Exhibit (g)(1)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 21st day of March, 1975 by and between CNA INCOME
SHARES, INC., a Maryland corporation (the "Company"), and CONTINENTAL ASSURANCE
COMPANY, a corporation organized under the Illinois Insurance Code (the
"Adviser").
WITNESSETH:
WHEREAS, the Company engages in business as a closed-end management
investment company and is registered as such under the Investment Company Act of
1940 ("1940 Act"); and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged in the business of providing
investment advice; and
WHEREAS, the Company desires to retain the Adviser to render such services
in the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, the Adviser desires to perform such services in the manner and on
the terms and conditions hereinafter set forth;
NOW, THERFORE, the Company and the Adviser agree as follows:
1. The Company hereby employs the Adviser to provide investment advisory
and statistical services and research facilities and services, to supervise the
composition of the Company's portfolio continuously, and to determine the nature
and timing of changes therein and the manner of effectuating such changes,
subject to supervision by the Company's Board of Directors and for the period
and on the terms set forth of this Agreement. The Adviser hereby accepts such
employment and agrees to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor.
2. The Adviser shall furnish to the Company, at the Adviser's expense:
(a) research and statistical and other factual information and reports
with respect to securities held by the Company or which the Company might
purchase. It will also furnish to the Company such information as may be
appropriate concerning developments which may affect issuers of securities
held by the Company or which the Company might purchase or the businesses
in which such issuers may be engaged. Such statistical and other factual
information and reports shall include information and reports on
industries, businesses, corporations and all types of securities, whether
or not the Company has at any time any holdings in such industries,
businesses, corporations or securities,
(b) from time to time, advice, information and recommendations with
respect to the acquisition, holding, or disposition by the Company of
securities in which the Company is permitted to invest in accordance with
its investment objectives, policies and limitations,
(c) necessary assistance in:
(i) The preparation of all reports now or hereafter required by
federal or other laws.
(ii) The preparation of prospectuses, registration statements and
amendments thereto that may be required by federal or other laws or by
the rules or regulations of any duly authorized commission or
administrative body. However, the Adviser shall not be obligated to
pay the costs of preparation, printing, or mailing of prospectuses
used in connection with sales of the Company's shares or otherwise,
unless otherwise provided herein.
(d) office space at such place as may be agreed upon from time to
time, and all necessary office facilities, simple business equipment,
supplies, utilities and telephone service for managing the affairs and
investments of the Company.
3. Except as otherwise expressly provided herein, the Company assumes and
shall pay or cause to be paid all costs and expenses of the Company, including,
without limitation:
(a) officers', directors' and employees compensation and expenses,
except that the Adviser shall pay all fees, salaries or other remuneration
of directors and officers of the Company who also serve as directors and
officers or employees of or special consultants to the Adviser, CNA
Financial Corporation, or any subsidiary or affiliate of CNA Financial
Corporation or the Adviser.
(b) all costs and expenses incident to any public offering of stock of
the Company, for cash or otherwise, including those relating to the
registration of shares under the Securities Act of 1933, as amended, the
qualification of shares of the Company under state securities laws, the
printing or other reproduction and distribution of any registration
statement (and all amendments thereto) under the Securities Act of 1933,
the preliminary and final prospectuses included therein, and any other
necessary documents including underwriting documents incident to any public
offering, the advertising of shares of the Company and review by the
National Association of Securities Dealers, Inc. of any underwriting
arrangements;
(c) the charges and expenses of any registrar or any custodian
appointed by the Company for the safekeeping of its cash, portfolio
securities and other property;
(d) the charges and expenses of auditors;
(e) the charges and expenses of any stock transfer or dividend
disbursing agent or agents appointed by the Company;
(f) brokers' charges and expenses, including without limitation
brokers' commissions and fees, dealer xxxx-ups and other charges and
expenses incurred in the acquisition or disposition of portfolio
securities;
(g) all taxes, including securities issuance and transfer taxes, and
corporate fees payable by the Company to federal, state or other
governmental agencies;
(h) the cost and expense of engraving or printing of stock
certificates representing shares of the Company;
(i) fees involved in registering and maintaining registrations of the
Company and of its shares with the Securities and Exchange Commission under
the 1940 Act and with various states and other jurisdictions;
(j) all expenses of stockholders' and directors' meetings and of
preparing, printing and mailing proxy statements and quarterly, semi-annual
and annual reports to stockholders;
(k) all fees and expenses incident to any dividend or distribution
program, including without limitation, the Company's Automatic Dividend
Investment Plan;
(l) charges and expenses of legal counsel in connection with matters
relating to the Company, including without limitation, legal services
rendered in connection with the Company's corporate and financial structure
and relations with its stockholders, issuances of Company shares, and
registrations and qualifications of securities under federal, state and
other laws;
(m) association dues;
(n) interest payable on Company borrowings;
(o) fees and expenses incident to the listing of the Company shares on
any stock exchange and continued compliance with listing requirements;
(p) the expense of keeping the general accounts and records of the
Company;
(q) postage; and
(r) extraordinary costs and expenses.
