EXHIBIT 5(B)
Investment Advisory Agreement
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(Tax-Exempt Portfolio)
(S&P 100 Plus Portfolio)
(Government Portfolio)
(Wisconsin Tax-Exempt Portfolio)
(Select Value Portfolio)
ASSIGNMENT AND CONSENT
THIS ASSIGNMENT AND CONSENT ("Assignment") is made as of this 31st day of
January, 1996 by and among PRINCIPAL PRESERVATION PORTFOLIOS, INC. ("Principal
Preservation"), a Maryland corporation which is a series, open-end, management
investment company registered under the Investment Company Act of 1940, X.X.
XXXXXXX AND COMPANY ("X.X. Xxxxxxx"), a registered investment adviser which
presently serves as the investment adviser to Principal Preservation, and
XXXXXXX ASSET MANAGEMENT, INC. ("ZAMI"), a registered investment adviser which
presently serves as the sub-adviser of Principal Preservation.
RECITALS
WHEREAS, X.X. Xxxxxxx and ZAMI are each wholly-owned subsidiaries of The
Xxxxxxx Companies, Inc.;
WHEREAS, X.X. Xxxxxxx presently serves as investment adviser to Principal
Preservation's Tax-Exempt Portfolio, Insured Tax-Exempt Portfolio, Government
Portfolio, S&P 100 Plus Portfolio, Balanced Portfolio, Wisconsin Tax-Exempt
Portfolio and Select Value Portfolio pursuant to the terms of a May 1, 1989
Investment Advisory Agreement by and between Principal Preservation and X.X.
Xxxxxxx, and also presently serves as investment adviser to Principal
Preservation's Dividend Achievers Portfolio pursuant to the terms of a December
15, 1986 Investment Advisory Agreement by and between Principal Preservation and
X.X. Xxxxxxx, (together "the Investment Advisory Agreements");
WHEREAS, pursuant to the terms of a Sub-Advisory Agreement, dated May 1,
1992, by and among Principal Preservation, X.X. Xxxxxxx and ZAMI (the "Sub-
Advisory Agreement"), ZAMI presently serves as sub-adviser to Principal
Preservation's Tax-Exempt Portfolio, Insured Tax-Exempt Portfolio, Government
Portfolio, Dividend Achievers Portfolio, Balanced Portfolio and Wisconsin Tax-
Exempt Portfolio;
WHEREAS, in connection with a restructuring and realignment, The Xxxxxxx
Companies, Inc. desires to house all of its investment advisory services within
ZAMI, and therefore desires to transfer and assign the Investment Advisory
Agreements from X.X. Xxxxxxx to ZAMI without otherwise affecting any of the
terms and conditions pursuant to which, or the manner in which, investment
advisory services presently are provided to Principal Preservation;
WHEREAS, in order to effect this realignment, it is necessary for X.X.
Xxxxxxx to assign to ZAMI each of the Investment Advisory Agreements, and for
ZAMI to agree to assume and perform all of X.X. Xxxxxxx'x duties and obligations
under the Investment Advisory Agreement;
WHEREAS, upon such assignment and assumption, the Sub-Advisory Agreement
will become superfluous and of no utility, and therefore should be terminated;
WHEREAS, all of the parties hereto agree and consent to the assignment of
the Investment Advisory Agreements and to the related termination of the Sub-
Advisory Agreement, subject to the terms and conditions of this Assignment;
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by all parties hereto, the parties hereto
agree as follows:
1. ASSIGNMENT OF INVESTMENT ADVISORY AGREEMENTS. Effective at the close
of business on January 31, 1996, X.X. Xxxxxxx hereby assigns, conveys, and
transfers all of its rights, duties and obligations under the Investment
Advisory Agreements, and ZAMI agrees to become bound by the terms and conditions
of each of the Investment Advisory Agreements and to assume, discharge, perform
and become liable for the performance of all of X.X. Xxxxxxx'x duties and
obligations under such Investment Advisory Agreements. Principal Preservation
hereby consents to such assignment and assumption. Accordingly, from and after
the close of business on January 31, 1996, the Investment Advisory Agreements
shall continue in full force and effect with all duties and obligations of X.X.
