INVESTMENT ADVISORY AGREEMENT
Agreement made this 30th day of April, 1997 between THE YACKTMAN
FUNDS, INC., a Maryland corporation (the "Company"), on behalf of THE
YACKTMAN FOCUSED FUND (the "Fund"), and YACKTMAN ASSET MANAGEMENT COMPANY,
an Illinois corporation (the "Advisor").
W I T N E S S E T H :
WHEREAS, the Company is in the process of registering the Fund
with the Securities and Exchange Commission as an open-end management
investment company under the Investment Company Act of 1940 (the "Act");
and
WHEREAS, the Fund desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as its investment adviser.
NOW, THEREFORE, the Company, on behalf of the Fund, 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 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 Fund, and, subject to such policies
as the board of directors of the Company may determine, direct the
purchase and sale of investment securities in the day-to-day management of
the 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 or the
Fund in any way or otherwise be deemed an agent of the Company or the
Fund. 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 Fund. Nothing herein contained shall be deemed to require the Company
or the Fund to take any action contrary to the Company's Articles of
Incorporation, as amended or supplemented, 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 Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund. The Adviser shall not be required to pay any
expenses of the Fund except as provided herein if the total expenses borne
by the Fund, including the Adviser's fee and the fees paid to the Fund's
Administrator but excluding all federal, state and local taxes, interest,
brokerage commissions and extraordinary items, in any year exceed that
percentage of the average net assets of the 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 Fund's shares are qualified for sale or, if
the states in which the Fund's shares are qualified for sale impose no
such restrictions, 2%. The expenses of the Fund's operations borne by the
Fund include by way of illustration and not limitation, directors fees
paid to those directors who are not officers of the Company, 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 (if any),
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 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 Fund shall monitor its expense ratio on a monthly basis. If
the accrued amount of the expenses of the Fund exceeds the expense
limitation established herein, the 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
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 Fund shall pay to the Adviser an
advisory fee, paid monthly, based on the average net assets of the Fund,
as determined by valuations made as of the close of each business day of
the month. The advisory fee shall be 1/12 of 1.00% (1.00% per annum) on
the average net assets of the Fund. 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 assets of the
business days during which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the 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 Fund, except for the purchase of shares of
the 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 Fund.
6. Exclusivity. The services of the Adviser to the 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 Fund
to use the name "Yacktman," if it so desires, it is understood and agreed
that the Adviser reserves the right to use and to permit other persons,
firms or corporations, including investment companies, to use such name,
and that the Fund will not use such name if the Adviser ceases to be the
Fund's sole investment adviser. During the period that this Agreement is
in effect, the Adviser shall be the 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 Fund or to any shareholder of the 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 Commissions. The Adviser may cause the 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, if required by the Act, by the vote
of the majority of the outstanding voting securities of the 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 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 Fund.
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 an initial period beginning as of the date hereof and ending
April 30, 1999 and indefinitely thereafter, but only so long as the
continuance after such initial 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 Fund, as defined in the Act,
and (ii) the board of directors of the Fund 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.
YACKTMAN ASSET MANAGEMENT COMPANY
(the "Adviser")
By:
President
Attest:
Secretary
On Behalf of THE YACKTMAN FOCUSED FUND:
THE YACKTMAN FUNDS, INC.
(the "Company")
By:
President
Attest:
Secretary
