INVESTMENT ADVISORY AGREEMENT
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AGREEMENT made the third day of August, 1987 by and between Advance
Capital I, Inc. ("Advance") and Advance Capital Management, Inc. ("ACM").
Amended July 24, 1992. Further Amended July 24, 1998.
WITNESSETH:
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In consideration of the mutual promises and agreements contained in
this Agreement and other good and valuable consideration, the receipt of
which is acknowledged, it is agreed by and between the parties as follows:
I. In General
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Advance engages ACM and ACM agrees to act as investment adviser
to Advance with respect to the investment of its assets and in
general to supervise the investments of Advance, subject at all
times to the direction and control of the Board of Directors of
Advance.
II. Duties of ACM with Respect to Investment of Assets of Advance and
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Accounting Services
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A. ACM shall regularly provide investment advice to Advance and
shall, subject to the succeeding provisions of this section,
supervise continuously the investment and reinvestment of cash,
securities or other property comprising the assets of the
investment portfolios of Advance consisting of its Equity
Growth Fund, Bond Fund, Balanced, Retirement Income Fund, and
Cornerstone Stock Fund (the "Funds"); and in furtherance of
those responsibilities, ACM shall:
1. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the
economy generally or the Funds of Advance, and whether
concerning the individual companies whose securities are
included in the Funds' portfolios or the industries in
which they engage, or with respect to securities which ACM
considers desirable for inclusion in the Funds' portfolios,
and regularly report thereon to the Board of Directors of
Advance;
2. furnish continuously an investment program for each of the
Funds of Advance;
3. determine what securities shall be purchased or sold by
each of the Funds of Advance;
4. take, on behalf of Advance, all actions which appear to
ACM necessary to carry into effect the investment program
and supervisory functions stated previously, including the
placing of purchase and sales orders, and make appropriate
reports thereon to the Board of Directors of Advance.
B. Any investment program furnished by ACM under this section, or
any supervisory function taken by ACM, shall at all times
conform to and be in accordance with any requirements imposed by:
1. the provisions of the Investment Company Act of 1940 and
any rules or regulations in force thereunder;
2. any other applicable provision of law;
3. the provisions of the Articles of Incorporation of Advance
as amended from time to time;
4. the provisions of the By-laws of Advance as amended from
time to time;
5. the terms of the registration statements of Advance, as
amended from time to time, under the Securities Act of
1933 and the Investment Company Act of 1940.
C. Any investment program furnished by ACM under this section or
any supervisory functions taken hereunder by ACM, shall at all
times be subject to any directions of the Board of Directors of
Advance, its Executive Committee or any committee or officer of
Advance acting pursuant to authority given by the Board of
Directors.
D. The foregoing notwithstanding, with the approval of the
shareholders and the directors of Advance given in the manner
prescribed by Sections (15(a) and 15(c), respectively, of the
Investment Company Act of 1940 for the approval of investment
advisory contracts and their terms, ACM may appoint another
entity, including an affiliated company of ACM, to act as sub
advisor to furnish to Advance on behalf of ACM the services
specified in paragraph (A) of the Section II and Section IV of
this Agreement. Such services shall be subject to the
requirements of paragraphs (B) and (C) of this Section II and
Sections IV and VI and would be provided under the terms of a
Sub advisory Agreement between ACM and the sub advisor.
III. Allocation of Expenses
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The expenses of Advance and the expenses of ACM in performing its
functions under this Agreement shall be divided into two classes,
to wit: (i) those expenses which will be paid in full by ACM, as
set forth in subparagraph "A" hereof, and (ii) those expenses which
will be paid in full by Advance, as set forth in subparagraph "B"
hereof.
A. With respect to the duties of ACM under Section II above, it
shall pay in full for (a) the salaries and employment benefits
of all employees of ACM who are engaged in providing these
services, (b) adequate office space and suitable office
equipment for such employees, (c) all telephone and postage
costs relating to such functions and (d) the fees and expenses
of any sub advisor appointed pursuant to the provisions of
paragraph (D) of Section II of this Agreement. In addition,
if requested by Advance, ACM shall pay the fees and expenses
of all directors of Advance who are employees of ACM or an
affiliated corporation and the salaries and employment benefits
of all officers or employees of Advance who are affiliated
persons of ACM.
