ADVISORY AGREEMENT
ADVISORY
AGREEMENT, dated February 15,
2007, between Xxxxxxx, Xxxxxxx Funds, Inc., a Maryland corporation (the "Fund"),
and Xxxxxxx, Loevner Management, L.P., a New Jersey limited partnership (the
"Adviser").
In
consideration of the mutual
agreements herein made, the parties hereto agree as follows:
1. Attorney-in-Fact. The
Fund appoints the Adviser as its attorney-in-fact to invest and reinvest the
assets of the International Small Companies Portfolio (the "Portfolio"), as
fully as the Fund itself could do. The Adviser hereby accepts this
appointment.
2. Duties
of the Adviser. (a) The Adviser shall be responsible for
managing the investment portfolio of the Portfolio, including, without
limitation, providing investment research, advice and supervision, determining
which portfolio securities shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the Portfolio and determining
how
voting and other rights with respect to portfolio securities of the Portfolio
shall be exercised, subject in each case to the control of the Board of
Directors of the Fund (the "Board") and in accordance with the objective,
policies and principles of the Portfolio set forth in the Registration
Statement, as amended, of the Fund, the requirements of the Investment Company
Act of 1940, as amended, (the "Act") and other applicable law. In
performing such duties, the Adviser shall provide such office space, and such
executive and other personnel as shall be necessary for the investment
operations of the Portfolio. In managing the Portfolio in accordance
with the requirements set forth in this paragraph 2, the Adviser shall be
entitled to act upon advice of counsel to the Fund or counsel to the
Adviser.
(b) Subject
to Section 36 of
the Act, the Adviser shall not be liable to the Fund for any error of judgment
or mistake of law or for any loss arising out of any investment or for any
act
or omission in the management of the Portfolio and the performance of its duties
under this Agreement except for losses arising out of the Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its duties
or
by reason of its reckless disregard of its obligations and duties under this
Agreement. It is agreed that the Adviser shall have no responsibility
or liability for the accuracy or completeness of the Fund's Registration
Statement under the Act and the Securities Act of 1933 except for information
about the Adviser contained in the Prospectus included as part of such
Registration Statement supplied by the Adviser for inclusion
therein. The Fund agrees to indemnify and hold the Adviser harmless
from and against all claims, losses, costs, damages and expenses, including
reasonable fees and expenses for counsel, incurred by it resulting from any
claim, demand, action or suit in connection with or arising out of any action
or
omission by the Adviser in the performance of this Agreement except for those
claims, losses, costs, damages and expenses resulting from the Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its duties
or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The
Adviser and its
officers may act and continue to act as investment advisers and managers for
others (including, without limitation, other investment companies), and nothing
in this Agreement will in any way be deemed to restrict the right of the Adviser
to perform investment management or other services for any other person or
entity, and the performance of such services for others will not be deemed
to
violate or give rise to any duty or obligation to the Fund.
(d) Except
as provided in
Section 5, nothing in this Agreement will limit or restrict the Adviser or
any
of its officers, affiliates or employees from buying, selling or trading in
any
securities for its or their own account or accounts. The Fund
acknowledges that the Adviser and its officers, affiliates or employees, and
its
other clients may at any time have, acquire, increase, decrease or dispose
of
positions in investments which are at the same time being acquired or disposed
of for the account of the Portfolio. The Adviser will have no
obligation to acquire for the Portfolio a position in any investment which
the
Adviser, its officers, affiliates or employees may acquire for its or their
own
accounts or for the account of another client, if in the sole discretion of
the
Adviser, it is not feasible or desirable to acquire a position in such
investment for the account of the Portfolio, provided that the Adviser shall
have acted in good faith and in a manner deemed equitable to the
Portfolio. The Adviser represents that it has adopted a code of
ethics governing personal trading that complies in all material respects with
the recommendations contained in the Investment Company Institute “Report of the
Advisory Group on Personal Investing,” dated May 9, 1994, and the Adviser agrees
to furnish a copy of such code of ethics to the Directors of the
Fund.
