KINETICS MUTUAL FUNDS, INC. INVESTMENT ADVISORY AGREEMENT
KINETICS
MUTUAL FUNDS, INC.
THIS INVESTMENT ADVISORY
AGREEMENT is made as of the 28 December 2009, by and between KINETICS
MUTUAL FUNDS, INC., a Maryland corporation (the "Company") on behalf of the
Tactical Paradigm Fund (the "Fund") and KINETICS ASSET MANAGEMENT, INC., a New
York corporation (the "Adviser").
W I T N E S S E T H
:
WHEREAS, the Company 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 Company, on
behalf of the Fund, desires to retain the Adviser to render advice and services
to the Fund 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 Company
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
Fund for the period and on the terms set forth in this Agreement, subject to the
supervision and direction of the Board of Directors.
2.
Duties of
Adviser.
(a) General
Duties. The Adviser shall act as investment adviser to the
Fund and shall supervise investments of the Fund in accordance with the
investment objective, policies and restrictions of the Fund as set forth in the
Fund's governing documents, including, without limitation, the Fund'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 Directors 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. The Adviser shall be free to retain a Subadviser (“Subadviser”)
for purposes of hedging a portion of the Fund in accordance with the Fund’s
investment objective and strategy.
Without limiting the generality of the
foregoing, the Adviser shall: (i) furnish the Fund with advice and
recommendations with respect to the investment of the Fund's assets and the
purchase and sale of fund securities for the Fund, 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 Fund, subject to the ultimate
supervision and direction of the Board of Directors; (iii) vote proxies for the
Fund, file ownership reports under Section 13 of the Securities Exchange Act of
1934 for the Fund, and take other actions on behalf of the Fund;
(iv) maintain the books and records required to be maintained by the Fund
except to the extent arrangements have been made for such books and records to
be maintained by U.S. Bancorp Fund Services, LLC, a Wisconsin limited liability
company (the "Administrator") or another agent of the Fund; (v) furnish reports,
statements and other data on securities, economic conditions and other matters
related to the investment of the Fund's assets which the Board of Directors or
the officers of the Fund may reasonably request; and (vi) render to the Board of
Directors such periodic and special reports with respect to the Fund's
investment activities as the Board may reasonably request, including at least
one in-person appearance annually before the Board of Directors.
(b) Brokerage. The
Adviser and Subadviser shall be responsible for decisions to buy and sell
securities for the Fund, for broker-dealer selection, and for negotiation of
brokerage commission rates, provided that the Adviser and Subadviser 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
Directors. The Adviser and Subadviser'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 and Subadviser 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 Fund on a continuing
basis. The price to the Fund 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 fund execution services offered.
Subject to such policies as the Board
of Directors may determine, the Adviser or Subadviser 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 Fund to pay a broker or
dealer that provides (directly or indirectly) brokerage or research services to
the Adviser or Subadviser an amount of commission for effecting a fund
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Adviser or Subadviser
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 and Subadviser 's overall responsibilities with respect to the
Fund. The Adviser or Subadviser is further authorized to allocate the
orders placed by it on behalf of the Fund to such brokers or dealers who also
provide research or statistical material, or other services, to the Fund, the
Adviser, Subadviser or any affiliate of either. Such allocation shall
be in such amounts and proportions as the Adviser or Subadviser shall determine,
and the Adviser or Subadviser shall report on such allocations regularly to the
Fund, indicating the broker-dealers to whom such allocations have been made and
the basis therefor. The Adviser or Subadviser is also authorized to
consider sales of shares as a factor in the selection of brokers or dealers to
execute fund 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.
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On occasions when the Adviser or
Subadviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as of other clients (to the extent that the Adviser or
Subadviser 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 or Subadviser
in the manner it considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
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3.
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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 Fund 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 of 1940, and any
other applicable state and/or self-regulatory organization
regulations.
4.
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 Fund in any way, or in any way be deemed
an agent for the Fund. It is expressly understood and agreed that the
services to be rendered by the Adviser to the Fund 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.
5.
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
Directors may desire and reasonably request.
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6.
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Expenses.
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(a) With
respect to the operation of the Fund, the Adviser shall be responsible for (i)
providing the personnel, office space and equipment reasonably necessary for the
investment management of the Fund, and (ii) the costs of any special Board of
Directors meetings or shareholder meetings convened for the primary benefit of
the Adviser. If the Adviser has agreed to limit the operating
expenses of the Fund, the Adviser shall also be responsible on a monthly basis
for any operating expenses that exceed the agreed upon expense
limitation.
