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EXHIBIT 5(e)
CAPSTONE INTERNATIONAL SERIES TRUST
CAPSTONE JAPAN FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on August 25, 1997, between FCA
CORP (the "Adviser") and CAPSTONE INTERNATIONAL SERIES TRUST (the "Trust") with
respect to CAPSTONE JAPAN FUND (the "Fund").
WHEREAS, the Trust is a Massachusetts business trust organized
under a Declaration of Trust dated May 2, 1986, as amended and restated December
29, 1986, ("Declaration of Trust") and is authorized to divide and classify its
shares of beneficial interest into separate series of shares and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, diversified management investment company;
WHEREAS, the Fund is a separate series of the Trust's shares of
beneficial interest;
WHEREAS, the Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940 ("Advisers Act");
WHEREAS, the Trust wishes to retain the Adviser to render
investment advisory services to the Fund and the Adviser is willing to furnish
such services to the Fund;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the Trust and the Adviser as
follows:
1. Appointment. The Trust hereby appoints the Adviser to act as
investment adviser to the Fund for the periods 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.
2. Investment Advisory Duties. Subject to the supervision of the
Trustees of the Trust, the Adviser will (a) provide a program of continuous
investment management for the Fund in accordance with the Fund's investment
objectives, policies and limitations as stated in the Fund's prospectus and
Statement of Additional Information included as part of the Trust's Registration
Statement filed with the Securities and Exchange Commission, as they may be
amended from time to time, copies of which shall be provided to the Adviser by
the Trust; (b) make investment decisions for the Fund; and (c) place orders to
purchase and sell securities for the Fund.
In performing its investment management services to the Fund
hereunder, the Adviser will provide the Fund with ongoing investment guidance
and policy direction, including oral and written research, analysis, advice,
statistical and economic data and judgments regarding individual investments,
general economic conditions and trends and long-range investment policy. The
Adviser will determine the securities, instruments, currencies, repurchase
agreements, futures, options and other investments and techniques that the Fund
will purchase, sell, enter into or use, and will provide an ongoing evaluation
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Fund's portfolio. The Adviser will determine what portion of the Fund's
portfolio shall be invested in securities and other assets and what portion, if
any, should be held uninvested.
The Adviser further agrees that it will:
(a) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Trustees;
(b) use reasonable efforts to manage the Fund so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for the
Fund directly with the issuer, or with any broker or dealer, in accordance with
applicable policies expressed in the Fund's prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements;
(d) furnish to the Fund whatever statistical information the Fund
may reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Adviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Adviser's own initiative, furnish to the Fund and the Adviser from time to
time whatever information the Adviser believes appropriate for this purpose;
(e) make available to the Fund's administrator, Capstone Asset
Management Company (the "Administrator"), and the Fund, promptly upon their
request, copies of all its investment records and ledgers with respect to the
Fund to assist the Administrator and the Fund in their compliance with
applicable laws and regulations. The Adviser will furnish the Trustees with such
periodic and special reports regarding the Fund as they may reasonably request;
(f) immediately notify the Fund in the event that the Adviser or
any of its affiliates: (1) becomes subject to a statutory disqualification that
prevents the Adviser from serving as investment adviser pursuant to this
Agreement; or (2) has been the subject of an administrative proceeding or
enforcement action by the Securities and Exchange Commission ("SEC") or other
regulatory authority. The Adviser further agrees to notify the Fund immediately
of any material fact known to the Adviser respecting or relating to the Adviser
that is not contained in the Trust's Registration Statement with respect to the
Fund, or any amendment or supplement thereto, and of any statement contained
therein that becomes untrue in any material request.
3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 3, the Adviser shall pay the compensation and expenses
of all its directors, officers and employees who serve as officers and executive
employees of the Trust (including the Fund's share of payroll taxes) and of all
Trustees of the Trust who are interested persons of the Adviser, and the Adviser
shall make available, without expense to the Fund, the service of its directors,
officers and employees who may be duly elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law.
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The Adviser shall not be required to pay any expenses of the Fund
other than those specifically allocated to the Adviser in this section 3. In
particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Fund's employees as are directors, officers or employees of the
Adviser whose services may be involved, for the following expenses of the Fund:
organization and certain offering expenses of the Fund (including out-of-pocket
expenses, but not including the Adviser's overhead and employee costs); fees
payable to the Adviser and to any other Fund advisers or consultants; legal
expenses; auditing and accounting expenses; interest expenses; telephone, telex,
facsimile, postage and other communications expenses; taxes and governmental
fees; fees, dues and expenses incurred by or with respect to the Fund in
connection with membership in investment company trade organizations; cost of
insurance relating to fidelity coverage for the Fund's officers and employees,
fees and expenses of the Fund's Administrator or of any custodian, subcustodian,
transfer agent, registrar, or dividend disbursing agent of the Fund; payments to
the Administrator for maintaining the Fund's financial books and records and
calculating its daily net asset value; other payments for portfolio pricing or
valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and, except as
provided below in this section 3, other expenses in connection with the
issuance, offering, distribution or sale of securities issued by the Fund;
expenses relating to investor and public relations; expenses of registering and
qualifying shares of the Fund for sale; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
or other assets of the Fund, or of entering into other transactions or engaging
in any investment practices with respect to the Fund; expenses of printing and
distributing prospectuses, Statements of Additional Information, reports,
notices and dividends to shareholders; costs of stationery; any litigation
expenses; costs of shareholders' and other meetings; the compensation and all
expenses (specifically including travel expenses relating to the Trust business)
of Trustees, officers and employees of the Trust who are not interested persons
of the Adviser or Administrator; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of the Adviser or the Administrator to the extent that such expenses
relate to attendance at meetings of the Board of Trustees of the Trust or any
committees thereof or advisers thereto.
