Exhibit 5
ADVISORY AGREEMENT
between
THE XXXXXX SQUARE STRATEGIC EQUITY FUND
and
WILMINGTON TRUST COMPANY
AGREEMENT made this 23rd day of February, 1998, by and between The
Xxxxxx Square Strategic Equity Fund, a Massachusetts business trust (hereinafter
called the "Fund"), and Wilmington Trust Company, a corporation organized under
the laws of the State of Delaware (hereinafter called the "Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act") as an open-end management investment company, and
offers for sale distinct series of shares of beneficial interest ("Series") each
corresponding to a distinct portfolio; and
WHEREAS, the Fund desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser on behalf of one or
more Series of the Fund, and to have that investment adviser provide or perform
for the Series various research, statistical and investment services; and
WHEREAS, the Adviser is willing to furnish such services to the Fund
with respect to each of the Series listed on Schedule A to this Agreement (the
"Portfolio" or "Portfolios") on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties as follows:
1. EMPLOYMENT OF THE ADVISER. The Fund hereby employs the Adviser to
invest and reinvest the assets of the Portfolio in the manner set forth in
Section 2 of this Agreement subject to the direction of the Trustees and the
officers of the Fund, for the period, in the manner, and on the terms set forth
hereinafter. The Adviser hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set forth.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY, THE ADVISER. The
Adviser undertakes to provide the services hereinafter set forth and to assume
the following obligations:
A. INVESTMENT ADVISORY SERVICES.
(i) The Adviser shall direct the investments of each
Portfolio, subject to and in accordance with the Portfolio's investment
objective, policies and limitations as provided in its Prospectus and Statement
of Additional Information ("the Prospectus") and other governing instruments, as
amended from time to time, and any other directions and policies which the
Trustees may issue to the Adviser from time to time.
(ii) The Adviser is authorized, in its discretion and
without prior consultation with the Fund, to purchase and sell securities and
other investments of each Portfolio.
B. CORPORATE MANAGEMENT SERVICES.
(i) The Adviser shall furnish for the use of the Fund
office space and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund.
(ii) The Adviser shall pay the salaries of all personnel
of the Fund or the Adviser performing services relating to research, statistical
and investment activities.
C. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF
REGISTRATION STATEMENT, AMENDMENTS AND OTHER MATERIALS. The Adviser will make
available and provide such information as the Fund or its administrator may
reasonably request for use in the preparation of its registration statement,
reports and other documents required by any applicable federal, foreign or state
statutes or regulations.
D. CODE OF ETHICS. The Adviser will adopt a written code of
ethics complying with the requirements of Rule 17j-1 under the 1940 Act and
Section 204A of the Investment Advisers Act of 1940 and will provide the Fund
and its administrator 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 Trustees that the Adviser has complied with the
requirements of Rule 17j-1 and Section 204A during the previous year and that
there has been no 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 Fund or its administrator, the
Adviser shall permit the Fund or its administrator to examine the reports
required to be made to the Adviser by Rule 17j-l(c)(l).
E. DISQUALIFICATION. The Adviser shall immediately notify the
Trustees 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
of the 1940 Act or any other applicable statute or regulation.
F. OTHER OBLIGATIONS AND SERVICES. The Adviser shall make its
officers and employees available to the Trustees and officers of the Fund for
consultation and discussion regarding the management of each Portfolio and its
investment activities.
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3. Execution and Allocation of Portfolio Brokerage.
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A. The Adviser, subject to the control and direction of the
Trustees, shall have authority and discretion to select brokers and dealers to
execute portfolio transactions for each Portfolio, and for the selection of the
markets on or in which the transactions will be executed.
B. In acting pursuant to Section 3A, the Adviser will place
orders through such brokers or dealers in conformity with the policies with
respect to portfolio transactions set forth in the Fund's registration
statement.
C. It is understood that neither the Fund nor the Adviser will
adopt a formula for allocation of a Portfolio's brokerage.
D. It is understood that the Adviser may, to the extent permitted
by applicable laws and regulations, aggregate securities to be sold or purchased
for any Portfolio and for other clients in order to obtain the most favorable
price and efficient execution. In that event, allocation of the securities
purchased or sold, as well as expenses incurred in 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 Fund and to its other clients.
E. It is understood that the Adviser may, in its discretion, use
brokers who provide a Portfolio with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Portfolio, and the
Adviser may pay to those brokers in return for brokerage and research services a
higher commission than may be charged by other brokers, subject to the Adviser
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Adviser to
the Portfolio and its other clients and that the total commissions paid by such
Portfolio will be reasonable in relation to the benefits to the Portfolio over
the long term.
