EXHIBIT 5
Investment Advisory Agreement dated as of December 9, 1997, between the
Registrant and Shay Assets Management, Inc.
INVESTMENT ADVISORY AGREEMENT
This Agreement made and entered into as of December 9, 1997, by and
between Institutional Investors Capital Appreciation Fund, Inc., a New York
corporation (the "Fund"), and Shay Assets Management, Inc., a Florida
corporation (the "Adviser"):
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management investment
company incorporated in New York on October 29, 1952; and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth the parties hereto agree as follows:
1. ADVISORY SERVICES. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund with respect to the assets belonging to the
Fund's common stock, $1.00 par value, for the period and on the terms set forth
in this Agreement. Shares of the Fund's common stock, $1.00 par value, are
referred to herein as "Fund Shares". The Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided. The Fund, at its option, may also appoint the Adviser to act as
investment adviser to the Fund hereunder with respect to the assets belonging to
any other class of capital stock of the Fund from time to time created, but the
Adviser shall not be required to accept any such appointment. The Adviser shall
furnish investment research and advice to the Fund and shall manage the
investment and reinvestment of the assets and its business affairs and matters
incidental thereto, all subject to the supervision of the Board of Directors of
the Fund and subject to the provisions of the Certificate of Incorporation (as
defined in paragraph 3(a) of this Agreement) and By-Laws (as defined in
paragraph 3(b) of this Agreement) of the Fund and any resolution, rules or
regulations adopted by the Board of Directors of the Fund. The Adviser shall for
all purposes herein provided be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Board of
Directors of the Fund from time to time, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent for the Fund. The
Fund shall also be free to retain, at its own expense, other persons to provide
it with any services whatsoever including, but not limited to, statistical,
factual or technical information or advice. The services of the Adviser herein
provided are not to be deemed exclusive and the Adviser shall be free to render
similar services or other services to others.
2. DUTIES OF THE ADVISER. Subject to the general supervision of the
Board of Directors of the Fund, the Adviser shall, employing its discretion,
manage the investment operations of the Fund and the composition of the
portfolio of securities and investments (including cash) belonging to the Fund,
including the purchase, retention and disposition thereof and the execution of
agreements relating thereto, in accordance with the investment objective,
policies and restrictions of the Fund as stated in the Prospectus (as defined in
paragraph 3(f) of this Agreement), Registration Statement (as defined in
paragraph 3(d) of this Agreement), Certificate of Incorporation and By-Laws of
the Fund and subject to the following understandings:
(a) The Adviser shall furnish a continuous investment program for the
Fund and determine from time to time what investments or securities will be
purchased, retained or sold by the Fund, and what portion of the assets will be
invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Certificate of Incorporation,
the By-Laws and Prospectus of the Fund and with the instructions and directions
of the Board of Directors of the Fund and will conform to and comply with the
requirements of the Investment Company Act of 1940, as amended from time to
time, and the rules and regulations of the Securities and Exchange Commission
thereunder (collectively, the "1940 Act") and all other applicable Federal and
state laws and regulations, including without limitation the provisions of the
Internal Revenue Code, as amended from time to time, applicable to the Fund as a
regulated investment company.
(d) The Adviser shall determine the securities and other investments to
be purchased or sold by the Fund and, as agent for the Fund, will effect
transactions pursuant to its determinations either directly with the issuer or
with any broker and/or dealer in such securities. In placing orders with brokers
and/or dealers the Adviser intends to seek the best price and execution for
purchases and sales and will comply with such policies with respect to brokerage
as are set forth in the Fund's Registration Statement and Prospectus or as the
Fund's Board of Directors may adopt from time to time. On occasions when the
Adviser deems the purchase or sale of a security to be in the best interest of
the Fund as well as other customers, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased in order to obtain the best price and
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Adviser in
a manner it considers to be equitable and consistent with its fiduciary
obligations to the Fund and, if applicable, to such other customers.
(e) The Adviser shall maintain books and records with respect to the
portfolio transactions of the Fund and shall render to the Fund's Board of
Directors such periodic and special reports as the Board of Directors may
reasonably request.
(f) The Adviser shall provide the Fund's custodian and administrator on
each business day with information relating to all transactions concerning the
assets of the Fund, except redemptions of and any subscriptions for Fund Shares,
and will provide on a timely basis to the Fund's administrator and other persons
providing services to the Fund such information as the administrator or such
other persons may reasonably request in connection with the performance of their
respective duties and obligations with respect to the Fund.
