INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of _______, 1996 between Xxxxxxx Xxxxx
Variable Series Funds, Inc., a Maryland corporation (the "Company"), and Xxxxxxx
Xxxxx Asset Management, L.P., a Delaware limited partnership (the "Adviser");
W I T N E S S E T H:
WHEREAS, the Company is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act"); and
WHEREAS, the Company is currently comprised of [sixteen] separate
Funds, each of which pursues its investment objective through separate
investment policies; and
WHEREAS, the Adviser is engaged in principally in rendering advisory
services and is registered as an investment adviser under the Investment
Advisers Act of 1940; and
WHEREAS, the Adviser is currently serving as the Investment Adviser to
the Company's Reserve Assets Fund pursuant to an Investment Advisory Agreement
dated November 10, 1981 as amended on April 23, 1985; to the Company's Prime
Bond Fund, High Current Income Fund, Quality Equity Fund and Equity Growth Fund
pursuant to an Investment Advisory Agreement dated April 21, 1982 as amended on
April 23, 1985; to the Company's Natural Resources Focus Fund and American
Balanced Fund pursuant to an Investment Advisory Agreement dated April, 1988;
and to the Company's Domestic Money Market Fund and Global Strategy Focus Fund
pursuant to an Investment Advisory
Agreement Dated October 16, 1991; to the Company's Basic Value Focus Fund,
Global Bond Focus Fund (formerly known as the World Income Focus Fund), Global
Utility Focus Fund and International Equity Focus Fund pursuant to an Investment
Advisory Agreement dated June, 1993; and to the Company's Developing Capital
Markets Focus Fund and Government Bond Fund (formerly known as the Intermediate
Government Bond Fund) pursuant to an Investment Advisory Agreement dated April,
1994;
WHEREAS, the Company desires to retain the Adviser to render
investment supervisory and corporate administrative services to the Company's
Index 500 Fund (the "Fund"), in the manner and on the terms hereinafter set
forth.
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Adviser hereby agree as follows:
ARTICLE 1.
Duties of the Adviser.
The Company hereby employs the Adviser to act as the investment
adviser to and manager of the Fund and to manage the investment and reinvestment
of the assets of the Fund, and to administer its affairs, subject to the
supervision of the Board of Directors of the Company, for the period and on the
terms and conditions set forth in this Agreement. The Adviser hereby accepts
such employment and agrees during such period, at its own expense, to render the
services and to assume the obligations herein set forth for the compensation
provided for herein. The Adviser shall
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for all purposes herein be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Company in any way or otherwise be deemed an agent of the
Company.
(a) Investment Advisory Services. In acting as investment adviser to
the Fund, the Adviser shall regularly provide the Fund with such investment
research, advice and supervision as the latter may from time to time consider
necessary for the proper supervision of the Fund and shall furnish continuously
an investment program and shall determine from time to time what securities
shall be purchased, sold or exchanged and what portion of the assets of the
Fund's portfolio shall be held in the various securities in which it may invest,
subject always to the restrictions of the Company's Articles of Incorporation
and By-Laws, as amended from time to time, the provisions of the Investment
Company Act and the statements relating to the Fund's investment objectives,
investment policies and investment restrictions set forth in the currently
effective prospectus of the Company relating to the Fund under the Securities
Act of 1933 (the "Prospectus"). Should the Board of Directors of the Company at
any time, however, make any definitive determination as to the investment policy
of the Fund and notify the Adviser thereof, the Adviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Adviser shall
take, on behalf of the Company, all actions which it deems necessary to
implement the investment policies determined as provided above, and in
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particular to place all orders for the purchase or sale of portfolio securities
for the Fund with brokers or dealers selected by it. In connection with the
selection of such brokers or dealers and the placing of such orders, the Adviser
is directed at all times to seek to obtain for the Fund the most favorable net
results for the Fund as determined by the Board of Directors and set forth in
the Prospectus. Subject to this requirement and the provisions of the Investment
Company Act, the Securities Exchange Act of 1934, and other applicable
provisions of law, nothing shall prohibit the Adviser from selecting brokers or
dealers with which it or the Company is affiliated.
(b) Administrative Services. In addition to the performance of
investment advisory services, the Adviser shall perform, or supervise the
performance of, administrative services in connection with the management of the
Company insofar as such services relate to and are required by the Fund. In this
connection, the Adviser agrees to (i) assist in supervising all aspects of the
Company's operations relating to the Fund, including the coordination of all
matters relating to the functions of the custodian, transfer agent, other
shareholder service agents, accountants, attorneys and other parties performing
services or operational functions for the Company relating to the Fund, (ii)
provide the Company, at the Adviser's expense, with services of persons
competent to perform such administrative and clerical functions as are necessary
in order to provide effective administration of the Company to the extent
required by the Fund, including duties in connection with shareholder relations,
reports,
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redemption requests and account adjustments and the maintenance of certain books
and records of the Company insofar as they relate to the Fund, and (iii) provide
the Company, at the Adviser's expense, with adequate office space and related
services necessary for its operations as contemplated in the Agreement.
