Exhibit 4(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the 30th day of September, 2003, by and between
MASTER BOND TRUST, a Delaware statutory trust (hereinafter referred to as the
"Trust"), and FUND ASSET MANAGEMENT, L.P., a Delaware limited partnership (the
"Investment Adviser").
W I T N E S S E T H:
WHEREAS, the Trust intends to engage in business as an open-end
diversified management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Trust is comprised of the separate series set forth on
Exhibit A hereto, as such Exhibit may be revised from time to time (each, a
"Series"), each of which pursues its investment objective through separate
investment policies; and
WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Investment Adviser to render
management and investment advisory services to the Trust in the manner and on
the terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Trust on the terms and conditions
hereinafter set forth; and
WHEREAS, each Series serves as the "master" portfolio for one or more
"feeder" funds (each, a "Fund") that invest all of their assets in the Series
and that have the same investment objective and policies as the Series.
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the Trust and the Investment Adviser hereby agree as
follows:
Article I
Duties of the Investment Adviser
The Trust hereby employs the Investment Adviser to act as a manager
and investment adviser of the Trust and to furnish, or arrange for affiliates
to furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall control of the Board of
Trustees of the Trust, for the period and on the terms and conditions set
forth in this Agreement. The Investment Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render, or arrange for
the rendering of, such services and to assume the obligations herein set forth
for the compensation provided for herein.
The Investment Adviser and its affiliates shall for all purposes herein be
deemed to be independent contractors and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed agents of the Trust.
(a) Management Services. The Investment Adviser shall perform (or
arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Trust and the
Series. It is understood that the Investment Adviser or its affiliates may
enter into separate agreements with each Fund for the provision of management
and administrative services necessary for the operation of each Fund. The
Investment Adviser shall provide the Trust with office space, facilities,
equipment and necessary personnel and such other services as the Investment
Adviser, subject to review by the Board of Trustees, shall from time to time
determine to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser shall also, on behalf of the Trust, conduct
relations with custodians, depositories, transfer agents, dividend disbursing
agents, other shareholder servicing agents, pricing agents, accountants,
attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers,
banks and such other persons in any such other capacity deemed to be necessary
or desirable. The Investment Adviser shall generally monitor the Trust's
compliance with investment policies and restrictions as set forth in the
current registration statement relating to the Trust under the Investment
Company Act (the "Registration Statement"). The Investment Adviser shall make
reports to the Board of Trustees of its performance of obligations hereunder
and furnish advice and recommendations with respect to such other aspects of
the business and affairs of the Trust as it shall determine to be desirable.
(b) Investment Advisory Services. The Investment Adviser shall
provide (or arrange for the provision by affiliates of the Investment Adviser)
the Trust with such investment research, advice and supervision as the latter
may from time to time consider necessary for the proper supervision of the
assets of each Series, shall furnish continuously an investment program for
each Series and shall determine from time to time which securities shall be
purchased, sold or exchanged and what portion of the assets of each Series
shall be held in the various securities and other financial instruments in
which the Series invests and the portion of the assets of the Series that
shall be held in cash, subject always to the restrictions set forth in the
Declaration of Trust and the By-Laws of the Trust, as amended from time to
time, the provisions of the Investment Company Act and the statements relating
to the Series' investment objective, investment policies and investment
restrictions as the same are set forth in the Registration Statement. The
Investment Adviser shall make decisions for each Series as to the manner in
which voting rights, rights to consent to corporate action and any other
rights pertaining to the Series' portfolio securities shall be exercised.
Should the Board of Trustees at any time, however, make any definite
determination as to investment policy and notify the Investment Adviser
thereof in writing, the Investment Adviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Investment
Adviser shall take, on behalf of the Trust, all actions which it deems
necessary to implement the investment policies determined as provided above
and, in particular, to place all orders for the purchase or sale of portfolio
securities for each Series' account with brokers or dealers selected by it,
and to that end, the Investment Adviser is authorized as the agent of the
Trust to give instructions to the Custodian of the Trust as to deliveries of
securities and payments of cash for the account of the Trust, on behalf of the
Series. In connection with the selection of such brokers or dealers and the
placing of such orders with respect to assets of each
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Series, the Investment Adviser is directed at all times to seek to obtain
execution and prices within the policy guidelines determined by the Board of
Trustees as set forth in the Registration Statement. Subject to this
requirement and the provisions of the Investment Company Act, the Securities
Exchange Act of 1934, as amended, and other applicable provisions of law, the
Investment Adviser may select brokers or dealers with which it or the Trust is
affiliated.
