Exhibit d(i)
INVESTMENT ADVISORY AGREEMENT
X.XXX FUNDS
This is an INVESTMENT ADVISORY AGREEMENT, dated as of June 13, 2000,
between X.xxx Asset Management, Inc. (the "Adviser") and X.xxx Funds (the
"Trust") with respect to the series listed on Exhibit A (the "Funds"), which
Exhibit A may be amended from time to time to add or delete Funds with mutual
consent of the parties.
WHEREAS, the Trust is a Delaware business trust organized pursuant to a
Declaration of Trust dated July 7, 1999 (the "Declaration of Trust"), and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company;
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services and other management services required for the ordinary
operations of the Funds, and the Adviser is willing to furnish those services to
the Funds;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS, the Advisor has provided investment advisory and other
management services to the Funds pursuant to that certain Investment Advisory
Agreement, dated as of November 17, 1999 (the "Old Investment Advisory
Agreement");
WHEREAS, the Old Investment Advisory Agreement has terminated in
accordance with its terms pursuant to a change of control of the parent company
of the Advisor;
WHEREAS, the parties hereto wish to reinstate the agreement evidenced
by the Old Investment Advisory Agreement on substantially the same terms, with
certain modifications as contemplated in the next paragraph; and
WHEREAS, the Trust has determined to increase the services to be
provided by the Advisor hereunder for the X.xxx U.S.A. Money Market Fund and,
subject to requisite shareholder approval, to compensate the Advisor for such
increased services.
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment.
The Trust hereby appoints the Adviser to act as investment adviser and
manager to the Funds for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Investment Advisory and Management Duties.
(a) Subject to the supervision of the Trustees of the Trust, the
Adviser will provide a program of continuous investment management for the Fund
in accordance with each Fund's investment objective, policies and limitations as
stated in the Fund's Prospectus and Statement of Additional Information included
as part of the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC") and as the Prospectus and Statement of Additional
Information may be amended from time to time, copies of which shall be provided
to the Adviser by the Trust. Subject to approval by the Trustees of the Trust,
the Adviser for each Fund may select a master fund having substantially the same
investment objective and policies as the Fund into which all or substantially
all of the Fund's assets may be invested, or select and manage investment
subadvisers who may be granted discretionary investment authority with respect
to the assets of the Fund.
(b) In performing its investment management services to the Funds
hereunder, the Adviser will provide the Funds with ongoing investment guidance,
policy direction, including oral and written research, monitoring of any master
funds, analysis, advice, statistical and economic data and judgments regarding
individual investments, general economic conditions and trends and long-range
investment policy.
(c) To the extent permitted by the Adviser's Form ADV as filed with the
SEC and subject to the approval of the Trustees of the Trust, the Adviser shall
have the authority to manage cash and money market instruments for cash flow
purposes.
(d) To the extent permitted by the Adviser's current Form ADV as filed
with the SEC, the Adviser will advise as to the securities, instruments,
repurchase agreements, options and other investments and techniques that each
Fund will purchase, sell, enter into or use, and will provide an ongoing
evaluation of the Fund's portfolio. The Adviser will advise as to what portion
of the Fund's portfolio shall be invested in securities and other assets, and
what portion if any, should be held uninvested.
(e) The Adviser shall provide or arrange for administration, transfer
agency, custody and all other services necessary for the Funds to operate, and
shall be responsible for the payment of all expenses associated with such
services, subject to Section 5 of this Investment Advisory Agreement.
(f) The Adviser may engage and remove one or more subadvisers, subject
to the legally required approvals of the Trust and its shareholders, and the
Adviser shall monitor the performance of any subadviser and report to the Trust
thereon.
