ADVISORY AGREEMENT
(Xxxxxxx Opportunities Fund)
This ADVISORY AGREEMENT (the "Agreement") is made as of July 23, 1999,
by and between XXXXXXX INVESTMENTS, a Massachusetts business trust (the
"Trust"), and XXXXXXX ASSET MANAGEMENT, INC., a Michigan corporation (the
"Adviser").
WHEREAS, the Trust is an open-end management investment company,
registered under the Investment Company Act of 1940 (the "1940 Act"), and has
created a series of shares having its own investment objective, policies and
limitations known as the "Xxxxxxx Opportunities Fund" (the "Fund");
WHEREAS, the Trust desires to retain the Advisor to render investment
advisory and management services for the Fund under the terms hereof; and
WHEREAS, the Adviser has been organized to operate as an investment
adviser and desires to provide investment advisory services to the Trust with
respect to the Fund, and is registered as an Investment Adviser under the
Investment Advisers Act of 1940, as amended;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. Employment of the Adviser. Effective on October 11, 1999, the
Trust hereby employs the Adviser to act as investment adviser for, and to
manage the investment and reinvestment of the assets of, the Fund in accordance
with the investment objective and policies and limitations for the Fund, and
to administer its affairs to the extent requested by and subject to the
supervision of the Trustees of the Trust for the period and upon the terms
herein set forth. The investment of monies shall be subject to all applicable
restrictions of the Declaration of Trust and Bylaws of the Trust as may from
time to time be in force.
The Adviser accepts such employment and agrees during such period to
render such services and to assume the obligations herein set forth for the
compensation herein provided. Subject to the supervision and direction of the
Trustees, to the restrictions of the Declaration of Trust and Bylaws of the
Trust, as amended from time to time, to the provisions of the 1940 Act and to
the statements relating to the Fund's investment objectives, investment
policies and investment restrictions as the same are set forth in the currently
effective Prospectus and Statement of Additional Information relating to the
shares of the beneficial interest of the Fund under the Securities Act of 1933,
as amended (the "Prospectus"), the services provided by the Adviser include,
but are not to be limited to: furnishing continuously an investment program and
determining from time to time which securities shall be purchased, sold or
exchanged and what portion of the assets of the Fund shall be held in
authorized securities or cash; making decisions for the Fund as to the manner
in which voting rights, rights to consent to action and any other rights
pertaining to the Fund's portfolio securities shall be exercised; implementing
investment policies and strategies; and taking, on behalf of the Fund, all
action which the Adviser deems necessary to implement the investment policies
determined as provided above, and in particular placing all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers
or dealers selected by it, and to that end, giving instructions to the
Custodian of the Fund as to deliveries of securities and payments of cash for
the account of the Fund. The Adviser shall for all purposes herein provided
be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund. It is understood
and agreed that the Adviser, by separate agreements with the Trust, may also
serve the Fund in other capacities.
2. Compensation of the Adviser. For the services and facilities
to be furnished by the Adviser hereunder, the Fund shall pay the Adviser an
annual fee computed on the basis of the Fund's average net assets and the
Fund's investment performance compared to the investment performance record of
the Standard & Poor's 500 Stock Index (the "S&P Index").
(a) The Fund's investment performance for any fiscal year shall
mean the sum of:
(1) The change in its net asset value per share during
such fiscal year; and
(2) The value of its cash and optional distributions per
share accumulated to the end of such fiscal year, expressed as
a percentage of its net assets value per share at the
beginning of such fiscal year. For this purpose,
distributions by the Fund of realized capital gains and of
dividends paid from investment income shall be treated as
reinvested at the net asset value per share in effect at the
close of business on the ex-date for the payment of such
distributions or dividends.
(b) The investment record of the S&P Index for any fiscal year
shall mean the sum of:
(1) The change in the level of the index during such
fiscal year; and
(2) The value, computed consistently with the index, of
cash distributions made by companies whose securities comprise
the index accumulated at the end of such fiscal year,
expressed as a percentage of the index level at the beginning
of such fiscal year. For this purpose, cash distributions on
the securities which comprise the index shall be treated as
reinvested in the index at the end of each calendar quarter
following the payment of the dividend.
(c) The Fund's average net assets shall be the sum of the net
assets, exclusive of any accrued performance bonus or penalty, at the beginning
and end of each month of the fiscal year, dividend by twenty-four (24).
