KINETICS PORTFOLIOS TRUST INVESTMENT ADVISORY AGREEMENT
THIS
INVESTMENT ADVISORY
AGREEMENT is made as of the 5th day of March, 2007, by and between
KINETICS PORTFOLIOS TRUST, a Delaware business trust (the "Trust") on behalf
of
its series the Water Infrastructure Portfolio (the "Portfolio") and KINETICS
ASSET MANAGEMENT, INC., a New York corporation (the "Adviser").
W
I T N E S S E T H :
WHEREAS,
the Trust is
an open-end management investment company, registered as such under the
Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS,
the Adviser
is registered as an investment adviser under the Investment Advisers Act of
1940
and is engaged in the business of providing investment advice to investment
companies; and
WHEREAS,
the Trust, on
behalf of the Portfolio, desires to retain the Adviser to render advice and
services to the Portfolio pursuant to the terms and provisions of this
Agreement, and the Adviser desires to furnish said advice and
services.
NOW,
THEREFORE, in
consideration of the covenants and the mutual promises hereinafter set forth,
the parties to this Agreement, intending to be legally bound hereby, mutually
agree as follows:
1. Appointment
of Adviser. The Trust hereby employs
the Adviser and the Adviser hereby accepts such employment, to render investment
advice and related services with respect to the assets of the Portfolio for
the
period and on the terms set forth in this Agreement, subject to the supervision
and direction of the Board of Trustees.
2. Subadviser.
It is understood that the Adviser may from time to time employ or
associate with itself such person or persons as the Adviser believes to be
fitted to assist it in the performance of this Agreement (herein a
“Subadviser”); provided, however, that the compensation of such person or
persons shall be paid by the Adviser and that the Adviser shall be as fully
responsible to the Trust for the acts and omissions of any such person as it
is
for its own acts and omissions; and provided, however, that the retention of
any
Subadviser shall be approved as may be required by the Investment Company
Act.
3. Duties
of Adviser.
(a) General
Duties. The Adviser shall act as investment adviser to the
Portfolio and shall supervise investments of the Portfolio in accordance with
the investment objective, policies and restrictions of the Portfolio as set
forth in the Portfolio's governing documents, including, without limitation,
the
Trust’s Certificate of Trust, as amended, Declaration of Trust, as amended, and
Bylaws, as amended, the prospectus and statement of additional information;
and
such other limitations, policies and procedures as the Board of Trustees of
the
Trust may impose from time to time in writing to the Adviser. In
providing such services, the Adviser shall at all times adhere to the provisions
and restrictions contained in the federal securities laws, applicable state
securities laws, the Internal Revenue Code, the Uniform Commercial Code and
other applicable law.
Without
limiting the generality of the
foregoing, the Adviser shall: (i) furnish the Portfolio with advice and
recommendations with respect to the investment of the Portfolio's assets and
the
purchase and sale of portfolio securities for the Portfolio, including the
taking of such steps as may be necessary to implement such advice and
recommendations (i.e., placing the orders); (ii) manage and oversee the
investments of the Portfolio, subject to the ultimate supervision and direction
of the Board of Trustees; (iii) vote proxies for the Portfolio, file ownership
reports under Section 13 of the Securities Exchange Act of 1934 for the
Portfolio, and take other actions on behalf of the Portfolio; (iv) maintain
the books and records required to be maintained by the Portfolio except to
the
extent arrangements have been made for such books and records to be maintained
by the Trust’s administrator (the "Administrator") or another agent
of the Portfolio; (v) furnish reports, statements and other data on securities,
economic conditions and other matters related to the investment of the
Portfolio's assets which the Board of Trustees or the officers of the
Trust may reasonably request; and (vi) render to the Board of
Trustees such periodic and special reports with respect to the Portfolio's
investment activities as the Board may reasonably request, including at least
one in-person appearance annually before the Board of Trustees. The
Adviser will also review, monitor and report to the Board of Trustees on the
performance and investment procedures of any Subadviser approved pursuant to
Section 2 and assist and consult with any Subadviser in connection with the
Portfolio’s investment program.
(b) Brokerage. The
Adviser shall be responsible for decisions to buy and sell securities for the
Portfolio, for broker-dealer selection, and for negotiation of brokerage
commission rates, provided that the Adviser shall not direct orders to an
affiliated person of the Adviser without general prior authorization to use
such
affiliated broker or dealer from the Board of Trustees. The Adviser's
primary consideration in effecting a securities transaction will be execution
at
the most favorable price. In selecting a broker-dealer to execute
each particular transaction, the Adviser may take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Portfolio on a continuing
basis. The price to the Portfolio in any transaction may be less
favorable than that available from another broker-dealer if the difference
is
reasonably justified by other aspects of the portfolio execution services
offered.
