PAGE 1
INVESTMENT MANAGEMENT AGREEMENT
Between
X. XXXX PRICE TAX-EFFICIENT BALANCED FUND, INC.
and
X. XXXX PRICE ASSOCIATES, INC.
INVESTMENT MANAGEMENT AGREEMENT, made as of the 24th day of
April, 1997, by and between X. XXXX PRICE TAX-EFFICIENT BALANCED
FUND, INC., a Maryland corporation (hereinafter called the
"Fund"), and X. XXXX PRICE ASSOCIATES, INC., a corporation
organized and existing under the laws of the State of Maryland
(hereinafter called the "Manager").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end
management investment company and is registered as such under the
federal Investment Company Act of 1940, as amended (the "Act");
and
WHEREAS, the Manager is engaged principally in the business of
rendering investment supervisory services and is registered as an
investment adviser under the federal Investment Advisers Act of
1940, as amended; and
WHEREAS, the Fund desires the Manager to render investment
supervisory services to the Fund in the manner and on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual promises hereinafter set forth, the parties hereto agree
as follows:
1. Duties and Responsibilities of Manager.
A. Investment Management Services. The Manager shall act
as investment manager and shall supervise and direct the
investments of the Fund in accordance with the Fund's investment
objectives, program and restrictions as provided in its
PAGE 2
prospectus, as amended from time to time, and such other
limitations as the Fund may impose by notice in writing to the
Manager. The Manager shall obtain and evaluate such information
relating to the economy, industries, businesses, securities
markets and securities as it may deem necessary or useful in the
discharge of its obligations hereunder and shall formulate and
implement a continuing program for the management of the assets
and resources of the Fund in a manner consistent with its
investment objectives. In furtherance of this duty, the Manager,
as agent and attorney-in-fact with respect to the Fund, is
authorized, in its discretion and without prior consultation with
the Fund, to:
(i) buy, sell, exchange, convert, lend, and otherwise
trade in any stocks, bonds, and other securities or assets;
and
(ii) place orders and negotiate the commissions (if any)
for the execution of transactions in securities with or
through such brokers, dealers, underwriters or issuers as
the Manager may select.
B. Financial, Accounting, and Administrative Services.
The Manager shall maintain the corporate existence and corporate
records of the Fund; maintain the registrations and
qualifications of Fund shares under federal and state law;
monitor the financial, accounting, and administrative functions
of the Fund; maintain liaison with the various agents employed by
the Fund (including the Fund's transfer agent, custodian,
independent accountants and legal counsel) and assist in the
coordination of their activities on behalf of the Fund.
C. Reports to Fund. The Manager shall furnish to or
place at the disposal of the Fund such information, reports,
evaluations, analyses and opinions as the Fund may, at any time
or from time to time, reasonably request or as the Manager may
deem helpful to the Fund.
D. Reports and Other Communications to Fund
Shareholders. The Manager shall assist the Fund in developing
all general shareholder communications, including regular
shareholder reports.
E. Fund Personnel. The Manager agrees to permit
individuals who are officers or employees of the Manager to serve
(if duly elected or appointed) as officers, directors, members of
any committee of directors, members of any advisory board, or
members of any other committee of the Fund, without remuneration
from or other cost to the Fund.
PAGE 3
F. Personnel, Office Space, and Facilities of Manager.
The Manager at its own expense shall furnish or provide and pay
the cost of such office space, office equipment, office
personnel, and office services as the Manager requires in the
performance of its investment advisory and other obligations
under this Agreement.
2. Allocation of Expenses.
A. Expenses Paid by Manager.
(1) Salaries and Fees of Officers. The Manager shall pay
all salaries, expenses, and fees of the officers and
directors of the Fund who are affiliated with the Manager.
(2) Assumption of Fund Expenses by Manager. The payment
or assumption by the Manager of any expense of the Fund
that the Manager is not required by this Agreement to pay
or assume shall not obligate the Manager to pay or assume
the same or any similar expense of the Fund on any
subsequent occasion.