(d) Compensation for each fiscal year shall be the following
percentage of average net assets:
(i) Basic Fee: ..................................0.90%
(ii) Plus or minus the following percentages of average net
assets:
If the Fund's investment performance for any fiscal year
exceeds the investment record of the S&P Index by:
6 to 12 percentage points.........plus 0.1%
more than 12 percentage points....plus 0.2%
If the Fund's investment performance for any fiscal year falls
below the investment record of the S&P Index by:
6 to 12 percentage points........minus 0.1%
more than 12 percentage points...minus 0.2%
(e) As soon as practicable after the last day of each fiscal
quarter, the Fund shall pay as an installment toward the annual fee, 0.1% of
average net assets for the quarter The excess of the annual fee over the
quarterly installments or over any payments of the advisory fee for any quarter
of the current fiscal year made heretofore shall be paid within 30 days after
receipt of the accountant's report covering the Fund's operations for the
fiscal year. For the month and year in which this Agreement become effective
or terminates, there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month and year,
respectively.
(f) With respect to the fiscal years of the Fund ending on June
30, 2000 and 2001, the Adviser agrees to waive that portion of its annual fee
as shall be necessary to ensure that the Total Operating Expenses of the Fund
for each such fiscal year does not exceed 1.25% of the Fund's average net
assets for the relevant fiscal year, calculated for the fiscal year as a whole.
At any time after July 1, 2001, the Adviser may terminate such fee waiver, in
its sole discretion. "Total Operating Expenses" of the Fund shall mean the
advisory fee payable hereunder, and any fees payable by the Fund on account of
administrative services, transfer agent services, custodian fees, and all other
fees and expenses properly chargeable to the Fund by the Trust and paid out of
the assets of the Fund.
3. Expenses Borne by Fund. In addition to the fee of the
Adviser, the Fund shall assume and pay any expenses for services rendered by
its Custodian, Transfer Agent, Dividend Disbursing Agent and Administrator for
the safekeeping of the Fund's securities or other property, for keeping its
books of account, and for any other charges of such entities. The Adviser
shall not be required to pay, and the Fund shall assume and pay, the charges
and expenses of the Fund's operations, including any compensation of the
Trustees, an administrator or a distributor, charges and expenses of
independent auditors, of legal counsel, any registrar of the Fund, costs of
acquiring and disposing of portfolio securities, interest, if any, on
obligations incurred by the Fund, cost of share certificates, if any, and of
reports, membership dues in the Investment Company Institute or any similar
organization, reports and notices to shareholders, other like miscellaneous
expenses and all taxes, costs and fees payable to federal, state or other
governmental agencies or others on account of the registration of securities
issued by the Trust, filing of corporate documents or otherwise. The Fund
shall not pay or incur any obligation for any expenses for which the Fund
intends to seek reimbursement from the Adviser or adjustment of the Adviser's
fee as herein provided without first obtaining the written approval of the
Adviser.
4. Allocation of Brokerage; Calculation of Net Asset Value; Sub-
Adviser. (a) The Adviser shall place all orders for the purchase or sale of
portfolio securities for the accounts of the Fund with brokers or dealers
selected by the Adviser, and to that end the Adviser is authorized as the agent
of the Fund to give instructions to the Custodians of each Fund as to
deliveries of securities and payment of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of
such orders, the Adviser shall use its best efforts to seek to execute security
transactions at prices that are advantageous to the Fund and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
selecting brokers or dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Adviser and the Adviser is expressly authorized
to pay any broker or dealer who provides such brokerage and research services
a commission for executing a security transaction which is in excess of the
amount of commission another broker or dealer would have shared for effecting
that transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities that the Adviser and its
affiliates have with respect to accounts over which they exercise investment
discretion. Subject to the requirement set forth in the second sentence of
this paragraph, the Adviser is authorized to consider, as a factor in the
selection of any broker or dealer with whom purchase or sale orders may be
placed, the fact that such broker or dealer has sold or is selling shares of
the Fund, or any other series of the Fund, or of other investment companies
sponsored by the Adviser or its affiliates.
