NARRAGANSETT INSURED TAX-FREE INCOME FUND
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made as of this 10th day of September, 1992,
by and between NARRAGANSETT INSURED TAX-FREE INCOME FUND (the
"Fund"), a Massachusetts business trust, 000 Xxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, and CITIZENS TRUST COMPANY,
Xxx Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000-0000.
W I T N E S S E T H :
WHEREAS, the Fund and the Adviser wish to enter into an
investment advisory agreement, referred to hereafter as "this
Agreement";
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to
act as managerial investment adviser to the Fund with respect to
the investment of the Fund's assets, and to supervise and arrange
the purchase of securities for and the sale of securities held in
the portfolio of the Fund.
2. Duties and Obligations of the Adviser With Respect To
Investment of the Assets of the Fund
(a) Subject to the succeeding provisions of this
section and subject to the direction and control of the Board of
Trustees of the Fund, the Adviser shall:
(i) Supervise continuously the investment program of
the Fund and the composition of its portfolio;
(ii) Determine what securities shall be purchased or
sold by the Fund;
(iii) Arrange for the purchase and the sale of
securities held in the portfolio of the Fund; and
(iv) At its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source
of pricing information satisfactory to the Fund and,
unless otherwise directed by the Board of Trustees,
provide for pricing of the Fund's portfolio at least
quarterly using another such source satisfactory to the
Fund.
(b) Any investment program furnished by the Adviser
under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Investment
Company Act of l940 (the "Act") and any rules or regulations in
force thereunder; (2) any other applicable laws, rules and
regulations; (3) the Declaration of Trust and By-Laws of the Fund
as amended from time to time; (4) any policies and determinations
of the Board of Trustees of the Fund; and (5) the fundamental
policies of the Fund. The Fund has furnished the Adviser a
schedule of such policies as of the date of this Agreement, and
agrees to amend such schedule if any of such policies are
changed.
(c) The Adviser shall give the Fund the benefit of its
best judgment and effort in rendering services hereunder, but the
Adviser shall not be liable for any loss sustained by reason of
the adoption of any investment policy or the purchase, sale or
retention of any security, whether or not such purchase, sale or
retention shall have been based upon (i) its own investigation
and research or (ii) investigation and research made by any other
individual, firm or corporation, if such purchase, sale or
retention shall have been made and such other individual, firm or
corporation shall have been selected in good faith by the
Adviser. Nothing herein contained shall, however, be construed
to protect the Adviser against any liability to the Fund or its
security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason
of its reckless disregard of its obligations and duties under
this Agreement.
(d) Nothing in this Agreement shall prevent the Adviser
or any affiliated person (as defined in the Act) of the Adviser
from acting as investment adviser or manager for any other
person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying,
selling or trading any securities for its own or their own
accounts or for the accounts of others for whom it or they may be
acting, provided, however, that the Adviser 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. It is agreed that the Adviser shall have
no responsibility or liability for the accuracy or completeness
of the Fund's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Adviser in writing specifically for inclusion therein. The
Adviser shall promptly inform the Fund as to any information
concerning the Adviser appropriate for inclusion in such
Registration Statement, or as to any transaction or proposed
transaction which might result in an assignment of the Agreement.
The Fund agrees to indemnify the Adviser to the full extent
permitted by the Fund's Declaration of Trust.
(e) In connection with its duties to arrange for the
purchase and sale of the Fund's portfolio securities, the Adviser
shall select such broker-dealers ("dealers") as shall, in the
Adviser's judgment, implement the policy of the Fund to achieve
"best execution," i.e., prompt, efficient, and reliable execution
of orders at the most favorable net price. The Adviser shall
cause the Fund to deal directly with the selling or purchasing
principal or market maker without incurring brokerage commissions
unless the Adviser determines that better price or execution may
be obtained by paying such commissions; the Fund expects that
most transactions will be principal transactions at net prices
and that the Fund will incur little or no brokerage costs. The
Fund understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter
and that principal transactions placed through dealers include a
spread between the bid and asked prices. In allocating
transactions to dealers, the Adviser is authorized to consider,
in determining whether a particular dealer will provide best
execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as
well as the difficulty of the transaction in question, and thus
need not pay the lowest spread or commission available if the
Adviser determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities
as to the accounts as to which it exercises investment
discretion. If, on the foregoing basis, the transaction in
question could be allocated to two or more dealers, the Adviser
is authorized, in making such allocation, to consider (i) whether
a dealer has provided research services, as further discussed
below; and (ii) whether a dealer has sold shares of the Fund or
any other investment company or companies having the Adviser as
its investment adviser or having the same sub-adviser,
administrator or principal underwriter as the Fund. Such
research may be in written form or through direct contact with
individuals and may include quotations on portfolio securities
and information on particular issuers and industries, as well as
on market, economic, or institutional activities. The Fund
recognizes that no dollar value can be placed on such research
services or on execution services, that such research services
may or may not be useful to the Fund and/or other accounts of the
Adviser, and that research received by such other accounts may or
may not be useful to the Fund.
