Exhibit (5)(a)
INVESTMENT ADVISORY AGREEMENT
THE BEAR XXXXXXX FUNDS
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
February 22, 1995
As Revised May 4, 1995
Bear Xxxxxxx Funds Management Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The above-named investment company (the "Fund"), with respect to the
series named on Schedule 1 hereto, as such Schedule may be revised from time to
time (each, a "Series"), herewith confirms its agreement with you as follows:
The Fund desires to employ its capital by investing and reinvesting the
same in investments of the type and in accordance with the limitations specified
in its charter documents and in its Prospectus and Statement of Additional
Information as from time to time in effect, copies of which have been or will be
submitted to you, and in such manner and to such extent as from time to time may
be approved by the Fund's Board. The Fund desires to employ you to act as its
investment adviser.
In this connection it is understood that from time to time you will
employ or associate with yourself such person or persons as you may believe to
be particularly fitted to assist you in the performance of this Agreement. Such
person or persons may be officers or employees who are employed by both you and
the Fund. The compensation of such person or persons shall be paid by you and
no obligation may be incurred on the Fund's behalf in any such respect. We have
discussed and concur in your employing on this basis each sub-investment adviser
indicated on Schedule 1 (each, a "Sub-Investment Adviser") for the Series
indicated thereon, as such Schedule may be revised from time to time.
Subject to the supervision and approval of the Fund's Board, you will
provide investment management of each Series' portfolio in accordance with such
Series' investment objectives and policies as stated in the Fund's Prospectus
and Statement of Additional Information as from time to time in effect. In
connection therewith, you will obtain and provide investment research and will
supervise each Series' investments and conduct a continuous program of
investment, evaluation and, if appropriate, sale and reinvestment of such
Series' assets. You will furnish to the Fund such statistical information, with
respect to the investments which a Series may hold or contemplate purchasing, as
the Fund may reasonably request. The Fund wishes to be informed of important
developments materially affecting any Series' portfolio and shall expect you, on
your own initiative, to furnish to the Fund from time to time such information
as you may believe appropriate for this purpose.
You shall exercise your best judgment in rendering the services to be
provided to the Fund hereunder, and the Fund agrees as an inducement to your
undertaking the same that neither you nor the Sub-Investment Adviser shall be
liable hereunder for any error of judgment or mistake of law or for any loss
suffered by one or more Series, provided that nothing herein shall be deemed to
protect or purport to protect you or any Sub-Investment Adviser against any
liability to the Fund or a Series or to its security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of your duties hereunder or by reason of your
reckless disregard of your obligations or duties hereunder (hereinafter
"Disabling Conduct") or to which any Sub-Investment Adviser would otherwise be
subject by reason of Disabling Conduct.
In consideration of services rendered pursuant to this Agreement, the
Fund will pay you on the first business day of each month a fee at the rate set
forth opposite each Series' name on Schedule 1 hereto or will pay you in
accordance with the methodology described on additional Schedules hereto. Net
asset value shall be computed on such days and at such time or times as
described in the Fund's then-current Prospectus and Statement of Additional
Information. The fee for the period from the date of the commencement of sales
of a Series' shares to the end of the month during which such sales shall have
been commenced shall be pro-rated according to the proportion which such period
bears to the full monthly period, and upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be pro-rated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to you, the value of each
Series' net assets shall be computed in the manner specified in the Fund's
charter documents for the computation of the value of each Series' net assets.
You will bear all expenses in connection with the performance of your
services under this Agreement and will pay
all fees of each Sub-Investment Adviser in connection with its duties in respect
of the Series. All other expenses to be incurred in the operation of the Fund
(other than those borne by a Sub-Investment Adviser) will be borne by the Fund,
except to the extent specifically assumed by you. The expenses to be borne by
the Fund include, without limitation, the following: organizational costs,
taxes, interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, fees of Board
members, Securities and Exchange Commission fees, state Blue Sky qualification
fees, advisory, administration and fund accounting fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining the Series' existence, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing stockholders, costs of stockholders' reports and meetings, and any
extraordinary expenses.
As to each Series, if in any fiscal year the aggregate expenses of a
Series (including fees pursuant to this Agreement, but excluding interest,
taxes, brokerage and, with the prior written consent of the necessary state
securities commissions, extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over such Series, the Fund may deduct from the
fees to be paid hereunder, or you will bear, such excess expense to the extent
required by state law. Your obligation pursuant hereto will be limited to the
amount of your fees hereunder. Such deduction or payment, if any, will be
estimated daily, and reconciled and effected or paid, as the case may be, on a
monthly basis.