(b) The net asset value for each class of the Fund's shares shall
be calculated as of the close of business of the New York Stock Exchange on
each day that such exchange is open for business, and as of such other time or
times as the Trustees may determine in accordance with the provisions of the
1940 Act and the policies and procedures established from time to time by the
Board of Trustees of the Trust. On each day when net asset value is not
calculated, the net asset value of a share of any class of the Fund's shares
shall be deemed to be the net asset value of such a share as of the last day
on which such calculation was made for the purpose of the foregoing
computations.
(c) The Adviser is authorized to employ one or more organizations
or entities to act as a subadviser to the Fund, provided that any such
organization or entity shall be registered as an investment adviser under the
federal Investment Advisers Act of 1940, as amended, and any applicable state
laws, or shall be exempt from such registration in all respects. If such a
subadviser is employed by the Adviser, the Adviser shall be responsible for
insuring that such subadviser adequately performs all functions and
responsibilities of the Adviser which are delegated by the Adviser to the
subadviser, the Adviser shall be permitted to terminate any agreement for
subadvisory services at any time, and to employ another such subadviser at any
time, without prior notice to, or consent or approval by, the Trust or its
shareholders, unless required by applicable law.
5. Permissible Investments. Subject to applicable statutes and
regulations, it is understood that Trustees, officers or agents of the Trust
are or may be interested in the Adviser as officers, directors, agents,
shareholders or otherwise, and that the officers, directors, shareholders and
agents of the Adviser may be interested in the Trust otherwise than as a
director, officer or agent.
6. Limitation on Adviser Liability. The Adviser shall use its
best judgment and knowledge in rendering the services to be provided by it
hereunder, and the Fund agrees and acknowledges that the Adviser shall not be
liable for any loss suffered by the Fund as a result of the investment
decisions made by the Adviser in managing the assets of the Fund.
7. Term; Termination. This Agreement shall become effective with
respect to the Fund on the date hereof and shall remain in full force until the
second anniversary of the effective date set forth in Section 1 above, unless
sooner terminated as hereinafter provided. This Agreement shall continue in
force from year to year thereafter with respect to the Fund, but only as long
as such continuance is specifically approved for the Fund at least annually in
the manner required by the 1940 Act and the rules and regulations thereunder;
provided, however, that if the continuation of this Agreement is not approved
for the Fund, the Adviser may continue to serve in such capacity for the Fund
in the manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment by the Adviser, and may be terminated by the Board of Trustees of
the Trust, by vote of a majority of the outstanding voting securities of the
Trust, or by the Adviser, at any time without cause and without the payment of
any penalty on sixty (60) days' written notice by one party to the other party.
This Agreement may also be terminated immediately, upon delivery of notice of
termination and without the payment of any penalty, by the Trust in the event
that the Board of Trustees determines that Cause for termination exists. The
term "Cause" shall include, without limitation, (i) a material breach of this
Agreement or other action or omission by the Adviser which has or is likely to
have a material and imminent adverse effect on the Fund or its shareholders,
(ii) any other breach of this Agreement by the Adviser which is not cured
within twenty (20) business days after written notice of such breach from the
Board, (iii) the insolvency or the filing of bankruptcy or reorganization
proceedings by or against the Adviser, or (iv) the conviction of the Adviser
or any director or executive officer of the Adviser of a felony. The terms
"assignment" and "majority of the outstanding voting securities" have the
meanings set forth in the 1940 Act and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
2 earned prior to the effective date of such termination.
8. Severability. If any provision of this Agreement shall be
held or made invalid or unenforceable by a court decision, statute, rule or
otherwise, the remainder shall not be thereby affected.
9. Notices. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
10. Limitation of Trust Liability. The Declaration of Trust
establishing Xxxxxxx Investments, dated July 19, 1993, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name "Xxxxxxx Investments" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of Xxxxxxx Investments, shall be held
to any personal liability, nor shall result be had to their private property
for the satisfaction of any obligation or claim or otherwise in connection with
the affairs of said Xxxxxxx Investments, but the Trust Estate only shall be
liable.
11. Defined Terms. Terms not defined herein shall have the same
meaning as such terms are used in the currently effective prospectus with
respect to shares of the Fund.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed.
XXXXXXX INVESTMENTS XXXXXXX ASSET MANAGEMENT, INC.
By: /S/ XXXX X. XXXXXXXX By: /S/ XXXX X. XXXXXX
Xxxx X. Xxxxxxxx, Chairman Xxxx X. Xxxxxx, President