3. Allocation of Expenses
The Adviser agrees that it will furnish the Fund, at the
Adviser's expense, all office space, facilities, equipment and
clerical personnel necessary for carrying out its duties under
this Agreement. The Adviser will also pay all compensation of the
Fund's officers, employees, and Trustees, if any, who are
affiliated persons of the Adviser. The Fund agrees to bear the
costs of preparing and setting in type its prospectuses,
statements of additional information and reports to its
shareholders, and the costs of printing or otherwise producing
and distributing those copies of such prospectuses, statements of
additional information and reports as are sent to its
shareholders. All costs and expenses not expressly assumed by
the Adviser under this Agreement or by such sub-adviser,
administrator or principal underwriter 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 Trustees other than those
affiliated with the Adviser or such sub-adviser, administrator or
principal underwriter; (v) legal and audit expenses; (vi)
custodian and transfer agent, or shareholder servicing agent,
fees and expenses; (vii) expenses incident to the issuance of its
shares (including issuance 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 and proxy material to shareholders of the Fund; (x) all
other expenses incidental to holding meetings of the Fund's
shareholders; and (xi) such non-recurring expenses as may arise,
including litigation affecting the Fund and the legal obligations
for which the Fund may have to indemnify its officers and
Trustees.
4. Compensation of the Adviser
(a) The Fund agrees to pay the Adviser, and the Adviser
agrees to accept as full compensation for all services rendered
by the Adviser as such, a management fee payable monthly and
computed on the net asset value of the Fund as of the close of
business each business day at the annual rate of .23 of 1% of
such net asset value.
(b) The Adviser agrees that the above fee shall be
reduced, but not below zero, by an amount equal to its pro-rata
portion (based upon the aggregate fees of the Adviser and the
Administrator) of the amount, if any, by which the total expenses
of the Fund in any fiscal year, exclusive of taxes, interest, and
brokerage fees, shall exceed the lesser of (i) 2.5% of the first
$30 million of average annual net assets of the Fund plus 2% of
the next $70 million of such assets and 1.5% of its average
annual net assets in excess of $100 million, or (ii) 25% of the
Fund's total annual investment income. The payment of the above
fee at the end of any month will be reduced or postponed so that
at no time will there be any accrued but unpaid liability under
this expense limitation, subject to readjustment during the year.
5. Duration and Termination
(a) This Agreement shall become effective on the
effective date of the Registration Statement containing the
initial registration of shares of the Fund and shall, unless
terminated as hereinafter provided, continue in effect until the
first meeting of the Fund's shareholders and if approved at that
meeting, shall continue in effect until the December 31 next
preceding the second anniversary of the effective date of this
Agreement, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually (1)
by a vote of the Fund's Board of Trustees, including a vote of a
majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party,
with votes cast in person at a meeting called for the purpose of
voting on such approval, or (2) by a vote of the holders of a
"majority" (as so defined) of the outstanding voting securities
of the Fund and by such a vote of the Trustees. If the Fund's
shareholders fail to approve this Agreement, the Adviser may
continue to serve and act in that capacity pending further action
by the Business Trust's Board of Trustees or the Fund's
shareholders, provided that the compensation received by the
Adviser during such period is equal to no more than its actual
costs incurred in furnishing such services to the Fund or the
amount it would have received under this Agreement, whichever is
less.
(b) This Agreement may be terminated by the Adviser at
any time without penalty upon giving the Fund sixty 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 Adviser sixty days' written notice (which notice may be
waived by the Adviser), provided that such termination by the
Fund shall be directed or approved by a vote of a majority of its
Trustees in office at the time or by a vote of the holders of a
majority (as defined in the Act) of the voting securities of the
Fund outstanding and entitled to vote. This Agreement shall
automatically terminate in the event of its assignment (as
defined in the Act). However, the Adviser agrees that it will
not exercise its termination rights for at least two years from
the effective date of this Agreement except for regulatory
reasons.
6. Disclaimer of Shareholder Liability
The Adviser understands that the obligations of this
Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; the Adviser
represents that it has notice of the provisions of the Fund's
Declaration of Trust disclaiming shareholder liability for acts
or obligations of the Fund.