4. In return for its advisory services, the Company will pay the Adviser a
monthly fee at an annual rate of 0.5% of the average weekly net assets of the
Company. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for such
month shall be computed in manner consistent with the calculation of the fees
payable on a monthly basis. Subject to the provisions of paragraph 5 hereof, the
accrued fees will be payable monthly as promptly as possible after the end of
each month during which this Agreement is in effect.
5. If costs and expenses borne by the Company, including amounts payable to
the Adviser pursuant to paragraph 4 hereof (but excluding interest, taxes,
brokers' charges and expenses, extraordinary costs and expenses, and, if payable
by the Company, the following costs and expenses incident to the public offering
of shares of the Company [except for costs and expenses incident to the public
offering of Company shares registered under the Securities Act of 1933 which may
from time to time be issued by the Company, including, without limitation, under
the Automatic Dividend Investment Plan, which costs and expenses shall be
included in the expense limitation contemplated by this paragraph 5]: filing and
legal fees incident to the registration and qualification of the Company's
shares under the Securities Act for 1933 and the securities laws of various
states, legal and auditing fees and expenses incurred in the preparation of
filing of all documents incident to such registration and qualification, the
costs of printing a registration statement, the preliminary and final
prospectuses forming a part thereof, or any blue sky surveys or memoranda
incident to an offering to be made pursuant to such a registration statement and
the preliminary and final prospectuses forming a part thereof, and fees payable
to the National Association of Securities Dealers, Inc. incident to its review
of such offering), for any fiscal year ending on a date on which this Agreement
is in effect exceed one and one-half per cent (1 1/2%) of the first thirty
million dollars ($30,000,000) of the average net assets of the Company, plus one
per cent (1%) of the average net assets of the Company in excess of $30,000,000,
in each case computed by dividing (i) the sum of the net asset values of the
Company as of the last business day of each week of such fiscal year or of each
week during such fiscal year during which this Agreement was in effect, as the
case may be, by (ii) the number of weeks of such fiscal year or the number of
weeks (including a partial week) during which this Agreement is in effect during
such years, as the case may be, the Adviser will pay to the Company the amount
of such excess as soon as is practicable at the end of a fiscal year of the
Company; provided, however, that although payment shall be made by the Adviser
as soon as is practicable at the end of a fiscal year of the Company, the
determination of whether reimbursement for such costs and expenses is due the
Company from the Adviser will be made on an accrual basis once monthly, and if
it is so determined that such reimbursement is due, the accrued amount of such
reimbursement which is due shall serve as an offset to the investment advisory
fee payable monthly by the Company to the Adviser pursuant to paragraph 4
hereof, and the amount to be paid by the Adviser to the Company as soon as is
practicable at the end of a fiscal year of the Company shall be equal to the
difference between the aggregate reimbursement due the Company from the Adviser
for that fiscal year and the aggregate offsets made by the Company against the
aggregate investment advisory fees payable to the Adviser pursuant to paragraph
4 hereof for that fiscal year by virtue of such aggregate reimbursement.
6. The services of the Adviser to the Company are not to be deemed
exclusive, and the Adviser shall be free to engage in any other business or to
render investment advisory or management services of any kind to any other
corporation, partnership, trust, individual or association, including any other
investment company, so long as its services hereunder are not impaired thereby.
Nothing in this Agreement shall limit or restrict the right of any director,
officer or employee of the Adviser to engage in any other business or to devote
his time and attention in part to the management or other aspects of any other
business, whether of a similar or dissimilar nature.
7. Neither the Adviser nor any of its officers or directors nor any
affiliate of the Adviser nor any of the officers or directors of such affiliate
shall take a long or short position in the stock of the Company, except that
they may purchase shares of such stock for investment purposes at the same price
as that available to the public at the time of purchase or if prior to the
initial public offering, at the contemplated public offering price less
contemplated underwriting discount.
