EXHIBIT 5
PROFESSIONALLY MANAGED PORTFOLIOS
INVESTMENT ADVISORY AGREEMENT
RCB Growth and Income Fund
RCB Small Cap Fund
THIS INVESTMENT ADVISORY AGREEMENT is made as of the __th day of ,
1998, by and between PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business
trust (hereinafter called the "Trust"), on behalf of the following series of the
Trust, the RCB Growth and Income Fund and RCB Small Cap Fund (each a "Fund") and
▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Inc., a California Corporation (hereinafter called the
"Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment
company, registered as such under the Investment Company Act of 1940, as amended
(the "Investment Company Act"); and
WHEREAS, each Fund is a series of the Trust having
separate assets and liabilities; and
WHEREAS, the Advisor is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and is engaged in the
business of supplying investment advice as an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render
advice and services to each Fund pursuant to the terms and provisions of this
Agreement, and the Advisor desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties to this Agreement, intending
to be legally bound hereby, mutually agree as follows:
1. Appointment of Advisor. The Trust hereby employs the
Advisor and the Advisor hereby accepts such employment, to render investment
advice and related services with respect to the assets of each Fund for the
period and on the terms set forth in this Agreement, subject to the supervision
and direction of the Trust's Board of Trustees.
2. Duties of Advisor.
(a) General Duties. The Advisor shall act as
investment adviser to each Fund and shall supervise investments of each Fund on
behalf of each Fund in accordance with the investment objectives, policies and
restrictions of each Fund as set forth in each Fund's and Trust's governing
documents, including, without limitation, the Trust's Agreement and Declaration
of Trust and By-Laws; each Fund's prospectus, statement of additional
E:\JA\19306\0001\AGMT\INVEMGMT
-1-
information and undertakings; and such other limitations, policies and
procedures as the Trustees may impose from time to time in writing to the
Advisor. In providing such services, the Advisor shall at all times adhere to
the provisions and restrictions contained in the federal securities laws,
applicable state securities laws, the Internal Revenue Code, the Uniform
Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the Advisor
shall: (i) furnish each Fund with advice and recommendations with respect to
the investment of each Fund's assets and the purchase and sale of portfolio
securities for each Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (i.e., placing the orders); (ii)
manage and oversee the investments of each Fund, subject to the ultimate
supervision and direction of the Trust's Board of Trustees; (iii) vote proxies
for each Fund, file ownership reports under Section 13 of the Securities
Exchange Act of 1934 for each Fund, and take other actions on behalf of each
Fund; (iv) maintain the books and records required to be maintained by each Fund
except to the extent arrangements have been made for such books and records to
be maintained by the administrator or another agent of each Fund; (v) furnish
reports, statements and other data on securities, economic conditions and other
matters related to the investment of each Fund's assets which each Fund's
administrator or distributor or the officers of the Trust may reasonably
request; and (vi) render to the Trust's Board of Trustees such periodic and
special reports with respect to each Fund's investment activities as the Board
may reasonably request, including at least one in-person appearance annually
before the Board of Trustees.
(b) Brokerage. The Advisor shall be responsible
for decisions to buy and sell securities for each Fund, for broker-dealer
selection, and for negotiation of brokerage commission rates, provided that the
Advisor shall not direct order to an affiliated person of the Advisor without
general prior authorization to use such affiliated broker or dealer for the
Trust's Board of Trustees. The Advisor's primary consideration in effecting a
securities transaction will be execution at the most favorable price. In
selecting a broker-dealer to execute each particular transaction, the Advisor
may take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size of
and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of each Fund on
a continuing basis. The price to each Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered.
