INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
INSTITUTIONAL EQUITY FUNDS, INC.
AND
X. XXXX PRICE ASSOCIATES, INC.
INVESTMENT MANAGEMENT AGREEMENT, made as of the 9th day of February, 2000,
by and between INSTITUTIONAL EQUITY FUNDS, INC., a Maryland corporation (the
"Corporation"), and X. XXXX PRICE ASSOCIATES, INC., a corporation organized and
existing under the laws of the State of Maryland (hereinafter called the
"Manager").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in business as an open-end management
investment company and is registered as such under the federal Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Corporation is authorized to issue shares of capital stock
("Shares") in the Institutional Small-Cap Stock Fund (the "Fund"), a separate
series of the Corporation whose Shares represent interests in a separate
portfolio of securities and other assets ("Fund Shares"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment supervisory services and is registered as an investment adviser under
the federal Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires the Manager to render investment supervisory
services to the Fund in the manner and on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. DUTIES AND RESPONSIBILITIES OF MANAGER.
A.
INVESTMENT MANAGEMENT SERVICES. The Manager shall act as investment manager and
shall supervise and direct the investments of the Fund in accordance with the
Fund's investment objective, program and restrictions as provided in the
Corporation's prospectus, on behalf of the Fund, as amended from time to time,
and such other limitations as the Corporation may impose by notice in writing to
the Manager. The Manager shall obtain and evaluate such information relating to
the economy, industries, businesses, securities markets and securities as it may
deem necessary or useful in the discharge of its obligations hereunder and shall
formulate and implement
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a continuing program for the management of the assets and resources of the Fund
in a manner consistent with its investment objective. In furtherance of this
duty, the Manager, as agent and attorney-in-fact with respect to the
Corporation, is authorized, in its discretion and without prior consultation
with the Corporation, to:
(1)
buy, sell, exchange, convert, lend, and otherwise trade in any stocks, bonds,
and other securities or assets; and
(2)
place orders and negotiate the commissions (if any) for the execution of
transactions in securities with or through such brokers, dealers, underwriters
or issuers as the Manager may select.
B.
FINANCIAL, ACCOUNTING, AND ADMINISTRATIVE SERVICES. The Manager shall maintain
the existence and records of the Corporation; maintain the registrations and
qualifications of Fund Shares under federal and state law; monitor the
financial, accounting, and administrative functions of the Fund; maintain
liaison with the various agents employed for the benefit of the Fund by the
Corporation (including the Corporation's transfer agent, custodian, independent
accountants and legal counsel) and assist in the coordination of their
activities on behalf of the Fund.
C.
REPORTS TO FUND. The Manager shall furnish to or place at the disposal of the
Corporation or Fund, as appropriate, such information, reports, evaluations,
analyses and opinions as they may, at any time or from time to time, reasonably
request or as the Manager may deem helpful to the Fund.
D.
REPORTS AND OTHER COMMUNICATIONS TO FUND SHAREHOLDERS. The Manager shall assist
in developing all general shareholder communications, including regular
shareholder reports.
E.
FUND PERSONNEL. The Manager agrees to permit individuals who are officers or
employees of the Manager to serve (if duly elected or appointed) as officers,
directors, members of any committee of directors, members of any advisory board,
or members of any other committee of the Corporation, without remuneration or
other cost to the Fund or the Corporation.
F.
PERSONNEL, OFFICE SPACE, AND FACILITIES OF MANAGER. The Manager at its own
expense shall furnish or provide and pay the cost of such office space, office
equipment, office personnel, and office services as the Manager requires in the
performance of its investment advisory and other obligations under this
Agreement.
PAGE 22
2. ALLOCATION OF EXPENSES.
A. EXPENSES PAID BY MANAGER.
(1)
SALARIES AND FEES OF OFFICERS. The Manager shall pay all salaries, expenses, and
fees of the officers and directors of the Corporation who are affiliated with
the Manager.
(2)
ASSUMPTION OF FUND EXPENSES BY MANAGER. The payment or assumption by the Manager
of any expense of the Corporation or Fund, as appropriate, that the Manager is
not required by this Agreement to pay or assume shall not obligate the Manager
to pay or assume the same or any similar expense of the Corporation or Fund, as
appropriate, on any subsequent occasion.
B.
