INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated June 27, 1991, between FPA PARAMOUNT FUND, INC., a
Maryland corporation (hereinafter called "Paramount"), and FIRST PACIFIC
ADVISORS, INC., a Massachusetts corporation (hereinafter called the "Adviser").
W I T N E S S E T H :
WHEREAS, Paramount and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain investment
advisory and management services for Paramount.
NOW, THEREFORE, in consideration of the premises and covenants
hereinafter contained, Paramount and the Adviser agree as follows:
1. EMPLOYMENT OF ADVISER
Paramount hereby employs the Adviser to manage the investment and
reinvestment of the assets of Paramount and to administer its affairs, to the
extent described herein, subject to the supervision of the Board of Directors of
Paramount, for the period and on the terms set forth in this Agreement. The
Adviser hereby accepts such employment and agrees during such period to render
the services and to assume the obligations herein set forth. The Adviser agrees
to use its best efforts and judgment in the performance of its obligations
hereunder. The Adviser shall, for all purposes herein, be deemed an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent Paramount in any way, or otherwise be deemed
an agent of Paramount.
2. ADVISORY SERVICES
Subject to any general directions furnished by the Board of Directors
of Paramount, the Adviser agrees to formulated and implement a continuing
program for the management of the assets of Paramount and to determine from time
to time what securities or other property shall be purchased or sold by
Paramount, and the portion of its assets to be held in cash or cash equivalents,
giving due consideration to, among other things, the policies of Paramount as
expressed in Paramount's Certificate of Incorporation, By-Laws, Registration
Statement under the Investment Company Act of 1940, and amended (the "1940
Act"), Registration Statement under the Securities Act of 1933, as amended (the
"1933 Act"), as reports under the Securities Exchange Act of 1934 (the "1934
Act"), as well as to the factors affecting Paramount's status as a registered
investment company under the Internal Revenue Code of 1954, as amended. The
Adviser shall obtain and evaluate such statistical, financial, and other
information relating to the economy, industries, businesses, securities markets,
and securities as it may deem necessary or useful in the performance of its
obligations hereunder.
3. OTHER SERVICES AND EXPENSES OF ADVISER
The Adviser shall furnish to Paramount the following services and
facilities:
(a) Office space, furniture, equipment and supplies, which may
be the same as occupied or used by the Adviser;
(b) Qualified personnel for administering the affairs, managing
the investments, and preparing and maintaining the books of
account, records, reports and tax returns of Paramount,
except as specified in Section 4 hereof;
(c) Adequate facilities and qualified personnel for the
placement with broker-dealers of orders for the purchase and
sale of portfolio securities for Paramount;
(d) Members of the Adviser's organization to serve without
compensation from Paramount (except as specified otherwise
in Section 5 hereof) as officers or agents of Paramount, if
desired by Paramount;
(e) Daily determination of net assets;
(f) General purpose accounting forms, supplies, stationery and
postage and telephones and utilities relating to the
obligations of the Adviser hereunder
4. EXPENSES OF PARAMOUNT
Except to the extent expressly assumed by the Adviser herein,
Paramount will pay all costs and expenses in connection with its operations.
Without limiting the generality of the foregoing, Paramount shall pay the
following costs and expenses:
(a) Fees and charges of independent accountants, custodian and
depository and legal counsel for Paramount;
(b) Fees and charges of Paramount's transfer agent, including
the costs of maintaining Paramount's shareholder account
books and records, dividend disbursing agent and registrar,
if any;
(c) Costs of designing, printing, engraving and issuing
certificates representing shares of Paramount;
(d) Expenses, including fees and disbursements of counsel, in
connection with litigation by or against Paramount;
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(e) Taxes, including franchise, income, issue, transfer,
business license and other corporate fees payable by
Paramount to Federal, State or other governmental agencies;
(f) Premiums for the fidelity bond maintained by Paramount
pursuant to Section 17 of the 1940 Act and for any errors
and omissions insurance policy maintained by Paramount;
(g) Dues for Paramount's membership in trade organizations;
(h) Interest on indebtedness, if any, incurred by Paramount;
(i) Costs of designing, printing and mailing periodic and other
reports to shareholders, proxy statements, dividend notice
and other communications to Paramount's shareholders;
(j) Expenses of meeting of shareholders and directors;
(k) Brokers' commissions, issued and transfer taxes and other
costs chargeable to Paramount in connection with security
transactions to which Paramount is a party or with
securities owned by Paramount;
(l) Fees and expenses in connection with maintaining
registration of Paramount under the Federal securities laws
and under the laws of states which regulates the sale of
Paramount's shares and complying with the requirements of
the Securities and Exchange Commission under the 1940 Act,
the 1933 Act, the 1934 Act and applicable state securities
laws.