8. The Adviser assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith. The Adviser shall not be
responsible for any action of the Board of Directors of the Company or any
committee thereof in following or declining to follow any advice or
recommendation of the Adviser. The Adviser shall be entitled to rely on written
instructions of the President or any Vice President of the Company or of a
majority of the Board of Directors of the Company.
9. Neither the Adviser, nor any director, officer, agent or employee of the
Adviser shall be liable or responsible to the Company or its stockholders for
any error of judgment, mistake of law or any loss arising out of any investment,
or for any other act or omission in the performance by the Adviser of its duties
under this Agreement, except for liability resulting from willful misfeasance,
bad faith or gross negligence on the Adviser's part or from reckless disregard
by the Adviser of its obligations and duties under this Agreement. The Company
will hold the Adviser harmless against judgments rendered against the Adviser,
together with settlements paid by the Adviser and expenses of defense incurred
by the Adviser which (a) result from specific actions or omissions by the
Adviser in respect of the performance of its obligations hereunder, which
specific acts or omissions occur as a result of express written instructions of
the President or any Vice President of the Company or of a majority of the Board
of Directors of the Company, and (b) arise in actions in which there is an
express finding that such specific acts or omissions did not constitute willful
misfeasance, bad faith, gross negligence, or reckless disregard of its duty.
10. This Agreement has been approved by the Board of Directors of the
Company, including all of the Directors who are not "interested persons" (as
defined in the 0000 Xxx) of the Adviser or the Company on January 31, 1975, and
by a majority of the outstanding voting securities of the Company on the date
hereof, and shall continue in effect from year to year thereafter (unless sooner
terminated as hereinafter provided), provided its continuance is specifically
approved at least annually by (1) the Board of Directors of the Company or the
vote of a majority of the outstanding voting securities of the Company and (2)
the vote of a majority of the Directors of the Company who are not "interested
persons" (as defined in the 0000 Xxx) of the Adviser or the Company cast in
person at a meeting called for the purpose of voting upon such approval,
provided, however, that (a) the Company may, at any time and without the payment
of any penalty, terminate this Agreement upon sixty days' written notice to the
Adviser either by majority vote of the Board of Directors of the Company or by
the Vote of a majority of the outstanding voting securities of the Company; (b)
this Agreement shall immediately terminate in the event of its assignment
(within the meaning of the 0000 Xxx) unless such automatic termination shall be
prevented by an exemptive order of the Securities and Exchange Commission;
provided, however, (i) that the Company shall be under no obligation to apply
for or render assistance to any other person who applies for such exemptive
order in the event of such assignment and (ii) that in the event that such
exemptive order is obtained, this Agreement may nevertheless be immediately
terminated, without penalty, by the Board of Directors of the Company or by a
vote of the majority of the outstanding voting securities of the Company; and
(c) the Adviser may terminate this Agreement without payment of penalty on sixty
days written notice to the Company.
11. All notices or communications hereunder shall be in writing and, if
sent to the Adviser shall be mailed by first class mail, or delivered, or
telegraphed and confirmed in writing to the Adviser at XXX Xxxxx, Xxxxxxx,
Xxxxxxxx 00000, Attention: Corporate Secretary, and if to the Company shall be
mailed by first class mail or delivered, or telegraphed and confirmed in writing
to the Company at XXX Xxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Secretary.
12. This Agreement may be amended. Any amendment hereto shall become
effective when approved by the Adviser and by a majority of (a) the outstanding
voting securities of the Company and (b) the Directors of the Company who are
not parties to this Agreement or "interested persons" (as defined in the 0000
Xxx) of any such party, whichever occurs later.
13. For purposes of this Agreement, a "majority of the outstanding voting
securities of the Company" shall be determined in accordance with the applicable
provisions of the 1940 Act.
14. This Agreement shall be construed in accordance with the laws of the
State of Maryland and the applicable provisions of the 1940 Act. To the extent
applicable law of the State of Maryland, or any of the provisions herein,
conflict with applicable provisions of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED AND DELIVERED THIS
Agreement on the day and year first above written in Chicago, Illinois.
CNA INCOME SHARES, INC.
By: /S/
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President
ATTEST:
/S/
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Secretary
CONTINENTAL ASSURANCE COMPANY
By: /S/
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Executive Vice President
ATTEST:
/S/
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Secretary