7. Notices of Meetings
The Fund agrees that notice of each meeting of the
Board of Trustees of the Fund will be sent to the Adviser and
that the Fund will make appropriate arrangements for the
attendance (as persons present by invitation) of such person or
persons as the Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized
officers and their seals to be hereunto affixed, all as of the
day and year first above written.
ATTEST: NARRAGANSETT INSURED TAX-FREE
INCOME FUND
/s/Xxxxxxx X. XxxXxxxxxx /s/Xxxx X. Xxxxxxxx
________________________ By:_______________________________
Xxxxxxx X. XxxXxxxxxx Xxxx X. Xxxxxxxx
Assistant Secretary President and Chairman
ATTEST: CITIZENS TRUST COMPANY
/s/Xxxx X. Xxxxxxx /s/Xxxxxxx Xxxxxxx
________________________ By:_______________________________
Secretary Executive Vice President
APPENDIX A
NARRAGANSETT INSURED TAX-FREE INCOME FUND
FUNDAMENTAL POLICIES
As of the date of this agreement, the fundamental policies
of the Fund, so described in its prospectus and Statement of
Additional Information are as follows:
In seeking its objective of providing as high a level of
safety of investor's capital and consistency in the payment of
current income which is exempt from both regular State of Rhode
Island and Federal income taxes, the Fund will invest primarily
in Rhode Island Obligations (as defined below) which are insured
by nationally recognized insurers of municipal obligations as to
the timely payment of principal and interest when due.
As a fundamental policy, at least 80% of the Fund's net
assets will be invested in Rhode Island Obligations whose income
payments will not be subject to the AMT; accordingly, the Fund
can invest up to 20% of its net assets in obligations which are
subject to the AMT. The Fund may refrain entirely from purchasing
Rhode Island Obligations subject to AMT.
As a fundamental policy, at least 65% of the Fund's total
net assets will be invested in insured Rhode Island Obligations.
1. The Fund invests only in certain limited securities.
The Fund cannot buy any securities other than Rhode Island
Obligations meeting the standards stated under "Investment of the
Fund's Assets."
2. The Fund has industry investment requirements.
The Fund cannot buy the obligations of issuers in any one
industry if more than 25% of its total assets would then be
invested in securities of issuers of that industry. The Fund will
consider that a non-governmental user of facilities financed by
industrial development bonds is an issuer in an industry.
3. The Fund cannot make loans.
The Fund can buy those Rhode Island Obligations which it is
permitted to buy (see "Investment of the Fund's Assets"); this is
investing, not making a loan. The Fund cannot lend its portfolio
securities.
4. The Fund can borrow only in limited amounts for special
purposes.
The Fund can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage
or pledge its assets only in connection with such borrowing and
only up to the lesser of the amounts borrowed or 5% of the value
of its total assets. Interest on borrowings would reduce the
Fund's income. Except in connection with borrowings, the Fund
will not issue senior securities. The Fund will not purchase any
Rhode Island Obligations while it has any outstanding borrowings
which exceed 5% of the value of its total assets.
The Fund will not invest more than 25% of its total assets
in (i) Rhode Island Obligations the interest on which is paid
from revenues of similar type projects or (ii) industrial
development bonds, unless this Prospectus and/or the Additional
Statement are supplemented to reflect the change and to give
additional information.
The Fund will not invest in the types of Rhode Island
Obligations which would give rise to interest that would be
subject to alternative minimum taxation if more than 20% of its
net assets would be so invested, and may refrain from investing
in that type of bond completely. The 20% limit is a fundamental
policy of the Fund.
1. The Fund invests only in certain limited securities.
The Fund cannot buy any securities other than the Rhode
Island Obligations (discussed under "Investment of the Fund's
Assets" in the Prospectus). Therefore the Fund cannot buy any
voting securities, any commodities or commodity contracts, any
mineral related programs or leases, any shares of other
investment companies or any warrants, puts, calls or combinations
thereof.
The Fund cannot purchase or hold the securities of any
issuer if, to its knowledge, Trustees, Directors or officers of
the Fund or its Adviser individually owning beneficially more
than 0.5 of 1% of the securities of that issuer together own in
the aggregate more than 5% of such securities.
The Fund cannot buy real estate or any non-liquid interests
in real estate investment trusts; however, it can buy any
securities which it can otherwise buy even though the issuer
invests in real estate or has interests in real estate.
2. The Fund does not buy for control.
The Fund cannot invest for the purpose of exercising control
or management of other companies.
3. The Fund does not sell securities it does not own or borrow
from brokers to buy securities.
Thus, it cannot sell short or buy on margin.
4. The Fund is not an underwriter.
The Fund cannot engage in the underwriting of securities,
that is, the selling of securities for others. Also, it cannot
invest in restricted securities. Restricted securities are
securities which cannot freely be sold for legal reasons.
