EXHIBIT 99.5(B)
INVESTMENT ADVISORY AGREEMENT
Agreement dated August 19, 1993 between KEYSTONE MANAGEMENT, INC., a Nevada
corporation (the "Manager") and KEYSTONE CUSTODIAN FUNDS, INC., a Delaware
corporation (the "Company").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE COMPANY TO KEYSTONE TAX FREE FUND (THE
"FUND").
The Company will provide investment management and other services to the
Fund (with the exception of certain managerial and administrative services to be
provided by the Manager) as specified below.
A. In providing investment management services to the Fund, the Company
will determine from time to time what securities shall be acquired, held or
disposed of and what portion of the assets of the Fund shall be held uninvested.
Should the Board of Trustees of the Fund or the Manager at any time, however,
notify the Company in writing of any portfolio transaction to be made or not to
be made or any investment policy to be followed by the Fund, the Company shall
be obliged to follow such direction or such investment policies for the period,
if any, specified in such notice or until the Company has received written
notice that such investment policy is no longer to be followed. The Company
shall take, on behalf of the Fund, all actions which it deems necessary to
implement the investment policies of the Fund, and in particular shall place all
orders for the purchase, sale or loan of portfolio securities for the Fund's
account with brokers or dealers or others selected by it, and to that end the
Company is authorized to give instructions to the custodian of the Fund's assets
as to deliveries of securities and payments of cash for the account of the Fund.
In the placement of such orders and the selection of brokers or dealers, the
Company shall conform to the Fund's policies concerning such matters as may be
from time to time determined by the Board of Trustees of the Fund or set forth
in the Fund's most recent prospectus under the Securities Act of 1933. In the
performance of these duties, the Company will use its best efforts to safeguard
and promote the welfare of the Fund. However, nothing in this agreement shall be
construed to constitute the Company as an agent of the Fund or the Manager.
B. The Company, at its own expense, shall furnish to the Fund office space
in the offices of the Company or in such other place as may be agreed upon from
time to time, and all necessary office facilities, equipment and personnel for
managing the affairs of the Fund, and shall arrange, if desired by the Fund, for
members of the Company's organization to serve without salaries from the Fund as
officers and agents of the Fund.
C. At the request of the Board of Trustees of the Fund or the Manager, the
Company at its own expense will provide or cause to be provided to the Fund the
following management and operating services, facilities and personnel: (a) the
officers of the Fund and each Trustee of the Fund who is an affiliated person of
the Company or the Manager; (b) determination from time to time of the value of
the net assets of the Fund, the keeping of its books and records and the
safekeeping of its cash, securities and other property; (c) auditors and
accountants; (d) transfer agents, dividend disbursing agents and registrars,
including checks, stationery and other supplies for the performance of such
functions; (e) insurance and membership in trade associations; (f) share
certificates representing shares of the Fund; (g) registration and maintenance
of registrations of the Fund and of its shares with various states and with the
Securities and Exchange Commission, including the preparation and printing of
prospectuses for filing with said Commission; (h) for shareholders' and
Trustees' meetings and the preparation, printing and mailing of reports and
other material to shareholders; (i) legal counsel in connection with the Fund's
existence, organization and financial structure and relations with its
shareholders, in connection with any of the foregoing items or otherwise, and in
connection with other legal matters with respect to which the Fund may require
and desire advice of legal counsel; and (j) all other services and facilities,
the expenses of which are not hereinafter specifically assumed by the Fund, for
the management of the investment and reinvestment of the assets of the Fund, the
offering and sale of the shares of the Fund and the administration of the
affairs of the Fund. The expense, charges, dues, fees and other costs to be
borne by the Company in providing or causing to be provided to the Fund the
services, facilities and personnel described in clauses (b) through (i) are
hereinafter referred to as the "Reimbursable Expenses of the Company".
The additional management and operating services, facilities and personnel
required by clauses (b) through (i), of the immediately preceding paragraph and
the performance of the same shall be paid for solely by the Company, but shall
be at all times subject to the directions, instructions and requests of the
Board of Trustees of the Fund and the Manager, including, without limitation,
directions as to the identity of the person or organization providing or
performing the same, the manner of performance and the rates of fees and charges
of such persons or organizations.
D. The Manager represents and warrants that the Fund has assumed and agreed
to pay (1) broker's commissions (which may be higher than other brokers would
charge if paid to a broker which provides brokerage and research services to the
Company or the Manager or any affiliate of either, for use in rendering
investment management, advisory or similar services to the Fund or other clients
of the Company or the Manager, or any affiliate of either); (2) issue and
transfer taxes chargeable to the Fund in connection with securities transactions
to which the Fund is a party; (3) its interest charges and all taxes and fees
(not hereinabove specifically required to be borne by the Company or the
Manager) payable by the Fund to federal, state or other governmental agencies
and (4) the compensation of each Trustee of the Fund who is not an affiliated
person of the Company or the Manager.
E. The services of the Company to the Fund hereunder are not to be deemed
exclusive, and the Company shall be free to render similar services to others or
to have any other business or management interests.
2. COMPENSATION TO BE PAID BY THE MANAGER TO THE COMPANY.
For its services (as described in Section 1) for the preceding month, the
Company will receive on the first business day of each month a fee which is 85%
of the management fee paid by the Fund to the Manager for the preceding month.
