INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 9th day of September,
2000, by and between Kit Xxxx Investment Trust, a Delaware business trust
(hereinafter called the "Trust"), on behalf of the following series of the
Trust, Kit Xxxx Strategic Growth Fund (the "Fund") and Kit Xxxx Investment
Advisory Services, Inc., a California corporation (hereinafter called the
"Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company, registered
as such under the Investment Company Act of 1940 (the "Investment Company Act");
and
WHEREAS, the Fund is a series of the Trust having separate assets and
liabilities; and
WHEREAS, the Advisor is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act") and is engaged in the
business of supplying investment advice as an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render advice and
services to the Fund pursuant to the terms and provisions of this Agreement, and
the Advisor desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties to this Agreement, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF ADVISOR. The Trust hereby employs the Advisor and the Advisor
hereby accepts such employment, to render investment advice and related services
with respect to the assets of the Fund for the period and on the terms set forth
in this Agreement, subject to the supervision and direction of the Trust's Board
of Trustees.
2. DUTIES OF ADVISOR.
(a) GENERAL DUTIES. The Advisor shall act as investment adviser to the Fund and
shall supervise investments of the Fund on behalf of the Fund in accordance with
the investment objectives, policies and restrictions of the Fund as set forth in
the Fund's and Trust's governing documents, including, without limitation, the
Trust's Agreement and Declaration of Trust and By-Laws; the Fund's prospectus,
statement of additional information and undertakings; and such other
limitations, policies and procedures as the Trustees may impose from time to
time in writing to the Advisor. In providing such services, the Advisor shall at
all times adhere to the provisions and restrictions contained in the federal
securities laws, applicable state securities laws, the Internal Revenue Code,
the Uniform Commercial Code and other applicable law. Without limiting the
generality of the foregoing, the Advisor shall: (i) furnish the Fund with advice
and recommendations with respect to the investment of the Fund's assets and the
purchase and sale of portfolio securities for the Fund, including the taking of
such steps as may be necessary to implement such advice and recommendations
(E.G., placing the orders); (ii) manage and oversee the investments of the Fund,
subject to the ultimate supervision and direction of the Trust's Board of
Trustees; (iii) vote proxies for the Fund, file ownership reports under Section
13 of the Securities Exchange Act of 1934 for the Fund, and take other actions
on behalf of the Fund; (iv) maintain the books and records required to be
maintained by the Fund except to the extent arrangements have been made for such
books and records to be maintained by the administrator or another agent of the
Fund; (v) furnish reports, statements and other data on securities, economic
conditions and other matters related to the investment of the Fund's assets
which the Fund's administrator or distributor or the officers of the Trust may
reasonably request; and (vi) render to the Trust's Board of Trustees such
periodic and special reports with respect to the Fund's investment activities as
the Board may reasonably request, including at least one in-person appearance
annually before the Board of Trustees.
(b) BROKERAGE. The Advisor shall be responsible for decisions to buy and sell
securities for the Fund, for broker-dealer selection, and for negotiation of
brokerage commission rates, provided that the Advisor shall not direct order to
an affiliated person of the Advisor without general prior authorization to use
such affiliated broker or dealer for the Trust's Board of Trustees. The
Advisor's primary consideration in effecting a securities transaction will be
execution at the most favorable price. In selecting a broker-dealer to execute
each particular transaction, the Advisor may take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
The price to the Fund in any transaction may be less favorable than that
available from another broker-dealer if other aspects of the portfolio execution
services offered reasonably justify the difference.
Subject to such policies as the Board of Trustees of the Trust may determine,
the Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides (directly or indirectly)
brokerage or research services to the Advisor an amount of commission for
effecting a portfolio transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Advisor determines in good faith that such amount of commission was 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
Advisor's overall responsibilities with respect to the Trust. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Fund to
such brokers or dealers who also provide research or statistical material, or
other services, to the Trust, the Advisor, or any affiliate of either. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine, and the Advisor shall report on such allocations regularly to the
Trust, indicating the broker-dealers to whom such allocations have been made and
the basis therefor. The Advisor is also authorized to consider sales of shares
as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, i.e., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a security to be in
the best interest of the Fund as well as of other clients, the Advisor, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and the most efficient execution. In such
event, 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 Fund and to such other clients.