Xxxxxxx thereunder being deemed duties and obligations of ZAMI as though
Principal Preservation had executed such Investment Advisory Agreements with
ZAMI, and all rights of X.X. Xxxxxxx under such Investment Advisory Agreements
shall be deemed rights of ZAMI enforceable by ZAMI. In short, ZAMI shall become
the principal investment adviser to each of Principal Preservation's Tax-Exempt,
Insured Tax-Exempt, Government, S&P 100 Plus, Dividend Achievers, Balanced,
Select Value and Wisconsin Tax-Exempt Portfolios under the terms of the
Investment Advisory Agreements, and each and every reference to X.X. Xxxxxxx in
the Investment Advisory Agreements shall be deemed instead a reference to ZAMI.
2. EFFECT OF ASSIGNMENTS. The parties acknowledge and intend that,
because (among other factors) X.X. Xxxxxxx and ZAMI are under the common control
of The Xxxxxxx Companies, Inc., this Assignment and Consent does not result in
an "assignment" (as that term is defined in the Investment Company Act of 1940)
of the Investment Advisory Agreements which would bring about their automatic
termination.
3. TERMINATION OF SUB-ADVISORY AGREEMENT. From and after the close of
business on January 31, 1996, the parties hereto agree that the Sub-Advisory
Agreement shall be terminated and of no further force and effect.
Notwithstanding such termination, each party to the Sub-Advisory Agreement shall
be responsible to the other parties thereto for performance of its obligations
thereunder up to and through the effective time of such termination.
IN WITNESS WHEREOF, each of the parties hereto has caused this Assignment
to be executed on its behalf by its duly authorized officer as of the date and
year written above.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By: /s/ X. X. Xxxxxxx
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X. X. Xxxxxxx, President
X.X. XXXXXXX AND COMPANY
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx, President
XXXXXXX ASSET MANAGEMENT, INC.
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, President and CEO
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of May, 1989, by and between PRINCIPAL
PRESERVATION PORTFOLIOS, INC. (the "Fund"), a Maryland corporation, and X.X.
XXXXXXX AND COMPANY (the "Advisor").
W I T N E S S E T H:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
1. IN GENERAL
The Fund hereby appoints the Advisor to act as investment advisor with
respect to each series of its common stock listed on Exhibit A attached hereto.
Each series is referred to herein as a "Portfolio," and collectively as the
"Portfolios." The Advisor agrees to provide professional investment management
with respect to the investment of the assets of each Portfolio and to supervise
and arrange the purchase and sale of securities held in the portfolio of each
Portfolio and generally administer the affairs of the Fund. The advisor may
engage, on behalf of the Fund or any Portfolio and with the required consent of
the shareholders thereof, the services of a Sub-Advisor, subject to any
limitations imposed by the Investment Company Act of 1940 (the "Act"). It is
understood that the Fund may create one or more additional series of shares and
that, if it does so, this Agreement may be amended to include additional series
under the terms of this Agreement.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO MANAGEMENT OF THE
FUND
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Directors of the Fund, the
Advisor shall:
(i) Decide what securities shall be purchased or sold by each
Portfolio and when; and
(ii) Arrange for the purchase and the sale of securities held in
the portfolio of each Portfolio by placing purchase and sale
orders for each Portfolio.
(b) Any purchases or sales of portfolio securities on behalf of the
Portfolios shall at all times conform to, and be in accordance with,
any requirements imposed by: (1) the provisions of the Act and of any
rules or regulations in force thereunder; (2) any other applicable
provisions of law; (3) the provisions of the Articles of Incorporation
and By-Laws of the Fund as amended from time to time; (4) any policies
and determinations of the Board of Directors of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its registration
statement under the Act, or as amended by the shareholders of the
Fund.
(c) The Advisor shall also administer the affairs of the Fund and, in
connection therewith, shall be responsible for (i) maintaining the
Fund's books and records, (other than financial or accounting books
and records maintained by any accounting services agent and such
records maintained by the Fund's custodian or transfer agent); (ii)
overseeing the Fund's insurance relationships; (iii) preparing for the
Fund (or assisting counsel and/or auditors in the preparation of) all
required tax returns, proxy statements and reports to the Fund's
shareholders and Directors and reports to and other filings with the
Securities and Exchange Commission and any other governmental agency
(the Fund agreeing to supply or cause to be supplied to the Advisor
all necessary financial and other information in connection with the
foregoing); (iv) preparing such applications and reports as may be
necessary to register or maintain the Fund's registration and/or the
registration of the shares of the Portfolios under the securities or
"blue sky" laws of the various states selected by the Fund's
Distributor (a Portfolio or Portfolios agreeing to pay all filing fees
or other similar fees in connection therewith); (v) responding to all
inquiries or other communications of shareholders, if any, which are
directed to the Advisor, or if any such inquiry or communication is
more properly to be responded to by the Fund's custodian, transfer
agent or accounting services agent, overseeing their response thereto;
(vi) overseeing all relationships between the Fund and its
custodian(s), transfer agent(s) and accounting services agent(s),
including the negotiation of agreements and the supervision of the
performance of such agreements; and (vii) authorizing and directing
any of the Advisor's directors, officers and employees who may be
elected as Directors or officers of the Fund to serve in the
capacities in which they are elected. All services to be furnished by
the Advisor under this Agreement may be furnished through the medium
of any such Directors, officers or employees of the Advisor.
