EXHIBIT 5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, dated July 23, 1996, between Composite Bond & Stock Fund, Inc.,
a Washington corporation (the "Fund") and Composite Research & Management Co., a
Washington corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund desires to retain the Manager to render investment
management services to the Fund, and the Manager is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
1. APPOINTMENT. The Fund hereby appoints the Manager to act as investment
manager to the Fund for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services herein described, for the compensation herein provided.
2. MANAGEMENT. Subject to the supervision of the Board of Directors of the
Fund, the Manager shall manage the investment operations of the Fund and
the composition of the Fund's portfolio, including the purchase, retention
and disposition of securities therefor, in accordance with the Fund's
investment objectives, policies and restrictions as stated in the
Prospectus and Statement of Additional Information (as such terms are
hereinafter defined) and resolutions of the Fund's Board of Directors and
subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's investments,
furnish a continuous investment program for the Fund's portfolio and
determine from time to time what securities will be purchased,
retained, or sold by the Fund, and what portion of the assets will be
invested or held as cash.
(b) The Manager shall use reasonable care and judgment in the management of
the Fund's portfolio.
(c) The Manager, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Articles of
Incorporation (as hereinafter defined) of the Fund and by the
investment policies of the Fund as determined by the Board of Directors
of the Fund and set forth in the Prospectus and Statement of Additional
Information. All acts of the Manager shall conform to and comply with
the requirements of the 1940 Act and all other applicable federal and
state laws and regulations.
(d) The Manager shall determine the securities to be purchased or sold by
the Fund and at the Fund's expense, and shall place orders for the
purchase and sale of portfolio securities pursuant to its
determinations with brokers or dealers selected by the Manager. In
executing portfolio transactions and selecting brokers or dealers, the
Manager shall use its best efforts to seek on behalf of the Fund the
best overall terms available. In assessing the best overall terms
available for any transaction, the Manager may consider all factors it
deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In evaluating the best overall terms available, and
in selecting the broker or dealer to execute a particular transaction,
the Manager also may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act
of 1934, as amended) provided to the Fund and/or other accounts over
which the Manager exercises investment discretion. The Manager is
authorized to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction
for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting the transaction if
the Manager determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of that
particular transaction or in terms of the overall responsibilities of
the Manager to the Fund and/or other accounts over which the Manager
exercises investment discretion.
(e) On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of the Fund as well as other fiduciary
accounts for which it has investment responsibility, the Manager, to
the extent permitted by applicable laws and regulations, may aggregate
the securities to be so sold or purchased in order to obtain the best
execution, most favorable net price or lower brokerage commissions. In
such event, allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, shall be made by the
Manager in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
fiduciary accounts.
(f) On each business day the Manager shall provide a list of all
transactions concerning the Fund's assets.
(g) When the Manager makes investment recommendations for the Fund, its
personnel shall not inquire or take into consideration whether the
issuer of the securities proposed for purchase or sale for the Fund's
account is a customer of any affiliate of the Manager. In dealing with
commercial customers, the Manager's affiliates shall not inquire or
take into consideration whether securities of those customers are held
by the Fund.
3. SERVICES NOT EXCLUSIVE. The investment management services rendered by the
Manager hereunder to the Fund are not to be deemed exclusive, and the
Manager shall have the right to render similar services to others,
including, without limitation, other investment companies.
4. EXPENSES. During the term of this Agreement, the Manager shall pay all
expenses incurred by it in connection with its activities under this
Agreement including the salaries and expenses of any of its officers or
employees who act as officers, directors or employees of the Fund but
excluding the cost of securities purchased for the Fund and the amount of
any brokerage fees and commissions incurred in executing portfolio
transactions for the Fund, and provide the Fund with suitable office space.
Other expenses to be incurred in the operation of the Fund (other than
those borne by any third party), including taxes, interest, brokerage fees
and commissions, if any, fees of directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Manager or the Fund's administrator or any of their affiliates,
Securities and Exchange Commission fees and state Blue Sky qualification
fees, advisory and administration fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of preparing, printing and distributing
prospectuses, costs of stockholders' reports and corporate meetings, costs
of implementing and operating the Fund's service plan, and any
extraordinary expenses will be borne by the Fund.
