XXXXXX CAPITAL FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
Agreement entered into this 9th day of February, 2004 between Xxxxxx
Capital Funds, Inc., a Maryland corporation (the "Company"), and Xxxxxx Capital
Management, Ltd. (the "Advisor"), a Kansas corporation.
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The Company is authorized to create separate series, each with its own separate
investment portfolio and beneficial interest in each such series will be
represented by a separate series of shares (the "Shares"); and
WHEREAS, the Advisor is an investment adviser registered under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires to retain the Advisor as investment adviser
to furnish investment advisory and portfolio management services to the Company
with respect to its initial series, the Xxxxxx Equity & Income Fund (the
"Fund"), and such other portfolios as the Company and the Advisor shall agree
upon, and the Advisor is willing to furnish such services and to perform the
functions assigned to it under this Agreement for the consideration provided
herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Company hereby appoints the Advisor as investment
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adviser of the Fund for the period and on the terms set forth in this Agreement.
The Advisor accepts such appointment and agrees to render the services herein.
In the performance of its duties, the Advisor will act in the best interests of
the Fund and will comply with (a) applicable laws and regulations, including,
but not limited to, the 1940 Act, (b) the terms of this Agreement, (c) the
Company's Articles of Incorporation, By-Laws and currently effective
registration statement under the Securities Act of 1933, as amended, and the
1940 Act, and any amendments thereto, (d) the stated investment objective,
policies and restrictions of the Fund, and (e) such other guidelines as the
Board of Directors of the Company (the "Board") reasonably may establish.
2. Duties as Investment Adviser.
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(a) Subject to the supervision of the Board, the Advisor will
provide a continuous investment program for the Fund, including investment
research and management with respect to all securities, investments and cash
equivalents held by the Fund. The Advisor will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Fund. The Advisor will exercise full discretion and act for the Fund in the
same manner and with the same force and effect as the Fund itself might or could
do with respect to purchases,
sales, or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases, sales
or other transactions.
(b) The Advisor will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or through other
brokers. In the selection of brokers and the placement of orders for the
purchase and sale of portfolio investments for the Fund, the Advisor shall use
its best efforts to obtain for the Fund the best qualitative execution, taking
into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer. In using its best efforts to obtain
the most favorable price and execution available, the Advisor, bearing in mind
the Fund's best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker involved, the
quality of service rendered by the broker in other transactions. Consistent
with the Rules of the National Association of Securities Dealers, Inc., and
subject to its obligation of seeking best qualitative execution, the Advisor may
give consideration to sales of shares of the Fund as a factor in the selection
of brokers and dealers to execute portfolio transactions. Subject to such
policies as the Board of Directors may determine, the Advisor shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund to pay a
broker that provides brokerage and research services to the Advisor an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker would have charged for effecting that
transaction if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the Fund
and to other clients of the Advisor or its affiliates as to which the Advisor or
its affiliates exercise investment discretion. In no instance will portfolio
securities of the Fund be purchased from or sold to the Advisor or any
affiliated person of the Advisor. The Fund agrees that any entity or person
associated with the Advisor which is a member of a national securities exchange
is authorized to effect any transaction on such exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of 1934,
as amended, and that the Fund consents to the retention of compensation for such
transactions.
(c) The Advisor will provide to the Board on a regular basis any
economic and investment analyses or reports concerning the Fund as are
reasonably requested by the Board.
(d) Any of the foregoing functions with respect to the Fund may be
delegated by the Advisor, at the Advisor's expense, to another appropriate party
(including an affiliated party), subject to such approval by the Board of
Directors and shareholders of the Fund as may be required by the 1940 Act. The
Advisor shall oversee the performance of delegated functions by any such party
and shall furnish to the Board quarterly evaluations and analyses concerning the
performance of delegated responsibilities by those parties.
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3. SERVICES NOT EXCLUSIVE. The services furnished by the Advisor
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hereunder are not to be deemed exclusive and the Advisor shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby.
4. BOOKS AND RECORDS. In compliance with the requirements of Rule
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3la-3 under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the Fund are the property of the Company and further agrees to
surrender promptly to the Company any of such records upon the Company's
request. The Advisor further agrees to preserve for the periods prescribed by
Rule 3la-2 under the 1940 Act the records required to be maintained by Rule
3la-1 under the 1940 Act.
5. EXPENSES. During the term of this Agreement, the Fund will bear
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all expenses not specifically assumed by the Advisor incurred in its operations
and the offering of its shares. Expenses borne by the Fund will include, but
not be limited to, the following: (a) brokerage commissions relating to
securities purchased or sold by the Fund or any losses incurred in connection
therewith; (b) fees payable to, and expenses incurred on behalf of the Fund, by
the Advisor; (c) expenses of organizing the Fund; (d) filing fees and expenses
relating to the registration, and notice filings of the Fund's shares under
federal or state securities laws and maintaining such registrations,
qualifications and notice filings; (e) distribution fees; (f) fees and salaries
payable to the members of the Board of Directors and officers who are not
officers or employees of the Advisor or interested persons (as defined in the
0000 Xxx) of any investment subadviser or distributor of the Fund; (g) taxes
(including any income or franchise taxes) and governmental fees; (h) costs of
any liability, uncollectible items of deposit and other insurance or fidelity
bonds; (i) any costs, expenses or losses arising out of any liability of or
claim for damage or other relief asserted against the Fund for violation of any
law; (j) legal, accounting and auditing expenses, including legal fees of
special counsel or salaries of compliance staff for the independent directors;
(k) charges of custodians, transfer agents and other agents; (l) costs of
preparing share certificates; (m) expenses of setting in type and printing
prospectuses and supplements thereto for existing shareholders, reports and
statements to shareholders and proxy material; (n) any extraordinary expenses
(including fees and disbursements of counsel) incurred by the Fund; and (o)
fees and other expenses incurred in connection with membership in investment
company organizations.
