INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this 27th day of June, 1991, between FPA PERENNIAL FUND,
INC., a Maryland corporation (hereinafter called the "Fund"), and FIRST PACIFIC
ADVISORS, INC., a Massachusetts corporation (hereinafter called the "Adviser").
WITNESSETH:
WHEREAS, the Fund and the Adviser wish to enter into an Agreement setting
forth the terms on which the Adviser will perform certain investment advisory
and management services for the Fund.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Fund and the Adviser agree as follows:
1. EMPLOYMENT OF ADVISER
The Fund hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Fund and to administer its affairs, to the
extent described herein, subject to the supervision of the Board of Directors of
the Fund, for the period and on the terms set forth in this Agreement. The
Adviser hereby accepts such employment and agrees during such period to render
the services and to assume the obligations herein set forth. The Adviser agrees
to use its best efforts and judgment in the performance of its obligations
hereunder. The Adviser shall, for all purposes herein, be deemed an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way, or otherwise be deemed an
agent of the Fund.
2. ADVISORY SERVICES
Subject to any general directions furnished by the Board of Directors
of the Fund, the Adviser agrees to formulate and implement a continuing program
for the management of the assets of the Fund and to determine from time to time
what securities or other property shall be purchased or sold by the Fund, and
the portion of its assets to be held in cash or cash equivalents, giving due
consideration to, among other things, the policies of the Fund as expressed in
the Fund's Certificate of Incorporation, By-Laws, Registration Statement under
the Investment Company Act of 1940, as amended (the "1940 Act"); Registration
Statement under the Securities Act of 1933, as amended (the "1933 Act"), and
reports under the Securities Exchange Act of 1934 (the "1934 Act"), as well as
to the factors affecting the Fund's status as a regulated investment company
under the Internal Revenue Code of 1954, as amended. The Adviser shall obtain
and evaluate such statistical, financial, and other information relating to the
economy, industries, businesses, securities markets, and securities as it may
deem necessary or useful in the performance of its obligations hereunder.
3. OTHER SERVICES AND EXPENSES OF ADVISER
The Adviser shall furnish to the Fund the following services and
facilities:
(a) Office space, furniture, equipment and supplies, which may
be the same as occupied or used by the Adviser;
(b) Qualified personnel for administering the affairs, managing
the investments, and preparing and maintaining the books of
account, records, reports and tax returns of the Fund,
except as specified in Section 5 hereof;
(c) Adequate facilities and qualified personnel for the
placement with broker-dealers of orders for the purchase and
sale of portfolio securities for the Fund;
(d) Members of the Adviser's organization to serve without
compensation from the Fund (except as specified otherwise in
Section 5 hereof) as officers or agents of the Fund, if
desired by the Fund;
(e) General purpose accounting forms, supplies, stationery and
postage and telephones and utilities relating to the
obligations of the Adviser hereunder.
4. EXPENSES OF THE FUND
Except to the extent expressly assumed by the Adviser herein, the Fund
will pay all costs and expenses in connection with its operations. Without
limiting the generality of the foregoing, the Fund shall pay the following costs
and expenses:
(a) Fees and charges of independent accountants, custodian and
depository and legal counsel for the Fund;
(b) Fees and charges of the Fund's transfer agent, including the
costs of maintaining the Fund's shareholder account books
and records, dividend disbursing agent and registrar, if
any;
(c) Costs of designing, printing, engraving and issuing
certificates representing shares of the Fund;
(d) Expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund;
(e) Taxes, including franchise, income, issue, transfer,
business license and other corporate fees payable by the
Fund to Federal, State or other governmental agencies;
-2-
(f) Premiums for the fidelity bond maintained by the Fund
pursuant to Section 17 of the 1940 Act and for any errors
and omissions insurance policy maintained by the Fund;
(g) Dues for the Fund's membership in trade organizations;
(h) Interest on indebtedness, if any, incurred by the Fund;
(i) Costs of designing, printing and mailing periodic and other
reports to shareholders, proxy statements, dividend notice
and other communications to the Fund's shareholders;
(j) Expenses of meeting of shareholders and directors of the
Fund;
(k) Brokers' commissions, issued and transfer taxes and other
costs chargeable to the Fund in connection with security
transactions to which the Fund is a party or with securities
owned by the Fund;
