FORM OF
THE MILLENNIUM XXXX FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
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Xxxxxxxx Xxxxx Investment Management, Inc.
THIS INVESTMENT ADVISORY AGREEMENT is made as of the _____ day
of _________, 1998, by and between THE MILLENNIUM XXXX FUNDS, INC., a Maryland
corporation (hereinafter called the "Corporation"), on behalf of the following
series of the Corporation, Millennium Growth & Income Fund (the "Fund") and
XXXXXXXX XXXXX INVESTMENT MANAGEMENT, INC., a California corporation
(hereinafter called the "Advisor").
WITNESSETH:
WHEREAS, the Corporation 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 Corporation having
separate assets and liabilities; and
WHEREAS, the Advisor is registered as an investment adviser
under the Investment Advisers Act of 1940 and is engaged in the business of
providing investment advice to individual clients and investment companies; and
WHEREAS, the Corporation 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 Corporation 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 Board of Directors.
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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 objective, policies and
restrictions of the Fund as set forth in the Fund's and Corporation's governing
documents, including, without limitation, the Corporation's Articles of
Incorporation and By-Laws; the Fund's prospectus, statement of additional
information and undertakings; and such other limitations, policies and
procedures as the Directors 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 (i.e., placing the orders); (ii)
manage and oversee the investments of the Fund, subject to the ultimate
supervision and direction of the Board of Directors; (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 Corporation may reasonably request; and (vi) render to the
Board of Directors 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 Directors.
(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 Board of
Directors. 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 the difference is reasonably justified
by other aspects of the portfolio execution services offered.
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Subject to such policies as the Board of Directors 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 Corporation. 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 Corporation, 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
Corporation, 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 one or more 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 Investment Advisers Act of 1940, the Investment
Company Act of 1940, 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
Directors in connection with their approval of this Agreement.
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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 Corporation or the Fund in any way, or in any way be deemed an
agent for the Corporation 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 Board of Directors 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, (ii) the expenses
of printing and distributing extra copies of the Fund's prospectus, statement of
additional information, and sales and advertising materials (but not the legal,
auditing or accounting fees attendant thereto) to prospective investors (but not
to existing shareholders), and (iii) the costs of any special Board of Directors
meetings or shareholder meetings convened for the primary benefit of the
Advisor. 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 Corporation 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
Corporation's Board of Directors that are properly payable by the Fund; salaries
and expenses of officers and
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fees and expenses of members of the Board of Directors 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, the
Fund shall promptly reimburse the Advisor for such costs and expenses, except to
the extent the Advisor has otherwise agreed to bear such expenses. To the extent
the services for which the Fund is obligated to pay are performed by the
Advisor, the Advisor shall be entitled to recover from the Fund to the extent of
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 and Management 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 investment advisory fee at the rate set forth in Schedule A to this
Agreement.
(b) The investment advisory 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.
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(d) The fee payable to the Advisor under this
Agreement will be reduced to the extent of any receivable 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
any Fund expense absorbed by the Advisor voluntarily or pursuant to an agreed
upon expense cap shall be reimbursed by the Fund to the Advisor, if so requested
by the Advisor, in the first, second or third (or any combination thereof)
fiscal year next succeeding the fiscal year of the withholding, reduction or
absorption if the aggregate amount actually paid by the Fund toward the
operating expenses for such fiscal year (taking into account the reimbursement)
do not exceed the applicable limitation on Fund expenses. Such reimbursement may
be paid prior to the Fund's payment of current expenses if so requested by the
Advisor even if such practice may require the Advisor to waive, reduce or absorb
current Fund expenses.
(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 Corporation's Governing Documents and
Applicable Laws. Nothing herein contained shall be deemed to require the
Corporation or the Fund to take any action contrary to the Corporation's
Articles of Incorporation, By-Laws, or any
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applicable statute or regulation, or to relieve or deprive the Board of
Directors of the Corporation of its responsibility for and control of the
conduct of the affairs of the Corporation and the Fund. In this connection, the
Advisor acknowledges that the Directors 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 Directors.
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 Corporation or another
third party for inclusion therein.
(b) 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.
(c) In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the obligations or duties
hereunder on the part of the Advisor, the Advisor shall not be subject to
liability to the Corporation 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.
(d) Each party to this Agreement shall indemnify
and hold harmless the other party and the shareholders, directors, 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 nonperformance 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.
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(e) No provision of this Agreement shall be
construed to protect any Director or officer of the Corporation, 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
Corporation's employment of the Advisor is not an exclusive arrangement. The
Corporation 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 having, 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
Investment Advisers Act of 1940 and has been approved by the Corporation's Board
of Directors.
13. Term. This Agreement shall become effective at the time
the Fund commences operations pursuant to an effective amendment to the
Corporation's Registration Statement under the Securities Act of 1933 and shall
remain in effect for a period of two (2) years, unless sooner terminated as
hereinafter provided. This Agreement shall continue in effect thereafter for
additional periods not exceeding one (1) year so long as such continuation is
approved for the Fund at least annually by (i) the Board of Directors of the
Corporation or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) the vote of a majority of the Directors of the Corporation 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.
14. Termination; No Assignment.
(a) This Agreement may be terminated by the
Corporation on behalf of the Fund at any time without payment of any penalty, by
the Board of Directors or by vote of a majority of the outstanding voting
securities of a Fund, upon sixty (60) days' written notice to the Advisor, and
by the Advisor upon sixty (60) days' written notice to a 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 Directors, 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.
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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 Investment
Advisers Act of 1940 and any rules and regulations promulgated thereunder.
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.
THE MILLENNIUM XXXX FUNDS, INC. XXXXXXXX XXXXX INVESTMENT
on behalf of the MANAGEMENT, INC.
Millennium Growth & Income Fund
By:
--------------------------------
Name: By:
Title: -------------------------
Name:
Title:
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Schedule A
Series or Fund of The Millennium XXXX Fund, Inc. Annual Fee rate
----------------------------------------------- ---------------
Millennium Growth & Income Fund 0.95% of
average net assets
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