INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the third day of August, 1987 by and between Advance
Capital I, Inc. ("Advance") and Advance Capital Management, Inc. ("ACM").
Amended July 24, 1992. Further Amended July 24, 1998, July 26, 2000,
June 30, 2006, August 3, 2007 and October 1, 2007.
WITNESSETH:
In consideration of the mutual promises and agreements contained in
this Agreement and other good and valuable consideration, the receipt of
which is acknowledged, it is agreed by and between the parties as follows:
I. In General
Advance engages ACM and ACM agrees to act as investment adviser to Advance
with respect to the investment of its assets and in general to supervise
the investments of Advance, subject at all times to the direction and
control of the Board of Directors of Advance.
II. Duties of ACM with Respect to Investment of Assets of Advance and
Accounting Services
A. ACM shall regularly provide investment advice to Advance and shall,
subject to the succeeding provisions of this section, supervise continuously
the investment and reinvestment of cash, securities or other property
comprising the assets of the investment portfolios of Advance consisting of
its Equity Growth Fund, Balanced Fund, Retirement Income Fund and Core Equity
Fund (the "Funds"); and in furtherance of those responsibilities, ACM shall:
1. obtain and evaluate pertinent information about significant developments
and economic, statistical and financial data, domestic, foreign or otherwise,
whether affecting the economy generally or the Funds of Advance, and whether
concerning the individual companies whose securities are included in the
Funds' portfolios or the industries in which they engage, or with respect to
securities which ACM considers desirable for inclusion in the Funds'
portfolios, and regularly report thereon to the Board of Directors of
Advance;
2. furnish continuously an investment program for each of the Funds
of Advance;
3. determine what securities shall be purchased or sold by each of the
Funds of Advance;
4. take, on behalf of Advance, all actions which appear to ACM necessary to
carry into effect the investment program and supervisory functions stated
previously, including the placing of purchase and sales orders, and make
appropriate reports thereon to the Board of Directors of Advance.
B. Any investment program furnished by ACM under this section, or any
supervisory function taken by ACM, shall at all times conform to and be
in accordance with any requirements imposed by:
1. the provisions of the Investment Company Act of 1940 and any rules or
regulations in force thereunder;
2. any other applicable provision of law;
3. the provisions of the Articles of Incorporation of Advance as amended
from time to time;
4. the provisions of the By-laws of Advance as amended from time to time;
5. the terms of the registration statements of Advance, as amended from time
to time, under the Securities Act of 1933 and the Investment Company Act
of 1940.
C. Any investment program furnished by ACM under this section or any
supervisory functions taken hereunder by ACM, shall at all times be
subject to any directions of the Board of Directors of Advance, its
Executive Committee or any committee or officer of Advance acting
pursuant to authority given by the Board of Directors.
D. The foregoing notwithstanding, with the approval of the shareholders
and the directors of Advance given in the manner prescribed by Sections
(15(a) and 15(c), respectively, of the Investment Company Act of 1940 for
the approval of investment advisory contracts and their terms, ACM may
appoint another entity, including an affiliated company of ACM, to act as
sub advisor to furnish to Advance on behalf of ACM the services specified
in paragraph (A) of the Section II and Section IV of this Agreement. Such
services shall be subject to the requirements of paragraphs (B) and (C) of
this Section II and Sections IV and VI and would be provided under the terms
of a Sub advisory Agreement between ACM and the sub advisor.
III. Allocation of Expenses
The expenses of Advance and the expenses of ACM in performing its
functions under this Agreement shall be divided into two classes, to wit:
(i) those expenses which will be paid in full by ACM, as set forth in
subparagraph "A" hereof, and (ii) those expenses which will be paid in
full by Advance, as set forth in subparagraph "B" hereof.
A. With respect to the duties of ACM under Section II above, it shall pay in
full for (a) the salaries and employment benefits of all employees of ACM
who are engaged in providing these services, (b) adequate office space and
suitable office equipment for such employees, (c) all telephone and postage
costs relating to such functions and (d) the fees and expenses of any sub
advisor appointed pursuant to the provisions of paragraph (D) of Section II
of this Agreement. In addition, if requested by Advance, ACM shall pay the
fees and expenses of all directors of Advance who are employees of ACM or
an affiliated corporation and the salaries and employment benefits of all
officers or employees of Advance who are affiliated persons of ACM.