B. Advance shall pay in full for all of its expenses which are
not listed above (other than those assumed by ACM or its
affiliates in their capacity as Administrator for Advance,
including (a) the costs of printing prospectuses and reports
to shareholders of Advance; (b) the costs of printing all
proxy statements and all other costs and expenses of meetings
of shareholders of Advance except preparation of proxy
statements and mailing costs; (c) interest, taxes, brokerage
commissions and premiums on fidelity insurance; (d) audit fees
and expenses of independent accountants and legal fees and
expenses of attorneys, but not of attorneys who are employees
of ACM; (e) fees and expenses of its directors, but not of
directors who are employees of ACM; (f) custodian fees and
expenses; (g) transfer agency fees and expenses; (h) fees
payable by Advance under the Securities Act of 1933, the
Investment Company Act of 1940, and the securities or "Blue
Sky" laws of any jurisdiction; (i) fees and assessments of
the Investment Company Institute or any successor organization;
(j) such nonrecurring or extraordinary expenses as may arise,
including litigation affecting Advance and any indemnification
by Advance of its officers, directors, employees and agents
with respect thereto; (k) the costs and expenses provided for
in any Administration Agreement, including amendments thereto,
contemplated by subsection C of this section III; and (l) the
costs and expenses provided for in any distribution plan
adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940. In the event that any of the foregoing shall, in
the first instance, be paid by ACM, Advance shall pay the same
to ACM on presentation of a statement with respect thereto.
C. ACM or an affiliate of ACM may also act as administrator of
Advance if at the time in question there is a separate
agreement ("Administration Agreement") covering such functions
between Advance and ACM or such affiliate. The corporation,
whether ACM or its affiliate, which is the party to the
Administration Agreement with Advance is referred to as the
"Administrator". Each Administration Agreement shall provide
in substance that it shall not go into effect, or may be
amended, or a new agreement covering the same topics between
Advance and the Administrator may be entered into only if the
terms of such Administration Agreement, such amendment or such
new agreement have been approved by the Board of Directors of
Advance, including the vote of a majority of the directors who
are not "interested persons" as defined in the Investment
Company Act of 1940, of either party to the Administration
Agreement, such amendment or such new agreement (considering
ACM to be such a party even if at the time in question, the
Administrator is an affiliate of ACM), cast in person at a
meeting called for the purpose of voting on such approval.
Such a vote is referred to as a "disinterested director"
vote. Each Administration Agreement shall also provide in
substance for its continuance, unless terminated, for a
specified period which shall not exceed two years from the
date of its execution and from year to year thereafter only
if such continuance is specifically approved at least annually
by a disinterested director vote and that any disinterested
director vote shall include a determination that (i) the
Administration Agreement, amendment, new agreement or
continuance in question is in the best interests of Advance
and its shareholders; (ii) the services to be performed under
the Administration Agreement as amended, new agreement or
agreement to be continued are services required for the
operation of Advance; (iii) the Administrator can provide
services the nature and quality of which are at least equal
to those provided by others offering the same or similar
services; and (iv) the fees for such services are fair and
reasonable in the light of the usual and customary charges
made by others for services of the same nature and quality.
Any Administration Agreement may also provide in substance
that any disinterested director vote may be conditioned on
the favorable vote of the holders of a majority (as defined
in or under the Investment Company Act of 1940) of the
outstanding shares of each class of Advance. Each
Administration Agreement shall also provide in substance
that it may be terminated by the Administrator at any time
without penalty upon giving Advance 120 days' written notice
(such notice may be waived by Advance) and may be terminated
by Advance at any time without penalty upon giving the
Administrator sixty (60) days' written notice (which notice
may be waived by the Administrator), provided that such
termination of Advance shall be directed or approved by the
vote of a majority of the Board of Directors (as defined in
or under the Investment Company Act of 1940) of the
outstanding shares of each class of Advance.
IV. Brokerage
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ACM shall place purchase and sale orders with brokers and/or
dealers who in the judgment of ACM are able to execute the
orders as expeditiously as possible and at the best obtainable
price. Generally, in order not to risk a possible adverse
change in price, ACM will make inquiry of brokers and/or dealers
who on the basis of interest shown and past experience ACM
believes can execute the order as expeditiously as possible and
at the best obtainable price.
