KINETICS PORTFOLIOS TRUST INVESTMENT ADVISORY AGREEMENT
THIS
INVESTMENT ADVISORY AGREEMENT
is made
as of the 1st day of January, 2006, by and between KINETICS PORTFOLIOS TRUST,
a
Delaware business trust (the "Trust") on behalf of its series the Market
Opportunities 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. 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 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 Trustees 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 U.S. Bancorp Fund Services, LLC,
a
Wisconsin limited liability company (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 Portfolio
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.
(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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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 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 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 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.
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 Trustees 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 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 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 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 Sub-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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7.
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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.
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 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.
9. Conflicts
with the Portfolio's Governing Documents and Applicable
Laws.
Nothing
herein contained shall be deemed to require the Portfolio 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 Trustees of its responsibility for and control
of the conduct of the affairs of the Portfolio. In this connection, the Adviser
acknowledges that the Trustees retain ultimate plenary authority over the
Portfolio 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 Trustees.
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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 Portfolio'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 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 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 Portfolio, 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
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
Portfolio's Board of Trustees.
13. Term.
This
Agreement shall become effective on January 1, 2006 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
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.
14. 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.
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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on behalf of its series, The Market
Opportunities Portfolio
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KINETICS ASSET MANAGEMENT,
INC.
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| By: /s/ Xxxxx Xxxxx | By: /s/ Xxxxxx Xxxxxxxx | ||
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9
SCHEDULE
A
Annual
Fee Rate
The
Market Opportunities Portfolio 1.25%
of
average daily net assets
