XXXXXX CAPITAL FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
Agreement entered into effective as of the 1st day of April, 2004 between
Xxxxxx Capital Funds, Inc., a Maryland corporation (the "Company"), and Xxxxxx
Capital Management, Ltd., a Kansas corporation (the "Advisor").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The Company is authorized to create separate series, each with its own separate
investment portfolio, and beneficial interest in each such series will be
represented by a separate series of shares (the "Shares"); and
WHEREAS, the Advisor is an investment adviser registered under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires to retain the Advisor as investment adviser to
furnish investment advisory and portfolio management services to the Company
with respect to its initial series, the Xxxxxx Equity & Income Fund (the
"Fund"), and such other portfolios as the Company and the Advisor shall agree
upon, and the Advisor is willing to furnish such services and to perform the
functions assigned to it under this Agreement for the consideration provided
herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Advisor as investment
adviser of the Fund for the period and on the terms set forth in this Agreement.
The Advisor accepts such appointment and agrees to render the services herein.
In the performance of its duties, the Advisor will act in the best interests of
the Fund and will comply with (a) applicable laws and regulations, including,
but not limited to, the 1940 Act, (b) the terms of this Agreement, (c) the
Company's Articles of Incorporation, By-Laws and currently effective
registration statement under the Securities Act of 1933, as amended, and the
1940 Act, and any amendments thereto, (d) the stated investment objective,
policies and restrictions of the Fund, and (e) such other guidelines as the
Board of Directors of the Company (the "Board") reasonably may establish.
2. Duties as Investment Adviser.
(a) Subject to the supervision of the Board, the Advisor will provide a
continuous investment program for the Fund, including investment research and
management with respect to all securities, other investments and cash
equivalents held by the Fund. The Advisor will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Fund. The Advisor will exercise full discretion and act for the Fund in the same
manner and with the same force and effect as the Fund itself might or could do
with respect to purchases, sales, or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(b) The Advisor will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or through other brokers. In the
selection of brokers and the placement of orders for the purchase and sale of
portfolio investments for the Fund, the Advisor shall use its best efforts to
obtain for the Fund the best qualitative execution, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. In using its best efforts to obtain the most favorable price
and execution available, the Advisor, bearing in mind the Fund's best interests
at all times, shall consider all factors it deems relevant, including by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker involved, the quality of service rendered by the broker
in other transactions. Consistent with the Rules of the National Association of
Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Advisor may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions. Subject to such policies as the Board of Directors may
determine, the Advisor shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker
would have charged for effecting that transaction if the Advisor determines in
good faith that such amount of commission was 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 the Advisor's overall
responsibilities with respect to the Fund and to other clients of the Advisor or
its affiliates as to which the Advisor or its affiliates exercise investment
discretion. In no instance will portfolio securities of the Fund be purchased
from or sold to the Advisor or any affiliated person of the Advisor. The Fund
agrees that any entity or person associated with the Advisor which is a member
of a national securities exchange is authorized to effect any transaction on
such exchange for the account of the Fund which is permitted by Section 11(a) of
the Securities Exchange Act of 1934, as amended, and that the Fund consents to
the retention of compensation for such transactions.
(c) The Advisor will provide to the Board on a regular basis any economic
and investment analyses or reports concerning the Fund as are reasonably
requested by the Board.
(d) Any of the foregoing functions with respect to the Fund may be
delegated by the Advisor, at the Advisor's expense, to another appropriate party
(including an affiliated party), subject to such approval by the Board of
Directors and shareholders of the Fund as may be required by the 1940 Act. The
Advisor shall oversee the performance of delegated functions by any such party
and shall furnish to the Board quarterly evaluations and analyses concerning the
performance of delegated responsibilities by those parties.
3. Services Not Exclusive. The services furnished by the Advisor hereunder
are not to be deemed exclusive and the Advisor shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby.
4. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the Fund are the property of the Company and further agrees to
surrender promptly to the Company any of such records upon the Company's
request. The Advisor further agrees to preserve for the periods prescribed by
Rule 3la-2 under the 1940 Act the records required to be maintained by Rule
3la-1 under the 1940 Act.
5. Expenses. During the term of this Agreement, the Fund will bear all
expenses not specifically assumed by the Advisor incurred in its operations and
the offering of its shares. Expenses borne by the Fund will include, but not be
limited to, the following: (a) brokerage commissions relating to securities
purchased or sold by the Fund or any losses incurred in connection therewith;
(b) fees payable to, and expenses incurred on behalf of the Fund, by the
Advisor; (c) expenses of organizing the Fund; (d) filing fees and expenses
relating to the registration, and notice filings of the Fund's shares under
federal or state securities laws and maintaining such registrations,
qualifications and notice filings; (e) distribution fees; (f) fees and salaries
payable to the members of the Board of Directors and officers who are not
officers or employees of the Advisor or interested persons (as defined in the
0000 Xxx) of any investment subadviser or distributor of the Fund; (g) taxes
(including any income or franchise taxes) and governmental fees; (h) costs of
any liability, uncollectible items of deposit and other insurance or fidelity
bonds; (i) any costs, expenses or losses arising out of any liability of or
claim for damage or other relief asserted against the Fund for violation of any
law; (j) legal, accounting and auditing expenses, including legal fees of
special counsel or salaries of compliance staff for the independent directors;
(k) charges of custodians, transfer agents and other agents; (l) costs of
preparing share certificates; (m) expenses of setting in type and printing
prospectuses and supplements thereto for existing shareholders, reports and
statements to shareholders and proxy material; (n) any extraordinary expenses
(including fees and disbursements of counsel) incurred by the Fund; and (o) fees
and other expenses incurred in connection with membership in investment company
organizations.
