EXHIBIT 4
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the ____ day of __________, 2000, by and between
MASTER U.S. HIGH YIELD TRUST, a Delaware business trust (hereinafter referred to
as the "Trust"), and FUND ASSET MANAGEMENT, L.P., a Delaware limited partnership
(the "Investment Adviser").
W I T N E S S E T H:
WHEREAS, the Trust intends to engage in business as an open-end
diversified management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Investment Adviser to render
management and investment advisory services to the Trust in the manner and on
the terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Trust on the terms and conditions
hereinafter set forth; and
WHEREAS, the Trust serves as the "master" portfolio for one or more
"feeder" funds (each, a "Fund") that invest all of their assets in the Trust and
that have the same investment objective and policies as the Trust.
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the Trust and the Investment Adviser hereby agree as
follows:
ARTICLE I
Duties of the Investment Adviser
The Trust hereby employs the Investment Adviser to act as a manager and
investment adviser of the Trust and to furnish, or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall control of the Board of
Trustees of the Trust, for the period and on the terms and conditions set forth
in this Agreement. The Investment Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein. The Investment Adviser and its affiliates
shall for all purposes herein be deemed to be independent contractors and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Trust in any way or otherwise be deemed agents of the Trust.
(a) Management Services. The Investment Adviser shall perform (or arrange
for the performance by affiliates of) the management and administrative services
necessary for the operation of the Trust. It is understood that the Investment
Adviser or its affiliates may enter into separate agreements with each Fund for
the provision of management and administrative services necessary for the
operation of each Fund. The Investment Adviser shall provide the Trust with
office space, facilities, equipment and necessary personnel and such other
services as the Investment Adviser, subject to review by the Board of Trustees,
shall from time to time determine to be necessary or useful to perform its
obligations under this Agreement. The Investment Adviser shall also, on behalf
of the Trust, conduct relations with custodians, depositories, transfer agents,
dividend disbursing agents, other shareholder servicing agents, pricing agents,
accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and such other persons in any such other capacity
deemed to be necessary or desirable. The Investment Adviser shall generally
monitor the Trust's compliance with investment policies and restrictions as set
forth in the current registration statement relating to the Trust under the
Investment Company Act (the "Registration Statement"). The Investment Adviser
shall make reports to the Board of Trustees of its
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performance of obligations hereunder and furnish advice and recommendations with
respect to such other aspects of the business and affairs of the Trust as it
shall determine to be desirable.
(b) Investment Advisory Services. The Investment Adviser shall provide (or
arrange for the provision by affiliates of the Investment Adviser) the Trust
with such investment research, advice and supervision as the latter may from
time to time consider necessary for the proper supervision of the assets of the
Trust, shall furnish continuously an investment program for the Trust and shall
determine from time to time which securities shall be purchased, sold or
exchanged and what portion of the assets of the Trust shall be held in the
various securities and other financial instruments in which the Trust invests
and the portion of the assets of the Trust that shall be held in cash, subject
always to the restrictions set forth in the Declaration of Trust and the By-Laws
of the Trust, as amended from time to time, the provisions of the Investment
Company Act and the statements relating to the Trust's investment objectives,
investment policies and investment restrictions as the same are set forth in the
Registration Statement. The Investment Adviser shall make decisions for the
Trust as to the manner in which voting rights, rights to consent to corporate
action and any other rights pertaining to the Trust's portfolio securities shall
be exercised. Should the Board of Trustees at any time, however, make any
definite determination as to investment policy and notify the Investment Adviser
thereof in writing, the Investment 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 Investment Adviser shall take, on
behalf of the Trust, 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 for the Trust's
account with brokers or dealers selected by it, and to that end, the Investment
Adviser is authorized as the agent of the Trust to give instructions to the
Custodian of the Trust as to deliveries of securities and payments of cash for
the account of the Trust. In connection with the selection of such brokers or
dealers and the placing of such orders with respect to assets of the Trust, the
Investment Adviser is directed at all times to seek to obtain execution and
prices within the policy guidelines determined by the Board of Trustees as set
forth
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in the Registration Statement. Subject to this requirement and the provisions of
the Investment Company Act, the Securities Exchange Act of 1934, as amended, and
other applicable provisions of law, the Investment Adviser may select brokers or
dealers with which it or the Trust is affiliated.
(c) Affiliated Sub-Advisers. In carrying out its responsibilities
hereunder, the Investment Adviser may employ, retain or otherwise avail itself
of the services of other persons or entities including without limitation,
affiliates of the Investment Adviser, on such terms as the Investment Adviser
shall determine to be necessary, desirable or appropriate. However, if the
Investment Adviser chooses to retain or avail itself of the services of another
person or entity to manage assets of the Trust, such other person or entity must
be (i) an affiliate of the Investment Adviser, (ii) retained at the Investment
Adviser's own cost and expense, and (iii) retained subject to the requirements
of Section 15 of the Investment Company Act. Retention of one or more affiliated
sub-advisers, or the employment or retention of other persons or entities to
perform services, shall in no way reduce the responsibilities or obligations of
the Investment Adviser under this Agreement and the Investment Adviser shall be
responsible for all acts and omissions of such affiliated sub-advisers, or other
persons or entities, in connection with the performance of the Investment
Adviser's duties hereunder.
