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EXHIBIT 5.1
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 31st day of August, 1995 by and between XXX XXXXXX AMERICAN
CAPITAL WORLD PORTFOLIO SERIES TRUST, a Delaware business trust hereinafter
referred to as the "FUND", and XXX XXXXXX AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation, hereinafter referred to as the "ADVISER".
The FUND and the ADVISER agree as follows:
1. APPOINTMENT
a. The FUND hereby appoints the ADVISER to act as investment adviser to the
FUND's American Capital Global Equity Fund ("Global Equity") and American
Capital Global Government Securities Fund ("Global Government") (collectively,
the "Portfolios"), for the period and on the terms set forth in this Agreement.
The ADVISER accepts such appointment and agrees to furnish the services herein
set forth for the compensation herein provided.
b. In the event that the FUND establishes one or more portfolios other than the
Portfolios with respect to which it desires to retain the ADVISER to act as
investment adviser hereunder, it shall notify the ADVISER in writing. If the
ADVISER is willing to render such services it shall notify the FUND in writing
whereupon such portfolio shall become a Portfolio hereunder and the compensation
payable by such new portfolio to the ADVISER will be as agreed in writing at the
time.
2. SUBADVISERS
It is understood that the ADVISER, subject to the prior approval of the FUND's
Trustees, will from time to time employ or associate itself with such person or
persons as the ADVISER may believe to be particularly fitted to assist it in the
performance of this Agreement, provided, however, that the compensation of such
person or persons shall be paid by the ADVISER and that the ADVISER shall be as
fully responsible to the FUND for the acts and omissions of any subadviser as it
is for its own acts and omissions. Without limiting the generality of the
foregoing, it is agreed that subadvisory services to the Portfolios may be
provided by Xxxx Xxxxxx & Co. Limited pursuant to a subadvisory agreement with
the ADVISER ("Subadvisory Agreement").
3. SERVICES RENDERED AND EXPENSES PAID BY ADVISER
The ADVISER, subject to the overall policies, control, direction, supervision
and review of the FUND's Trustees and in conformity with applicable laws, the
FUND's Agreement and Declaration of Trust ("Declaration of Trust"), Bylaws,
registration statements, prospectuses and stated investment objectives, policies
and restrictions of each Portfolio, shall:
a. manage the investment and reinvestment of the FUND's assets
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including, by way of illustration, the evaluation of pertinent economic,
statistical, financial and other data, determination of the industries and
companies to be represented in the FUND's Portfolios, and formulation and
implementation of investment programs;
b. place all orders for the purchase and sale of portfolio investments for
the account of each Portfolio of the FUND with brokers or dealers selected by
the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by
way of illustration, the preparation of registration statements, reports, and
amendments thereto, and the furnishing of legal services except for services
provided by outside counsel to the FUND selected by the Trustees; and
d. pay the compensation of each FUND trustee and FUND officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER
shall use its best efforts to obtain for the FUND and each Portfolio the most
favorable price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization by
the FUND's Trustees of appropriate policies and procedures, the ADVISER may, to
the extent authorized by law, cause the FUND to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. To the extent authorized by law the ADVISER shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its trustees and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office space,
facilities, and equipment used by the Treasurer and such personnel in the
performance of their normal duties for the FUND which consist of maintenance of
the accounts, books and other documents which constitute the record forming the
basis for the FUND's financial statements, preparation of such financial
statements and other FUND documents and reports of a financial nature required
by federal and state laws, and participation in the production of the FUND's
registration statements, prospectuses, proxy solicitation materials and reports
to shareholders; (v) fees of outside counsel to and of independent accountants
of the FUND selected by the Trustees; (vi) custodian,
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registrar and transfer agent fees and expenses; (vii) expenses related to the
repurchase or redemption of its shares; (viii) expenses related to the issuance
of its shares against payment therefor by or on behalf of the subscribers
thereto; (ix) fees and related expenses of registering and qualifying the FUND
and its shares for distribution under state and federal securities laws; (x)
expenses of printing and mailing of registration statements, prospectuses,
reports, notices and proxy solicitation materials of the FUND; (xi) all other
expenses incidental to holding meetings of the FUND's shareholders including
proxy solicitations therefor; (xii) expenses for servicing shareholder accounts;
(xiii) insurance premiums for fidelity coverage and errors and omissions
insurance; (xiv) dues for the FUND's membership in trade associations approved
by the Trustees; and (xv) such nonrecurring expenses as may arise, including
those associated with actions, suits, or proceedings to which the FUND is a
party and the legal obligation which the FUND may have to indemnify its officers
and trustees with respect thereto. To the extent that any of the foregoing
expenses are allocated between the FUND and any other party, such allocations
shall be pursuant to methods approved by the Trustees.
