Exhibit 5(1)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this __ day of April, 2001 between Xxxxxxx Xxxxx Variable
Series Funds, Inc., a Maryland corporation (the "Company"), and Xxxxxxx Xxxxx
Investment Managers, 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 twenty separate series,
each of which pursues its investment objective through separate investment
policies; and
WHEREAS, the Adviser is engaged 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
each of the Company's series; and
WHEREAS, the Company desires to retain the Adviser to render investment
supervisory and corporate administrative services to the Company's Large Cap
Value Focus Fund (hereinafter 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 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 Bylaws, as amended from time to time, the provisions of the Investment
Company Act
1
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
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, 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, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and other expenses properly payable by the Company.
2
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 0.75% 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 allocated to the Fund. Whenever the expenses of
the Fund exceeds 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
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.
3
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. 38 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.
Article 7
Definitions
The term "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.
4
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 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:__________________________________
Secretary President
XXXXXXX XXXXX INVESTMENT MANAGERS,
L.P.
ATTEST: By: Princeton Services, Inc., its general partner
____________________________ By:__________________________________
Secretary President
5