The Adviser shall not be required to pay expenses of any activity
which is primarily intended to result in sales of shares of the Fund if and to
the extent that (i) such expenses are assumed or required to be borne by the
Fund's principal underwriter or some other party, or (ii) the Trust on behalf of
the Fund shall have adopted a plan in conformity with Rule 12b-1 under the 1940
Act providing that the Fund (or some other party) shall assume some or all of
such expenses. The Adviser shall be required to pay such of the foregoing sales
expenses as are not assumed or required to be paid by the principal underwriter
or some other party or are not permitted to be paid by the Fund (or some other
party) pursuant to such a plan.
4. Compensation. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Fund will pay the Adviser at
the end of each calendar month an advisory fee computed daily at a rate equal on
an annual basis to 0.75% of the Fund's average daily net assets. The "average
daily net assets" of the Fund shall mean the average of the values placed on the
Fund's net assets as of 4:00 p.m. (New York time) on each day on which the net
asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of
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its net assets as of some other time on each business day, as of such other
time. The value of net assets of the Fund shall always be determined pursuant to
the applicable provisions of the Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of the New York Stock
Exchange, or as of such other time as the value of the net assets of the Fund's
portfolio may lawfully be determined, on that day. If the determination of the
net asset value of the shares of the Fund has been so suspended for a period
including any month end when the Adviser's compensation is payable pursuant to
this section, then the Adviser's compensation payable at the end of such month
shall be computed on the basis of the value of the net assets of the Fund as
last determined (whether during or prior to such month). If the Fund determines
the value of the net assets of its portfolio more than once on any day, then the
last such determination thereof on that day shall be deemed to be the sole
determination thereof on that day for the purposes of this section 4.
5. Books and Records. The Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and Rule
31a-2 under the 1940 Act and otherwise in connection with its services hereunder
are the property of the Fund and will be surrendered promptly to the Fund upon
its request. And the Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Trust or the Fund are being conducted in
accordance with applicable laws and regulations.
6. Standard of Care and Limitation of Liability. The Adviser shall
exercise its best judgment in rendering the services provided by it under this
Agreement. 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, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Adviser against any liability to the
Trust, the Fund or to holders of the Fund's shares to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of the
Adviser's reckless disregard of its obligations and duties under this Agreement.
7. Services Not Exclusive. It is understood that the services of the
Adviser are not exclusive, and nothing in this Agreement shall prevent the
Adviser from providing similar services to other investment companies (whether
or not their investment objectives and policies are similar to those of the
Fund) or from engaging in other activities, provided such other services and
activities do not, during the term of this Agreement, interfere in a material
manner with the Adviser's ability to meet its obligations to the Fund and to the
Trust hereunder. When the Adviser recommends the purchase or sale of a security
for other investment companies and other clients, and at the same time the
Adviser recommends the purchase or sale of the same security for the Fund, it is
understood that in light of its fiduciary duty to the Fund, such transactions
will be executed on a basis that is fair and equitable to the Fund. In
connection with purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its directors, officers or employees
shall act as a principal or agent or receive any commission. If the Adviser
provides any advice to
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its clients concerning the shares of the Fund, the Adviser shall act solely as
investment counsel for such clients and not in any way on behalf of the Fund.
8. Duration and Termination. This Agreement shall continue until August
25, 1999, and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually by
(i) the Trustees or (ii) a vote of a "majority" (as defined in the 0000 Xxx) of
the Fund's outstanding voting securities (as defined in the 1940 Act), provided
that in either event the continuance is also approved by a majority of the
Trustees who are not "interested persons" (as defined in the 0000 Xxx) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated: (a) at any time without penalty by the Trust upon
the vote of a majority of the Trustees or by vote of the majority of the Fund's
outstanding voting securities, upon sixty (60) days' written notice to the
Adviser or (b) by the Adviser at any time without penalty, upon ninety (90)
days' written notice to the Fund. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
9. Amendments. 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, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Trustees who are not
interested persons of any part to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
10. Limitation of Liability for Claim. The Declaration of Trust of the
Trust, a copy of which, together with all amendments thereto, is on file in the
Office of the Secretary of the Commonwealth of Massachusetts, provides that the
name "Capstone International Series Trust" refers to the Trustees under the
Declaration of Trust collectively as trustees and not as individuals or
personally, and that no shareholder of the Fund, or Trustee, officer, employee
or agent of the Trust, shall be subject to claims against or obligations of the
Trust or of the Fund to any extent whatsoever, but that the Trust estate only
shall be liable.
The Adviser is hereby expressly put on notice of the limitation
of liability as set forth in the Declaration of Trust and hereby agrees that the
obligations assumed by the Trust on behalf of the Fund pursuant to this
Agreement shall be limited in all cases to the Fund and its assets, and the
Adviser shall not seek satisfaction of any such obligation from shareholders or
any shareholder of the Fund or any other series of the Trust or their
shareholders, or from any Trustee, officer, employee or agent of the Trust. The
Adviser understands that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous.
a. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
b. The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
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c. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
d. Nothing herein shall be construed as constituting the Adviser as an
agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of August 25, 1997.
CAPSTONE INTERNATIONAL SERIES TRUST
CAPSTONE JAPAN FUND
By ___________________________________
President
FCA CORP
By ___________________________________
President
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