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EX-99.B5
Investment Advisory Agreement
INVESTMENT ADVISORY AGREEMENT
Agreement made this 31st day of December, 1997 between Xxx
Xxxxxxx Funds, Inc., a Maryland corporation (the "Company"), and Xxx Xxxxxxx
Capital Management, Inc., a California corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act") as an
open-end management investment company consisting at the date hereof of seven
series, the Xxx Xxxxxxx Micro-Cap Growth Fund (the "Micro-Cap Fund"), the Xxx
Xxxxxxx Emerging Growth Fund (the "Emerging Growth Fund"), the Xxx Xxxxxxx
Mid-Cap Growth Fund (the "Mid-Cap Fund"), the Xxx Xxxxxxx Capital Appreciation
Fund (the "Capital Appreciation Fund"), the Xxx Xxxxxxx Growth Fund (the
"Growth Fund"), the Xxx Xxxxxxx Post-Venture Fund (the "Post-Venture Fund") and
the Xxx Xxxxxxx Technology Fund (the "Technology Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is
an investment adviser registered under the Investment Advisers Act of 1940, as
the investment adviser for the Technology Fund.
NOW, THEREFORE, the Company and the Adviser do mutually
promise and agree as follows:
1. Employment. The Company hereby employs the Adviser
to manage the investment and reinvestment of the assets of the Technology Fund
for the period and on the terms set forth in this Agreement. The Adviser
hereby accepts such employment for the
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compensation herein provided and agrees during such period to render the
services and to assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and manage
the investment portfolio of the Technology Fund, and, subject to such policies
as the board of directors of the Company may determine, direct the purchase and
sale of investment securities in the day to day management of the Technology
Fund. The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Company or the Technology Fund in any
way or otherwise be deemed an agent of the Company or the Technology Fund.
However, one or more shareholders, officers, directors or employees of the
Adviser may serve as directors and/or officers of the Company, but without
compensation or reimbursement of expenses for such services from the Company.
Nothing herein contained shall be deemed to require the Company to take any
action contrary to its Articles of Incorporation, as amended, restated or
supplemented from time to time, or any applicable statute or regulation, or to
relieve or deprive the board of directors of the Company of its responsibility
for and control of the affairs of the Technology Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company or the Technology Fund, shall furnish office
space, and all necessary office facilities, equipment and executive personnel
for managing the investments of the Technology Fund. The Adviser shall not be
required to pay any expenses of the Technology Fund except as provided herein
if the total expenses borne by the Technology Fund, including the Adviser's fee
and the fees paid to the Technology Fund's Administrator but excluding all
federal, state and
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local taxes, interest, brokerage commissions and extraordinary items, in any
year exceed that percentage of the average net assets of the Technology Fund
for such year, as determined by valuations made as of the close of each
business day, which is the most restrictive percentage provided by the state
laws of the various states in which the Technology Fund's shares are qualified
for sale or, if the states in which the Technology Fund's shares are qualified
for sale impose no such restrictions, 2%. The expenses of the Technology
Fund's operations borne by the Technology Fund include by way of illustration
and not limitation, directors fees paid to those directors who are not officers
of the Company, the costs of preparing and printing registration statements
required under the Securities Act of 1933 and the Act (and amendments thereto),
the expense of registering its shares with the Securities and Exchange
Commission and in the various states, the printing and distribution cost of
prospectuses mailed to existing shareholders, the cost of stock certificates
(if any), director and officer liability insurance, reports to shareholders,
reports to government authorities and proxy statements, interest charges,
taxes, legal expenses, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, insurance
premiums, brokerage and other expenses connected with the execution of
portfolio securities transactions, fees and expenses of the custodian of the
Technology Fund's assets, expenses of calculating the net asset value and
repurchasing and redeeming shares, printing and mailing expenses, charges and
expenses of dividend disbursing agents, registrars and stock transfer agents
and the cost of keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Technology
Fund on a monthly basis. If the accrued amount of the expenses of the
Technology Fund exceeds the
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expense limitation established herein, the Company shall create an account
receivable from the Adviser in the amount of such excess. In such a situation
the monthly payment of the Adviser's fee will be reduced by the amount of such
excess, subject to adjustment month by month during the balance of the
Company's fiscal year if accrued expenses thereafter fall below the expense
limitation.
4. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company, through and on behalf of the
Technology Fund, shall pay to the Adviser an advisory fee, paid monthly, based
on the average net assets of the Technology Fund, as determined by valuations
made as of the close of each business day of the month. The monthly advisory
fee shall be 1/12 of 1.25%, (1.25% per annum) on the average daily net assets
of the Technology Fund. For any month in which this Agreement is not in effect
for the entire month, such fee shall be reduced proportionately on the basis of
the number of calendar days during which it is in effect and the fee computed
upon the average net asset value of the business days during which it is so in
effect.
5. Ownership of Shares of the Technology Fund. The
Adviser shall not take an ownership position in the Technology Fund, and shall
not permit any of its shareholders, officers, directors or employees to take a
long or short position in the shares of the Technology Fund, except for the
purchase of shares of the Technology Fund for investment purposes at the same
price as that available to the public at the time of purchase or in connection
with the initial capitalization of the Technology Fund.
6. Exclusivity. The services of the Adviser to the
Technology Fund hereunder are not to be deemed exclusive and the Adviser shall
be free to furnish similar
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services to others as long as the services hereunder are not impaired thereby.
Although the Adviser has agreed to permit the Technology Fund and the Company
to use the name "Xxx Xxxxxxx", if they so desire, it is understood and agreed
that the Adviser reserves the right to use and to permit other persons, firms
or corporations, including investment companies, to use such name, and that the
Technology Fund and the Company will not use such name if the Adviser ceases to
be the Technology Fund's sole investment adviser. During the period that this
Agreement is in effect, the Adviser shall be the Technology Fund's sole
investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Technology Fund or to any shareholder of the Technology 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.
8. Brokerage Commissions. The Adviser, subject to the control
and direction of the Company's Board of Directors, shall have authority and
discretion to select brokers and dealers to execute portfolio transactions for
the Technology Fund and for the selection of the markets on or in which the
transactions will be executed. The Adviser may cause the Technology Fund to
pay a broker-dealer which provides brokerage and research services, as such
services are defined in Section 28(e) of the Securities Exchange Act of 1934
(the "Exchange Act"), to the Adviser a commission for effecting a securities
transaction in excess of the amount another broker-dealer would have charged
for effecting such transaction, if the Adviser determines in good faith that
such amount of commission is reasonable in relation to the
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value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he exercises
investment discretion (as defined in Section 3(a)(35) of the Exchange Act).
The Adviser shall provide such reports as the Company's Board of Directors may
reasonably request with respect to the Technology Fund's total brokerage and
the manner in which that brokerage was allocated.
9. Code of Ethics. The Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the Act and has
provided the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Adviser shall permit
the Company to examine any reports required to be made by the Adviser pursuant
to Rule 17j-1(c)(1) under the Act.
10. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be amended
without the approval of the board of directors of the Company in the manner
required by the Act, and by the vote of the majority of the outstanding voting
securities of the Technology Fund, as defined in the Act.
11. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the Company or
by a vote of the majority of the outstanding voting securities of the
Technology Fund, as defined in the Act, upon giving sixty (60) days' written
notice to the Adviser. This Agreement may be terminated by the Adviser at any
time upon the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall
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continue in effect for an initial period beginning as of the date hereof and
ending December 31, 1999 and indefinitely thereafter, but only so long as the
continuance after such initial period is specifically approved annually by (i)
the board of directors of the Company or by the vote of the majority of the
outstanding voting securities of the Technology Fund, as defined in the Act,
and (ii) the board of directors of the Company in the manner required by the
Act, provided that any such approval may be made effective not more than sixty
(60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
XXX XXXXXXX CAPITAL MANAGEMENT, INC.
(the "Adviser")
By:________________________________
President
XXX XXXXXXX FUNDS, INC.
(the "Company")
By:_________________________________
President
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