INVESTMENT MANAGEMENT AGREEMENT
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INVESTMENT MANAGEMENT AGREEMENT (this "Agreement"), dated __________, 1997,
between The Composite Funds, a Massachusetts business trust, (the "Trust"), on
behalf of each of its series which are listed on the signature page of this
Agreement (each referred to herein as a "Fund") and Composite Research &
Management Co., a Washington corporation (the "Manager").
W I T N E S S E T H
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WHEREAS, the Trust is an open-end series management investment company,
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, each Fund, as a separate series of the Trust, desires to retain
the Manager to render investment management services to the Fund, and the
Manager is willing to render such services;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
1. Appointment. The Fund hereby appoints the Manager to act as investment
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manager to the Fund for the period and on the terms set forth in this Agreement.
The Manager accepts such appointment and agrees to render the services herein
described, for the compensation herein provided.
2. Management. Subject to the supervision of the Board of Trustees of the
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Trust, the Manager shall manage the investment operations of the Fund and the
composition of the Fund's portfolio, including the purchase, retention and
disposition of securities therefor, in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Prospectus and Statement
of Additional Information (as such terms are hereinafter defined) and
resolutions of the Trust's Board of Trustees and subject to the following
understandings:
(a) The Manager shall provide supervision of the Fund's investments,
furnish a continuous investment program for the Fund's portfolio and
determine from time to time what securities will be purchased, retained, or
sold by the Fund, and what portion of the assets will be invested or held
as cash.
(b) The Manager, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Declaration of Trust (as
hereinafter defined) of the Trust and the investment policies of the Fund
as determined by the Board of Trustees of the Trust.
(c) The Manager shall determine the securities to be purchased or sold by
the Fund and shall place orders for the purchase and sale of portfolio
securities pursuant to its determinations with brokers or dealers selected
by the Manager. In executing portfolio
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transactions and selecting brokers or dealers, the Manager shall use its
best efforts to seek on behalf of the Fund the best overall terms
available. In assessing the best overall terms available for any
transaction, the Manager may consider all factors it deems relevant,
including the breadth of the market in the security, the price of the
security, the size of the transaction, the timing of the transaction, the
reputation, financial condition, experience, and execution capability of a
broker or dealer, the amount of commission, and the value of any brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by a broker or
dealer. The Manager is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting the
transaction if the Manager 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
Manager to the Fund and/or other accounts over which the Manager exercises
investment discretion.
(d) On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of the Fund as well as other fiduciary accounts
for which it has investment responsibility, the Manager, to the extent
permitted by applicable laws and regulations, may aggregate the securities
to be so sold or purchased in order to obtain the best execution, most
favorable net price or lower brokerage commissions.
(e) Subject to the provisions of the Agreement and Declaration of Trust of
the Trust and the Investment Company Act of 1940, as amended (the "1940)
Act"), the Manager, at its expense, may select and contract with one or
more investment advisers (the "Subadviser") for the Fund to perform some or
all of the services for which it is responsible pursuant to this Section 2.
The Manager shall be solely responsible for the compensation of any
Subadviser of the Fund for its services to the Fund. The Manager may
terminate the services of any Subadviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Subadviser unless and until a successor Subadviser is selected. To the
extent that more than one Subadviser is selected, the Manager shall, in its
sole discretion, determine the amount of the Fund's assets allocated to
each such Subadviser.
3. Services Not Exclusive. The investment management services rendered by the
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Manager hereunder to the Fund are not to be deemed exclusive, and the Manager
shall have the right to render similar services to others, including, without
limitation, other investment companies.
4. Expenses. During the term of this Agreement, the Manager shall pay all
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expenses incurred by it in connection with its activities under this Agreement
including the salaries and expenses of any of the officers or employees of the
Manager who act as officers, Trustees or employees of the Trust but excluding
the cost of securities purchased for the Fund and the amount of any brokerage
fees and commissions incurred in executing portfolio transactions for the Fund,
and shall provide the Fund with suitable office space. Other expenses to be
incurred in the operation of the Fund (other than those borne by any third
party), including without limitation, taxes, interest, brokerage fees and
commissions, fees of Trustees who are not
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officers, directors, or employees of the Manager, federal registration fees and
state Blue Sky qualification fees, administration fees, bookkeeping, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, industry association fees, outside auditing and legal expenses, costs
of maintaining the Fund's or the Trust's existence, costs of independent pricing
services, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of preparing, printing and
distributing prospectuses to existing shareholders, costs of stockholders'
reports and meetings of shareholders and Trustees of the Fund or the Trust, as
applicable, and any extraordinary expenses will be borne by the Fund.