The advisory fee payable hereunder has been negotiated on the
understanding, and the parties hereto agree, that the Adviser has received, and
shall continue to receive, supplementary research and other information from
broker-dealers which execute portfolio transactions for Paramount.
5. COMPENSATION OF ADVISER
For the services to be rendered pursuant to this Agreement, Paramount
shall pay to the Adviser a monthly fee computed at the annual rates of 0.75% on
the first $50 million of Paramount's average net asset value and 0.65% on the
excess over $50 million of Paramount's average net asset value. Such average net
asset value shall be determined by taking the average of all of the
determinations of net asset value, made in the manner provided in Paramount's
Certificate of Incorporation, for each business day during a given calendar
month. Such fee shall be payable for each calendar month as soon as practicable
after the end of the month.
In addition to the above-stated fee, Paramount shall reimburse the
Adviser monthly for the costs incurred by the Adviser in providing financial
services to Paramount including, among other normal financial services for
Paramount, maintaining the accounts, books and other documents which constitute
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the record forming the basis for Paramount's financial statements, preparation
of such financial statements and other Paramount documents and reports of a
financial nature required by Federal and state laws, calculating daily net asset
value of Paramount, and participating in the production of Paramount's
registration statements, prospectuses, proxy solicitation materials and reports
to stockholders (including compensation of the Treasurer or other principal
financial officer of Paramount, compensation of personnel working under such
person's direction and expenses of office space, facilities and equipment used
by such personnel in the performance of their financial services duties to
Paramount); provided, however, that such reimbursement shall not exceed for any
fiscal year of Paramount 0.10% of the average net asset value of Paramount. Such
maximum reimbursement shall be calculated in the same manner as the fee referred
to in the preceding paragraph.
The fees and reimbursements to be paid to the Adviser shall be payable
for the period commencing on the date hereof and ending on the date of
termination hereof. If this Agreement is terminated, the fees and reimbursements
shall be prorated for any fraction of a month of termination..
The fees and reimbursements payable hereunder shall be reduced by an
amount which is equivalent to any solicitation fees received by the Adviser, or
any affiliated person of the Adviser, in connection with a tender of portfolio
securities of Paramount in acceptance of an exchange or tender offer. The
Adviser shall use its best efforts to recapture any available solicitation fees.
The Adviser also agrees to reduce the advisory fee and reimbursement
payable hereunder by the amount by which certain operating expenses of Paramount
(after the exclusion described below and after reflecting any advisory fee and
reimbursement reduction provided for in the preceding paragraph) for any fiscal
year shall exceed 1 1/2% of the first $30 million of Paramount's average net
asset value taken at the close of business on the last business day of each
calendar month of such year, plus 1% of the remaining average net asset value of
Paramount so taken. For purposes of this expense limitation provision, the
following expenses shall be excluded from the total operating expenses in
computing "certain operating expenses": (i) interest, (ii) taxes, (iii) any
expenditures pursuant to Section 6 hereof for brokerage and research services,
and (iv) any extraordinary expenses, such as those of litigation, merger,
reorganization, or recapitalization, to the extent such extraordinary are
permitted to be excluded by the rules or policies of the states in which shares
of Paramount are from time to time qualified for sale. All expenditures,
including costs incurred in connection with the purchase, holding, or sale of
portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, shall be
accounted for as capital items and not as expenses. Any accrued advisory fee
reduction under this expense limitation provision shall be withheld by Paramount
from the fees paid hereunder. Any additional reduction computed at the end of
the fiscal year shall be paid to Paramount within five days of the computation
as a reduction of advisory fees paid during the fiscal year.
For purposes of this Section 5, the term "fiscal year" shall exclude
the portion of the current fiscal year which shall have elapsed at the prior to
the date hereof and shall include the portion of the then current fiscal year
which shall have elapsed at the date of termination of this Agreement.