The Fund may pay directly any expense incurred by it in its normal
operations and, if any such payment is consented to by the Advisor and
acknowledged as otherwise payable by the Advisor pursuant to this Agreement, the
Fund may reduce the fee payable to the Advisor pursuant to paragraph 6 hereof by
such amount. To the extent that such deductions exceed the fee payable to the
Advisor on any monthly payment date, such excess shall be carried forward and
deducted in the same manner from the fee payable on succeeding monthly payment
dates.
6. COMPENSATION. For the services to be rendered and payments to be
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made as provided in this Agreement, as of the last business day of each month,
the Fund will pay the Advisor a fee at the annual rate of 1.25% of the average
daily value of the first $100 million in net assets; and 1.00% of the average
daily value of net assets over $100 million.
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The average daily value of the net assets of the Fund shall be
determined pursuant to the applicable provisions of the Articles of
Incorporation and By-laws governing the Fund, or a resolution of the Board, if
required. If, pursuant to such provisions, the determination of net asset value
of the Fund is suspended for any particular business day, then, for purposes of
this paragraph, the value of the net assets of the Fund as last determined shall
be deemed to be the value of the net assets as of the close of the business day,
or as of such other time as the value of the Fund's net assets may be lawfully
determined on that day. If the determination of the net asset value of the Fund
has been suspended for a period including such month, the compensation payable
at the end of such month shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such month).
7. LIMITATION OF LIABILITY OF THE ADVISOR. The Advisor shall not be
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liable for any error of judgment or mistake of law or for any loss suffered by
the Company in connection with the matters to which this Agreement relate except
a loss resulting from the willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. Any person, even though also
an officer, partner, employee, or agent of the Advisor, who may be or become an
officer, director, employee or agent of the Company shall be deemed, when
rendering services to the Company or acting in any business of the Company, to
be rendering such services to or acting solely for the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
the Advisor even though paid by it.
8. DURATION AND TERMINATION. This Agreement shall become effective
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upon the date that the Company's registration statement is declared effective by
the Securities and Exchange Commission; provided, that with respect to the
Fund, this Agreement shall not take effect unless it first has been approved (i)
by a vote of the majority of those Directors who are not parties to this
Agreement or interested persons of such party, cast in person at a meeting
called for the purpose of voting on such approval, and (ii) by vote of a
majority of the Fund's outstanding voting securities. This Agreement shall
remain in full force and effect continuously thereafter until terminated without
the payment of any penalty as follows:
(a) By vote of a majority of its Directors, or by the affirmative vote
of a majority of the outstanding shares of the Fund, the Company may at any time
terminate this Agreement with respect to the Fund by providing not more than 60
days' written notice delivered or mailed by registered mail, postage prepaid, to
the Advisor at its principal offices; or
(b) With respect to the Fund, if (i) the Directors or the shareholders
of the Fund by the affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Directors who are not interested persons
of the Company or of the Advisor, by vote cast in person at a meeting called for
the purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Agreement, then this Agreement shall
automatically terminate at the close of business on the second anniversary of
its execution, or upon the expiration of one year from the effective date of the
last such continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the Fund for
their approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Advisor may continue to serve hereunder
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in a manner consistent with the 1940 Act and the rules and regulations
thereunder with respect to the Fund; or
(c) The Advisor may at any time terminate this Agreement by not less
than 60 days' written notice delivered or mailed by registered mail, postage
prepaid to the Company.
(d) This Agreement automatically and immediately will terminate in the
event of its assignment.
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
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changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
Fund's outstanding voting securities.
10. NAME OF COMPANY. The Company may use the name "Xxxxxx Capital
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Funds" or "Xxxxxx Equity & Income Fund" only for so long as this Agreement or
any extension, renewal or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded to the
business of the Advisor. At such time as such an agreement shall no longer be
in effect, the Company will (to the extent that it lawfully can) cease to use
any name derived from "Xxxxxx Capital Funds," "Xxxxxx Equity & Income Fund" or
any successor organization.
11. GOVERNING LAW. This Agreement shall be construed in accordance
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with the laws of the State of Missouri, without giving effect to the conflicts
of laws principles thereof, and the 1940 Act. To the extent the laws of the
State of Missouri conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. DEFINITIONS. As used in this Agreement, the terms "majority of
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the outstanding voting securities," "interested person," and "assignment" shall
have the same meanings as such terms have in the 1940 Act.
13. SEVERABILITY. If any provision of this Agreement shall be held or
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made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
14. MISCELLANEOUS. The captions in this Agreement are included for
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convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
XXXXXX CAPITAL MANAGEMENT, LTD.
By:___________________________
Name:
Title:
XXXXXX CAPITAL FUNDS, INC.
By:___________________________
Name:
Title:
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