EXPENSES PAID BY FUND. The Corporation or Fund, as appropriate, shall bear all
expenses of its organization, operations, and business not specifically assumed
or agreed to be paid by the Manager as provided in this Agreement. In
particular, but without limiting the generality of the foregoing, the
Corporation or Fund, as appropriate, shall pay:
(1)
CUSTODY AND ACCOUNTING SERVICES. All expenses of the transfer, receipt,
safekeeping, servicing and accounting for the cash, securities, and other
property of the Corporation, for the benefit of the Fund, including all charges
of depositories, custodians, and other agents, if any;
(2)
SHAREHOLDER SERVICING. 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 the Fund,
if any;
(3)
SHAREHOLDER COMMUNICATIONS. All expenses of preparing, setting in type,
printing, and distributing reports and other communications to shareholders;
(4)
SHAREHOLDER MEETINGS. All expenses incidental to holding meetings of Fund
shareholders, including the printing of notices and proxy material, and proxy
solicitation therefor;
(5)
PROSPECTUSES. All expenses of preparing, setting in type, and printing of annual
or more frequent revisions of the Fund's prospectus and of mailing them to
shareholders;
(6)
PRICING. All expenses of computing the Fund's net asset value per share,
including the cost of any equipment or services used for obtaining price
quotations;
(7)
COMMUNICATION EQUIPMENT. All charges for equipment or services used for
communication between the Manager or the Corporation or Fund and the custodian,
transfer agent or any other agent selected by the Corporation;
(8)
LEGAL AND ACCOUNTING FEES AND EXPENSES. All charges for services and expenses of
the Corporation's legal counsel and independent auditors for the benefit of the
Fund;
PAGE 23
(9)
DIRECTORS' FEES AND EXPENSES. All compensation of directors, other than those
affiliated with the Manager, and all expenses incurred in connection with their
service;
(10)
FEDERAL REGISTRATION FEES. All fees and expenses of registering and maintaining
the registration of the Corporation under the Act and the registration of the
Fund's shares under the Securities Act of 1933, as amended (the "'33 Act"),
including all fees and expenses incurred in connection with the preparation,
setting in type, printing, and filing of any registration statement and
prospectus under the '33 Act or the Act, and any amendments or supplements that
may be made from time to time;
(11)
STATE FILING FEES. All fees and expenses imposed on the Fund with respect to the
sale of the Fund shares under securities laws of various states or
jurisdictions, and, under all other laws applicable to the Fund, or its business
activities (including registering the Fund as a broker-dealer, or any officer of
the Fund or any person as agent or salesman of the Fund in any state);
(12)
ISSUE AND REDEMPTION OF FUND SHARES. All expenses incurred in connection with
the issue, redemption, and transfer of the Fund's shares, including the expense
of confirming all share transactions;
(13)
BONDING AND INSURANCE. All expenses of bond, liability, and other insurance
coverage required by law or deemed advisable by the Corporation's board of
directors;
(14)
BROKERAGE COMMISSIONS. All brokers' commissions and other charges incident to
the purchase, sale, or lending of the Fund's portfolio securities;
(15)
TAXES. All taxes or governmental fees payable by or with respect of the
Corporation or Fund, as appropriate, to federal, state, or other governmental
agencies, domestic or foreign, including stamp or other transfer taxes;
(16)
TRADE ASSOCIATION FEES. All fees, dues, and other expenses incurred in
connection with the Corporation's or Fund's, as appropriate, membership in any
trade association or other investment organization; and
(17)
NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring expenses as may
arise, including the costs of actions, suits, or proceedings to which the
Corporation or Fund, as appropriate, is a party and the expenses the Corporation
or Fund, as appropriate, may incur as a result of its legal obligation to
provide indemnification to its officers, directors, and agents.
3.
MANAGEMENT FEE. The Fund shall pay the Manager a fee computed as follows,
based on the value of the net assets of the Fund:
A.
FEE RATE. The fee shall be at the annual rate of 0.65% of the average daily net
assets of the Fund.
PAGE 24
B.
METHOD OF COMPUTATION. The fee shall be accrued for each calendar day and the
sum of the daily fee accruals shall be paid monthly to the Manager on the first
business day of the next succeeding calendar month. The daily fee accruals will
be computed by multiplying the fraction of one over the number of calendar days
in the year by the applicable annual rate described in subparagraph (a) of this
Paragraph 3, and multiplying this product by the net assets of the Fund as
determined in accordance with the Fund's prospectus as of the close of business
on the previous business day on which the Fund was open for business.
C.