Subject to such policies as the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have
E:\JA\19306\0001\AGMT\INVEMGMT
-2-
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused each Fund to pay a broker or
dealer that provides (directly or indirectly) brokerage or research services to
the Advisor an amount of commission for effecting a portfolio transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Advisor's overall
responsibilities with respect to the Trust. The Advisor is further authorized to
allocate the orders placed by it on behalf of each Fund to such brokers or
dealers who also provide research or statistical material, or other services, to
the Trust, the Advisor, or any affiliate of either. Such allocation shall be in
such amounts and proportions as the Advisor shall determine, and the Advisor
shall report on such allocations regularly to the Trust, indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
The Advisor is also authorized to consider sales of shares as a factor in the
selection of brokers or dealers to execute portfolio transactions, subject to
the requirements of best execution, i.e., that such brokers or dealers are able
to execute the order promptly and at the best obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a
security to be in the best interest of one or more of each Fund as well as of
other clients, the Advisor, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
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
Advisor in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to each Fund and to such other clients.
3. Representations of the Advisor.
(a) The Advisor shall use its best judgment and
efforts in rendering the advice and services to each Fund as
contemplated by this Agreement.
(b) The Advisor shall maintain all licenses and
registrations necessary to perform its duties hereunder in good
order.
( c) The Advisor shall conduct its operations at
all times in conformance with the Investment Advisers Act of 1940, the
Investment Company Act of 1940, and any other applicable state and/or
self-regulatory organization regulations.
E:\JA\19306\0001\AGMT\INVEMGMT
-3-
(d) The Advisor shall maintain errors and
omissions insurance in an amount at least equal to that disclosed to the Board
of Trustees in connection with their approval of this Agreement.
4. Independent Contractor. The Advisor shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Trust or each Fund in any way, or in any way be deemed an agent
for the Trust or for each Fund. It is expressly understood and agreed that the
services to be rendered by the Advisor to each Fund under the provisions of this
Agreement are not to be deemed exclusive, and the Advisor shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
5. Advisor's Personnel. The Advisor shall, at its own expense,
maintain such staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Advisor shall be
deemed to include persons employed or retained by the Advisor to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Advisor or the Trust's Board of Trustees may desire and reasonably request.
6. Expenses.
(a) With respect to the operation of each Fund,
the Advisor shall be responsible for (i) providing the personnel, office space
and equipment reasonably necessary for the operation of each Fund, (ii) the
expenses of printing and distributing extra copies of each Fund's prospectus,
statement of additional information, and sales and advertising materials (but
not the legal, auditing or accounting fees attendant thereto) to prospective
investors (but not to existing shareholders), and (iii) the costs of any special
Board of Trustees meetings or shareholder meetings convened for the primary
benefit of the Advisor. If the Advisor has agreed to limit the operating
expenses of each Fund, the Advisor shall also be responsible on a monthly basis
for any operating expenses that exceed the agreed upon expense limit.
(b) Each Fund is responsible for and has assumed
the obligation for payment of all of its expenses, other than as stated in
Subparagraph 6(a) above, including but not limited to: fees and expenses
incurred in connection with the issuance, registration and transfer of its
shares; brokerage and commission expenses; all expenses of transfer, receipt,
safekeeping, servicing and accounting for the cash, securities and other
E:\JA\19306\0001\AGMT\INVEMGMT
-4-
property of the Trust for the benefit of each Fund including all fees and
expenses of its custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the Investment Company Act; taxes, if any; a pro rata portion of
expenditures in connection with meetings of each Fund's shareholders and the
Trust's Board of Trustees that are properly payable by each Fund; salaries and
expenses of officers and fees and expenses of members of the Trust's Board of
Trustees or members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Advisor; insurance premiums on
property or personnel of each Fund which inure to its benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and statements of additional information
of each Fund or other communications for distribution to existing shareholders;
legal, auditing and accounting fees; trade association dues; fees and expenses
(including legal fees) of registering and maintaining registration of its shares
for sale under federal and applicable state and foreign securities laws; all
expenses of maintaining and servicing shareholder accounts, including all
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of each Fund, if any; and all other
charges and costs of its operation plus any extraordinary and non-recurring
expenses, except as herein otherwise prescribed.
( c) The Advisor may voluntarily absorb certain
Fund expenses or waive the Advisor's own advisory fee.