5. COMPENSATION. For the services provided pursuant to this Agreement, the
Fund shall pay to the Manager as full compensation therefor a monthly fee
computed on the average daily net assets of the Fund equal to .625% per
annum up to the first $250 million; on assets in excess of $250 million the
fee decreases to .50%. The Fund acknowledges that the Manager, as agent for
the Fund, will allocate a portion of the fee equal to .15% of such assets
to Xxxxxxx Xxxxx Securities Services, Inc. for administrative services,
portfolio accounting, and regulatory compliance systems and a portion of
the fee equal to .125% of such assets to Xxxxxxx Xxxxx, Inc. for
shareholder servicing activities.
6. LIMITATION OF LIABILITY. The Manager 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, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b) of the 0000
Xxx) or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
7. DELIVERY OF DOCUMENTS. The Fund has heretofore delivered to the Manager
true and complete copies of each of the following documents and shall
promptly deliver to it all future amendments and supplements thereto, if
any:
(a) Articles of Incorporation of the Fund (such Articles as presently in
effect and as amended from time to time, the "Articles of
Incorporation");
(b) Bylaws of the Fund;
(c) Resolutions of the Board of Directors of the Fund authorizing the
appointment of the Manager and approving the form of this Agreement;
(d) Registration Statement under the Securities Act of 1933 and under the
1940 Act of the Fund on Form N-1A, and all amendments thereto, as filed
with the Securities and Exchange Commission (the "Registration
Statement") relating to the Fund and the shares of the Fund's common
stock;
(e) Notification of Registration of the Fund under the 1940 Act on Form
N-8A;
(f) Prospectus of the Fund (such prospectus as presently in effect and/or
as amended or supplemented from time to time, the "Prospectus"); and
(g) Statement of Additional Information of the Fund (such statement as
presently in effect and/or as amended or supplemented from time to
time, the "Statement of Additional Information").
8. DURATION AND TERMINATION. This Agreement is a continuation of the agreement
dated July 29, 1982. Unless terminated herein, this Agreement shall
continue in effect provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Fund's
Board of Directors who are not parties to the Contract or "interested
persons" to any such party, cast in person at a meeting called for that
purpose, or by vote of a majority of the outstanding voting securities of
the Fund. Notwithstanding the foregoing, (a) this Agreement may be
terminated at any time, without the payment of any penalty, by either the
Fund (by vote of the Fund's Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund) or the Manager, on sixty
(60) days prior written notice to the other and (b) shall automatically
terminate in the event of its assignment. As used in this Agreement, the
terms "majority of the outstanding voting securities", "interested persons"
and "assignment" shall have the meanings assigned to such terms in the 1940
Act.
9. AMENDMENTS. No provision of this Agreement may be amended, modified, waived
or supplemented except by a written instrument signed by the party against
which enforcement is sought. No amendment of this Agreement shall be
effective until approved in accordance with the provisions of the 1940 Act.
10. USE OF MANAGER'S NAME AND LOGO. The Fund agrees that it shall furnish to
the Manager, prior to any use or distribution thereof, copies of all
prospectuses, statements of additional information, proxy statements,
reports to stockholders, sales literature, advertisements, and other
material prepared for distribution to stockholders of the Fund or to the
public, which in any way refer to or describe the Manager or which include
any trade names, trademarks or logos of the Manager or of any affiliate of
the Manager. The Fund further agrees that it shall not use or distribute
any such material if the Manager reasonably objects in writing to such use
or distribution within five (5) business days after the date such material
is furnished to the Manager. The provisions of this section shall survive
termination of this Agreement.
11. NOTICES. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, if to the Fund: 000 X. Xxxx Xxx., Xxxxx
000, Xxxxxxx, Xxxxxxxxxx 00000; or if to the Manager: 0000 Xxxxx Xxx.,
Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000; or to either party at such other
address as such party shall designate to the other by a notice given in
accordance with the provisions of this section.
12. MISCELLANEOUS.
(a) Except as otherwise expressly provided herein or authorized by the Board of
Directors of the Fund from time to time, the Manager for all purposes
herein shall be deemed to be an independent contractor and shall have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Fund shall furnish or otherwise make available to the Manager such
information relating to the business affairs of the Fund as the Manager at
any time or from time to time reasonably requests in order to discharge its
obligations hereunder.
(c) This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington and shall inure to the benefit of the
parties hereto and their respective successors.
(d) If any provision of this Agreement shall be held or made invalid or by any
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first above-written.
COMPOSITE BOND & STOCK FUND, INC.
/s/ XXXXXXX X. XXXXXX Date-----------------------------
President
COMPOSITE RESEARCH & MANAGEMENT CO.
/s/ XXXXXXX X. XXXXXX Date-----------------------------
President
