EXHIBIT (D)(4)
May 1, 2004
XXXXXXX FINANCIAL INDUSTRIES FUND
INVESTMENT ADVISORY AGREEMENT
XXXXXXX INVESTORS TRUST on behalf of
XXXXXXX FINANCIAL INDUSTRIES FUND
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
XXXXXXX ASSET MANAGEMENT CORPORATION
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Gentlemen:
The undersigned, Xxxxxxx Investors Trust, a Delaware statutory trust
(the "TRUST"), is an investment company registered under the Investment Company
Act of 1940, as amended ("1940 ACT"). The Trust hereby engages you to act as the
investment adviser to Xxxxxxx Financial Industries Fund (the "FUND"), a series
of the Trust, subject to the terms and conditions set forth below.
SECTION 1. INVESTMENT ADVISORY SERVICES.
a. You will regularly provide the Fund with investment research, advice
and supervision and will furnish continuously an investment program for the
Fund, consistent with the investment objectives and policies of the Fund. You
will from time to time recommend to the Fund what securities, in your opinion,
should be purchased or sold by the Fund and what portion of the assets of the
Fund should remain uninvested. In conducting such review and making such
recommendations, you will be guided by the Fund's investment policies and
restrictions as described in the Trust's registration statement under the
Securities Act of 1933, as amended, and the 1940 Act, as filed with the
Securities and Exchange Commission (the "SEC") and as amended from time to time;
by policies adopted by the Trust's Board of Trustees (the "BOARD"); and by the
provisions of the 1940 Act and the rules and regulations thereunder, subject
however to such exemptions as may be granted by the SEC by any rule, regulation,
order or interpretative position, so that at all times the Fund will be in
compliance with its investment policies and restrictions and with the
requirements of the 1940 Act and the rules and regulations thereunder, subject
however to such exemptions as may be granted by the SEC by any rule, regulation,
order or interpretive position. The Trust agrees to supply you with copies of
all such documents and to notify you of any changes in the Fund's investment
policies and restrictions.
b. In rendering such investment advisory services to the Fund pursuant
to this Agreement, you may employ, retain or otherwise avail yourself of the
services or facilities of other persons or organizations for the purpose of
providing you or the Fund with statistical and other factual information, advice
regarding economic factors and trends, advice as to occasional transactions in
specific securities or any other information, advice or assistance that you may
deem necessary, appropriate or convenient for the discharge of your obligations
hereunder or otherwise helpful to the Fund or in the discharge of your overall
responsibilities with respect to the other accounts for which you or your
affiliates serve as investment adviser.
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c. You may employ one or more sub-investment advisers (each, a
"SUBADVISER") to provide investment advisory services to the Fund by entering
into a written agreement with each Subadviser. However, any agreement first will
be approved in accordance with the requirements of the 1940 Act as such
requirements may be modified or superseded by rule, regulation, order or
interpretive position of the SEC. The authority given to you in this Agreement
may be delegated by you under any such agreement; PROVIDED, HOWEVER, that any
Subadviser will be subject to the same restrictions and limitations on
investments and brokerage discretion as you are. The Trust agrees that you will
not be accountable to the Fund or its shareholders for any loss or other
liability relating to specific investments directed by any Subadviser, even
though you retain the right to reverse any such investment, because, in the
event a Subadviser is retained, you and the Fund will rely almost exclusively on
the expertise of such Subadviser for the selection and monitoring of specific
investments.
d. You and any person performing executive or trading functions for the
Fund, whose services were made available to the Fund by you, are specifically
authorized to allocate brokerage and principal business to firms that provide
such services or facilities and to cause the Fund to pay a member of a
securities exchange or any other securities broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, if you or such person determine in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services (as such services are defined in Section 28(e)
of the Securities Exchange Act of 1934) provided by such member, broker or
dealer, viewed in terms of either that particular transaction or your or such
person's overall responsibilities with respect to the accounts as to which you
or such person exercise investment discretion (as that term is defined in
Section 3(a)(35) of the Securities Exchange Act of 1934).
SECTION 2. BOOKS, RECORDS AND REPORTS, ETC.
a. You will maintain all books and records with respect to the Fund's
securities transactions required by sub-paragraphs (b)(5), (6), (7), (9) and
(10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those
records being maintained by the Trust's administrator, custodian or transfer
agent) and preserve such records for the periods prescribed therefor by Rule
31a-2 under the 1940 Act.
b. You will furnish to the Board, at its regularly scheduled meetings,
and at such other times as the Board may reasonably request, a resume of the
portfolio and report on all matters pertaining to your services as investment
adviser. In addition, you will furnish the Trust with such reports and other
data as the Board may request, including, without being limited to, industry
surveys, news of recent developments, statistical data, and such other
information as may keep the Board properly informed on developments relating to
the Fund's portfolio, or similar data relating to securities which you recommend
for inclusion in the portfolio of the Fund.