EXPENSE LIMITATION. As part of the consideration for the Fund entering into this
Agreement, the Manager hereby agrees to limit the aggregate expenses of every
character incurred by the Fund, including but not limited to Fees of the Manager
computed as hereinabove set forth, but excluding interest, taxes, brokerage, and
other expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, ("Manager Limitation"). Under
the Manager Limitation, the Manager agrees that through December 31, 2001, such
expenses shall not exceed 0.75% of the average daily net assets of the Fund
("0.75% Expense Limitation"). To determine the Manager's liability for the
Fund's expenses over the 0.75% Expense Limitation, the amount of allowable
year-to-date expenses shall be computed daily by pro rating the 0.75% Expense
Limitation based on the number of days elapsed within the fiscal year of the
Fund, or limitation period, if shorter ("Pro Rated Limitation"). The Pro Rated
Limitation shall be compared to the expenses of the Fund recorded through the
prior day in order to produce the allowable expenses to be recorded for the
current day ("Allowable Expenses"). If the Fund's Management Fee and other
expenses for the current day exceed the Allowable Expenses, the Management Fee
for the current day shall be reduced by such excess ("Unaccrued Fees"). In the
event the excess exceeds the amount due as the Management Fee, the Manager shall
be responsible to the Fund for the additional excess ("Other Expenses Exceeding
Limit"). If at any time up through and including December 31, 2001, the Fund's
Management Fee and other expenses for the current day are less than the
Allowable Expenses, the differential shall be due to the Manager as payment of
cumulative Unaccrued Fees (if any) or as payment for cumulative Other Expenses
Exceeding Limit (if any). If cumulative Unaccrued Fees or cumulative Other
Expenses Exceeding Limit remain at December 31, 2001, these amounts shall be
paid to the Manager in the future provided that: (1) no such payment shall be
made to the Manager after December 31, 2003; and (2) such payment shall only be
made to the extent that it does not result in the Fund's aggregate expenses
exceeding an expense limit of 0.75% of average daily net assets. The Manager may
voluntarily agree to an additional expense limitation (any such additional
expense limitation hereinafter referred to as an "Additional Expense
Limitation"), at the same or a different level and for the same or a different
period of time beyond December 31, 2001 (any such additional period being
hereinafter referred to an as "Additional Period") provided, however, that: (1)
the calculations and methods of payment shall be as described above; (2) no
payment for cumulative Unaccrued Fees or cumulative Other Expenses Exceeding
Limit shall be made to the Manager more than two years after the end of an
Additional Period; and (3) payment for cumulative Unaccrued Fees or cumulative
Other Expenses Exceeding Limit after the expiration of the Additional Period
shall only be made to the extent it does not result in the Fund's aggregate
expenses exceeding the Additional Expense Limitation to which the unpaid amounts
relate.
D.
PRORATION OF FEE. If this Agreement becomes effective or terminates before the
end of any month, the Fee for the period from the effective date to the end of
such month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated
PAGE 25
according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs.
4.
BROKERAGE. Subject to the approval of the board of directors, the Manager, in
carrying out its duties under Paragraph 1.A., may cause the Corporation, with
respect to the Fund, to pay a broker-dealer which furnishes brokerage or
research services [as such services are defined under Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "'34 Act")], a higher
commission than that which might be charged by another broker-dealer which does
not furnish brokerage or research services or which furnishes brokerage or
research services deemed to be of lesser value, if such commission is deemed
reasonable in relation to the brokerage and research services provided by the
broker-dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Manager with respect to the accounts as to which
it exercises investment discretion (as such term is defined under Section
3(a)(35) of the '34 Act).
5.
MANAGER'S USE OF THE SERVICES OF OTHERS. The Manager may (at its cost except as
contemplated by Paragraph 4 of this Agreement) employ, retain or otherwise avail
itself of the services or facilities of other persons or organizations for the
purpose of providing the Manager or the Corporation or Fund, as appropriate,
with such statistical and other factual information, such advice regarding
economic factors and trends, such advice as to occasional transactions in
specific securities or such other information, advice or assistance as the
Manager may deem necessary, appropriate or convenient for the discharge of its
obligations hereunder or otherwise helpful to the Corporation or Fund, as
appropriate, or in the discharge of Manager's overall responsibilities with
respect to the other accounts which it serves as investment manager.
6.
OWNERSHIP OF RECORDS. All records required to be maintained and preserved by the
Corporation or Fund pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the Act and maintained
and preserved by the Manager on behalf of the Corporation or Fund, as
appropriate, are the property of the Corporation or Fund, as appropriate, and
will be surrendered by the Manager promptly on request by the Corporation or
Fund, as appropriate.
