FORM OF
TANAKA FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the ___ day of _________, 1998, by and between
TANAKA Funds, Inc., a Maryland Corporation, with its principal office and place
of business at Two Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000 (the "Corporation"),
and Tanaka Fund Advisers, LLC, a Delaware limited liability company with its
principal office and place of business at 000 Xxxx Xxxxxx, Xxx. 0000, Xxx Xxxx,
Xxx Xxxx 00000 ("Adviser").
WHEREAS, the Corporation is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end, management investment
company and may issue its shares of beneficial interest, no par value (the
"Shares"), in separate series; and
WHEREAS, the Corporation desires that the Adviser perform investment
advisory services for each series of the Corporation listed in Appendix A hereto
(each, a "Fund" and collectively, the "Funds"), and the Adviser is willing to
provide those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Corporation and the Adviser hereby agree as
follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Corporation hereby employs Adviser, subject to the direction
and control of the Board, to manage the investment and reinvestment of the
assets in each Fund and, without limiting the generality of the foregoing, to
provide other services as specified herein. The Adviser accepts this employment
and agrees to render its services for the compensation set forth herein.
(b) In connection therewith, the Corporation has delivered to the
Adviser copies of (i) the Corporation's Articles of Incorporation and Bylaws
(collectively, as amended from time to time, "Organic Documents"), (ii) the
Corporation's Registration Statement and all amendments thereto filed with the
U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), or the 1940 Act (the "Registration
Statement"), (iii) the Corporation's current Prospectuses and Statements of
Additional Information of each Fund (collectively, as currently in effect and as
amended or supplemented, the "Prospectus"), and (iv) all procedures adopted by
the Corporation with respect to the Funds (i.e., repurchase agreement
procedures), and shall promptly furnish the Adviser with all amendments of or
supplements to the foregoing. The Corporation shall deliver to the Adviser (x) a
certified copy of the resolution of the Board of Directors of the Corporation
(the "Board") appointing the Adviser and authorizing the execution and delivery
of this Agreement, (y) a copy of all proxy statements and related materials
relating to the Funds, and (z) any other documents, materials or information
that the Adviser shall reasonably request to enable it to perform its duties
pursuant to this Agreement.
(c) The Adviser has delivered to the Corporation (i) a copy of its Form
ADV as most recently filed with the SEC and (ii) a copy of its code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act (the "Code").
The Adviser shall promptly furnish the Corporation with all amendments of or
supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE CORPORATION
In order for the Adviser to perform the services required by this
Agreement, the Corporation (i) shall cause all service providers to the
Corporation to furnish information to the Adviser, and assist the Adviser as may
be required and (ii) shall ensure that the Adviser has reasonable access to all
records and documents maintained by the Corporation or any service provider to
the Corporation.
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser will make decisions with respect to all purchases and
sales of securities and other investment assets in each Fund. To carry out such
decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for
the Corporation, for the account of, at the risk of and in the name of the
Corporation, to place orders and issue instructions with respect to those
transactions of the Funds. In all purchases, sales and other transactions in
securities and other investments for the Funds, the Adviser is authorized to
exercise full discretion and act for the Corporation in the same manner and with
the same force and effect as the Corporation might or could do with respect to
such purchases, sales or other transactions, as well as with respect to all
other things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
Consistent with Section 28(e) of the Securities and Exchange Act of
1934, as amended, the Adviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Adviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Adviser or its affiliates.
Whenever the Adviser simultaneously places orders to purchase or sell the same
asset on behalf of a Fund and one or more other accounts advised by the Adviser,
the orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account.
(b) The Adviser will report to the Board at each meeting thereof as
requested by the Board all material changes in each Fund since the prior report,
and will also keep the Board informed of important developments affecting the
Corporation, the Funds and the Adviser, and on its own initiative, will furnish
the Board from time to time with such information as the Adviser may believe
appropriate for this purpose, whether concerning the individual companies whose
securities are included in the Funds' holdings, the industries in which they
engage, the economic, social or political conditions prevailing in each country
in which the Funds maintain investments, or otherwise. The Adviser will also
furnish the Board with such statistical and analytical information with respect
to investments of the Funds as the Adviser may believe appropriate or as
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the Board reasonably may request. In making purchases and sales of securities
and other investment assets for the Funds, the Adviser will bear in mind the
policies set from time to time by the Board as well as the limitations imposed
by the Organic Documents and Registration Statement, the limitations in the 1940
Act, the Securities Act, the Internal Revenue Code of 1986, as amended, and
other applicable laws and the investment objectives, policies and restrictions
of the Funds.
(c) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on the
Corporation's behalf in any such respect.
