INVESTMENT ADVISORY AGREEMENT
Agreement made this _____ day of _________, 2000 between Xxxxxxxx
Funds, Inc., a Maryland corporation (the "Company"), and Xxxxxxxx Xxxxxx Capital
Management, LLC., a Delaware limited liability company (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (the "Act") as an open-end
management investment company consisting of three series, including the Xxxxxxxx
Select Industries Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940, as the
investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise and
agree as follows:
1. Employment. The Company hereby employs the Adviser to manage the
investment and reinvestment of the assets of the Fund for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
for the compensation herein provided and agrees during such period to render the
services and to assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and manage
the investment portfolio of the Fund, and, subject to such policies as the board
of directors of the Company may determine, direct the purchase and sale of
investment securities in the day to day management of the Fund. 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 or the Fund in
any way or otherwise be deemed an agent of the Company or the Fund. However, one
or more members, officers or employees of the Adviser may serve as directors
and/or officers of the Company, but without compensation or reimbursement of
expenses for such services from the Company. Nothing herein contained shall be
deemed to require the Company to take any action contrary to its Articles of
Incorporation, as amended, restated or supplemented from time to time, or any
applicable statute or regulation, or to relieve or deprive the board of
directors of the Company of its responsibility for and control of the affairs of
the Fund.
3. Expenses. The Adviser, at its own expense and without reimbursement
from the Company or the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund. The Adviser shall not be required to pay any expenses
of the Fund except as provided herein if the total expenses borne by the Fund,
including the Adviser's fee and the fees paid to the Fund's Administrator but
excluding all federal, state and local taxes, interest, reimbursement payments
to securities lenders for dividend and interest payments on securities sold
short, brokerage commissions and extraordinary items ("excluded expenses"), in
any year exceed that percentage of the average net assets of the Fund for such
year, as determined by valuations made as of the close of each business day,
which is the most restrictive percentage provided by the state laws of the
various states in which the Fund's shares are qualified for sale or, if the
states in which the Fund's shares are qualified for sale impose no such
restrictions, 1.95%. The expenses of the Fund's operations borne by the Fund
include by way of illustration and not limitation, directors fees paid to those
directors who are not officers of the Company, the
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costs of preparing and printing registration statements required under the
Securities Act of 1933 and the Act (and amendments thereto), the expense of
registering its shares with the Securities and Exchange Commission and in the
various states, the printing and distribution cost of prospectuses mailed to
existing shareholders, the cost of stock certificates (if any), director and
officer liability insurance, reports to shareholders, reports to government
authorities and proxy statements, interest charges, reimbursement payments to
securities lenders for dividend and interest payments on securities sold short,
taxes, legal expenses, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, insurance
premiums, brokerage and other expenses connected with the execution of portfolio
securities transactions, fees and expenses of the custodian of the Fund's
assets, expenses of calculating the net asset value and repurchasing and
redeeming shares, printing and mailing expenses, charges and expenses of
dividend disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a monthly
basis. If the accrued amount of the expenses of the Fund, less excluded
expenses, exceeds the expense limitation established herein, the Company shall
create an account receivable from the Adviser in the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess (and if the amount of such excess in any month is greater
than the monthly payment of the Adviser's fee, the Adviser will pay the Fund the
amount of such difference), subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses, less excluded
expenses, thereafter fall below the expense limitation. If, in any of the three
fiscal years following any fiscal year
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in which the Adviser has reimbursed (either by fee reduction or payment) the
Fund for excess expenses, the Fund's expenses, less excluded expenses, as a
percentage of the Fund's average net assets, are less than the expense
limitation established herein, the Fund shall repay to the Adviser the amount
the Adviser reimbursed the Fund; provided, however, that the Fund's expenses,
less excluded expenses, as a percentage of the Fund's average net assets, shall
not exceed the limitation established herein.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser hereunder, the Company, through and on behalf of the Fund, shall pay to
the Adviser an advisory fee, paid monthly, based on the average net assets of
the Fund, as determined by valuations made as of the close of each business day
of the month. The monthly advisory fee shall be 1/12 of 1.00% (1.00% per annum)
on the average daily net assets of the Fund. For any month in which this
Agreement is not in effect for the entire month, such fee shall be reduced
proportionately on the basis of the number of calendar days during which it is
in effect and the fee computed upon the average net asset value of the business
days during which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not take an
ownership position in the Fund, and shall not permit any of its members,
officers, or employees to take a long or short position in the shares of the
Fund, except for the purchase of shares of the Fund for investment purposes at
the same price as that available to the public at the time of purchase or in
connection with the initial capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund hereunder are
not to be deemed exclusive and the Adviser shall be free to furnish similar
services to others as long as the services hereunder are not impaired thereby.
Although the Adviser has agreed to
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permit the Fund and the Company to use the name "Xxxxxxxx", if they so desire,
it is understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment companies, to
use such names, and that the Fund and the Company will not use such names if the
Adviser ceases to be the Fund's sole investment adviser. During the period that
this Agreement is in effect, the Adviser shall be the Fund's sole investment
adviser.
7. Liability. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to 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.
8. Brokerage Commissions. The Adviser, subject to the control and
direction of the Company's Board of Directors, shall have authority and
discretion to select brokers and dealers to execute portfolio transactions for
the Fund and for the selection of the markets on or in which the transactions
will be executed. The Adviser may cause the Fund to pay a broker-dealer which
provides brokerage and research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), to
the Adviser a commission for effecting a securities transaction in excess of the
amount another broker-dealer would have charged for effecting such transaction,
if the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of brokerage and research services provided
by the executing broker-dealer viewed in terms of either that particular
transaction or his overall responsibilities with respect to the accounts as to
which he exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act). The
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Adviser shall provide such reports as the Company's Board of Directors may
reasonable request with respect to the Fund's total brokerage and the manner in
which that brokerage was allocated.
9. Code of Ethics. The Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and has provided the
Company with a copy of the code of ethics and evidence of its adoption. Upon the
written request of the Company, the Adviser shall permit the Company to examine
any reports required to be made by the Adviser pursuant to Rule 17j-1(d) under
the Act.
10. Amendments. This Agreement may be amended by the mutual consent of
the parties; provided, however, that in no event may it be amended without the
approval of the board of directors of the Company in the manner required by the
Act, and, if required by the Act, by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act.
11. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by the board of directors of the Company or by a
vote of the majority of the outstanding voting securities of the Fund, as
defined in the Act, upon giving sixty (60) days' written notice to the Adviser.
This Agreement may be terminated by the Adviser at any time upon the giving of
sixty (60) days' written notice to the Company. This Agreement shall terminate
automatically in the event of its assignment (as defined in Section 2(a)(4) of
the Act). Subject to prior termination as hereinbefore provided, this Agreement
shall continue in effect for an initial period beginning as of the date hereof
and ending ___________, 2002 and indefinitely thereafter, but only so long as
the continuance after such initial period is specifically approved annually by
(i) the board of directors of the
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Company or by the vote of the majority of the outstanding voting securities of
the Fund, as defined in the Act, and (ii) the board of directors of the Company
in the manner required by the Act, provided that any such approval may be made
effective not more than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day first above written.
XXXXXXXX XXXXXX CAPITAL MANAGEMENT, LLC
(the "Adviser")
By:___________________________________
President
XXXXXXXX FUNDS, INC.
(the "Company")
By:___________________________________
President
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