(c) Affiliated Sub-Advisers. In carrying out its responsibilities
hereunder, the Investment Adviser may employ, retain or otherwise avail itself
of the services of other persons or entities including without limitation,
affiliates of the Investment Adviser, on such terms as the Investment Adviser
shall determine to be necessary, desirable or appropriate. However, if the
Investment Adviser chooses to retain or avail itself of the services of
another person or entity to manage assets of a Series, such other person or
entity must be (i) an affiliate of the Investment Adviser, (ii) retained at
the Investment Adviser's own cost and expense, and (iii) retained subject to
the requirements of Section 15 of the Investment Company Act. Retention of one
or more affiliated sub-advisers, or the employment or retention of other
persons or entities to perform services, shall in no way reduce the
responsibilities or obligations of the Investment Adviser under this Agreement
and the Investment Adviser shall be responsible for all acts and omissions of
such affiliated sub-advisers, or other persons or entities, in connection with
the performance of the Investment Adviser's duties hereunder.
(d) Notice Upon Change in Partners of the Investment Adviser. The
Investment Adviser is a limited partnership and its limited partner is Xxxxxxx
Xxxxx & Co., Inc. and its general partner is Princeton Services, Inc. The
Investment Adviser will notify the Trust of any change in the membership of
the partnership within a reasonable time after such change.
Article II
Allocation of Charges and Expenses
(a) The Investment Adviser. The Investment Adviser assumes and shall
pay, or cause its affiliates to pay, for maintaining the staff and personnel
necessary to perform its obligations under this Agreement, and shall at its
own expense, provide the office space, facilities, equipment and necessary
personnel which it is obligated to provide under Article I hereof. The
Investment Adviser shall pay, or cause its affiliates to pay, compensation of
all officers of the Trust and all Trustees of the Trust who are affiliated
persons of the Investment Adviser, or any sub-adviser, or an affiliate of the
Investment Adviser or sub-adviser.
(b) The Trust. The Trust assumes and shall pay or cause to be paid
all other expenses of the Trust, including, without limitation: taxes,
expenses for legal and auditing services, costs of printing proxies, stock
certificates, shareholder reports, Registration Statements, charges of the
custodian, any sub-custodian and transfer agent, expenses of portfolio
transactions, expenses of redemption of shares, Securities and Exchange
Commission fees, expenses of registering the shares under Federal, state and
foreign laws, fees and actual out-of-pocket expenses of all Trustees of the
Trust who are not affiliated persons of the Investment Adviser or any
sub-adviser or of an affiliate of the Investment Adviser or any sub-adviser,
accounting and pricing costs (including the daily calculation of the net asset
value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other
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expenses properly payable by the Trust. It also is understood that the Trust
will reimburse the Investment Adviser for its costs incurred in providing
accounting services to the Trust.
Article III
Compensation of the Investment Adviser
(a) Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Investment Adviser, the Trust
shall pay to the Investment Adviser at the end of each calendar month a fee
based on the average daily value of the aggregate net assets of the three
Series (or, if one or more Series have not commenced operations as of the end
of the relevant calendar month (each, a "Non-Commenced Series"), the aggregate
net assets of (i) each Series that has commenced operations as of the end of
the relevant calendar month (each, a "Commenced Series") and (ii) each series
of Xxxxxxx Xxxxx Xxxx Fund, Inc. that has the same investment objective and
strategies as its corresponding Non-Commenced Series (each, a "Bond Fund
Corresponding Series")), commencing on the day following effectiveness hereof,
as determined and computed in accordance with the description of the
determination of net asset value contained in the Prospectus and Statement of
Additional Information of the Trust. 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 that part of the month this Agreement is in
effect shall be prorated in a manner consistent with the calculation of the
fee as set forth above. Subject to the provisions of subsection (b) hereof,
payment of the Investment Adviser's compensation for the preceding month shall
be made as promptly as possible after completion of the computations
contemplated herein. During any period when the determination of the net asset
value of a Series is suspended by the Board of Trustees, the net asset value
of a share of such Series as of the last business day prior to such suspension
shall for this purpose be deemed to be the net asset value of such Series at
the close of each succeeding business day until it is again determined.
