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EXHIBIT 5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this May 31, 1997, by and between XXX XXXXXX
AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST, a Delaware business trust
(hereinafter referred to as the "FUND"), and XXX XXXXXX AMERICAN CAPITAL ASSET
MANAGEMENT, INC., a Delaware corporation (hereinafter referred to as the
"ADVISER").
The FUND and the ADVISER agree as follows:
(1) APPOINTMENT
a. The FUND hereby appoints the ADVISER to act as investmentadviser to the
FUND's Xxx Xxxxxx American Capital Global Equity Fund ("Global Equity") and Xxx
Xxxxxx American Capital Global Government Securities Fund ("Global Government")
(collectively, the "Portfolios"), for the period and on the terms set forth in
this Agreement. The ADVISER accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
b. In the event that the FUND establishes one or more portfolios other than
the Portfolios with respect to which it desires to retain the ADVISER to act
as investment adviser hereunder, it shall notify the ADVISER in writing. If
the ADVISER is willing to render such services it shall notify the FUND in
writing whereupon such portfolio shall become a Portfolio hereunder and the
compensatioin payable by such new portfolio to the ADVISER will be as agreed in
writing at the time.
(2) SUBADVISERS
It is understood that the ADVISER, subject to the prior approval of the
FUND's Trustees, will from time to time employ or associate itself with such
person or persons as the ADVISER may believe to be particularly fitted to
assist it in the performance of this Agreement, provided, however, that the
compensation of such person or persons shall be paid by the ADVISER and that
the ADVISER shall be as fully responsible to the FUND for the acts and
omissions of any subadviser as it is for its own acts and omissions. Without
limiting the generality of the foregoing, it is agreed that subadvisory
services to the Portfolio may be provided by Xxxxxx Xxxxxxx Asset Management
Inc. pursuant to a subadvisory agreement with the ADVISER ("SUBADVISORY
AGREEMENT").
(3) SERVICES RENDERED AND EXPENSES PAID BY ADVISER
The ADVISER, subject to the overall policies, control, direction, supervision
and review of the FUND's Trustees and in conformity with applicable laws, the
FUND's Agreement and Declaration of Trust ("Declaration of Trust"), By-laws,
registration statements, prospectus and stated investment objectives, policies
and restrictions of each Portfolio, shall:
a. manage the investment and reinvestment of the FUND's assets
including, by way of illustration, the evaluation of pertinent economic,
statistical, financial and other data, determination of the industries and
companies to be represented in the FUND's Portfolios, and formulation and
implementation of investment programs;
b. place all orders for the purchase and sale of portfolio investments
for the account of each Portfolio of the Fund with brokers or dealers selected
by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including,
by way of illustration, the preparation of registration statements, reports,
and amendments thereto, and the furnishing of
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routine legal services except for services provided by outside counsel
to the FUND selected by the Trustees; and
d. pay the compensation of each FUND trustee and Fund officer who is
an affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND and each Portfolio the most
favorable price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization
by the FUND's Trustees of appropriate policies and procedures, the ADVISER may,
to the extent authorized by law, cause the FUND to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. To the extent authorized by law, the ADVISER shall not be deemed
to have acted unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its trustees and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office
space, facilities, and equipment used by the Treasurer and such personnel in
the performance of their normal duties for the FUND which consist of
maintenance of the accounts, books and other documents which constitute the
record forming the basis for the FUND's financial statements, preparation of
such financial statements and other FUND documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the FUND's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the FUND selected by the Trustees; (vi) custodian,
registrar and transfer agent fees and expenses; (vii) expenses related to the
repurchase or redemption of its shares including expenses related to a program
of periodic repurchases or redemptions; (viii) expenses related to the issuance
of its shares against payment therefor by or on behalf of the subscribers
thereto; (ix) fees and related expenses of registering and qualifying the FUND
and its shares for distribution under state and federal securities laws; (x)
expenses of printing and mailing of registration statements, prospectuses,
reports, notices and proxy solicitation materials of the FUND; (xi) all other
expenses incidental to holding meetings of the FUND's shareholders including
proxy solicitations therefor; (xii) expenses for servicing shareholder
accounts; (xiii) insurance premiums for fidelity coverage and errors and
omissions insurance; (xiv) dues for the FUND's membership in trade associations
approved by the Trustees; and (xv) such nonrecurring expenses as may arise,
including those associated with actions, suits or proceedings to which the FUND
is a party and the legal obligation which the FUND may have to indemnify its
officers and trustees with respect thereto. To the extent that any of the
foregoing expenses are allocated between the FUND and any other party, such
allocations shall be pursuant to methods approved by the Trustees.