(1) Fees and expenses in connection with maintaining
registration of the Fund under the Federal securities laws
and under the laws of states which regulate the sale of the
Fund's shares and complying with the requirements of the
Securities and Exchange Commission under the 1940 Act, the
1933 Act, the 1934 Act and applicable state securities laws.
The advisory fee payable hereunder has been negotiated on the
understanding, and the parties hereto agree, that the Adviser has received, and
shall continue to receive, supplementary research and other information from
broker-dealers which execute portfolio transactions for the Fund.
5. COMPENSATION OF ADVISER
For the services to be rendered pursuant to this Agreement, the Fund
shall pay to the Adviser a monthly fee computed at the annual rates of 0.75% on
the first $50 million of the Fund's average net asset value and 0.65% on the
excess over $50 million of the Fund's average net asset value. Such average net
asset value shall be determined by taking the average of all of the
determinations of net asset value, made in the manner provided in the Fund's
Certificate of Incorporation, for each business day during a given calendar
month. Such fee shall be payable for each calendar month as soon as practicable
after the end of the month.
In addition to the above-stated fee, the Fund shall reimburse the
Adviser monthly for the costs incurred by the Adviser in providing financial
services to the Fund including, among other normal financial services for the
Fund, maintaining the accounts, books and other documents which constitute the
record forming the basis for the Fund's financial statements, preparation of
such financial statements, preparation of such financial statements and other
the Fund documents and reports of a financial nature required by Federal and
state laws, calculating daily net asset value of the Fund, and participating in
the production of the Fund's registration statements, prospectuses,
-3-
proxy solicitation materials and reports to stockholders (including compensation
of the Treasurer or other principal financial officer of the Fund, compensation
of personnel working under such person's direction and expenses of office space,
facilities and equipment used by such personnel in the performance of their
financial services duties to the Fund); provided, however, that such
reimbursement shall not exceed for any fiscal year of the Fund 0.10% of the
average net asset value of the Fund. Such maximum reimbursement shall be
calculated in the same manner as the fee referred to in the preceding paragraph.
The fees and reimbursements to be paid to the Adviser shall be payable
for the period commencing on the date hereof and ending on the date of
termination hereof. If this Agreement is terminated, the fees and reimbursements
shall be prorated for any fraction of a month at termination.
The fees and reimbursements payable hereunder shall be reduced by an
amount which is equivalent to any solicitation fees received by the Adviser, or
any affiliated person of the Adviser, in connection with a tender of portfolio
securities of the Fund in acceptance of an exchange or tender offer. The Adviser
shall use its best efforts to recapture any available solicitation fees.
The Adviser also agrees to reduce the advisory fee and reimbursement
payable hereunder by the amount by which certain operating expenses of the Fund
(after the exclusions described below and after reflecting any advisory fee and
reimbursement reduction provided for in the preceding paragraph) for any fiscal
year shall exceed 1 1/2 % of the first $30 million of the Fund's average net
asset value taken at the close of business on the last business day of each
calendar month of such year, plus 1 % of the remaining average net asset value
of the Fund so taken. For purposes of this expense limitation provision, the
following expenses shall be excluded from the total operating expenses in
computing "certain operating expenses": (i) interest, (ii) taxes, (iii) any
expenditures pursuant to Section 6 hereof for brokerage and research services,
and (iv) any extraordinary expenses, such as those of litigation, merger,
reorganization, or recapitalization, to the extent such extraordinary expenses
are permitted to be excluded by the rules or policies of the states in which
shares of the Fund are from time to time qualified for sale. All expenditures,
including costs incurred in connection with the purchase, holding, or sale of
portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, shall be
accounted for as capital items and not as expenses. Any accrued advisory fee
reduction under this expense limitation provision shall be withheld by the Fund
from the fees paid hereunder. Any additional reduction computed at the end of
the fiscal year shall be paid to the Fund within five days of the computation as
a reduction of advisory fees paid during the fiscal year.