3. REPRESENTATIONS OF THE ADVISOR.
(a) The Advisor shall use its best judgment and efforts in rendering the advice
and services to the Fund as contemplated by this Agreement.
(b) The Advisor shall maintain all licenses and registrations necessary to
perform its duties hereunder in good order.
(c) The Advisor shall conduct its operations at all times in conformance with
the Advisers Act, the Investment Company Act, and any other applicable state
and/or self-regulatory organization regulations.
(d) The Advisor shall maintain errors and omissions insurance in an amount at
least equal to that disclosed to the Board of Trustees in connection with their
approval of this Agreement.
4. INDEPENDENT CONTRACTOR. The Advisor shall, for all purposes herein, be deemed
to be an independent contractor, and shall, unless otherwise expressly provided
and authorized to do so, have no authority to act for or represent the Trust or
the Fund in any way, or in any way be deemed an agent for the Trust or for the
Fund. It is expressly understood and agreed that the services to be rendered by
the Advisor to the Fund under the provisions of this Agreement are not to be
deemed exclusive, and the Advisor shall be free to render similar or different
services to others so long as its ability to render the services provided for in
this Agreement shall not be impaired thereby.
5. ADVISOR'S PERSONNEL. The Advisor shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other persons as
it shall from time to time determine to be necessary to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Advisor shall be deemed to include
persons employed or retained by the Advisor to furnish statistical information,
research, and other factual information, advice regarding economic factors and
trends, information with respect to technical and scientific developments, and
such other information, advice and assistance as the Advisor or the Trust's
Board of Trustees may desire and reasonably request.
6. EXPENSES.
(a) With respect to the operation of the Fund, the Advisor shall be responsible
for (i) providing the personnel, office space and equipment reasonably necessary
for the operation of the Fund, and (ii) the costs of any special Board of
Trustees meetings or shareholder meetings convened for the primary benefit of
the Advisor (E.G., to obtain an approval in circumstances involving a sale of
the Advisor for profit). If the Advisor has agreed to limit the operating
expenses of the Fund, the Advisor shall also be responsible on a monthly basis
for any operating expenses that exceed the agreed upon expense limit.
(b) The Fund is responsible for and has assumed the obligation for payment of
all of its expenses, other than as stated in Subparagraph 6(a) above, including
but not limited to: fees and expenses incurred in connection with the issuance,
registration and transfer of its shares; brokerage and commission expenses; all
expenses of transfer, receipt, safekeeping, servicing and accounting for the
cash, securities and other property of the Trust for the benefit of the Fund
including all fees and expenses of its custodian, shareholder services agent and
accounting services agent; interest charges on any borrowings; costs and
expenses of pricing and calculating its daily net asset value and of maintaining
its books of account required under the Investment Company Act; taxes, if any; a
pro rata portion of expenditures in connection with meetings of the Fund's
shareholders and the Trust's Board of Trustees that are properly payable by the
Fund; salaries and expenses of officers and fees and expenses of members of the
Trust's Board of Trustees or members of any advisory board or committee who are
not members of, affiliated with or interested persons of the Advisor; insurance
premiums on property or personnel of the Fund which inure to its benefit,
including liability and fidelity bond insurance; the cost of preparing and
printing reports, proxy statements, prospectuses and statements of additional
information of the Fund or other communications for distribution to existing
shareholders; legal, auditing and accounting fees; trade association dues; fees
and expenses (including legal fees) of registering and maintaining registration
of its shares for sale under federal and applicable state and foreign securities
laws; all expenses of maintaining and servicing shareholder accounts, including
all charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of the Fund, if any; and all other
charges and costs of its operation plus any extraordinary and non-recurring
expenses, except as herein otherwise prescribed.
(c) The Advisor may voluntarily absorb certain Fund expenses or waive the
Advisor's own advisory fee.
(d) To the extent the Advisor incurs any costs by assuming expenses, which are
an obligation of the Fund as set forth herein or otherwise absorbs Fund expenses
or waives receipt of fees, the Advisor shall be entitled to seek reimbursement
in accordance with Paragraph 7(f) below and any related agreements that the
Advisor may enter into in this regard and any applicable policies adopted by the
Board of Trustees. To the extent that the Advisor performs services for the Fund
for which the Fund is obligated to pay, the Advisor shall be entitled to recover
from the Fund the Advisor's actual costs for providing such services. In
determining the Advisor's actual costs, the Advisor may take into account an
allocated portion of the salaries and overhead of personnel performing such
services.