The Fund may pay directly any expense incurred by it in its normal
operations and, if any such payment is consented to by the Advisor and
acknowledged as otherwise payable by the Advisor pursuant to this Agreement, the
Fund may reduce the fee payable to the Advisor pursuant to paragraph 6 hereof by
such amount. To the extent that such deductions exceed the fee payable to the
Advisor on any monthly payment date, such excess shall be carried forward and
deducted in the same manner from the fee payable on succeeding monthly payment
dates.
6. Compensation. For the services to be rendered and payments to be made as
provided in this Agreement, as of the last business day of each month, the Fund
will pay the Advisor a fee at the annual rate of 1.25% of the first $100 million
of average daily net assets; and 1.00% of the average daily value of net assets
over $100 million.
The average daily value of the net assets of the Fund shall be determined
pursuant to the applicable provisions of the Articles of Incorporation and
By-laws governing the Fund, or a resolution of the Board, if required. If,
pursuant to such provisions, the determination of net asset value of the Fund is
suspended for any particular business day, then, for purposes of this paragraph,
the value of the net assets of the Fund as last determined shall be deemed to be
the value of the net assets as of the close of the business day, or as of such
other time as the value of the Fund's net assets may be lawfully determined on
that day. If the determination of the net asset value of the Fund has been
suspended for a period including such month, the compensation payable at the end
of such month shall be computed on the basis of the value of the net assets of
the Fund as last determined (whether during or prior to such month).
7. Limitation of Liability of the Advisor. 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 matters to which this Agreement relate except a
loss resulting from the willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. Any person, even though also an
officer, partner, employee, or agent of the Advisor, who may be or become an
officer, director, employee or agent of the Company shall be deemed, when
rendering services to the Company or acting in any business of the Company, to
be rendering such services to or acting solely for the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
the Advisor even though paid by it.
8. Duration and Termination. This Agreement shall become effective upon the
date that the Company's registration statement is declared effective by the
Securities and Exchange Commission; provided, that with respect to the Fund,
this Agreement shall not take effect unless it first has been approved (i) by a
vote of the majority of those Directors who are not parties to this Agreement or
interested persons of such party, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by vote of a majority of the Fund's
outstanding voting securities. This Agreement shall remain in full force and
effect continuously thereafter until terminated without the payment of any
penalty as follows:
(a) By vote of a majority of its Directors, or by the affirmative vote of a
majority of the outstanding shares of the Fund, the Company may at any time
terminate this Agreement with respect to the Fund by providing not more than 60
days' written notice delivered or mailed by registered mail, postage prepaid, to
the Advisor at its principal offices; or
(b) With respect to the Fund, if (i) the Directors or the shareholders of
the Fund by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Directors who are not interested persons of the
Company or of the Advisor, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Agreement, then this Agreement shall
automatically terminate at the close of business on the second anniversary of
its execution, or upon the expiration of one year from the effective date of the
last such continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the Fund for
their approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Advisor may continue to serve hereunder in a
manner consistent with the 1940 Act and the rules and regulations thereunder
with respect to the Fund; or
(c) The Advisor may at any time terminate this Agreement by not less than
60 days' written notice delivered or mailed by registered mail, postage prepaid
to the Company.
(d) This Agreement automatically and immediately will terminate in the
event of its assignment.
9. Amendment of This Agreement. 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 which enforcement of the change, waiver,
discharge or termination is sought, and no material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
Fund's outstanding voting securities.
10. Name of Company. The parties acknowledge that the Fund owns the
trademark "Xxxxxx Capital." The Fund, subject to the terms of this Agreement and
only during the term of this Agreement, hereby grants to Advisor a revocable,
non-exclusive license to use the trademark solely in connection with providing
investment advisory services to the Fund. Upon termination of this Agreement,
Advisor will (to the extent that it lawfully can) cease to use any name derived
from "Xxxxxx Capital."
11. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Missouri, without giving effect to the conflicts of laws
principles thereof, and the 1940 Act. To the extent the laws of the State of
Missouri conflict with the applicable provisions of the 1940 Act, the latter
shall control.
12. Definitions. As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person," and "assignment" shall have
the same meanings as such terms have in the 1940 Act.
13. Severability. 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. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
XXXXXX CAPITAL MANAGEMENT, LTD.
By:
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Name:
Title:
XXXXXX CAPITAL FUNDS, INC.
By:
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Name:
Title:
