EX-99.B(5)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 1st day
of April, 1991 by and between TOTAL RETURN U.S. TREASURY FUND INC., a Maryland
corporation (the "Fund"), and INTERNATIONAL STRATEGY & INVESTMENT INC., a
Delaware corporation (the "Advisor"), with respect to the following recital of
fact:
R E C I T A L
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Advisor is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and engages in the
business of acting as an investment adviser; and
WHEREAS, the Fund and the Advisor desire to enter an agreement
to provide investment advisory services for the Fund on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund hereby appoints the Advisor to manage
the Fund's affairs and supervise all aspects of the Fund's operations, including
the investment and reinvestment of the cash, securities or other properties
comprising the Fund's assets (the "Portfolio"), subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor hereby
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Delivery of Documents. The Fund has furnished the Advisor
with copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on June 3, 1988 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "By-Laws", the By-Laws and the Articles of Incorporation
are sometimes collectively referred to herein as the "Charter");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Advisor and approving this
Agreement;
(d) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-12179) and
under the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") on June 6, 1988 relating to the shares of the Fund, and all amendments
thereto; and
(e) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish the Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties of Investment Advisor. The Advisor shall give the
Fund the benefit of its best judgment, efforts and facilities in rendering its
services as Advisor. In carrying out its obligations under paragraph 1 hereof,
the Advisor shall:
(a) formulate and implement continuing programs for the
purchases and sales of securities consistent with the Prospectus and regularly
report thereon to the Fund's Board of Directors; and
(b) determine what securities shall be represented in the
Portfolio and in what proportion and regularly report them to the Fund's Board
of Directors; and
(c) provide the Board of Directors of the Fund on a regular
basis with financial reports with respect to the Portfolio, investments and
analyses of the Fund's operations and the operations of comparable investment
companies; and
(d) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Portfolio
of the Fund, and whether concerning the individual issuers whose securities are
included in the Portfolio or the activities in which they engage, or with
respect to securities which the Advisor considers desirable for inclusion in the
Portfolio; and
(e) take, on behalf of the Fund, all actions which appear
to the Fund necessary to carry into effect such purchase and sale programs and
supervisory functions as aforesaid, including the placing of orders for the
purchase and sale of portfolio securities; and
(f) maintain such books and records, in cooperation with
the Fund's administrator and the Fund's distributors, as may be required by law
or deemed advisable by the Board of Directors.
4. Portfolio Transactions. The Advisor shall be responsible
for decisions to buy and sell securities for the Portfolio, selection of
broker-dealers and negotiation of commission rates. Portfolio securities may be
purchased or sold by the Fund in principal transactions. The Advisor may also
purchase securities from underwriters at prices which include a commission paid
by the issuer to the underwriter. The purchase price paid to dealers serving as
market makers may include a spread between the bid and asked prices.
The Advisor's primary consideration in effecting a security
transaction shall be to obtain the best net price and the most favorable
execution of the order. To the extent that the execution and prices offered by
more than one dealer are comparable, the Advisor may, in its discretion, effect
transactions with dealers that furnish statistical, research or other
information or services which the Advisor deems to be beneficial to the
Portfolio's investment program. Such research services supplement the Advisor's
own research. Research services may include the following: statistical and
background information on the U.S. economy; forecasts and interpretations with
respect to the U.S. money market fixed income markets; information on federal,
state, local and foreign political developments; portfolio management
strategies; performance information on securities, indices and investment
accounts; information concerning prices of securities; the providing of
equipment used to communicate research information; and the providing of access
to consultants who supply research information. Certain research services
furnished by dealers may be useful to the Advisor with clients other than the
Fund. Similarly, any research services received by the Advisor through placement
of portfolio transactions of other clients may be of value to the Advisor in
fulfilling its obligations to the Fund. The Advisor is of the opinion that the
material received is beneficial in supplementing its research and analysis; and
therefore, it may benefit the Fund and the Portfolio by improving the quality of
the Advisor's investment advice. The advisory fee paid by the Fund shall not be
reduced because the Advisor receives such services as the Advisor must evaluate
information received as a result of such services, receipt of such services and
thus does not reduce the Advisor's workload.
