X.X. Xxxx & Associates, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Re: Advisory Agreement
Ladies and Gentlemen:
The Xxxx Family of Funds (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), and subject to the rules and regulations promulgated
thereunder. The Trust's shares of beneficial interest are divided into three
separate series, the Large Cap Value Fund, the Small Cap Value Fund and the
Balanced Fund (the "Funds"). Each share of a Fund represents an undivided
interest in the assets, subject to the liabilities, allocated to that Fund. Each
fund has a separate investment objective and separate investment policies.
1. APPOINTMENT AS ADVISER. The Trust being duly authorized
hereby appoints and employs X.X. Xxxx & Associates, Inc. (the "Adviser") as
discretionary portfolio manager on the terms and conditions set forth herein
of the Funds.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE.
The Adviser accepts the appointment as discretionary portfolio
manager and agrees to use its best professional judgement to make
timely investment decisions for the Funds in accordance with the
provisions of this Agreement.
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3. PORTFOLIO MANAGEMENT SERVICES OF THE ADVISER.
The Adviser is hereby employed and authorized to select
portfolio securities for investment by the Trust on behalf of the Funds, to
purchase and sell securities of the Funds, and upon making any purchase or sale
decision, to place orders for the execution of such portfolio transactions in
accordance with paragraphs 5 and 6 hereof. In providing portfolio management
services to the Funds, the Adviser shall be subject to such investment
restrictions as are set forth in the Act and the rules thereunder, the Internal
Revenue Code of 1986, applicable state securities laws, the supervision and
control of the Trustees of the Trust, such specific instructions as the Trustees
may adopt and communicate to the Adviser and the investment objectives, policies
and restrictions of the Trust applicable to the Funds furnished pursuant to
paragraph 4. The Adviser is not authorized by the Trust to take any action,
including the purchase or sale of securities for the Funds, in contravention of
any restriction, limitation, objective, policy or instruction described in the
previous sentence. The Adviser shall maintain on behalf of the Trust the records
listed in Schedule A hereto (as amended from time to time). At the Trust's
reasonable request, the Adviser will consult with the Trust with respect to any
decision made by it with respect to the investments of the Funds.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust
will provide the Adviser with the statement of investment objectives, policies
and restrictions applicable to the Funds as contained in the Trust's
registration statement under the Act and the Securities Act of 1933, and any
instructions adopted by the
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Trustees supplemental thereto. The Trust will provide the Adviser with such
further information concerning the investment objectives, policies and
restrictions applicable thereto as the Adviser may from time to time reasonably
request. The Trust retains the right, on written notice to the Adviser from the
Trust, to modify any such objectives, policies or restrictions in any manner at
any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated
by payment to or delivery by Banc One or any successor custodian (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Trust, of all cash and/or securities
due to or from the Funds, and the Adviser shall not have possession or custody
thereof. The Adviser shall advise the Custodian and confirm in writing to the
Trust and to MGF Service Corp., or any other designated agent of the Trust,
all investment orders for the Funds placed by it with brokers and dealers.
The Adviser shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated by
the Adviser.
6. ALLOCATION OF BROKERAGE. The Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Adviser and to select the markets on or in which the
transactions will be executed.
In doing so, the Adviser will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this policy,
the Adviser may consider the financial responsibility, research and investment
information and
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other services provided by brokers or dealers who may effect or be a party to
any such transaction or other transactions to which other clients of the Adviser
may be a party. It is understood that neither the Trust nor the Adviser has
adopted a formula for allocation of the Funds' investment transaction business.
It is also understood that it is desirable for the Trust that the Adviser have
access to supplemental investment and market research and security and economic
analyses provided by certain brokers who may execute brokerage transactions at a
higher commission to the Funds than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission. Therefore, the
Adviser is authorized to place orders for the purchase and sale of securities
for the Funds with such certain brokers, subject to review by the Trust's
Trustees from time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such brokers may be
useful to the Adviser in connection with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Funds as well as other clients, the Adviser,
to the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as expenses incurred in
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the transaction, will be made by the Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Trust
and to such other clients.
For each fiscal quarter of the Trust, the Adviser shall prepare and
render reports to the Trust's Trustees of the total brokerage business placed
and the manner in which the allocation has been accomplished. Such reports shall
set forth at a minimum the information required to be maintained by Rule
31a-1(b)(9) under the Act.
7. PROXIES. The Trust will vote all proxies solicited by or
with respect to the issuers of securities in which assets of the Funds may be
invested from time to time. At the request of the Trust, the Adviser shall
provide the Trust with its recommendations as to the voting of such proxies.