7. INVESTMENT ADVISORY FEE.
(a) The Fund shall pay to the Advisor, and the Advisor agrees to accept, as full
compensation for all investment management and advisory services furnished or
provided to the Fund pursuant to this Agreement, an annual management fee at the
annual rate of 1.00%.
(b) The management fee shall be accrued daily by the Fund and paid to the
Advisor on the first business day of the succeeding month.
(c) The initial fee under this Agreement shall be payable on the first business
day of the first month following the effective date of this Agreement and shall
be prorated as set forth below. If this Agreement is terminated prior to the end
of any month, the fee to the Advisor shall be prorated for the portion of any
month in which this Agreement is in effect which is not a complete month
according to the proportion which the number of calendar days in the month
during which the Agreement is in effect bears to the number of calendar days in
the month, and shall be payable within ten (10) days after the date of
termination.
(d) The fee payable to the Advisor under this Agreement will be reduced to the
extent of any amount owed by the Advisor to the Fund and as required under any
expense limitation applicable to the Fund.
(e) The Advisor 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, which are the responsibility of the 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 Advisor hereunder or
to continue future payments. Any such reduction will be agreed to prior to
accrual of the related expense or fee and will be estimated daily and reconciled
and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by
the Advisor voluntarily or pursuant to an agreed upon expense cap (collectively
"subsidies") shall be reimbursed by the Fund to the Advisor, if so requested by
the Advisor, any time before the end of the third fiscal year following the year
to which the subsidy relates, provided the aggregate amount of the Fund's
current operating expenses for such fiscal year (taking into account the
reimbursement) does not exceed the applicable limitation on Fund expenses. In
the case of a new Fund, subsidies incurred by the Advisor in the Fund's first
three years of operation remain eligible for reimbursement for an extended
number of years, as follows: subsidies incurred in the first and second years of
the Fund's operation are eligible for reimbursement through the end of the
Fund's sixth fiscal year; subsidies incurred by the Advisor in the third year of
operation are eligible for reimbursement through the end of the seventh fiscal
year. The Fund must pay its current ordinary operating expenses before the
Advisor is entitled to any reimbursement of fees and/or expenses. Any such
reimbursement is also contingent upon Board of Trustees review and approval
prior to the time the reimbursement is initiated.
(g) The Advisor may agree not to require payment of any portion of the
compensation or reimbursement of expenses otherwise due to it pursuant to this
Agreement. Any such agreement shall be applicable only with respect to the
specific items covered thereby and shall not constitute an agreement not to
require payment of any future compensation or reimbursement due to the Advisor
hereunder.
8. NO SHORTING; NO BORROWING. The Advisor agrees that neither it nor any of its
officers or employees shall take any short position in the shares of the Fund.
This prohibition shall not prevent the purchase of such shares by any of the
officers or employees of the Advisor or any trust, pension, profit-sharing or
other benefit plan for such persons or affiliates thereof, at a price not less
than the net asset value thereof at the time of purchase, as allowed pursuant to
rules promulgated under the Investment Company Act. The Advisor agrees that
neither it nor any of its officers or employees shall borrow from the Fund or
pledge or use the Fund's assets in connection with any borrowing not directly
for the Fund's benefit. For this purpose, failure to pay any amount due and
payable to the Fund for a period of more than thirty (30) days shall constitute
a borrowing.
9. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS. Nothing
herein contained shall be deemed to require the Trust or the Fund to take any
action contrary to the Trust's Agreement and Declaration of Trust, By-Laws, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of the Trust of its responsibility for and control of the conduct of
the affairs of the Trust and Fund. In this connection, the Advisor acknowledges
that the Trustees retain ultimate plenary authority over the Fund and may take
any and all actions necessary and reasonable to protect the interests of
shareholders.
10. REPORTS AND ACCESS. The Advisor agrees to supply such information to the
Fund's administrator and to permit such compliance inspections by the Fund's
administrator as shall be reasonably necessary to permit the administrator to
satisfy its obligations and respond to the reasonable requests of the Trustees.