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SECTION 3. MULTIPLE CAPACITIES.
a. Nothing contained in this Agreement will prohibit you from acting
and being separately compensated for acting, in one or more capacities on behalf
of the Trust including, but not limited to, the capacities of administrator,
broker and distributor. The Trust understands that you may act as investment
adviser or in other capacities on behalf of other investment companies and
customers. While information and recommendations you supply to the Fund will in
your judgment be appropriate under the circumstances and in light of the
investment objectives of the Fund, they may be different from the information
and recommendations you supply to other investment companies and customers. You
will give the Fund equitable treatment under the circumstances in supplying
information, recommendations and any other services requested of you, but you
will not be required to give preferential treatment to the Fund as compared with
the treatment given to any other investment company or customer. Whenever you
will act in multiple capacities on behalf of the Fund, you will maintain the
appropriate separate accounts and records for each such capacity. All
information and advice supplied by you to the Fund hereunder will be for its own
use exclusively.
b. Nothing in this Agreement will in any way limit or restrict you or
any of your officers, directors, or employees from buying, selling or trading in
any securities for your or their own accounts or other accounts.
c. When you deem the purchase or sale of a security to be in the best
interest of the Fund as well as other clients, you may, to the extent permitted
by applicable laws and regulations, but shall be under no obligations to,
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, you will
allocate the securities so purchased or sold, as well as the expenses incurred
in the transaction, in the manner you consider to be the most equitable and
consistent with your fiduciary obligations to the Fund and to your other
clients.
d. You are an independent contractor and not an employee of the Trust
for any purpose. If you ever give any advice to your clients concerning the
shares of the Trust, you will act solely as investment counsel for such clients
and not in any way on behalf of the Trust or the Fund.
SECTION 4. PAYMENT OF EXPENSES.
a. Except as otherwise provided herein, you will at your own expense
furnish to the Trust office space in your offices or in such other place as may
be agreed upon from time to time, and all necessary office facilities, equipment
and personnel for managing the Fund's investments, and you will arrange, if
desired by the Trust, for members of your organization to serve as trustees,
officers or agents of the Trust.
b. You will pay directly or reimburse the Trust for the compensation
(if any) of the Trustees who are affiliated with, or interested persons of, you
and all officers of the Trust who are your employees.
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c. All of the ordinary business expenses incurred in the operations of
the Fund and the offering of its shares shall be borne by the Fund unless
specifically otherwise provided in this agreement. The Trust, on behalf of the
Fund to the extent allowable to the Fund, will assume and will pay: (i) charges
and expenses for fund accounting, pricing and appraisal services and related
overhead, including, to the extent such services are performed by your
personnel, or your affiliates, office space and facilities and personnel
compensation, training and benefits; (ii) the charges and expenses of auditors;
(iii) the charges and expenses of any administrator, custodian, transfer agent,
plan agent, dividend disbursing agent and registrar appointed by the Trust; (iv)
issue and transfer taxes chargeable to the Fund in connection with securities
transactions to which the Fund is a party; (v) insurance premiums, interest
charges, dues and fees for membership in trade associations and all taxes and
corporate fees payable by the Trust to federal, state or other governmental
agencies; (vi) fees and expenses involved in registering and maintaining
registrations of the Trust and/or its shares with the SEC, state or blue sky
securities agencies and foreign countries, including the preparation of
prospectuses and statements of additional information for filing with the SEC;
(vii) all expenses of shareholders' and Trustees' meetings and of preparing,
printing and distributing prospectuses, notices, proxy statements, and reports
to shareholders and reports to governmental agencies; (viii) charges and
expenses of legal counsel to the Trust and the Trustees; (ix) any distribution
fees paid by the Fund in accordance with Rule 12b-1 under the 1940 Act; (x)
compensation of those Trustees of the Trust who are not affiliated with or
interested persons of you, the Trust (other than as Trustees) or Xxxxxxx
Securities, Inc.; (xi) the cost of preparing and printing share certificates;
and (xii) interest on borrowed money, if any.
d. In addition to the expenses described in Section 4(c) above, the
Fund will pay all brokers' and underwriting commissions chargeable to the Fund
in connection with securities transactions to which the Fund is a party.
e. You shall not be obligated to pay any expenses of or for the Fund
not expressly assumed by you pursuant to this Section.
SECTION 5. COMPENSATION FOR SERVICES.
a. The Fund shall pay you, as compensation for your services and
expenses assumed hereunder, a fee as set forth below. Advisory fees payable
hereunder shall be computed daily and paid monthly in arrears.
b. The fee payable hereunder shall be composed of the Basic Fee (as
defined below) and a Performance Adjustment (as defined below) to the Basic Fee
based upon the investment performance of the Fund in relation to the investment
record of a securities index determined by the Board to be appropriate over the
same period, which the Board has designated as the Philadelphia Bank Index (the
"INDEX").