If and when this agreement terminates, any compensation payable hereunder for
the period ending with the date of such termination shall be payable upon such
termination. Amounts payable hereunder shall be promptly paid when due.
Any other provision of this agreement to the contrary notwithstanding, the
total monthly compensation payable to the Company shall not exceed (i) the
largest amount which would not cause the Fund's expenses to exceed the lowest
applicable expense limitation imposed as of the beginning of the fiscal year by
any statute or any regulatory authority of any jurisdiction in which shares of
the Fund are qualified for offer and sale as such limitation is set forth in the
most recent notice furnished by the Company to the Fund not later than the first
day of the fiscal year or (ii) such lower percentage limit as the Company may by
written notice to the Fund and the Manager declare to be effective for such
period of time as shall be stated in the notice. For purposes of clause (i) of
this paragraph, there shall be excluded from the "Fund's expenses" any amount
borne directly or indirectly by the Fund which is permitted to be excluded from
the computation of such limitation by such statute or regulatory authority. If
the Company shall serve under this agreement for less than the whole of any
calendar month, the foregoing compensation will be prorated. The Company shall
submit to the Fund and the Manager detailed statements of all Reimbursable
Expenses of the Company promptly after the end of each such calendar month. The
Fund and the Manager and their agents, accountants and employees shall have the
right at reasonable times during normal business hours to inspect the books and
records of the Company pertaining to such Reimbursable Expenses of the Company.
3. PUBLIC ACCOUNTANT'S REPORT.
The Manager represents and warrants that the Fund has agreed that its books
and accounts shall be audited at least once each year by a reputable,
independent public accountant or organization of public accountants who shall
render a report to the Fund.
4. INTERESTED AND AFFILIATED PERSONS.
Subject to and in accordance with the Declaration of Trust of the Fund, the
Certificate of Incorporation of the Company and the Articles of Incorporation of
the Manager, it is understood that Trustees, Directors, officers, agents and
shareholders of the Fund or the Manager are or may be interested in the Company
(or any successor thereof) as Directors and officers of the Company or its
affiliates, as stockholders of Keystone Group, Inc. or otherwise; that
Directors, officers and agents of the Company and its affiliates or stockholders
of Keystone Group, Inc. are or may be interested in the Fund or the Manager as
Trustees, Directors, officers, shareholders or otherwise, that the Company (or
any such successor) is or may be interested in the Fund or the Manager as
shareholder, or otherwise, and that the effect of any such adverse interests
shall be governed by said Declaration of Trust of the Fund, Certificate of
Incorporation of the Company and Articles of Incorporation of the Manager.
5. TERMINATION AND AMENDMENT.
This agreement shall continue in effect until July 1, 1994, after which it
will terminate unless its continuance after said date is specifically approved
at least annually by the vote of a majority of the Trustees of the Fund who are
not interested persons of the Fund or interested persons of the Company or the
Manager (as defined in the Investment Company Act of 1940) cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that (1) this agreement may at any time be terminated without the payment of any
penalty by the Manager, by the vote of the Board of Trustees of the Fund or by
the vote of a majority of the outstanding voting securities of the Fund, on 60
days' written notice to the Company, (2) this agreement shall immediately
terminate in the event of its assignment (within the meaning of the Investment
Company Act of 1940), and (3) this agreement may be terminated by the Company on
90 days' written notice to the Fund and the Manager. The aforesaid requirement
that continuance of this agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act of
1940 and the Rules and Regulations thereunder. Any notice under this agreement
shall be given in writing, addressed and delivered, or mailed postpaid, to the
other party at any office of such party.
This agreement may be amended at any time by mutual consent of the parties,
provided that such consent on the part of the Fund shall have been approved by
the vote of a majority of the outstanding voting securities of the Fund and by
the vote of a majority of the Trustees of the Fund who are not interested
persons of the Fund or interested persons of the Company (as defined in the
Investment Company Act of 1940) cast in person at a meeting called for the
purpose of voting on such approval.
6. LIABILITY OF THE COMPANY.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Company, or of reckless disregard of its obligations and duties
hereunder, the Company shall not be subject to liability for any act or omission
in the course of, or connected with, rendering services hereunder. The Fund
agrees to indemnify and hold the Company harmless from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the Securities Exchange
Act of 1934, the Investment Company Act of 1940, and any state and foreign
securities and blue sky laws, as amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action or thing which the Company takes or does
or omits to take or do hereunder provided that the Company shall not be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of a breach of fiduciary duty
with respect to the receipt of compensation for services, willful misfeasance,
bad faith, or gross negligence on the part of the Company in the performance of
its duties, or from reckless disregard by it of its obligations and duties under
this agreement.
7. DEFINITIONS.
For the purpose of this agreement (1) the words "vote of a majority of the
outstanding voting securities of the Fund" mean the affirmative vote, at a duly
held meeting of shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present in person or by proxy and entitled to vote at
such meeting, if the holders or more than 50% of the outstanding shares of the
Fund are present in person or by proxy and entitled to vote at such meeting, or
(b) of the holders of more than 50% of the outstanding shares of the Fund,
whichever is less, and (2) the words "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto authorized at Boston,
Massachusetts, on the day and year first above written.
KEYSTONE MANAGEMENT, INC.
By: /s/ X. Xxxxxxx
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Title: Treasurer
KEYSTONE CUSTODIAN FUNDS, INC.
By: /s/ X. Xxxxxxx
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Title: Sr. Vice President
