Exhibit (g)(1)
INVESTMENT ADVISORY AGREEMENT
April 2, 1996
Xxxxxx X. Xxxxxx
Park Place
00 Xxxx Xxxxxxxxxxx Xx.
Xxxxxx, XX 00000
Dear Sirs:
Xxxxxx FunShares, Inc., an Ohio corporation (the "Company") hereby confirms its
agreement with Xxxxxx X. Xxxxxx (the "Advisor") with respect to the Advisor's
serving as an investment advisor of the Company, as follows:
SECTION 1. INVESTMENT DESCRIPTION; APPOINTMENT
(a) The Board of Directors of the Company desire to employ the Company's capital
by investing and reinvesting in investments of the kind and in accordance with
the investment objectives, policies and limitations specified in its most recent
prospectus (the "Prospectus"), and in the manner and to the extent as may from
time to time be approved by the Board of Directors of the Company. Copies of the
Prospectus have been or will be submitted to the Advisor.
(b) The Board of Directors hereby appoints the Advisor to act as an investment
advisor to the Company for the periods and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
SECTION 2. MANAGEMENT DUTIES
(a) Subject to the supervision of the Company's Board of Directors, the Advisor
will (i) manage all the Company's assets in accordance with the Company's
investment objectives, policies and limitations as stated in the Prospectus;
(ii) make investment decisions with respect to the assets; and (iii) place
orders to purchase and sell securities and, where appropriate, commodity futures
contracts with respect to assets.
(b) The Advisor will keep the Company informed of developments materially
affecting the Company and shall, on the Advisor's own
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initiative, furnish to the Company's Board of Directors from time to time
whatever information the Advisor believes appropriate for this purpose.
(c) The Advisor agrees that it will comply with the Investment Company Act of
1940, as amended (the "Act"), and all rules and regulations thereunder, all
applicable federal and state laws and regulations and with any applicable
procedures adopted by the Company's Board of Directors.
SECTION 3. BROKERAGE
(a) The Advisor agrees that it will place orders in accordance with the issuer
or with brokers or dealers selected by it in accordance with the standards
specified in paragraphs (b) and (c) of this Section 3.
(b) In placing orders with brokers and dealers, the Advisor will use his best
efforts to seek the best overall terms available for any transaction, the
Advisor will consider all factors it deems relevant including, but not limited
to, 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 any commission for the specific transaction and on a
continuing basis.
(c) In selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Advisor may 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 Company and/or other
accounts over which the Advisor or an affiliate exercise investment discretion.
The Company recognizes that it is desirable that the Advisor have access to
supplemental investment and market research and security and economic analyses
provided by brokers and that such brokers may execute brokerage transactions at
a higher cost to the Company than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the Advisor is authorized to pay higher brokerage
commissions for the purchase and sale of securities for the Company to brokers
who provide such research and analyses, subject to review by the Company's Board
of Directors from time to time with respect to the extent and continuation of
this practice.
SECTION 4. INFORMATION PROVIDED TO THE COMPANY
(a) The Advisor agrees that he will make available to the Company promptly upon
their request copies of all of his investment records and ledgers with respect
to the Company's assets to assist the Company in monitoring compliance with
the Act and the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), as well as other applicable laws. The Advisor will furnish the Company's
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Board of Directors with such periodic and special reports as the Board of
Directors may reasonably request.
(b) The Advisor agrees that it will immediately notify the Company in the event
that the Advisor or any of his affiliates: (i) becomes subject to a statutory
disqualification that prevents the Advisor from serving as investment advisor
in accordance with this Agreement; (ii) is or expects to become the subject of
an administrative proceeding or enforcement action by the SEC or other
regulatory authority. The Advisor has provided information about himself to
the Board of Directors, and he further agrees to notify the Company's Board of
Directors immediately of any material fact known to the Advisor respecting or
relating to the Advisor that is not contained in the information previously
supplied to the Directors.
(c) The Advisor represents that it is an investment adviser registered under the
Advisers Act and other applicable laws and that the statements contained in the
Advisor's registration under the Advisers Act on Form ADV, as of the date
hereof, are true and correct and do not omit to state any material fact required
to be stated therein or necessary in order to make the statement therein not
misleading. The Advisor agrees to maintain the completeness and accuracy of its
registration on Form ADV in accordance with all legal requirements relating to
that Form. The Advisor acknowledges that he is an "investment adviser" to the
Company within the meaning of the Act and the Advisers Act.
