Exhibit (d)(1)
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ADVISORY AGREEMENT
between
XXXXXX XXXXXX SELECT FUND, INC.
and
XXXXXX ASSET MANAGEMENT, INC.
ADVISORY AGREEMENT made this 25th day of June, 2001 (the "Agreement"), by
and between Xxxxxx Xxxxxx Select Fund, Inc., a Maryland corporation (hereinafter
called the "Fund"), and Xxxxxx Asset Management, Inc., a corporation organized
under the laws of the State of Tennessee (hereinafter called the "Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended ("1940 Act") as an open-end management investment company, and offers
for sale two distinct series of shares of common stock, which have been
designated Xxxxxx Xxxxxx Intermediate Bond Fund and Xxxxxx Xxxxxx High Income
Fund (each referred to herein as a "Portfolio"); and
WHEREAS, the Fund desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser on behalf of the
Portfolios, and to have that investment adviser provide or perform for each
Portfolio various research, statistical and investment services;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, it is agreed between the parties as follows:
1. EMPLOYMENT OF THE ADVISER. The Fund hereby employs the Adviser to
invest and reinvest the assets of each Portfolio in the manner set forth in
Section 2 of this Agreement subject to the direction of the Board of Directors
(the "Board") and the officers of the Fund, for the period, in the manner, and
on the terms set forth hereinafter. The Adviser hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY, THE ADVISER. The
Adviser undertakes to provide the services hereinafter set forth and to assume
the following obligations:
A. INVESTMENT ADVISORY SERVICES.
(i) The Adviser shall direct the investments of each Portfolio,
subject to and in accordance with the each Portfolio's investment objective,
policies and limitations as provided in its Prospectus and Statement of
Additional Information (the "Prospectus") and other governing instruments, as
amended from time to time, and any other directions and policies which the Board
may issue to the Adviser from time to time.
(ii) The Adviser is authorized, in its discretion and without
prior consultation with the Fund, to purchase and sell securities and other
investments for each Portfolio.
B. CORPORATE MANAGEMENT SERVICES.
(i) The Adviser shall furnish for the use of the Fund, office
space and all necessary office facilities, equipment and personnel for servicing
the investments of the Fund.
(ii) The Adviser shall pay the salaries of all personnel of the
Fund or the Adviser performing services relating to research, statistical and
investment activities.
C. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF
REGISTRATION STATEMENT, AMENDMENTS AND OTHER MATERIALS. The Adviser will make
available and provide such information as the Fund or its administrator may
reasonably request for use in the preparation of its registration statement,
reports and other documents required by any applicable federal, foreign or state
statutes or regulations.
D. CODE OF ETHICS. The Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and Section
204A of the Investment Advisers Act of 1940 and will provide the Fund and its
administrator with a copy of the code of ethics and evidence of its adoption.
Within forty-five (45) days of the end of the last calendar quarter of each year
while this Agreement is in effect, an executive officer of the Adviser shall
certify to the Board that the Adviser has complied with the requirements of Rule
17j-1 and Section 204A during the previous year and that there has been no
violation of the Adviser's code of ethics or, if such a violation has occurred,
that appropriate action was taken in response to such violation. Upon the
written request of the Fund or its administrator, the Adviser shall permit the
Fund or its administrator to examine the reports required to be made to the
Adviser by Rule 17j-l(c)(l).
E. DISQUALIFICATION. The Adviser shall immediately notify the Board
of the occurrence of any event which would disqualify the Adviser from serving
as an investment adviser of an investment company pursuant to Section 9 of the
1940 Act or any other applicable statute or regulation.
F. OTHER OBLIGATIONS AND SERVICES. The Adviser shall make its
officers and employees available to the Board and officers of the Fund for
consultation and discussion regarding the management of each Portfolio and its
investment activities.
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3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE.
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A. The Adviser, subject to the control and direction of the Board,
shall have authority and discretion to select brokers and dealers to execute
transactions for each Portfolio, and for the selection of the markets on or in
which the transactions will be executed.
B. In acting pursuant to Section 3A, the Adviser will place orders
through such brokers or dealers in conformity with the policies with respect to
transactions for each Portfolio set forth in the Fund's registration statement.
C. It is understood that neither the Fund nor the Adviser will adopt
a formula for allocation of a Portfolio's brokerage.
D. It is understood that the Adviser may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for any Portfolio and for other clients in order to obtain the most favorable
price and efficient execution. In that event, allocation of the securities
purchased or sold, as well as expenses incurred in the transaction, will be made
by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to its other clients.
