EXHIBIT A
INVESTMENT ADVISORY CONTRACT
INVESTMENT ADVISORY CONTRACT, made as of this 29th day of May,
1997 between the CLIPPER FUND, INC, a California corporation
(hereinafter called the "Fund"), and PF Newco, Inc., DBA PACIFIC
FINANCIAL RESEARCH (hereinafter called the "Investment Adviser"),
a Massachusetts Corporation, a wholly owned subsidiary of United
Asset Management Corporation.
WHEREAS, the Fund is organized as an open-end, non-
diversified management company, registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), for the purpose
of investing its assets in securities, and
WHEREAS, the Fund desires to retain the Investment Adviser
to render various investment advisory, operational, statistical,
accounting and clerical services to the Fund, and the Investment
Adviser is willing to render such services.
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto, intending to be legally
bound, mutually covenant and agree as follows:
1. Appointment of Investment Adviser. Effective immediately,
the Fund hereby appoints the Investment Adviser to act as
investment adviser to the Fund for the period and on the
terms set forth herein. The Investment Adviser accepts such
appointment and agrees to render the services set forth herein,
for the compensation provided herein.
2. Duties of the Fund. The Fund shall at all times keep
the Investment Adviser fully informed of the securities owned,
the funds available and to become available for investment, and
generally as to the condition of its affairs. The Fund shall
furnish the Investment Adviser with a signed copy of each report
prepared by the Fund's independent public accountants and with
such other documents and information as the Investment Adviser
may from time to time reasonably request.
3. Duties of Investment Adviser. Subject to the supervision
of the Board of Directors of the Fund, the Investment Adviser
shall manage the investment operations of the Fund and the
composition of its portfolio, including the purchase, retention
and disposition of securities, in accordance with the Fund's
investment objectives and policies as stated in the Fund's
Prospectus and Statement of Additional Information (as amended or
supplemented from time to time) and subject to the following
understandings:
(a) The Investment Adviser shall provide supervision of the
Fund's investments, furnish a continuous investment program
for the Fund, determine from time to time what securities will be
purchased, retained or sold by the Fund and what portion of the
assets will be invested or held uninvested as cash.
(b) The Investment Adviser shall use the same skill and
care in the management of the portfolio of the Fund as it uses
in the administration of other portfolios for which it has
investment responsibility.
(c) The Investment Adviser, in the performance of its
duties and obligations under this Contract, shall act in
conformity with the Fund's Articles of Incorporation, By-Laws,
Prospectus and Statement of Additional Information and shall
conform to and comply with the requirements of the 1940 Act and
all other applicable Federal and state laws and regulations.
(d) The Investment Adviser, its officers and employees shall
not make loans for the purpose of purchasing or carrying shares
of capital stock of the Fund or make loans to the Fund.
(e) The Investment Adviser shall place orders for the purchase or
sale of securities either directly with the issuer or with any
broker or dealer who specializes in the securities owned
by the Fund. In providing the Fund with investment supervision,
it is recognized that the Investment Adviser will give primary
consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Investment
Adviser may consider the financial responsibility, research and
investment information and other services provided by brokers or
dealers who may effect or be a party to any such transaction or
other transactions to which other clients of the Investment
Adviser may be a party. It is understood that it is desirable for
the Fund that the Investment Adviser have access to supplemental
investment and market research and security and economic analysis
provided by brokers, and that the allocation of Fund brokerage to
such brokers in exchange for access to such research and analysis
may result in higher brokerage costs to the Fund than would be
the case if brokerage were allocated exclusively on the basis of
seeking the most favorable price and efficient execution.
Therefore, the Investment Adviser is authorized to pay higher
brokerage commissions for the purchase and sale of securities for
the Fund to brokers who provide such research and analysis,
subject to review by the Fund's Board of Directors from time to
time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Investment Adviser in connection
with its services to other clients.
On occasions when the Investment Adviser deems the purchase
or sale of a security to be in the best interest of the Fund as
well as other clients, the Investment 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 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 Investment Adviser in the manner
it considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to such other clients.
(f) The Investment Adviser shall provide all statistical,
economic and financial information reasonably required by the
Fund and reasonably available to the Investment Adviser; and
shall provide persons satisfactory to the Fund's Board of
Directors to act as officers and employees of the Fund. Such
officers and employees, as well as certain directors of the Fund,
may be directors, officers or employees of the Investment Adviser.
(g) The Investment Adviser shall maintain all books and
records required by paragraph (b) (5), (6), (7), (9), (10) and
(11) and paragraph (f) of Rule 31a-1 under the 1940 Act with
respect to the Fund's securities transactions and shall render to
the Fund's Board of Directors such periodic and special reports
as the Board may reasonably request.
(h) The Investment Adviser shall provide the Custodian of
the Fund's securities on each business day with a list of trades
for that day.
(i) The Investment Adviser may act as an investment adviser
to other persons, firms or corporations (including investment
companies), and has numerous Advisory clients besides the Fund.
4. Expenses.
(a) The Investment Adviser is responsible for the
following expenses incurred by the Fund: (i) the compensation of
any of the Fund's directors, officers and employees who are
interested persons of the Investment Adviser or its affiliates
(other than by reason of being directors, officers or employees
of the Fund), and (ii) expenses of printing and distributing the
Fund's Prospectus, Statement of Additional Information and
periodic financial reports to persons other than current
shareholders of the Fund, and sales and advertising materials.