(g) The Adviser further agrees that, in performing its duties
hereunder, it will:
(i) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code") and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Trustees;
(ii) use reasonable efforts to manage each Fund so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;
(iii) place orders pursuant to each Fund's investment determinations as
approved by the Trustees for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements;
(iv) furnish to the Trust whatever statistical information the Trust
may reasonably request with respect to each Fund's assets or contemplated
investments. In addition, the Adviser will keep the Trust and the Trustees
informed of developments materially affecting each Fund's portfolio and shall,
on the Adviser's own initiative, furnish to the Trust from time to time whatever
information the Adviser believes appropriate for this purpose;
(v) make available to the Trust's administrator (the "Administrator")
and the Trust, promptly upon their request, such copies of its investment
records and ledgers with respect to each Fund as may be required to assist the
Administrator and the Trust in their compliance with applicable laws and
regulations. The Adviser will furnish the Trustees with such periodic and
special reports regarding the Fund and any subadviser as they may reasonably
request;
(vi) immediately notify the Trust in the event that the Adviser or any
of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the SEC or other regulatory
authority. The Adviser further agrees to notify the Trust immediately of any
material fact known to the Adviser respecting or relating to the Adviser that is
not contained in the Trust's Registration Statement regarding the Funds, or any
amendment or supplement thereto, but that is required to be disclosed thereon,
and of any statement contained therein that becomes untrue in any material
respect; and
(vii) in providing investment advice to the Funds, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Adviser seek to obtain any such information.
3. Futures and Options.
The Adviser's investment authority shall include advice with regard to
purchasing, selling, covering open positions, and generally dealing in financial
futures contracts and options thereon, or master funds which do so in accordance
with Rule 4.5 of the Commodity Futures Trading Commission.
The Adviser's authority shall include authority to: (i) open and
maintain brokerage accounts for financial futures and options (such accounts
hereinafter referred to as "Brokerage Accounts") on behalf of and in the name of
the Fund; and (ii) execute for and on behalf of the Brokerage Accounts, standard
customer agreements with a broker or brokers. The Adviser may, using such of the
securities and other property in the Brokerage Accounts as the Adviser deems
necessary or desirable, direct the custodian to deposit on behalf of a Fund,
original and maintenance brokerage deposits and otherwise direct payments of
cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Adviser deems desirable or appropriate.
4. Use of Securities Brokers and Dealers.
The Adviser will monitor the use by master funds of broker-dealers. To
the extent permitted by the Adviser's Form ADV as filed with the SEC, purchase
and sale orders will usually be placed with brokers who are selected by the
Adviser as able to achieve "best execution" of such orders. "Best execution"
shall mean prompt and reliable execution at the most favorable securities price,
taking into account the other provisions hereinafter set forth. Whenever the
Adviser places orders, or directs the placement of orders, for the purchase or
sale of portfolio securities on behalf of a Fund, in selecting brokers or
dealers to execute such orders, the Adviser is expressly authorized to consider
the fact that a broker or dealer has furnished statistical, research or other
information or services which enhance the Adviser's research and portfolio
management capability generally. It is further understood in accordance with
Section 28(e) of the Securities Exchange Act of 1934, as amended, that the
Adviser may negotiate with and assign to a broker a commission which may exceed
the commission which another broker would have charged for effecting the
transaction if the Adviser determines in good faith that the amount of
commission charged was reasonable in relation to the value of brokerage and/or
research services (as defined in Section 28(e)) provided by such broker, viewed
in terms either of the Fund or the Adviser's overall responsibilities to the
Adviser's discretionary accounts.
Neither the Adviser nor any parent, subsidiary or related firm shall
act as a securities broker with respect to any purchases or sales of securities
which may be made on behalf of a Fund, provided that this limitation shall not
prevent the Adviser from utilizing the services of a securities broker which is
a parent, subsidiary or related firm, provided such broker effects transactions
on a "cost only" or "nonprofit" basis to itself and provides competitive
execution. Unless otherwise directed by the Trust in writing, the Adviser may
utilize the service of whatever independent securities brokerage firm or firms
it deems appropriate to the extent that such firms are competitive with respect
to price of services and execution.
5. Allocation of Charges and Expenses.
The Adviser will pay all of the expenses of each class of each series
of the Trust's shares that it shall manage, other than the following expenses:
o interest;
o taxes;
o brokerage commissions;
o insurance and bonding premiums;
o fees and expenses of those trustees who are not "interested persons"
as defined in the 1940 Act, including counsel fees;
o extraordinary expenses approved by those disinterested trustees; and
o fees and expenses of any master portfolio into which that series
invests all or substantially all of its assets.
The Adviser also will pay expenses incurred in connection with the
provision of shareholder services and distribution services.
