INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT, made this 14th day of June, 1995, by and between
State Bond Investment Funds, Inc., a Maryland corporation (hereinafter called
the "Investment Corporation"), and ARM Capital Advisors, Inc., a Delaware
corporation (hereinafter called the "Manager"),
WITNESSETH:
WHEREAS, the Investment Corporation has been organized for the purpose of
investing its funds in common stock and other securities, and wishes to make use
of the experience, sources of information, advice, assistance and facilities
available to the Manger, and to have the Manager perform for it various
management, statistical, accounting and clerical services; and the Manager is
willing to furnish such advice, facilities and services on the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed as follows:
1. The Investment Corporation shall at all times keep the Manager fully
informed with regard to the securities owned by it, its funds available, or to
become available, for investment, and generally as to the condition of its
affairs. It shall furnish the Manager with a certified copy of all financial
statements, and a singed copy of each report prepared by certified public
accountants, and with such other information with regard to its affairs as the
Manager may from time to time reasonably request.
2. The Manager shall furnish to the Board of Directors and officers of the
Investment Corporation advice and recommendations with respect to the
acquisition, by purchase, exchange, subscription or otherwise, the holding and
disposal, through sale, exchange or otherwise, of securities, and advice and
recommendations with respect to other aspects of the business and affairs of the
Investment Corporation; and shall perform such functions of management and
supervision as may be directed by the Board of Directors of the Investment
Corporation.
3. The Manager shall supply at its expense, the Board of Directors and
officers of the Investment Corporation with all statistical information
reasonably required by them and reasonably available to the Manager; shall
furnish the Investment Corporation with office facilities, including space,
furniture and equipment and all personnel reasonably necessary for the operation
of the Investment Corporation; shall authorize and permit any of its directors,
officers and employees, who may be elected as directors or officers of the
Investment Corporation, to serve in the capacities in which they are elected.
Other than as herein specifically indicated, the Manager will not be responsible
for Investment Corporation expenses. Such Investment Corporation expenses
include, by way of example but not by way of limitation, all expenses incurred
in the operation of the Investment Corporation and any public offering of its
shares including, among others, distribution fees payable pursuant to any plan
of distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended ("Rule 12b-1 Plan of Distribution"); legal, auditing and accounting
expenses; interest, taxes, governmental fees or membership dues; brokerage
commissions or charges; custodian, transfer agent or registrar fees; expense of
preparing share certificates and other expenses of issue, sale, underwriting and
distribution of its shares; expenses of redemption or repurchase of Investment
Corporation shares; expenses of registering and distributing reports, notices
and dividends to shareholders; costs of stationery; costs of stockholders and
other meetings; and traveling expenses of officers, directors and employees, if
any.
4. No director, officer or employee of the Investment Corporation shall
receive from the Investment Corporation any salary or other compensation as such
director, officer or employee while he is at the same time a director, officer
or employee of the Manager. This paragraph shall not apply to directors,
executive committee members, consultants and other persons who are not regular
members of the Manager's staff.
5. As compensation for the services performed and the facilities furnished
by the Manager, including the services of any consultants retained by the
Manager, the Investment Corporation shall pay the Manager subject to the
provisions of Paragraph 6 hereof, as promptly as possible after the last day of
each month, a monthly fee of 1/12th of .65 of 1% on the first $100,000,000 of
average net assets of the Investment Corporation, 1/12th of .60 of 1% on the
next
$100,000,000 of average daily net assets and 1/12th of .55 of 1% on average
daily net assets over $200,000,000. The first payment shall be made as promptly
as possible at the end of the month next succeeding the effective date of this
contract, and shall constitute a full payment of the fee due the Manger for all
services prior to that date. If this Agreement is terminated as of any date not
the last day of a month, such fee shall be paid as promptly as possible after
such date of termination, shall be based on the average daily net assets of the
Investment Corporation in the period from the beginning of such month to such
date of termination and shall be that proportion of such average daily net
assets as the number of business days in such period bears to the number of
business days in such month. The average daily net assets of the Investment
Corporation shall in all cases be based only on business days and shall be
computed as of the time of closing of the New York Stock Exchange. Each such
payment shall be accompanied by a report of the Investment Corporation or by a
reputable firm of independent accountants which shall show the amount properly
payable to the Manager under this Agreement and the detailed computation
thereof.
The parties agree that from time to time, the Manager may recommend that
the Investment Corporation execute all or a portion of its portfolio
transactions through SBM Financial Services, Inc., or some other subsidiary or
affiliate of the Manager; provided the execution of such portfolio transactions
is consistent with the Fund's obligations under the Investment Company Act of
1940, as amended. When such recommendations are accepted by the officers of the
Investment Corporation, and brokerage commissions are paid to SBM Financial
Services, Inc., or any other subsidiary of the Manger, the management fee
payable as above described will be reduced to the extent of the "net profits" of
such brokerage operation as hereinafter defined. This offset will be credited
after the close of the calendar year against the management fee due to the
Manager for the next succeeding month or months.
"Net profits" of the brokerage operations shall be determined in the
following manner:
Gross revenues of SBM Financial Services, Inc. (or other subsidiaries or
affiliate) from brokerage transactions for the portfolio of the Investment
Corporation will be credited to an "offset account" for the Investment
Corporation.
