INVESTMENT ADVISORY AGREEMENT
Xxxxxx Equity Funds
Agreement effective this 1st day of June, 1995, between XXXXXX EQUITY
FUNDS, a registered open-end management investment company organized as a
California Corporation (the "Company"),and XXXXXX MANAGEMENT CORPORATION, a
registered investment advisor incorporated in the State of California (the
"Advisor").
Whereas, the Company is authorized to issue shares of common stock in one
or more series with each such series representing interests in a separate
portfolio of securities and other assets; and
Whereas, the Company currently offers its shares in five series designated
as the Xxxxxx Gold Equities Index Fund, Xxxxxx Income & Growth Fund, Xxxxxx
Equity Growth Fund, Xxxxxx Utilities Income Fund, and Xxxxxx Global Natural
Resources Index Fund (the "Initial Series"), (such Initial Series together with
all other series subsequently established by the Company with respect to which
the Company desires to retain the Advisor to render investment advisory services
hereunder and with respect to which the Advisor is willing to do so being herein
collectively referred to as the "Series"). In the event the Company establishes
one or more series other than the Initial Series with respect to which it
desires to retain the Advisor to render management and investment advisory
services hereunder, it shall notify the Advisor in writing, whereupon such
series shall become a Series hereunder.
I. DESCRIPTION OF SERVICES TO BE PROVIDED. In consideration for the
compensation hereinafter described, the Advisor agrees to provide the following
services to the Company and to the Series:
A. INVESTMENT ADVICE AND PORTFOLIO MANAGEMENT. The Advisor shall
manage the investment and reinvestment of the Series' assets in accordance with
the investment objectives and policies of the Series as set forth in the
Company's registration statement with the Securities and Exchange Commission as
amended from time to time and such instructions as the Company's board of
directors may issue. Consistent with the foregoing, the Advisor shall make all
determinations as to the investment of the Series' assets and the purchase and
sale of its portfolio securities and take all steps necessary to implement the
same. Such determinations and services shall also include determining the manner
in which voting rights, rights to consent to corporate actions and other rights
pertaining to the Series' portfolio securities shall be exercised. In placing
orders for the execution of the Series' portfolio transactions, the Advisor
shall use its best efforts to obtain the best possible price and execution and
shall otherwise place such orders subject to and in accordance with any
directions which the Company's board of directors may issue from time to time
with respect thereto. The Advisor shall select brokers and dealers for the
execution of portfolio transactions in accordance with the provisions of Section
I.B. of this agreement.
B. BROKERAGE. In executing transactions for the Series and selecting
brokers or dealers, the Advisor will use its best efforts to seek the best price
and execution available and shall execute or direct the execution of all such
transactions in a manner both permitted by law and that suits the best interest
of the Series and its shareholders. In assessing the best price and execution
available for any Series transaction, the Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction and on a continuing basis. Consistent with the
obligation to obtain best execution, the Advisor may
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cause a Series to pay a broker which provides brokerage and research services to
the Advisor a commission for effecting a securities transaction in excess of the
amount another broker might have charged. Such higher commissions may not be
paid unless the Advisor determines in good faith that the amount paid is
reasonable in relation to the services received in terms of the particular
transaction or the Advisor's overall responsibilities to the Series and any
other of the Advisor's clients.
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of the Series as permitted by applicable law, the
Advisor may aggregate the securities to be sold or purchased with purchases of
sales of other funds in order to obtain the best execution of the order or lower
brokerage commissions, if any. The Advisor may also on occasion purchase or sell
a particular security for one or more clients in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Advisor in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Company and to such other customers.
C. REPORTS AND INFORMATION. The Advisor shall render regular reports
to the Company at quarterly meetings of the board of directors and at such other
times as may reasonably be requested by the Company's board of (i) the decisions
it has made with respect to the Series' assets and the purchase and sale of its
portfolio securities, (ii) the reasons for such decisions and related actions
and, (iii) the extent to which those decisions have been implemented. In
addition, the Advisor will provide the Company with such accounting and
statistical data as it requires for the preparation of registration statements,
reports and other documents required by federal and state securities, tax and
other applicable laws and regulations and such additional documents and
information as the Company may reasonably request for the management of its
affairs.