To the extent the Adviser incurs any costs by assuming expenses that
are an obligation of a Fund as set forth herein, such Fund shall promptly
reimburse the Adviser for those costs and expenses, except to the extent the
Adviser has otherwise agreed to bear those expenses. To the extent the services
for which a Fund is obligated to pay are performed by the Adviser, the Adviser
shall be entitled to recover from that Fund to the extent of the Adviser's
actual costs for providing those services.
6. Compensation.
(a) As compensation for the services provided and expenses assumed by
the Adviser under this Agreement, the Trust will arrange for each Fund to pay
the Adviser at the end of each calendar month an advisory fee computed daily at
an annual rate equal to the amount of average daily net assets listed opposite
each Fund's name in Exhibit A, attached hereto. The "average daily net assets"
of a Fund shall mean the average of the values placed on the Fund's net assets
as of 4:00 p.m. (New York time) on each day on which the net asset value of the
Fund is determined consistent with the provisions of Rule 22c-1 under the 1940
Act or, if the Fund lawfully determines the value of its net assets as of some
other time on each business day, as of such other time. The value of net assets
of each Fund shall always be determined pursuant to the applicable provisions of
the Declaration of Trust and the Registration Statement. If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this Section 6, the value of the net
assets of a Fund as last determined shall be deemed to be the value of its net
assets as of the close of the New York Stock Exchange, or as of such other time
as the value of the net assets of the Fund's portfolio may lawfully be
determined, on that day. If the determination of the net asset value of the
shares of a Fund has been so suspended for a period including any month end when
the Adviser's compensation is payable pursuant to this Section 6, then the
Adviser's compensation payable at the end of such month shall be computed on the
basis of the value of the net assets of the Fund as last determined (whether
during or prior to such month). If a Fund determines the value of the net assets
of its portfolio more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on that
day for the purposes of this Section 6.
(b) The Adviser voluntarily may reduce any portion of the compensation
or reimbursement of expenses due to it pursuant to this Agreement and may agree
to make payments to limit the expenses that are the responsibility of a Fund
under this Agreement. Any such reduction or payment shall be applicable only to
such specific reduction or payment and shall not constitute an agreement to
reduce any future compensation or reimbursement due to the Adviser hereunder or
to continue future payments.
7. Books and Records.
The Adviser agrees to maintain such books and records with respect to
its services to the Funds as are required by Section 31 under the 1940 Act, and
rules adopted thereunder, and by other applicable legal provisions, and to
preserve such records for the periods and in the manner required by that
Section, and those rules and legal provisions. The Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-1 and Rule 31a-2 under
the 1940 Act and otherwise in connection with its services hereunder are the
property of the Trust and will be surrendered promptly to the Trust upon its
request. The Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Funds are being conducted in accordance
with applicable laws and regulations.
8. Aggregation of Orders.
Provided that the investment objective, policies and restrictions of
the Funds are adhered to, the Trust agrees that the Adviser may aggregate sales
and purchase orders of securities held in the Funds with similar orders being
made simultaneously for other accounts managed by the Adviser or with accounts
of the affiliates of the Adviser, if in the Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the respective Fund
taking into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. The Trust acknowledges that the determination of
such economic benefit to a Fund by the Adviser represents the Adviser's
evaluation that the Fund is benefited by relatively better purchase or sales
prices, lower commission expenses and beneficial timing of transactions or a
combination of these and other factors.
9. Standard of Care and Limitation of Liability.
The Adviser shall exercise its best judgment in rendering the services
provided by it under this Agreement. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund or the
holders of the Fund's shares in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Adviser against any liability to the Trust,
the Fund or to holders of the Fund's shares to which the Adviser would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Adviser's reckless
disregard of its obligations and duties under this Agreement. As used in this
Section 9, the term "Adviser" shall include any officers, directors, employees
or other affiliates of the Adviser performing services with respect to the Fund.
10. Services Not Exclusive.
It is understood that the services of the Adviser are not exclusive,
and that nothing in this Agreement shall prevent the Adviser from providing
similar services to other investment companies or to other series of investment
companies, including the Trust (whether or not their investment objectives and
policies are similar to those of the Fund) or from engaging in other activities,
provided such other services and activities do not, during the term of this
Agreement, interfere in a material manner with the Adviser's ability to meet its
obligations to the Funds hereunder. When the Adviser recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Adviser recommends the purchase or sale of the same security for a
Fund, it is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to the Fund.
