PROFESSIONALLY MANAGED PORTFOLIOS
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 18th day of May, 1999,
by and between PROFESSIONALLY MANAGED PORTFOLIOS, a Massachusetts business trust
(hereinafter called the "Trust"), on behalf of Portfolio 21 (the "Fund") and
Progressive Investment Management Corporation(an Oregon corporation hereinafter
called the "Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company, registered
as such under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, the Fund is a series of the Trust having separate assets and
liabilities; and
WHEREAS, the Advisor is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is engaged in the business of
supplying investment advice as an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render advice and
services to the Fund pursuant to the terms and provisions of this Agreement, and
the Advisor 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 Advisor. The Trust hereby employs the Advisor and the
Advisor 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
Trust's Board of Trustees.
2. Duties of Advisor.
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(a) General Duties. The Advisor shall act as investment adviser to the
Fund and shall supervise investments of the Fund on behalf of the Fund in
accordance with tile investment objectives, policies and restrictions of
the Fund as set forth in the Fund's and Trust's governing documents,
including, without limitation, the Trust's Agreement and Declaration of
Trust and By-Laws; the Fund's prospectus, statement of additional
information and undertakings; and such other limitations, policies and
procedures as the Trustees may impose from time to time in writing to the
Advisor. In providing such services, tile Advisor 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 Advisor shall:
(1) furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of portfolio
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 Trust's Board of Trustees;
(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 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 Fund's administrator or distributor or the
officers of the Trust may reasonably request; and (vi) render to tile
Trust's Board of Trustees 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
Trustees.
(b) Brokerage. The Advisor 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 Advisor shall
not direct orders to an affiliated person of the Advisor without general
prior authorization to use such affiliated broker or dealer for the Trust's
Board of Trustees. The Advisor's primary consideration in effecting a
securities transaction will be execution at tile most favorable price. In
selecting a broker-dealer to execute each particular transaction, the
Advisor 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 a 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 portfolio execution services offered.
Subject to such policies as the Board of Trustees of the Trust may
determine, the Advisor 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 a Fund to pay a broker or dealer that provides
(directly or indirectly) brokerage or research services to tile Advisor 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 Advisor 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 Advisor's overall
responsibilities with respect to the Trust. The Advisor is further
authorized to allocate the orders placed by it on behalf of a Fund to such
brokers or dealers who also provide research or statistical material, or
other services, to the Trust, the Advisor, or any affiliate of either. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine, and the Advisor shall report on such allocations regularly to
the Trust, indicating the broker-dealers to whom such allocations have been
made and the basis therefor. The Advisor 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 Advisor deems the purchase or sale of a security
to be in the best interest of a Fund as well as of other clients, the
Advisor, 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 Advisor in tile manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
clients.
3. Representations of the Advisor.
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(a) The Advisor shall use its best judgment and efforts in rendering
the advice and services to the Fund as contemplated by this Agreement.
(b) The Advisor shall maintain all licenses and registrations
necessary to perform its duties hereunder in good order.
(c) The Advisor 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.
(d) The Advisor shall maintain errors and omissions insurance in an
amount at least equal to that disclosed to the Board of Trustees in
connection with their approval of this Agreement.
4. Independent Contractor. The Advisor shall, or 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
Trust or the Fund in any way, or in any way be deemed an agent for the Trust or
for the Fund. It is expressly understood and agreed that the services to be
rendered by the Advisor to the Fund under the provisions of this Agreement are
not to be deemed exclusive, and the Advisor 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. Advisor's Personnel. The Advisor 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 Advisor shall be
deemed to include persons employed or retained by the Advisor 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 Advisor or the Trust's Board of Trustees may desire and reasonably request.
6. Expenses.
(a) With respect to the operation of the Fund, the Advisor shall be
responsible for (i) providing the personnel, office space and equipment
reasonably necessary for the operation of the Fund, (ii) tile expenses or
printing and distributing extra copies of the Fund's prospectus, statement
of additional information, and sales and advertising materials (but not the
legal, auditing or accounting fees attendant thereto) to prospective
investors (but not to existing shareholders), and (iii) the costs of any
special Board of Trustees meetings or shareholder meetings convened for the
primary benefit of the Advisor. If the Advisor has agreed to limit the
operating expenses of the Fund, the Advisor shall also be responsible on a
monthly basis for any operating expenses that exceed the agreed upon
expense limit.
(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: fees and expenses incurred in
connection with the issuance, registration and transfer of its shares;
brokerage and commission expenses1 all expenses of transfer, receipt,
safekeeping, servicing and accounting for the cash, securities and other
property of the Trust for the benefit 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 tile Investment Company Act; taxes, if any;
a pro rata portion of expenditures in connection with meetings of the
Fund's shareholders and the Trust's Board of Trustees that are properly
payable by the Fund; salaries and expenses of officers and fees and
expenses of members of the Trust's Board of Trustees or members of any
advisory board or committee who are not members of, affiliated with or
interested persons of the Advisor; 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, if any; and all other charges and costs of its
operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed.
(c) -The Advisor may voluntarily absorb certain Fund expenses or waive
tile Advisor's own advisory fee.