(g) The Adviser will report to the Board of Directors of the Fund at
each meeting thereof all changes in the investments and other assets of the Fund
since the prior report, and will keep the Board of Directors informed of
material developments affecting the Fund and the Adviser, and on its own
initiative, will furnish the Board of Directors from time to time with such
information as the Adviser may believe appropriate for this purpose, whether
concerning the individual companies whose securities are included in the Fund's
holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Fund maintains
investments. The Adviser also will furnish the Board of Directors with such
statistical and analytical information with respect to securities and other
investments of the Fund as the Adviser may believe appropriate or as the Board
of Directors may reasonably request. The Adviser shall prepare and furnish to
the Board of Directors all such other written materials and documents as may be
requested or as may otherwise be necessary or appropriate in connection with
meetings of the Board of Directors, and, if the Secretary of the Fund is an
officer, director, or employee of the Adviser or any of its affiliated persons,
the Adviser shall cause to be prepared and shall bear the costs of preparing and
keeping the minutes of the meetings of the Board of Directors and committees
thereof and of meetings of the stockholders of the Fund.
(h) The Adviser shall furnish such office and other facilities as may
be required by the Fund.
3. DELIVERY OF DOCUMENTS. The Fund has delivered, or will deliver
promptly, copies of each of the following documents to the Adviser and will
promptly notify and deliver to it all future amendments and supplements if any:
(a) Certificate of incorporation of the Fund, as filed with the
Secretary of State of the State of New York and in effect on the date hereof and
as amended or restated from time to time (the "Certificate of Incorporation").
(b) By-Laws of the Fund, as in effect on the date hereof and as amended
or restated from time to time (the "By-Laws").
(c) Certified resolutions of the Board of Directors of the Fund and of
the Fund's stockholders, respectively, authorizing the appointment of the
Adviser and approving the form of this Agreement.
(d) Registration Statement under the 1940 Act and, if applicable, the
Securities Act of 1933, as amended, on Form N-1A (the "Registration Statement")
as filed with the Securities and Exchange Commission (the "Commission") and in
effect on the date hereof relating to the Fund, and all subsequent amendments
thereto.
(e) Notification of Registration under the 1940 Act on Form N-8A as
filed with the Commission.
(f) Prospectus or Prospectuses and Statement or Statements of
Additional Information of the Fund, if any, as currently in effect and as
amended or supplemented from time to time, being herein called the "Prospectus".
4. EMPLOYEES OF THE ADVISER. The Adviser shall authorize and permit any
of its directors, officers and employees who may be elected as Directors or
officers of the Fund to serve in the capacities in which they are elected.
5. BOOKS AND RECORDS. The Adviser shall keep the Fund's books and
records required to be maintained by it pursuant to paragraph 2(e) of this
Agreement. The Adviser agrees that all records which it maintains for the Fund
are the property to the Fund and it will promptly surrender any of such records
to the Fund upon the Fund's request. The Adviser further agrees to preserve for
the period prescribed by Rule 31a-2 of the Commission under the 1940 Act any
such records as are required to be maintained by the Adviser with respect to the
Fund hereunder or by Rule 31a-1 of the Commission under the 1940 Act, as such
rule may be amended from time to time, and any other applicable rule that may be
adopted by the Commission.
6. EXPENSES. During the term of this Agreement the Adviser will pay all
expenses (including without limitation the compensation of all its directors,
officers and employees serving as Directors or officers of the Fund pursuant to
paragraph 4 of this Agreement) incurred by it in connection with its activities
under this Agreement other than the cost of the securities and investments
purchased for the Fund (including taxes and brokerage commissions, if any). The
Adviser also shall pay the salaries, fees and expenses of Directors, officers
and employees of the Fund who are affiliated persons of the Adviser or
affiliated persons of any affiliated person of the Adviser. All other expenses
shall be borne by the Fund, subject to the limitations and reimbursements
provided for in paragraphs 7 and 8 hereof.
7. COMPENSATION AND GENERAL EXPENSE LIMITATION.
(a) For the services provided and expenses borne by the Adviser
pursuant to this Agreement, the Fund shall pay to the Adviser compensation based
on the annual percentage of the Fund's average daily net assets paid monthly, as
follows: 0.75% of the first $100 million and 0.50% over $100 million; provided,
however, that if the Restricted Expenses (as defined below) of the Fund with
respect to any fiscal year of the Fund exceed an amount (the "Restricted Expense
Cap") equal to 1.10% of the average daily net asset value of the Fund during
such fiscal year, the fee payable to the Adviser with respect to such fiscal
year shall be reduced by the amount of such excess, but not below zero. The fee
payable to the Adviser pursuant to this paragraph 7 (the "Advisory Fee") shall
commence on the date hereof (the "Effective Date") and shall be accrued daily,
subject to adjustment as provided below in this paragraph 7 and subject to
further adjustment as provided in paragraph 8, and the fee for each month will
be paid to the Adviser during the succeeding month.