4. RESTRICTION ON THE ADVISER'S POWERS
The ADVISER shall not commit any Portfolio to any extent beyond the amount
of the cash and securities placed by such Portfolio under the control of the
ADVISER.
In carrying out its duties hereunder the ADVISER shall comply with all
reasonable instructions of the Portfolio in connection therewith. Such
instructions may be given by the Trustees or by any other person authorized by a
resolution of the Trustees provided a certified copy of such resolution has been
supplied to the ADVISER.
All securities, cash, and other assets of each Portfolio shall be placed
and maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Board as custodian and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the 0000 Xxx) is approved by
the Board as sub-custodians.
Persons authorized by resolution of the Trustees shall have the right to
inspect and copy contracts, notes, vouchers, and copies of entries in books or
electronic recording media relating to the Portfolio's transactions at the
registered office of the ADVISER at any time during normal business hours.
5. ROLE OF ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940
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any of the shareholders, trustees, officers and employees of the FUND may be a
shareholder, director, officer or employee of, or be otherwise interested in,
the ADVISER, and in any person controlled by or under common control with the
ADVISER, and the ADVISER, and any person controlled by or under common control
with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad
faith, negligence, or reckless disregard of obligations or duties hereunder on
the part of the ADVISER, the ADVISER 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 or for any losses that may
be sustained in the purchase, holding or sale of any security.
6. COMPENSATION PAYABLE TO ADVISER
The FUND shall pay to the ADVISER, as compensation for the services
rendered and expenses paid by the ADVISER, with respect to the Global Equity, a
monthly fee computed at 1.00%, per annum, of the Portfolio's average daily net
assets and with respect to Global Government, a monthly fee computed at .75%,
per annum of the Portfolio's average daily net assets.
For purposes of these calculations, assets of each Portfolio shall be
considered separately in calculating the investment advisory fee. Average daily
net assets of these Portfolios shall be determined by taking the average of the
net assets for each business day during a given calendar month, calculated in
the manner provided in the FUND's Declaration of Trust. Such fee shall be
payable for each calendar month as soon as practicable after the end of that
month.
The fees payable to the ADVISER by the FUND pursuant to this Section 6
shall be reduced by any commissions, tender solicitation and other fees,
brokerage or similar payments received by the ADVISER, or any other direct or
indirect majority owned subsidiary of VK/AC Holding, Inc., in connection with
the purchase and sale of portfolio investments of the FUND, less any direct
expenses incurred by the ADVISER, or any other direct or indirect majority owned
subsidiary of VK/AC Holding, Inc. in connection with obtaining such commissions,
fees, brokerage or similar payments. The ADVISER shall use its best efforts to
recapture all available tender offer solicitation fees and exchange offer fees
in connection with the FUND's portfolio transactions and shall advise the
Trustees of any other commissions, fees, brokerage or similar payments which may
be possible for the ADVISER or any other direct or indirect majority owned
subsidiary of VK/AC Holding, Inc. to receive in connection with the FUND's
portfolio transactions or other arrangements which may benefit the FUND.
In the event that the ordinary business expenses of the FUND, calculated
separately for each Portfolio, for any fiscal year should exceed the most
restrictive expense limitation applicable in the states where the FUND's shares
are qualified for sale, the
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compensation due the ADVISER for such fiscal year shall be reduced by the amount
of such excess. The ADVISER's compensation shall be so reduced by a reduction or
a refund thereof, at the time such compensation is payable after the end of each
calendar month during such fiscal year of the FUND, and if such amount should
exceed such monthly compensation, the ADVISER shall pay the FUND an amount
sufficient to make up the deficiency, subject to readjustment during the FUND's
fiscal year. For purposes of this paragraph, all ordinary business expenses of
the FUND include the investment advisory fee and other operating costs paid by
the FUND except (i) for interest and taxes; (ii) for brokerage commissions;
(iii) as a result of litigation in connection with a suit involving a claim for
recovery by the FUND; (iv) as a result of litigation involving a defense against
a liability asserted against the FUND, provided that, if the ADVISER made the
decision or took the actions which resulted in such claim, it acted in good
faith without negligence or misconduct; (v) any indemnification paid by the FUND
to its officers and trustees and the ADVISER in accordance with applicable state
and federal laws as a result of such litigation; and (vi) amounts paid to Xxx
Xxxxxx American Capital Distributors, Inc., the distributor of the FUND's shares
in connection with a distribution plan adopted by the FUND's Trustees pursuant
to Rule 12b-1 under the Investment Company Act of 1940.
If the ADVISER shall serve for less than the whole of any month, the
foregoing compensation shall be prorated.
7. Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any of
such records upon the FUND's request. The ADVISER further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the Act.