Subject
to such policies as the Board
of Trustees may determine, the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Portfolio to pay a broker or dealer
that provides (directly or indirectly) brokerage or research services to the
Adviser an amount of commission for effecting a portfolio transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall responsibilities
with respect to the Portfolio. The Adviser is further authorized to
allocate the orders placed by it on behalf of the Portfolio to such brokers
or
dealers who also provide research or statistical material, or other services,
to
the Portfolio, the Adviser, or any affiliate of either. Such
allocation shall be in such amounts and proportions as the Adviser shall
determine, and the Adviser shall report on such allocations regularly to the
Portfolio, indicating the broker-dealers to whom such allocations have been
made
and the basis therefor. The Adviser is also authorized to consider
sales of shares as a factor in the selection of brokers or dealers to execute
portfolio transactions, subject to the requirements of best execution,
i.e., that such brokers or dealers are able to execute the order
promptly and at the best obtainable securities price.
On
occasions when the Adviser deems
the purchase or sale of a security to be in the best interest of the Portfolio
as well as of other clients (to the extent that the Adviser may, in the future,
have other clients), the Adviser, to the extent permitted by applicable laws
and
regulations, may aggregate the securities to be so purchased or sold in order
to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will
be
made by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolio and to such other
clients.
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4.
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Representations
of the
Adviser.
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(a) The
Adviser shall use its best judgment and efforts in rendering the advice and
services to the Portfolio as contemplated by this Agreement.
(b) The
Adviser shall maintain all licenses and registrations necessary to perform
its
duties hereunder in good order.
(c) The
Adviser shall conduct its operations at all times in conformance with the
Investment Advisers Act of 1940, the Investment Company Act, and any other
applicable state and/or self-regulatory organization regulations.
5. Independent
Contractor. The Adviser shall, for all
purposes herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized to do so, have no authority to
act
for or represent the Portfolio in any way, or in any way be deemed an agent
for
the Portfolio. It is expressly understood and agreed that the
services to be rendered by the Adviser to the Portfolio under the provisions
of
this Agreement are not to be deemed exclusive, and the Adviser shall be free
to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired
thereby.
6. Adviser's
Personnel. The Adviser shall, at its
own expense, maintain such staff and employ or retain such personnel and consult
with such other persons as it shall from time to time determine to be necessary
to the performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, the staff and personnel of the Adviser
shall be deemed to include persons employed or retained by the Adviser to
furnish statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical
and
scientific developments, and such other information, advice and assistance
as
the Adviser or the Board of Trustees may desire and reasonably
request.
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7.
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Expenses.
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(a) With
respect to the operation of the Portfolio, the Adviser shall be responsible
for
(i) providing the personnel, office space and equipment reasonably necessary
for
the investment management of the Portfolio, and (ii) the costs of any special
Board of Trustees meetings or shareholder meetings convened for the primary
benefit of the Adviser. If the Adviser has agreed to limit the
operating expenses of the Portfolio, the Adviser shall also be responsible
on a
monthly basis for any operating expenses that exceed the agreed upon expense
limitation.
(b) The
Portfolio is responsible for and has assumed the obligation for payment of
all
of its expenses, other than as stated in Subparagraph 7(a) above,
including but not limited to: investment advisory, administrative and
sub-administrative fees payable to the Adviser or the Administrator under the
appropriate agreements entered into with the Adviser or the Administrator,
as
the case may be; fees and expenses incurred in connection with the issuance,
registration and transfer of its shares; brokerage and commission expenses;
all
expenses of transfer, receipt, safekeeping, servicing and accounting for the
cash, securities and other property of the Portfolio including all fees and
expenses of its custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the Investment Company Act; taxes, if any; a pro rata portion
of
expenditures in connection with meetings of the Portfolio's shareholders and
Board of Trustees that are properly payable by the Portfolio; salaries and
expenses of officers and fees and expenses of members of the Board of Trustees
or members of any advisory board or committee who are not members of, affiliated
with or interested persons of the Adviser or the Administrator; insurance
premiums on property or personnel of the Portfolio which inure to its benefit,
including liability and fidelity bond insurance; the cost of preparing and
printing reports, proxy statements, prospectuses and statements of additional
information of the Portfolio or other communications for distribution to
existing shareholders; legal, auditing and accounting fees; trade association
dues; fees and expenses (including legal fees) of registering and maintaining
registration of its shares for sale under federal and applicable state and
foreign securities laws; all expenses of maintaining and servicing shareholder
accounts, including all charges for transfer, shareholder recordkeeping,
dividend disbursing, redemption, and other agents for the benefit of the
Portfolio; and all other charges and costs of its operation plus any
extraordinary and non-recurring expenses, except as herein otherwise
prescribed.
