INVESTMENT ADVISORY AGREEMENT
BETWEEN
SM&R INVESTMENTS, INC.
(SM&R XXXXX FUNDS)
AND
SECURITIES MANAGEMENT AND RESEARCH, INC.
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made and
entered as of the 1st day of September, 2000, by and between SECURITIES
MANAGEMENT AND RESEARCH, INC., a Florida corporation hereinafter referred to as
the "Adviser," and SM&R INVESTMENTS, INC., a Maryland corporation hereinafter
referred to as the "Fund", on behalf of the following four series of the Fund:
the SM&R Xxxxx Growth Fund, the SM&R Xxxxx Small-Cap Fund, the SM&R Xxxxx
Aggressive Growth Fund, and the SM&R Xxxxx Technology Fund (collectively the
"SM&R Xxxxx Funds").
Each of the SM&R Xxxxx Funds is a separate series of the Fund with
different investment objectives than the other series, which each pursues
through separate investment policies.
Adviser is engaged in the business of rendering investment advisory and
related services to investment companies and desires to provide such services to
the SM&R Xxxxx Funds.
In consideration of the mutual covenants contained in this Agreement
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Adviser and the Fund hereby agree as follows:
1. Adviser shall act as investment adviser for the SM&R Xxxxx Funds and
shall, in such capacity, supervise the investment and reinvestment of
the cash, securities and other properties comprising the assets of the
SM&R Xxxxx Funds, subject at all times to the objectives, policies and
restrictions of each of the SM&R Xxxxx Funds and to the policies and
approval of the Board of Directors of the Fund. Adviser shall give the
SM&R Xxxxx Funds the benefit of its best judgment and efforts in
rendering its services as investment adviser. In carrying out its
obligations in this Agreement, the Adviser shall be deemed to be an
independent contractor and, except as expressly provided or authorized
by the Fund (whether in this Agreement or otherwise), shall have no
authority to act for or represent the Fund in any way or otherwise be
deemed to be an agent of the Fund.
2. In carrying out its obligations under paragraph (1) hereof, Adviser
shall:
(a) Obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
portfolios of the SM&R Xxxxx Funds, and whether concerning the
individual companies whose securities are included in the SM&R Xxxxx
Funds' portfolios, or the industries in which the SM&R Xxxxx Funds
engage, or with respect to securities which the Adviser considers
desirable for inclusion in one or more of the portfolios of the SM&R
Xxxxx Funds.
(b) Determine what industries and companies shall be represented in the
SM&R Xxxxx Funds' portfolios and regularly report them to the Board of
Directors of the Fund.
(c) After such determination, formulate and implement programs for the
purchases and sales of the securities of such companies and regularly
report thereon to the Board of Directors of the Fund.
(d) Take, on behalf of the SM&R Xxxxx Funds, all actions which appear
to the Adviser to be necessary to carry into effect such purchase and
sale programs, and all related supervisory and other functions,
including the placing of orders for the purchase and sale of portfolio
securities for the SM&R Xxxxx Funds.
(e) Maintain all internal bookkeeping, account and auditing services
and records in connection with the investment activities of the SM&R
Xxxxx Funds and the computation of the net asset value of each of the
SM&R Xxxxx Funds. As required by the rules and regulations under the
Investment Company Act of 1940, as amended (the "`40 Act"), the Adviser
agrees that all records which it may maintain for the Fund or the SM&R
Xxxxx Funds thereof are the property of the Fund and the SM&R Xxxxx
Funds and further agrees to promptly surrender to the Fund any of such
records upon the Fund's request. The Adviser further agrees
1
to preserve for the periods prescribed by such rules and regulations
any such records as are required to be preserved.
3. The Adviser may delegate to one or more investment subadvisers (the
"Subadviser") any one or more of the Adviser's duties to be exercised under
this Agreement. The duties, obligations, and compensation of such Subadviser
shall be detailed in a separate written subadvisory agreement approved by the
Board of Directors of the Fund and by the shareholder(s) of the SM&R Xxxxx
Funds and otherwise satisfying the requirements of the Investment Company Act
of 1940 and the rules promulgated thereunder. The Adviser acknowledges that
any Subadviser may also render similar services to other advisory clients, as
long such services to other clients do not impair the Subadviser's services
provided to the SM&R Xxxxx Funds.
4. As its sole compensation for the services supplied to the Fund
hereunder, each of the SM&R Xxxxx Funds shall pay to the Adviser an
investment advisory fee, according to the schedule below. The investment
advisory fee shall be paid monthly and shall be computed by applying to the
average daily net asset value of each of the SM&R Xxxxx Funds each month
one-twelfth (1/12th) of the annual rate.
FUND ANNUAL PERCENTAGE RATE
--------------------------------------------------------------------------------
SM&R Xxxxx Growth Fund 0.85%
--------------------------------------------------------------------------------
SM&R Xxxxx Small-Cap Fund 1.00%
--------------------------------------------------------------------------------
SM&R Xxxxx Aggressive Growth Fund 1.05%
--------------------------------------------------------------------------------
SM&R Xxxxx Technology Fund 1.35%
--------------------------------------------------------------------------------
The "average daily net asset value" of each of the SM&R Xxxxx Funds for
a particular period shall be determined by adding net asset values as regularly
computed by the Fund each day during such period and dividing the resulting
total by the number of days during such period.
The investment advisory fees for each month shall each be payable as
soon as practical after the last business day of such month.
5. Any investment program undertaken by the Adviser pursuant to this
Agreement, as well as any other activities undertaken by the Adviser on
behalf of the Fund pursuant hereto, shall at all times be subject to any
directives of the Board of Directors of the Fund, any Committee of the Fund's
Board of Directors acting pursuant to authority of the Board, and any officer
of the Fund acting pursuant to authority of the Board of Directors.