It is understood that brokerage services may also be rendered to others,
including other funds and institutions, and revenues attributable to such other
broker transactions will not be credited to the Investment Corporation's offset
account. Those revenues which cannot be specifically attributed to a
particular person or fund will be apportioned quarterly, on the basis of the
volume of portfolio transactions of the Investment Corporation (whether
transacted by the subsidiary or not), relative to the dollar volume of
transactions of other funds (whether transacted by the subsidiary or not) for
which the Manager (or a subsidiary) is the advisor, and a brokerage account is
maintained with the Manager or its subsidiaries. Such dollar volume of
portfolio transactions shall not include transactions in government securities,
commercial paper, cash equivalents, net trades, or principal transactions of the
Investment Corporation. This prorated amount will be credited to the offset
account for the Investment Corporation. Revenues to be so apportioned shall
include commissions received by the subsidiary from reciprocal transactions,
including those participations in commissions generally known as "give ups."
The offset account will be charged with all the direct expense of each
transaction, such as clearing broker fees, floor broker fees, transfer taxes,
exchange fees or other fees; and a share of the expense of the subsidiary
brokerage operations. The share of expenses to be charged to the offset account
shall be prorated on the basis of the subsidiary's gross brokerage revenues
attributable to the Investment Corporation, attributable to the Investment
Corporation, compared to the subsidiary's gross brokerage revenue from all
sources. Such prorated expenses shall include salaries for all personnel
regularly engaged in the brokerage operations, including record keeping,
accounting and administration. If any employee who is regularly engaged in
brokerage operations is not employed full time in such operation, the proportion
of his salary that shall be deemed an expense that is to be prorated shall be
determined according to generally accepted accounting principles. Other costs
and expenses such as rent, telephone, stock quotation, and other expenses and
adjustments customary to a brokerage operation which are made to the offset
account shall be determined according to generally accepted accounting
principles.
In addition, there shall be a deduction for the expenses of general
overhead, executive supervision, and general administration in an amount equal
to 20% of the gross revenues allocated to the offset account. The net amount,
determined as set forth above, shall be subject to a deduction for income taxes,
the sum to deducted for this purpose is to computed as if the offset account
were to file a separate income tax return. The balance of the account after all
the above deductions will be considered "net profits."
6. The maximum charges per annum incurred by the Investment Corporation,
inclusive of management fee computed without regard to the offset described
above, but exclusive of Rule 12b-1 Plan of Distribution fees, interest, taxes,
brokerage fees, and extraordinary expenses, shall not exceed one and one-half
percent (1 1/2%) of the first $30,000,000 of the average annual value of the net
assets of the Investment Corporation and one percent (1%) of the average annual
value of any additional net assets of the Investment Corporation, exclusive of
the amount, if any, of funds borrowed for investment purposes, computed at least
quarterly. The Manager will assume and pay all expenses of the Investment
Corporation in excess of the expense limitations provided for herein, up to an
amount not exceeding its management and advisory fees for the period for which
reimbursement is made, such reimbursement to be made not less frequently than
annually.
7. Appropriate officers of the Manager shall provide the directors of the
Investment Corporation with such information as is required by any plan of
distribution adopted by the Investment Corporation pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended.
8. The Manager assumes no responsibility under this Agreement other than
to render the services called for hereunder, in good faith, and shall not be
responsible for any action of the Board of Directors of the Investment
Corporation in following or declining to follow any advice or recommendations of
the Manager.
9. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of the Manager who may also be a director,
officer or employee of the Investment Corporation to engage in any other
business or to devote this time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature, nor to limit or restrict the right of the Manager to engage in any other
business or to render services of any kind to any other corporation, firm,
individual or association.
10. As used in this Agreement, the terms "assignment" and "majority of the
outstanding voting securities" shall have the meanings given to them by Section
2(a) of the Investment Company Act of 1940.
11. This Agreement shall terminate automatically in the event of its
assignment by the Manager and shall not be assignable by the Investment
Corporation without the consent of the Manager.
12. This Agreement may be terminated at any time, without the payment of
any penalty, (a) by the Board of Directors of the Investment Corporation or by
vote of a majority of the outstanding voting securities of the Investment
Corporation by sixty days' written notice addressed to the Manager at its
principal place of business; and (b) by the Manager by sixty days' written
notice addressed to the Investment Corporation at its principal place of
business.
13. This Agreement shall be submitted for approval to the Board of
Directors of the Investment Corporation annually and shall continue in effect
only so long as specifically approved annually by the Board of Directors or by a
majority of the outstanding voting securities, and in either event by the vote
of a majority of the directors who are not parties to such contract or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
14. This Agreement shall become effective as of the later of June 14, 1995
or the date of this Agreement is approved by a vote of the holders of at least a
majority of the outstanding voting securities, as defined in the Investment
Company Act of 1940, of the Investment Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
STATE BOND INVESTMENT FUNDS, INC.
By: /s/ Xxxxxx X. Xxxxx
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Its: Vice President
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ARM CAPITAL ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxx
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Its: Co-Chief Executive Officer
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