ISI STRATEGY FUND, INC.
ISI STRATEGY FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 12th day of September, 1997, by and
between ISI STRATEGY FUND, INC., a Maryland corporation (the "Fund"), and
INTERNATIONAL STRATEGY & INVESTMENT GROUP INC., a Delaware corporation
("ISI").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and
WHEREAS, the Fund wishes to appoint ISI as the exclusive
distributor of the class of shares of the Fund known as the ISI Strategy Fund
Shares (the "Shares") and ISI wishes to become the distributor of the Shares;
and
WHEREAS, the compensation to ISI hereunder and the payments
contemplated by paragraph 9 constitute the financing of activities intended to
result in the sale of Shares, and this Agreement is entered into pursuant to a
"written plan" pursuant to Rule 12b-1 under the 1940 Act (the "Plan") allowing
the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and
of other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints ISI as the exclusive
distributor of the Shares for the period and on the terms set forth in this
Agreement. ISI accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished ISI with
copies, properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed
with the Secretary of State of Maryland on June 12, 1997 and all amendments
thereto (the "Articles of Incorporation");
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
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(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of ISI as the distributor of the Shares and
approving this Agreement;
(d) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as
filed with the Securities and Exchange Commission (the "SEC") on July 11,
1997;
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File No.
333-31127) and under the 1940 Act as filed with the SEC on July 11, 1997
relating to the Fund and all amendments thereto; and
(f) The Fund's most recent prospectus for the
Shares (such prospectus and all amendments and supplements thereto are herein
called "Prospectus").
The Fund will furnish ISI from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties as Distributor. ISI agrees that all solicitations
for subscriptions for Shares shall be made in accordance with the Fund's
Articles of Incorporation and By-Laws, and its then current Registration
Statement, Prospectus and Statement of Additional Information, and shall not
at any time or in any manner violate any provisions of the laws of the United
States or of any state or other jurisdiction in which solicitations are then
being made. In carrying out its obligations hereunder, ISI shall undertake the
following actions and responsibilities:
(a) receive orders for the purchase of Shares,
accept or reject such orders on behalf of the Fund in accordance with the
currently effective Prospectus for the Shares and the Fund's Statement of
Additional Information and transmit such orders as are so accepted to the
Fund's transfer agent as promptly as possible;
(b) receive requests for redemption from holders of
Shares and transmit such redemption requests to the Fund's transfer agent as
promptly as possible;
(c) respond to inquiries from the Fund's
shareholders concerning the status of their accounts with the Fund;
(d) provide to the Fund's Treasurer, at least
quarterly, a written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including an
explanation of the purposes for which such expenditures were made; and
(e) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares and perform such
other administrative duties with respect to the Shares as the Fund's Board of
Directors may require.
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4. Distribution of Shares. ISI shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that ISI does
not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through ISI and securities dealers who
have valid Agency Distribution Agreements with ISI. Notwithstanding the
provisions of the foregoing sentence the Fund may issue its Shares at their
net asset value to any shareholder of the Fund purchasing such Shares with
dividends or other cash distributions received from the Fund pursuant to an
offer made to all shareholders.
5. Control by Board of Directors. Any distribution
activities undertaken by ISI pursuant to this Agreement, as well as any other
activities undertaken by ISI on behalf of the Fund pursuant hereto, shall at
all times be subject to any directives of the Board of Directors of the Fund.