B. Expenses Paid by Fund. The Fund shall bear all
expenses of its organization, operations, and business not
specifically assumed or agreed to be paid by the Manager as
provided in this Agreement. In particular, but without limiting
the generality of the foregoing, the Fund shall pay:
(1) Custody and Accounting Services. All expenses of the
transfer, receipt, safekeeping, servicing and accounting
for the Fund's cash, securities, and other property,
including all charges of depositories, custodians, and
other agents, if any;
(2) Shareholder Servicing. All expenses of maintaining
and servicing shareholder accounts, including all charges
of the Fund's transfer, shareholder recordkeeping, dividend
disbursing, redemption, and other agents, if any;
(3) Shareholder Communications. All expenses of
preparing, setting in type, printing, and distributing
reports and other communications to shareholders;
(4) Shareholder Meetings. All expenses incidental to
holding meetings of Fund shareholders, including the
printing of notices and proxy material, and proxy
solicitation therefor;
PAGE 4
(5) Prospectuses. All expenses of preparing, setting in
type, and printing of annual or more frequent revisions of
the Fund's prospectus and of mailing them to shareholders;
(6) Pricing. All expenses of computing the Fund's net
asset value per share, including the cost of any equipment
or services used for obtaining price quotations;
(7) Communication Equipment. All charges for equipment
or services used for communication between the Manager or
the Fund and the custodian, transfer agent or any other
agent selected by the Fund;
(8) Legal and Accounting Fees and Expenses. All charges
for services and expenses of the Fund's legal counsel and
independent auditors;
(9) Directors' Fees and Expenses. All compensation of
directors, other than those affiliated with the Manager,
and all expenses incurred in connection with their service;
(10) Federal Registration Fees. All fees and expenses of
registering and maintaining the registration of the Fund
under the Act and the registration of the Fund's shares
under the Securities Act of 1933, as amended (the "'33
Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing,
and filing of any registration statement and prospectus
under the '33 Act or the Act, and any amendments or
supplements that may be made from time to time;
(11) State Filing Fees. All fees and expenses imposed on
the Fund, as appropriate, with respect to the sale of the
Fund and of the Fund's shares under securities laws of
various states or jurisdictions, and under all other laws
applicable to the Fund or its business activities
(including registering the Fund as a broker-dealer, or any
officer of the Fund or any person as agent or salesman of
the Fund in any state);
(12) Issue and Redemption of Fund Shares. All expenses
incurred in connection with the issue, redemption, and
transfer of Fund shares, including the expense of
confirming all share transactions, and of preparing and
transmitting the Fund's stock certificates;
(13) Bonding and Insurance. All expenses of bond,
liability, and other insurance coverage required by law or
deemed advisable by the Fund's board of directors;
PAGE 5
(14) Brokerage Commissions. All brokers' commissions and
other charges incident to the purchase, sale, or lending of
the Fund's portfolio securities;
(15) Taxes. All taxes or governmental fees payable by or
with respect of the Fund to federal, state, or other
governmental agencies, domestic or foreign, including stamp
or other transfer taxes;
(16) Trade Association Fees. All fees, dues, and other
expenses incurred in connection with the Fund's membership
in any trade association or other investment organization;
and
(17) Nonrecurring and Extraordinary Expenses. Such
nonrecurring expenses as may arise, including the costs of
actions, suits, or proceedings to which the Fund is a party
and the expenses the Fund may incur as a result of its
legal obligation to provide indemnification to its
officers, directors, and agents.
