1
Draft of January 30, 1996
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT (this "Agreement"), dated
________ __, 1996, between The CountryBaskets Index Fund, Inc., a Maryland
corporation (the "Company"), with respect to each series of the Company
listed on Annex A (each such series, and each series hereafter authorized
and incorporated into Annex A, herein referred to as a "Series"), and
Deutsche Xxxxxx Xxxxxxxx/X. X. Xxxxxxxx Inc., a Delaware corporation (the
"Adviser").
W I T N E S S E T H :
WHEREAS, the Company is a management investment company organ-
ized as a series fund and registered under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Adviser is a registered investment adviser under
the Investment Advisers Act of 1940, as amended, and a registered broker-
dealer under the Securities Exchange Act of 1934, as amended (the "1934
Act");
WHEREAS, each Series is considered to be an open-end fund and
the Company desires to retain the Adviser to render specified investment
advisory and certain management and administrative services to it with
respect to each Series; and
WHEREAS, the Adviser desires to render such services to the
Company with respect to each Series;
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, and representations contained in this Agreement, the parties
hereto agree as follows:
ARTICLE I
Investment Management Services
1.1 Investment Advisory Services. The Adviser shall, for the
period and on the terms set forth in this Agreement, act as the investment
adviser to each Series. The Adviser shall determine which securities shall
be purchased, sold and loaned, which options contracts, futures contracts
and options thereon the Series will enter into and which other investments
shall be made by the Series, make purchases and sales of securities and
other investments on behalf of the Series and arrange for the lending of
the portfolio securities of the Series, determine how the securities held
by the Series should be voted, determine what portion of the Series' assets
2
shall be held uninvested, in each case subject to the overall supervision
of the Company's Board of Directors and in compliance with the investment
objectives, policies and restrictions pertaining to such Series set forth
from time to time in the Fund's registration statement (File Nos. 33-85710,
811-8734) under the Securities Act of 1933, as amended (the "1933 Act"),
and the 1940 Act (the "Registration Statement"), the prospectus and
statement of additional information contained therein, the 1940 Act, and
other applicable laws and regulations. The lending of portfolio securities
shall be subject to liability as set forth in Section 3.1 and conducted in
accordance with such policies, standards and procedures as may be adopted
by the Board of Directors from time to time and all applicable laws and
regulations, and in connection therewith the Adviser, subject to the
approval of the Company's Board of Directors, may appoint as its agent and
at its expense and continuing responsibility hereunder, one or more persons
to carry out such lending operations.
1.2 Portfolio Transactions.
(a) The Adviser shall select the brokers or dealers that will
execute the purchases and sales of securities and other investments for the
Series and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as permitted herein.
(b) If in good faith the Adviser believes it can obtain the
best price and most favorable execution in connection therewith, the
Adviser may execute each Series' portfolio transactions on an agency basis
through itself or an affiliated broker or dealer, provided that any
transaction so executed complies with Section 17(e) of the 1940 Act and the
rules thereunder. Such transactions may not be executed by the Adviser or
an affiliate as principal unless permitted by an exemptive order of the
Securities and Exchange Commission (the "Commission") or applicable rule or
regulation.
(c) Unless and until otherwise directed by the Board of
Directors of the Company, the Adviser may also effect individual securities
and other transactions with nonaffiliated brokers or dealers at commission
rates in excess of the commission rates another broker or dealer would have
charged, if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall responsibili-
ties with respect to the Series as contemplated by Section 28(e) of the
3
1934 Act. The execution of such transactions shall not be deemed to
represent an unlawful act or breach of any duty created by this Agreement
or otherwise. The Adviser will promptly communicate to the officers and
Board of Directors of the Company such information relating to Series
portfolio transactions as they may reasonably request.
1.3 Third-Party Service Providers. The Adviser shall:
(a) negotiate, maintain, evaluate and coordinate contractual
arrangements with third-party service providers, including, but not limited
to, administrators, custodians, transfer agents, distributors, independent
accountants, principal underwriters, attorneys, insurers and printers; and
(b) assist the various third-party service providers retained
by the Company for itself or with respect to a Series by, among other
things, providing any information to such service providers as the
Company's Board of Directors deems appropriate; reviewing and providing
advice to such service providers regarding sales literature and marketing
plans and providing information to the Series' principal underwriters
concerning Series performance and administration.