B. Advance shall pay in full for all of its expenses which are not listed
above (other than those assumed by ACM or its affiliates in their capacity
as Administrator for Advance) including (a) the costs of printing
prospectuses and reports to shareholders of Advance; (b) the costs of
printing all proxy statements and all other costs and expenses of meetings
of shareholders of Advance except preparation of proxy statements and
mailing costs; (c) interest, taxes, brokerage commissions and premiums
on fidelity insurance; (d) audit fees and expenses of independent
accountants and legal fees and expenses of attorneys, but not of attorneys
who are employees of ACM; (e) fees and expenses of its directors, but not
of directors who are employees of ACM; (f) custodian fees and expenses;
(g) transfer agency fees and expenses; (h) fees payable by Advance under
the Securities Act of 1933, the Investment Company Act of 1940, and the
securities or "Blue Sky" laws of any jurisdiction; (i) fees and assessments
of the Investment Company Institute or any successor organization; (j) such
nonrecurring or extraordinary expenses as may arise, including litigation
affecting Advance and any indemnification by Advance of its officers,
directors, employees and agents with respect thereto; (k) the costs and
expenses provided for in any Administration Agreement, including amendments
thereto, contemplated by subsection C of this section III; and (l) the costs
and expenses provided for in any distribution plan adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940. In the event that any of
the foregoing shall, in the first instance, be paid by ACM, Advance shall
pay the same to ACM on presentation of a statement with respect thereto.
C. ACM or an affiliate of ACM may also act as administrator of Advance if at
the time in question there is a separate agreement ("Administration Agreement")
covering such functions between Advance and ACM or such affiliate. The
corporation, whether ACM or its affiliate, which is the party to the
Administration Agreement with Advance is referred to as the "Administrator".
Each Administration Agreement shall provide in substance that it shall not go
into effect, or may be amended, or a new agreement covering the same topics
between Advance and the Administrator may be entered into only if the terms
of such Administration Agreement, such amendment or such new agreement have
been approved by the Board of Directors of Advance, including the vote of a
majority of the directors who are not "interested persons" as defined in the
Investment Company Act of 1940, of either party to the Administration
Agreement, such amendment or such new agreement (considering ACM to be such
a party even if at the time in question, the Administrator is an affiliate
of ACM), cast in person at a meeting called for the purpose of voting on such
approval. Such a vote is referred to as a "disinterested director" vote.
Each Administration Agreement shall also provide in substance for its
continuance, unless terminated, for a specified period which shall not
exceed two years from the date of its execution and from year to year
thereafter only if such continuance is specifically approved at least
annually by a disinterested director vote and that any disinterested
director vote shall include a determination that (i) the Administration
Agreement, amendment, new agreement or continuance in question is in the
best interests of Advance and its shareholders; (ii) the services to be
performed under the Administration Agreement as amended, new agreement or
agreement to be continued are services required for the operation of
Advance; (iii) the Administrator can provide services the nature and
quality of which are at least equal to those provided by others offering
the same or similar services; and (iv) the fees for such services are fair
and reasonable in the light of the usual and customary charges made by
others for services of the same nature and quality. Any Administration
Agreement may also provide in substance that any disinterested director
vote may be conditioned on the favorable vote of the holders of a majority
(as defined in or under the Investment Company Act of 1940) of the
outstanding shares of each class of Advance. Each Administration Agreement
shall also provide in substance that it may be terminated by the Administrator
at any time without penalty upon giving Advance 120 days' written notice
(such notice may be waived by Advance) and may be terminated by Advance at
any time without penalty upon giving the Administrator sixty (60) days'
written notice (which notice may be waived by the Administrator), provided
that such termination of Advance shall be directed or approved by the vote
of a majority of the Board of Directors (as defined in or under the
Investment Company Act of 1940) of the outstanding shares of each class
of Advance.