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For a period of one year commencing on the effective date of this Agreement,
the ADVISER and the FUND agree that the retention of (i) the chief executive
officer, president, chief financial officer and secretary of the ADVISER and
(ii) each director, officer and employee of the ADVISER or any of its
Affiliates (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) who serves as an officer of the FUND (each person referred to in
(i) or (ii) hereinafter being referred to as an "Essential Person"), in his or
her current capacities, is in the best interest of the FUND and the FUND's
shareholders. In connection with the ADVISER's acceptance of employment
hereunder, the ADVISER hereby agrees and covenants for itself and on behalf of
its Affiliates that neither the ADVISER nor any of its Affiliates shall make
any material or significant personnel changes or replace or seek to replace any
Essential Person or cause to be replaced any Essential Person, in each case
without first informing the Board of Trustees of the FUND in a timely manner.
In addition, neither the ADVISER nor any Affiliate of the ADVISER shall change
or seek to change or cause to be changed, in any material respect, the duties
and responsibilities of any Essential Person, in each case without first
informing the Board of Trustees of the FUND in a timely manner.
(4) RESTRICTION ON THE ADVISER'S POWERS
The ADVISER shall not commit any Portfolio to any extent beyond the amount of
the cash and securities placed by such Portfolio under the control of the
ADVISER.
In carrying out its duties hereunder the ADVISER shall comply with all
reasonable instructions of the Portfolio in connection therewith. Such
instructions may be given by the Trustees or by any other person authorized by
a resolution of the Trustees provided a certified copy of such resolution has
been supplied to the ADVISER.
All securities, cash, and other assets of each Portfolio shall be placed and
maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Board as custoidan and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the 0000 Xxx) is aproved by
the Board as sub-custodians.
Persons authorized by resolution of the Trustees shall have the right to
inspect and copy contracts, notes, vouchers, and copies of entries in books or
electronic recording media relating to the Portfolio's transactions at the
registered office of the ADVISER at any time during normal business hours.
(5) ROLE OF ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (the "1940
Act"), any of the shareholders, trustees, officers and employees of the FUND
may be a shareholder, trustee, director, officer or employee of, or be
otherwise interested in, the ADVISER, and in any person controlled by or under
common control with the ADVISER, and the ADVISER, and any person controlled by
or under common control with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, neither the ADVISER nor any subadviser shall be subject to
liability to the FUND, or to any shareholder of the FUND, for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
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(6) COMPENSATION PAYABLE TO THE ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered
and expenses paid by the ADVISER, with respect to the Global Equity, a monthly
fee computed at 1.00%, per annum, of the Portfolio's average daily net assets
and with respect to Global Government, a monthly fee computed at .75%, per
annum of the Portfolio's average daily net assets.
For purposes of these calculations, assets of each Portfolio shall be
considered separately in calculating the investment advisory fee. Average
daily net assets of these Portfolios shall be determined by taking the average
of the net assets for each business day during a given calendar month,
calculated in the manner provided in the FUND's Declaration of Trust. Such fee
shall be payable for each calendar month as soon as practicable after the end
of that month.
The fees payable to the ADVISER by the FUND pursuant to this Section 6 shall
be reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the FUND, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with the FUND's portfolio transactions and
shall advise the Trustees of any other commissions, fees, brokerage or similar
payments which may be possible for the ADVISER or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc. to receive in connection with
FUND's portfolio transactions or other arrangements which may benefit the FUND.
In the event that the ordinary business expenses of the FUND, calculated
separately for each Portfolio, for any fiscal year should exceed the most
restrictive expense limitation applicable in the states where the FUND's shares
are qualified for sale, the compensation due the ADVISER for such fiscal year
shall be reduced by the amount of such excess. The Adviser's compensation
shall be so reduced by a reduction or a refund thereof, at the time such
compensation is payable after the end of each calendar month during such fiscal
year of the FUND, and if such amount should exceed such monthly compensation,
the ADVISER shall pay the FUND an amount sufficient to make up the deficiency,
subject to readjustment during the FUND's fiscal year. For purposes of this
paragraph, all ordinary business expenses of the FUND shall include the
investment advisory fee and other operating expenses paid by the FUND except
(i) for interest and taxes; (ii) brokerage commissions; (iii) as a result of
litigation in connection with a suit involving a claim for recovery by the
FUND; (iv) as a result of litigation involving a defense against a liability
asserted against the FUND, provided that, if the ADVISER made the decision or
took the actions which resulted in such claim, it acted in good faith without
negligence or misconduct; (v) any indemnification paid by the FUND to its
officers and trustees and the ADVISER in accordance with applicable state and
federal laws as a result of such litigation; and (vi) amounts paid to Xxx
Xxxxxx American Capital Distributors, Inc., the distributor of the FUND's
shares, in connection with a distribution plan adopted by the FUND's Trustees
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
If the ADVISER shall serve for less than the whole of any month, the
foregoing compensation shall be prorated.
(7) BOOKS AND RECORDS
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any
of such records upon the FUND's request. The ADVISER further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the Act.