(d) The Advisor shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties ("disabling conduct") hereunder on the part of
the Advisor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity
affiliated with the Advisor) the Advisor 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, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement related, except to the extent
specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation
for services. Except for such disabling conduct, the Fund shall
indemnify the Advisor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity
affiliated with the Advisor) from any liability arising from the
Advisor's conduct under this Agreement to the extent permitted by the
Fund's Articles of Incorporation, By-Laws and applicable law.
(e) Nothing in this Agreement shall prevent the Advisor or any affiliated
person (as defined in the Act) of the Advisor from acting as
investment adviser or manager and/or principal underwriter for any
other person, firm or corporation and shall not in any way limit or
restrict the Advisor or any such affiliated person from buying,
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 Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement.
(f) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Fund's Registration
Statement under the Act or the Securities Act of 1933 except for
information supplied by the Advisor for inclusion therein.
3. BROKER-DEALER RELATIONSHIPS
In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and the sale of securities held by each
Portfolio by placing purchase and sale orders for the Portfolio, the Advisor
and/or any Sub-Advisor shall select such broker-dealers ("brokers") as shall, in
the Advisor's or Sub-Advisor's judgment, implement the policy of the Fund to
achieve "best execution," i.e., prompt and efficient execution at the most
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favorable securities price. In making such selection, the Advisor and/or Sub-
Advisor is authorized to consider the reliability, integrity and financial
condition of the broker. The Advisor and/or Sub-Advisor is also authorized to
consider whether the broker provides brokerage and/or research services to the
Fund and/or other accounts of the Advisor or Sub-Advisor. The commissions paid
to such brokers may be higher than another broker would have charged if a good
faith determination is made by the Advisor and/or Sub-Advisor that the
commission is reasonable in relation to the services provided, viewed in terms
of either that particular transaction or the Advisor's or Sub-Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion. The Advisor and/or Sub-Advisor shall use its judgment in
determining that the amount of commissions paid are reasonable in relation to
the value of brokerage and research services provided and need not place or
attempt to place a specific dollar value on such services or on the portion of
commission rates reflecting such services. To demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the Advisor and/or Sub-Advisor shall be prepared to show that
commissions paid (i) were for purposes contemplated by this Agreement; (ii)
provide lawful and appropriate assistance to the Advisor and/or Sub-Advisor in
the performance of its decision-making responsibilities; and (iii) were within a
reasonable range as compared to the rates charged by qualified brokers to other
institutional investors as such rates may become known from available
information. The Fund recognizes that, on any particular transaction, a higher
than usual commission may be paid due to the difficulty of the transaction in
question. The Advisor and/or Sub-Advisor is also authorized to consider sales
of shares as a factor in the selection of brokers to execute brokerage and
principal transactions, subject to the requirements of "best execution," as de-
fined above.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Fund, at the Advisor's expense,
with all office space and facilities, and equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Advisor will
also pay all compensation of all Directors, officers and employees of the Fund
who are affiliated persons of the Advisor. All costs and expenses not expressly
assumed by the Advisor under this Agreement shall be paid by the Fund,
including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Directors other than those affiliated with the Advisor; (v) legal and audit
expenses; (vi) fees and expenses of the Fund's custodian, shareholder servicing
or transfer agent and accounting services agent; (vii) expenses incident to the
issuance of its shares, including stock certificates and issuance of shares on
the payment of, or reinvestment of, dividends; (viii) fees and expenses incident
to the registration under Federal or state securities laws of the Fund or its
shares; (ix) expenses of preparing, printing and mailing reports and notices,
proxy material and prospectuses to shareholders of the Fund; (x) all other
expenses incidental to holding meetings of the Fund's shareholders; (xi) dues or
assessments of or contributions to the Investment Company Institute or any
successor or other industry association; (xii) such non-recurring expenses as
may arise, including litigation affecting the Fund and the legal obligations
which the Fund may have to indemnify its officers and Directors with respect
thereto; and (xiii) all expenses which the Fund or a Portfolio agrees to bear in
any distribution agreement or in any plan adopted by the Fund and/or a Portfolio
pursuant to Rule 12b-1 under the Act.
