FLAG INVESTORS MARYLAND INTERMEDIATE TAX-FREE INCOME FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 1st day
of September, 1997 by and between FLAG INVESTORS MARYLAND INTERMEDIATE TAX-FREE
INCOME FUND, INC., a Maryland corporation (the "Fund"), and INVESTMENT COMPANY
CAPITAL CORP., a Maryland corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor
under the Investment Advisors Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and
WHEREAS, the Fund and the Advisor desire to enter into an
agreement to provide investment advisory and administrative 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 of Investment Advisor. The Fund hereby appoints
the Advisor to act as the Fund's investment advisor. The Advisor shall manage
the Fund's affairs and shall supervise all aspects of the Fund's operations
(except as otherwise set forth herein), including the investment and
reinvestment of the cash, securities or other properties comprising the Fund's
assets, subject at all times to the policies and control of the Fund's Board of
Directors. The Advisor shall give the Fund the benefit of its best judgment,
efforts and facilities in rendering its service as Advisor.
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
State of Maryland on July 23, 1993 and all amendments thereto (such Articles of
Incorporation, as presently in effect and as they shall from time to time be
amended, are herein called the "Articles of Incorporation");
(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");
(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 Notification of Registration filed pursuant
to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with
the Securities and Exchange Commission (the "SEC") on August 2, 1993;
(e) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act"), (File No. 33-66870) and
under the 1940 Act as filed with the SEC on July 28, 1993 relating to the shares
of the Fund, and all amendments thereto; and
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(f) 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. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Fund's
operations, except for distribution services;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Fund;
(c) provide the Fund with such executive, administrative
and clerical services as are deemed advisable by the Fund's Board of Directors;
(d) provide the Fund with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery, supplies and similar items for the
Fund's principal office;
(e) 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 Fund, and
whether concerning the individual issuers whose securities are included in the
Fund's portfolio or the activities in which they engage, or with respect to
securities which the Advisor considers desirable for inclusion in the Fund's
portfolio;
(f) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the Fund's
Board of Directors;
(g) take all actions necessary to carry into effect the
Fund's purchase and sale programs;
(h) supervise the operations of the Fund's transfer and
dividend disbursing agent;
(i) provide the Fund with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the Fund's shareholders and reports to and filings with the SEC and state Blue
Sky authorities.
4. Broker-Dealer Relationships. In the event that the Advisor
is responsible for decisions to buy and sell securities for the Fund,
broker-dealer selection, and negotiation of its brokerage
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commission rates, the Advisor's primary consideration in effecting securities
transactions will be to obtain the best price and execution on an overall basis.
In performing this function the Advisor shall comply with applicable policies
established by the Board of Directors and shall provide the Board of Directors
with such reports as the Board of Directors may require in order to monitor the
Fund's portfolio transaction activities. In certain instances the Advisor may
make purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker-dealer to execute each particular transaction, the Advisor
will take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size of
and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Fund. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Fund to
such broker-dealers other than Alex. Xxxxx & Sons Incorporated ("Alex. Xxxxx")
who also provide research or statistical material or other services to the Fund
or the Advisor. Such allocation shall be in such amounts and proportions as the
Advisor shall determine and the Advisor will report on said allocation regularly
to the Board of Directors of the Fund, indicating the broker-dealers to whom
such allocations have been made and the basis therefor.
Consistent with the Conduct Rules of the National Association
of Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Advisor may consider services in connection with the sale of shares of the Fund
as a factor in the selection of broker-dealers to execute portfolio transactions
for the Fund.
Subject to the policies established by the Board of Directors
in compliance with applicable law, the Advisor may direct Alex. Xxxxx to execute
portfolio transactions for the Fund on an agency basis. The commissions paid to
Alex. Xxxxx must be, as required by Rule 17e-1 under the 1940 Act, "reasonable
and fair compared to the commission, fee or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." If the purchase or sale
of securities consistent with the investment policies of the Fund or one or more
other accounts of the Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Advisor. Alex. Xxxxx and the Advisor may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution.
The Fund will not deal with the Advisor or Alex. Xxxxx in any
transaction in which the Advisor or Alex. Xxxxx acts as a principal with respect
to any part of the Fund's order. If Alex. Xxxxx is participating in an
underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with the rules of the SEC.
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
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Advisor on behalf of the Fund pursuant thereto, shall at all times be subject to
any applicable 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;
(b) the provisions of the Registration Statement of the
Fund under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the By-laws; and
(e) any other applicable provisions of Federal and State
law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall, subject to compliance with
applicable banking regulations, furnish, at its expense and without cost to the
Fund, the services of and one or more officers of the Fund, to the extent that
such officers may be required by the Fund, for the proper conduct of its
affairs.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution, the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions, 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 fees payable by the Fund to Federal, State or
other governmental agencies; the costs and the expenses of engraving or printing
of certificates representing shares of the Fund; all costs and expenses in
connection with registration and maintenance of registration of the Fund and its
shares with the SEC and various states and other jurisdictions (including filing
fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information 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 Director members of any advisory board
or committee; 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 Fund's shares; charges
and expenses of legal counsel, including counsel to the Directors of the Fund
who are not "interested persons" (as defined in the 0000 Xxx) of the Fund 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.
(a) Subject to the approval of the Board of Directors
including a majority of the Fund's Directors who are not "interested persons"
(as defined in the 0000 Xxx) of the Fund and shareholders of the Fund, the
Advisor may delegate to a sub-advisor its duties enumerated in Section 3,
hereof. The Advisor
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shall continue to supervise the performance of any such sub-advisor and shall
report regularly thereon to the Fund's Board of Directors, but shall not be
responsible for the sub-advisor's performance under the sub-advisory agreement.
(b) The Advisor may, but shall not be under any 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 monthly
compensation at an annual rate of .35% of the Fund's average daily net assets.
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 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.
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 or 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, trustees or directors of any other firm, trust or corporation,
including other investment companies.
11. Term and Renewal. This Agreement shall become effective as
of the date hereof and shall continue in force and effect, subject to Section 12
hereof, for two years from the date hereof. Following the expiration of its
initial two-year term, this Agreement shall continue in force and effect 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 the 1940
Act); 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 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.
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12. Termination. This Agreement may be terminated without the
payment of any penalty, by the Fund upon vote of the Fund's Board of Directors
or a vote of a majority of the Fund's outstanding voting securities (as defined
in the 0000 Xxx) or by the Advisor, upon sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
13. Liability of Advisor. 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 to ensure
the accuracy of all services performed 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 the 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 and of the Advisor for this purpose shall be Xxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 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.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective offices as of the day
and year first above written.
[SEAL] FLAG INVESTORS MARYLAND INTERMEDIATE
TAX FREE INCOME FUND, INC.
Attest: /s/ Xxx X. Xxxxxx By: /s/ Xxxxx Xxxxx
----------------- -------------------
Xxx X. Xxxxxx Name: Xxxxx Xxxxx
Title: President
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/ Xxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
----------------- ----------------------
Xxx X. Xxxxxx Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President
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