E. It is understood that the Adviser may, in its discretion, use
brokers who provide a Portfolio with research, analysis, advice and similar
services to execute transactions on behalf of the Portfolio, and the Adviser may
pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Adviser
determining in good faith that such commission is reasonable in terms either of
the particular transaction or of the overall responsibility of the Adviser to
such Portfolio and its other clients and that the total commissions paid by such
Portfolio will be reasonable in relation to the benefits to the Portfolio over
the long term.
F. It is understood that the Adviser may use brokers who (i) are
affiliated with the Adviser provided that no such broker will be utilized in any
transaction in which such broker acts as principal; and (ii) the commissions,
fees or other remuneration received by such brokers is reasonable and fair
compared to the commissions, fees or other remuneration paid to other brokers in
connection with comparable transactions involving similar securities being
purchased or sold during a comparable period of time.
G. The Adviser shall provide such reports as the Board may reasonably
request with respect to each Portfolio's total brokerage and transaction
activities and the manner in which that business was allocated.
4. EXPENSES OF THE FUND. During the term of this Agreement, each
Portfolio will bear all expenses, not specifically assumed by the Adviser,
incurred in its operations and the offering of its shares. Expenses borne by the
Portfolios will include but not be limited to the following (or each Portfolio's
proportionate share of the following): legal and audit expenses, organizational
expenses; interest; taxes; governmental fees; fees, voluntary assessments and
other expenses incurred in connection with membership in investment company
organizations; the cost (including brokerage commissions or charges, if any) of
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securities purchased or sold by each Portfolio and any losses incurred in
connection therewith; fees of custodians, transfer agents, registrars or other
agents; distribution fee; expenses of preparing share certificates; expenses
relating to the redemption or repurchase of shares; expenses of registering and
qualifying shares for sale under applicable federal and state law and
maintaining such registrations and qualifications; expenses of preparing,
setting in print, printing and distributing prospectuses, proxy statements,
reports, notices and dividends to shareholders; cost of stationery; costs of
stockholders and other meetings of the Fund; compensation and expenses of the
independent directors of the Fund; and the Fund's pro rata portion of premiums
of any fidelity bond and other insurance covering the Fund and its officers and
directors.
5. COMPENSATION OF THE ADVISER. For the services and facilities to be
furnished and expenses assumed hereunder, the Adviser shall receive from each
Portfolio an advisory fee at the annual rate listed along with that Portfolio's
name in Schedule A attached hereto. This advisory fee shall be payable monthly
as soon as practicable after the last day of each month based on the average of
the daily values placed on the net assets of each respective Portfolio as
determined at the close of business on each day throughout the month. The assets
of each Portfolio will be valued separately as of the close of regular trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern time) on each
business day throughout the month or, if the Fund lawfully determines the value
of the net assets of any Portfolio as of some other time on each business day,
as of such time with respect to that Portfolio. The first payment of such fee
shall be made as promptly as possible at the end of the month next succeeding
the effective date of this Agreement. In the event that the Adviser's right to
such fee commences on a date other than the last day of the month, the fee for
such month shall be based on the average daily assets of the Portfolio in that
period from the date of commencement to the last day of the month. If the Fund
determines the value of the net assets of any Portfolio more than once on any
business day, the last such determination on that day shall be deemed to be the
sole determination on that day. The value of net assets shall be determined
pursuant to the applicable provisions of the Fund's Articles of Incorporation,
its By-Laws and the 1940 Act. If, pursuant to such provisions, the determination
of the net asset value of any Portfolio of the Fund is suspended for any
particular business day, then the value of the net assets of that Portfolio on
that day shall be deemed to be the value of its net assets as determined on the
preceding business day. If the determination of the net asset value of any
Portfolio has been suspended for more than one month, the Adviser's compensation
payable at the end of that month shall be computed on the basis of the value of
the net assets of the Portfolio as last determined (whether during or prior to
such month).
6. ACTIVITIES AND AFFILIATES OF THE ADVISER.
A. Nothing in this Agreement shall limit or restrict the right of
any director, officer, or employee of the Adviser who may also be a director,
officer, or employee of the Fund, to engage in any other business or to devote
his time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature, nor to limit or
restrict the right of the Adviser to engage in any other business or to render
services of any kind, including investment advisory and management services, to
any other corporation, firm, individual or association.
