Exhibit (d)2.
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SM&R CAPITAL FUNDS, INC.
(MONEY MARKET FUND)
AND
SECURITIES MANAGEMENT AND RESEARCH, INC.
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made and entered
into this 19th day of November, 1998, by and between SM&R CAPITAL FUNDS, INC.
(to be renamed SM&R INVESTMENTS, INC. effective December 31, 1998), a Maryland
corporation hereinafter referred to as the "Fund", on behalf of SM&R Money
Market Fund (the "Money Market Series") and SECURITIES MANAGEMENT AND RESEARCH,
INC., a Florida corporation hereinafter referred to as the "Adviser".
The Money Market Series is a series of the Fund with different investment
objectives than the other series which it pursues through separate investment
policies.
SM&R is engaged in the business of rendering investment advisory and
related services to investment companies and desires to provide such services to
the Money Market Series.
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 Money Market Series and
shall, in such capacity, supervise the investment and reinvestment of the cash,
securities and other properties comprising the assets of the Money Market
Series, subject at all times to the objectives, policies and restrictions of the
Money Market Series and to the policies and approval of the Board of Directors
of the Fund. Adviser shall give the Money Market Series the benefit of its best
judgment and efforts in rendering its services as investment adviser. In
carrying out its obligations in this Agreement, the Advisor 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
portfolio of the Money Market Series, and whether concerning the individual
companies whose securities are included in the Money Market Series'
portfolio, or the industries in which the Money Market Series engages, or
with respect to securities which the Adviser considers desirable for
inclusion in the Money Market Series' portfolio.
(b) Determine what industries and companies shall be represented in the
Money Market Series' portfolio 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 Money Market Series of the Fund, 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 Money Market Series.
(e) Maintain all internal bookkeeping, account and auditing services and
records in connection with the investment activities of the Money Market
Series and the computation of the Money Market Series' net asset value. 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 Money Market Series thereof are the
property of the Fund and the Money Market Series and further agrees to
promptly surrender to the Fund any of such records upon the Fund's request.
The Adviser
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further agrees to preserve for the periods prescribed by such rules and
regulations any such records as are required to be preserved.
3. As its sole compensation for the services supplied to the Fund hereunder,
the Money Market Series shall pay to the Adviser an investment advisory fee
equal to .25 of 1% annually. The investment advisory fee shall be paid monthly
and shall be computed by applying to the average daily net asset value of the
Money Market Series each month one-twelfth (1/12th) of the annual rate.
The "average daily net asset value" of the Money Market Series of the Fund
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 fee for each month shall each be payable as soon as
practical after the last business day of such month.
4. 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.
5. In carrying out its obligations under this Agreement, 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
account of the Money Market Series of the Fund, 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.
6. Decisions with respect to placement of the Money Market Series' portfolio
transactions will be made by the Adviser. The primary consideration in making
these decisions will be efficiency in the execution of orders and obtaining the
most favorable net prices for the Money Market Series. When consistent with
these objectives, business may be placed with brokers and dealers who furnish
investment research services to the Adviser. 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 to supplement its own research activities
and enables the Adviser to obtain the views and information of individuals and
research staffs of many different securities firms prior to making investment
decisions for the Money Market Series. To the extent portfolio transactions are
effected by dealers who furnish research services to it, the Adviser 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 Money
Market Series 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 monthly, regarding the
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total brokerage business placed with brokers falling into either of the
foregoing categories and the manner in which the allocation has been
accomplished.
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.
7. 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 "American National Funds
Group". 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 American National Funds Group and other clients for which the Adviser
is investment advisor may own securities of the same companies from time to
time. However, the Money Market Series' portfolio security transactions will be
conducted independently, except when decisions are made to purchase or sell
portfolio securities of or for the Money Market Series, the other series of the
Fund, the American National Funds Group and/or other clients of the Adviser
simultaneously. In such event, the transactions will be averaged as to price
and allocated as to amount (according to the proportionate share of the total
commitment) in accordance with the daily purchase or sale orders actually
executed.
In authorizing the execution of this Agreement, the Funds' Board of
Directors and shareholders have determined that such ability to effect
simultaneous transactions may be in the best interest of the Fund and each
series thereof. It is recognized that in some cases these practices could have
a detrimental effect upon the price and volume of securities being bought and
sold by the Fund or a series thereof, while in other cases these practices could
produce better executions.
8. 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.
9. This Agreement shall become effective on the date set forth above and shall
continue in effect until November 19, 2000. 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
Money Market Series of the Fund, 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.
10. 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 Money Market Series of
the Fund, or by the Adviser, on sixty days' written notice to the other party.
11. 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.
12. 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 Money Market Series of the
Fund, and that of the Adviser for this purpose shall be 0000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxxxx 00000.
13. 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.
14. 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate on the day and year first above written.
SM&R CAPITAL FUNDS, INC.
By: /s/ Xxxxxxx X. XxXxxxxxx
--------------------------
Xxxxxxx X. XxXxxxxxx, President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------
Xxxxxx X. Xxxxx, Senior Vice President
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