INVESTMENT ADVISORY AGREEMENT
BETWEEN
XXXXXXXXX ASSOCIATES, INC.
AND
PORTFOLIOS, INC.
THIS INVESTMENT ADVISORY AGREEMENT is made this 30th day of October, 1981
by and between Xxxxxxxxx Associates, Inc., a Texas corporation, and Portfolios,
Inc., a Texas corporation:
W 1 T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act; and
WHEREAS, the Adviser is willing to provide investment advisory and
administrative services to the Fund on the terms and conditions hereinafter set
forth:
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ss. 1. DEFINITIONS. The terms defined in this ss.l whenever used in this
Agreement shall have the respective meanings hereinafter specified.
"ADVISER" means Portfolios, Inc., a Texas corporation.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Fund, as from time to time amended.
"AVERAGE DAILY NET ASSETS" means the average of the Fund's net asset
values (determined in accordance with the Articles of Incorporation) at the
close of business on each day on which the New York Stock Exchange is open
for business during the period.
"BOARD" means the Board of Directors of the Fund.
"FUND" means Xxxxxxxxx Associates, Inc., a Texas corporation.
"INTERESTED PERSON" has the meaning set forth in Section 2 (a) of the
Investment Company Act.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
from time to time amended.
"PRIOR AGREEMENT" means the Investment Advisory Agreement dated
October 30, 1979 between the Fund and the Adviser.
"RESEARCH" means research, statistical and similar information and
services.
"SBH" means Xxxxxxxxx, Xxxxxx & Xxxxxxx, Inc., a Texas corporation.
ss. 2. DUTIES OF THE ADVISER. The Adviser shall provide the Fund with such
investment advice and supervision as the Fund may consider necessary for the
proper management of its assets. The Adviser shall act as investment adviser to
the Fund and, as such, shall determine what securities shall be purchased, sold
or exchanged and what portion of the assets of the Fund shall be held
uninvested. The Adviser may take, on behalf of the Fund, all actions which it
deems necessary in connection with the management of the Fund's investments. The
Adviser may place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers or dealers selected by it, including SBH,
and is authorized as the agent of the Fund to give instructions to the custodian
of the Fund as to deliveries of securities and payments of cash for the account
of the Fund. The rights and duties set forth above are subject always to the
provisions of the Articles of Incorporation and to the provisions of the
Investment Company Act.
ss. 3. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish to the
Fund, at the Adviser's expense, office space, local telephone service and
utilities, and shall be responsible for the compensation of directors, officers
and employees of the Fund who are Interested Persons of the Adviser. The Fund
shall be responsible for and shall pay all of its own expenses, debts and
liabilities including, without limitation, all of the following: the
compensation of directors who are not Interested Persons of the Adviser;
governmental fees; interest charges; taxes; membership dues in the
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Investment Company Institute and the No-Load Mutual Fund Association, Inc.; fees
and expenses of its legal counsel and of its independent accountants and
auditors; all charges of each transfer agent, registrar, custodian and
disbursing agent of the Fund for all services to the Fund including, without
limitation, those relating to safekeeping of funds and securities, issuance and
redemption of shares of the Fund, solicitation of shareholder votes, shareholder
confirmations and statements, mailings to shareholders and keeping of
shareholder accounts and records; expenses of issuing, delivering, re-purchasing
and redeeming shares; expenses of preparing, printing and mailing stock
certificates, prospectuses, shareholders' reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution of portfolio security transactions; insurance
premiums; expenses of solicitation of shareholder votes; and expenses relating
to the registration and qualification of shares of the Fund under the Securities
Act of 1933, as amended, and state securities or "blue sky" laws; PROVIDED,
HOWEVER, that the Adviser will reimburse the Fund for such expenses to the
extent provided in ss. 5 below.
ss. 4. COMPENSATION OF THE ADVISER. For the services to be rendered and for
the facilities to be furnished as provided in xx.xx. 2 and 3 above, the Fund
shall pay to the Adviser a cash fee, to be calculated and paid monthly as
hereinafter provided in this ss. 4, at the annual rate of .8% of its Average
Daily Net Assets for each fiscal year. Such fee shall be calculated as of the
end of each month during the fiscal year (i) on the basis of such annual rate,
and (ii) cumulatively from the beginning of the current fiscal year to the
month-end as of which the calculation is made, with credit being given to the
Fund for previous fee payments for said year. Within ten days after the
determination of the amount and, in any event, within twenty-five days after the
end of each month, the amount of the fee due by the Fund to the Adviser
hereunder shall be settled between the Fund and the Adviser. All such monthly
calculations and settlements shall be subject to final adjustment as of the end
of each fiscal year. If the Adviser shall serve for less than the whole of any
period specified in this ss. 4, the compensation to the Adviser shall be
prorated.