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(8) DURATION OF AGREEMENT
This Agreement will become effective with respect to the Portfolios on the
date hereof, and with respect to any additional Portfolios, on the date of
receipt by the FUND of notice from the ADVISER in accordance with Section 1(b)
hereof that the ADVISER is willing to serve as investment adviser with respect
to such Portfolio, provided that this Agreement (as supplemented by the terms
specified in any notice and agreement pursuant to Section 1(b) hereof) shall
have been approved by the shareholders of each Portfolio subject to this
Agreement, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall remain in full force until May 31,
1999. Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Portfolio for successive periods of twelve months each, or
such shorter period as may be agreed upon, provided such continuance is
specifically approved at least annually, (a) by the vote of a majority of those
members of the FUND's Trustees who are not interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of voting on
such approval, and (b) by the vote of a majority of the FUND's Trustees or by
vote of a majority of the outstanding voting securities of such Portfolio.
Notwithstanding the foregoing this Agreement may be terminated as to any
Portfolio at any time, without the payment of any penalty, by the FUND (by vote
of the FUND's Trustees or by vote of a majority of the outstanding voting
securities of such Portfolio), or by the ADVISER, on sixty days' written
notice. This Agreement will immediately terminate in the event of its
assignment.
This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
a. if the FUND or the ADVISER shall go into liquidation (except
a voluntary liquidating for the purpose of and followed by a bona
fide reconstruction or amalgamation upon terms previously
approved in writing by the party not in liquidation) or if a
receiver or receiver and manger of any of the assets of any of
them is appointed; or
b. if either of the parties hereto shall commit any breach of
the provisions hereof and shall not have remedied such breach
within 30 days after the service of notice by the party not in
breach on the other requiring the same to be remedied.
Termination shall be without prejudice to the completion of any
transactions which the ADVISER shall have committed to on behalf
of a Portfolio prior to the time of termination. The ADVISER
shall not effect and the FUND shall not be entitled to instruct
the ADVISER to effect any further transactions on behalf of a
Portfolio subsequent to the time termination takes effect.
On the termination of this Agreement and completion of all
matters referred to in the foregoing paragraph, the ADVISER
shall deliver or cause to be delivered to the FUND all
documents, records, books and any other properties which are
in its possession, power or control and which are valid and in
force at the date of termination.
(9) AMENDMENT TO THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective as to a particular
Portfolio until approved by vote of a majority of the outstanding voting series
of such Portfolio.
(10) MISCELLANEOUS PROVISIONS
a. Definitions
For the purposes of this Agreement, the terms "affiliated person, "
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the
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1940 Act and the Rules and Regulations thereunder, subject, however, to
such exemptions as may be granted to either the ADVISER or the FUND by the
Securities and Exchange Commission (the "Commission"), or such interpretive
positions as may be taken by the Commission or its staff, under the 1940 Act,
and the term "brokerage and research services" shall have the meaning given in
the Securities Exchange Act of 1934 and the Rules and Regulations thereunder.
b. Indemnity for U.K. Taxes
i. Notwithstanding any other provision of this Agreement, the FUND
shall indemnify and save the ADVISER harmless from, against, for and in respect
of all liabilities incurred pursuant to Section 3.4 of the Subadvisory
Agreement.
ii. The FUND will not be liable under this indemnification provision
with respect to any liabilities incurred by the ADVISER's willful misfeasance,
bad faith, or gross negligence in the performance of the ADVISER's duties or by
reason of the ADVISER's reckless disregardof obligations and duties under this
Agreement or to the FUND.
iii. The FUND will not be liable under this indemnification provision
with respect to any claim made against the ADVISER unless the ADVISER shall
have notified the FUND in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
ave been served upon the ADVISER (or afer the ADVISER shall have received
notice of such service on any designated agent). In case any such action is
brought against the ADVISER, the FUND will be entitled to participate, at its
own exepnse, in the defense therof. The FUND also will be 3entitled to assume
the defense thereof, with counsel satisfactory to the party named in the
action. Afer notice from the FUND to such party of the FUND's election ot
assume the defense thereof, such party will bear the fees and expenses of any
additional counsel retained by it, and the FUND will not be liable to such
party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof.
c. Choice of Law
This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of the State
of Texas.
d. Other
The execution of this Agreement has been authorized by the FUND's Trustees
and by the sole shareholder. This Agreement is executed on behalf of the Fund
or the Trustees of the FUND as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the FUND individually but are binding only upon the
assets and property of the FUND. A Certificate of Trust in respect of the Fund
is on file with the Secretary of State of Delaware.
In connection with its employment hereunder, the ADVISER hereby agrees and
covenants not to change its name without the prior consent of the Board of
Trustees of the FUND.
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The parties hereto each have caused this Agreement to be signed in duplicate
on its behalf by its duly authorized officer on the above date.
XXX XXXXXX AMERICAN CAPITAL XXX XXXXXX AMERICAN CAPITAL
ASSET MANAGEMENT, INC. WORLD PORTFOLIO SERIES TRUST
By:/s/ Xxxxxx X. XxXxxxxxx By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxxx X. XxXxxxxxx Name: Xxxxx X. Xxxxx
Its: President Its: Executive Vice President