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees to accept
as full compensation for all services rendered by the Advisor as such,
an annual management fee, payable monthly and computed on the value of
the average daily net asset value of the Portfolio as shown on Exhibit
A attached hereto.
(b) In the event the expenses of a Portfolio (including the fees of the
Advisor and amortization of organization expenses but excluding
interest, taxes, brokerage commissions, extraordinary expenses and
sales charges and distribution fees) for any fiscal year exceed the
limits set by applicable regulations of state securities commissions,
the Advisor will reduce its fee by the amount of such excess. Any
such reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be reduced
or postponed or, if necessary, a refund will be made to a Portfolio so
that at no time will there be any accrued but unpaid liability under
this expense limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect as to each Portfolio on the date
set forth on Exhibit A attached hereto and shall, unless terminated as
hereinafter provided, continue in effect until May 1, 1991 and
thereafter from year to year, but only so long as such continuance is
specifically approved at least annually by: (i) the vote of a majority
of the Directors who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party cast in person at a
meeting called for the purpose of voting on such approval; and (ii)
either by a vote of a majority of the Board of Directors or by the
vote of the holders of a "majority" (as defined in the Act) of the
outstanding voting securities of the Fund (or with respect to any
Portfolio, by the vote of a majority of the outstanding shares of such
Portfolio).
(b) This Agreement may be terminated by the Advisor at any time without
penalty upon giving the Fund sixty (60) days' written notice (which
notice may be waived by the Fund) and may be terminated by the Fund at
any time without penalty upon giving the Advisor sixty (60) days'
written notice (which notice may be waived by the Advisor), provided
that such termination by the Fund shall be directed or approved by the
vote of a majority of all of its Directors in office at the time or by
the vote of the holders of a majority (as defined in the Act) of the
voting securities of the Fund, or with respect to any Portfolio by the
vote of a majority of the outstanding shares of such Portfolio. This
Agreement shall automatically terminate in the event of its assignment
(as defined in the Act).
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by duly authorized persons and their seals to be hereunto
affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
/s/ X. X. Xxxxxxx
By:
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X. X. Xxxxxxx, President
X.X. XXXXXXX AND COMPANY
/s/ X. X. Xxxxxxx
By:
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X. X. Xxxxxxx, President
EXHIBIT A TO THE
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
1. TAX-EXEMPT PORTFOLIO.
a. Effective Date: May 1, 1989
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.60
of 1% of the average daily net assets of the Portfolio up to $50
million, reducing to 0.50 of 1% for the next $200 million of average
daily net assets, and 0.40 of 1% of average daily net assets in excess
of $250 million.
2. GOVERNMENT PORTFOLIO.
a. Effective Date: May 1, 1989
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.60
of 1% of the average daily net assets of the Portfolio up to $50
million, reducing to 0.50 of 1% for the next $200 million of average
daily net assets, and 0.40 of 1% of average daily net assets in excess
of $250 million.
3. S&P 100 PLUS PORTFOLIO.
a. Effective Date: May 1, 1996.
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of
0.575 of 1% of average daily net assets of the Portfolio up to $20
million, 0.45 of 1% on the next $30 million, 0.40 of 1% on the next
$50 million, 0.35 of 1% on the next $400 million and 0.30 of 1% on
assets over $500 million.
4. WISCONSIN TAX-EXEMPT PORTFOLIO.
a. Effective Date: June 13, 1994
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.50
of 1% of the first $250 million of the average daily net assets of the
Portfolio, and 0.40 of 1% on average daily net assets in excess of
$250 million.
5. SELECT VALUE PORTFOLIO.
a. Effective Date: August 24, 1994
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.75
of 1% of the first $250 million of the average daily net assets of the
Portfolio, and 0.65 of 1% on average daily net assets in excess of
$250 million.