3. Management Fee. The Fund shall pay the Manager a fee
("Fee") which will consist of two components: a Group Management
Fee ("Group Fee") and an Individual Fund Fee ("Fund Fee"). The
Fee shall be paid monthly to the Manager on the first business
day of the next succeeding calendar month and shall be calculated
as follows:
A. Group Fee. The monthly Group Fee ("Monthly Group
Fee") shall be the sum of the daily Group Fee accruals ("Daily
Group Fee Accruals") for each month. The Daily Group Fee Accrual
for any particular day will be computed by multiplying the Price
Funds' group fee accrual as determined below ("Daily Price Funds'
Group Fee Accrual") by the ratio of the Fund's net assets for
that day to the sum of the aggregate net assets of the Price
Funds for that day. The Daily Price Funds' Group Fee Accrual for
any particular day shall be calculated by multiplying the
fraction of one (1) over the number of calendar days in the year
by the annualized Daily Price Funds' Group Fee Accrual for that
day as determined in accordance with the following schedule:
Price Funds' Annual Group
Base Fee Rate for Each Level of Assets
___________________________________________
0.480% First $1 billion
0.450% Next $1 billion
0.420% Next $1 billion
0.390% Next $1 billion
0.370% Next $1 billion
PAGE 6
0.360% Next $2 billion
0.350% Next $2 billion
0.340% Next $5 billion
0.330% Next $10 billion
0.320% Next $10 billion
0.310% Next $16 billion
0.305% Next $30 billion
0.300% Thereafter
The Price Funds shall include all the mutual funds distributed
by X. Xxxx Price Investment Services, Inc., excluding
institutional or private label mutual funds. For the purpose of
calculating the Daily Price Funds' Group Fee Accrual for any
particular day, the net assets of each Price Fund shall be
determined in accordance with the Fund's prospectus as of the
close of business on the previous business day on which the Fund
was open for business.
B. Fund Fee. The monthly Fund Fee ("Monthly Fund Fee")
shall be the sum of the daily Fund Fee accruals ("Daily Fund Fee
Accruals") for each month. The Daily Fund Fee Accrual for any
particular day will be computed by multiplying the fraction of
one (1) over the number of calendar days in the year by the Fund
Fee Rate of 0.20% and multiplying this product by the net assets
of the Fund for that day, as determined in accordance with the
Fund's prospectus as of the close of business on the previous
business day on which the Fund was open for business.
C. Expense Limitation. As part of the consideration for
the Fund entering into this Agreement, the Manager hereby agrees
to limit the aggregate expenses of every character incurred by
the Fund, including but not limited to Fees of the Manager
computed as hereinabove set forth, but excluding interest, taxes,
brokerage, and other expenditures which are capitalized in
accordance with generally accepted accounting principles and
extraordinary expenses, ("Manager Limitation"). Under the
Manager Limitation, the Manager agrees that through February 28,
1999, such expenses shall not exceed 1.00% of the average daily
net assets of the Fund ("1.00% Expense Limitation"). To
determine the Manager's liability for the Fund's expenses over
the 1.00% Expense Limitation, the amount of allowable year-to-
date expenses shall be computed daily by pro rating the 1.00%
Expense Limitation based on the number of days elapsed within the
fiscal year of the Fund, or limitation period, if shorter ("Pro
Rated Limitation"). The Pro Rated Limitation shall be compared
to the expenses of the Fund recorded through the prior day in
order to produce the allowable expenses to be recorded for the
current day ("Allowable Expenses"). If the Fund's Management Fee
and other expenses for the current day exceed the Allowable
PAGE 7
Expenses, the Management Fee for the current day shall be reduced
by such excess ("Unaccrued Fees"). In the event the excess
exceeds the amount due as the Management Fee, the Manager shall
be responsible to the Fund for the additional excess ("Other
Expenses Exceeding Limit"). If at any time up through and
including February 28, 1999, the Fund's Management Fee and other
expenses for the current day are less than the Allowable
Expenses, the differential shall be due to the Manager as payment
of cumulative Unaccrued Fees (if any) or as payment for
cumulative Other Expenses Exceeding Limit (if any). If
cumulative Unaccrued Fees or cumulative Other Expenses Exceeding
Limit remain at February 28, 1999, these amounts shall be paid to
the Manager in the future provided that: (1) no such payment
shall be made to the Manager after February 28, 2001; and (2)
such payment shall only be made to the extent that it does not
result in the Fund's aggregate expenses exceeding an expense
limit of 1.00% of average daily net assets. The Manager may
voluntarily agree to an additional expense limitation (any such
additional expense limitation hereinafter referred to as an
"Additional Expense Limitation"), at the same or a different
level and for the same or a different period of time beyond
February 28, 1999 (any such additional period being hereinafter
referred to an as "Additional Period") provided, however, that:
(1) the calculations and methods of payment shall be as described
above; (2) no payment for cumulative Unaccrued Fees or cumulative
Other Expenses Exceeding Limit shall be made to the Manager more
than two years after the end of an Additional Period; and (3)
payment for cumulative Unaccrued Fees or cumulative Other
Expenses Exceeding Limit after the expiration of the Additional
Period shall only be made to the extent it does not result in the
Fund's aggregate expenses exceeding the Additional Expense
Limitation to which the unpaid amounts relate.