6. In carrying out its obligations under this Agreement, the Adviser
shall at all times conform to:
(a) All applicable provisions of the Investment Company Act of
1940, as amended, and any rules and regulations adopted thereunder;
(b) The provisions of the Articles of Incorporation of the Fund
as amended from time to time;
(c) The provisions of the By-Laws of the Fund as amended from
time to time;
(d) The provisions of the registration statements of the Fund
under the Securities Act of 1933 and the Investment Company Act of
1940, as amended from time to time;
(e) Any other applicable provisions of state or federal law.
In connection with purchases or sales of portfolio securities for the
accounts of the SM&R Xxxxx Funds, neither the Adviser nor any officer or
director of the Adviser shall act as a principal or receive any commission other
than its compensation provided for in paragraph (3) hereof; provided, however,
that this paragraph shall not be construed to limit the ability of any
Subadviser to place orders with and to pay commissions to persons affiliated
with such investment subadviser, subject to best execution requirements.
7. Decisions with respect to placement of the SM&R Xxxxx Funds' portfolio
transactions will be made by the Adviser and/or any Subadviser. The primary
consideration in making these decisions will be efficiency in the
2
execution of orders and obtaining the most favorable net prices for the SM&R
Xxxxx Funds. When consistent with these objectives, business may be placed
with brokers and dealers who furnish investment research services to the
Adviser and/or any Subadviser. Such research services include advice, both
directly and in writing, as to the value of securities, or purchasers or
sellers of securities, as well as analyses and reports concerning issues,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts. The investment research furnished by such
brokers and dealers allows the Adviser and/or any Subadviser to supplement
its own research activities and enables the Adviser and/or any Subadviser to
obtain the views and information of individuals and research staffs of many
different securities firms prior to making investment decisions for the SM&R
Xxxxx Funds. To the extent portfolio transactions are effected by dealers who
furnish research services to it, the Adviser and/or Subadviser receives a
benefit not susceptible of evaluation in dollar amounts, without providing
any direct monetary benefit to the Fund from these transactions. The Adviser
believes that most research obtained by it generally benefits several or all
of the investment companies which it manages, as opposed to solely
benefitting one specific fund.
Consistent with the foregoing, the Adviser may recommend that the SM&R
Xxxxx Funds execute portfolio transactions through brokers and dealers who have
sold shares of other investment companies managed by the Adviser, but in no
event will any such recommendation be intended as a reward or compensation for
sales of such other funds' shares, nor will such sales be considered by the
Adviser as either a qualifying or disqualifying factor in the selection of
executing broker/dealers.
The Adviser shall render regular reports to the Fund, not more
frequently than quarterly, regarding the total brokerage business placed with
brokers falling into either of the foregoing categories and the manner in which
the allocation has been accomplished. Adviser shall obtain such information, as
applicable, from the Subadviser.
The Adviser agrees that no investment recommendation will be made or
influenced by a desire to provide brokerage for allocation, except in accordance
with the foregoing, and that the recommendations for such allocation or
brokerage shall not interfere with the Adviser's paramount consideration of
obtaining the best possible price and execution for the Fund.
8. The Fund understands and acknowledges that the Adviser furnishes
investment advisory, management and underwriting services to a number of
other clients including, the three (3) mutual funds known as the "SM&R Equity
Funds," and the American National Investment Accounts, Inc. Accordingly, the
Fund agrees that the services of the Adviser to the Fund hereunder are not
deemed to be exclusive and the Adviser is and shall continue to be free to
render such services and services related thereto to others.
The SM&R Equity Funds, American National Investment Accounts, Inc., and
other clients for which the Adviser is investment adviser may own securities of
the same companies from time to time. However, the SM&R Xxxxx Funds' portfolio
security transactions will be conducted independently.
9. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund or any series thereof in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of the Adviser in the performance of its duties or from reckless disregard by
the Adviser of its obligations and duties under this Agreement.
10. This Agreement shall become effective on the date set forth above
and shall continue in effect until August 31, 2002. Thereafter, this
Agreement will continue in effect for additional one year periods only so
long as such continuance is specifically approved at least annually by the
Board of Directors of the Fund or by vote of a majority of the outstanding
voting securities of the SM&R Xxxxx Funds, and in either case by the specific
approval of a majority of the directors who are not parties to such contract
or agreement, or "interested" persons of any such parties, cast in person at
a meeting called for the purpose of voting on such approval, the term
"interested" persons for this purpose having the meaning defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended.
11. This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Board of Directors of the Fund or by vote of the
holders of a majority of the outstanding voting securities of the SM&R Xxxxx
Funds, or by the Adviser, on sixty days' written notice to the other party.
12. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the Investment Company Act of 1940.
3
13. Any notice under this Agreement shall be in writing addressed and
delivered or mailed postage paid to the other party, at such address as
such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the
Fund, the SM&R Xxxxx Funds, and that of the Adviser for this purpose
shall be 0000 Xxxxx Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxxxx
00000.
14. No amendment to this Agreement shall be effective until approved by
vote of the holders of a majority of the outstanding shares of the Fund as
defined in the Investment Company Act of 1940.
15. This Investment Advisory Agreement is separate and distinct from,
and neither affects nor is affected by, the Underwriting Agreement or the
Administrative Service Agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate as of the day and year first above written.
SM&R INVESTMENTS, INC.
By:
---------------------------------------------
Xxxxxxx X. XxXxxxxxx, President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By:
---------------------------------------------
Xxxxxx X. Xxxxx, Senior Vice President
4