(b) The amount of compensation payable to the Adviser with respect to
each day during a fiscal year of the Fund shall be adjusted as follows:
(i) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the close
of business on such day exceeds the Applicable Pro Rata
Portion of the Restricted Expense Cap (as defined below)
through such day, the compensation payable to the Adviser
with respect to such day shall be reduced by the amount of
such excess.
(ii) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the close
of business on such day is less than the Applicable Pro Rata
Portion of the Restricted Expense Cap through such day, the
compensation payable to the Adviser with respect to such day
shall be increased by the amount of such excess, except to
the extent such increase would cause the aggregate
compensation payable to the Adviser with respect to the
period from the beginning of such fiscal year through such
date to exceed the Applicable Pro Rata Portion of the
Advisory Fee (as defined below).
In the event any reduction of the Advisory Fee provided for in this paragraph
7(b) would result in an aggregate Advisory Fee of less than zero for any month
in a fiscal year, the Adviser shall make a refund payment to the Fund in such
amount; provided, however, the Adviser shall not be obligated to refund an
amount greater than the aggregate amount of the Advisory Fee previously paid to
the Adviser with respect to such fiscal year.
(c) For purposes of this paragraph 7:
(i) "Applicable Pro Rata Portion of the Restricted Expense Cap'
as of any day shall mean the dollar amount computed by
multiplying 1.10% by (A) the ratio computed by dividing the
number of days elapsed since the beginning of the relevant
fiscal year by the number of days in such year and (B) the
average daily net asset value of the Fund from the beginning
of the relevant fiscal year through such day. (ii)
"Applicable Pro Rata Portion of the Advisory Fee" as of any
day shall mean the dollar amount of the Advisory Fee that
would be payable to the Adviser with respect to the period
from the beginning of the relevant fiscal year through such
day, if such amount were computed without regard to the
limitations set forth in paragraph 7(b) and paragraph 8,
multiplied by the ratio computed by dividing the number of
days elapsed since the beginning of the relevant fiscal year
by the number of days in such fiscal year.
(d) In the event this Agreement becomes effective on a date other than
the first day of any fiscal year, solely for the purpose of computing the amount
of the Advisory Fee for such fiscal year, such first fiscal year shall be deemed
to begin on the Effective Date and to end on December 31 of such year. In the
event this Agreement terminates on a date other than the last day of any fiscal
year, solely for the purpose of computing the amount of the Advisory Fee for
such fiscal year, such fiscal year shall be deemed to begin on January 1 of such
year and to end on the date of the termination of this Agreement. In either of
such events, the Applicable Pro Rata Portion of the Restricted Expense Cap and
the Applicable Pro Rata Portion of the Advisory Fee shall be reduced by
multiplying such amount by the ratio computed by dividing the number of days
deemed to occur in such fiscal year by 365.
(e) As used herein, the term "Restricted Expenses" means all expenses
of the Fund, including without limitation (i) the general expenses of the Fund,
(ii) the fees payable to the Adviser, the Fund's administrator, if any, the
Fund's transfer agent and dividend paying agent, if any, and the Fund's
custodian and (iii) registration fees and the costs and expenses of qualifying
the Fund's shares for offer and sale under the Blue Sky laws of any jurisdiction
where such shares may be qualified from time to time; but the Restricted
Expenses shall exclude (A) the fees and expenses of the Fund's outside counsel
(other than registration and filing fees disbursed by such counsel on behalf of
the Fund), (B) the fees and expenses of the Fund's independent accountants, (C)
Directors' fees and the expenses incurred by Directors and reimbursed by the
Fund and (D) fees and expenses paid under a plan of distribution, if any,
adopted pursuant to Rule 12b-1 under the 1940 Act.
