Exhibit 4(a)
EXHIBIT B
FORM OF INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of January, 1981, by and between XXXXXXX XXXXX
MUNICIPAL BOND FUND, INC., a Maryland corporation (the "Fund"), and FUND ASSET
MANAGEMENT, INC., a Delaware corporation (the "Adviser"):
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act")
WHEREAS, the Fund is comprised of. three separate Portfolios, each of
which pursues its investment objective through separate investment policies;
WHEREAS, the Adviser is engaged principally in rendering advisory services
and is registered as an investment adviser under the Investment Advisers Act of
1940; and
WHEREAS, the Fund desires to retain the Adviser to render investment
supervisory and corporate administrative services to the Fund in the manner and
on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Adviser hereby agree as follows:
ARTICLE 1.
Duties of the Adviser
The Fund hereby employs the Adviser to act as the investment adviser to
and manager of the Fund and to manage the investment and reinvestment of the
assets of each of its Portfolios and to administer its affairs, subject to the
supervision of the Board of Directors of the Fund, for the period and on the
terms and conditions set forth in this Agreement. The Adviser hereby accepts
such employment and agrees during such period, at its own expense, to render the
services and to assume the obligations herein set forth for the compensation
provided for herein. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
(a) Investment Advisory Services. In acting as investment adviser to
the Fund, the Adviser shall regularly provide the Fund with such investment
research, advice and supervision as the latter may from time to time consider
necessary for the proper supervision of its Portfolios and shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of each Portfolio shall be held in the various securities in which it may
invest, subject always to the restrictions of the Fund's Articles of
Incorporation and By-Laws, as amended from time to
time, the provisions of the Investment Company Act, and the statements relating
to the Fund's investment objectives, investment policies and investment
restrictions as the same are set forth in the currently effective prospectus of
the Fund under the Securities Act of 1933 (the "Prospectus"). The Adviser shall
also be responsible for all duties arising in connection with any portfolio
insurance policies, which the Insured Portfolio maintains. Should the Board of
Directors of the Fund at any time, however, make any definite determination as
to investment policy and notify the Adviser thereof, the Adviser shall be bound
by such determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Adviser shall
take, on behalf of the Fund, 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 of each Portfolio
with brokers or dealers selected by it. In connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed at
all times to seek to obtain for the Fund the most favorable execution and price
within the meaning of such terms as determined by the Board of Directors and set
forth in the Prospectus. Subject to this requirement and the provisions of the
Investment Company Act, the Securities Exchange Act of 1934, and other
applicable provisions of law, nothing shall prohibit the Adviser from selecting
brokers or dealers with which it or the Fund is affiliated.
(b) Administrative Services. In addition to the performance of
investment advisory services, the Adviser shall perform or supervise the
performance of, administrative services in connection with the management of the
Fund and the Portfolios. In this connection, the Adviser agrees to (i) assist in
supervising all aspects of the Fund's operations, including the coordination of
all matters relating to the functions of the custodian, transfer agent, other
shareholder service agents, accountants, attorneys and other parties performing
services or operational functions for the Fund, (ii) provide the Fund, at the
Adviser's expenses, with services of persons competent to perform such
administrative and clerical functions as are necessary in order to provide
effective administration of the Fund, including duties in connection with
shareholder relations, reports, redemption requests and account adjustments and
the maintenance of certain books and records of the Fund, (iii) provide the
Fund, at the Adviser's expense, with adequate office space and related services
necessary for its operations as contemplated in this Agreement, and (iv)
supervise and administer the operation of the Exchange Privilege referred to in
the Prospectus. The Fund acknowledges that the Adviser intends to arrange for
the provision of services and the performance of functions referred to in this
subsection (b) by Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated (the
"Administrator") pursuant to an Administration Agreement between the Adviser and
the Administrator.
ARTICLE 2.
Allocation of Charges and Expenses
(a) The Adviser. The Adviser assumes and shall pay for maintaining
the staff and personnel and shall at its own expense provide the equipment,
office space and facilities, necessary to perform its obligations under this
Agreement, and shall pay all compensation of officers of the Fund and the fees
of all directors of the Fund who are affiliated persons of Xxxxxxx Xxxxx & Co.,
Inc. or its subsidiaries.
2
(b) The Fund. The Fund assumes and shall pay all expenses of the
Fund, including, without limitation, organization costs, insurance (including
portfolio insurance maintained by the Insured Portfolio), taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports and prospectuses (except to the extent paid by the
Distributor), charges of the Custodian and Transfer Agent, expenses of
redemption of shares, Securities and Exchange Commission fees, expenses of
registering the shares under Federal and state securities laws, fees and
expenses of directors who are not affiliated persons of Xxxxxxx Xxxxx & Co.,
Inc. or its subsidiaries, accounting and pricing costs (including the daily
calculation of net asset value), interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other expenses properly payable by
the Fund.