(d) To the extent the Advisor incurs any costs by
assuming expenses which are an obligation of each Fund as set forth herein, the
Fund shall promptly reimburse the Advisor for such costs and expenses, except to
the extent the Advisor has otherwise agreed to bear such expenses. To the extent
the services for which a Fund is obligated to pay are performed by the Advisor,
the Advisor shall be entitled to recover from such Fund to the extent of the
Advisor's actual costs for providing such services. In determining the Advisor's
actual costs, the Advisor may take into account an allocated portion of the
salaries and overhead of personnel performing such services.
7. Investment Advisory and Management Fee.
(a) each Fund shall pay to the Advisor, and the
Advisor agrees to accept, as full compensation for all investment management and
advisory services furnished or provided to each Fund pursuant to this Agreement,
an annual management fee equal to 0.60% of of the RCB Growth and Income Fund's
and 0.85% of of the RCB Small Cap Fund's daily net assets, computed on the value
of the net assets of each Fund as of the close of business each day.
(b) The management fee shall be accrued daily by
each Fund and paid to the Advisor on the first business day of
the succeeding month.
E:\JA\19306\0001\AGMT\INVEMGMT
-5-
( c) The initial fee under this Agreement shall be
payable on the first business day of the first month following the effective
date of this Agreement and shall be prorated as set forth below. If this
Agreement is terminated prior to the end of any month, the fee to the Advisor
shall be prorated for the portion of any month in which this Agreement is in
effect which is not a complete month according to the proportion which the
number of calendar days in the month during which the Agreement is in effect
bears to the number of calendar days in the month, and shall be payable within
ten (10) days after the date of termination.
(d) The fee payable to the Advisor under this
Agreement will be reduced to the extent of any receivable owed by the Advisor to
each Fund and as required under any expense limitation applicable to each Fund.
(e) The Advisor voluntarily may reduce any portion of
the compensation or reimbursement of expenses due to it pursuant to this
Agreement and may agree to make payments to limit the expenses which are the
responsibility of a Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Advisor hereunder or to continue future payments. Any such reduction will
be agreed to prior to accrual of the related expense or fee and will be
estimated daily and reconciled and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and
any Fund expense absorbed by the Advisor voluntarily or pursuant to an agreed
upon expense cap shall be reimbursed by each Fund to the Advisor, if so
requested by the Advisor, in the first, second or third (or any combination
thereof) fiscal year next succeeding the fiscal year of the withholding,
reduction or absorption if the aggregate amount actually paid by each Fund
toward the operating expenses for such fiscal year (taking into account the
reimbursement) do not exceed the applicable limitation on Fund expenses. Such
reimbursement may be paid prior to each Fund's payment of current expenses if so
requested by the Advisor even if such practice may require the Advisor to waive,
reduce or absorb current Fund expenses.
(g) The Advisor may agree not to require payment
of any portion of the compensation or reimbursement of expenses otherwise due to
it pursuant to this Agreement. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Advisor hereunder.
8. No Shorting; No Borrowing. The Advisor agrees that neither
it nor any of its officers or employees shall take any short position in the
shares of each Fund. This prohibition shall not prevent the purchase of such
shares by any of the
E:\JA\19306\0001\AGMT\INVEMGMT
-6-
officers or employees of the Advisor or any trust, pension, profit-sharing or
other benefit plan for such persons or affiliates thereof, at a price not less
than the net asset value thereof at the time of purchase, as allowed pursuant to
rules promulgated under the Investment Company Act. The Advisor agrees that
neither it nor any of its officers or employees shall borrow from each Fund or
pledge or use each Fund's assets in connection with any borrowing not directly
for each Fund's benefit. For this purpose, failure to pay any amount due and
payable to each Fund for a period of more than thirty (30) days shall constitute
a borrowing.
9. Conflicts with Trust's Governing Documents and Applicable
Laws. Nothing herein contained shall be deemed to require the Trust or each Fund
to take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and Fund. In this connection, the Advisor
acknowledges that the Trustees retain ultimate plenary authority over each Fund
and may take any and all actions necessary and reasonable to protect the
interests of shareholders.
10. Reports and Access. The Advisor agrees to supply such
information to each Fund's administrator and to permit such compliance
inspections by each Fund's administrator as shall be reasonably necessary to
permit the administrator to satisfy its obligations and respond to the
reasonable requests of the Trustees.
