EXHIBIT 5
DRAFT 3/7/97
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the _____ day of __________, 1997, by and
between THE SBI FUND, INC., a Maryland corporation (the
"Fund"), and SBI CAPITAL MANAGEMENT AND RESEARCH CORPORATION,
a Florida not-for-profit corporation ("SBICMRC").
WHEREAS, SBICMRC has been established by the School of
Business and Industry ("SBI") of the Florida Agricultural and
Mechanical University ("Florida A&M") to provide students of
SBI, as part of their curriculum, with the opportunity to
participate in the operation of a registered investment
company under the management and supervision of SBI faculty
and investment professionals;
WHEREAS, the Fund is an open-end, diversified series manage-
ment investment company registered as such with the Securi-
ties and Exchange Commission (the "Commission") pursuant to
the Investment Company Act of 1940 (the "Investment Company
Act"), and SBICMRC is an investment adviser registered as
such with the Commission under the Investment Advisers Act of
1940 (the "Investment Advisers Act");
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, it is agreed by and between
the parties, as follows:
1. DUTIES OF SBICMRC
The Fund hereby employs SBICMRC and SBICMRC hereby
undertakes to act as the investment adviser of the Fund
and to perform for the Fund such other duties and
functions as are hereinafter set forth. Subject to the
direction and control of the Fund's Board of Directors,
SBICMRC will provide investment management of each of
the Fund's portfolios in accordance with the Fund's
investment objectives and policies as stated in its
Prospectus and Statement of Additional Information as
from time to time in effect. In connection therewith,
SBICMRC will make determinations of what investments
shall be made by each portfolio of the Fund and when,
and will arrange for the purchase of securities and
other investments for the Fund and the sale of
securities and other investments held in the portfolios
of the Fund. SBICMRC shall furnish to the Fund such
information, with respect to the investments which the
Fund may hold or contemplate purchasing, as the Fund may
reasonably request. The Fund wishes to be informed of
important developments
materially affecting its portfolio and shall expect
SBICMRC, on its own initiative, to furnish to the Fund
from time to time such information as SBICMRC may
believe appropriate for this purpose.
In addition, SBICMRC agrees to provide to the Fund
office facilities (which may be in SBICMRC's own
offices) and supplies, and certain internal executive
and administrative services; to compile and maintain
such records with respect to its operations as may
reasonably be required; and generally assist in all
aspects of the Fund's operations.
SBICMRC shall exercise its best judgment in rendering
the services to be provided to the Fund hereunder.
SBICMRC shall not be liable hereunder for any error of
judgment or mistake of law or for any loss suffered by
the Fund, provided that nothing herein shall be deemed
to protect or purport to protect SBICMRC against any
liability to the Fund or to its security holders to
which SBICMRC would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder, or by reason of
SBICMRC's reckless disregard of its obligations and
duties hereunder.
2. RELATIONSHIP WITH SBI, SBICMRC PERSONNEL AND EDUCATIONAL
PURPOSES OF SBICMRC
It is understood that SBICMRC was established by SBI as
part of its Professional Development program, to provide
students of SBI with the opportunity to participate in
the operation of a registered investment company under
the management and supervision of investment
professionals and SBI faculty, and that students of SBI
will participate in the operations of SBICMRC under the
management and supervision of SBI faculty and SBICMRC
personnel. Upon the direction and close monitoring by
the officers of SBICMRC and by other SBI faculty
members, SBI students will assist in all capacities
involved in the management of SBICMRC, from clerical
assignments through supporting research and strategy
recommendations. SBICMRC will determine from time to
time which students and SBI faculty will be assigned to
participate in SBICMRC's operations and which tasks each
will perform.
It is understood that the persons employed by SBICMRC,
including students and faculty of SBI, will not devote
their full time to activities on behalf of SBICMRC and/
or the Fund and nothing contained herein shall be deemed
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to limit or restrict the right of SBICMRC or any of its
affiliates or employees to engage in and devote time and
attention to other businesses or activities.
Any person, even though also an officer, director,
employee or agent of SBICMRC, who may be or become an
officer, director, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting
on any business of the Fund, to be rendering such
services to or acting solely for the Fund and not as an
officer, director, employee or agent, or under the
control or direction of, SBICMRC even if paid by
SBICMRC.
The Fund agrees that the term "SBI" in its name is
derived from the School of Business and Industry, which
established SBICMRC, and further agrees that, in the
event that SBICMRC ceases to be the Fund's investment
advisor for any reason, the Fund will promptly take all
necessary action to change its name to a name not
including the words SBI or any other reference to the
School of Business and Industry of Florida A&M.