(c) The
Adviser may voluntarily absorb certain Portfolio expenses or waive the Adviser's
own advisory fee.
(d) To
the extent the Adviser incurs any costs by assuming expenses which are an
obligation of the Portfolio as set forth herein, the Portfolio shall promptly
reimburse the Adviser for such costs and expenses, except to the extent the
Adviser has otherwise agreed to bear such expenses. To the extent the
services for which the Portfolio is obligated to pay are performed by the
Adviser, the Adviser shall be entitled to recover from the Portfolio to the
extent of the Adviser's actual costs for providing such services. In
determining the Adviser's actual costs, the Adviser may take into account an
allocated portion of the salaries and overhead of personnel performing such
services.
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8.
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Investment
Advisory
Fee.
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(a) The
Portfolio shall pay to the Adviser, and the Adviser agrees to accept, as full
compensation for all investment and advisory services furnished or provided
to
the Portfolio pursuant to this Agreement, an annual investment advisory fee
at
the rate set forth in Schedule A to this Agreement.
(b) The
investment advisory fee shall be accrued daily by the Portfolio and paid to
the
Adviser on the first business day of the succeeding month.
(c) The
initial fee under this Agreement shall be payable on the first business day
of
the first month following the effective date of this Agreement and shall be
prorated as set forth below. If this Agreement is terminated prior to
the end of any month, the fee to the Adviser shall be prorated for the portion
of any month in which this Agreement is in effect which is not a complete month
according to the proportion which the number of calendar days in the month
during which the Agreement is in effect bears to the number of calendar days
in
the month, and shall be payable within ten (10) days after the date of
termination.
(d) The
fee payable to the Adviser under this Agreement will be reduced to the extent
of
any receivable owed by the Adviser to the Portfolio and as required under any
expense limitation applicable to the Portfolio.
(e) The
Adviser voluntarily may reduce any portion of the compensation or reimbursement
of expenses due to it pursuant to this Agreement and may agree to make payments
to limit the expenses which are the responsibility of the Portfolio under this
Agreement. Any such reduction or payment shall be applicable only to
such specific reduction or payment and shall not constitute an agreement to
reduce any future compensation or reimbursement due to the Adviser hereunder
or
to continue future payments. Any such reduction will be agreed to
prior to accrual of the related expense or fee and will be estimated daily
and
reconciled and paid on a monthly basis.
(f) Any
fee withheld or voluntarily reduced and any Portfolio expense absorbed by the
Adviser voluntarily or pursuant to an agreed upon expense cap shall be
reimbursed by the Portfolio to the Adviser, if so requested by the Adviser,
no
later than the third fiscal year succeeding the fiscal year of the withholding,
reduction or absorption if the aggregate amount actually paid by the Portfolio
toward the operating expenses for such fiscal year (taking into account the
reimbursement) do not exceed the applicable limitation on Portfolio
expenses. Such reimbursement may not be paid to the Adviser for any
fiscal year prior to the Portfolio’s payment of such year’s current expenses if
such practice would require the Adviser to waive, reduce or absorb current
Portfolio expenses in excess of the expense limitation in effect at the time
the
unreimbursed expense was actually incurred.
(g) The
Adviser may agree not to require payment of any portion of the compensation
or
reimbursement of expenses otherwise due to it pursuant to this
Agreement. Any such agreement shall be applicable only with respect
to the specific items covered thereby and shall not constitute an agreement
not
to require payment of any future compensation or reimbursement due to the
Adviser hereunder.
9. No
Shorting; No Borrowing. The Adviser
agrees that neither it nor any of its officers or employees shall take any
short
position in the shares of the Portfolio. This prohibition shall not
prevent the purchase of such shares by any of the officers or employees of
the
Adviser or any trust, pension, profit-sharing or other benefit plan for such
persons or affiliates thereof, at a price not less than the net asset value
thereof at the time of purchase, as allowed pursuant to rules promulgated under
the Investment Company Act. The Adviser agrees that neither it nor
any of its officers or employees shall borrow from the Portfolio or pledge
or
use the Portfolio's assets in connection with any borrowing not directly for
the
Portfolio's benefit. For this purpose, failure to pay any amount due
and payable to the Portfolio for a period of more than thirty (30) days shall
constitute a borrowing.
10. Conflicts
with the Trust’s Governing Documents and Applicable Laws.
Nothing herein contained shall be deemed to
require the Portfolio to
take any action contrary to the Trust’s Certificate of Trust, as amended,
Declaration of Trust, as amended, Bylaws, as amended, or any applicable statute
or regulation, or to relieve or deprive the Board of Trustees of its
responsibility for and control of the conduct of the affairs of the
Portfolio. In this connection, the Adviser acknowledges that the
Board of Trustees retains ultimate plenary authority over the Portfolio and
may
take any and all actions necessary and reasonable to protect the interests
of
shareholders.