5. Control by Board of Directors. Any management or
supervisory activities undertaken by the Advisor pursuant to this Agreement, as
well as any other activities undertaken by the Advisor on behalf of the Fund
pursuant hereto, shall at all times be subject to any directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder as amended; and
(b) the provisions of the Registration Statement of the
Fund under the 1933 Act and the 1940 Act; and
(c) the provisions of the Fund's Charter; and
(d) any other applicable provisions of state and federal
law and applicable rules of any registered national securities organization.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without
cost to the Fund (except as provided in paragraph 8 hereof), the services of
such officers and employees as may be required by the Fund for the proper
conduct of its affairs; travel expenses of employees and officers of the
Advisor; office space, equipment, research services and supplies; expenses of
maintaining accounts, books, and records, except to the extent such services are
provided by a third party pursuant to a contract with the Fund.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Advisor; the charges and expenses of any registrar, any custodian appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any stock transfer, dividend or accounting agent or agents
appointed by the Fund; brokers' commissions, if any, chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and corporate fees
payable by the Fund to federal, state or other governmental agencies; the cost
and expense of engraving or printing of stock certificates representing shares
of the Fund; all costs and expenses in connection with maintenance of
registration of the Fund and its shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the expenses of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of directors or members of any advisory board or committee other than
such directors or members who are "interested persons" of the Fund (as defined
in Section 2(a)(19) of the 1940 Act, all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not "interested persons" of the Fund (as defined
in Section 2(a)(19) of the 0000 Xxx) and of independent accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
8. Delegation of Responsibilities. The Advisor may, but shall
be under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and the Advisor's charge
in rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its obligations to
the Fund nor obligate the Advisor to pay or assume any similar Fund expense on
any subsequent occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by the Advisor, the Fund shall pay to the Advisor as
compensation a percentage of the Fund's average daily net assets which will vary
as follows based on the amount of the net assets of the Fund.
Average Daily Net Assets Advisory Fee
------------------------ ------------
(as a percentage
of net assets)
Less than 100,000,000 .20%
100,000,000-200,000,000 .18%
200,000,001-300,000,000 .16%
300,000,001-400,000,000 .14%
500,000,001 and above .12%
The Fund shall also pay the Advisor 1.5% of the Fund's gross
interest income.
Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. 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 the part of the month during which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Advisor's compensation for the preceding month shall
be made as promptly as possible after completion of the computations
contemplated by this paragraph 9.
10. Non-Exclusivity. The services of the Advisor to the Fund
are not to be deemed to be exclusive, and the Advisor shall be free to render
investment advisory and other services to others (including other investment
companies) and to engage in other activities, so long as its services under this
Agreement are not impaired thereby. It is understood and agreed that officers or
directors of the Advisor may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors of the
Advisor to the extent permitted by law; and that the officers and directors of
the Advisor are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers or directors of any other firm or corporation, including other
investment companies.
11. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall continue in force and
effect until the earlier of the date that is one hundred twenty days after the
date hereof or approval by the shareholders of the Fund of a new investment
advisory agreement between the Fund and the Advisor and thereafter from year to
year, provided that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the
vote of a majority of the outstanding voting securities (as defined in Section
2(a)(42) of the 0000 Xxx); and
(b) by the affirmative vote of a majority of the directors
who are not parties to this Agreement or "interested persons" (as defined in
Section 2(a)(19) of the 0000 Xxx) of a party to this Agreement (other than as
directors of the Fund), by votes cast in person at a meeting specifically called
for such purpose.
12. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party, without the payment of
any penalty, (i) by vote of the Fund's Board of Directors or (ii) by vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 0000 Xxx) or (iii) by the Advisor. The notice provided for
herein may be waived by either party. This Agreement shall automatically
terminate in the event of its assignment (as defined in Section 2(a)(4) of the
1940 Act.)
13. Liability. In the performance of its duties hereunder, the
Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but the Advisor shall not be liable
for any act or omission which does not constitute willful misfeasance, bad faith
or gross negligence on the part of the Advisor or its officers, directors or
employees, or reckless disregard by the Advisor of its duties under this
Agreement.
14. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Fund for this purpose shall be 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx
00000, and the address of the Advisor shall be 000 Xxxxx Xxxxxx, Xxx Xxxx, XX
00000.
15. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] TOTAL RETURN U.S. TREASURY
FUND, INC.
Attest: /s/ Xxxxxx X. Marhaush By: /s/ Xxxxxx X. Xxxxxxxx
---------------------- ----------------------
Vice President
INTERNATIONAL STRATEGY & INVESTMENT INC.
Attest: /s/ Xxxx X. Xxxx By: /s/ R. Xxxx Xxxxxxx
------------------- ------------------------