(d) To the extent the Advisor incurs any costs by assuming expenses
which are an obligation of the Fund as set forth herein, the Fund shall
promptly reimburse the Advisor for such costs and expenses, except to the
extent the Advisor has otherwise agreed to bear such expenses. To the
extent the services for which a Fund is obligated to pay are performed by
the Advisor, the Advisor shall be entitled to recover from such Fund to the
extent of the Advisor's actual costs for providing such services. In
determining the Advisor's actual costs, the Advisor may take into account
an allocated portion of the salaries and overhead of personnel performing
such services.
7. Investment Advisory and Management Fee.
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(a) The Fund shall pay to the Advisor, and the Advisor agrees to
accept, as full compensation for all investment management and advisory
services furnished or provided to such Fund pursuant to this Agreement, an
annual management fee equal to the amount specified in Appendix A to this
Agreement, computed on the value of the net assets of the Fund as of the
close of business each day.
(b) The management fee shall be accrued daily by the Fund and paid to
the Advisor 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 tile end of any month, the fee to the Advisor 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 Advisor under this Agreement will be
reduced to the extent of any receivable owed by the Advisor to the Fund and
as required under any expense limitation applicable to the Fund.
(e) The Advisor 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 Advisor 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 Advisor voluntarily or pursuant to an agreed upon expense
cap shall be reimbursed by the Fund to the Advisor, if so requested by the
Advisor, in the first, second or third (or any combination thereof) fiscal
year next 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 tile
reimbursement) do not exceed the applicable limitation on Fund expenses.
Such reimbursement may be paid prior to a Fund's payment of current
expenses if so requested by the Advisor even if such practice may require
the Advisor to waive, reduce or absorb current Fund expenses.
(g) The Advisor 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 Advisor hereunder.
8. No Shorting; No Borrowing. Tile Advisor 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 Advisor 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 tile time of purchase, as allowed
pursuant to rules promulgated under the Investment Company Act. The Advisor
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 Trust's Governing Documents and Applicable Laws. Nothing
herein contained shall be deemed to require the Trust or the Fund to take any
action contrary to the Trust's Agreement and Declaration of Trust, By-Laws, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of the Trust of its responsibility for and control of the conduct of
the affairs of the Trust and Fund. In this connection, the Advisor acknowledges
that the Trustees 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 Advisor agrees to supply such information to
the Fund's administrator and to permit such compliance inspections by the Fund's
administrator as shall be reasonably necessary to permit the administrator to
satisfy its obligations and respond to the reasonable requests of the Trustees.
11. Advisor's Liabilities and Indemnification.
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(a) The Advisor 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 administrator or the Trust or another third
party for inclusion therein.
(b) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on
the part of the Advisor, the Advisor shall not be subject to liability to
the Trust or 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.
(C) Each party to this Agreement shall indemnify and hold harmless the
other party and tile shareholders, 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 non-performance 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 Trust, or officer of the Advisor, from liability
in violation of Sections 17(h) and (i) of the Investment Company Act.
12. Non-Exclusivity: Trading for Advisor's Own Account. The Trust's
employment of the Advisor is not an exclusive arrangement. The Trust may from
time to time employ other individuals or entities to furnish it with the
services provided for herein. Likewise, the Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
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
will adversely affect the performance of its obligations to the Fund under this
Agreement, and provided further that the Advisor 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.
13. Term
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(a) This Agreement shall become effective at the time the Fund
commences operations pursuant to an effective amendment to the Trust's
registration Statement under the Securities Act of 1933 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
Trustees of the Trust or by the vote of a majority of the outstanding
voting securities of the Fund and (ii) the vote of a majority of the
Trustees of the Trust 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.
(b) The Fund may use the name Portfolio 21 or any name derived from or
using that name only for so long as this Agreement or any extension,
renewal or amendment hereof remains in effect. Within sixty (60) days from
such time as this Agreement shall no longer be in effect, the Fund shall
cease to use such a name or any other name connected with the Advisor.
14. Termination: No Assignment.
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(a) This Agreement may be terminated by the Trust on behalf of a Fund
at any time without payment of any penalty, by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty (60) days' written notice to the Advisor, and by the
Advisor upon sixty (60) days' written notice to the Fund. In the event of a
termination, the Advisor shall cooperate in the orderly transfer of Fund
affairs and, at the request of the Board of Trustees, transfer any and all
books and records of the Fund maintained by the Advisor 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. Notice of Declaration of Trust. The Advisor agrees that the Trust's
obligations under this Agreement shall be limited to the Fund and to their
assets, and that the Advisor shall not seek satisfaction of any such obligation
from the shareholders of the Fund nor from any trustee, officer, employee or
agent of the Trust or the Fund.
17. 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.
18. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Massachusetts 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 Advisors 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.
PROFESSIONALLY MANAGED PROGRESSIVE INVESTMENT
PORTFOLIOS on behalf of MANAGEMENT CORPORATION
Portfolio 21
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx Xxxxxxxxx
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Xxxxxx X. Xxxxxx Xxxxxx Xxxxxxxxx
Xxxxx: Treasurer Title: President
APPENDIX A
Investment Advisory Fee Rate
1.00's of average daily net assets annually