D. PROMOTION AND DISTRIBUTION. The Advisor shall promote the sale and
distribution of the Series' shares to the general public in such a manner and at
such times and places as the Advisor shall, in the exercise of reasonable
discretion, determine; and otherwise as the Advisor and the Company's board of
directors may from time to time agree.
II. COMPENSATION FOR SERVICES.
(a) AMOUNT OF COMPENSATION. As compensation for the services rendered
and duties assumed by the Advisor, the Fund, on behalf of the Series, shall,
within ten (10) days after the last day of each calendar month, pay the Advisor
an advisory fee equal to the amount determined using the following formula: (A)
a Company Fee plus an Individual Fund Fee (if any), minus (B) the amount by
which the Series' Expenses exceed the Expense Guarantee Rate as defined below,
minus (C) any further amount by which the Advisor publicly announces it will
reduce the Series' Expenses, plus (D) the amount of any recoupment as described
below.
The Advisor's compensation shall be computed and accrued daily.
Upon termination of this agreement before the end of any calendar month,
the fee for the period from the end of the calendar month preceding the month of
termination to the date of termination shall be prorated according to the
proportion which the number of calendar days in the month prior to the date of
termination bears to the number of calendar days in the month of termination,
and shall be payable within ten (10) days after the date of termination. For
this purpose, the value of the Series' net assets shall be computed by the same
method at the end of each business day as the Series uses to compute the value
of its net assets in connection with the determination of the net asset value of
Series shares, all as more fully set forth in the Series' prospectus. To the
extent that Expenses of the Series in excess of the Series' Expense Guarantee
Rate exceed the total of the Company Fee and Individual Fund Fee (if any), plus
any recoupment due, the Advisor will reimburse the Series for such excess.
(b) DETERMINATION OF COMPANY FEE AND INDIVIDUAL FUND FEE. The Company
Fee for each Series shall be equal to that Series' pro-rata share of the value
of the aggregated average daily net
2
assets of the Company, determined for each calendar day, pursuant to the
following schedule of annualized rates:
0.50% of the first $100 million;
0.45% of the next $100 million;
0.40% of the next $100 million;
0.35% of the next $100 million;
0.30% of the next $100 million;
0.25% of the next $1 billion;
0.24% of the next $1 billion;
0.23% of the next $1 billion;
0.22% of the next $1 billion;
0.21% of the next $1 billion;
0.20% of the next $1 billion; and
0.19% of the net assets over $6.5 billion.
With respect to the Xxxxxx Global Natural Resources Index Fund, the
Individual Fund Fee shall be determined based on the average daily net assets of
the Xxxxxx Global Natural Resources Index Fund, pursuant to the following
schedule of annualized rates:
0.05% of the first $500 million;
0.04% of the next $500 million; and
0.03% of the net assets over $1 billion.
(c) LIMITATION OF FUND EXPENSES.
1. The Expense Guarantee Rate for each Series is set
forth on Schedule A, attached hereto, as such
schedule may be amended from time to time by the
Company's board of directors.
2. The term "Expenses" as used in Section II of this
agreement shall mean:
A. The Company Fee plus the Individual Fund Fee (if
any).
B. Compensation for administrative and transfer
agent services as specified in Section I.B
and II.B of The Administrative Services
Agreement, as such agreement may be amended
from time to time by the Company's board of
directors or shareholders (the
"Administrative Services Agreement").
C. Direct expenses as specified in Section III.B of
the Administrative Services Agreement.
D. Extraordinary Expenses, as specified in Section
III.C of the Administrative Services Agreement,
are excluded from the definition of Expenses as
set forth herein.