(e) If
the purchase or sale
of securities consistent with the investment policies of the Portfolio and
one
or more other clients serviced by the Adviser is considered at or about the
same
time, transactions in such securities will be allocated among the Portfolio
and
clients in a manner deemed fair and reasonable by the
Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the
Board.
3. Expenses. The
Adviser shall pay all of its expenses arising from the performance of its
obligations under this Agreement. Except as provided below, the
Adviser shall not be required to pay any other expenses of the Fund (including
out-of-pocket expenses, but not including the Adviser's overhead or employee
costs), including without limitation, organization expenses of the Fund;
brokerage commissions; maintenance of books and records which are required
to be
maintained by the Fund's custodian or other agents of the Fund; telephone,
telex, facsimile, postage and other communications expenses; expenses relating
to investor and public relations; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; indemnification
of Directors and officers of the Fund; travel expenses (or an appropriate
portion thereof) of Directors and officers of the Fund to the extent that such
expenses relate to attendance at meetings of the Board of Directors of the
Fund
or any committee thereof or advisors thereto held outside of Somerville, New
Jersey; interest, fees and expenses of independent attorneys, auditors,
custodians, accounting agents, transfer agents, dividend disbursing agents
and
registrars; payment for portfolio pricing or valuation service to pricing
agents, accountants, bankers and other specialists, if any; taxes and government
fees; cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares; expenses of
registering and qualifying shares of the Fund under Federal and state laws
and
regulations; expenses of printing and distributing reports, notices, dividends
and proxy materials to existing stockholders; expenses of printing and filing
reports and other documents filed with governmental agencies, expenses of
printing and distributing prospectuses; expenses of annual and special
stockholders' meetings; costs of stationery, fees and expenses (specifically
including travel expenses relating to Fund business) of Directors of the Fund
who are not employees of the Adviser or its affiliates; membership dues in
the
Investment Company Institute; insurance premiums and extraordinary expenses
such
as litigation expenses.
4. Compensation. (a) As
compensation for the services performed and the facilities and personnel
provided by the Adviser pursuant to this Agreement, the Fund will pay to the
Adviser promptly at the end of each calendar month, a fee, calculated on each
day during such month, at an annual rate of [1.25]% of the Portfolio's average
daily net assets. The Adviser shall be entitled to receive during any month
such
interim payments of its fee hereunder as the Adviser shall request, provided
that no such payment shall exceed 50% of the amount of such fee then accrued
on
the books of the Portfolio and unpaid.
(b) If
the Adviser shall
serve hereunder for less than the whole of any month, the fee payable hereunder
shall be prorated.
(c) For
purposes of this
Section 4, the "average daily net assets" of the Portfolio shall mean the
average of the values placed on the Portfolio's net assets on each day pursuant
to the applicable provisions of the Fund's Registration Statement, as
amended.
5. Purchase
and Sale of Securities. The Adviser shall purchase securities from or
through and sell securities to or through such persons, brokers or dealers
as
the Adviser shall deem appropriate in order to carry out the policy with respect
to the allocation of portfolio transactions as set forth in the Registration
Statement of the Fund, as amended, or as the Board may direct from time to
time. The Adviser will use its reasonable efforts to execute all
purchases and sales with dealers and banks on a best net price
basis. The Adviser will consider the full range and quality of
services offered by the executing broker or dealer when making these
determinations. Neither the Adviser nor any of its officers,
affiliates or employees will act as principal or receive any compensation from
the Portfolio in connection with the purchase or sale of investments for the
Portfolio other than the fee referred to in Paragraph 4 hereof.