1.4 Determination of Fund Basket. The Adviser shall determine
after the end of each trading day on the New York Stock Exchange (the
"NYSE"), in accordance with the Series' policies as adopted from time to
time by the Board of Directors, the identity and weighting of the
securities in the Fund Basket (as defined in the Registration Statement)
required for the issuance of shares of the Series on a specified date of
purchase and for the redemption of shares of the Series on the next trading
day. The Adviser shall provide or cause to be provided this information to
the Series' distributor and other persons according to the policy
established by the Company's Board of Directors.
1.5 Reports and Records. (a) The Adviser shall assist the
Company in determining the amount of dividends and other shareholder
distributions to be declared and paid with respect to the Series; provide
the Company's Board of Directors with those financial reports and analyses
that the Board deems necessary to fulfill its fiduciary obligations with
respect to the Series; plan and facilitate all quarterly and special
meetings of the Board of Directors of the Company; oversee the preparation
of and, as necessary, filing of all documents and reports required under
4
the 1933 Act, the 1934 Act and the 1940 Act, including all information,
documents and reports required to be filed by the Company under
Sections 30(a) and (b) of the 1940 Act and any financial statements
contained therein, but the Adviser shall not be responsible for the
preparation of any of the above material; oversee the tabulation of proxies
by the Company's transfer agent; assist the Company in maintaining its
corporate existence; oversee and implement procedures for monitoring the
Company's compliance with federal and state law, regulations applicable to
the Company's operations and each Series' investment objective, policies
and restrictions as established by the Company's Board of Directors;
oversee and coordinate the maintenance of appropriate insurance and
fidelity bonds on behalf of each Series and provide any other management
services that the Company may reasonably request with respect to the
Series, and oversee the filings and other requirements under the rules of
the NYSE applying to the shares of its Series as listed securities.
(b) The Adviser shall be responsible for preparing,
maintaining and preserving for the periods prescribed by Rule 31a-2 of the
Commission under the 1940 Act the following records:
(i) the journals required by paragraph (b)(1) of Rule 31a-
1 under the 1940 Act (the "Rule") insofar as such journals require
entries with respect to purchases and sales of portfolio securities
of each Series;
(ii) the securities record or ledger required by paragraph
(b)(3) of the Rule;
(iii) the Company's Articles of Incorporation, by-laws and
other corporate documents required by paragraph (b)(4) of the Rule;
(iv) the record of brokerage orders and portfolio purchases
and sales required by paragraphs (b)(5) and (b)(6) of the Rule;
(v) the record of all puts, calls, spreads, straddles and
other options required by paragraph (b)(7) of the Rule;
(vi) the record of allocation of portfolio purchase and
sale orders to named brokers or dealers required by paragraph (b)(9)
of the Rule;
5
(vii) the record of authorizations of transactions in
portfolio securities required by paragraph (b)(10) of the Rule; and
(viii) the file of advisory material required by paragraph
(b)(11) of the Rule.
1.6 Budgets and Allocation of Expenses.
(a) The Adviser shall establish the Series' operating expense
budgets and oversee the payment of incurred operating expenses. The
Adviser shall bear all expenses, including personnel costs and overhead,
incurred by the Adviser pursuant to its duties under this Agreement and
shall pay the salaries of directors and officers of the Company who are
affiliated persons (as defined in the 0000 Xxx) of the Adviser. The
Adviser shall provide office facilities and personnel adequate to perform
the services described in Article I of this Agreement. The Adviser shall
not be required to pay expenses of any activity which is primarily intended
to result in sales of shares of the Series.