8. REPORTS TO THE ADVISER. The Trust will provide the Adviser
with such periodic reports concerning the status of the Funds as the Adviser
may reasonably request.
9. FEES FOR SERVICES. For all of the services to be rendered
and payments made as provided in this Agreement, each Fund will pay the Adviser
a fee, computed and accrued daily and paid monthly, at the annual rate of
1.00% of its average daily net assets.
10. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall employ
or provide and compensate the executive, administrative, secretarial and
clerical personnel necessary to provide the services set forth herein,
and shall bear the expense thereof.
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The Adviser shall compensate all Trustees, officers and employees of the Trust
who are also employees of the Adviser. The Adviser will pay all expenses
incurred in connection with the sale or distribution of the Funds' shares to the
extent such expenses are not assumed by the Funds under the Trust's Distribution
Expense Plans.
The Funds will be responsible for the payment of all operating expenses
of the Funds, including fees and expenses incurred by the Funds in connection
with membership in investment company organizations, brokerage fees and
commissions, legal, auditing and accounting expenses, expenses of registering
shares under federal and state securities laws, insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, the transfer, shareholder
service and dividend disbursing agent and the accounting and pricing agent of
the Funds, expenses including clerical expenses of the issue, sale, redemption
or repurchase of shares of the Funds, the fees and expenses of Trustees of the
Trust who are not interested persons of the Trust, the cost of preparing,
printing and distributing prospectuses, statements, reports and other documents
to shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including litigation
to which the Trust may be a party and indemnification of the Trust's officers
and Trustees with respect thereto, or any other expense not specifically
described above incurred in the performance of the Trust's
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obligations. All other expenses not expressly assumed by the Adviser herein
incurred in connection with the organization, registration of shares and
operations of the Funds will be borne by the Funds.
11. OTHER INVESTMENT ACTIVITIES OF THE ADVISER. The Trust
acknowledges that the Adviser or one or more of its affiliates may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that the
Adviser, its affiliates or any of its or their directors, officers, agents or
employees may buy, sell or trade in any securities for its or their respective
accounts ("Affiliated Accounts"). Subject to the provisions of paragraph 2
hereof, the Trust agrees that the Adviser or its affiliates may give advice or
exercise investment responsibility and take such other action with respect to
other Affiliated Accounts which may differ from the advice given or the timing
or nature of action taken with respect to the Funds, provided that the Adviser
acts in good faith, and provided further, that it is the Adviser's policy to
allocate, within its reasonable discretion, investment opportunities to the
Funds over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Funds and any specific investment restrictions applicable thereto. The
Trust acknowledges that one or more of the Affiliated Accounts may at any time
hold, acquire, increase, decrease, dispose of or otherwise deal with positions
in
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investments in which the Funds may have an interest from time to time, whether
in transactions which involve the Funds or otherwise. The Adviser shall have no
obligation to acquire for the Funds a position in any investment which any
Affiliated Account may acquire, and the Trust shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Funds or otherwise.
12. CERTIFICATE OF AUTHORITY. The Trust and the Adviser shall
furnish to each other from time to time certified copies of the resolutions of
their Trustees or Board of Directors or executive committees, as the case may
be, evidencing the authority of officers and employees who are authorized to
act on behalf of the Trust, the Funds and/or the Adviser.
13. LIMITATION OF LIABILITY. The Adviser shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Trust, provided, however, that such acts or omissions shall not have
resulted from the Adviser's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Adviser in its actions under this Agreement or breach of its duty or of its
obligations hereunder. Nothing in this paragraph 13 shall be construed in a
manner inconsistent with Sections 17(h) and (i) of the Act.
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14. CONFIDENTIALITY. Subject to the duty of the Adviser and the
Trust to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Funds and the actions of the
Adviser and the Trust in respect thereof.
15. ASSIGNMENT. No assignment of this Agreement shall be made by
the Adviser, and this Agreement shall terminate automatically in the event of
such assignment. The Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with the Adviser.
16. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE TRUST.
The Trust represents, warrants and agrees that:
A. The Adviser has been duly appointed by the Trustees
of the Trust to provide investment advisory services to the Funds as
contemplated hereby.
B. The Trust will deliver to the Adviser true and complete
copies of its then current prospectuses and statements of additional information
as effective from time to time and such other documents or instruments governing
the investments of the Funds and such other information as is necessary for the
Adviser to carry out its obligations under this Agreement.
