INVESTMENT ADVISORY AGREEMENT
Agreement, made as of this 1st day of November, 1991, among THE WINDSOR
FUNDS, INC., a Maryland corporation (the "Company"), and TUKMAN CAPITAL
MANAGEMENT, INC., a Delaware corporation ("Tukman").
WHEREAS, the Company is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), which offers shares of several diversified investment series, each
having its own objective and policies; and
WHEREAS, the Company desires to retain Tukman to render to that series of
the Company known as "Windsor II" investment advisory services relating to
certain assets of Windsor II which the Board of Directors of the Company
determines to assign to Tukman, (referred to as the "Tukman Portfolio"), and
Tukman is willing to render such services;
NOW THEREFORE, this Agreement
WITNESSETH:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. APPOINTMENT OF TUKMAN. The Company hereby employs Tukman as investment
adviser, on the terms and conditions set forth herein, for the assets of Windsor
II which the Board of Directors determines to assign to Tukman. The Board of
Directors may, from time to time, make additions to, and withdrawals from, the
assets of Windsor II assigned to Tukman. Tukman accepts such employment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES OF TUKMAN. The Company employs Tukman to manage the investment
and reinvestment of the Windsor II assets assigned to Tukman, to continuously
review, supervise and administer the investment program for such assets of
Windsor II, to determine in its discretion the securities to be purchased or
sold and the portion of such assets to be held uninvested, to provide the
Company with records concerning the activities of Tukman which the Company is
required to maintain, and to render regular reports to the Company's officers
and Board of Directors concerning the discharge of the foregoing
responsibilities. Tukman shall discharge the foregoing responsibilities subject
to the control of the officers and the Board of Directors of the Company, and in
compliance with the objectives, policies and limitations set forth in Windsor
II's prospectus and applicable laws and regulations. Tukman agrees to provide,
at its own expense, the office space, furnishings and equipment and the
personnel required by it to perform the services on the terms and for the
compensation provided herein.
3. SECURITIES TRANSACTIONS. Tukman is authorized to select the brokers or
dealers that will execute the purchases and sales of securities for that portion
of the assets of Windsor II for which it serves as investment adviser, and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. Subject to policies
established by the Board of Directors of the Company, Tukman may also be
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if Tukman determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage or research services provided by such broker or dealer, viewed in
terms of either that particular transaction or overall
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responsibilities of Tukman with respect to Windsor II. The execution of such
transactions shall not be deemed to represent an unlawful act or breach of any
duty created by this Agreement or otherwise. Tukman will promptly communicate to
the officers and Directors of the Company such information relating to portfolio
transactions as they may reasonably request.
4. COMPENSATION OF TUKMAN. For the services to be rendered by Tukman as
provided in this Agreement, Windsor II shall pay to Tukman at the end of each of
the Company's fiscal quarters, a basic fee calculated by applying a quarterly
rate, based on the following annual percentage rates, to the average month-end
net assets of the Tukman Portfolio for the quarter:
.40% on the first $25 million of net assets;
.35% on the next $125 million of net assets;
.25% on the next $350 million of net assets;
.20% onthe next $500 million of net assets:
.15% on the net assets in excess of $1 billion.
Effective with the quarter ending October 31, 1994, the basic fee paid to
Tukman, as provided above, shall be increased or decreased by applying an
incentive/penalty fee adjustment based on the investment performance of the
Tukman Portfolio relative to the investment record of the Standard and Poor's
500 Composite Stock Price Index ("S&P 500"). Such incentive/penalty fee
adjustment provides for: (i) a 50% increase or decrease in the basic advisory
fee if the investment performance of the Tukman Portfolio for the 36 months
preceding the end of the quarter is 12 percentage points or more above or below,
respectively, the investment record of the S&P 500 for the same period; or (ii)
a 25% increase or decrease in the basic advisory fee if the investment
performance of the Tukman Portfolio for such 36 months is 6 or more but less
than 12 percentage points above or below, respectively, the investment record of
the S&P 500 for the same period.
Until the quarter ending October 31, 1994, the incentive/penalty fee
adjustment for Tukman shall be calculated in accordance with the following
transition rules:
(a) NOVEMBER 1, 1991 THROUGH JULY 31, 1992. For the quarters ending on or
prior to July 31, 1992, the incentive/penalty fee adjustment will not be
operable. The advisory fee payable by the Fund shall be the basic fee,
calculated as described above.