(d) The Adviser will report to the Board all material matters related
to the Adviser. On an annual basis, the Adviser shall report on its compliance
with its Code to the Board and upon the written request of the Corporation, the
Adviser shall permit the Corporation, or its representatives to examine the
reports required to be made to the Adviser under the Code. The Adviser will
notify the Corporation of any change of control of the Adviser and any changes
in the key personnel who are either the portfolio manager(s) of the Fund or
senior management of the Adviser, in each case prior to or promptly after such
change.
(e) The Adviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Corporation under the 1940 Act. The Adviser shall prepare
and maintain, or cause to be prepared and maintained, in such form, for such
periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Adviser pursuant
to this Agreement required to be prepared and maintained by the Adviser or the
Corporation pursuant to applicable law. To the extent required by law, the books
and records pertaining to the Corporation which are in possession of the Adviser
shall be the property of the Corporation. The Corporation, or its
representatives, shall have access to such books and records at all times during
the Adviser's normal business hours. Upon the reasonable request of the
Corporation, copies of any such books and records shall be provided promptly by
the Adviser to the Corporation or its representatives.
(f) The Adviser will cooperate with each Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to the accountants for the performance of the accountants' duties.
(g) The Adviser will provide the Funds' custodian and fund accountant
on each business day with such information relating to all transactions
concerning the Funds' assets as the custodian and fund accountant may reasonably
require. In accordance with procedures adopted by the Board, the Adviser is
responsible for assisting in the fair valuation of all Fund assets and will use
its reasonable efforts to arrange for the provision of prices from a parties who
are not affiliated persons of the Adviser for each asset for which the Funds'
fund accountant does not obtain prices in the ordinary course of business.
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(h) The Adviser shall authorize and permit any of its directors,
officers and employees who may be elected as Directors or officers of the
Corporation to serve in the capacities in which they are elected.
(i) The Adviser shall have no duties or obligations pursuant to this
Agreement (other than the continuation of its preexisting duties and
obligations) during any period in which the Fund invests all (or substantially
all) of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Corporation shall pay the
Adviser, with respect to each of Fund, a fee at an annual rate as listed in
Appendix A hereto. Such fees shall be accrued by the Corporation daily and shall
be payable monthly in arrears on the first day of each calendar month for
services performed hereunder during the prior calendar month. If fees begin to
accrue in the middle of a month or if this Agreement terminates before the end
of any month, all fees for the period from that date to the end of that month or
from the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion that the period bears to the full
month in which the effectiveness or termination occurs. Upon the termination of
this Agreement with respect to a Fund, the Corporation shall pay to the Adviser
such compensation as shall be payable prior to the effective date of
termination.
(b) The Adviser may reimburse expenses of each Fund or waive its fees
expense ratio agreements.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
(d) The Corporation shall be responsible for and assumes the obligation
for payment of all of its expenses, including: (a) the fee payable under this
Agreement; (b) the fees payable to each administrator under an agreement between
the administrator and the Corporation; (c) expenses of issue, repurchase and
redemption of Shares; (d) interest charges, taxes and brokerage fees and
commissions; (e) premiums of insurance for the Corporation, its directors and
officers and fidelity bond premiums; (f) fees and expenses of third parties,
including the Corporation's independent accountant, custodian, transfer agent,
dividend disbursing agent and fund accountant; (g) fees of pricing, interest,
dividend, credit and other reporting services; (h) costs of membership in trade
associations; (i) telecommunications expenses; (j) funds transmission expenses;
(k) auditing, legal and compliance expenses; (l) costs of forming the
Corporation and maintaining its existence; (m) costs of preparing, filing and
printing the Corporation's Prospectuses, subscription application forms and
shareholder reports and other communications and delivering them to existing
shareholders, whether of record or beneficial; (n) expenses of meetings of
shareholders and proxy solicitations therefor; (o) costs of maintaining books of
original entry for portfolio and fund
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accounting and other required books and accounts, of calculating the net asset
value of Shares and of preparing tax returns; (p) costs of reproduction,
stationery, supplies and postage; (q) fees and expenses of the Corporation's
directors and officers; (r) the costs of personnel (who may be employees of the
Adviser, an administrator or their respective affiliated persons) performing
services for the Corporation; (s) costs of Board, Board committee, shareholder
and other corporate meetings; (t) SEC registration fees and related expenses;
(u) state, territory or foreign securities laws registration fees and related
expenses; and (v) all fees and expenses paid by the Corporation in accordance
with any distribution or service plan or agreement related to similar manners.
SECTION 5. STANDARD OF CARE
(a) The Corporation shall expect of the Adviser, and the Adviser will
give the Corporation the benefit of, the Adviser's best judgment and efforts in
rendering its services to the Corporation. The Adviser shall not be liable
hereunder for any mistake of judgment or in any event whatsoever, except for
lack of good faith, provided that nothing herein shall be deemed to protect, or
purport to protect, the Adviser against any liability to the Corporation or to
the Corporation's security holders to which the Adviser would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Adviser's duties hereunder, or by reason of the Adviser's
reckless disregard of its obligations and duties hereunder.