F. It is understood that the Adviser may use brokers who (i) are
affiliated with the Adviser provided that no such broker will be utilized in any
transaction in which such broker acts as principal; and (ii) the commissions,
fees or other remuneration received by such brokers is reasonable and fair
compared to the commissions fees or other remuneration paid to other brokers in
connection with comparable transactions involving similar securities being
purchased or sold during a comparable period of time.
G. The Adviser shall provide such reports as the Trustees may
reasonably request with respect to each Portfolio's total brokerage and
portfolio transaction activities and the manner in which that business was
allocated.
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4. DELEGATION OF ADVISER'S OBLIGATIONS AND SERVICES. With respect to
any or all Portfolios, the Adviser may enter into one or more contracts
("Sub-Advisory Contract") with a sub-adviser in which the Adviser delegates to
such sub-adviser any or all of its obligations or services specified in Section
2 of this Agreement, provided that each Sub-Advisory Agreement imposes on the
sub-adviser bound thereby all the duties and conditions the Adviser is subject
to under this Agreement, and further provided that each Sub-Advisory Agreement
meets all requirements of the 1940 Act and rules thereunder.
5. EXPENSES OF THE FUND. It is understood that the Fund will pay all
its expenses other than those expressly stated to be payable by the Adviser
hereunder, which expenses payable by the Fund shall include, without limitation:
A. fees payable for administrative services;
B. fees payable for accounting services;
C. the cost of obtaining quotations for calculating the value of the
assets of each Portfolio;
D. interest and taxes;
E. brokerage commissions, dealer spreads and other costs in
connection with the purchase or sale of securities;
F. compensation and expenses of its Trustees other than those who
are "interested persons" of the Fund within the meaning of the
1940 Act;
G. Legal and audit expenses;
H. fees and expenses related to the registration and qualification
of the Fund and its shares for distribution under state and
federal securities laws;
I. expenses of typesetting. printing and mailing reports, notices
and proxy material to shareholders of the Fund;
J. all other expenses incidental to holding meetings of the Fund's
shareholders, including proxy solicitations therefor;
K. premiums for fidelity bond and other insurance coverage;
L. the Fund's association membership dues;
M. expenses of typesetting for printing Prospectuses;
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N. expenses of printing and distributing Prospectuses to existing
shareholders;
O. out-of-pocket expenses incurred in connection with the provision
of custodial and transfer agency services;
P. service fees payable by each Portfolio to the Distributor for
providing personal services to the shareholders of each Portfolio
and for maintaining shareholder accounts for those shareholders;
Q. distribution fees; and
R. such non-recurring expenses as may arise, including costs arising
from threatened actions, actions, suits and proceedings to which
the Fund is a party and the legal obligation which the Fund may
have to indemnify its Trustees and officers with respect thereto.
6. COMPENSATION OF THE ADVISER. For the services and facilities to be
furnished hereunder, the Adviser shall receive an advisory fee equivalent to the
annual rate listed along with each Portfolio's name in Schedule B attached
hereto. This advisory fee shall be payable monthly as soon as practicable after
the last day of each month based on the average of the daily values placed on
the net assets of the Fund as determined at the close of business on each day
throughout the month, with each Portfolio to contribute pro-rata to the payment
to the Adviser on the basis of its net assets. The assets of each Portfolio will
be valued separately as of the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time) on each business day throughout the
month or, if the Fund lawfully determines the value of the net assets of any
Portfolio as of some other time on each business day, as of such time with
respect to that Portfolio. If the Fund determines the value of the net assets of
any Portfolio more than once on any business day, the last such determination on
that day shall be deemed to be the sole determination on that day. The value of
net assets shall be determined pursuant to the applicable provisions of the
Fund's Declaration of Trust, its By-Laws and the 1940 Act. If, pursuant to such
provisions, the determination of the net asset value of any Portfolio of the
Fund is suspended for any particular business day, then the value of the net
assets of that Portfolio on that day shall be deemed to be the value of its net
assets as determined on the preceding business day. If the determination of the
net asset value of any Portfolio has been suspended for more than one month, the
Adviser's compensation payable at the end of that month shall be computed on the
basis of the value of the net assets of the Portfolio as last determined
(whether during or prior to such month).
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7. Activities and Affiliates of the Adviser.
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A. The services of the Adviser to the Fund are not to be deemed
exclusive, the Adviser being free to render services to others and engage in
other activities, provided, however, that 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 all of its obligations with respect to rendering
services to the Fund hereunder.