D. Proration of Fee. If this Agreement becomes
effective or terminates before the end of any month, the Fee for
the period from the effective date to the end of such month or
from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion
which such period bears to the full month in which such
effectiveness or termination occurs.
4. Brokerage. Subject to the approval of the board of
directors of the Fund, the Manager, in carrying out its duties
under Paragraph 1.A., may cause the Fund to pay a broker-dealer
which furnishes brokerage or research services [as such services
are defined under Section 28(e) of the Securities Exchange Act of
1934, as amended (the "'34 Act")], a higher commission than that
which might be charged by another broker-dealer which does not
furnish brokerage or research services or which furnishes
brokerage or research services deemed to be of lesser value, if
PAGE 8
such commission is deemed reasonable in relation to the brokerage
and research services provided by the broker-dealer, viewed in
terms of either that particular transaction or the overall
responsibilities of the Manager with respect to the accounts as
to which it exercises investment discretion (as such term is
defined under Section 3(a)(35) of the '34 Act).
5. Manager's Use of the Services of Others. The Manager
may (at its cost except as contemplated by Paragraph 4 of this
Agreement) employ, retain or otherwise avail itself of the
services or facilities of other persons or organizations for the
purpose of providing the Manager or the Fund with such
statistical and other factual information, such advice regarding
economic factors and trends, such advice as to occasional
transactions in specific securities or such other information,
advice or assistance as the Manager may deem necessary,
appropriate or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund, or in the discharge
of Manager's overall responsibilities with respect to the other
accounts which it serves as investment manager.
6. Ownership of Records. All records required to be
maintained and preserved by the Fund pursuant to the provisions
of rules or regulations of the Securities and Exchange Commission
under Section 31(a) of the Act and maintained and preserved by
the Manager on behalf of the Fund are the property of the Fund
and will be surrendered by the Manager promptly on request by the
Fund.
7. Reports to Manager. The Fund shall furnish or otherwise
make available to the Manager such prospectuses, financial
statements, proxy statements, reports, and other information
relating to the business and affairs of the Fund as the Manager
may, at any time or from time to time, reasonably require in
order to discharge its obligations under this Agreement.
8. Services to Other Clients. Nothing herein contained
shall limit the freedom of the Manager or any affiliated person
of the Manager to render investment supervisory and corporate
administrative services to other investment companies, to act as
investment manager or investment counselor to other persons,
firms or corporations, or to engage in other business activities;
but so long as this Agreement or any extension, renewal or
amendment hereof shall remain in effect or until the Manager
shall otherwise consent, the Manager shall be the only investment
manager to the Fund.
9. Limitation of Liability of Manager. Neither the Manager
nor any of its officers, directors, or employees, nor any person
PAGE 9
performing executive, administrative, trading, or other functions
for the Fund (at the direction or request of the Manager) or the
Manager in connection with the Manager's discharge of its
obligations undertaken or reasonably assumed with respect to this
Agreement, shall be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except for loss
resulting from willful misfeasance, bad faith, or gross
negligence in the performance of its or his duties on behalf of
the Fund or from reckless disregard by the Manager or any such
person of the duties of the Manager under this Agreement.