The Fund understands that you now act, and that from time to time
hereafter you may act, as investment adviser to one or more other investment
companies and fiduciary or other managed accounts, and the Fund has no objection
to your so acting, provided that when the purchase or sale of securities of the
same issuer is suitable for the investment objectives of two or more companies
or accounts managed by you which have available funds for investment, the
available securities will be allocated in a manner believed by you to be
equitable to each company or account. It is recognized that in some cases this
procedure may adversely affect the price paid or received by one or more Series
or the size of the position obtainable for or disposed of by one or more Series.
In addition, it is understood that the persons employed by you to
assist in the performance of your duties hereunder will not devote their full
time to such service and nothing
-3-
contained herein shall be deemed to limit or restrict your right or the right of
any of your affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
Any person, even though also your officer, director, partner, employee
or agent, who may be or become an officer, Board member, employee or agent of
the Fund, shall be deemed, when rendering services to the Fund or acting on any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as your officer, director, partner, employee, or agent or one under
your control or direction even though paid by you.
The Fund will indemnify you and each Sub-Investment Adviser (each, an
"indemnitee") against, and hold each indemnitee harmless from, any and all
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) not resulting from Disabling Conduct by the indemnitee.
Indemnification shall be made only following: (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
indemnitee was not liable by reason of Disabling Conduct or (ii) in the absence
of such a decision, a reasonable determination, based upon a review of the
facts, that the indemnitee was not liable by reason of Disabling Conduct by (a)
the vote of a majority of a quorum of Board members who are neither "interested
persons" of the Fund nor parties to the proceeding ("disinterested non-party
Board members") or (b) an independent legal counsel in a written opinion. Each
indemnitee shall be entitled to advances from the Fund for payment of the
reasonable expenses incurred by it in connection with the matter as to which it
is seeking indemnification in the manner and to the fullest extent permissible
under the New York Business Corporation Law. Each indemnitee shall provide to
the Fund a written affirmation of its good faith belief that the standard of
conduct necessary for indemnification by the Fund has been met and a written
undertaking to repay any such advance if it should ultimately be determined that
the standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the indemnitee shall provide
security in form and amount acceptable to the Fund for its undertaking; (b) the
Fund is insured against losses arising by reason of the advance; or (c) a
majority of a quorum of disinterested non-party Board members, or independent
legal counsel, in a written opinion, shall have determined, based on a review of
facts readily available to the Fund at the time the advance is proposed to be
made, that there is reason to believe that the indemnitee will ultimately be
found to be entitled to indemnification. No provision of this Agreement shall
be construed to protect any Board member or officer of the Fund, or any
indemnitee, from
-4-
liability in violation of Sections 17(h) and (i) of the Investment Company Act
of 1940, as amended (the "1940 Act").
As to each Series, this Agreement shall continue until the date set
forth opposite such Series' name on Schedule 1 hereto (the "Reapproval Date")
and thereafter shall continue automatically for successive annual periods ending
on the day of each year set forth opposite the Series' name on Schedule 1 hereto
(the "Reapproval Day"), provided such continuance is specifically approved at
least annually by (i) the Fund's Board or (ii) vote of a majority (as defined in
the 0000 Xxx) of such Series' outstanding voting securities, provided that in
either event its continuance also is approved by a majority of the Fund's Board
members who are not "interested persons" (as defined in the 0000 Xxx) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. As to each Series, this Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board or by vote
of holders of a majority of such Series' shares or, upon not less than 90 days'
notice, by you. This Agreement also will terminate automatically, as to the
relevant Series, in the event of its assignment (as defined in the 1940 Act).
The Fund recognizes that from time to time your directors, officers and
employees may serve as trustees, directors, partners, officers and employees of
other business trusts, corporations, partnerships or other entities (including
other investment companies), and that such other entities may include the name
"Bear Xxxxxxx" as part of their name, and that your corporation or its
affiliates may enter into investment advisory or other agreements with such
other entities. If you cease to act as the Fund's investment adviser, the Fund
agrees that, at your request, the Fund will take all necessary action to change
the name of the Fund to a name not including "Bear Xxxxxxx" in any form or
combination of words.
The Fund is agreeing to the provisions of this Agreement that limit a
Sub-Investment Adviser's liability and other provisions relating to the Sub-
Investment Adviser so as to induce the Sub-Investment Adviser to enter into its
Sub-Investment Advisory Agreement with you and to perform its obligations
thereunder. Each Sub-Investment Adviser is expressly made a third party
beneficiary of this Agreement with rights as respects the Fund to the same
extent as if it had been a party hereto.