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c. From time to time, the Board may by a vote of the trustees,
including a majority of the trustees who are not interested persons of you or
(other than as Board members) the Fund in the manner prescribed by the 1940 Act
and the rules and regulations thereunder, determine: (i) that another securities
index is a more appropriate benchmark than the Index for purposes of evaluating
the performance of the Trust; and/or (ii) that a Class of shares of the Trust
other than Class A is most appropriate for use in calculating the Performance
Adjustment. After ten days' written notice to you, a successor index (the
"SUCCESSOR INDEX") may be substituted for the Index in prospectively calculating
the Performance Adjustment; and/or a different Class of shares may be
substituted in calculating the Performance Adjustment. However, the calculation
of that portion of the Performance Adjustment attributable to any portion of the
performance period prior to the adoption of the Successor Index will still be
based upon the Trust's performance compared to the Index. The use of a different
Class of shares for purposes of calculating the Performance Adjustment shall
apply to the entire performance period so long as such Class was outstanding at
the beginning of such period. In the event that such Class of shares was not
outstanding for all or a portion of the Performance Period, it may only be used
in calculating that portion of the Performance Adjustment attributable to the
period during which such Class was outstanding and any prior portion of the
Performance Period shall be calculated using Class A shares. Any actions
permitted by this Section 5(c) taken by the Board shall not be effective unless
approved by a majority of the outstanding voting securities of the Fund if so
required by the 1940 Act, subject however to such exemptions as may be granted
by the SEC by any rule, regulation, order or interpretive position from any such
requirement of the 1940 Act.
d. The "BASIC FEE" shall be equal to 0.90% per annum of the Fund's
average daily net assets.
e. The "PERFORMANCE ADJUSTMENT" consists of an adjustment to the
monthly Basic Fee to be made by applying a performance adjustment rate to the
average net assets of the Fund over the Performance Period (as defined below).
The resulting dollar figure shall be added to or subtracted from the Basic Fee
depending on whether the Fund experienced better or worse performance than the
Index.
The performance adjustment rate shall be equal to 0.01% per annum for
each percentage point rounded to the nearer point (the higher point if exactly
one-half point) that the Fund's investment performance for the period was better
or worse than the record of the Index (as then constituted). The maximum
Performance Adjustment is plus or minus 0.10% per annum. In addition, as the
Fund's average daily net assets over the Performance Period may differ
substantially from the Fund's average daily net assets during the current year,
the Performance Adjustment may be further adjusted to the extent necessary to
ensure that the total Performance Adjustment to the Basic Fee on an annualized
basis does not exceed 0.10%.
The "PERFORMANCE PERIOD" shall consist of a rolling 36 month period
consisting of the most recently completed month and the previous 35 months, or
such shorter period since commencement of the Fund's operations.
The Fund's investment performance will be measured by comparing the (i)
opening net asset value of one Class A share of the Fund on the first business
day of the Performance Period with (ii) the closing net asset value of one Class
A share of the Fund as of the last business day of such Performance Period. In
computing the investment performance of the Fund and the investment record of
the Index, distributions of realized capital gains, the value of capital gains
taxes per share paid or payable on undistributed realized long-term capital
gains accumulated to the end of such period and dividends paid out of investment
income on the part of the Fund, and all cash distributions of the companies
whose stock comprise the Index, will be treated as reinvested in accordance with
Rule 205-1 (or any other applicable rule) under the Investment Advisers Act of
1940, as the same from time to time may be amended.
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The computation of the Performance Adjustment shall not be cumulative.
A positive fee adjustment will apply even though the performance of the Fund
over some period of time shorter than the Performance Period has been behind
that of the Index, and, conversely, a negative fee adjustment will apply for the
month even though the performance of the Fund over some period of time shorter
than the Performance Period has been ahead of that of the Index.
f. An appropriate percentage (based on the number of days in the
current month) of the annual Performance Adjustment rate shall be multiplied by
the Fund's average net assets (computed in the manner set forth in the Trust's
registration statement adjusted as provided above, if applicable) determined as
of the close of business on each business day through out the performance
period. The resulting dollar amount is added to or deducted from the Basic Fee.
g. The advisory fee payable hereunder shall be computed daily and paid
monthly in arrears. If this Agreement terminates before the last day of a month,
the Basic Fee then in effect shall be computed on the basis of the period ending
on the last business day on which this Agreement is in effect subject to a pro
rata adjustment based on the number of days elapsed in the current month as a
percentage of the total number of days in such month. The amount of any
Performance Adjustment to the Basic Fee will be computed on the basis of and
applied to net assets averaged over the 36 month period (or such shorter period
since commencement of the Fund's operations) ending on the last business day on
which this Agreement is in effect.