ss. 5. EXPENSE REIMBURSEMENT. The Adviser agrees to reimburse the Fund for
all expenses (including the advisory fee paid pursuant to ss. 4 above but
excluding interest, taxes, brokerage commissions and extraordinary charges such
as litigation costs) incurred by the Fund with respect to any fiscal year in
excess of the following percentages of its Average Daily Net Assets for the
fiscal year: 2% of the first $10 million of Average Daily Net Assets; 1.5% of
the next $20
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million of Average Daily Net Assets; and 1% of the remaining Average Daily Net
Assets. Such reimbursement shall be calculated as of the end of each month
during the fiscal year (i) on the basis of such annual percentages and
reasonably anticipated annual expenditures (whether or not such expenses have
been incurred in whole or in part at the date of the calculation), and (ii)
cumulatively from the beginning of the current fiscal year to the month-end as
of which the calculation is made, with credit being given to the Adviser for
previous expense reimbursements for said year. Within ten days after the
determination of the amount and in any event within twenty-five days after the
end of each month, the amount of any reimbursement due by the Adviser to the
Fund hereunder, or of any refund by the Fund to the Adviser of reimbursement
previously made, shall be settled between the Fund and the Adviser. All such
monthly calculations and settlements shall be subject to final adjustment as of
the end of each fiscal year.
ss. 6. BROKERAGE. In discharging its duties pursuant to ss. 2, the Adviser
may give preference, and may cause the Fund to pay higher negotiated commission
rates, to brokers which, in addition to having the capacity of obtaining the
best price for the security itself and of executing the order with speed,
efficiency and confidentiality, also provide Research to the Adviser. Research
furnished by brokers through whom the Fund effects securities transactions may
be used by the Adviser in servicing all of its accounts, and there shall be no
reduction in the compensation of the Adviser hereunder as a consequence of its
receipt of such Research. The Adviser, however, in the allocation of brokerage
must determine in good faith that the amount of the commission is reasonable in
relation to the value of the brokerage services and Research provided by the
broker, viewed in terms of either the particular transaction or the Adviser's
overall responsibilities with respect to the accounts as to which it exercises
investment discretion. Further, any commissions, fees or other remuneration for
brokerage allocated to SBH shall be 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. In the allocation of brokerage for the Fund,
the Adviser shall be subject always to such policies and requirements that the
Board may adopt or approve.
ss. 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to the Fund
are not deemed to be exclusive, and the Adviser shall be free to engage in any
other business or to render similar services to others.
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ss. 8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective upon its execution and shall continue in effect for two years
from the date of its execution, and thereafter, but only so long as such
continuance is specifically approved at least annually (i) by the vote of a
majority of the directors of the Fund who are not parties to this Agreement or
Interested Persons of the Fund or the Adviser at a meeting specifically called
for the purpose of voting on such approval, and (ii) by the Board or by a vote
of a majority of the outstanding voting securities of the Fund. This Agreement
may be terminated by the Adviser at any time without penalty on 60 days' written
notice, and may be terminated at any time without penalty by the Board or by the
vote of a majority of the outstanding voting securities of the Fund on 60 days'
written notice. This Agreement shall automatically terminate in the event of its
transfer or assignment.
ss. 9. TERMINATION OF PRIOR AGREEMENT. The Prior Agreement is hereby
terminated effective at the opening of business on the date hereof, and the
relations of the parties thereafter shall be governed by the terms of this
Agreement.
ss. 10. ACCOUNTING PRINCIPLES. All computations under this Agreement
affecting or pertaining to fees, expenses and expense reimbursements shall be
made in accordance with generally accepted accounting principles.
ss. 11. INVESTMENT COMPANY ACT. This Agreement is made subject to the
provisions of the Investment Company Act.
IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed as of the date first above written.
XXXXXXXXX ASSOCIATES, INC.
By /s/ Xxxxxxx X. Xxxx
---------------------------
Vice President
PORTFOLIOS, INC.
By /s/ X.X. Xxxxxx
---------------------------
President
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