MARKETOCRACY CAPITAL MANAGEMENT, LLC
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Investment Advisory and Management Agreement ("Agreement"), is made and
entered into as of December 13, 2000 by and between Marketocracy Funds, a
Delaware business trust ("the Trust") having its principal place of business at
26888 Almaden Court, Los Altos, CA 94022 and Marketocracy Capital Management,
LLC ("Adviser"), having its principal place of business at 881 Fremont Street,
Suite B2, Los Altos, CA 94024.
WHEREAS, the Trust, an open-end, non-diversified investment company
registered under the Investment Company Act of 1940 (the "1940 Act"), wishes to
retain the Adviser to provide investment advisory and management services to the
series listed on Schedule A, which may be changed from time to time, (each a
"Fund"); and
WHERAS, the Adviser is willing to furnish such services on the terms
and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. ENGAGEMENT. The Trust hereby engages and appoints the Adviser to
manage the investment and reinvestment of assets of the Fund for the period and
on the terms set forth in this Agreement. The Adviser accepts such appointment
and agrees to render the services herein set forth, for the compensation herein
provided.
2. FUND ASSETS AND DOCUMENTS. The Fund shall at all times inform the Adviser as
to the securities owned by it, the funds available or to become available for
investment by it, and generally as to the condition of its affairs. It shall
furnish the Adviser with such other documents and information with regard to its
affairs as the Adviser may from time to time reasonably request.
3. PORTFOLIO MANAGEMENT. Subject to the direction and control of the Trust's
Board of Trustees, the Adviser shall regularly provide the Fund with investment
research, advice, management and supervision and shall furnish a continuous
investment program for the Funds' portfolios consistent with the Fund's
investment objective, policies, and limitations as stated in the Fund's current
Prospectus and Statement of Additional Information. The Adviser shall determine
from time to time what securities will be purchased, retained or sold by the
Fund, and shall implement those decisions, all subject to the provisions of the
Fund's Declaration of Trust, the 1940 Act, the applicable rules and regulations
of the Securities and Exchange Commission, and other applicable federal and
state laws, as well as the investment objectives, policies, and limitations of
the Fund. In placing orders for the Fund with brokers and dealers with respect
to the execution of the Fund's securities transactions, the Adviser shall
attempt to obtain the best net results. In doing so, the Adviser may consider
such factors which it deems relevant to the Fund's best interest, such as price,
the size of the transaction, the nature of the market for the security, the
amount of the commission, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer involved and the quality
of service rendered by the broker-dealer in other transactions. The Adviser
shall have the discretionary authority to utilize certain broker-dealers even
though it may result in the payment by the Fund of an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, providing,
however, that the Adviser had determined that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by the broker-dealer effecting the transaction. In no instance will
portfolio securities be purchased from or sold to the Adviser or any affiliated
person thereof except in accordance with the rules and regulations promulgated
by the Securities and Exchange Commission pursuant to the 1940 Act. The Adviser
shall also provide advice and recommendations with respect to other aspects of
the business and affairs of the Fund and shall perform such other functions of
management and supervision as may be directed by the Board of Trustees of the
Trust, provided that in no event shall the Adviser be responsible for any
expense occasioned by the performance of such functions.
4. USE OF SUB-ADVISERS. In providing the services and assuming the obligations
set forth herein, in connection with the investment portfolios of the Fund, the
Adviser may at its expense employ one or more sub-advisers, and may enter into
such service agreements as the Adviser deems appropriate in connection with the
performance of its duties and obligations hereunder, including without
limitation, from time to time delegating any or all of its portfolio management
responsibilities hereunder. Reference herein to the duties and responsibilities
of the Adviser shall include any sub-adviser employed by the Adviser to the
extent that the Adviser shall delegate such duties and responsibilities to any
such sub-adviser. Any agreement between the Adviser and a sub-adviser shall be
subject to the approval of the Trust, its Board of Trustees, and the owners of
interests issued by any portfolio affected thereby, as required by the 1940 Act,
and any such sub-adviser shall at all times be subject to the direction of the
Board of Trustees of the Trust or any officer of the Trust acting pursuant to
the authority of the Board of Trustees. The Adviser shall perform ongoing due
diligence oversight of any such sub-adviser in order to assure continuing
quality of performance by said sub-adviser.
5. COMPENSATION.
(a) The Adviser is responsible for (1) compensation of any of the Trust's
trustees, officers and employees who are interested persons of the Adviser and
(2) compensation of the Adviser's personnel and other expenses incurred in
connection with the provisions of portfolio management services under this
Agreement. Other than as herein specifically indicated, the Adviser shall not be
responsible for Fund expenses. Specifically, the Adviser will not be
responsible, except to the extent of the reasonable compensation of employees of
the Fund whose services may be used by the Adviser hereunder, for any of the
following expenses of the Fund, which expenses shall be borne by the Fund: legal
and audit expenses, organization 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 securities purchased or sold by the Fund and
any losses incurred in connection therewith; expenses of holding or carrying a
Fund's securities, including without limitation expenses of dividends on stock
borrowed to cover a short sale and interest, fees or other charges incurred in
connection with a Fund's leverage and related borrowings, fees of custodian,
transfer agents, registrars or other agents; distribution fees; expenses of
preparing share certificates; expenses relating to the redemption or purchase of
the Fund's shares; expenses of registering and qualifying Fund shares for sale
under applicable federal and state law and maintaining such registrations and
qualification; expenses of preparing, setting in print, printing and
distributing prospectuses, proxy statements, reports, notices and dividends to
Fund shareholders; cost of stationery; costs of shareholders and other meetings
of the Fund; compensation and expenses of the independent trustees of the Trust;
and the Fund's pro rata portion of premiums of any fidelity bond and other
insurance covering the Fund and/or the Trust's officers and trustees.