(b) The Adviser shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties (other than those related to the Adviser's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon approval by a majority of the outstanding voting securities of
that Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; provided that
such continuance is specifically approved at least annually (i) by the Board or
by the vote of a majority of the outstanding voting securities of the Fund, and,
in either case, (ii) by the vote of a majority of the Corporation's directors
who are not parties to this Agreement or interested persons of any such party
(other than as directors of the Corporation) cast in person at a meeting called
for the purpose of voting on such approval; provided further, however, that if
the continuation of this Agreement is not approved as to a Fund, the Adviser may
continue to render to that Fund the services described herein in the manner and
to the extent permitted by the 1940 Act and the rules and regulations
thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting
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securities of the Fund on 60 days' written notice to the Adviser or (ii) by the
Adviser on 60 days' written notice to the Corporation. This Agreement shall
terminate immediately upon its assignment.
SECTION 7. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's directors, officers or employees to engage in any
other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, trust, firm, individual or
association.
SECTION 8. REPRESENTATIONS OF ADVISER.
The Adviser represents and warrants that (i) it is either registered as
an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act,
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement, and (iv) will promptly notify the Corporation of
the occurrence of any event that would disqualify the Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
SECTION 9. SUBADVISERS
At its own expense, the Adviser may carry out any of its obligations
under this Agreement by employing, subject to the direction and control of the
Board, one or more persons who are registered as investment advisers pursuant to
the Advisers Act or who are exempt from registration thereunder ("Subadvisers").
Each Subadviser's employment will be evidenced by a separate written agreement
approved by the Board and, if required, by the shareholders of the applicable
Fund. The Adviser shall not be liable hereunder for any act or omission of any
Subadviser, except to exercise good faith in the employment of the Subadviser
and except with respect to matters as to which the Adviser assumes
responsibility in writing.
SECTION 10. LIMITATION OF SHAREHOLDER AND DIRECTOR LIABILITY
The Directors of the Corporation and the shareholders of each Fund
shall not be liable for any obligations of the Corporation or of the Funds under
this Agreement, and the Adviser agrees that, in asserting any rights or claims
under this Agreement, it shall look only to the assets and property of the
Corporation or the Fund to which the Adviser's rights or claims relate in
settlement of such rights or claims, and not to the Directors of the Corporation
or the shareholders of the Funds.
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SECTION 11. RIGHTS TO NAME
If the Adviser ceases to act as investment adviser to the Corporation
or any Fund whose name includes the word "TANAKA" (the "Xxxx") or if the Adviser
requests in writing, the Corporation shall take prompt action to change the name
of the Corporation any such Fund to a name that does not include the Xxxx. The
Adviser may from time to time make available without charge to the Corporation
for the Corporation's use any marks or symbols owned by the Adviser, including
marks or symbols containing the Xxxx or any variation thereof, as the Adviser
deems appropriate. Upon the Adviser's request in writing, the Corporation shall
cease to use any such xxxx or symbol at any time. The Corporation acknowledges
that any rights in or to the Xxxx and any such marks or symbols which may exist
on the date of this Agreement or arise hereafter are, and under any and all
circumstances shall continue to be, the sole property of the Adviser. The
Adviser may permit other parties, including other investment companies, to use
the Xxxx in their names without the consent of the Corporation. The Corporation
shall not use the Xxxx in conducting any business other than that of an
investment company registered under the 1940 Act without the permission of the
Adviser.
SECTION 12. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the 1940 Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall effect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(d) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Delaware.
(e) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written.
(f) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(g) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced
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as if the Agreement did not contain the particular part, term or provision held
to be illegal or invalid.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(j) Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Fund of the Corporation are
separate and distinct from the assets and liabilities of each other Fund and
that no Fund shall be liable or shall be charged for any debt, obligation or
liability of any other Fund, whether arising under this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Adviser shall be liable at law or in equity for the Adviser's obligations
under this Agreement.
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof and each
party hereto warrants and represents that this Agreement, when executed and
delivered, will constitute a legal, valid and binding obligation of the party,
enforceable against the party in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
TANAKA FUNDS, INC.
--------------------------
[Officer name]
[Title]
TANAKA FUND ADVISERS, LLC
--------------------------
[Officer name]
[Title]
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TANAKA FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
Appendix A
Fee as a % of the Annual
Fund of the Corporation Average Daily Net Assets of the Fund
----------------------- ------------------------------------
TANAKA Growth Fund 1.00
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