IV. Brokerage
ACM shall place purchase and sale orders with brokers and/or dealers who in
the judgment of ACM are able to execute the orders as expeditiously as
possible and at the best obtainable price. Generally, in order not to
risk a possible adverse change in price, ACM will make inquiry of brokers
and/or dealers who on the basis of interest shown and past experience ACM
believes can execute the order as expeditiously as possible and at the best
obtainable price.
ACM is authorized to allocate brokerage and principal business to members
of securities exchanges, brokers and dealers ("brokers") who provide
brokerage and research services (as such services are defined in Section
28(e) of the Securities and Exchange Act of 1934) for Advance and/or other
accounts for which ACM exercises investment discretion (as that term is
defined in Section 3(a)(35) of the aforesaid Act) and to cause Advance to
pay a commission for effecting a securities transaction in excess of the
amount another broker would have charged for effecting that transaction
if ACM determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that
particular transaction or ACM's overall responsibilities with respect
to the accounts as to which it exercises investment discretion. ACM
shall use its judgment in determining that the amount of commissions
paid is reasonable in relation to the value of brokerage and research
services received and need not place or attempt to place a specific
dollar value on research services received or on the portion of the
commission rate reflecting such services. In demonstrating that such
determinations were in good faith, ACM shall be prepared to show that
the commissions allocated or paid for research services were for purposes
contemplated by this Agreement, that the commissions paid were within a
reasonable range and that commissions paid were not allocated or paid for
products or services which were readily and customarily available and
offered to the public on a commercial basis. ACM is also authorized to
consider sales of shares as a factor in the selection of brokers to
execute brokerage and principal portfolio transactions, subject to the
requirements of best execution, (i.e., that such brokers are able to
execute the order quickly and at the best obtainable price).
V. Compensation of ACM
As compensation in full for services rendered and for the facilities and
personnel furnished under sections I, II and IV of this Agreement, Advance
will pay to ACM for each day the fees specified in Exhibit A hereto.
The amounts payable to ACM shall be determined as of the close of business
each day; shall, except as set forth below, be based upon the value of net
assets computed in accordance with the Articles of Incorporation of Advance;
shall be paid in arrears whenever requested by ACM; and provided, however,
that each of the Funds of Advance will pay a portion of the total fee
payable by Advance in an amount equal to the proportion that such Funds'
average daily net assets bears to the average daily net assets of Advance.
In computing the value of the net assets of Advance, there shall be excluded
the amount owed to Advance in respect to shares which have been sold but
not yet paid to ACM or any of its affiliates.
Notwithstanding the foregoing, if the laws, regulations or policies of any
state in which shares of Advance are qualified for sale limit the operating
and management expenses of Advance, ACM will refund to the appropriate Fund
the amount by which such expenses exceed the lowest of such state limitations.
VI. Undertakings of ACM; Liability
ACM shall give to Advance the benefit of its best judgment, efforts and
facilities in rendering services under this Agreement, but shall be free to
render services to others similar to that rendered under this Agreement or
of a different nature except as such services may conflict with the services
to be rendered or the duties to be assumed under this Agreement.
ACM shall at all times be guided by and be subject to Advance's investment
policies, the provisions of its Articles of Incorporation and By-laws as
each shall from time to time be amended, and to the decision and
determination of Advance's Board of Directors.
This Agreement shall be performed in accordance with the requirements of
the Investment Company Act of 1940, the Investment Advisers Act of 1940,
the Securities Act of 1933 and the Securities Exchange Act of 1934, to
the extent that the subject matter of this Agreement is within the purview
of such Acts. Insofar as applicable to ACM as an investment adviser and
affiliated person of Advance, ACM shall comply with the provisions of the
Investment Company Act of 1940, the Investment Advisers Act of 1940 and
the respective Rules and Regulations of the Securities and Exchange
Commission.