SECTION 5. BOOKS AND RECORDS
In compliance with the requirements of Rule 31a-3 under the Act, the Advisor
hereby agrees that all records that it maintains for the Company are the
property of the Company and further agrees to surrender promptly to the Company
copies of any such records upon the Company's request. The Advisor further
agrees to preserve for the periods prescribed by Rule 31a-2 under the Act the
records required to be maintained by Rule 31a-1 under the Act and to preserve
the records required by Rule 204-2 under the Advisers Act for the period
specified in that Rule.
SECTION 6. COMPENSATION
(a) In consideration of services rendered in accordance with this Agreement, the
Company will pay the Advisor a fee or the first business day of each month a fee
at the annual rate of one percent (1%) of the average value of the Company's net
assets up to One Hundred Fifty Million Dollars ($150,000,000) and seventy-five
hundredths percent (0.75%) of the average value of the Company's net assets in
excess of One Hundred Fifty Million Dollars ($150,000,000). Net assets value
shall be computed at least once each week.
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(b) The Advisor fee for the period from the date this Agreement becomes
effective to the end of the month during which this Agreement becomes effective
shall be prorated according to the proportion that such period bears to the full
monthly period. Upon any termination of this Agreement before the end of the
month, the fee for such part of that month shall be prorated according to the
proportion that this period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Advisor, the value of the
Company's net assets shall be computed in the manner specified in the Company's
Prospectus for the computation of the value of these net assets.
SECTION 7. COSTS AND EXPENSES
During the term of this Agreement, if in any fiscal year the Company's total
operating expenses, exclusive of taxes, interest, brokerage fees and
commissions, amortization and extraordinary expenses, exceed 2% of the average
annual net assets of the Company, the Advisor will reimburse the Company for the
amount of this excess, except that the amount required to be reimbursed for any
fiscal year shall not exceed the amount of fees received by the Advisor
hereunder in respect of that fiscal year. This expense reimbursement will be
estimated, reconciled and paid on a monthly basis.
SECTION 8. STANDARD OF CARE
The Advisor shall exercise his best judgment in rendering the services provided
by him under this Agreement. The Advisor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Company in connection
with the matter to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect the Advisor against any liability to the
Company or to holders of the Company's shares representing interests in the
Company to which the Advisor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on his part in the performance of his
duties or by reason of the Advisor's reckless disregard of his obligations and
duties under this Agreement.
SECTION 9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
(a) It is understood that the services of the Advisor are not exclusive, and
nothing in this Agreement shall prevent the Advisor from providing similar
services to other investment companies (whether their investment objectives and
policies are similar to those of the Company) or from engaging in other
activities.
(b) When the Advisor recommends the purchase or sale of a security for other
investment companies and other clients, and at the same
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time the Advisor recommends the purchase or sale of the same security for the
Company, it is understood that in light of his fiduciary duty to the Company
such transactions will be executed on a basis that is fair and equitable to the
Company.
(c) The Company understands and acknowledges that the persons employed by the
Advisor to assist in the performance of his duties under this Agreement will not
devote their full time to that service; nothing contained in this Agreement will
be deemed to limit or restrict the right of the Advisor or any affiliate of the
Advisor to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 10. DURATION AND TERMINATION
(a) This Agreement shall become effective if approved by the shareholders on the
date of approval by the newly constituted Board of Director's of the Company,
and shall continue for a period of one (1) year from that date, and thereafter
shall continue automatically for successive annual periods, provided this
continuance is specifically approved at least annually by (i) the Company's
Board of Directors or (ii) by a vote of a majority of the Company's outstanding
voting securities (as defined in the Act), provided that in either event the
continuance is also approved by a majority of the Board of Directors who are not
"interested persons" (as defined in the Act) of the Company, by vote cast in
person at a meeting called for the purpose of voting on the approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated (i) at any
time without penalty by the Company, upon the vote of the majority of the
Company's Board of Directors or by vote of the majority of the Company's
outstanding voting securities, upon notice to the Company, or (ii) by the
Advisor at any time without penalty.
(c) This Agreement will terminate automatically in the event of its assignment
(as defined in the Act and in rules adopted under the Act).
SECTION 11. AMENDMENTS
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 whom
enforcement of the change, waiver, discharge or termination is sought, and no
amendment of this Agreement shall be effective until approved in accordance with
applicable law.
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SECTION 12. MISCELLANEOUS
(a) This Agreement shall be governed by the laws of the State of Ohio, provided
that nothing herein shall be construed in a manner inconsistent with the 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 thereof 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 thereby and, to this extent, the provisions of this Agreement shall
be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Advisor as an agent
of the Company.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
XXXXXX FUNSHARES, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Title: President
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Accepted and Agreed to :
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
Date: April 2, 1996
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