(b) Each Series shall be responsible for all its own
expenses, including, without limitation, its allocable share of the
organizational expenses of the Company; insurance expenses; the
compensation of directors not affiliated with the Adviser, administrator or
distributor and their travel expenses; expenses incurred by the Series in
connection with Board of Directors meetings other than those incurred by
persons affiliated with the Adviser, administrator or distributor;
brokerage and other costs of executing portfolio transactions; payment for
portfolio pricing services to a pricing agent, if any; litigation expenses;
interest expense; taxes and governmental fees; registration and qualifying
fees paid to the Commission and any other state or foreign governmental
agency regulating the purchase and sale of the Series' shares; legal and
independent accountants' fees; custody, dividend paying, and transfer agent
expenses; fees payable to the Series' administrator; expenses of obtaining
and maintaining stock exchange listings of the Series' shares; shareholder
meeting expenses; proxy and shareholder report expenses; expenses of
preparing, printing and delivering the Company's prospectuses and
statements of additional information required to be delivered to purchases
of its shares by the 1934 Act as well as those used in connection with
making offers to sell the Series' shares in Creation Unit size which are
paid for by each Series in accordance with its plan adopted under
Rule 12b-1 of the 1940 Act; expenses incurred by the Series in connection
6
with the Company's membership in investment company organizations and
trade associations; and extraordinary expenses.
1.7 Shareholder and Press Relations. The Adviser shall
arrange the Company's relationships with shareholders of the Series and the
NYSE, including responding to shareholder inquiries and requests related to
the Series and shall prepare or oversee the preparation of all press
releases and notices to the NYSE.
ARTICLE II
Fees and Duration
2.1 Fees. In return for the Adviser's services with respect
to the Series under this Agreement, each Series shall pay the Adviser a
fee, computed daily and paid monthly, equal to the annualized percentage of
the average daily net assets of the Series set forth on Annex A, plus 40%
of: (a) the gross investment income of the Series as calculated for
financial reporting purposes less (b) dividends on securities held in the
portfolio of the Series.
2.2 Duration.
(a) Unless sooner terminated, this Agreement shall continue
in effect with respect to each Series until __________, 1998. Thereafter,
if not terminated, this Agreement shall continue in effect for successive
periods of twelve months after such date, provided that each such
continuance shall be subject to annual approval with respect to each Series
by (i) the Company's Board of Directors or (ii) the vote of a majority of
the Series' outstanding voting securities (as defined in the 1940 Act),
provided that in either event the continuance is also approved by a
majority of the Company's Board of Directors who are not interested persons
(as defined in the 0000 Xxx) of the Company by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement
is terminable with respect to any Series, without penalty, upon 60 days'
notice, by the Board of Directors or by the vote of a majority (as defined
in the 0000 Xxx) of the Series' outstanding voting securities. The
Agreement is also terminable without penalty, upon 60 days' notice, by the
Adviser with respect to any Series, and will terminate automatically in the
event of its assignment (as defined in the 1940 Act). Except as may be
provided by law, the termination of this Agreement with respect to one or
more particular Series shall not act to terminate this Agreement with
respect to any other Series, as to which this Agreement shall remain in
full force and effect.
7
(b) Notwithstanding anything to the contrary contained in
this Section 2.2, the sublicense granted to the Company pursuant to Section
4.7 shall terminate upon the termination of this Agreement except that in
the event of termination resulting from a change of control of the Adviser
that is deemed to be an assignment under the 1940 Act and a termination by
the Adviser, the Company may elect to continue as a sublicensee for 90 days
provided it pays the Adviser a license fee during the period equal to the
license fee the Adviser is paying under the License Agreement.
(c) Upon termination of this Agreement with respect to any
Series the obligations of each party shall cease except for the provisions
of this Section 2.2 and Sections 4.7 and 4.9.
2.3 Reductions to Fees. The Adviser shall reimburse the
Series for that portion of the Series' annual net expenses (excluding
interest, taxes, brokerage commissions, distribution expenses, if any, and
extraordinary expenses), that exceeds the most stringent limits prescribed
by any state in which Series shares are offered for sale. However, the
Adviser will not be obligated to reimburse any Series for any such amounts
that exceed the fees (calculated pursuant to Section 2.1) paid to the
Adviser by the Series.
ARTICLE III
Liability
3.1 Generally. Absent (i) willful misfeasance, bad faith or
gross negligence on its part in the performance of, or reckless disregard
by it of its obligations and duties under, this Agreement, or (ii) a breach
of a fiduciary duty owed to the Series with respect to the receipt of com-
pensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940
Act), neither the Adviser nor any of its directors, officers, or employees
shall be liable to the Series, the Company or to any Series shareholder for
any error of judgment, mistake of law, or for any loss suffered by the
Series in connection with the matters to which this Agreement relates
including, without limitation, any loss that may be sustained in connection
with the purchase, holding, redemption, sale or lending of any security or
investments or the entering into of any futures or options on futures
contracts on behalf of the Series.