5. Compensation. For the services provided pursuant to this Agreement, each
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Fund shall pay to the Manager as full compensation therefor a monthly fee
computed on the average daily net assets of the Fund as stated in Schedule A
attached hereto. The Fund acknowledges that the Manager, as agent for the Fund,
will allocate a portion of the fee equal to the sub-advisory fee payable to the
sub-advisor, if any, under its sub-advisory agreement to the sub-advisor for
sub-advisory services. The Fund acknowledges that the Manager, as agent for the
Fund, will allocate a portion of the fee to ▇▇▇▇▇▇▇ ▇▇▇▇▇ Securities Services,
Inc. for administrative services, portfolio accounting and regulatory compliance
systems. The Manager also from time to time and in such amounts as it shall
determine in its sole discretion may allocate a portion of the fee to Composite
Funds Distributor, Inc. for facilitating distribution of the Fund. This payment
would be made from revenue which otherwise would be considered profit to the
Manager for its services. This disclosure is being made to the Fund solely for
the purpose of conforming with requirements of the Washington Department of
Revenue for exclusion of revenue from the Washington Business and Occupation
Tax.
6. Limitation of Liability. The Manager shall not be liable for any error of
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judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Delivery of Documents. The Trust has heretofore delivered to the Manager
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true and complete copies of each of the following documents and shall promptly
deliver to it all future amendments and supplements thereto, if any:
(a) Agreement and Declaration of Trust (such Agreement and Declaration as
presently in effect and as amended from time to time, the "Declaration of
Trust");
(b) Bylaws of the Trust;
(c) Registration Statement under the Securities Act of 1933 and under the
1940 Act of the Trust on Form N-1A, and all amendments thereto, as filed
with the Securities and Exchange Commission (the "Registration Statement")
relating to the Fund and the shares of the Fund;
(d) Notification of Registration of the Trust under the 1940 Act on Form
N-8A;
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(e) Prospectuses of the Fund (such prospectuses as presently in effect
and/or as amended or supplemented from time to time, the "Prospectus"); and
(f) Statement of Additional Information of the Fund (such statement as
presently in effect and/or as amended or supplemented from time to time,
the "Statement of Additional Information").
8. Duration and Termination. This Agreement shall become effective as of the
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date first above-written for an initial period of two years and shall continue
thereafter so long as such continuance is specifically approved at least
annually (a) by the vote of the Board of Trustees including a majority of those
members of the Trust's Board of Trustees who are not parties to this Agreement
or "interested persons" of any such party, cast in person at a meeting called
for that purpose, or by vote of a majority of the outstanding voting securities
of the Fund. Notwithstanding the foregoing, (a) this Agreement may be
terminated at any time, without the payment of any penalty, by either the Fund
(by vote of the Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund) or the Manager, on sixty (60) days
prior written notice to the other and (b) shall automatically 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 meanings assigned to such terms in the 1940 Act.
9. Amendments. No provision of this Agreement may be amended, modified,
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waived or supplemented except by a written instrument signed by the party
against which enforcement is sought. No amendment of this Agreement shall be
effective until approved in accordance with any applicable provisions of the
1940 Act.
10. Use of Name and Logo. The Fund agrees that it shall furnish to the
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Manager, prior to any use or distribution thereof, copies of all prospectuses,
statements of additional information, proxy statements, reports to stockholders,
sales literature, advertisements, and other material prepared for distribution
to stockholders of the Fund or to the public, which in any way refer to or
describe the Manager or which include any trade names, trademarks or logos of
the Manager or of any affiliate of the Manager. The Fund further agrees that it
shall not use or distribute any such material if the Manager reasonably objects
in writing to such use or distribution within five (5) business days after the
date such material is furnished to the Manager.