For purposes of this Section 5, the term "fiscal year" shall exclude
the portion of the current fiscal year which shall have elapsed prior to the
date hereof and shall include the portion of the then current fiscal year which
shall have elapsed at the date of termination of this Agreement.
6. BROKERAGE AND RESEARCH SERVICES
The advisory fee payable hereunder has been negotiated on the
understanding, and the parties hereto agree, that the Adviser shall receive,
supplementary research and other information from brokers and dealers which
execute portfolio transactions for the Fund. The Adviser may employ, retain, or
otherwise avail itself of the services or facilities of other persons or
organizations
-4-
for the purpose of providing the Adviser 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 Adviser may deem necessary, appropriate
or convenient for the discharge of its obligations hereunder or otherwise
helpful to the Fund, or in the discharge of Adviser's overall responsibilities
with respect to any other accounts which it might serve as investment adviser.
The Adviser and any person performing executive, administrative or trading
functions for the Fund, whose services were made available to the Fund by the
Adviser, are specifically authorized to allocate brokerage and principal
business to firms that provide such services or facilities and to cause the Fund
to pay a member of a securities exchange, or any other securities broker or
dealer, an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Adviser or such person
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services (as such services
are defined in Section 28(e) of the 0000 Xxx) provided by such member, broker or
dealer, viewed in terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to the accounts as to which the
Adviser exercises investment discretion (as that term is defined in Section
3(a)(35) of the 1934 Act). Subject to seeking best execution, the Adviser may
also consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
7. OTHER ACTIVITIES
The Adviser may perform investment advisory, management or distribution
services for other investment companies and other persons or companies, and
affiliates of the Adviser may engage in other related or unrelated businesses.
Except as otherwise required by the 1940 Act, any of the shareholders,
directors, officers and employees of the Fund may be a shareholder, director,
officer or employee of, or be otherwise interested in, the Adviser, and in any
person controlled by or under common control with the Adviser, and the Adviser,
and any person controlled by or under common control with the Adviser, may have
an interest in the Fund.
8. LIABILITY OF ADVISER
Neither the Adviser nor any of its officers, directors or employees, nor
any person performing executive, administrative or trading functions for the
Funds whose services were made available to the Fund by the Adviser, 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 negligence in the
performance of its or his duties, or from reckless disregard by the Adviser or
any such person of the duties of the Adviser under this Agreement. Without
limiting the generality of the foregoing, neither the Adviser nor any such
person shall be deemed to have acted unlawfully or to have breached any duty to
the Fund under State or Federal law in effect at the date of the enactment of
Section 28(e) of the 1934 Act solely by reason of having caused the Fund to pay
a member of any securities exchange or any other securities broker or dealer, an
amount of commission for effecting a securities transaction in excess of the
commission another member of a securities exchange or another securities broker
or dealer would have charged for effecting that transaction if the Adviser or
such person determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage
-5-
and research services provided by such member, broker or dealer, viewed in terms
of either that particular transaction or the overall responsibilities of the
Adviser with respect to the account as to which the Adviser exercises investment
discretion.
9. TERM OF AGREEMENT
This Agreement shall continue in effect to April 30, 1993. It may be
continued in effect thereafter by mutual consent, provided that such continuance
shall be specifically approved at least annually by (i) the Board of Directors
of the Fund, or by the vote of a majority (as defined in the 0000 Xxx) of the
outstanding voting securities of the Fund, and (ii) by a majority of directors
who are not parties to this Agreement or interested persons (as defined in the
0000 Xxx) of any such party, cast in person at a meeting called for the purpose
of voting on such approval.
10. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Fund or by the vote of a majority (as
defined in the 0000 Xxx) of the outstanding voting securities of the Fund, on
sixty (60) days' written notice to the Adviser, or by the Adviser on like notice
to the Fund. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized and the corporate seals
to be affixed as of the day and year first above written.
FPA PERENNIAL FUND, INC.
(SEAL) By: /s/ Xxxxxxxxxxx Xxxxxx
----------------------
Xxxxxxxxxxx Xxxxxx
President
FIRST PACIFIC ADVISORS, INC.
(SEAL) By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxxx
President
-6-