INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (this "Agreement") is made this 29th day
of October, 2003 between Lotsoff Capital Management Equity Trust, a Delaware
statutory trust (the "Trust"), and Lotsoff Capital Management (the "Adviser").
RECITALS:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (the "Act") as an open-end
management investment company consisting of one series, Lotsoff Capital
Management Micro Cap Fund (the "Fund"); and
WHEREAS, the Trust 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.
AGREEMENT:
NOW, THEREFORE, the Trust and the Adviser do mutually promise and agree as
follows:
1. Employment. The Trust 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
Trustees of the Trust 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 Trust in any way or otherwise be deemed an agent of the Trust.
However, one or more members, officers or employees of the Adviser may serve as
trustees and/or officers of the Trust, but without compensation or reimbursement
of expenses for such services from the Trust. Nothing herein contained shall be
deemed to require the Trust to take any action contrary to its charter
documents, as amended or supplemented, or any applicable statute or regulation,
or to relieve or deprive the Board of Trustees of the Trust of its
responsibility for and control of the affairs of the Trust.
3. Expenses. The Adviser, at its own expense and without reimbursement
from the Trust, 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, reimbursement payments to
securities lenders for dividend and interest payments on securities sold short,
brokerage commissions and extraordinary items, in any year exceed that
percentage of the average net asset value 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, 3.00%. The
expenses of the Fund's operations borne by the Fund include by way of
illustration and not limitation, trustees' fees paid to those trustees who are
not interested trustees under the Act, the professional costs of preparing and
printing registration statements required under the Securities Act of 1933, as
amended, 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, trustee and officer liability insurance, reports to shareholders,
reports to government authorities and proxy statements, interest charges on any
borrowings, dividend and interest payments on securities sold short, taxes,
legal expenses, salaries of administrative and clerical personnel, association
membership dues, auditing and accounting services, insurance premiums, brokerage
commissions 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 share transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Trust shall monitor the Fund's expense ratio on a monthly basis. If the
accrued amount of the expenses of the Fund exceeds the expense limitation
established herein, the Fund 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 Trust'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 Trust through 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 advisory fee shall be 0.95% per annum of such average net assets. 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 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 members,
officers or employees 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.
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
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the services hereunder are not impaired thereby. Although the Adviser has agreed
to permit the Fund and the Trust to use the names "Lotsoff" and "Lotsoff Capital
Management", 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
Trust will not use such names 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 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, as amended
(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).
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
Trust with a copy of the code of ethics and evidence of its adoption. Upon
written request of the Trust, the Adviser shall permit the Trust to examine any
reports required to be made by the Adviser pursuant to Rule 17j-1(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 Trustees of the Trust in the manner required by the
Act, and, if required by the Act, 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 Trustees of the Trust or by a vote of
the majority of the outstanding voting securities of the Fund, as defined in the
Act, upon giving written notice sixty (60) calendar days in advance to the
Adviser. This Agreement may be terminated by the Adviser at any time upon giving
written notice sixty (60) calendar days in advance to the Trust. 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 two (2) years from the
date hereof and indefinitely thereafter, but only so long as the continuance
after such two (2) year period is specifically approved annually by (i) the
Board of Trustees of the Trust 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
Trustees of the Trust in the manner
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required by the Act, provided that any such approval may be made effective not
more than sixty (60) calendar days thereafter.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed on the day first above written.
LOTSOFF CAPITAL MANAGEMENT
(the "Adviser")
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx, CFA
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Title: Senior Managing Director
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LOTSOFF CAPITAL MANAGEMENT EQUITY TRUST
(the "Trust")
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx, CFA
---------------------------
Title: President
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