The Manager and/or its affiliates own the names "Sierra", "Composite" and
any other names which may be listed from time to time on a Schedule B to be
attached hereto that they may develop for use in connection with the Fund, which
names may be used by the Fund or the Trust only with the consent of the Manager
and/or its affiliates. The Manager, on behalf of itself and/or its affiliates,
consents to the use by the Trust and by the Fund of such names or any other
names embodying such names, but only on condition and so long as (i) this
Agreement shall remain in full force, (ii) the Fund and the Trust shall fully
perform, fulfill and comply with all provisions of this Agreement expressed
herein to be performed, fulfilled or complied with by it, and (iii) the Manager
is the manager of the Fund and the Trust. No such name shall be used by the
Fund or the Trust at any time or in any place or for any purposes or under any
conditions except as provided in this section. The foregoing authorization by
the Manager, on
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behalf of itself and/or its affiliates, to the Fund and the Trust to use such
names as part of a business or name is not exclusive of the right of the Manager
and/or its affiliates themselves to use, or to authorize others to use, the
same; the Fund and the Trust acknowledge and agree that as between the Manager
and/or its affiliates and the Fund or the Trust, the Manager and/or its
affiliates have the exclusive right so to use, or authorize others to use, such
names, and the Fund and the Trust agree to take such action as may reasonably be
requested by the Manager, on behalf of itself and/or its affiliates, to give
full effect to the provisions of this section (including, without limitation,
consenting to such use of such names). Without limiting the generality of the
foregoing, the Fund and the Trust agree that, upon (i) any violation of the
provisions of this Agreement by the Fund or the Trust or (ii) any termination of
this Agreement, by either party or otherwise, the Fund and the Trust will, at
the request of the Manager, on behalf of itself and/or its affiliates, made
within six months after such violation or termination, use its best efforts to
change the name of the Fund and the Trust so as to eliminate all reference, if
any, to such names and will not thereafter transact any business in a name
containing such names in any form or combination whatsoever, or designate itself
as the same entity as or successor to an entity of such names, or otherwise use
such names or any other reference to the Manager and/or its affiliates, except
as may be required by law. Such covenants on the part of the Fund and the Trust
shall be binding upon it, its Trustees, officers, shareholders, creditors and
all other persons claiming under or through it.
The provisions of this section shall survive termination of this Agreement.
11. Notices. Any notice or other communication required to be given pursuant
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to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, if to the Fund: ▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; or if to the Manager: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; or to either party at such other address as
such party shall designate to the other by a notice given in accordance with the
provisions of this section.
12. Miscellaneous.
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(a) Except as otherwise expressly provided herein or authorized by the
Board of Trustees of the Trust from time to time, the Manager for all
purposes herein shall be deemed to be an independent contractor and shall
have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
(b) The Trust shall furnish or otherwise make available to the Manager
such information relating to the business affairs of the Fund as the
Manager at any time or from time to time reasonably requests in order to
discharge its obligations hereunder.
(c) This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts and shall inure to the
benefit of the parties hereto and their respective successors.
(d) If any provision of this Agreement shall be held or made invalid or by
any court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
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13. Declaration of Trust and Limitation of Liability. A copy of the
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Declaration of Trust of the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed by an officer of the Trust on behalf of the Trustees of the Trust, as
trustees and not individually, on further behalf of the Fund, and that the
obligations of this Agreement shall be binding upon the assets and properties of
the Fund only and shall not be binding upon the assets and properties of any
other series of the Trust or upon any of the Trustees, officers, employees,
agents or shareholders of the Fund or the Trust individually.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first above-written.
THE COMPOSITE FUNDS, on behalf of its series COMPOSITE
BOND & STOCK FUND,
COMPOSITE GROWTH & INCOME FUND,
COMPOSITE U.S. GOVERNMENT SECURITIES FUND,
COMPOSITE TAX-EXEMPT BOND FUND,
COMPOSITE CASH MANAGEMENT COMPANY
MONEY MARKET FUND,
COMPOSITE CASH MANAGEMENT COMPANY
TAX-EXEMPT MONEY MARKET FUND,
COMPOSITE NORTHWEST FUND
COMPOSITE HIGH YIELD FUND
By:
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Name:
Title:
Attest:
By:
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Name:
Title:
COMPOSITE RESEARCH &
MANAGEMENT CO.
By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
Attest:
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary
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SCHEDULE A
INVESTMENT MANAGEMENT FEES
FUND FEE
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Composite Bond & Stock Fund Monthly fee equal to .625% per
Composite Growth & Income Fund annum computed on the average
Composite Income Fund daily net assets of the Fund; on
Composite U.S. Government Securities assets in excess of $250
Fund million, the fee decreases to
Composite High Yield Fund .50% per annum.
Monthly fee equal to .50% per
Composite Tax-Exempt Bond Fund annum computed on the average
daily net assets of the Fund; on
assets in excess of $250
million, the fee decreases to
.40% per annum.
Composite Cash Management Company Monthly fee computed on the
Money Market Fund average daily net assets of the
Composite Cash Management Company Fund equal to .45% per annum up
Tax-Exempt Money Market Fund to the first $1 billion of
assets; .40% per annum on assets
of $1 billion and above.
Monthly fee computed on the
Composite Northwest Fund average daily net assets of the
Fund equal to .625% per annum up
to the first $500 million of
assets; .50% per annum on assets
of $500 million to $1 billion;
.375% per annum on assets of $1
billion and above.
