EXHIBIT (D)(1)
INVESTMENT ADVISORY AGREEMENT
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PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 31st day of December, 1998, by and between
PRINCIPAL PRESERVATION PORTFOLIOS, INC., a Maryland corporation (the "Fund"),
and X.X. XXXXXXX AND COMPANY, a Wisconsin corporation (the "Advisor").
W I T N E S S E T H:
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
The Fund hereby appoints the Advisor to act as investment advisor
with respect to each series of its common stock listed on Exhibit A attached
hereto. Each series is referred to herein as a "Portfolio," and collectively
as the "Portfolios." The Advisor agrees to provide professional investment
management with respect to the investment of the assets of each Portfolio and
to supervise and arrange the purchase and sale of securities held in the
portfolio of each Portfolio and generally administer the affairs of the Fund.
The advisor may engage, on behalf of the Fund or any Portfolio and with the
required consent of the shareholders thereof, the services of a Sub-Advisor,
subject to any limitations imposed by the Investment Company Act of 1940 (the
"Act"). It is understood that the Fund may create one or more additional
series of shares and that, if it does so, this Agreement may be amended to
include additional series under the terms of this Agreement.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO MANAGEMENT OF
THE FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Directors
of the Fund, the Advisor shall:
(i) Decide what securities shall be purchased or sold by each
Portfolio and when; and
(ii) Arrange for the purchase and the sale of securities held
in the portfolio of each Portfolio by placing purchase and
sale orders for each Portfolio.
(b) Any purchases or sales of portfolio securities on behalf of the
Portfolios shall at all times conform to, and be in accordance
with, any requirements imposed by: (1) the provisions of the
Act and of any rules or regulations in force thereunder; (2)
any other applicable provisions of law; (3) the provisions of
the Articles of Incorporation and By-Laws of the Fund as
amended from time to time; (4) any policies and determination s
of the Board of Directors of the fund; and (5) the fundamental
policies of the Fund, as reflected in its registration
statement under the Act, or as amended by the shareholders of
the Fund.
(c) The Advisor shall also administer the affairs of the Fund and,
in connection therewith, shall be responsible for (i)
maintaining the Fund's books and records, (other than financial
or accounting books and records maintained by any accounting
services agent and such records maintained by the Fund's
custodian or transfer agent); overseeing the Fund's insurance
relationships; (iii) preparing for the Fund (or assisting
counsel and/or auditors in the preparation of) all required tax
returns, proxy statements and reports to the Fund's
shareholders and Directors and reports to and other filings
with the Securities and Exchange Commission and other
governmental agency (the Fund agreeing to supply or cause to be
supplied to the Advisor all necessary financial and other
information in connection with the foregoing); (iv) preparing
such applications and reports as may be necessary to register
or maintain the Fund's registration and/or the registration of
the shares of the Portfolios under the securities or "blue sky"
laws of the various states selected by the Fund's Distributor
(a Portfolio or Portfolios agreeing to pay all filing fees or
other similar fees in connection therewith); (v) responding to
all inquiries or other communications of shareholders, if any,
which are directed to the Advisor, or if any such inquiry or
communication is more properly to be responded to by the Fund's
custodian, transfer agent or accounting services agent,
overseeing their response thereto; (vi) overseeing all
relationships between the Fund and its custodian(s), transfer
agent(s) and accounting services agent(s), including the
negotiation of agreements and the supervision of the
performance of such agreements; and (vii) authorizing and
directing any of the Advisor's directors, officers and
employees who may be elected as Directors or officers of the
Fund to serve in the capacities in which they are elected. All
services to be furnished by the Advisor under this Agreement
may be furnished through the medium of any such Directors,
officers or employees of the Advisor.
(d) The Advisor shall give the fund the benefit of its best
judgment and effort in rendering services hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties ("disabling
conduct") hereunder on the part of the Advisor (and its
officers, directors, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the
Advisor) the Advisor shall not be subject to liability to the
Fund or to any shareholder of the Fund for any act or omission
in the course of, or connected with rendering services
hereunder, including without limitation, any error of judgment
or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement related,
except to the extent specified in Section 36(b) of the Act
concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services. Except
for such disabling conduct, the Fund shall indemnify the
Advisor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or
entity affiliated with the Advisor) from any liability arising
from the Advisor's conduct under this Agreement to the extent
permitted by the Fund's Articles of Incorporation, By-Laws and
applicable law.