3. CUSTODY OF ASSETS
The assets of the Fund will be held in an account with
State Street Bank and Trust Company or any such other
brokerage firm or bank which the Fund may hereinafter
select (the "Custodian"). SBICMRC shall not act as
custodian but may issue such instructions to the
Custodian as may be appropriate in connection with the
settlement of transactions effected by SBICMRC pursuant
hereto. SBICMRC shall not be responsible for any loss
incurred by reason of any act or omission of the
Custodian.
4. COMPENSATION
The Fund agrees to pay SBICMRC and SBICMRC agrees to
accept as full compensation for the performance of all
functions and duties on its part to be performed
pursuant to the provisions hereof, a fee calculated
daily and paid quarterly in arrears at the annual rate
of 0.10% of the value of the Fund's average daily net
assets in Pool A of the Fund ("Pool A") and a fee
calculated daily and paid quarterly in arrears at the
annual rate of 0.50% of the value of the Fund's average
daily net assets in Pool B of the Fund ("Pool B"). Net
asset value shall be computed on such days and at such
time or times as described in the Fund's then-current
Prospectus and Statement of Additional Information and
in the manner specified in the Fund's Articles of
Incorporation for the
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computation of the value of the Fund's net assets. Upon
the commencement of activities of the Fund in the middle
of a quarter or upon termination of this Agreement
before the end of any quarter, the fee for such part of
a quarter shall be prorated appropriately and, in the
case of termination, shall be payable upon the date of
termination of this Agreement.
5. EXPENSES
SBICMRC shall bear all expenses in connection with the
performance of its services under this Agreement.
SBICMRC shall, in addition to its own expenses, bear the
following expenses of the Fund:
organizational costs of the Fund; and
fees and expenses incident to the filing of the
initial registration statement under federal law
covering the shares of the Fund for public sale.
All other expenses to be incurred in the operation of
the Fund shall be borne by the Fund, including but not
limited to the following expenses:
brokerage commissions on portfolio transactions;
insurance premiums for fidelity and other coverage;
expenses of members of the Board of Directors of
the Fund not affiliated with SBICMRC;
legal and audit expenses;
custodian and transfer agent fees and expenses;
fees and expenses of the custodian for
administrative activities undertaken by the
custodian on behalf of the Fund;
interest and taxes;
fees with respect to registration of the shares
of the Fund under federal securities laws and any
fees with respect to notification filings or other
filings as may be required under state securities
laws;
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expenses of printing and mailing reports, notices
and proxy materials to shareholders of the Fund;
expenses incurred in connection with the
distribution of shares of the Fund pursuant to a
duly adopted Rule 12b-1 Plan;
all incidental expenses to holding meetings of the
Fund's shareholders; and
such extraordinary non-recurring expenses as may
arise, including litigation, affecting the Fund and
any legal obligation which the Fund may have to
indemnify its officers and directors with respect
thereto.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE
SBICMRC is authorized, in arranging the purchase and
sale of the Fund's portfolio securities, to employ or
deal with such members of securities or commodities
exchanges, brokers or dealers, or futures commission
merchants (hereinafter "broker-dealers"), including
"affiliated" broker-dealers (as that term is defined in
the Investment Company Act), as may, in its best
judgment, implement the policy of the Fund to obtain, at
reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable security price
obtainable) of the Fund's portfolio transactions as well
as to obtain, consistent with the provisions of the
third subparagraph of this Paragraph 6, the benefit of
such investment information or research as will be of
significant assistance to the performance by SBICMRC of
its investment management functions. Portfolio
transactions may be transacted with primary marketmakers
acting as principal on a net basis, with no brokerage
commissions being paid by the Fund. Such principal
transactions may, however, result in a profit to such
marketmakers. SBICMRC may make purchases of
underwritten issues for the Fund at prices which include
underwriting fees.
SBICMRC shall select broker-dealers to effect the Fund's
portfolio transactions on the basis of its estimate of
their ability to obtain best execution of particular and
related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular
portfolio transaction(s) will be judged by SBICMRC on
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the basis of all relevant factors and considerations
including, insofar as feasible, the execution
capabilities required by the transaction or
transactions; the ability and willingness of the broker-
dealer to facilitate the Fund's portfolio transactions
by participating therein for its own account; the
importance to the Fund of speed, efficiency or
confidentiality; the broker-dealer's apparent
familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any
other matters relevant to the selection of a broker-
dealer for particular and related transactions of the
Fund.