6. Term
of Agreement. This Agreement shall continue in full force and effect
until two years from the date hereof, and will continue in effect from year
to
year thereafter if such continuance is approved in the manner required by the
Act, provided that this Agreement is not otherwise terminated. The Adviser
may
terminate this Agreement at any time, without the payment of any penalty, upon
60 days' written notice to the Fund. The Fund may terminate this
Agreement with respect to the Portfolio at any time, without the payment of
any
penalty, on 60 days' written notice to the Adviser by vote of either the
majority of the non-interested members of the Board or a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the Act) of
the
Portfolio. This Agreement will automatically terminate in the event
of its assignment (the term “assignment” for this purpose having the meaning
defined in Section 2(a)(4) of the Act).
7. Changes
in Membership. The Adviser is a limited partnership and, pursuant to
the New Jersey Uniform Securities Law and the Investment Advisers Act of 1940,
shall notify the Fund of any change in the membership of such partnership within
a reasonable time after the change.
8. Notices.
Any notice or other communication authorized or required hereunder shall be
in
writing or by confirming telegram, cable, telex or facsimile sending
device. Notice shall be addressed to the Fund at 00 Xxxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx 00000, Attention: President; and to Investors
Bank & Trust Company, 000 Xxxxxxxxx Xxxxxx, XXX00, Xxxxxx, Xxxxxxxxxxxxx
00000, Attention: Rainer X.X. Xxxxx. Either party may
designate a different address by notice to the other party. Any such
notice or other communication shall be deemed given when actually
received.
9. Amendment. This
Agreement may be amended by the parties hereto with respect to the Portfolio
only if such amendment is specifically approved (i) by the Board of Directors
of
the Fund or by the vote of a majority of outstanding shares of the Portfolio
(“Shares”), and (ii) by the Director(s) who are not interested persons (the term
“non interested” for this purpose having the meaning defined in section 2 (a)
(19) of the Act) of the Fund (“Non-Interested Director(s)”), which vote must be
cast in person at a meeting called for the purpose of voting on such
approval.
10. Right
of Adviser In Corporate Name. The Adviser and the Fund each
agree that the phrase "HLM," which comprises a component of the Portfolio's
corporate name, is a property right of the Adviser. The Fund agrees
and consents that (i) it will only use the phrase "HLM" as a component of its
corporate name and for no other purpose; (ii) it will not purport to grant
to
any third party the right to use the phrase "HLM" for any purpose; (iii) the
Adviser or any corporate affiliate of the Adviser may use or grant to others
the
right to use the phrase "HLM" or any combination or abbreviation thereof, as
all
or a portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company, and at the
request of the Adviser, the Fund will take such action as may be required to
provide its consent to such use or grant; and (iv) upon the termination of
any
investment advisory agreement into which the Adviser and the Fund may enter,
the
Fund shall, upon request by the Adviser, promptly take such action, at its
own
expense, as may be necessary to change the Portfolio's corporate name to one
not
containing the phrase "HLM" and following such a change, shall not use the
phrase "HLM" or any combination thereof, as part of the Portfolio's corporate
name or for any other commercial purpose, and shall use its reasonable efforts
to cause its officers, directors and stockholders to take any and all actions
which the Adviser may request to effect the foregoing and recovery to the
Adviser any and all rights to such phrase.
11. Miscellaneous. This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New Jersey. Anything herein to the contrary notwithstanding,
this Agreement shall not be construed to require or to impose any duty upon
either of the parties to do anything in violation of any applicable laws or
regulations.
IN
WITNESS WHEREOF, the Fund and the
Adviser have caused this Agreement to be executed by their duly authorized
officers as of the date first written above.
ATTEST XXXXXXX,
XXXXXXX FUNDS, INC.
By:
/s/
Xxxxxxx
Xxxxxxxx By:
/s/ Xxxxx X. Xxxxxxx
Xxxxx
X. Xxxxxxx,
President
ATTEST XXXXXXX,
LOEVNER MANAGEMENT,L.P.
BY:
HLM HOLDINGS, INC., General
Partner
By:
/s/
Xxxxxxx
Xxxxxxxx By:
/s/ Xxxxx X. Xxxxxxx
Xxxxx
X. Xxxxxxx,
President
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