h. You may from time to time agree not to impose all or a portion of
your fee otherwise payable hereunder (in advance of the time such fee or a
portion thereof would otherwise accrue) and/or undertake to pay or reimburse the
Trust for all or a portion of its expenses not otherwise required to be borne or
reimbursed by you, subject to such terms regarding recoupment as from time to
time agreed to by the Board, including a majority of the trustees who are not
interested persons of you. Any such fee reduction or undertaking may be
discontinued or modified by you at any time.
i. Nothing herein will preclude you or your affiliates from executing
brokerage transactions for the Fund, charging the Fund brokerage commissions for
these transactions and deriving a profit from these transactions.
SECTION 6. LIABILITY OF THE INVESTMENT ADVISER.
a. You will be liable for your own acts and omissions caused by your
willful misfeasance, bad faith, or gross negligence in the performance of your
duties or by your reckless disregard of your obligations under this Agreement,
and nothing herein will protect you against any such liability to the Trust, the
Fund or its shareholders. You will not be liable for the acts and omissions of
any agent employed by you, nor for those of any bank, trust company, broker or
other person with whom or into whose hands any moneys, shares of the Trust or
securities and investments may be deposited or come in compliance with the
provisions of this Agreement. You will not be liable for any defect in title of
any property acquired, nor for any loss unless it occurs through your own
willful default. Subject to the first sentence of this section, you will not be
liable for any action taken or omitted on advice, obtained in good faith, of
counsel, provided such counsel is satisfactory to the Trust.
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b. None of the trustees, officers, agents or shareholders of the Trust
will be personally liable hereunder or are assuming any liability for
obligations entered into on behalf of the Trust. All persons dealing with the
Trust must look solely to the property of the Trust for the enforcement of any
claims against the Trust. The Fund will not be liable for any claims against any
other series of the Trust.
SECTION 7. USE OF THE NAME "XXXXXXX."
a. The Trust agrees that in the event that neither you nor any of your
affiliates acts as an investment adviser to the Trust or the Fund, the name of
the Trust or Fund will be changed to one that does not contain the name
"Xxxxxxx" or otherwise suggest an affiliation with you.
SECTION 8. TERMINATION OF AGREEMENT, ASSIGNMENT AND AMENDMENT.
a. This Agreement may be terminated at any time with respect to the
Fund without the payment of any penalty upon not more than 60 days' written
notice by the terminating party to the other party, by you or by the Trust
acting pursuant to a resolution adopted by the Board, or by the vote of a
majority of the outstanding voting securities of the Fund.
b. This Agreement will automatically terminate in the event of its
assignment. Termination will not affect rights of the parties which have accrued
prior thereto.
c. This Agreement contains the entire agreement of the parties hereto,
and is intended to be the complete and exclusive statement of the terms hereof.
It may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with any
applicable requirements of the 1940 Act as modified or superseded by any rule,
regulation, order on interpretive position of the SEC.
SECTION 9. DURATION OF AGREEMENT.
a. Unless sooner terminated, this Agreement will continue in effect
until the second anniversary of the date of this Agreement and from year to year
thereafter until terminated, provided that each such continuation of this
Agreement and the terms thereof are approved annually in accordance with the
requirements of the 1940 Act, as modified or superseded by rule, regulation,
order or interpretative position of the SEC, subject to your right and the
Trust's right to terminate this Agreement as provided in Section 8 hereof.
SECTION 10. DEFINITIONS.
a. The terms "assignment", "interested person" and "voting securities"
when used in this Agreement will have the meanings given such terms in the 1940
Act.
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SECTION 11. CONCERNING APPLICABLE PROVISIONS OF LAW.
a. This Agreement will be subject to all applicable provisions of law,
including, without being limited to, the applicable provisions of the 1940 Act.
To the extent that any provisions herein conflict with any applicable provisions
of law, the latter will control.
b. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
c. This Agreement will be governed by the substantive law of the State
of New York and the applicable provisions of the 1940 Act.
d. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
SECTION 12. EFFECTIVE DATE.
a. This Agreement is effective as of the date first written above or
commencement of the Fund's operations, which ever is later.
SECTION 13. MISCELLANEOUS.
a. The captions in this agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Very truly yours,
XXXXXXX INVESTORS TRUST on behalf of
XXXXXXX FINANCIAL INDUSTRIES FUND
By: /s/ XXXXXXX X. XXXXX
---------------------------
Xxxxxxx X. Xxxxx
Its: Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
This Agreement is hereby agreed to as of the date first written above.
XXXXXXX ASSET MANAGEMENT CORPORATION
By: /s/ XXX X. XXXXXXX
----------------------
Xxx X. Xxxxxxx
Its: Chairman, Chief Executive Officer and Director
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