SBICMRC shall have discretion, in the interests of the
Fund, to allocate brokerage on the Fund's portfolio
transactions to broker-dealers, other than "affiliated"
broker-dealers (as defined in the Investment Company
Act), qualified to obtain best execution of such
transactions who provide brokerage and/or research
services (as such services are defined in Section 28(e)
of the Securities Exchange Act of 1934) for the Fund
and to cause the Fund to pay such broker-dealers a
commission for effecting a portfolio transaction for the
Fund that is in excess of the amount of commission
another broker-dealer adequately qualified to effect
such transaction would have charged for effecting that
transaction, if SBICMRC determines, in good faith, that
such commission is reasonable in relation to the value
of the brokerage and/or research services provided by
such broker-dealer, viewed in terms of either that
particular transaction or the overall responsibilities
of SBICMRC with respect to the Fund. In reaching such
determination, SBICMRC will not be required to place or
attempt to place a specific dollar value on the
brokerage and/or research services provided or being
provided by such broker-dealer. In demonstrating that
such determinations were made in good faith, SBICMRC
shall be prepared to show that all commissions were
allocated for purposes contemplated by this Agreement
and that the total commissions paid by the Fund over a
representative period selected by the Board of Directors
of the Fund were reasonable in relation to the benefits
to the Fund.
SBICMRC shall have no duty or obligation to seek advance
competitive bidding for the most favorable commission
rate applicable to any particular portfolio transactions
or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the
best of its ability, endeavor to be aware of the current
level of the charges of eligible broker-dealers and to
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minimize the expense incurred by the Fund for effecting
its portfolio transactions to the extent consistent with
the interests and policies of the Fund as established by
the determinations of the Board of Directors and the
provisions of this paragraph 6.
The Fund recognizes that an "affiliated" broker-dealer
(as defined in the Investment Company Act): (i) may act
as one of the Fund's regular brokers for the Fund so
long as it is lawful for it so to act; (ii) may be a
major recipient of brokerage commissions paid by the
Fund; and (iii) may effect portfolio transactions for
the Fund only if the commissions, fees or other
remuneration received or to be received by it are
determined in accordance with procedures contemplated by
any rule, regulation or order adopted under the
Investment Company Act for determining the permissible
level of such commissions.
7. DURATION
This Agreement will take effect on the date first set
forth above. Unless earlier terminated pursuant to
paragraph 8 hereof, this Agreement shall remain in ef-
fect until [December 31, 1997], and thereafter will
continue in effect from year to year, so long as such
continuance shall be approved at least annually by the
Fund's Board of Directors, including the vote of the
majority of the directors of the Fund who are not
parties to this Agreement or "interested persons" (as
defined in the Investment Company Act) of any such
party, cast in person at a meeting called for the
purpose of voting on such approval, or by the holders of
a "majority" (as defined in the Investment Company Act)
of the outstanding voting securities of the Fund and by
such a vote of the Fund's Board of Directors.
8. TERMINATION
This Agreement may be terminated (i) by SBICMRC at any
time without penalty upon sixty days' written notice to
the Fund (which notice may be waived by the Fund); or
(ii) by the Fund at any time without penalty upon sixty
days' written notice to SBICMRC (which notice may be
waived by SBICMRC) provided that such termination by the
Fund shall be directed or approved by the vote of a
majority of all of the Directors of the Fund then in
office or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the
outstanding voting securities of the Fund.
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9. AMENDMENT AND ASSIGNMENT
This Agreement may not be amended or the rights of
SBICMRC hereunder sold, transferred, pledged or
otherwise in any manner encumbered without the
affirmative vote or written consent of the holders of
the "majority" (as defined in the Investment Company
Act) of the outstanding voting securities of the Fund.
This Agreement shall automatically and immediately
terminate in the event of its "assignment" (as defined
in the Investment Company Act). An assignment shall be
deemed to have occurred for purposes of this paragraph
if SBI no longer controls SBICMRC.
10. DEFINITIONS
The terms and provisions of the Agreement shall be
interpreted and defined in a manner consistent with the
provisions and definitions contained in the Investment
Company Act.
THE SBI FUND, INC.
Attest:
______________________ By: ______________________
SBI CAPITAL MANAGEMENT AND
RESEARCH CORPORATION
Attest:
______________________ By: ______________________
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