3. The Advisor will be legally bound by any public
announcement that it will reduce, in accordance with
the terms of its announcement, the Series' Expenses
below the Expense Guarantee Rate.
(d) RECOUPMENT. The Advisor may recover amounts (representing Expenses
in excess of the Expense Guarantee Rate) which reduced the Advisor's
compensation or that it reimbursed to a Series during the preceding 11 months
if, and to the extent that, for any given month, the Series'
3
expense ratio (net of reimbursements) was lower than the Expense Guarantee Rate
in effect at the time, but not during any period, during which the Advisor has
agreed, pursuant to paragraph (c)3 above, to limit the Series' Expenses to an
amount less than the Expense Guarantee Rate.
III. EXPENSES. Except as hereinafter provided, the Advisor shall pay all of
its expenses incurred in the performance of this agreement, including but not
limited to salaries and other compensation of its officers and employees and all
other costs of providing such advice, portfolio management and information and
reports to the Company and the Series as are required hereunder, and all
expenses associated with any activity primarily intended to result in the sale
of Series' shares, such as advertising, printing and mailing of prospectuses to
other than current shareholders, printing and mailing of sales literature and
compensation of sales personnel.
IV. ACTIVITIES OF THE ADVISOR. The services of the Advisor to the Series
hereunder are not to be deemed exclusive, and the Advisor shall be free to
render similar services to others. Subject to and in accordance with the
Articles of Incorporation and the Bylaws of the Company and to Section 10(a) of
the Investment Company Act of 1940, it is understood that directors, officers,
agents and shareholders of the Company are or may be interested in the Advisor
as directors, officers or shareholders of the Advisor, that directors, officers,
agents or shareholders of the Advisor are or may be interested in the Company as
directors, officers, shareholders or otherwise, that the Advisor is or may be
interested in the Company as a shareholder or otherwise, and that the effect of
any such interest shall be governed by the Company's Articles of Incorporation,
its Bylaws and the Investment Company Act of 1940.
V. LIABILITY OF THE ADVISOR. In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of its obligations and duties
hereunder, the Advisor shall not be subject to liability to the Series or to any
shareholder of the Series for any act or omission in the course of, or connected
with, rendering advice or services hereunder or for any losses that may be
sustained in the purchase, retention or sale of any security. No provision of
this agreement shall be construed to protect any director or officer of the
Company or any director or officer of the Advisor from liability in violation of
Sections 17(h) and (i) of the Investment Company Act of 1940.
VI. LIMITATION OF COMPANY'S LIABILITY. The Advisor acknowledges that it has
received notice of and accepts the limitations of the Company's liability as set
forth in its Articles of Incorporation. The Advisor agrees that the Company's
obligations hereunder shall be limited to the Series and to its assets and that
the Advisor shall not seek satisfaction of any such obligation from the
shareholders of the Series nor from any director, officer, employee or agent of
the Company.
VII. RENEWAL, TERMINATION AND AMENDMENT. The term of this agreement shall
be from the date first written above, and shall continue in effect, unless
sooner terminated as provided herein, for two years from such date, and shall
continue in effect with respect to a Series from year to year thereafter only so
long as such continuance is specifically approved at least annually by the vote
of either a majority of the outstanding voting securities of that Series or a
majority of the Company's directors, and the vote of a majority of the Company's
directors who are neither parties to the agreement nor interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval. "Approved at least annually" shall mean approval occurring, with
respect to the first continuance of the agreement, during the 90 days prior to
and including the date of its termination in the absence of such approval, and
with respect to any subsequent continuance, during the 90 days prior to and
including the first anniversary of the date upon which the most recent previous
annual continuance of this agreement became effective. This agreement may be
terminated at any time without payment of any penalty, by the board of directors
of the Company, or with respect to a Series, by a vote of the majority of the
outstanding voting securities of such Series, upon 60 days' written notice to
the Advisor, and by the Advisor upon 60 days' written notice to the Company.