8. Duration and Termination
This Agreement will become effective with respect to the Portfolios on the
date hereof, and with respect to any additional Portfolios, on the date of
receipt by the FUND of notice from the ADVISER in accordance with Section 1(b)
hereof that the ADVISER is willing to serve as investment adviser with respect
to such Portfolio, provided that this Agreement (as supplemented by the terms
specified in any notice and agreement pursuant to Section 1(b) hereof) shall
have been approved by the shareholders of each Portfolio subject to this
Agreement, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for a period of
two years. Thereafter, if not terminated, this Agreement shall continue in
effect as to a particular Portfolio for successive periods of twelve months
each, or such shorter period as may be agreed upon,
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provided such continuance is specifically approved at least annually, (a) by the
vote of a majority of those members of the FUND's Trustees who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the vote of a
majority of the FUND's Trustees or by vote of a majority of the outstanding
voting securities of such Portfolio. Notwithstanding the foregoing this
Agreement may be terminated as to any Portfolio at any time, without the payment
of any penalty, by the FUND (by vote of the FUND's Trustees or by vote of a
majority of the outstanding voting securities of such Portfolio), or by the
ADVISER, on sixty days' written notice. This Agreement will immediately
terminate in the event of its assignment.
This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
a. if the FUND or the ADVISER shall go into liquidation (except a voluntary
liquidation for the purpose of and followed by a bona fide reconstruction or
amalgamation upon terms previously approved in writing by the party not in
liquidation) or if a receiver or receiver and manager of any of the assets of
any of them is appointed; or
b. if either of the parties hereto shall commit any breach of the
provisions hereof and shall not have remedied such breach within 30 days after
the service of notice by the party not in breach on the other requiring the same
to be remedied.
Termination shall be without prejudice to the completion of any
transactions which the ADVISER shall have committed to on behalf of a Portfolio
prior to the time of termination. The ADVISER shall not effect and the FUND
shall not be entitled to instruct the ADVISER to effect any further transactions
on behalf of a Portfolio subsequent to the time termination takes effect.
On the termination of this Agreement and completion of all matters referred
to in the foregoing paragraph, the ADVISER shall deliver or cause to be
delivered to the FUND all documents, records, books and any other properties
which are in its possession, power or control and which are valid and in force
at the date of termination.
9. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective as to a particular
Portfolio until approved by vote of a majority of the outstanding voting series
of such Portfolio.
10. Miscellaneous Provisions
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(a) Definitions
For the purposes of this Agreement, the terms "affiliated person,"
"assignment,"interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 and the Rules and Regulations thereunder, subject, however,
to such exemptions as may be granted to either the ADVISER or the FUND by the
Securities and Exchange Commission, or such interpretive positions as may be
taken by the Commission or its staff, under said Act, and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
(b) Indemnity for U.K. Taxes
i) Notwithstanding any other provision of this Agreement, the FUND shall
indemnify and save the ADVISER harmless from, against, for and in respect of all
liabilities incurred pursuant to Section 3.4 of the Subadvisory Agreement.
ii) The FUND will not be liable under this indemnification provision with
respect to any liabilities incurred by the ADVISER'S willful misfeasance, bad
faith, or gross negligence in the performance of the ADVISER'S duties or by
reason of the ADVISER'S reckless disregard of obligations and duties under this
Agreement or to the FUND.
iii) The FUND will not be liable under this indemnification provision with
respect to any claim made against the ADVISER unless the ADVISER shall have
notified the FUND in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the ADVISER (or after the ADVISER shall have received notice of
such service on any designated agent). In case any such action is brought
against the ADVISER, the FUND will be entitled to participate, at its own
expense, in the defense thereof. The FUND also will be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the FUND to such party of the FUND's election to assume the
defense thereof, such party will bear the fees and expenses of any additional
counsel retained by it, and the FUND will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof.
(c) Choice of Law
This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of the State of
Texas.
(d) Other
The execution of this Agreement has been authorized by the FUND's
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Trustees and by the sole shareholder. This Agreement is executed on behalf of
the Fund or the Trustees of the FUND as Trustees and not individually and that
the obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the FUND individually but are binding only upon the
assets and property of the FUND. A Certificate of Trust in respect of the Fund
is on file with the Secretary of State of Delaware.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer as of the above date.
XXX XXXXXX AMERICAN CAPITAL WORLD
PORTFOLIO SERIES TRUST
By: /s/ XXXX X. XXXXXX
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Name: Xxxx X. Xxxxxx
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Its: Vice President
XXX XXXXXX AMERICAN CAPITAL ASSET
MANAGEMENT, INC.
By: /s/ XXXX X. XXXXXXX, XX.
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Name: Xxxx X. Xxxxxxx, Xx.
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Its: Vice President
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