B. The Fund acknowledges that the Adviser or one or more of its
"affiliated persons" may have investment responsibilities or render investment
advise to or perform other investment advisory services for other individuals or
entities and that the Adviser, its "affiliated persons" or any of its or their
directors, officers, agents or employees may buy, sell or trade in securities
for its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 3, the Fund agrees that the Adviser or its "affiliated
persons" may give advice or exercise investment responsibility and take such
other action with respect to Affiliated Accounts which may differ from the
advice given or the timing or nature of action with respect to the Portfolios of
the Fund, provided that the Adviser acts in good faith. The Fund 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 investments
in which one or more Portfolios may have an interest. The Adviser shall have no
obligation to recommend for any Portfolio a position in any investment which an
Affiliated Account may acquire, and the Fund shall have no first refusal,
co-investment or other rights in respect of any such investment, either for its
Portfolios or otherwise.
C. Subject to and in accordance with the Declaration of Trust and
By-Laws of the Fund as currently in effect and the 1940 Act and the rules
thereunder, it is understood that Trustees, officers and agents of the Fund and
shareholders of the Fund are or may be interested in the Adviser or its
"affiliated persons" as directors, officers, agents or shareholders of the
Adviser or its "affiliated persons"; that directors, officers, agents and
shareholders of the Adviser or its "affiliated persons" are or may be interested
in the Fund as trustees, officers, agents, shareholders or otherwise; that the
Adviser or its "affiliated persons" may be interested in the Fund as
shareholders or otherwise; and that the effect of any such interests shall be
governed by said Declaration of Trust, By-Laws and the 1940 Act and the rules
thereunder.
8. Liabilities of the Adviser.
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A. Except as provided below, 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 or its Portfolios 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 or the making of any investment for or on behalf of the
Fund.
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B. No provision of this Agreement shall be construed to protect any
Trustee or officer of the Fund, or the Adviser, from liability in violation of
Sections 17(h), 17(i), 36(a) or 36(b) of the 1940 Act.
9. EFFECTIVE DATE; TERM. This Agreement shall become effective on the
date first written above and shall remain in force for a period of two years
from such date, and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Board of Trustees,
including the vote of a majority of the Trustees who are not "interested
persons" of the Fund, cast in person at a meeting called for the purpose of
voting on such approval, or by vote of a majority of the outstanding voting
securities. The aforesaid provision shall be construed in a manner consistent
with the 1940 Act and the rules and regulations thereunder.
10. ASSIGNMENT. No "assignment" of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in event of such
assignment. The Adviser shall notify the Fund in writing in advance of any
proposed change of "control" to enable the Fund to take the steps necessary to
enter into a new advisory agreement.
11. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Fund, which amendment is subject
to the approval of the Trustees of the Fund and, where required by the 1940 Act,
the shareholders of any affected Portfolio in the manner required by the 1940
Act and the rules thereunder.
12. TERMINATION. This Agreement:
A. may at any time be terminated without payment of any penalty
by the Fund with respect to any Portfolio (by vote of the
Board of Trustees of the Fund or by "vote of a majority of the
outstanding voting securities") on sixty (60) days' written
notice to the Adviser;
B. shall immediately terminate in the event of its "assignment";
and
C. may be terminated with respect to any Portfolio by the Adviser
on sixty (60) days' written notice to the Fund.
13. DEFINITIONS. As used in this Agreement, the terms "affiliated
person," "assignment," 'control," "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the 1940
Act and the rules and regulations thereunder, subject to any applicable orders
of exemption issued by the Securities and Exchange Commission.
14. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed postage prepaid to the other party to this
Agreement at its principal place of business.
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15. SEVERABILITY. 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 thereby.
16. SHAREHOLDER LIABILITY. The Adviser is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust of the Fund and agrees that obligations assumed by the Fund
pursuant to this Agreement shall be limited in all cases to the Fund and its
assets, and if the liability relates to one or more Portfolios, the obligations
hereunder shall be limited to the respective assets of such Portfolio or
Portfolios. The Adviser further agrees that it shall not seek satisfaction of
any such obligation from the shareholders or any individual shareholder of the
Portfolios of the Fund, nor from the Trustees or any individual Trustee of the
Fund.
17. GOVERNING LAW. To the extent that state law has not been 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
Delaware.
IN WITNESS WHEREOF the parties have caused this instrument to be signed
on their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date first written
above.
THE XXXXXX SQUARE STRATEGIC EQUITY FUND
(SEAL) By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Xxxxx: President
WILMINGTON TRUST COMPANY
(SEAL) By: /s/ Xxxxxx X. Xxxxxxxxx
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Name: Xxxxxx X. Xxxxxxxxx
Xxxxx: Senior Vice President
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SCHEDULE A
THE XXXXXX SQUARE STRATEGIC EQUITY FUND
PORTFOLIO LISTING
Large Cap Growth Equity Portfolio
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SCHEDULE B
THE XXXXXX SQUARE STRATEGIC EQUITY FUND
FEE SCHEDULE
% of average
Portfolio daily net assets
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Large Cap Growth Equity Portfolio 0.55%
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