INVESTMENT ADVISORY AGREEMENT
(XXX Xxxx-Short Market Neutral Fund)
AGREEMENT made as of ______, 1998 between THE RBB FUND, INC., a
Maryland corporation (herein called the "Company"), and BEA ASSOCIATES, a New
York general partnership (herein called the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, management
investment company under the Investment Company Act of 1940 (the "1940 Act") and
currently offers or proposes to offer shares representing interests in twenty
five separate investment portfolios; and
WHEREAS, the Company desires to retain the Investment Adviser to
render certain investment advisory services to the Company with respect to the
Company's XXX Xxxx-Short Market Neutral Fund (the "Fund"), and the Investment
Adviser is willing to so render such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT. The Company hereby appoints the Investment Adviser
to act as investment adviser for the Fund for the period and on the terms set
forth in this Agreement. The Investment Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DELIVERY OF DOCUMENTS. The Company has furnished the Investment
Adviser with copies properly certified or authenticated or each of the
following:
(a) Resolutions of the Board of Directors of the Company
authorizing the appointment of the Investment Adviser and the execution and
delivery of this Agreement;
(b) Each Prospectus relating to any class of Shares representing
interests in the Fund of the Company in effect under the 1933 Act (such
prospectuses, as presently in effect and as they shall from time to time be
amended and supplemented, are herein collectively called the "Prospectuses").
The Company will furnish the Investment Adviser from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to the foregoing, if any.
3. MANAGEMENT OF THE FUND. Subject to the supervision of the Board
of Directors of the Company, the Investment Adviser will provide for the overall
management of the Fund including (i) the provision of continuous investment
programs for the Fund, including investment research and management with respect
to all securities, investments, cash and cash equivalents in the Fund, (ii) the
determination from time to time of what securities and other investments will be
purchased, retained, or sold by the Company for the Fund, and (iii) the
placement from time to time of orders for all purchases and sales made for the
Fund. The Investment Adviser will provide the services rendered by it hereunder
in accordance with the Fund's investment objectives, restrictions and policies
as stated in the applicable Prospectuses and the applicable statement of
additional information contained in the Registration Statement. The Investment
Adviser further agrees that it will render to the Company's Board of Directors
such periodic and special reports regarding the performance of its duties under
this Agreement as the Board may request. The Investment Adviser agrees to
provide to the Company (or its agents and service providers) prompt and accurate
data with respect to the Fund's transactions and, where not otherwise available,
the daily valuation of securities in the Fund.
4. BROKERAGE. The investment Adviser may place orders either
directly with the issuer or with any broker or dealer. In placing orders with
brokers and dealers, the Investment Adviser will attempt to obtain the best
price and the most favorable execution of its orders. In placing orders, the
Investment Adviser will consider the experience and skill of the firm's
securities traders as well as the firm's financial responsibility and
administrative efficiency. Consistent with this obligation, the Investment
Adviser may, subject to the review of the Board of Directors, select brokers on
the basis of the research, statistical and pricing services they provide to the
Fund and other clients of the Investment Adviser. Information and research
received from such brokers will be in addition to, and not in lieu of, the
services required to be performed by the Investment Adviser hereunder. A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that
the Investment Adviser determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Investment Adviser to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long-term. In no instance will the Fund's securities be
purchased from or sold to the Company's principal underwriter, the Investment
Adviser, or any affiliated person thereof, except to the extent permitted by SEC
exemptive order or by applicable law.
-2-
5. CONFORMITY WITH LAW; CONFIDENTIALITY. The Investment Adviser
further agrees that it will comply with all applicable rules and regulations of
all federal regulatory agencies having jurisdiction over the Investment Adviser
in the performance of its duties hereunder. The Investment Adviser will treat
confidentially and as proprietary information of the Company all records and
other information relating to the Company and prior, present or potential
shareholders (except clients of the Investment Adviser and its affiliates), and
will not use such records and information for any purpose other than performance
of its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where the Investment Adviser may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such Information by duly constituted authorities, or when so requested
by the Company.