ACM is authorized to allocate brokerage and principal business
to members of securities exchanges, brokers and dealers
("brokers") who provide brokerage and research services (as
such services are defined in Section 28(e) of the Securities
and Exchange Act of 1934) for Advance and/or other accounts for
which ACM exercises investment discretion (as that term is
defined in Section 3(a)(35) of the aforesaid Act) and to cause
Advance to pay a commission for effecting a securities transaction
in excess of the amount another broker would have charged for
effecting that transaction if ACM determines in good faith that
such amount of commission is 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 ACM's
overall responsibilities with respect to the accounts as to
which it exercises investment discretion. ACM shall use its
judgment in determining that the amount of commissions paid is
reasonable in relation to the value of brokerage and research
services received and need not place or attempt to place a
specific dollar value on research services received or on the
portion of the commission rate reflecting such services. In
demonstrating that such determinations were in good faith, ACM
shall be prepared to show that the commissions allocated or paid
for research services were for purposes contemplated by this
Agreement, that the commissions paid were within a reasonable
range and that commissions paid were not allocated or paid for
products or services which were readily and customarily available
and offered to the public on a commercial basis. ACM is also
authorized to consider sales of shares as a factor in the
selection of brokers to execute brokerage and principal portfolio
transactions, subject to the requirements of best execution,
i.e., that such brokers are able to execute the order quickly
and at the best obtainable price.
V. Compensation of ACM
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As compensation in full for services rendered and for the
facilities and personnel furnished under sections I, II and IV
of this Agreement, Advance will pay to ACM for each day the fees
specified in Exhibit A hereto.
The amounts payable to ACM shall be determined as of the close of
business each day; shall, except as set forth below, be based upon
the value of net assets computed in accordance with the Articles of
Incorporation of Advance; shall be paid in arrears whenever
requested by ACM; and provided, however, that each of
the Funds of Advance will pay a portion of the total fee payable
by Advance in an amount equal to the proportion that such Funds'
average daily net assets bears to the average daily net assets of
Advance. In computing the value of the net assets of Advance, there
shall be excluded the amount owed to Advance in respect to shares
which have been sold but not yet paid to ACM or any of its
affiliates.
Notwithstanding the foregoing, if the laws, regulations or
policies of any state in which shares of Advance are qualified
for sale limit the operating and management expenses of Advance,
ACM will refund to the appropriate Fund the amount by which such
expenses exceed the lowest of such state limitations.
VI. Undertakings of ACM; Liability
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ACM shall give to Advance the benefit of its best judgment,
efforts and facilities in rendering services under this Agreement,
but shall be free to render services to others similar to that
rendered under this Agreement or of a different nature except
as such services may conflict with the services to be rendered
or the duties to be assumed under this Agreement.
ACM shall at all times be guided by and be subject to Advance's
investment policies, the provisions of its Articles of
Incorporation and By-laws as each shall from time to time be
amended, and to the decision and determination of Advance's
Board of Directors.
This Agreement shall be performed in accordance with the
requirements of the Investment Company Act of 1940, the
Investment Advisers Act of 1940, the Securities Act of 1933
and the Securities Exchange Act of 1934, to the extent that
the subject matter of this Agreement is within the purview of
such Acts. Insofar as applicable to ACM as an investment
adviser and affiliated person of Advance, ACM shall comply
with the provisions of the Investment Company Act of 1940,
the Investment Advisers Act of 1940 and the respective Rules
and Regulations of the Securities and Exchange Commission.
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties
hereunder on the part of ACM, it shall not be subject to
liability to Advance or to any stockholder of Advance for
any act or omission in the course of or connected with
rendering services thereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
VII. Duration of this Agreement
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This Agreement shall become effective at the start of business
on the date hereof and shall continue in effect, unless
terminated as hereinafter provided, for a period of one year
and from year to year thereafter only if such continuance is
specifically approved at least annually by the Board of Directors,
including the vote of a majority of the directors who are not
parties to this Agreement or
"interested persons" (as defined in the Investment Company Act of
1940) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or by the vote of the holders
of a majority (as so defined) of the outstanding voting securities
of each class of Advance and by the vote of a majority of the
directors who are not parties to this Agreement or "interested
persons" (as so defined) of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
As additional investment portfolios ("New Fund") other than the
existing Funds are established by Advance, this Agreement shall
become effective with respect to each such New Fund upon the
initial public offering of such New Fund, provided that this
Agreement has been approved previously for continuation, together
with any related agreements, by vote of the Board of Directors of
Advance including the majority of directors who are not parties
to this Agreement or "interested persons" (as defined in the
Investment Company Act of 1940) of any such party, cast in
person at a meeting held before the initial public offering of
such New Fund and called for the purpose of voting as such
approval.