ARTICLE 2.
Allocation of Charges and Expenses.
(a) The Adviser. The Adviser assumes and shall pay for
maintaining the staff and personnel, and shall at its own expense provide the
equipment, office space and facilities, necessary to perform its obligations
under this Agreement, and shall pay all compensation of officers of the Company
and the fees of all directors of the Company who are affiliated persons of
Xxxxxxx Xxxxx & Co., Inc. or its subsidiaries, and shall pay the organization
costs of the Fund.
(b) The Company. The Company assumes and shall pay all expenses of the
Fund, including, without limitation: insurance, taxes, expenses for legal and
auditing services, costs of printing proxies, stock certificates, shareholder
reports and prospectuses (except to the extent paid by the Distributor), charges
of the Custodian and Transfer Agent, expenses of redemption of shares,
Securities and Exchange Commission fees, expenses of registering the shares
under federal and state securities laws, fees and expenses of directors who are
not affiliated persons of Xxxxxxx Xxxxx & Co., Inc. or its subsidiaries,
accounting and pricing costs (including the daily calculation of net asset
value), interest,
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brokerage costs, litigation and other extraordinary or nonrecurring expenses,
and other expenses properly payable by the Company.
ARTICLE 3.
Compensation of the Adviser.
(a) Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Adviser, the Company shall
pay to the Adviser at the end of each calendar month a fee at the annual rate
of 0.30% of the average daily net assets of the Fund, as determined and
computed in accordance with the description of the method of determination of
net asset value contained in the Prospectus.
(b) Expense Limitations. In the event the operating expenses of the
Fund, including the investment advisory fee applicable to the Fund payable to
the Adviser pursuant to subsection (a) hereof, for any fiscal year ending on a
date on which this Agreement is in effect, exceeds the expense limitations under
state securities laws or published regulations thereunder, as such limitations
may be raised or lowered from time to time, the Adviser shall reduce its
investment advisory fee by the extent of such excess and, if required under any
such laws or regulations, will reimburse the Fund in the amount of such excess;
provided, however, to the extent permitted under law, there shall be excluded
from such expenses the amount of any interest, taxes, brokerage commissions and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto) paid
or payable by the Company and
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allocated to the Fund. Whenever the expenses of the Fund exceed a pro rata
portion of the applicable annual expense limitations, the estimated amounts of
reimbursement under such limitations shall be applicable as an offset against
the monthly payment of the advisory fee due to the Adviser.
ARTICLE 4.
Limitation of Liability of the Adviser.
The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with any
investment policy or the purchase, sale or redemption of any securities on the
recommendation of the Adviser. Nothing herein contained shall be construed to
protect the Adviser against any liability to the Company or its security
holders to which the Adviser shall otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties on
behalf of the Company, reckless disregard of the Adviser's obligations and
duties under this Agreement or the violation of any applicable law.
ARTICLE 5.
Activities of the Adviser.
The services of the Adviser under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others so long as its services hereunder are not impaired thereby. It is
understood that directors, officers, employees and shareholders of the Company
are or may become
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interested in the Adviser, as directors, officers, employees or shareholders or
otherwise and that directors, officers, employees or shareholders of the
Adviser are or may become similarly interested in the Company, and that the
Adviser is or may become interested in the Company as shareholder or otherwise.
ARTICLE 6.
Duration and Termination of this Agreement.
This Agreement shall become effective as of the effective date of
the Company's Post Effective Amendment No. 26 to its Registration Statement, and
shall remain in force until the second anniversary of such effectiveness and
thereafter, but only so long as such continuance after the second anniversary is
specifically approved at least annually by (i) the Board of Directors of the
Company, or by the vote of a majority of the outstanding shares of the Fund, and
(ii) a majority of those directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purposes of voting on such approval.
This Agreement may be terminated at any time, as to the Fund, without
the payment of any penalty, by the Board of Directors of the Company or by vote
of a majority of the outstanding shares of the Fund, or by the Adviser, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
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ARTICLE 7.
Definitions.
The terms "assignment", "affiliated person" and "interested person",
when used in this Agreement, shall have the respective meanings specified in the
Investment Company Act. As used with respect to the Company or the Fund, the
term "majority of the outstanding shares" means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares.
ARTICLE 8.
Amendments of this Agreement.
This Agreement may be amended by the parties only if such
amendment is specifically approved by (i) the Board of Directors of the Company,
or by the vote of the majority of outstanding shares of the Fund, and (ii) a
majority of those directors of the Company who are not parties to this Agreement
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.
ARTICLE 9.
Governing Law.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable laws of
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the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act, the latter shall control.
XXXXXXX XXXXX VARIABLE SERIES
FUNDS, INC.
ATTEST:
By:
-----------------------------
President
-------------------------------
Secretary
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By Princeton Services, Inc., its
general partner
ATTEST:
-------------------------------
Secretary
By:
-----------------------------
President
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