6. SERVICES NOT EXCLUSIVE. The investment management and services
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
7. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Adviser 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 Investment Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
8. EXPENSES. During the term of this Agreement, the Investment
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities purchased for the Fund
(including brokerage commissions, if any), the cost of independent pricing
services used in valuing the Fund's securities and fees and expenses of
registering and qualifying shares for distribution under state securities laws.
If the expenses borne by the Fund in any fiscal year exceed the most
restrictive applicable expense limitations imposed by the securities regulations
of any state in which the Shares of the Fund are registered or qualified for
sale to the public, the Investment Adviser shall reimburse the Fund for any
excess up to the amount of the fees payable by the Fund to it during such fiscal
year pursuant to Paragraph 9 hereof in the same proportion that its fees bear to
the total fees paid by the Company for investment advisory services in respect
of the Fund;
-3-
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Investment Adviser
shall reimburse the Fund for such excess expenses regardless of the amount of
such fees payable to it during such fiscal year to the extent that the
securities regulations of any state in which the Shares are registered or
qualified for sale so require.
9. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to
this Agreement with respect to the Fund, until the Fund has completed twelve
full calendar months of investment operations (the "Initial Period"), the
Company will pay the Investment Adviser from the assets of the Fund and the
Investment Adviser will accept as full compensation therefor a fee, computed
daily and payable monthly, at the annual rate of 1.50% of the Fund's average
daily net assets.
(b) Following the Initial Period, the Company will pay the Investment
Adviser from the assets of the Fund and the Investment Adviser will accept as
full compensation therefor fees calculated as follows:
(i) There shall be a fee, computed daily and payable monthly, at
the annual rate of 1.50% of the Fund's average daily net assets (the "Base
Fee"), PROVIDED, however, that if subparagraph (ii) below is applicable, the fee
shall be calculated pursuant to subparagraph (iii) below.
(ii) After each calendar month, it shall be determined whether
the investment performance of the Fund (calculated in accordance with
subparagraph (v) below) has exceeded or lagged the Target (as hereinafter
defined) within the parameters of one of subparagraphs (A) through (E) during
the immediately preceding twelve months:
(A) the investment performance of the Fund exceeded or
lagged the Target by more than 100 but not more than 200 basis points;
(B) the investment performance of the Fund exceeded or
lagged the Target by more than 200 but not more than 300 basis points;
(C) the investment performance of the Fund exceeded or
lagged the Target by more than 300 but not more than 400 basis points;
(D) the investment performance of the Fund exceeded or
lagged the Target by more than 400 but not more than 500 basis points; or
-4-
(E) the investment performance of the Fund exceeded or
lagged the Target by more than 500 basis points.
(iii) If subparagraph (ii) applies, the rate of the Base Fee
for such calendar month should be adjusted as follows:
(A) If subparagraph (ii)(A) applies, the annual rate of the
Base Fee shall be 1.60% if the investment performance of the Fund exceeded the
Target or 1.40% if the investment performance lagged the Target;
(B) If subparagraph (ii)(B) applies, the annual rate of the
Base Fee shall be 1.70% if the investment performance of the Fund exceeded the
Target or 1.30% if the investment performance lagged the Target;
(C) If subparagraph (ii)(C) applies, the annual rate of the
Base Fee shall be 1.80% if the investment performance of the Fund exceeded the
Target or 1.20% if the investment performance lagged the Target;
(D) If subparagraph (ii)(D) applies, the annual rate of the
Base Fee shall be 1.90% if the investment performance of the Fund exceeded the
Target or 1.10% if the investment performance lagged the Target; or
(E) If subparagraph (ii)(E) applies, the annual rate of the
Base Fee shall be 2.00% if the investment performance of the Fund exceeded the
Target or 1.00% if the investment performance lagged the Target.