11. Advisor's Liabilities and Indemnification.
(a) The Advisor shall have responsibility for the
accuracy and completeness (and liability for the lack thereof) of the statements
in each Fund's offering materials (including the prospectus, the statement of
additional information, advertising and sales materials), except for information
supplied by the administrator or the Trust or another third party for inclusion
therein.
(b) In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the obligations or duties
hereunder on the part of the Advisor, the Advisor shall not be subject to
liability to the Trust or each Fund or to any shareholder of each Fund for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security by each Fund.
( c) Each party to this Agreement shall indemnify
and hold harmless the other party and the shareholders, directors, officers and
employees of the other party (any such person, an "Indemnified Party") against
any loss, liability, claim, damage or expense (including the reasonable cost of
E:\JA\19306\0001\AGMT\INVEMGMT
-7-
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
(e) No provision of this Agreement shall be
construed to protect any Trustee or officer of the Trust, or officer of the
Advisor, from liability in violation of Sections 17(h) and (I) of the Investment
Company Act.
12. Non-Exclusivity; Trading for Advisor's Own Account. The
Trust's employment of the Advisor is not an exclusive arrangement. The Trust may
from time to time employ other individuals or entities to furnish it with the
services provided for herein. Likewise, the Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
from buying, selling or trading any securities for its or their own accounts or
the accounts of others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake no activities which
will adversely affect the performance of its obligations to each Fund under this
Agreement; and provided further that the Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Investment Advisers Act
of 1940 and has been approved by the Trust' Board of Trustees.
13. Term.
(a) This Agreement shall become effective at the
time each Fund commences operations pursuant to an effective amendment to the
Trust's Registration Statement under the Securities Act of 1933 and shall remain
in effect for a period of two (2) years, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for additional
periods not exceeding one (l) year so long as such continuation is approved for
each Fund at least annually by (I) the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of each Fund and (ii)
the vote of a majority of the Trustees of the Trust who are not parties to this
Agreement nor interested persons thereof, cast in person at a meeting called for
the purpose of voting on such approval. The terms "majority of the outstanding
voting securities" and "interested persons" shall have the meanings as set forth
in the Investment Company Act.
(b) each Fund may use the name "RCB" or any
name derived from or using the name "▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇"
E:\JA\19306\0001\AGMT\INVEMGMT
-8-
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect. Within sixty (60) days from such time as this Agreement shall
no longer be in effect, each Fund shall cease to use such a name or any other
name connected with the Advisor.
14. Termination; No Assignment.
(a) This Agreement may be terminated by the Trust
on behalf of each Fund at any time without payment of any penalty, by the Board
of Trustees of the Trust or by vote of a majority of the outstanding voting
securities of each Fund, upon sixty (60) days' written notice to the Advisor,
and by the Advisor upon sixty (60) days' written notice to each Fund. In the
event of a termination, the Advisor shall cooperate in the orderly transfer of
each Fund's affairs and, at the request of the Board of Trustees, transfer any
and all books and records of each Fund maintained by the Advisor on behalf of
each Fund.
(b) This Agreement shall terminate automatically
in the event of any transfer or assignment thereof, as defined in
the Investment Company Act.
15. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
16. Notice of Declaration of Trust. The Advisor agrees that
the Trust's obligations under this Agreement shall be limited to each Fund and
to its assets, and that the Advisor shall not seek satisfaction of any such
obligation from the shareholders of each Fund nor from any trustee, officer,
employee or agent of the Trust or each Fund.
17. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to the conflict of laws principles thereof; provided that nothing herein
shall be construed to preempt, or to be inconsistent with, any federal law,
regulation or rule, including the Investment Company Act and the Investment
Advisors Act of 1940 and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers, all on the day
and year first above written.
E:\JA\19306\0001\AGMT\INVEMGMT
-9-
PROFESSIONALLY MANAGED ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, INC.
PORTFOLIOS on behalf of the
RCB Growth and Income Fund and
RCB Small Cap Fund
By: By: