INVESTMENT ADVISORY AGREEMENT
THE XXXXXXXXXX FUNDS, a Delaware business trust registered under the
Investment Company Act of 1940 ("1940 Act") as an open-end diversified
management investment company ("Trust"), hereby appoints XXXXXXXXXX INVESTMENT
MANAGEMENT LLC, an Illinois limited liability company registered under the
Investment Advisers Act of 1940 as an investment adviser ("Adviser"), to furnish
investment advisory and portfolio management services with respect to the
portion of its assets represented by the shares of beneficial interest issued
in the series designated XXXXXXXXXX BALANCED FUND (the "Fund"). Trust and
Adviser hereby agree that:
1. INVESTMENT ADVISORY SERVICES. Adviser shall manage the investment
operations of the Fund, subject to the terms of this Agreement and to the
supervision and control of Trust's Board of Trustees ("Trustees"). Adviser
agrees to perform, or arrange for the performance of, the following services
with respect to the Fund:
(a) to obtain and evaluate such information relating to economies,
industries, businesses, securities and commodities markets, and
individual securities, commodities and indices as it may deem
necessary or useful in discharging its responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in a manner
consistent with and subject to (i) Trust's agreement and declaration
of trust and by-laws; (ii) the Fund's investment objectives, policies,
and restrictions as set forth in written documents furnished by the
Trust to Adviser; (iii) all securities, commodities, and tax laws and
regulations applicable to the Fund and Trust; and (iv) any other
written limits or directions furnished by the Trustees to Adviser;
(c) unless otherwise directed by the Trustees, to determine from time to
time securities, commodities, interests or other investments to be
purchased, sold, retained or lent by the Fund, and to implement those
decisions, including the selection of entities with or through which
such purchases, sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will qualify
as a regulated investment company under subchapter M of the Internal
Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting rights,
rights to consent to Trust or Fund action, and any other rights
pertaining to Trust or the Fund shall be exercised;
(f) to make available to Trust promptly upon request all of the Fund's
records and ledgers and any reports or information reasonably
requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory authorities
any information or reports relating to the services provided pursuant
to this Agreement.
Except as otherwise instructed from time to time by the Trustees, with
respect to execution of transactions on behalf of the Fund, Adviser shall place,
or arrange for the placement of, all orders for purchases, sales, or loans with
issuers, brokers, dealers or other counterparties or agents selected by Adviser.
In connection with the selection of all such parties for the placement of all
such orders, Adviser shall attempt to obtain most favorable execution and price,
but may nevertheless in its sole discretion as a secondary factor, purchase and
sell portfolio securities from and to brokers and dealers who provide Adviser
with statistical, research and other information, analysis, advice, and similar
services. In recognition of such services or brokerage services provided by a
broker or dealer, Adviser is hereby authorized to pay such broker or dealer a
commission or spread in excess of that which might be charged by another broker
or dealer for the same transaction if the Adviser determines in good faith that
the commission or spread is reasonable in relation to the value of the services
so provided.
Adviser may, where it deems to be advisable, aggregate orders for its other
customers together with any securities of the same type to be sold or purchased
for the Fund in order to obtain best execution or lower brokerage commissions.
In such event, Adviser shall allocate the shares so purchased or sold, as well
as the expenses incurred in the transaction, in a manner it considers to be
equitable and fair and consistent with its fiduciary obligations to the Fund,
and Adviser's other customers.
Adviser shall for all purposes be deemed to be an independent contractor
and not an agent of Trust and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent Trust in any way.
2. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In connection with
the services to be provided by Adviser under this Agreement, Adviser may, to the
extent it deems appropriate, and subject to compliance with the requirements of
applicable laws and regulations and upon receipt of written approval of the
Trustees, make use of (i) its affiliated companies and their directors,
trustees, officers, and employees and (ii) subcontractors selected by Adviser,
provided that Adviser shall supervise and remain fully responsible for the
services of all such third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with services provided by
any such third parties shall be borne by Adviser or such parties.