8. BLUE SKY LIMITATION ON EXPENSES.
(a) In the event the Expenses (as defined in paragraph 8(b) below) of
the Fund for any fiscal year exceed the lowest applicable annual expense
limitations, if any, established pursuant to the statutes or regulations of any
jurisdictions in which Fund Shares are then qualified for offer and sale (such
excess hereinafter called the "Blue Sky Excess Expense"), the compensation due
to the Adviser under paragraph 7 for the fiscal year in question shall be
reduced by an amount equal to the Blue Sky Excess Expense of the Fund, and if
the Blue Sky Excess Expense of the Fund exceeds the fees of the Fund payable to
the Adviser with respect to the Fund for the fiscal year in question, the
Adviser shall, to the extent required by such statute or regulations, reimburse
the Fund for the amount of such excess. If for any month the Expenses shall
exceed 1/12th of the percentage of average daily net assets allowable as
Expenses, the payment to the Adviser for that month shall be reduced, and, if
necessary, the Adviser shall make a refund payment to the Fund so that the
Expenses will not exceed such percentage. As of the end of the fiscal year,
however, the foregoing computations shall be readjusted so that the aggregate
compensation payable to the Adviser for the year is equal to the amount provided
for in paragraph 7 hereof, reduced by an amount equal to the Blue Sky Excess
Expense of the Fund. The aggregate of the repayments, if any, by the Adviser to
the Fund for the year shall be the amount necessary to reimburse the Fund for
the amount of such excess.
(b) For purposes of paragraph 8(a) of this Agreement, the term
"Expenses" means the general expenses of the Fund, including without limitation
fees payable to the Adviser, the Fund's administrator, if any, the Fund's
transfer agent, if any, and to the Fund's custodian; but the Expenses shall
exclude any interest, taxes, brokerage commissions and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business.
9. LIMITATION OF LIABILITY. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation 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 0000 Xxx) or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
10. EFFECTIVE DATE AND TERM. This Agreement shall become effective on
the date hereof. This Agreement shall remain in effect until May 30, 1998, and
shall continue in effect thereafter for successive twelve-month periods (or for
such shorter periods as may be specified by the Fund's Board of Directors)
subject to termination as hereinafter provided, if such continuance is approved
at least annually (a) by vote of the Fund's Board of Directors, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by vote
of a majority of the Directors of the Fund who are not parties to this Agreement
or "interested persons" (as defined in the 0000 Xxx) of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The annual approvals provided for herein shall be effective to
continue this Agreement from year to year (or for such shorter period referred
to above) if given within a period beginning not more than ninety (90) days
prior to (and including) the anniversary of the date upon which the most recent
previous continuance of this Agreement became effective, notwithstanding the
fact that more than three hundred sixty-five (365) days may have elapsed since
the date on which such approval was last given. This Agreement may be terminated
(i) by the Fund at any time, without the payment of any penalty, by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities (as defined in the 0000 Xxx) of the Fund, on 30 (thirty) days'
written notice to the Adviser, or (ii) after May 19, 1998, by the Adviser at any
time, without the payment of any penalty, on 90 (ninety) days' written notice to
the Fund. This Agreement will automatically and immediately terminate in the
event of its assignment (as defined in the 1940 Act).
11. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent, provided that the amendment is approved (a) by vote of a majority of
those Directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the 0000 Xxx) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b), if required
by the 1940 Act, by vote of a majority of the outstanding voting securities (as
defined in the 0000 Xxx) of the Fund.
12. NOTICES. Notices of any kind to be given to the Adviser by the Fund
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 000 Xxxx Xxxxxx Xx., Xxxxxxx, XX 00000, Attention: Executive Vice
President, or at such other address or to such other individual as shall be
specified by the Adviser to the Fund in accordance with this paragraph 12.
Notices of any kind to be given to the Fund by the Adviser shall be in writing
and shall be duly given if mailed or delivered to the Fund at 000 Xxxx Xxxxxx,
Xxx Xxxx, XX 00000, Attention: President, or at such other address or to such
other individual as shall be specified by the Fund to the Adviser in accordance
with this paragraph 12, with copies to each of the Fund's Directors at their
respective addresses set forth in the Fund's Registration Statement and to the
legal counsel to the Fund.
13. AUTHORITY. The Directors have authorized the execution of this
Agreement in their capacity as Directors and not individually. The Adviser
agrees that neither the stockholders nor the Directors nor any officer,
employee, representative or agent of the Fund shall be personally liable upon,
nor shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Fund, that the
stockholders, Directors, officers, employees, representatives and agents of the
Fund shall not be personally liable hereunder, and that the Adviser shall look
solely to the property of the Fund for the satisfaction of any claim hereunder.
14. CONTROLLING LAW. This Agreement shall be governed by the construed
in accordance with the laws of the state of New York.
15. MULTIPLE COUNTERPARTS. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed to be an
original, but which together shall constitute one and the same instrument.
16. CAPTIONS. The captions of the paragraphs are for descriptive
purposes only and they are not intended to limit or otherwise affect the content
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ XXXXX X. XXXXXXX
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Xxxxx X. Xxxxxxx
President
SHAY ASSETS MANAGEMENT, INC.
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx
Vice President