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C. The Trust is currently in compliance and shall at
all times comply with the requirements imposed upon the Trust by
applicable law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
ADVISER. The Adviser represents, warrants and agrees that:
A. The Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940.
B. The Adviser will maintain, keep current and preserve on
behalf of the Trust, in the manner and for the time periods required or
permitted by the Act, the records identified in Schedule A. The Adviser agrees
that such records (unless otherwise indicated on Schedule A) are the property of
the Trust, and will be surrendered to the Trust promptly upon request.
C. The Adviser will complete such reports concerning purchases
or sales of securities on behalf of the Funds as the Trust may from time to time
require to ensure compliance with the Act, the Internal Revenue Code of 1986 and
applicable state securities laws.
D. The Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the Act and will provide the Trust
with a copy of the code of ethics and evidence of its adoption. Within
forty-five (45) days of the end of the last calendar quarter of each year while
this Agreement is in effect, an executive officer of the Adviser shall certify
to the Trust that the Adviser has complied with the requirements of Rule 17j-1
during the previous year and that there has been no
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violation of the Adviser's code of ethics or, if such a violation has occurred,
that appropriate action was taken in response to such violation. Upon the
written request of the Trust, the Adviser shall permit the Trust, its employees
or its agents to examine the reports required to be made to the Adviser by Rule
17j-1(c)(1).
E. The Adviser will, promptly after filing with the
Securities and Exchange Commission an amendment to its Form ADV,
furnish a copy of such amendment to the Trust.
F. Upon request of the Trust, the Adviser will
provide assistance to the Custodian in the collection of income
due or payable to the Funds.
G. The Adviser will immediately notify the Trust of the
occurrence of any event which would disqualify the Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the Act
or otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but
only by written agreement between the Adviser and the Trust, which amendment,
other than amendments to Schedule A, is subject to the approval of the Trustees
and the shareholders of the Funds in the manner required by the Act and the
rules thereunder, subject to any applicable exemptive order of the Securities
and Exchange Commission modifying the provisions of the Act with respect to
approval of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective
on the date of its execution and shall remain in force for a period of two
(2) years from such date, and from year to
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year thereafter but only so long as such continuance is specifically approved at
least annually by the vote of a majority of the Trustees who are not interested
persons of the Trust or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of the Board of Trustees or of
a majority of the outstanding voting securities of the Funds. The aforesaid
requirement that this Agreement may be continued "annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
20. TERMINATION. This Agreement may be terminated by either party
hereto, without the payment of any penalty, immediately upon written notice to
the other in the event of a breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other, but
any such termination shall not affect the status, obligations or liabilities of
any party hereto to the other.
21. OBLIGATIONS OF THE TRUST. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
trustees, shareholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the trust property of the Trust. The execution and
delivery of this Agreement have been authorized by the trustees of the Trust and
signed by an officer of the Trust, acting as such, and neither such
authorization by such trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust.
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22. USE OF NAME. The name "Xxxx" is a property right of the
Adviser. The Adviser may use the name "Xxxx" in other connections and for other
purposes, including without limitation in the name of other investment
companies, corporations or businesses that it may manage, advise, sponsor or
own, or in which it may have a financial interest. The Trust will discontinue
any use of the name "Xxxx" if the Adviser ceases to be employed as the Trust's
portfolio manager.
23. DEFINITIONS. As used in paragraphs 15 and 19 of this
Agreement, the terms "assignment," "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
24. APPLICABLE LAW. To the extent that state law is not
preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the
State of Ohio.
XXXX FAMILY OF FUNDS
By: /S/ XXXXX X. XXXXX
Title: PRESIDENT
Date: April 1, 1997
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ACCEPTANCE
The foregoing Agreement is hereby accepted.
X.X. XXXX & ASSOCIATES, INC.
By: /S/ XXXXXX X. XXXX
Title: PRESIDENT
Date: April 1, 1997
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SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Adviser on behalf of
the Funds for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modification or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf
of the Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected,
and the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Funds by brokers or
dealers.
(ii) The supplying of services or benefits by brokers
or dealers to:
(a) The Trust;
(b) The Adviser; and,
(c) Any person affiliated with the foregoing
persons.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as
such.
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B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate
memorandum identifying the person or persons, committees or
groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be
retained as part of this record any memorandum,
recommendation or instruction supporting or authorizing the
purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Funds.
-----------------------
* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendation; i.e., buy, sell, hold)
or any internal reports or portfolio adviser reviews.
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