Exhibit 10.4
RESTATED
INVESTMENT ADVISORY AGREEMENT
Agreement made this 28th day of February, 2002 between The Xxxxxxxx
Funds, Inc., a Maryland corporation (the "Company"), and Xxxxxxxx Advisors,
Inc., a California corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company 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 two series, the Xxxxxxxx Balanced
Fund and the Xxxxxxxx Total Return 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 Xxxxxxxx Balanced Fund (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
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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
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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 shareholders,
officers, directors or employees 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 Articles of Incorporation
or Bylaws, 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
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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
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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 0.60% (0.60% per annum)
of 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
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ownership position in the Fund, and shall not permit any of the shareholders,
officers, directors 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 or in connection with the initial capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund hereunder
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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,
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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.
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8. Brokerage Commissions. The Adviser, subject to the control and
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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 reasonably 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
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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
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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,
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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 indefinitely, but only so long as the continuance 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day first above written.
THE XXXXXXXX FUNDS, INC.
By: /s/ Xxxx X. Xxxxxxxx
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President
XXXXXXXX ADVISORS, INC.
By: /s/ Xxxx X. Xxxxxxxx
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President
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