(b) AUGUST 1, 1992 THROUGH OCTOBER 31, 1994. Beginning with the quarter
ending October 31, 1992, the incentive/penalty fee adjustment shall be computed
based upon a comparison of the investment performance of the Tukman Portfolio
and that of the S&P 500 over the number of months that have elapsed between
November 1, 1991 and the end of the quarter for the which the fee is computed.
The number of percentage points by which the investment performance of the
Tukman Portfolio must exceed or fall below the investment record of the S&P 500
shall increase proportionately from 4 and 2, respectively, for the 12 months
ending October 31, 1992, to 12 and 6, respectively, for the 36 months ending
October 31, 1994.
The investment performance of the Tukman Portfolio, for any period,
expressed as a percentage of the "Tukman Portfolio Unit Value" at the beginning
of such period, will be the sum of: (i) the change in the Tukman Portfolio unit
value during such period; (ii) the unit value of the Fund's cash distributions
from the Tukman Portfolio's net investment income and realized net capital gains
(whether long-term or
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short-term) having an ex-dividend date occurring within such period; and (iii)
the unit value of capital gains taxes paid or accrued during such period by the
Fund for undistributed realized long-term capital gains realized from the Tukman
Portfolio.
The "Tukman Portfolio Unit Value" will be determined by dividing the total
net assets of the Tukman Portfolio by a given number of units. On the initial
date of the agreement, the number of units in the Tukman Portfolio will equal
the total shares outstanding of the Fund. After such initial date, as assets are
added to or withdrawn from the Tukman Portfolio, the number of units of the
Tukman Portfolio will be adjusted based on the unit value of the Tukman
Portfolio on the day such changes are executed.
The investment record of the S&P 500 will be calculated quarterly by (i)
multiplying the total return for the quarter (change in market price plus
dividends) of each stock included in the S&P 500 by its weightings in the S&P
500 at the beginning of the quarter, and (ii) adding the values discussed in
(i). For any period, therefore, the investment record of the S&P 500 will be the
compounded quarterly returns of the S&P 500.
For the purposes of determining the incentive/penalty fee adjustment, the
net assets of the Tukman Portfolio will be averaged over the same period as the
investment performance of the Tukman Portfolio and the investment record of the
S&P 500 are computed.
In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current fiscal quarter as a percentage of
the total number of days in such quarter.
5. REPORTS. The Company and Tukman agree to furnish to each other current
prospectuses, proxy statements, reports to shareholders, certified copies of
their financial statements, and such other information with regard to their
affairs as each may reasonably request.
6. STATUS OF TUKMAN. The services of Tukman to Windsor II are not to be
deemed exclusive, and Tukman shall be free to render similar services to others
so long as its services to Windsor II are not impaired thereby. Tukman shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Company or
Windsor II in any or otherwise be deemed an agent of the Company or Windsor II.
7. LIABILITY OF TUKMAN. No provision of this Agreement shall be deemed to
protect Tukman against any liability to the Company or its shareholders to which
it might otherwise be subject by reasons of any willful misfeasance, bad faith
or gross negligence in the performance of its duties or the reckless disregard
of its obligations under this Agreement.
8. DURATION AND TERMINATION. This Agreement shall become effective on
November 1, 1991, and shall continue in effect until October 31,1993. The
Agreement shall continue after October 31,1993, only so long as such continuance
is approved at least annually by votes of the Company's Board of Directors,
including the votes of a majority of the Directors who are not parties to such
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting such approval. In addition, the question of
continuance of the Agreement may be presented to the shareholders of Windsor II;
in such event, such continuance shall be effected only if approved by the
affirmative vote of a majority of the outstanding voting securities of Windsor
II.
Provided, however, that (i) this Agreement may at any time be terminated
without payment of any penalty either by vote of the Board of Directors of the
Company or by vote of a majority of the outstanding
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voting securities of Windsor II, on sixty days' written notice to Tukman, (ii)
this Agreement shall automatically terminate in the event of its assignment, and
(iii) this Agreement may be terminated by Tukman on ninety days' written notice
to the Company. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office of
such party.
As used in this Section 8, the terms "assignment," "interested persons,"
and a "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.
9. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 1st day of November, 1991.
ATTEST: THE WINDSOR FUNDS. INC.
___________________________ By:______________________________
SECRETARY PRESIDENT
ATTEST: TUKMAN CAPITAL MANAGEMENT,INC.
___________________________ By:______________________________
SECRETARY PRESIDENT