(e) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the Act) of the Advisor from
acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and shall
not in any way limit or restrict the advisor or any such
affiliated person 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, in its judgment, will adversely affect the
performance of its obligations to the Fund under this
Agreement.
(f) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Fund's
Registration Statement under the Act or the Securities Act of
1933 except for information supplied by the Advisor for
inclusion therein.
3. BROKER-DEALER RELATIONSHIPS
In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and the sale of securities held by each
Portfolio by placing purchase and sale orders for the Portfolio, the Advisor
and/or any Sub-Advisor shall select such broker-dealers ("brokers") as shall,
in the Advisor's or Sub-Advisor's judgment, implement the policy of the Fund
to achieve "best execution," i.e., prompt and efficient execution at the most
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favorable securities price. In making such selection, the Advisor and/or Sub-
Advisor is also authorized to consider whether the broker provides brokerage
and/or research services to the Fund and/or other accounts of the Advisor or
Sub-Advisor. The commissions paid to such brokers may be higher than another
broker would have charged if a good faith determination is made by the Advisor
and/or Sub-Advisor that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or
the Advisor's or the Sub-Advisor's overall responsibilities as to the accounts
as to which it exercises investment discretion. The Advisor and/or Sub-
Advisor shall use its judgment in determining that the amount of commissions
paid are reasonable in relation to the value of brokerage and research
services provided and need not place or attempt to place a specific dollar
value on such services or on the portion of commission rates reflecting such
services. To demonstrate that such determinations were in good faith, and to
show the overall reasonableness of commissions paid, the Advisor and/or Sub-
Advisor shall be prepared to show that commissions paid (i) were for purposes
contemplated by this Agreement; (ii) provide lawful and appropriate assistance
to the Advisor and/or Sub-Advisor in the performance of its decision-making
responsibilities; and (iii) were within a reasonable range as compared to the
rates charged by qualified brokers to other institutional investors as such
rates may become known from available information. The Fund recognizes that,
on any particular transaction, a higher than usual commission may be paid due
to the difficulty of the transaction in question. The Advisor and/or Sub-
Advisor is also authorized to consider sales of shares as a factor in the
selection of brokers to execute brokerage and principal transactions, subject
to the requirements of "best execution," as defined above.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Fund, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor will also pay all compensation of all Directors, officers and
employees of the Fund who are affiliated persons of the Advisor. All costs
and expenses not expressly assumed by the Advisor under this Agreement shall
be paid by the Fund, including, but not limited to (i) interest and taxes;
(ii) brokerage commissions; (iii) insurance premiums; (iv) compensation and
expenses of its Directors other than those affiliated with the Advisor; (v)
legal and audit expenses; (vi) fees and expenses of the Fund's custodian,
shareholder servicing or transfer agent and accounting services agent; (vii)
expenses incident to the issuance of its shares, including stock certificates
and issuance of shares on the payment of, or reinvestment of, dividends;
(viii) fees and expenses incident to the registration under Federal or state
securities laws of the Fund or its shares; (ix) expenses of preparing,
printing and mailing reports and notices proxy material and prospectuses to
shareholders of the Fund; (x) all other expenses incidental to holding
meetings of the Fund's shareholders; (xi) dues or assessments of or
contributions to the Investment Company Institute or any successor or other
industry association; (xii) such non-recurring expenses as may arise,
including litigation affecting the Fund and the legal obligations which the
Fund may have to indemnify its officers and Directors with respect thereto;
and (xiii) all expenses which the Fund or a Portfolio agrees to bear in any
distribution agreement or in any plan adopted by the Fund and/or a Portfolio
pursuant to Rule 12b-1 under the Act.
5. COMPENSATION OF THE ADVISOR
(a) The Fund agrees to pay the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the
Advisor as such, an annual management fee, payable monthly and
computed on the value of the average daily net asset value of
the Portfolio as shown on Exhibit A attached hereto.