(iv) The "Target" means the investment record of the Xxxxxxx
Xxxxx Barney 1-Month Treasury Xxxx Index-TM- plus 500 basis points.
(v) The investment record of the Xxxxxxx Xxxxx Barney 1-Month
Treasury Xxxx Index-TM- shall be calculated in accordance with Rule 205-1(b)
under the Investment Advisers Act of 1940, as amended (the "Advisers Act") as
such Rule shall be amended from time to time or any successor regulation. The
investment performance of the Fund shall be calculated in accordance with Rule
205-1(a) under the Advisers Act as such Rule shall be amended from time to time
or any successor regulation.
(c) The fee attributable to the Fund shall be satisfied only against
assets of the Fund and not against the assets of any other investment portfolio
of the Company.
10. LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER. The
Investment Adviser shall not be liable for any error of
-5-
judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement ("disabling conduct"). The Fund will
indemnify the Investment Adviser against and hold it harmless from any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit
not resulting from disabling conduct by the Investment Adviser.
Indemnification shall be made only following: (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that
the Investment Adviser was not liable by reason of disabling conduct or (ii)
in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the Investment Adviser was not liable by reason of
disabling conduct by (a) the vote of a majority of a quorum of directors of
the Fund who are neither "interested persons" of the Fund nor parties to the
proceeding ("disinterested non-party directors") or (b) an independent legal
counsel in a written opinion. The Investment Adviser shall be entitled to
advances from the Fund for payment of the reasonable expenses incurred by it
in connection with the matter as to which it is seeking indemnification in
the manner and to the fullest extent permissible under the Maryland General
Corporation Law. The Investment Adviser shall provide to the Fund a written
affirmation of its good faith belief that the standard of conduct necessary
for indemnification by the Fund has been met and a written undertaking to
repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the Investment Adviser
shall provide a security in form and amount acceptable to the Fund for its
undertaking; (b) the Fund is insured against losses arising by reason of the
advance; or (c) a majority of a quorum of disinterested non-party directors,
or independent legal counsel, in a written opinion, shall have determined,
based upon a review of facts readily available to the Fund at the time the
advance is proposed to be made, that there is reason to believe that the
Investment Adviser will ultimately be found to be entitled to
indemnification. Any amounts payable by the Fund under this Section shall be
satisfied only against the assets of the Fund and not against the assets of
any other investment portfolio of the Company.
11. DURATION AND TERMINATION. This Agreement shall become effective
with respect to the Fund upon approval of this Agreement by vote of a majority
of the outstanding voting securities of the Fund and, unless sooner terminated
as provided
-6-
herein, shall continue with respect to the Fund until ______, 199_.
Thereafter, if not terminated, this Agreement shall continue with respect to the
Fund for successive annual periods ending on _______, PROVIDED such continuance
is specifically approved at least annually (a) by the vote of a majority of
those members of the Board of Directors of the Company who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the Board
of Directors of the Company or by vote of a majority of the outstanding voting
securities of the Fund; PROVIDED, HOWEVER, that this Agreement may be terminated
with respect to the Fund by the Company at any time, without the payment of any
penalty, by the Board of Directors of the Company or by vote of a majority of
the outstanding voting securities of the Portfolio, on the 60 days' prior
written notice to the Investment Adviser, or by the Investment Adviser at any
time, without payment of any penalty, on 90 days' prior written notice to the
Company. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meaning as such terms have in the 1940 Act).
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, discharged or terminated orally, except by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought, and no amendment of this Agreement affecting the Fund
shall be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Fund.
13. 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. 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 and shall be
governed by Delaware law.
14. CHANGE IN MEMBERSHIP. The Investment Adviser shall notify the
Company of any change in its membership within a reasonable time after such
change.
15. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the
-7-
state of New York without giving effect to the conflicts of laws principles
thereof.
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.
THE RBB FUND, INC.
By:
-----------------------------
President
BEA ASSOCIATES
By:
-----------------------------
-8-