VIII.Termination
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This Agreement may be terminated by ACM at any time without
penalty upon giving Advance sixty (60) days' written notice
(which notice may be waived by Advance) and may be terminated
by Advance at any time without penalty upon giving ACM sixty
(60) days' written notice (which notice may be waived by ACM),
provided that such termination by Advance shall be directed or
approved by the vote of a majority of the Board of Directors
of Advance in office at the time or by the vote of a majority
(as defined in the Investment Company Act of 1940) of the
outstanding voting securities of Advance. This Agreement shall
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 Investment Company Act of 1940.
ACM hereby acknowledges that all records pertaining to
Advance's investment are the property of Advance, and in the
event that this Agreement is terminated and a transfer of
investment advisory services to someone other than ACM or an
affiliated company should ever occur, ACM will promptly, and
at its own cost, take all steps necessary to segregate such
records and deliver them to Advance.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized
officers, as of the day and year first above written.
ADVANCE CAPITAL I, INC.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Its President
ATTEST: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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ADVANCE CAPITAL MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Its Vice President
ATTEST: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Exhibit A
COMPENSATION OF ADVANCE CAPITAL MANAGEMENT, INC.
AS INVESTMENT ADVISER TO ADVANCE CAPITAL I, INC.
For services provided and expenses assumed pursuant to the
Investment Advisory Agreement, Advance Capital Management, Inc.
("ACM") shall be paid an advisory fee, computed daily and paid
monthly, at the annual rate, as displayed in the table below, of
the average daily net assets of each Fund as those terms are
defined in the Investment Advisory Agreement and subject to the
limitations therein. From time to time, as it may deem appropriate
in its sole discretion, ACM may waive a portion or all of such fee.
FUND NAME CLASS OF SHARES ANNUAL RATE
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Equity Growth Fund A .7%
Bond Fund B .4% (1)
Balanced Fund C .7%
Retirement Income Fund E .5% (2)
Cornerstone Stock Fund F .4% (3)
1 -Annual rate lowered on April 28, 1989 from .7% to .4%
2 -Initial annual rate approved at July 24, 1992 Board of Directors Meeting.
3 -Cornerstone Stock Fund fees approved at July 24, 1998 Board of Directors
Meeting.
Resolution Passed by the Board of Directors
of
Advance Capital I, Inc.
July 24, 1998
WHEREAS, Advance Capital Management, Inc. has acted as the investment
advisor to the Company since its inception, and has made material
contributions to the growth of the four portfolios represented by
Classes A, B, C, and E of the Company's stock, and
WHEREAS, The Board of Directors approved, on December 6, 1991, the
Investment Advisory Agreement between the Company and Advance Capital
Management, Inc. with respect to the investment management of the
Equity Growth Fund, Bond Fund, Balanced Fund, and Retirement Income
Fund, and
WHEREAS, the Investment Advisory Agreement provides for additional
investment portfolios to be established by the Company and for the
Investment Advisory Agreement to be extended to cover any new
portfolios following the approval of the Board of Directors of the
Company, and
WHEREAS, the Board of Directors has authorized the addition of one
new portfolio, as represented by Class F , of the common stock of
the Company, and
WHEREAS, the Directors, including those Directors who are not
parties to said Agreement and who are not interested persons as
that term is defined in the Investment Company Act of 1940, have
reviewed the Agreement, and
WHEREAS, it is the desire of the Board of Directors to extend said
agreement to include the management of the portfolio represented by
Classes F of the Company's common stock,
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does
hereby ratify and affirm the Investment Advisory Agreement between
the Company and Advance Capital Management, Inc. in all respects as
it pertains to the existing four portfolios and to the additional
portfolio represented by Class F of the Company's common stock; and
further
RESOLVED, that the advisory fee paid to Advance Capital Management, Inc.
pursuant to the Investment Advisory Agreement shall be computed daily
and paid monthly at the annual rate of 0.40% of the average daily net
assets of the portfolio represented by Class F of the Company's common
stock (the Cornerstone Stock Fund) as those terms are defined in the
Investment Advisory Agreement and subject to the limitations therein,
and further
RESOLVED, that from time to time, as it may deem appropriate in its
sole discretion, Advance Capital Management, Inc. may waive a portion
or all of such fee.