EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
Agreement made this ____ day of ________, 1996 between The
Xxxxxxxx Funds, Inc., a Maryland corporation (the "Company"), and The
Xxxxxxxx Management Co., L.P., a California limited partnership (the
"Adviser").
W I T N E S S E T H:
WHEREAS, the Company is in the process of registering with the
Securities and Exchange Commission under the Investment Company Act of
1940 (the "Act") as an open-end management investment company consisting
initially of one series, the Xxxxxxxx Balanced Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in this Agreement. The Adviser hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the board of directors of the Company may determine, direct the
purchase and sale of investment securities in the day to day management of
the Fund. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Company or the
Fund in any way or otherwise be deemed an agent of the Company or the
Fund. However, one or more limited partners of the Adviser or one or more
shareholders, officers, directors or employees of the general partner of
the Adviser may serve as directors and/or officers of the Company, but
without compensation or reimbursement of expenses for such services from
the Company. Nothing herein contained shall be deemed to require the
Company to take any action contrary to its Limited Partnership Agreement
or Certificate of Limited Partnership, as either document may be amended,
restated or supplemented from time to time, or any applicable statute or
regulation, or to relieve or deprive the board of directors of the Company
of its responsibility for and control of the affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company or the Fund, shall furnish office space,
and all necessary office facilities, equipment and executive personnel for
managing the investments of the Fund. The Adviser shall not be required
to pay any expenses of the Fund except as provided herein if the total
expenses borne by the Fund, including the Adviser's fee and the fees paid
to the Fund's Administrator but excluding all federal, state and local
taxes, interest, brokerage commissions and extraordinary items, in any
year exceed that percentage of the average net assets of the Fund for such
year, as determined by valuations made as of the close of each business
day, which is the most restrictive percentage provided by the state laws
of the various states in which the Fund's shares are qualified for sale
or, if the states in which the Fund's shares are qualified for sale impose
no such restrictions, 3%. The expenses of the Fund's operations borne by
the Fund include by way of illustration and not limitation, directors fees
paid to those directors who are not officers of the Company or interested
persons of the Adviser, the costs of preparing and printing registration
statements required under the Securities Act of 1933 and the Act (and
amendments thereto), the expense of registering its shares with the
Securities and Exchange Commission and in the various states, the printing
and distribution cost of prospectuses mailed to existing shareholders, the
cost of stock certificates (if any), director and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser in the amount of such excess. In such
a situation the monthly payment of the Adviser's fee will be reduced by
the amount of such excess, subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses thereafter fall
below the expense limitation.
4. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company, through and on behalf of
the Fund, shall pay to the Adviser an advisory fee, paid monthly, based on
the average net assets of the Fund, as determined by valuations made as of
the close of each business day of the month. The monthly advisory fee
shall be 1/12 of 0.85% (0.85% per annum) on the average daily net assets
of the Fund. For any month in which this Agreement is not in effect for
the entire month, such fee shall be reduced proportionately on the basis
of the number of calendar days during which it is in effect and the fee
computed upon the average daily net assets of the business days during
which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
partners or any of the shareholders, officers, directors or employees of
its general partner to take a long or short position in the shares of the
Fund, except for the purchase of shares of the Fund for investment
purposes at the same price as that available to the public at the time of
purchase or in connection with the initial capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has agreed to permit the Fund
and the Company to use the name "Xxxxxxxx", if they so desire, it is
understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund and the Company will not
use such name if the Adviser ceases to be the Fund's sole investment
adviser. During the period that this Agreement is in effect, the Adviser
shall be the Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser, subject to the control
and direction of the Company's Board of Directors, shall have authority
and discretion to select brokers and dealers to execute portfolio
transactions for the Fund and for the selection of the markets on or in
which the transactions will be executed. The Adviser may cause the Fund
to pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act). The Adviser shall provide such reports as the Company's
Board of Directors may reasonable request with respect to the Fund's total
brokerage and the manner in which that brokerage was allocated.
9. Code of Ethics. The Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the Act and has
provided the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Adviser shall
permit the Company to examine any reports required to be made by the
Adviser pursuant to Rule 17j-1(c)(1) under the Act.
10. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Company in
the manner required by the Act, and by the vote of the majority of the
outstanding voting securities of the Fund, as defined in the Act.
11. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the
Company or by a vote of the majority of the outstanding voting securities
of the Fund, as defined in the Act, upon giving sixty (60) days' written
notice to the Adviser. This Agreement may be terminated by the Adviser at
any time upon the giving of sixty (60) days' written notice to the
Company. This Agreement shall terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the Act). Subject to prior
termination as hereinbefore provided, this Agreement shall continue in
effect for an initial period beginning as of the date hereof and ending
___________, 1998 and indefinitely thereafter, but only so long as the
continuance after such initial period is specifically approved annually by
(i) the board of directors of the Company or by the vote of the majority
of the outstanding voting securities of the Fund, as defined in the Act,
and (ii) the board of directors of the Company in the manner required by
the Act, provided that any such approval may be made effective not more
than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
THE XXXXXXXX MANAGEMENT CO., L.P.
By: Xxxxxx X. Xxxxxxxx, Incorporated,
General Partner
By:
President
THE XXXXXXXX FUNDS, INC.
By:
President