The fee with respect to each Series shall be at the rates set forth
below. These rates are subject to reduction to the extent that the aggregate
average daily net assets of (x) the three Commenced Series or (y) if one or
more Series is a Non-Commenced Series, the Commenced Series and the Bond Fund
Corresponding Series exceeds $250 million, $500 million or $750 million, as
the case may be. The reductions shall be applicable to each Series regardless
of size on a "uniform percentage" basis. Determination of the portion of the
net assets of that Series to which a reduced rate is applicable is made by
multiplying the net assets of that Series by the "uniform percentage," which
is derived by dividing (i) the amount by which the combined assets of the
three Commenced Series or the Commenced Series and the Bond Fund Corresponding
Series, as the case may be, exceed the minimum amount to which such rate
applies by (ii) such combined assets.
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Rate of Advisory Fee
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Aggregate average daily net assets of the three Commenced Series or Core High Intermediate
the Commenced Series and the Bond Fund Corresponding Series, as the Bond Income Term
case may be Portfolio Portfolio Portfolio
----------------------------------------------------------------------- ---------- ------------ ------------------
Not exceeding $250 million.......................................... 0.20% 0.25% 0.20%
In excess of $250 million but not more than $500 million............ 0.15% 0.20% 0.15%
In excess of $500 million but not more than $750 million............ 0.10% 0.15% 0.10%
In excess of $750 million........................................... 0.05% 0.10% 0.05%
(b) Expense Limitations. In the event the operating expenses of a
Series, including amounts payable to the Investment Adviser pursuant to
subsection (a) hereof, for any fiscal year ending on a date on which this
Agreement is in effect, exceed the expense limitations applicable to the
Series imposed by applicable state securities laws or regulations thereunder,
as such limitations may be raised, lowered or waived from time to time, the
Investment Adviser shall reduce its management and investment advisory fee by
the extent of such excess and, if required pursuant to any such laws or
regulations, will reimburse the Series in the amount of such excess; provided,
however, to the extent permitted by law, there shall be excluded from such
expenses the amount of any interest, taxes, brokerage fees and commissions,
distribution fees and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Trust and allocated to the Series.
Whenever the expenses of a Series exceed a pro rata portion of the applicable
annual expense limitations, the estimated amount of reimbursement under such
limitations shall be applicable as an offset against the monthly payment of
the fee due to the Investment Adviser. Should two or more such expense
limitations be applicable as at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the
Investment Adviser's fee shall be applicable.
Article IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the management of the Trust or any Series, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder. As
used in this Article IV, the term "Investment Adviser" shall include any
affiliates of the Investment Adviser performing services for the Trust
contemplated hereby and the partners, directors, officers and employees of the
Investment Adviser and such affiliates.
Article V
Activities of the Investment Adviser
The services of the Investment Adviser to the Trust are not to be
deemed to be exclusive; the Investment Adviser and any person controlled by or
under common control with
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the Investment Adviser (for purposes of this Article V referred to as
"affiliates") are free to render services to others. It is understood that the
Board of Trustees, officers, employees and shareholders of the Trust are or
may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees, partners, and shareholders or otherwise, and
that the Investment Adviser and directors, officers, employees, partners and
shareholders of the Investment Adviser and its affiliates are or may become
similarly interested in the Trust as shareholders or otherwise.
Article VI
Duration and Termination of this Agreement
As to each Series, this Agreement shall become effective as of the
date indicated for that Series on Exhibit A hereto and shall remain in force
for a period of two years thereafter and thereafter shall continue from year
to year, but only so long as such continuance is specifically approved at
least annually by (i) the Board of Trustees of the Trust, or by the vote of a
majority of the outstanding voting securities of the Series, and (ii) a
majority of those Trustees who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose
of voting on such approval.
As to each Series, this Agreement may be terminated at any time,
without the payment of any penalty, by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Series, or by the
Investment Adviser, on sixty days' written notice to the other party. This
Agreement shall automatically terminate, as to the relevant Series, in the
event of its assignment.
Article VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved by the vote of the Trustees of the Trust, including a
majority of those Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval and, where required by the Investment Company Act,
by the vote of a majority of the outstanding voting securities of each
affected Series.
Article VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission
under said Act.
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Article IX
Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
MASTER BOND TRUST
/s/Xxxxxx X. Xxxxx
----------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President and Treasurer
FUND ASSET MANAGEMENT, L.P.
By: Princeton Services, Inc.,
General Partner
/s/Xxxxxx X. Xxxxx
----------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President and
Treasurer
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EXHIBIT A
Name of Series Effective Date
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Core Bond Portfolio October 1, 0000
Xxx. A-1