This agreement shall terminate automatically in the event of its assignment. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth for such terms in the Investment Company Act
of 1940 and Rule 18f-2 thereunder.
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VIII. SEVERABILITY. If any provision of this agreement shall be held or
made invalid by a court decision, statute, rule or similar authority, the
remainder of this agreement shall not be affected thereby.
IX. APPLICABLE LAW. This agreement shall be construed in accordance with
the laws of the State of California.
In witness whereof, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first written
above.
XXXXXX EQUITY FUNDS
By /s/Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
President
XXXXXX MANAGEMENT CORPORATION
By /s/Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
President
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EXPENSE GUARANTEE RATES
SCHEDULE A
Expense Guarantee Rates and Effective Dates
Approved by Board of Directors/Trustees April 3, 1995
=========================================================================================================================
(Proposed '95) BOARD EFFECTIVE
FUND EXPENSE APPROVAL DATES
GUARANTEE DATE
RATE
=========================================================================================================================
Capital Preservation Fund .54% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Capital Preservation Fund II .75% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx California Tax-Free and Municipal Funds
-------------------------------------------------------------------------------------------------------------------------
Municipal High-Yield Fund .62% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Municipal Money Market Fund .58% " "
-------------------------------------------------------------------------------------------------------------------------
Tax-Free Insured Fund .62% " "
-------------------------------------------------------------------------------------------------------------------------
Tax-Free Intermediate Fund .62% " "
-------------------------------------------------------------------------------------------------------------------------
Tax-Free Long-Term Fund .62% " "
-------------------------------------------------------------------------------------------------------------------------
Tax-Free Money Market Fund .54% " "
-------------------------------------------------------------------------------------------------------------------------
Tax-Free Short-Term Fund .62% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Equity Funds
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Equity Growth Fund .75% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Gold Equities Index Fund .75% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Income & Growth Fund .75% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Utilities Income Fund .75% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Global Natural Resources Index Fund .75% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Government Income Trust
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx GNMA Income Fund .65% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Treasury Note Fund .65% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Government Agency Fund .50% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Adjustable Rate Government Securities Fund .65% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Short-Term Treasury and Agency Fund .65% " "
-------------------------------------------------------------------------------------------------------------------------
Benham Long-Term Treasury and Agency Fund .65% " "
-------------------------------------------------------------------------------------------------------------------------
EXPENSE GUARANTEE RATES
SCHEDULE A
Expense Guarantee Rates and Effective Dates
Approved by Board of Directors/Trustees April 3, 1995
=========================================================================================================================
(Proposed '95) BOARD EFFECTIVE
FUND EXPENSE APPROVAL DATES
GUARANTEE DATE
RATE
=========================================================================================================================
Xxxxxx International Funds
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx European Government Bond Fund .90% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Investment Trust
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Prime Money Market Fund .50% 4/3/95 6/1/95 to
5/31/98
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Manager Funds
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Capital Manager Fund 1.00% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Municipal Trust
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx National Tax-Free Money Market Fund .64% 4/3/95 6/1/94 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx National Tax-Free Intermediate-Term Fund .69% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx National Tax-Free Long-Term Fund .69% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Florida Municipal Money Market Fund .65% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Florida Municipal Intermediate-Term Fund .69% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Arizona Municipal Intermediate-Term Fund .69% " "
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Target Maturities Trust
-------------------------------------------------------------------------------------------------------------------------
1995 Portfolio .70% 4/3/95 6/1/95 to
5/31/96
-------------------------------------------------------------------------------------------------------------------------
2000 Portfolio .70% " "
-------------------------------------------------------------------------------------------------------------------------
2005 Portfolio .70% " "
-------------------------------------------------------------------------------------------------------------------------
2010 Portfolio .70% " "
-------------------------------------------------------------------------------------------------------------------------
2015 Portfolio .70% " "
-------------------------------------------------------------------------------------------------------------------------
2020 Portfolio .70% " "
=========================================================================================================================
