EXHIBIT 4
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the _____ day of __________, 2000, by and between
MASTER BASIC VALUE TRUST, a Delaware business 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 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, the Trust serves as the "master" portfolio for one or more
"feeder" funds (each, a "Fund") that invest all of their assets in the Trust and
that have the same investment objective and policies as the Trust.
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 including administering
shareholder accounts and handling shareholder relations for the Trust. 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,
2
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 here under 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 Trust with such investment
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Trust, shall furnish
continuously an investment program for the Trust and shall determine from time
to time which securities shall be purchased, sold or exchanged and what portion
of the assets of the Trust shall be held in the various securities in which the
Trust invests or 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
Trust's investment objectives, investment policies and investment restrictions
as the same are set forth in the Registration Statement. The Investment Adviser
shall make decisions for the Trust as to the manner in which voting rights,
rights to consent to corporate action and any other rights pertaining to the
Trust's 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
3
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 the Trust's 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. In connection with
the selection of such brokers or dealers and the placing of such orders with
respect to assets of the Trust, 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 the Trust, 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
4
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 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, and shall pay all compensation of officers of the Trust
and all Trustees of the Trust who are affiliated persons of the Investment
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 and Registration Statements, charges of the custodian, any
sub-custodian and transfer agent, expenses of portfolio transactions, 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,
accounting and pricing costs (including the daily
5
calculation of the net asset value), insurance, interest and brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other expenses
properly payable by 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 net assets of the Trust at the annual rate of 0.60 of
1.0% of that portion of the average daily net assets of the Trust not exceeding
$100 million; 0.50 of 1.0% of that portion of the average net assets of the
Trust in excess of $100 million but not exceeding $200 million; and 0.40 of 1.0%
of that portion of the average net assets of the Trust in excess of $200 million
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 Registration Statement 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 by subsection (b) hereof. During any period when the determination
of net asset value is suspended by the Board of Trustees, the average net asset
value of a share for the day prior to such suspension shall for this purpose be
deemed to be the net asset value each succeeding day until it is again
determined.
6
(b) Expense Limitations. In the event the operating expenses of the
-------------------
Trust, 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 Trust
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 Trust 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 commissions 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. Whenever
the expenses of the Trust 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, 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
7
performing services for the Trust contemplated hereby and 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 directors, officers, employees, partners, and shareholders of
the Investment Adviser and its affiliates are or may become similarly interested
in the Trust, and that the Investment Adviser and directors, officers,
employees, partners, and shareholders of its affiliates may become interested in
the Trust as shareholders or otherwise.
ARTICLE VI
----------
Duration and Termination of this Agreement
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force for a period of two years thereafter and thereafter
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 Trust, 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.
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 Trust, or
8
by the Investment Adviser, on sixty days' written notice to the other party.
This Agreement shall automatically terminate 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 (i) the vote of the Trustees, or by the of a majority
of outstanding voting securities of the Trust, 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.
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 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.
9
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MASTER BASIC VALUE TRUST
By_______________________________
Title:
FUND ASSET MANAGEMENT, L.P.
By_______________________________
Title:
10