(b) The
Fund is responsible for and has assumed the obligation for payment of all of its
expenses, other than as stated in Subparagraph 6(a) above, including but not
limited to: investment advisory, administrative and
sub-administrative fees payable to the Adviser or the Sub-Administrator under
the appropriate agreements entered into with the Adviser or the
Sub-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 Fund 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 Fund's
shareholders and Board of Directors that are properly payable by the Fund;
salaries and expenses of officers and fees and expenses of members of the Board
of Directors or members of any advisory board or committee who are not members
of, affiliated with or interested persons of the Adviser or the
Sub-Administrator; insurance premiums on property or personnel of the Fund 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 Fund 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 Fund;
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 Fund 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 Fund as set forth herein, the Fund 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 Fund is obligated to pay are performed by the Adviser, the Adviser
shall be entitled to recover from the Fund 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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7.
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Investment
Advisory Fee.
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(a) The
Fund 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 Fund 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 Fund 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 Fund and as required under any expense
limitation applicable to the Fund.
(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 Fund 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 Fund expense absorbed by the Adviser
voluntarily or pursuant to an agreed upon expense cap shall be reimbursed by the
Fund 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 Fund toward the
operating expenses for such fiscal year (taking into account the reimbursement)
do not exceed the applicable limitation on Fund expenses. Such
reimbursement may not be paid to the Adviser for any fiscal year prior to the
Fund’s payment of such year’s current expenses if such practice would require
the Adviser to waive, reduce or absorb current Fund expenses in excess of the
expense limitation in effect at the time the unreimbursed expense was actually
incurred.
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(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.
8.
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 Fund. 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 Fund or pledge or use the
Fund's assets in connection with any borrowing not directly for the Fund's
benefit. For this purpose, failure to pay any amount due and payable
to the Fund for a period of more than thirty (30) days shall constitute a
borrowing.
9.
Conflicts
with the Fund's Governing Documents and Applicable Laws. Nothing herein contained
shall be deemed to require the Fund to take any action contrary to its
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 Directors of its responsibility for and control of the conduct of the
affairs of the Fund. In this connection, the Adviser acknowledges
that the Directors retain ultimate plenary authority over the Fund and may take
any and all actions necessary and reasonable to protect the interests of
shareholders.
10. Reports
and Access. The Adviser
agrees to supply such information to the Sub-Administrator and to permit such
compliance inspections by the Sub-Administrator as shall be reasonably necessary
to permit the Sub-Administrator to satisfy its obligations and respond to the
reasonable requests of the Directors.
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11.
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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 Fund's offering
materials (including the prospectus, the statement of additional information,
advertising and sales materials), except for information supplied by the
Sub-Administrator or the Fund or another third party for inclusion
therein.
(b) The
Adviser shall be liable to the Fund for any loss (including brokerage charges)
incurred by the Fund 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 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 by the Fund.
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(d) Each
party to this Agreement shall indemnify and hold harmless the other party and
the shareholders, directors, directors, 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 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 Director or
officer of the Fund, or officer of the Adviser, from liability in violation of
Sections 17(h) and (i) of the Investment Company Act.
12. Non-Exclusivity;
Trading for Adviser's Own Account. The Fund's
employment of the Adviser is not an exclusive arrangement. The Fund
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
Fund 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 Fund's Board of
Directors.
13. Term.
This Agreement shall become effective on January 1, 2010 and shall remain in
effect for a period of two (2) years, 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 Fund at least annually by (i) the Board of Directors or by the
vote of a majority of the outstanding voting securities of the Fund and (ii) the
vote of a majority of the Directors of the Fund 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.
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14. Termination;
No Assignment.
(a) This
Agreement may be terminated by the Fund at any time without payment of any
penalty, by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund, upon sixty (60) days' written notice to the
Adviser, and by the Adviser upon sixty (60) days' written notice to the
Fund. In the event of a termination, the Adviser shall cooperate in
the orderly transfer of the Fund's affairs and, at the request of the Board of
Directors, transfer any and all books and records of the Fund maintained by the
Adviser on behalf of the Fund.
(b) This
Agreement shall terminate automatically in the event of any transfer or
assignment thereof, as defined in the Investment Company Act.
15. 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.
16. 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.
17. 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.
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KINETICS
MUTUAL FUNDS, INC.
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KINETICS
ASSET MANAGEMENT, INC.
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on
behalf of its series, The Tactical Paradigm Fund
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By: /s/ Xxx
Xxxxxxx
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By: /s/ Xxxxxx
Xxxxxxxx
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Name: Xxx
Xxxxxxx
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Name: Xxxxxx
Xxxxxxxx
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Title: Vice-President
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Title: Chief
Financial Officer
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SCHEDULE
A
Annual Fee
Rate
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The
Tactical Paradigm Fund
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1.90%
of average daily net assets
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