Exhibit 99.d
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT (this "Agreement") is made as of the
29th day of October, 2004, by and between PRIMECAP Odyssey Funds, a Delaware
statutory trust (the "Trust"), and XXXXXXXX Xxxxxxxxxx Company, a California
corporation (the "Manager").
WHEREAS, the Trust is registered as a open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust wishes to retain the Manager to provide certain
investment advisory; and
WHEREAS, the Manager is willing to furnish such services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. The Trust hereby appoints the Manager to serve as investment adviser
to each of the separate series of the Trust (each, a "Fund") for the period and
on the terms set forth in this Agreement. The Manager accepts such appointment
and agrees to render the services herein set forth for the compensation herein
provided.
2. The Trust shall at all times keep the Manager fully informed with
regard to the securities and other property owned by it, its funds available (or
to become available) for investment, and generally as to the condition of its
affairs. It shall furnish the Manager with such other documents and information
with regard to its affairs as the Manager may from time to time reasonably
request.
3. (a) Subject to the supervision of the Trust's Board of Trustees (the
"Trustees"), the Manager shall regularly provide the Trust with investment
research, advice, management and supervision and shall furnish a continuous
investment program for each Fund consistent with such Fund's investment
objectives, policies and restrictions. The Manager shall determine from time to
time what securities or other property will be purchased, retained or sold by
each Fund, and shall implement those decisions, all subject to the provisions of
the Trust's Agreement and Declaration of Trust and By-Laws, the 1940 Act, the
applicable rules and regulations of the Securities and Exchange Commission, and
other applicable federal and state law, as well as the investment objectives,
policies and restrictions of such Fund, as each of the foregoing may be amended
from time to time.
(b) The Manager shall place orders pursuant to its investment
determinations for the Trust either directly with the issuer or with any broker,
dealer or futures commission merchant (collectively, a "broker"). In the
selection of brokers and the placing of orders for the purchase and sale of
portfolio investments for the Funds, the Manager shall seek to obtain the most
favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for the Trust's
the most favorable price and execution available, the
1
Manager, bearing in mind the Trust'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 and the quality of service rendered by the broker in other
transactions. Subject to such policies as the Trustees may determine, the
Manager 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 a Fund to pay a broker that provides brokerage and research services to
the Manager 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 Manager 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 Manager's overall responsibilities
with respect to the Trust and to other clients of the Manager as to which the
Manager exercises investment discretion. The Manager shall also provide advice
and recommendations with respect to other aspects of the business and affairs of
the Trust, and shall perform such other functions of management and supervision,
as may be directed by the Trustees.
4. (a) The Manager, at its expense, shall supply the Board of Trustees
and officers of the Trust with statistical information and reports reasonably
requested by them and reasonably available to the Manager. The Manager shall
oversee the maintenance of all books and records with respect to the Trust's
portfolio transactions in accordance with all applicable federal and state laws
and regulations and shall perform such other administrative, bookkeeping or
clerical duties as may be agreed upon by the parties. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Manager hereby agrees that
any records which it maintains for the Trust are the property of the Trust, and
further agrees to surrender promptly to the Trust or its agents any of such
records upon the Trust's request. The Manager further agrees to arrange for the
preservation of the records required to be maintained by Rule 31a-1 under the
1940 Act for the periods prescribed by Rule 31a-2 under the 1940 Act. The
Manager shall authorize and permit any of its directors, officers and employees
who may be elected as Trustees or officers of the Trust to serve in the
capacities in which they are elected. The Manager may enter into a contract with
one or more other parties in which the Manager delegates to such party or
parties any or all of the duties specified in this Paragraph 5(a).
(b) Other than as herein specifically indicated, the Manager shall
not be responsible for the expenses of the Trust. Specifically (but without
limitation), the Manager shall not be responsible for any of the following
expenses of the Trust, which expenses shall be borne by the Trust: advisory
fees; distribution fees; interest; taxes; governmental fees; fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; the cost (including brokerage commissions or
charges, if any) of securities or other property purchased or sold by the Trust
and any losses in connection therewith; fees of custodians, transfer agents,
registrars, administrators or other agents; legal expenses; expenses of
preparing share certificates; expenses relating to the redemption or repurchase
of the Trust's shares; expenses of registering and qualifying shares of the
Trust for sale under applicable federal and state law; expenses of preparing,
setting in print, printing and distributing prospectuses, reports, notices and
dividends to Trust shareholders; costs of stationery; costs of shareholders' and
other meetings of the Trust; Trustees' fees; audit fees; travel expenses of
2
officers, Trustees and employees of the Trust, if any; and the Trust's pro rata
portion of premiums on any fidelity bond and other insurance covering the Trust
and its officers and Trustees.
5. No Trustee, officer or employee of the Trust shall receive from the
Trust any salary or other compensation as such Trustee, officer or employee
while he or she is at the same time a director, officer, or employee of the
Manager or any affiliated company of the Manager. This Paragraph 5 shall not
apply to Trustees, executive committee members, consultants and other persons
who are not regular members of the Manager's or any affiliated company's staff.