11. ADVISOR'S LIABILITIES AND INDEMNIFICATION.
(a) The Advisor shall have responsibility for the accuracy and completeness (and
liability for the lack thereof) of the statements in the Fund's offering
materials (including the prospectus, the statement of additional information,
advertising and sales materials), except for information supplied by the
administrator or the Trust or another third party for inclusion therein.
(b) The Advisor shall be responsible for managing the Fund's affairs and
investments with the care and prudence required of a fiduciary and professional
investment adviser.
(c) The Advisor shall be liable to the Fund for any loss (including brokerage
charges) incurred by the Fund as a result of any improper investment made by the
Advisor.
(d) Subject to the foregoing, the Advisor shall not be subject to liability to
the Trust or 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 by
the Fund unless the Advisor has acted (or failed to act) in a manner that
constitutes willful misfeasance, bad faith, gross negligence, or reckless
disregard of the Advisor's obligations or duties hereunder.
(e) Each party to this Agreement shall indemnify and hold harmless the other
party and the shareholders, directors, trustees, officers and employees of the
other party (any such person, an "Indemnified Party") against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
(f) No provision of this Agreement shall be construed to protect any Trustee or
officer of the Trust, or officer of the Advisor, from liability in violation of
Sections 17(h) and (i) of the Investment Company Act.
12. NON-EXCLUSIVITY; TRADING FOR ADVISOR'S OWN ACCOUNT. The Trust's employment
of the Advisor is not an exclusive arrangement. The Trust may from time to time
employ other individuals or entities to furnish it with the services provided
for herein. Likewise, the Advisor may act as investment adviser for any other
person, and shall not in any way be limited or restricted from buying, selling
or trading any securities for its or their own accounts or the accounts of
others for whom it or they may be acting, provided, however, that the Advisor
expressly represents that it will undertake no activities which will adversely
affect the performance of its obligations to the Fund under this Agreement; and
provided further that the Advisor will adhere to a code of ethics governing
employee trading and trading for proprietary accounts that conforms to the
requirements of the Investment Company Act and the Advisers Act and has been
approved by the Trust's Board of Trustees.
13. TERM.
(a) This Agreement shall become effective at the time the Fund commences
operations pursuant to the Trust's Registration Statement under the Securities
Act of 1933 and shall remain in effect for a period of up to two (2) years,
unless sooner terminated as hereinafter provided. After its initial term, this
Agreement shall continue in effect thereafter for additional periods not
exceeding one (l) year so long as such continuation is approved for the Fund at
least annually by (i) the Board of Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of the Fund and (ii) the vote of a
majority of the Trustees of the Trust who are not parties to this Agreement nor
interested persons thereof, cast in person at a meeting called for the purpose
of voting on such approval. The terms "majority of the outstanding voting
securities" and "interested persons" shall have the meanings as set forth in the
Investment Company Act.
(b) The Fund may use the name Kit Xxxx or any name derived from or using the
name Kit Xxxx only so long as this Agreement or any extension, renewal or
amendment hereof remains in effect. Within sixty (60) days from such time as
this Agreement shall no longer be in effect, the Fund shall cease to use such a
name.
14. TERMINATION; NO ASSIGNMENT.
(a) This Agreement may be terminated by the Trust on behalf of the Fund at any
time without payment of any penalty, by the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the Fund, upon sixty
(60) days' written notice to the Advisor, and by the Advisor upon sixty (60)
days' written notice to the Fund. In the event of a termination, the Advisor
shall cooperate in the orderly transfer of the Fund's affairs and, at the
request of the Board of Trustees, transfer any and all books and records of the
Fund maintained by the Advisor on behalf of the Fund.
(b) This Agreement shall terminate automatically in the event of any transfer or
assignment thereof, as defined in the Investment Company Act.
15. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise rendered
invalid, the remainder of this Agreement shall not be affected thereby.
16. CAPTIONS. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
17. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the Investment Company Act and the Advisers Act and any rules
and regulations promulgated thereunder.
18. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their duly authorized officers, all on the day and year first above
written.
KIT XXXX INVESTMENT TRUST
On behalf of the Kit Xxxx Strategic Growth Fund
By: /s/ Xxxx Xxxxxx
--------------------------
Name: Xxxx Xxxxxx
Title: President
KIT XXXX INVESTMENT ADVISORY SERVICES
By: /s/ Kit X. Xxxx
--------------------------
Name: Kit X. Xxxx
Title: Chief Executive Officer