(d) Notice Upon Change in Partners of the Investment Adviser. The
Investment Adviser is a limited partnership and its limited partner is Xxxxxxx
Xxxxx & Co., Inc. and its general partner is Princeton Services, Inc. The
Investment Adviser will notify the Trust of any change in the membership of the
partnership within a reasonable time after such change.
ARTICLE II
Allocation of Charges and Expenses
(a) The Investment Adviser. The Investment Adviser assumes and shall pay,
or
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cause its affiliates to pay, for maintaining the staff and personnel
necessary to perform its obligations under this Agreement, and shall at its own
expense, provide the office space, facilities, equipment and necessary personnel
which it is obligated to provide under Article I hereof. The Investment Adviser
shall pay, or cause its affiliates to pay, compensation of all officers of the
Trust and all Trustees of the Trust who are affiliated persons of the Investment
Adviser, or any sub-adviser, or an affiliate of the Investment Adviser or
sub-adviser.
(b) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports, Registration Statements, charges of the custodian, any
sub-custodian and transfer agent, expenses of portfolio transactions, expenses
of redemption of shares, Securities and Exchange Commission fees, expenses of
registering the shares under Federal, state and foreign laws, fees and actual
out-of-pocket expenses of all Trustees of the Trust who are not affiliated
persons of the Investment Adviser or any sub-adviser or of an affiliate of the
Investment Adviser or any sub-adviser, accounting and pricing costs (including
the daily calculation of the net asset value), insurance, interest, brokerage
costs, litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable by the Trust. It also is understood that the Trust
will reimburse the Investment Adviser for its costs incurred in providing
accounting services to the Trust.
ARTICLE III
Compensation of the Investment Adviser
(a) Investment Advisory Fee. For the services rendered, the facilities
furnished and expenses assumed by the Investment Adviser, the Trust shall pay to
the Investment Adviser at the end of each calendar month a fee based on the
average daily value of the net assets of the Trust at the annual rate of 0.35 of
1.0% of the average daily net assets of the Trust commencing on the day
following effectiveness hereof, as determined and computed in accordance with
the description of the determination of net asset value contained in the
Prospectus and Statement of Additional Information of the Trust. 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 that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fee as set forth above. Subject to the provisions of
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subsection (b) hereof, payment of the Investment Adviser's compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated herein. During any period when the determination of
net asset value is suspended by the Board of Trustees, 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.
(b) Expense Limitations. In the event the operating expenses of the Trust,
including amounts payable to the Investment 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 the Trust imposed by
applicable state securities laws or regulations thereunder, as such limitations
may be raised, lowered or waived from time to time, the Investment Adviser shall
reduce its management and investment advisory fee by the extent of such excess
and, if required pursuant to any such laws or regulations, will reimburse the
Trust 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 fees and commissions, distribution fees 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
Trust. Whenever the expenses of the Trust exceed a pro rata portion of the
applicable annual expense limitations, the estimated amount of reimbursement
under such limitations shall be applicable as an offset against the monthly
payment of the fee due to the Investment Adviser. Should two or more such
expense limitations be applicable as at the end of the last business day of the
month, that expense limitation which results in the largest reduction in the
Investment Adviser's fee shall be applicable.
ARTICLE IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
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reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Trust contemplated hereby and the
partners, directors, officers and employees of the Investment Adviser and such
affiliates.
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Trust are not to be deemed
to be exclusive; the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for purposes of this Article V
referred to as "affiliates") are free to render services to others. It is
understood that the Board of Trustees, officers, employees and shareholders of
the Trust are or may become interested in the Investment Adviser and its
affiliates, as directors, officers, employees, partners, and shareholders or
otherwise and that directors, officers, employees, partners, and shareholders of
the Investment Adviser and its affiliates are or may become similarly interested
in the Trust, and that the Investment Adviser and directors, officers,
employees, shareholders, partners, and shareholders of its affiliates may become
interested in the Trust as shareholders or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force for a period of two years thereafter and thereafter
shall continue from year to year, but only so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees of the
Trust, or by the vote of a majority of the outstanding voting securities of the
Trust, and (ii) a majority of those Trustees 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 Trustees or by vote of a majority of the outstanding
voting securities of the Trust, or by the Investment
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Adviser, on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of the Trustees of the Trust, including a
majority of those Trustees 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 and, where required by the Investment Company Act, by
the vote of a majority of the outstanding voting securities of the Trust.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws 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.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MASTER U.S. HIGH YIELD TRUST
By:
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Title:
FUND ASSET MANAGEMENT, L.P.
By: Princeton Services, Inc., General
Partner
By:
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Title:
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