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
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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
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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
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
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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
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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 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
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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
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 such combined assets.
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Rate of Advisory Fee
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Aggregate average daily net assets of the three High Intermediate
Commenced Series or the Commenced Series and the Core Bond Income Term
Bond Fund Corresponding Series, as the case may be Portfolio Portfolio Portfolio
----------------------------------------------------------- ----------- ---------- --------------
Not exceeding $250 million 0.50% 0.55% 0.50%
In excess of $250 million but not more than $500 million 0.45% 0.50% 0.45%
In excess of $500 million but not more than $750 million 0.40% 0.45% 0.40%
In excess of $750 million 0.35% 0.40% 0.35%
(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
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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 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.
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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.
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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.
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
By: /s/ Xxxxxx X. Xxxxx
____________________________
Name: Xxxxxx X. Xxxxx
Title: Vice President and
Treasurer
FUND ASSET MANAGEMENT, L.P.
By: Princeton Services, Inc.,
General Partner
By: /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, 2003