6. As compensation for the services performed and expenses assumed by
the Manager with respect to each Fund, including the services of any
consultants, investment advisers or other parties retained by the Manager, the
Fund shall pay the Manager an annual fee, payable on a monthly basis, at the
annual rate of 0.60% on the first $100,000,000 of the Fund's average daily
assets and 0.55% on the portion of the Fund's average daily assets in excess of
$100,000,000. The payment of the foregoing fee shall be made within thirty (30)
days of the end of each month. For any period less than a month during which
this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to the number of days in such month. For
purposes of this Agreement and except as otherwise provided herein, the average
daily assets of the Funds shall be calculated pursuant to procedures adopted by
the Trustees of the Trust for calculating the value of the Funds' assets or
delegating such calculations to third parties. In the event that the expenses of
a Fund exceed any expense limitation which the Manager may, by written notice to
the Trust, voluntarily declare to be effective with respect to the Fund, subject
to such terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
7. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or any
Fund or to any shareholder of the Trust or any Fund, for any act or omission in
the course of, or connected with, rendering services hereunder other than a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services.
8. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of the Manager who may also be a Trustee,
officer, or employee of the Trust to engage in any other business or to devote
his or her time and attention to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature, or limit or
restrict the right of the Manager to engage in any other business or to render
services of any kind, including investment advisory and management services, to
any other trust, firm, individual or association.
9. As used in this Agreement, the terms "assignment," "interested
person," and "majority of the outstanding voting securities" shall have the
meanings given to them by Section 2(a) of the 1940 Act, subject to such
exemptions as may be granted, issued or adopted by the Securities and Exchange
Commission or its staff by any rule, regulation, or order; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the 1940
3
Act and the rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder.
10. This Agreement shall become effective upon its execution, and shall
remain in full force and effect with respect to each Fund continuously
thereafter (unless terminated automatically as set forth in Paragraph 11 below)
until terminated as follows:
(a) Either party hereto may at any time terminate this Agreement
with respect to any Fund by not more than sixty days' written notice delivered
or mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees or the shareholders of a Fund by the vote of
a majority of the outstanding voting securities of a Fund, and (ii) a majority
of the Trustees who are not interested persons of the Trust or of the Manager,
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 with respect to a Fund, then this Agreement shall automatically
terminate with respect to such Fund 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 a Fund for their approval and such shareholders fail to approve
such continuance of this Agreement as provided herein, the Manager may continue
to serve hereunder in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
Action by the Trust under paragraph (a) of this Paragraph 10 with
respect to a Fund may be taken either (i) by vote of a majority of the Trustees,
or (ii) by the vote of a majority of the outstanding voting securities of the
Fund.
11. Except as otherwise provided herein, this Agreement shall terminate
automatically in the event of its assignment by the Manager and shall not be
assignable by the Trust without the consent of the Manager. Any termination of
this Agreement pursuant to Paragraph 10 shall be without the payment of any
penalty. This Agreement shall not be amended with respect to a Fund unless such
amendment is approved by the vote of a majority of the outstanding voting
securities of such Fund (provided that such shareholder approval is required by
the 1940 Act and the rules and regulations thereunder, giving effect to any
interpretations of the Securities and Exchange Commission and its staff), and by
the vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Trustees who are not interested persons of the
Trust or of the Manager.
12. (a) In the event this Agreement is terminated by either party or
upon written notice from the Manager at any time with respect to all the Funds,
the Trust hereby agrees that it will eliminate from its trust name and the names
of all Funds any reference to the names "PRIMECAP" or "PRIMECAP Odyssey."
(b) In the event this Agreement is terminated by either party or
upon written notice from the Manager at any time with respect to a particular
Fund, the Trust hereby agrees
4
that it will eliminate from the Fund's name any reference to the names
"PRIMECAP" or "PRIMECAP Odyssey."
13. This Agreement embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof. Should any part of this
Agreement 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 and shall inure to the benefit of the parties hereto
and their respective successors.
14. This Agreement shall be governed by the internal laws, and the law
of conflicts of laws, of the State of Delaware; provided that nothing herein
will be construed in a manner inconsistent with the Investment Company Act of
1940, as amended, the Investment Advisers Act of 1940, as amended, or any rule
or regulation of the Securities and Exchange Commission thereunder.
15. Notice is hereby given that this Agreement has been executed on
behalf of the Trust by an officer of the Trust as an officer and not
individually. The obligations of or arising out of this Agreement are not
binding upon any of the Trustees, officers or shareholders of the Trust
individually but are binding only upon the assets and property of the Trust and
all persons dealing with any Fund must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust..
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
PRIMECAP Odyssey Funds, a Delaware statutory trust,
on behalf of each of its series of shares
/s/ Xxxx X. Xxxxx
-----------------------------------------------------
Xxxx X. Xxxxx
Co-Chief Executive Officer
XXXXXXXX Xxxxxxxxxx Company, a California corporation
/s/ Xxxxxx X. Xxxxx
-----------------------------------------------------
Xxxxxx X. Xxxxx
Chairman
5