(b) No trustee, officer or employee of the Trust shall receive from the Trust
any salary or other compensation as such trustee, officer or employee while he
is at the same time a director, officer or employee of the Adviser or any
affiliated company of the Adviser. This paragraph shall not apply to trustees,
executive committee members, consultants and other persons who are not regular
members of the Adviser's or any affiliated company's staff.
(c) As compensation for the services performed by the Adviser, the Funds shall
pay the Adviser, as promptly as possible after the last day of each month, a
fee, accrued each calendar day (including weekends and holidays) at the rate of
1.5% per annum of the daily net assets of the Fund. The Adviser shall reduce
such fee or, if necessary, make expense reimbursements to the Fund to the extent
required to limit the total annual operating expenses of each Fund (excluding,
however, expenses of holding or carrying a Fund's securities, including without
limitation expenses of dividends on stock borrowed to cover a short sale or
interest, fees or other charges incurred in connection with a Fund's leverage
and related borrowings) to 1.95% of its average daily net assets up to $200
million; 1.90% of such assets from $200 million to $500 million; 1.85% of such
assets from $500 million to $1 billion; and 1.80% of such assets in excess of $1
billion. The daily net assets of the Fund shall be computed as of the time of
the regular close of business of the New York Stock Exchange, or such other time
as may be determined by the Board of Trustees of the Trust. Any of such payments
as to which the Adviser may so request shall be accompanied by a report of the
Trust prepared either by the Trust or by a reputable firm of independent
accountants which shall show the amount properly payable to the Adviser under
this Agreement and the detailed computation thereof.
6. LIABILITY. The Adviser assumes no responsibility under this Agreement other
than to render the services called for hereunder in good faith, and shall not be
responsible for any action of the Board of Trustees of the Trust in the
following or declining to follow any advice or recommendation of the Adviser;
provided that nothing in this Agreement shall protect the Adviser against any
liability to the Fund or its stockholders to which it would otherwise be subject
by reason of 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 hereunder.
7. INDEPENDENT CONTRACTOR. The Adviser shall be an independent contractor and
shall have no authority to act for or represent the Fund in its investment
commitments unless otherwise provided. No agreement, bid, offer, commitment,
contract or other engagement entered into by the Adviser whether on behalf of
the Adviser or whether purporting to have been entered unto on behalf of the
Fund shall be finding upon the Fund, and all acts authorized to be done by the
Adviser under this Agreement shall be done by it as an independent contractor
and not as an agent.
8. NON-EXCLUSIVITY. Nothing in this Agreement shall limit or restrict the right
of any director, officer, or employee of the Adviser who may also be a trustee,
officer, or employee of the Trust, 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.
9. DEFINITIONS. As used in this Agreement, the terms "assignment," "interested
person," and "majority of the outstanding voting securities" shall have the
meanings given to them by Section 2(a) of the 1940 Act, subject to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
10. TERMINATION. This Agreement shall terminate automatically in the event of
its assignment by the Adviser and shall not be assignable by the Trust without
the consent of the Adviser. This Agreement may also be terminated at any time,
without the payment of penalty, by the Fund or by the Adviser on sixty (60)
days' written notice addressed to the other party at its principal place of
business.
11. EFFECTIVENESS AND TERM. This Agreement shall become effective on the date
hereof and shall continue in effect for two years and from year to year
thereafter only so long as specifically approved annually, (1) by vote of a
majority of the trustees of the Trust who are not parties to this Agreement or
interested persons of such parties, cast in person at a meeting called for that
purpose, and, (2) either by vote of the holders of a majority of the outstanding
voting securities of the Trust or by a majority vote of the Trust's Board of
Trustees.
12. MODIFICATION. No provision of this Agreement may be 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 materials amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of the Trust's
outstanding voting securities.
13. SEVERABILITY. The provisions of this Agreement are severable and 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. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
14. GOVERNING LAW. This Agreement shall be governed by, and its provisions
shall be construed and interpreted in accordance with, the laws of the State of
California as applied to agreements between California residents entered into
and performed entirely within the State of California.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and sealed by their officers thereunto duly authorized on the day and
year first above written.
MARKETOCRACY FUNDS
By: /S/ ARTHUR ROTH
--------------------
Arthur Roth
Its: Chairman
MARKETOCRACY CAPITAL MANAGEMENT, LLC
By: /S/ KENDRICK W. KAM
------------------------
Kendrick W. Kam
Its: President
SCHEDULE A
TO
Marketocracy Capital Management LLC
Investment Advisory and Management Agreement
Marketocracy Capital Management, LLC shall manage the following fund series in
accordance with the preceding agreement:
The ChangeWave Fund
The Technology Plus Fund