10. Use of Manager's Name. The Fund may use the name "X.
Xxxx Price Tax-Efficient Balanced Fund, Inc." or any other name
derived from the name "X. Xxxx Price" only for so long as this
Agreement or any extension, renewal or amendment hereof remains
in effect, including any similar agreement with any organization
which shall have succeeded to the business of the Manager as
investment manager. At such time as this Agreement or any
extension, renewal or amendment hereof, or such other similar
agreement shall no longer be in effect, the Fund will (by
corporate action, if necessary) cease to use any name derived
from the name "X. Xxxx Price," any name similar thereto or any
other name indicating that it is advised by or otherwise
connected with the Manager, or with any organization which shall
have succeeded to the Manager's business as investment manager.
11. Term of Agreement. The term of this Agreement shall
begin on the date first above written, and unless sooner
terminated as hereinafter provided, this Agreement shall remain
in effect through April 30, 1998. Thereafter, this Agreement
shall continue in effect from year to year, subject to the
termination provisions and all other terms and conditions hereof,
so long as: (a) such continuation shall be specifically approved
at least annually by the board of directors of the Fund or by
vote of a majority of the outstanding voting securities of the
Fund and, concurrently with such approval by the board of
directors or prior to such approval by the holders of the
outstanding voting securities of the Fund, as the case may be, by
the vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the directors of the
Fund who are not parties to this Agreement or interested persons
of any such party; and (b) the Manager shall not have notified
the Fund, in writing, at least 60 days prior to April 30, 1998 or
prior to April 30th of any year thereafter, that it does not
desire such continuation. The Manager shall furnish to the Fund,
promptly upon its request, such information as may reasonably be
necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
PAGE 10
12. Amendment and Assignment of Agreement. This Agreement
may not be amended or assigned without the affirmative vote of a
majority of the outstanding voting securities of the Fund, and
this Agreement shall automatically and immediately terminate in
the event of its assignment.
13. Termination of Agreement. This Agreement may be
terminated by either party hereto, without the payment of any
penalty, upon 60 days' prior notice in writing to the other
party; provided, that in the case of termination by the Fund such
action shall have been authorized by resolution of a majority of
the directors of the Fund who are not parties to this Agreement
or interested persons of any such party, or by vote of a majority
of the outstanding voting securities of the Fund.
14. Miscellaneous.
A. Captions. The captions in this Agreement are
included for convenience of reference only and in no way define
or delineate any of the provisions hereof or otherwise affect
their construction or effect.
B. Interpretation. Nothing herein contained shall be
deemed to require the Fund to take any action contrary to its
Articles of Incorporation or By-Laws, or any applicable statutory
or regulatory requirement to which it is subject or by which it
is bound, or to relieve or deprive the board of directors of the
Fund of its responsibility for and control of the conduct of the
affairs of the Fund.
C. Definitions. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the Act shall be
resolved by reference to such term or provision of the Act and to
interpretations thereof, if any, by the United States courts or,
in the absence of any controlling decision of any such court, by
rules, regulations or orders of the Securities and Exchange
Commission validly issued pursuant to the Act. Specifically, the
terms "vote of a majority of the outstanding voting securities,"
"interested person," "assignment," and "affiliated person," as
used in Paragraphs 2, 8, 10, 11, and 12 hereof, shall have the
meanings assigned to them by Section 2(a) of the Act. In
addition, where the effect of a requirement of the Act reflected
in any provision of this Agreement is relaxed by a rule,
regulation or order of the Securities and Exchange Commission,
whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule,
regulation or order.
PAGE 11
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto
duly authorized and their respective seals to be hereunto
affixed, as of the day and year first above written.
Attest: X. XXXX PRICE TAX-EFFICIENT
BALANCED
FUND, INC.
/s/Xxxxxxxx X. Xxxxxxx /s/Xxxxx X. Xxxxx
By: _________________________ __________________________
Xxxxxxxx X. Xxxxxxx Xxxxx X. Xxxxx
Assistant Secretary President
Attest: X. XXXX PRICE ASSOCIATES, INC.
/s/Xxxxxxx X. Xxx Xxxx /s/Xxxxx X. Xxxxxxx
By: ________________________ _____________________________
Xxxxxxx X. Xxx Xxxx Xxxxx X. Xxxxxxx
Assistant Secretary Managing Director