7.
REPORTS TO MANAGER. The Corporation or Fund, as appropriate, shall furnish or
otherwise make available to the Manager such prospectuses, financial statements,
proxy statements, reports, and other information relating to the business and
affairs of the Corporation or Fund, as appropriate, as the Manager may, at any
time or from time to time, reasonably require in order to discharge its
obligations under this Agreement.
8.
SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the freedom of
the Manager or any affiliated person of the Manager to render investment
supervisory and corporate administrative services to other investment companies,
to act as investment manager or investment counselor to other persons, firms or
corporations, or to engage in other business activities; but so long as this
Agreement or any extension, renewal or amendment hereof shall remain in effect
or until the Manager shall otherwise consent, the Manager shall be the only
investment manager to the Fund.
9.
LIMITATION OF LIABILITY OF MANAGER. Neither the Manager nor any of its officers,
directors, or employees, nor any person performing executive, administrative,
trading, or other functions for the Corporation or Fund (at the direction or
request of the Manager) or the Manager in
PAGE 26
connection with the Manager's discharge of its obligations undertaken or
reasonably assumed with respect to this Agreement, shall be liable for any error
of judgment or mistake of law or for any loss suffered by the Corporation or
Fund in connection with the matters to which this Agreement relates, except for
loss resulting from willful misfeasance, bad faith, or gross negligence in the
performance of its or his duties on behalf of the Corporation or Fund or from
reckless disregard by the Manager or any such person of the duties of the
Manager under this Agreement.
10.
TERM OF AGREEMENT. The term of this Agreement shall begin on the date first
above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect through April 30, 2001. Thereafter, this
Agreement shall continue in effect from year to year, with respect to the Fund,
subject to the termination provisions and all other terms and conditions hereof,
so long as such continuation shall be specifically approved at least annually
(a) by either the board of directors of the Corporation, or by vote of a
majority of the outstanding voting securities of the Fund; (b) in either event
by the vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the directors of the Corporation, with respect
to the Fund, who are not parties to this Agreement or interested persons of any
such party; and (c) the Manager shall not have notified the Corporation, in
writing, at least 60 days prior to April 30, 2001 or prior to April 30th of any
year thereafter, that it does not desire such continuation. The Manager shall
furnish to the Corporation, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
11.
AMENDMENT AND ASSIGNMENT OF AGREEMENT. This Agreement may not be amended or
assigned without the affirmative vote of a majority of the outstanding voting
securities of the Fund, and this Agreement shall automatically and immediately
terminate in the event of its assignment.
12.
TERMINATION OF AGREEMENT. This Agreement may be terminated by either party
hereto, without the payment of any penalty, upon 60 days' prior notice in
writing to the other party; provided, that in the case of termination by the
Corporation, with respect to the Fund, such action shall have been authorized by
resolution of a majority of the directors of the Corporation who are not parties
to this Agreement or interested persons of any such party, or by vote of a
majority of the outstanding voting securities of the Fund.
13. MISCELLANEOUS.
A.
CAPTIONS. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
B.
INTERPRETATION. Nothing herein contained shall be deemed to require the
Corporation to take any action contrary to its Articles of Incorporation or
By-Laws, or any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or
PAGE 27
deprive the board of directors of the Corporation of its responsibility for and
control of the conduct of the affairs of the Fund.
C.
DEFINITIONS. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Act shall be resolved by reference to such term or provision of the Act
and to interpretations thereof, if any, by the United States courts or, in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission validly issued pursuant to the
Act. Specifically, the terms "vote of a majority of the outstanding voting
securities," "interested person," "assignment," and "affiliated person," as used
in Paragraphs 2, 8, 9, 10, 11, and 12 hereof, shall have the meanings assigned
to them by Section 2(a) of the Act. In addition, where the effect of a
requirement of the Act reflected in any provision of this Agreement is relaxed
by a rule, regulation or order of the Securities and Exchange Commission,
whether of special or of general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
Attest: INSTITUTIONAL EQUITY
FUNDS, INC.
___________________________ By: _________________________________
Xxxxxxxx X. Xxxxxxx, M. Xxxxx Xxxxx,
Secretary President
Attest: X. XXXX PRICE
ASSOCIATES, INC.
___________________________ By: _________________________________
Xxxxxxx X. XxxXxxx, Xxxxx X. Xxxxxxx,
Assistant Secretary Managing Director