(b) In the event the expenses of a Portfolio (including the fees of
the Advisor and amortization of organization expenses but
excluding interest, taxes, brokerage commissions, extraordinary
expenses and sales charges and distribution fees) for any
fiscal year exceed the limits set by applicable regulations of
state securities commissions, the Advisor will reduce its fee
by the amount of such excess. Any such reductions are subject
to readjustment during the year. The payment of the management
fee at the end of any month will be reduced or postponed or, if
necessary, a refund will be made to a Portfolio so that at any
time will there be any accrued but unpaid liability under this
expense limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect as to each Portfolio on the
date set forth on Exhibit A attached hereto and shall, unless
terminated as hereinafter provided, continue in effect until
December 31, 2000 and thereafter from year to year, but only so
long as such continuance is specifically approved at least
annually by: (i) the vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party case in person at a
meeting called for the purpose of voting on such approval; and
(ii) either by a vote of a majority of the Board of Directors
or by the vote of the holders of a "majority" (as defined in
the Act) of the outstanding voting securities of the Fund (or
with respect to any Portfolio, by the vote of a majority of the
outstanding shares of such Portfolio).
(b) This Agreement may be terminated by the Advisor at any time
without penalty upon giving the Fund sixty (60) days' written
notice (which notice may be waived by the Fund) and may be
terminated by the Fund at any time without penalty upon giving
the Advisor sixty (60) days' written notice (which notice may
be waived by the Advisor), provided that such termination by
the Fund shall be directed or approved by the vote of a
majority of all of its Directors in office at the time or by
the vote of the holders of a majority (as defined in the Act)
of the voting securities of the Fund, or with respect to any
Portfolio by the vote of a majority of the outstanding shares
of such Portfolio. This Agreement shall automatically
terminate in the event of its assignment (as defined in the
Act).
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
/s/ Xxxxxx X. Xxxxxxxxx
By: ------------------------------
Xxxxxx X. Xxxxxxxxx, President
X.X. XXXXXXX AND COMPANY
/s/ Xxxxx X. Xxxxxxx
By: ------------------------------------
Xxxxx X. Xxxxxxx, President and Chief
Executive Officer
EXHIBIT A
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PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
1. TAX-EXEMPT PORTFOLIO.
a. Effective Date: May 1, 1999
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.60 of 1% of the average daily net assets of the
Portfolio up to $50 million, reducing to 0.50 of 1% for the next
$200 million of average daily net assets, and 0.40 of 1% of average
daily net assets in excess of $250 million.
2. GOVERNMENT PORTFOLIO.
a. Effective Date: May 1, 1999.
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.60 of 1% of the average daily net assets of the
Portfolio up to $50 million, reducing to 0.50 of 1% for the next
$200 million of average daily net assets, and 0.40 of 1% of average
daily net assets in excess of $250 million.
3. WISCONSIN TAX-EXEMPT PORTFOLIO.
a. Effective Date: May 1, 1999
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.50 of 1% of the first $250 million of the average
daily net assets of the Portfolio, and 0.40 of 1% on average daily
net assets in excess of $250 million.
4. S&P 100 PLUS PORTFOLIO.
a. Effective Date: May 1, 1999.
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.575 of 1% of the average daily net assets of the
Portfolio up to $20 million, 0.45 of 1% on the next $30 million,
0.40 of 1% on the next $50 million, 0.35 of 1% on the next $400
million and 0.30 of 1% on assets over $500 million.
5. DIVIDEND ACHIEVERS PORTFOLIO
a. Effective Date: May 1, 1999
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.75 of 1% of the first $250 million of the average
daily net assets of the Portfolio, 0.70 of 1% on the next $250
million in net assets, and 0.65 of 1% on net assets in excess of
$500 million.
6. SELECT VALUE PORTFOLIO.
a. Effective Date: May 1, 1999
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.75 of 1% of the first $250 million of the average
daily net assets of the Portfolio, and 0.65 of 1% on average daily
net assets in excess of $250 million.
7. PSE TECH 100 INDEX PORTFOLIO.
a. Effective Date: May 1, 1999
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.50 of 1% of the first $50 million of the average
daily net assets of the Portfolio, 0.30 of 1% of the next $200
million in net assets, 0.25 of 1% of the next $250 million in net
assets, and 0.20 of 1% of net assets in excess of $500 million.
8. MANAGED GROWTH PORTFOLIO.
a. Effective Date: January 1, 1999
b. Management Fee: The management fee for this Portfolio, calculated
in accordance with paragraph 5 of the Principal Preservation
Portfolios, Inc. Investment Advisory Agreement, shall be at an
annual rate of 0.75 of 1% of the first $250 million of the average
daily net assets of the Portfolio, and 0.65 of 1% on average daily
net assets in excess of $250 million.
