EXHIBIT 5.1
INVESTMENT ADVISORY AGREEMENT
Agreement made this 21st day of February, 1990, between The
Primary Income Funds, Inc., a Wisconsin corporation (the "Company"), and
Xxxxxx Investment Counsel Incorporated, a Wisconsin corporation (the
"Adviser").
W I T N E S S E T H:
WHEREAS, the Company is in the process of registering with the
Securities and Exchange Commission under the Investment Company Act of
1940 (the "Act") as an open-end management investment company comprising a
series of three mutual funds, The Primary Income Fund, The Primary Money
Market Fund and The Primary U.S. Government Fund;
WHEREAS, upon so registering with the Securities and Exchange
Commission, the Company will be a registered investment company; and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940
and which is engaged principally in the business of rendering investment
supervisory services within the meaning of Section 202(a)(13) of the
Investment Advisers Act of 1940, as the investment adviser for The Primary
Income Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of The Primary Income
Fund for the period and on the terms set forth in this Agreement. The
Adviser hereby accepts such employment for the compensation herein
provided and agrees during such period to render the services and to
assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of The Primary Income Fund and, subject to
such policies as the board of directors of the Fund may determine, direct
the purchase and sale of investment securities in the day to day
management of The Primary Income Fund. The Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for
or represent the Company in any way or otherwise be deemed an agent of the
Company. However, one or more shareholders, officers, directors or
employees of the Adviser may serve as directors and/or officers of the
Company, but without compensation or reimbursement of expenses for such
services from the Company. Nothing herein contained shall be deemed to
require the Company to take any action contrary to its Articles of
Incorporation or any applicable statute or regulation, or to relieve or
deprive the board of directors of the Company of its responsibility for
and control of the affairs of the Company.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company, shall furnish office space, and all
necessary office facilities, equipment and executive personnel for
managing the investments of The Primary Income Fund and maintaining its
organization. The Adviser, at its own expense and without reimbursement
from the Company, shall provide The Primary Income Fund with copies of the
Primary Income Trends, an investment letter published by the Adviser, in
quantities sufficient for distribution to each shareholder of The Primary
Income Fund. The Adviser shall pay the salaries and fees of all officers
and directors of the Company (except the fees paid to those directors who
are not interested persons of the Adviser, as defined in the Act, and who
are not officers or employees of the Company). The Adviser shall also
bear all sales and promotional expenses of The Primary Income Fund, except
for expenses incurred in complying with laws regulating the issue or sale
of securities. The Adviser shall not be required to pay any other
expenses of The Primary Income Fund except as provided herein if the total
expenses borne by The Primary Income Fund, including the Adviser's fee but
excluding all federal, state and local taxes, interest, brokerage
commissions and extraordinary items, in any year exceed that percentage of
the average net asset value of The Primary Income Fund for such year, as
determined by valuations made as of the close of each business day, which
is the most restrictive percentage provided by the state laws of the
various states in which The Primary Income Fund's shares are qualified for
sale or, if the states in which such shares are qualified for sale impose
no such restrictions, 2%. The expenses of The Primary Income Fund's
operations borne by The Primary Income Fund include by way of illustration
and not limitation, directors fees paid to those directors who are not
interested persons of the Company, as defined in the Act, the costs of
preparing and printing registration statements required under the
Securities Act of 1933 and the Act (and amendments thereto), the expense
of registering its shares with the Securities and Exchange Commission and
in the various states, the printing and distribution cost of prospectuses
mailed to existing shareholders, the cost of stock certificates, director
and officer liability insurance, reports to shareholders, reports to
government authorities and proxy statements, interest charges, taxes,
legal expenses, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, insurance
premiums, brokerage and other expenses connected with the execution of
portfolio securities transactions, fees and expenses of the custodian of
The Primary Income Fund's assets, expenses of calculating the net asset
value and repurchasing and redeeming shares, printing and mailing
expenses, charges and expenses of dividend disbursing agents, registrars
and stock transfer agents and the cost of keeping all necessary
shareholder records and accounts.
The Primary Income Fund shall monitor its expense ratio on a
monthly basis. If the accrued amount of the expenses of The Primary
Income Fund exceeds the expense limitation established herein, The Primary
Income Fund shall create an account receivable from the Adviser in the
amount of such excess. In such a situation the monthly payment of the
Adviser's fee will be reduced by the amount of such excess, subject to
adjustment month by month during the balance of The Primary Income Fund's
fiscal year if accrued expenses thereafter fall below the expense
limitation.
4. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company through The Primary Income
Fund shall pay to the Adviser an advisory fee, paid monthly, based on the
average net asset value of The Primary Income Fund, as determined by
valuations made as of the close of each business day of the month. The
annual advisory fee shall be 0.74 of 1.0% of such net asset value. For
any month in which this Agreement is not in effect for the entire month,
such fee shall be reduced proportionately on the basis of the number of
calendar days during which it is in effect and the fee computed upon the
average net asset value of the business days during which it is so in
effect.
5. Ownership of Shares of The Primary Income Fund. The
Adviser shall not take an ownership position in The Primary Income Fund,
and shall not permit any of its shareholders, officers, directors or
employees to take a long or short position in the shares of The Primary
Income Fund, except for the purchase of shares of The Primary Income Fund
for investment purposes at the same price as that available to the public
at the time of purchase or in connection with the initial capitalization
of the Company.
6. Exclusivity. The services of the Adviser to The Primary
Income Fund hereunder are not to be deemed exclusive and the Adviser shall
be free to furnish similar services to others as long as the services
hereunder are not impaired thereby. Although the Adviser has agreed to
permit the Company to use the name "Primary," if it so desires, it is
understood and agreed that the Adviser reserves the right to use and
permit other persons, firms or corporations, including investment
companies, to use such name. During the period that this Agreement is in
effect, the Adviser shall be The Primary Income Fund's sole investment
adviser.
7. Liability. 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 Primary Income Fund or to any shareholder of The Primary
Income Fund 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.
8. Brokerage Commmissions. The Adviser may cause The Primary
Income Fund to pay a broker-dealer which provides brokerage and research
services, as such services are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "Exchange Act"), to the Adviser a commission for
effecting a securities transaction in excess of the amount another
broker-dealer would have charged for effecting such transaction, if the
Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Company in
the manner required by the Act, and by the vote of the majority of the
outstanding voting securities of The Primary Income Fund, as defined in
the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the
Company or by a vote of the majority of the outstanding voting securities
of The Primary Income Fund, as defined in the Act, upon giving sixty (60)
days' written notice to the Adviser. This Agreement may be terminated by
the Adviser at any time upon the giving of sixty (60) days' written notice
to the Company. This Agreement shall terminate automatically in the event
of its assignment (as defined in Section 2(a)(4) of the Act). Subject to
prior termination as hereinbefore provided, this Agreement shall continue
in effect for two (2) years from the date hereof and indefinitely
thereafter, but only so long as the continuance after such two (2) year
period is specifically approved annually by (i) the board of directors of
the Company or by the vote of the majority of the outstanding voting
securities of The Primary Income Fund, as defined in the Act, and
(ii) the board of directors of the Company in the manner required by the
Act, provided that any such approval may be made effective not more than
sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
XXXXXX INVESTMENT COUNSEL INCORPORATED
By: _________________________ By: ________________________
Secretary President
THE PRIMARY INCOME FUNDS, INC.
By: _________________________ By: ________________________
Secretary President