8
3.2 Other Liabilities. The Adviser does not assume
responsibility for the acts or omissions of any other person.
ARTICLE IV
Miscellaneous
4.1 Notices. Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if addressed
and delivered or mailed by registered mail, postage prepaid, to (1)
Deutsche Xxxxxx Xxxxxxxx/X. X. Xxxxxxxx Inc. at 00 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxx; and (2) The CountryBaskets
Index Fund, Inc. at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Secretary.
4.2. Choice of Law. This Agreement shall be construed in
accordance with New York State law.
4.3. Captions. The captions in this Agreement are included
for convenience only and in no way define or limit any of the provisions
hereof or otherwise affect their construction.
4.4 Severability. If any provisions of this Agreement shall
be held or made invalid, in whole or in part, then the other provisions of
this Agreement shall remain in force. Invalid provisions shall, in
accordance with this Agreement's intent and purpose, be replaced, to the
extent legally possible, by valid provisions in order to effectuate the
intended results of the invalid provisions.
4.5 Agency. The Company has not appointed the Adviser as its
agent under this Agreement.
4.6 Reliance on Communications. The Adviser shall be entitled
to rely on any notice or communication reasonably believed by it to be
genuine and correct and to have been sent by or on behalf of the Series.
4.7 FT Index Sublicense. The Adviser hereby grants to the
Company with respect to each Series a non-exclusive, non-transferable
royalty free sublicense to use and refer to the Financial Times/Standard &
Poor's Actuaries World Indices(TM) and the related trade name and trademark
rights identified as "Trademarks" in the License Agreement, dated as of
__________, 1996, between Standard & Poor's, a division of The XxXxxx-Xxxx
Companies, Inc., and the Adviser (the "License Agreement"), on the terms
and conditions specified in Section 13(a) thereof. Such sublicense shall
9
terminate at the later of 60 days after notice is given under Section 2.2
by the Adviser of termination of this Agreement or 60 days after the
termination of the License Agreement. No Series shall be required to make
any payments in respect of such sublicense after the termination of the
sublicense except as provided in Section 2.2.
4.8 Exclusivity. The Adviser's services to the Series shall
not be exclusive and nothing in the Agreement shall prevent the Adviser, or
any of its affiliates, from providing similar services to other investment
companies or clients (regardless of whether their investment objectives or
policies are similar to the Series') or from engaging in any other
activities. When the Adviser's other clients seek to purchase or sell a
security at the same time such security is being purchased or sold for the
Series, such purchases and sales will, to the extent feasible, be allocated
among the Series and the Adviser's other clients in a manner that the
Adviser believes equitable.
4.9 Right of Company to Use Name of CountryBaskets Index Fund.
"The CountryBaskets Index Fund," "CountryBaskets," "CB Shares" and various
names connected with CountryBaskets, for which the Adviser has filed
registration applications with the U.S. Patent and Trademarks Office (the
"Marks"), are trade and service marks of the Adviser. The Adviser consents
to the Company's use of "CountryBaskets" in its corporate name and
otherwise and grants to the Company a non-exclusive, non-transferable
royalty fee sublicense to use and refer to the Marks during the term of
this Agreement. Upon termination of this Agreement such consent and
sublicense shall terminate after 120 days and the Company will promptly
take the necessary steps to change its name. To the extent that is not
accomplished within 120 days, the Company agrees that it will cease issuing
new shares until its name is changed to one that has no similarity to "The
CountryBaskets Index Fund".
10
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first written above.
THE COUNTRYBASKETS INDEX FUND, INC.
By:________________________________
Name:
Title:
DEUTSCHE XXXXXX XXXXXXXX/
X. X. XXXXXXXX INC.
By:________________________________
Name:
Title:
11
INVESTMENT MANAGEMENT AGREEMENT
The CountryBaskets Index Fund, Inc.
Annex A
Percentage of
Average Daily
Series Net Assets (Annualized)
Australia Index Series .30%
France Index Series .30%
Germany Index Series .30%
Hong Kong Index Series .45%
Italy Index Series .30%
Japan Index Series .30%
South Africa Index Series .45%
UK Index Series .30%
US Index Series .20%