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B. The Fund acknowledges that the Adviser or one or more of its
"affiliated persons" may have investment responsibilities or render investment
advice to or perform other investment advisory services for other individuals or
entities and that the Adviser, its "affiliated persons" or any of its or their
directors, officers, agents or employees may buy, sell or trade in securities
for its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 3, the Fund agrees that the Adviser or its "affiliated
persons" may give advice or exercise investment responsibility and take such
other action with respect to Affiliated Accounts which may differ from the
advice given or the timing or nature of action with respect to the Portfolios,
provided that the Adviser acts in good faith. The Fund acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Portfolio may have an interest. The Adviser shall have no obligation to
recommend for the Portfolio a position in any investment which an Affiliated
Account may acquire, and the Fund shall have no first refusal, co-investment or
other rights in respect of any such investment, either for its Portfolios or
otherwise.
C. Subject to and in accordance with the Articles of Incorporation
and By-Laws of the Fund as currently in effect and the 1940 Act and the rules
thereunder, it is understood that Directors, officers and agents of the Fund and
shareholders of the Fund are or may be interested in the Adviser or its
"affiliated persons," or that directors, officers, agents and shareholders of
the Adviser or its "affiliated persons" are or may be interested in the Fund;
and that the effect of any such interests shall be governed by said Articles of
Incorporation, By-Laws and the 1940 Act and the rules thereunder.
7. LIABILITIES OF THE ADVISER.
A. Except as provided below, 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 or its Portfolios 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 or the making of any investment for or on behalf of the
Fund.
B. No provision of this Agreement shall be construed to protect any
Director or officer of the Fund, or the Adviser, from liability in violation of
Sections 17(h), 17(i), 36(a) or 36(b) of the 1940 Act.
8. EFFECTIVE DATE; TERM. This Agreement shall continue in effect for one
year and from year to year thereafter only so long as specifically approved
annually by (i) vote of a majority of the directors of the Fund who are not
parties to this Agreement or interested persons of such parties, cast in person
at a meeting called for that purpose, and (ii) by the Board or with respect to
any given Portfolio by a vote of a majority of the outstanding voting securities
of such Portfolio.
9. ASSIGNMENT. No "assignment" of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in event of such
assignment. The Adviser shall notify the Fund in writing in advance of any
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proposed change of "control" to enable the Fund to take the steps necessary to
enter into a new advisory agreement, if necessary.
10. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Fund, which amendment is subject
to the approval of the Board and, where required by the 1940 Act, the
shareholders of the affected Portfolio in the manner required by the 1940 Act
and the rules thereunder.
11. TERMINATION. This Agreement:
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A. may at any time be terminated without payment of any penalty by
the Fund with respect to any Portfolio (by vote of the Board or by
"vote of a majority of the outstanding voting securities") on
sixty (60) days' written notice to the Adviser;
B. shall immediately terminate in the event of its "assignment"; and
C. may be terminated with respect to any Portfolio by the Adviser on
sixty (60) days' written notice to the Fund.
12. NAME. In the event this Agreement is terminated by either party or
upon written notice from the Adviser at any time, the Fund hereby agrees that it
will eliminate from its corporate name any reference to the name "Xxxxxx
Xxxxxx." The Fund shall have the non-exclusive use of the name "Xxxxxx Xxxxxx"
in whole or in part so long as this Agreement is effective or until such notice
is given.
13. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the 1940 Act
and the rules and regulations thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
13. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed postage prepaid to the other party to this
Agreement at its principal place of business.
14. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
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15. GOVERNING LAW. To the extent that state law has not been preempted
by the provisions of any law of the United States, this Agreement shall
be administered, construed and enforced according to the laws of the State of
Maryland.
IN WITNESS WHEREOF the parties have caused this instrument to be signed on
their behalf by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date first written above.
XXXXXX XXXXXX SELECT FUND, INC.
(SEAL) By: /s/ Xxxxxxx X. Xxxxxxx
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Secretary
XXXXXX ASSET MANAGEMENT, INC.
(SEAL) By: /s/ Xxxxxxx X. Xxxxxxx
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Treasurer
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SCHEDULE A
XXXXXX XXXXXX SELECT FUND, INC.
FEE SCHEDULE
Portfolio % of average
--------- daily net assets
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Xxxxxx Xxxxxx Intermediate Bond Fund 0.40%
Xxxxxx Xxxxxx High Income Fund 0.75%
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