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6. BROKERAGE AND RESEARCH SERVICES
The advisory fee payable hereunder has been negotiated on the
understanding, and the parties hereto agree, that the Adviser has received, and
shall continue to receive, supplementary research and other information from
brokers and dealers which execute portfolio transactions for Paramount. The
Adviser may employ, retain, or otherwise avail itself of the services or
facilities of other persons or organizations for the purpose of providing the
Adviser or Paramount with such statistical and other factual information, such
advice regarding economic factors and trends, such advice as to occasional
transactions in specific securities or such other information, advice or
obligations hereunder or otherwise helpful to Paramount, or in the discharge of
Adviser's overall responsibilities with respect to any other accounts which it
might serve as investment adviser. The Adviser and any person performing
executive, administrative or trading functions for Paramount, whose services
were made available to Paramount by the Adviser, are specifically authorized to
allocate brokerage and principal business to firms that provide such services or
facilities and to cause Paramount to pay a member of a securities exchange, or
any other securities broker or dealer, an amount of commissions for effecting a
securities transaction in excess of the amount of commission if the Adviser or
such person determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services (as
such services are defined in Section 28(e) of the 0000 Xxx) provided by such
member, broker or dealer, viewed in terms of either that particular transaction
or the overall responsibilities of the Adviser with respect to the accounts as
to which the Adviser exercises investment discretion (as that term is defined in
Section 3(a)(35) of the 1934 Act).
7. OTHER ACTIVITIES
The Adviser may perform investment advisory, management or
distribution services for other investment companies and other persons or
companies, and affiliates of the Adviser may engage in other related or
unrelated businesses. Except as otherwise required by the 1940 Act, any of the
shareholders, directors, officers and employees of Paramount may be a
shareholder, director, officer or employee of, or be otherwise interested in,
the Adviser, and in any person controlled by or under common control with the
Adviser, and the Adviser, and any person controlled by or under common control
with the Adviser, may have an interest in Paramount.
8. LIABILITY OF ADVISER
Neither the Adviser nor any of its officers, directors or employees,
nor any person performing executive, administrative or trading functions for
Paramount whose services were made available to Paramount by the Adviser, shall
be liable for any error of judgment or mistake of law or for any loss suffered
by Paramount in connection with the matters to which this Agreement relates,
except for loss resulting from willful misfeasance, bad faith or negligence in
the performance of its duties, on behalf of Paramount or from reckless disregard
by the Adviser or any such person of the duties of the Adviser under this
Agreement. Without limiting the generality of the foregoing, neither the Adviser
nor any such person shall be deemed to have acted unlawfully or to have breached
any duty to Paramount under State or Federal law in effect at the date of the
enactment of Section 28(e) of the 1934 Act solely by reason of having caused
Paramount to pay a member of any securities exchange or any other securities
broker or dealer, an amount of commission for effecting a securities transaction
in excess of the commission another members of a securities exchange or another
securities broker or dealer would have charged for effecting that transaction if
the Adviser or such person determines in good faith that such amount of
commission was
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reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Adviser with
respect to the account to which the Adviser exercises investment discretion.
9. TERM OF AGREEMENT
This Agreement shall continue in effect to November 30, 1992. It may
be continued in effect thereafter by mutual consent, provided that such
continuance shall be specifically approved at least annually by (i) the Board of
Directors of Paramount, or by the vote of a majority (as defined in the 0000
Xxx) of the outstanding voting securities of Paramount, and (ii) by a majority
of directors who are not parties to this Agreement or interested persons (as
defined in the 0000 Xxx) of any such party, cast in person at a meeting called
for the purpose of voting on such approval.
10. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of Paramount or by the vote of a majority (as
defined in the 0000 Xxx) of the outstanding voting securities of Paramount, on
sixty (60) days' written notice to the Adviser, or by the Adviser on like notice
to Paramount. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day and year
first above written.
FPA PARAMOUNT FUND, INC.
(seal) By: /s/ Xxxxxxxxxxx Xxxxxx
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Xxxxxxxxxxx Xxxxxx
Senior Vice President
FIRST PACIFIC ADVISORS, INC.
(seal) By: /s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
President
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