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and property
of the relevant Series and shall not be binding upon any Board member, officer
or shareholder of the Fund individually.
-5-
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE BEAR XXXXXXX FUNDS
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Accepted:
BEAR XXXXXXX FUNDS MANAGEMENT INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
-6-
SCHEDULE 1
Annual Fee as
a Percentage
of Average
Name of Series Assets Reapproval Date Reapproval Day
-------------- ------------- --------------- --------------
Large Cap Value
Portfolio .75 of 1% February 22, 1997 February 22
Small Cap Value
Portfolio .75 of 1% February 22, 1997 February 22
Total Return Bond
Portfolio .45 of 1% February 22, 1997 February 22
The Insiders Select
Portfolio * February 22, 1997 February 22
------------------------
* See Schedule 2; the Sub-Investment Adviser is Symphony Asset Management.
SCHEDULE 2
For the period beginning with the day on which the Fund commences
investment operations and ending with the last day of the twelfth full calendar
month thereafter, the Fund will pay you, at the end of each month, a monthly
advisory fee calculated at an annual rate of 1.0% of the Series' average daily
net assets during such month (the "Basic Fee"). Beginning with the thirteenth
month, the Basic Fee will be adjusted each month (the "Monthly Performance
Adjustment") depending on the extent to which the investment performance of the
Class of shares expected to bear the highest total Series operating expenses (as
such Class from time to time may be designated by the Fund's Board, the
"Designated Class"), reflecting the deduction of expenses, exceeds or is
exceeded by the percentage change in the investment record of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500") for the immediately
preceding twelve calendar months on a rolling basis. The rate of the Monthly
Performance Adjustment may increase or decrease the fee payable to you by up to
.50% per annum of the Series' average daily net assets.
The performance of the Designated Class during a performance period
will be calculated by first determining the change in the Class' net asset value
per share during the period, assuming the reinvestment of distributions during
that period, and then expressing this amount as a percentage of the net asset
value per share at the beginning of the period. The performance of the S&P 500
during a performance period is calculated as the sum of the change in the level
of the index during the period, plus the value of any dividends or distributions
made by the companies whose securities comprise the index accumulated to the end
of the period.
After the Monthly Performance Adjustment is effective, the total
advisory fee, payable by the Fund to you at the end of each calendar month, will
be equal to the Basic Fee for the month adjusted upward or downward for the
month by the Monthly Performance Adjustment for the month. The monthly advisory
fee will be calculated as follows: (1) one-twelfth of the 1% annual basic fee
rate will be applied to the Series' average daily net assets over the most
recent calendar month, giving a dollar amount which will be the Basic Fee for
that month; (2) one-twelfth of the applicable performance adjustment fee rate
from the table below will be applied to the Series' average daily net assets
over the most recent month, giving a dollar amount which will be the Monthly
Performance Adjustment; and (3) the Monthly Performance Adjustment will then be
added to or subtracted from the Basic Fee and the result will be the amount
payable by the Fund to you as the total advisory fee for that month.
The full range of permitted fees on an annualized basis is as follows:
Percentage Point Difference Between
Designated Class' Performance (Net
of Expenses Including Advisory Fees) Performance
and Percentage Change in the Adjustment
S&P 500 Investment Record Basic Fee (%) Rate (%) Total Fee (%)
--------------------------------------- ----------- ----------- -----------
+3.00 percentage points or more........ 1% .50% 1.50%
+2.75 percentage points or more but
less than +3.00 percentage points.... 1% .40% 1.40%
+2.50 percentage points or more but
less than +2.75 percentage points.... 1% .30% 1.30%
+2.25 percentage points or more but
less than +2.50 percentage points.... 1% .20% 1.20%
+2.00 percentage points or more but
less than +2.25 percentage points.... 1% .10% 1.10%
Less than +2.00 percentage points but
more than -2.00 percentage points.... 1% 0% 1.00%
-2.00 percentage points or less but
more than -2.25 percentage points.... 1% -.10% .90%
-2.25 percentage points or less but
more than -2.50 percentage points.... 1% -.20% .80%
-2.50 percentage points or less but
more than -2.75 percentage points.... 1% -.30% .70%
-2.75 percentage points or less but
more than -3.00 percentage points.... 1% -.40% .60%
-3.00 percentage points or less........ 1% -.50% .50%
The period over which performance will be measured is a rolling 12-
month period.