11. Reports
and Access. The Adviser agrees to
supply such information to the Administrator and to permit such compliance
inspections by the Administrator as shall be reasonably necessary to permit
the
Administrator to satisfy its obligations and respond to the reasonable requests
of the Trustees.
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12.
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Adviser's
Liabilities and
Indemnification.
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(a) The
Adviser shall have responsibility for the accuracy and completeness (and
liability for the lack thereof) of the statements in the Portfolio's offering
materials (including the prospectus, the statement of additional information,
advertising and sales materials), except for information supplied by the
Administrator or the Portfolio or another third party for inclusion
therein.
(b) The
Adviser shall be liable to the Portfolio for any loss (including brokerage
charges) incurred by the Portfolio as a result of any improper investment made
by the Adviser.
(c) In
the absence of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the obligations or duties hereunder on the part of the Adviser,
the
Adviser shall not be subject to liability to the Portfolio or to any shareholder
of the Portfolio 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 by the Portfolio.
(d) Each
party to this Agreement shall indemnify and hold harmless the other party and
the shareholders, directors, trustees, officers and employees of the other
party
(any such person, an "Indemnified Party") against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating and defending
any alleged loss, liability, claim, damage or expenses and reasonable counsel
fees incurred in connection therewith) arising out of the Indemnified Party's
performance or nonperformance of any duties under this Agreement provided,
however, that nothing herein shall be deemed to protect any Indemnified Party
against any liability to which such Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties under this Agreement.
(e) No
provision of this Agreement shall be construed to protect any Trustee or officer
of the Trust, or director or officer of the Adviser, from liability
in violation of Sections 17(h) and (i) of the Investment Company
Act.
13. Non-Exclusivity;
Trading for Adviser's Own Account. The
Portfolio's employment of the Adviser is not an exclusive
arrangement. The Portfolio may from time to time employ other
individuals or entities to furnish it with the services provided for
herein. Likewise, the Adviser may act as investment adviser for any
other person, and shall not in any way be limited or restricted from having,
selling or trading any securities for its or their own accounts or the accounts
of others for whom it or they may be acting, provided, however, that the Adviser
expressly represents that it will undertake no activities which will adversely
affect the performance of its obligations to the Portfolio under this Agreement;
and provided further that the Adviser will adhere to a code of ethics governing
employee trading and trading for proprietary accounts that conforms to the
requirements of the Investment Company Act and the Investment Advisers Act
of
1940 and has been approved by the Board of Trustees of the
Trust.
14. Term.
This Agreement shall remain in effect with respect to the
Portfolio until April 30, 2008, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for
additional periods not exceeding one (1) year so long as such continuation
is
approved for the Portfolio at least annually by (i) the Board of Trustees or
by
the vote of a majority of the outstanding voting securities of the Portfolio
and
(ii) the vote of a majority of the Trustees of the Portfolio who are not parties
to this Agreement nor interested persons thereof, cast in person at a meeting
called for the purpose of voting on such approval. The terms
"majority of the outstanding voting securities" and "interested persons" shall
have the meanings as set forth in the Investment Company Act.
15. Termination;
No Assignment.
(a) This
Agreement may be terminated by the Portfolio at any time without payment of
any
penalty, by the Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio, upon sixty (60) days' written notice to
the
Adviser, and by the Adviser upon sixty (60) days' written notice to the
Portfolio. In the event of a termination, the Adviser shall cooperate
in the orderly transfer of the Portfolio's affairs and, at the request of the
Board of Trustees, transfer any and all books and records of the Portfolio
maintained by the Adviser on behalf of the Portfolio.
(b) This
Agreement shall terminate automatically in the event of any transfer or
assignment thereof, as defined in the Investment Company Act.
16. Severability. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute or rule, or shall be otherwise rendered invalid, the remainder
of this Agreement shall not be affected thereby.
17. Captions. The
captions in this Agreement are included for convenience of reference only and
in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
18. Governing
Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York without
giving effect to the conflict of laws principles thereof; provided that nothing
herein shall be construed to preempt, or to be inconsistent with, any federal
law, regulation or rule, including the Investment Company Act and the Investment
Advisers Act of 1940 and any rules and regulations promulgated
thereunder.
IN
WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed by their
duly
authorized officers, all on the day and year first above written.
| KINETICS PORTFOLIOS TRUST | KINETICS ASSET MANAGEMENT, INC. |
| on behalf of its series, |
| By: /s/ Xxxxx X. Xxxxx | By: /s/ Xxx Xxxxxxx |
| Name: Xxxxx X. Xxxxx | Name: Xxx Xxxxxxx |
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Title:
President
|
Title:
Assistant Secretary
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