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of ACM,
it shall not be subject to liability to Advance or to any stockholder of
Advance for any act or omission in the course of or connected with
rendering services thereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
VII. Duration of this Agreement
This Agreement shall become effective at the start of business on the date
hereof and shall continue in effect, unless terminated as hereinafter
provided, for a period of one year and from year to year thereafter only
if such continuance is specifically approved at least annually by the
Board of Directors, including the vote of a majority of the directors
who are not parties to this Agreement or "interested persons" (as defined
in the Investment Company Act of 1940) of any such party, cast in person
at a meeting called for the purpose of voting on such approval, or by the
vote of the holders of a majority (as so defined) of the outstanding
voting securities of each class of Advance and by the vote of a majority
of the directors who are not parties to this Agreement or "interested
persons" (as so defined) of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
As additional investment portfolios ("New Fund") other than the existing
Funds are established by Advance, this Agreement shall become effective
with respect to each such New Fund upon the initial public offering of such
New Fund, provided that this Agreement has been approved previously for
continuation, together with any related agreements, by vote of the Board
of Directors of Advance including the majority of directors who are not
parties to this Agreement or "interested persons" (as defined in the
Investment Company Act of 1940) of any such party, cast in person at a
meeting held before the initial public offering of such New Fund and called
for the purpose of voting as such approval.
VIII. Termination
This Agreement may be terminated by ACM at any time without penalty upon
giving Advance sixty (60) days' written notice (which notice may be waived
by Advance) and may be terminated by Advance at any time without penalty
upon giving ACM sixty (60) days' written notice (which notice may be
waived by ACM), provided that such termination by Advance shall be directed
or approved by the vote of a majority of the Board of Directors of Advance
in office at the time or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of
Advance. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2 (a)(4) of the Investment Company Act of 1940.
ACM hereby acknowledges that all records pertaining to Advance's investment
are the property of Advance, and in the event that this Agreement is
terminated and a transfer of investment advisory services to someone
other than ACM or an affiliated company should ever occur, ACM will
promptly, and at its own cost, take all steps necessary to segregate
such records and deliver them to Advance.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers, as of the day and
year first above written.
ADVANCE CAPITAL I, INC.
By -----------------------------
Xxxxxx X. Xxxxxxxx, President
ATTEST: ---------------------------------------
Xxxxx X. Xxxxxxxx, Vice President
ADVANCE CAPITAL MANAGEMENT, INC.
By: -----------------------------------
Xxxxxxxxxxx X. Xxxxxx, President
ATTEST: --------------------------------------
Xxxxx X. Xxxxxxxxxx, Vice President
Exhibit A
COMPENSATION OF ADVANCE CAPITAL MANAGEMENT, INC.
AS INVESTMENT ADVISER TO ADVANCE CAPITAL I, INC.
For services provided and expenses assumed pursuant to the Investment
Advisory Agreement, Advance Capital Management, Inc. ("ACM") shall be paid
an advisory fee, computed daily and paid monthly, at the annual rate, as
displayed in the table below, of the average daily net assets of each
Fund as those terms are defined in the Investment Advisory Agreement and
subject to the limitations therein. From time to time, as it may deem
appropriate in its sole discretion, ACM may waive a portion or all of
such fee.
ANNUAL
FUND NAME RATE
------------------------- ------------
Equity Growth Fund
- First $500 million .70%
- Above $500 million .65%
Balanced Fund
- First $500 million .70%
- Above $500 million .65%
Retirement Income Fund
- First $500 million .50%
- Above $500 million .45%
Core Equity Fund .80%
Notes:
1 - Annual rate lowered on April 28, 1989 from .7% to .4% on the Bond Fund.
2 - Initial annual rate approved at July 24, 1992 Board of Directors Meeting
for the Retirement Income Fund.
3 - Cornerstone Stock Fund fees approved at July 24, 1998 Board of Directors
Meeting.
4 - Revision to include step at $200 million on the Equity Growth Fund,
the Balanced Fund and the Retirement Income Fund approved at
July 28, 2000 Board of Directors Meeting.
5 - Combination of the Bond and Retirement Income Funds in April, 2004.
Resolution passed by the Board of Directors of Advance Capital I, Inc.
6 - August 3, 2007, Shareholders voted to increase steps on management fee
from $200 Million to $500 Million and increase fees for assets in excess
of $500 Million for the Retirement Income, the Balanced and the Equity
Growth Funds.
7 - Core Equity Fund fees approved at October 1, 2007 special meeting of the
Board of Directors.