ARTICLE 3.
Compensation of the Adviser
(a) Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Adviser, the Fund shall pay to
the Adviser at the end of each calendar month a fee based upon the average daily
value of the net assets of the portfolios, as determined and computed in
accordance with the ascription of the method of determination of net asset value
contained in the Prospectus. During any period when the determination of net
asset value is suspended by the Board of Directors of the Fund, the net asset
value of a share as of the last business day prior to such suspension shall for
this purpose be deemed to be the net asset value at the close of each succeeding
business day until it is again determined.
The fee with respect to each Portfolio shall be at the rates set
forth below. These rates are subject to reduction to the extent that the
aggregate of the average daily net assets of the three combined Portfolios
exceeds $250 million. [In addition, the fee payable by the Limited Maturity
Portfolio is subject to further reductions to the extent the combined assets of
the Portfolios exceed $400 million and $550 million.] The reductions shall be
applicable to each Portfolio regardless of size on a "uniform percentage" basis.
Determination of the portion of the net assets of each Portfolio to which the
reduced rates are applicable is made by multiplying the net assets of that
Portfolio by "uniform percentages", derived by dividing the amount by which the
combined assets of all Portfolios exceed the various applicable breakpoints by
such combined assets.
Rate of Advisory Fee
------------------------------------
Aggregate of High Limited
average daily net assets Insured Yield Maturity
of the three combined Portfolios Portfolio Portfolio Portfolio
-------------------------------- --------- --------- ---------
Not exceeding $250 million................. 0.40 % 0.50 % 0.40 %
In excess of $250 million but not
exceeding $400 million .................. 0.375 0.475 0.375
In excess of $400 million but not
exceeding $550 million .................. 0.375 0.475 0.350
In excess of $550 million.................. 0.375 0.475 0.325
3
(b) Expense Limitations. In the event the operating expenses of any
Portfolio, including the investment advisory fee applicable to such Portfolio
payable to the 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 that Portfolio imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Adviser shall reduce its investment advisory fee by the extent of
such excess and, if required pursuant to any such laws or regulations, will
reimburse such Portfolio 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 Fund and
allocated to such Portfolio. Whenever the expenses of any Portfolio exceed a pro
rata portion of the applicable annual expense limitations, the estimated amounts
of reimbursement under such limitations shall be applicable as an offset against
the monthly payment of the advisory fee due to the Adviser.
ARTICLE 4
Limitation of Liability of the Adviser
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 any investment
policy or the purchase, sale or redemption of any securities on the
recommendation of the Adviser. Nothing herein contained shall be construed to
protect the Adviser against any liability to the Fund or its security holders to
which the Adviser shall otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence in the performance of its duties on behalf of the
Fund, reckless disregard of the Adviser's obligations and duties under this
Agreement or the violation of any applicable law.
ARTICLE 5
Activities of the Adviser
The services of the Adviser under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others so long as its services hereunder are not impaired thereby. It is
understood that directors, officers, employees and shareholders of the Fund are
or may become interested in the Adviser, as directors, officers, employees or
shareholders or otherwise and that directors, officers, employees or
shareholders of the Adviser are or may become similarly interested in the Fund,
and that the Adviser is or may become interested in the Fund as shareholder or
otherwise.
ARTICLE 6
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until December 31, 1981 and thereafter, but
only so long as such continuance is specifically approved at least annually by
(i) the Board of Directors of the Fund, or by the vote of a majority of the
outstanding shares of the Fund including a majority of the outstanding shares of
4
each Portfolio, and (ii) a majority of those directors 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 Directors of the Fund or by vote of a majority of
the outstanding shares of the Fund, or by the Adviser on sixty days' written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment.
ARTICLE 7
Definitions
The terms "assignment", "affiliated person" and "interested person",
when used in this Agreement, shall have the respective meanings specified in the
Investment Company Act. As used with respect to the Fund or any of its
Portfolios, the term "majority of the outstanding shares" means the lesser of
(i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
ARTICLE 8
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved by (i) the Board of Directors of the Fund, or by the
vote of a majority of outstanding shares of the Fund, including a majority of
the outstanding shares of each Portfolio, and (ii) a majority of those directors
of the Fund 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 9
Governing Law
The provisions of this Agreement shall be construed and interpreted
in accordance with the laws of the State of New York as at the time in effect
and the applicable provisions of the Investment Company Act. To the extent that
the applicable law 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.
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
XXXXXXX XXXXX MUNICIPAL BOND FUND, INC.
By: ____________________________________
Attest:
_____________________________________
Secretary
FUND ASSET MANAGEMENT, INC.
By:_____________________________________
Attest:
_____________________________________
Secretary
6