3. EXPENSES BORNE BY TRUST. Except to the extent expressly assumed by
Adviser herein or under a separate agreement between Trust and Adviser and
except to the extent required by law to be paid by Adviser, Adviser shall not be
obligated to pay any costs or expenses incidental to the organization,
operations or business of the Trust. Without limitation, such costs and
expenses shall include but not be limited to:
(a) all charges of depositories, custodians and other agencies for the
safekeeping and servicing of its cash, securities, and other property;
(b) all charges for equipment or services used for obtaining price
quotations or for communication between Adviser or Trust and the
custodian, transfer agent or any other agent selected by Trust;
(c) all charges for administrative and accounting services provided to
Trust by Adviser, or any other provider of such services;
(d) all charges for services of Trust's independent auditors and for
services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated with
Adviser, all expenses incurred in connection with their services to
Trust, and all expenses of meetings of the Trustees or committees
thereof;
(f) all expenses incidental to holding meetings of shareholders of the
Trust, including printing and of supplying each record-date
shareholder with notice and proxy solicitation material, and all other
proxy solicitation expense;
(g) all expenses of printing of annual or more frequent revisions of Trust
prospectus(es) and of supplying each then-existing shareholder with a
copy of a revised prospectus;
(h) all expenses related to preparing and transmitting certificates
representing Trust shares;
(i) all expenses of bond and insurance coverage required by law or deemed
advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident to the
purchase, sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to Federal, state or other
governmental agencies, domestic or foreign, including all stamp or
other transfer taxes;
(l) all expenses of registering and maintaining the registration of Trust
under the 1940 Act and, to the extent no exemption is available,
expenses of registering Trust's shares under the 1933 Act, of
qualifying and maintaining qualification of Trust and of Trust's
shares for sale under securities laws of various states or other
jurisdictions and of registration and qualification of Trust under all
other laws applicable to Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a Fund; and
(n) all fees, dues and other expenses incurred by Trust in connection with
membership of Trust in any trade association or other investment
company organization.
4. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses borne by Trust
that are attributable solely to the organization, operation or business of the
Fund shall be paid solely out of Fund assets. Any expense borne by Trust which
is not solely attributable to the Fund, nor solely to any other series of shares
of Trust, shall be apportioned in such manner as Adviser determines is fair and
appropriate, or as otherwise specified by the Board of Trustees.
5. EXPENSES BORNE BY ADVISER. Adviser at its own expense shall furnish
all executive and other personnel, office space, and office facilities required
to render the investment advisory services set forth in this Agreement.
In the event that Adviser pays or assumes any expenses of Trust or the Fund
not required to be paid or assumed by Adviser under this Agreement, Adviser
shall not be obligated hereby to pay or assume the same or similar expense in
the future; PROVIDED that nothing contained herein shall be deemed to relieve
Adviser of any obligation to Trust or the Fund under any separate agreement or
arrangement between the parties.
6. INVESTMENT ADVISORY FEE. For the services rendered, facilities
provided, and charges assumed and paid by Adviser hereunder, Trust shall pay to
Adviser out of Fund assets a fee at the annual rate of 0.75%. The fee shall
accrue on each calendar day, and shall be payable monthly on the first business
day of the next succeeding calendar month. The daily fee accrual shall be
computed by multiplying the fraction of one divided by the number of days in the
calendar year by the applicable annual rate of fee, and multiplying this product
by the net assets of the Fund, determined in the manner established by the Board
of Trustees, as of the close of business on the last preceding business day on
which the Fund's net asset value was determined.
7. RETENTION OF SUB-ADVISER. Subject to obtaining the initial and
periodic approvals required under Section 15 of the 1940 Act, Adviser may retain
one or more sub-advisers at Adviser's own cost and expense for the purpose of
furnishing one or more of the services described in Section 1 hereof with
respect to the Fund. Retention of a sub-adviser shall in no way reduce the
responsibilities or obligations of Adviser under this Agreement, and Adviser
shall be responsible to Trust and its Funds for all acts or omissions of any
sub-adviser in connection with the performance of Adviser's duties hereunder.
8. NON-EXCLUSIVITY. The services of Adviser to Trust hereunder are not
to be deemed exclusive and Adviser shall be free to render similar services to
others.
9. STANDARD OF CARE. Neither Adviser, nor any of its members, officers,
managers, agents or employees shall be liable to Trust or its shareholders for
any error of judgment, mistake of law, loss arising out of any investment, or
any other act or omission in the performance by Adviser of its duties under this
Agreement, except for loss or liability resulting from willful misfeasance, bad
faith or gross negligence on Adviser's part or from reckless disregard by
Adviser of its obligations and duties under this Agreement.
10. AMENDMENT. This Agreement may not be amended without the affirmative
votes (a) of a majority of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" of Trust or of Adviser, voting in
person at a meeting called for the purpose of voting on such approval, and (b)
of a "majority of the outstanding shares" of the Fund. The terms
"interested persons" and "vote of a majority of the outstanding
shares" shall be construed in accordance with their respective definitions
in the 1940 Act and, with respect to the latter term, in accordance with Rule
18f-2 under the 1940 Act.
11. EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective
on the date hereof. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Trustees of Trust, or by a vote of a
majority of the outstanding shares of the Fund, upon at least sixty
(60) days' written notice to Adviser. This Agreement may be terminated by
Adviser at any time upon at least sixty (60) days' written notice to Trust.
This Agreement shall terminate automatically in the event of its "assignment"
(as defined in the 1940 Act). Unless terminated as hereinbefore provided, this
Agreement shall continue in effect until March 31, 1999 and thereafter from year
to year only so long as such continuance is specifically approved at least
annually (a) by a majority of those Trustees who are not interested persons of
Trust or of Adviser, voting in person at a meeting called for the purpose of
voting on such approval, and (b) by either the Board of Trustees of Trust or
by a "vote of a majority of the outstanding shares" of the Fund.
12. OWNERSHIP OF RECORDS; REPORTING. All records required to be
maintained and preserved by Trust pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are maintained and
preserved by Adviser on behalf of Trust and any other records the parties
mutually agree shall be maintained by Adviser on behalf of Trust are the
property of Trust and shall be surrendered by Adviser promptly on request by
Trust; PROVIDED that Adviser may at its own expense make and retain copies of
any such records.
Adviser shall prepare and furnish to Trust as to the Fund statistical data
and other information in such form and at such intervals as Trust may reasonably
request.
13. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation of Trust
hereunder shall be binding only upon the assets of the Fund and shall not be
binding upon any Trustee, officer, employee, agent or shareholder of Trust.
Neither the authorization of any action by the Trustees or shareholders of Trust
nor the execution of this Agreement on behalf of Trust shall impose any
liability upon any Trustee or any shareholder.
14. USE OF ADVISER'S NAME. Trust may use the name "The Xxxxxxxxxx Funds"
and the Fund may use the name "Xxxxxxxxxx Balanced Fund" or any other name
derived from the name "Xxxxxxxxxx" only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the business of
Adviser as investment adviser. At such time as this Agreement or any extension,
renewal or amendment hereof, or such other similar agreement shall no longer be
in effect, Trust will cease to use any name derived from the name "Xxxxxxxxxx"
or otherwise connected with Adviser, or with any organization which shall have
succeeded to Adviser's business as investment adviser.
15. APPLICABLE LAW. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 13 above which will be
construed in accordance with Delaware law) the laws of the State of Illinois.
16. REFERENCES AND HEADINGS. In this Agreement and in any such amendment,
references to this Agreement and all expressions such as "herein," "hereof," and
"hereunder" shall be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Dated: March 31, 1997
Attest: THE XXXXXXXXXX FUNDS
/s/ Xxxxxx X. Xxxxxxx, III By: /s/ H. Steel Bokhof,Jr.
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Xxxxxx X. Xxxxxxx, III H. Steel Bokhof, Jr.
Secretary President
Attest: XXXXXXXXXX INVESTMENT MANAGEMENT LLC
/s/ Xxxxxx X. Xxxxxxx, III By: /s/ H. Steel Bokhof,Jr.
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Xxxxxx X. Xxxxxxx, III H. Steel Bokhof, Jr.
Secretary President