In connection with purchases or sales of portfolio securities for the account of
a Fund, neither the Adviser nor any of its directors, officers or employees
shall act as a principal or agent or receive any commission. If the Adviser
provides any advice to its clients concerning the shares of a Fund, the Adviser
shall act solely as investment counsel for such clients and not in any way on
behalf of the Trust or the Fund.
11. Duration and Termination.
(a) This Agreement shall continue for a period of two years from the
date of commencement, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Trustees or (ii) a vote of a "majority" (as defined in the
0000 Xxx) of the Funds' outstanding voting securities (as defined in the 1940
Act), provided that in either event the continuance is also approved by a
majority of the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the 0000 Xxx) of any party to this Agreement, by vote
cast in person (to the extent required by the 0000 Xxx) at a meeting called for
the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated:
(a) at any time without penalty by the Funds upon the vote of a majority of the
Trustees or by vote of the majority of the Funds' outstanding voting securities,
upon sixty (60) days' written notice to the Adviser or (b) by the Adviser at any
time without penalty, upon sixty (60) days' written notice to the Trust. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
12. Amendments.
This Agreement may be amended at any time but only by the mutual
agreement of the parties to this Agreement and in accordance with any applicable
legal or regulatory requirements.
13. Proxies.
Unless the Trust gives written instructions to the contrary, the
Adviser shall vote all proxies solicited by or with respect to the issuers of
securities in which assets of a Fund may be invested in a manner which best
serves the interests of the Fund's shareholders. The Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders.
14. Use of "S&P 500" Name.
It is understood that the Adviser has entered into a licensing
agreement with The XxXxxx-Xxxx Companies, Inc., for use of the terms "S&P 500",
"S&P", "Standard & Poor's", and "Standard & Poor's 500" (the "license"). In
accordance with such license, the Adviser shall permit the Trust, on behalf of
the affected Funds, to use the terms "S&P 500", "S&P", "Standard & Poor's", and
"Standard & Poor's 500", so long as the license and this Agreement shall
continue in effect.
15. Failure to Perform; Force Majeure.
No failure or omission by either party hereto in the performance of any
obligation of this Agreement (other than payment obligations) shall be deemed a
breach of this Agreement or create any liability if the same shall arise from
any cause or causes beyond the control of the party, including but not limited
to, the following: acts of God, acts or omissions of any governmental agency;
any rules, regulations, or orders issued by any governmental authority or by any
officer, department, agency or instrumentality thereof; fire; storm; flood;
earthquake, war; rebellion; insurrection; riot; and invasion and provided that
such failure or omission resulting from one of the above causes is cured as soon
as is practicable after the occurrence of one or more of the above-mentioned
causes.
16. [Reserved.]
17. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser as an
agent of the Trust or the Fund.
(e) All liabilities of the Trust hereunder are limited to the assets of
the Funds, but this shall not be interpreted to conflict with each Fund's
maintaining its separate assets and liabilities.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of June 13, 2000.
X.XXX FUNDS
By: /s/ Xxxx X. Story
----------------------------------------
Name: Xxxx X. Story
Title: President
X.XXX ASSET MANAGEMENT, INC.
By: /s/ Xxxx X. Story
----------------------------------------
Name: Xxxx X. Story
Title: Chief Financial Officer and
Chief Operating Officer
EXHIBIT A
NAME OF FUND ADVISORY FEE EFFECTIVE DATE
------------ ------------ --------------
X.xxx Premier S&P 500 Fund 0.23% June 13, 2000
X.xxx U.S.A. Bond Fund 0.32% June 13, 2000
X.xxx U.S.A. Money Market Fund 1.80% June 13, 2000
X.xxx International Index Fund 0.35% June 13, 2000
X.XXX FUNDS
By: /s/ Xxxx X. Story
--------------------------------
Name: Xxxx X. Story
Title: President
X.XXX ASSET MANAGEMENT, INC.
By: /s/ Xxxx X. Story
----------------------------------
Name: Xxxx X. Story
Title: Chief Financial Officer and
Chief Operating Officer