(b) The Fund is responsible and has assumed the obligation
for payment of all of its other expenses including (i) brokerage
and commission expenses, (ii) Federal, state or local taxes,
including issue and transfer taxes, incurred by or levied on the
Fund, (iii) interest charges on borrowings, (iv) compensation of
any of the Fund's directors, officers or employees who are not
interested persons of the Investment Adviser or its affiliates
(other than by reason of being directors, officers or employees
of the Fund), (v) charges and expenses of the Fund's custodian,
transfer agent and registrar, (vi) all costs associated with
shareholders meetings and the preparation and dissemination of
proxy solicitation materials, except for meetings called solely
for the Investment Adviser's benefit, (vii) legal and auditing
expenses, (viii) payment of all investment Advisory fees
(including the fee payable to the Investment Adviser under this
Contract), (ix) insurance premiums on the Fund's property and
personnel, including the fidelity bond and liability insurance
for officers and directors, (x) printing and mailing of all
reports, including semi-annual and annual reports, prospectuses
and statements of additional information to existing shareholders,
(xi) fees and expenses of registering the Fund's shares under the
Federal securities laws and of qualifying its shares under
applicable state securities laws, including expenses attendant
upon renewing and increasing such registrations and
qualifications, (xii) accounting and bookkeeping costs and
expenses necessary to maintain the Fund's books and records as
required by the 1940 Act, including the pricing of the Fund's
portfolio securities and the calculation of its daily net asset
value, (xiii) organizational expenses and (xiv) any extraordinary
and non-recurring expenses, except as otherwise prescribed herein.
(c) To the extent the Investment Adviser incurs any costs
or performs any services which are an obligation of the Fund, as
set forth herein, the Fund shall promptly reimburse the
Investment Adviser for such costs and expenses. To the extent the
services for which the Fund is obligated to pay are performed by
the Investment Adviser, the Investment Adviser shall be entitled
to recover from the Fund only to the extent of the Investment
Adviser's actual costs for such services, including the costs of
personnel, office space, and other facilities applicable to the
furnishing of such services.
5. Books and Records. The Investment Adviser agrees that
all records which it maintains for the Fund are the property of
the Fund, and it will surrender promptly to the Fund any such
records upon the Fund's request. The Investment Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under
the 1940 Act any such records as are required to be maintained
by Rule 31a-1 under the 1940 Act.
6. Investment Adviser's Fee. For the services provided by
the Investment Adviser under the Contract, the Investment Adviser
shall receive from the Fund a management fee equal to 1% per
annum of the Fund's average daily net asset values. The
management fee shall be accrued daily in computing the net asset
value of a share for the purpose of determining the offering and
redemption price per share, and shall be paid to the Investment
Adviser at the end of each month. The Investment Adviser shall
reduce the fees payable to it under this Contract to the extent
required under the most stringent expense limitation applicable
to the Fund imposed by any state in which shares of beneficial
interest of the Fund are qualified for sale. The Investment
Adviser may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Contract and
may agree to pay expenses which are the responsibility of the
Fund under this Contract. 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 Investment Adviser hereunder or to
continue future payments.
7. Limitation of Liability. The Investment Adviser shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matter to
which this Contract relates, except for liability resulting from
willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it
of its obligations and duties under this Contract. The Fund shall
indemnify the Investment Adviser from and against liability,
including, but not limited to, expenses incurred in defending
against the same, except for liability to which the Investment
Adviser is subject pursuant to the preceding sentence, to the
extent permitted by applicable law.
The obligations of the Fund are not binding upon any of the
Directors, officers or shareholders of the Fund individually, but
are binding only upon the assets and property of the Fund, and
no resort shall be had to the private property of any such
Director, officer or shareholder for the satisfaction of any
obligation or claim hereunder.
8. Duration and Termination. This Contract, unless sooner
terminated as provided herein, shall continue in effect until
March 31, 1998. This Contract shall continue in effect thereafter
for successive periods not exceeding one year, provided that such
continuance is specifically approved at least annually (i) by the
Fund's Board of Directors or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the 0000
Xxx) and (ii) by a majority of the Fund's Board of Directors who
are not parties to the Contract or interested persons of any such
party, by vote cast in person at a meeting called for the purpose
of voting on such approval.
The Contract is terminable on 60 days' written notice by
vote of a majority of the Fund's outstanding shares (as defined
in the 0000 Xxx) or by vote of a majority of the Fund's entire
Board of Directors, or by the Investment Adviser on 60 days
written notice, and shall automatically terminate in the event of
its assignment (as defined in the 1940 Act.)
9. Amendment of Contract. This Contract constitutes the
entire agreement between the parties hereto. This Contract may be
amended only with the approval of the holders of a majority of
the outstanding shares of the Fund, as defined in the 1940 Act.
10. Governing Law. This Contract shall be governed by and
construed in accordance with the laws of the State of California,
without reference to principles of conflicts of law; provided,
however, that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of
1940, or any rule or regulation of the Securities and Exchange
Commission thereunder.
11. Miscellaneous. The captions in this Contract are
included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their
construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year above written.
CLIPPER FUND, INC.
By:/s/ Xxxxx X. Xxxxxx
Chairman and President
ATTEST:/s/ Xxxxxxx Xxxxx
Secretary/Treasurer
PF NEWCO, INC., DBA
PACIFIC FINANCIAL RESEARCH
(CORPORATE SEAL) By:/s/ Xxxxx X. Xxxxxx
President
ATTEST:/s/ Xxxxx X. Xxxxx
Secretary/Chief Financial Officer