The Board of Directors may agree, on behalf of the Fund, to amendments to this
Agreement, provided that the Fund must obtain prior approval of the
shareholders of the Fund to any amendment which would result in a material
increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, ISI shall at all times conform to:
(a) all applicable provisions of the 1940 Act and
any rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act and any amendments and
supplements thereto;
(c) the provisions of the Articles of Incorporation
of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of federal and
state law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and ISI as follows:
(a) ISI shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such services
are required to carry out their obligations under this Agreement;
(b) ISI shall bear the expenses of any promotional
or sales literature used by ISI or furnished by ISI to purchasers or dealers
in connection with the public offering of the
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Shares, the expenses of advertising in connection with such public offering
and all legal expenses in connection with the foregoing; and
(c) the Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees
of the Fund's investment advisor and administrator; the charges and expenses
of any registrar, any custodian or depositary appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any
stock transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and corporate fees payable by the Fund
to federal, state or other governmental agencies; the cost and expense of
engraving or printing of stock certificates representing Shares; all costs and
expenses in connection with maintenance of registration of the Fund and the
Shares with the SEC and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel) except as provided in
subparagraph (a) above; the expenses of printing, including typesetting, and
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of directors who are not "interested
persons" of the Fund (as defined in the 0000 Xxx) or members of any advisory
board or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's Shares;
charges and expenses of legal counsel, including counsel to the directors who
are not "interested persons" of the Fund (as defined in the 1940 Act), and of
independent accountants, in connection with any matter relating to the Fund; a
portion of membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Fund's operation unless otherwise explicitly provided
herein.
8. Delegation of Responsibilities. ISI may, but shall be
under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and ISI's charges in
rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by
ISI of any Fund expense that ISI is not required to pay or assume under this
Agreement shall not relieve ISI of any of its obligations to the Fund or
obligate ISI to pay or assume any similar Fund expense on any subsequent
occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by ISI, the Fund shall pay to ISI, compensation at the annual
rate of .25% of the average daily net assets invested in the Shares of the
Fund. Except as hereinafter set forth, continuing compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. 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 the part of the month during which this
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Agreement is in effect shall be prorated in a manner consistent with the
calculations of the fees as set forth above.
10. Compensation for Servicing Shareholder Accounts. The
Fund acknowledges that ISI may compensate its investment representatives for
opening accounts, processing investor letters of transmittal and applications
and withdrawal and redemption orders, responding to inquiries from Fund
shareholders concerning the status of their accounts and the operations of the
Fund, and communicating with the Fund and its transfer agent on behalf of the
Fund shareholders.
11. Agency Distribution Agreements. ISI may enter into
agency distribution agreements (the "Agency Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
transmitting broker in connection with the proposed offering. All Agency
Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and ISI, ISI may pay each such transmitting broker an
amount not to exceed that portion of the compensation paid to ISI hereunder
that is attributable to accounts of Fund shareholders who are customers of
such transmitting broker.
12. Non-Exclusivity. The services of ISI to the Fund are not
to be deemed exclusive and ISI shall be free to render distribution or other
services to others (including other investment companies) and to engage in
other activities. It is understood and agreed that directors, officers or
employees of ISI may serve as directors or officers of the Fund, and that
directors or officers of the Fund may serve as directors, officers and
employees of ISI to the extent permitted by law; and that directors, officers
and employees of ISI are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, directors or officers of any other firm or corporation, including
other investment companies.
13. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and
effect for an initial term of two years and from year to year thereafter,
provided that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act), and
(b) by the affirmative vote of a majority of the
directors who are not "interested persons" of the Fund (as defined in the 0000
Xxx) and do not have a financial interest in the operation of this Agreement,
by votes cast in person at a meeting specifically called for such purpose.
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14. Termination. This Agreement may be terminated at any
time, on sixty (60) days' written notice to the other party without the
payment of any penalty, (i) by vote of the Fund's Board of Directors, (ii) by
vote of a majority of the directors who are not "interested persons" of the
Fund (as defined in the 0000 Xxx) and who do not have a financial interest in
the operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act) or (iv) by ISI. The
notice provided for herein may be waived by each party. This Agreement shall
automatically terminate in the event of its assignment as defined in the 1940
Act.
15. Liability. In the performance of its duties hereunder,
ISI shall be obligated to exercise care and diligence and to act in good faith
and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of ISI or reckless disregard by ISI of its duties
under this Agreement.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other parties, it is agreed that for this purpose
the address of the Fund and ISI shall be 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
17. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be
deemed to incorporate the effect of such rule, regulation or order. Otherwise
the provisions of this Agreement shall be interpreted in accordance with the
laws of Maryland.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the day and year
first above written.
[SEAL] ISI STRATEGY FUND, INC.
Attest: By:
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Name: Name:
Title:
[SEAL] INTERNATIONAL STRATEGY &
INVESTMENT GROUP INC.
Attest: By
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Name: Name:
Title:
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