EXHIBIT 4(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___ day of February, 2004 by and between XXXXXXX XXXXX
INFLATION PROTECTED FUND, a Delaware statutory trust (the "Trust"), and FUND
ASSET MANAGEMENT, L.P., a Delaware limited partnership (hereinafter referred to
as the "Adviser").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act"); and
WHEREAS, the 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; and
WHEREAS, the Trust desires to retain the Adviser to render management and
investment advisory services to the Trust in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Adviser is willing to provide management and investment
advisory services to the Trust on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE ADVISER
---------------------
The Trust hereby employs the Adviser to act as an investment 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 policies of, review by and overall control of the Board of Trustees
of the Trust (the "Trustees"), 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, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein. The Adviser and its affiliates 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 Trust in any way or otherwise be deemed an agent of the Trust.
(a) Management Services. The Adviser shall perform, or arrange for the
-------------------
performance by affiliates of, the management and administrative services
necessary for the operation of the Trust, including administering shareholder
accounts and handling shareholder relations. The Adviser shall provide the Trust
with office space, equipment and facilities and such other services as the
Adviser, subject to review by the Trustees, shall from time to time
determine to be necessary or useful to perform its obligations under this
Agreement. The Adviser shall also, on behalf of the Trust, conduct relations
with custodians, depositories, transfer agents, dividend disbursing agents,
other servicing 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 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
Adviser shall make reports to the Trustees of its performance of the 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 Adviser shall provide (or arrange for
----------------------------
affiliates to provide) 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 in which the Trust invests,
options, futures, options on futures or cash, subject always to the restrictions
set forth in the Declaration of Trust and 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 objective, investment policies and investment
restrictions as the same are set forth in the Prospectus and Statement of
Additional Information. The Adviser shall also 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 Trustees at any time, however, make any definite
determination as to investment policy and notify the Adviser thereof in writing,
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 Trust, all actions that
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 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 Adviser is directed at all times to seek to obtain execution
and price within the policy guidelines determined by the Trustees as set forth
in the prospectus and statement of additional information that form a part of
the Trust's 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 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 Adviser may employ, retain or otherwise avail itself of the
services of other persons or entities, including, without limitation, affiliates
of the Adviser, on such terms as the Adviser shall determine to be necessary,
desirable or appropriate. However, if the 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 Adviser, (ii)
retained at the Adviser's own cost and expense, and (iii) retained subject to
the requirements of Section 15 of the Investment Company
2
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 Adviser under this Agreement,
and the 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 Adviser's duties hereunder.
(d) Notice Upon Change in Partners of Adviser. The Adviser is a limited
-----------------------------------------
partnership and its limited partner is Xxxxxxx Xxxxx & Co., Inc. and its general
partner is Princeton Services, Inc. The 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 Adviser. The Adviser assumes and shall 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, equipment and facilities
which it is obligated to provide under Article I hereof, and shall pay all
compensation of officers of the Trust and all Trustees who are affiliated
persons of the Adviser.
(b) The Trust. The Trust assumes and shall pay or cause to be paid all
---------
other expenses of the Trust (except for the expenses paid by FAM Distributors,
Inc. (the "Distributor")), including, without limitation: organizational cost,
redemption expenses, expenses of portfolio transactions, expenses of registering
shares under federal and state securities laws, pricing costs (including the
daily calculation of net asset value), expenses of printing shareholder reports,
stock certificates (if any), prospectuses and statements of additional
information, Securities and Exchange Commission fees, interest, taxes, custodian
and transfer agency fees, fees and actual out-of-pocket expenses of Trustees who
are not affiliated persons of the Adviser, fees for legal and auditing services,
litigation expenses, costs of printing proxies and other expenses related to
shareholder meetings, and other expenses properly payable by the Trust. It is
also understood that the Trust shall reimburse the Adviser for its costs, if
any, in providing accounting services to the Trust. The Distributor will pay
certain of the expenses of the Trust incurred in connection with the continuous
offering of Trust shares.
ARTICLE III
COMPENSATION OF THE ADVISER
---------------------------
(a) Investment Management Fee. For the services rendered, the facilities
-------------------------
furnished and expenses assumed by the Adviser, the Trust shall pay to the
Adviser at the end of each calendar month a fee at the annual rate of 0.50% 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
Registration Statement. 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
3
this Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fee as set forth above.
(b) Fee Payment. Payment of the Adviser's compensation for the preceding
-----------
month shall be made as promptly as possible after completion of the computations
contemplated by Article III(a) above. During any period when the determination
of net asset value is suspended by the Board of Trustees, the average net asset
value of a share for 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.
(c) Expense Limitations. In the event the operating expenses of the Trust,
-------------------
including amounts 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 the Trust imposed by applicable state
securities laws or regulations thereunder, as such limitations may be raised or
lowered from time to time, the Adviser shall reduce its management 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 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 management fee due to the 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
Adviser's fee shall be applicable.
ARTICLE IV
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 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 reckless disregard
of its obligations and duties hereunder. As used in this Article IV, the term
"Adviser" shall include any affiliates of the manager performing services for
the Trust contemplated hereby and the partners, shareholders, directors,
officers and employees of the Adviser and such affiliates.
ARTICLE V
ACTIVITIES OF THE ADVISER
-------------------------
The services of the Adviser to the Trust are not to be deemed to be
exclusive, and the Adviser and any person controlled by or under common control
with the Adviser (for purposes of Article V referred to as "affiliates") is free
to render services to others. It is
4
understood that Trustees, officers, employees and shareholders of the Trust are
or may become interested in the Adviser and its affiliates, as directors,
officers, employees, partners and shareholders or otherwise and that the Adviser
and the directors, officers, employees, partners and shareholders of the Adviser
and its affiliates are or may become similarly interested in the Trust as
shareholders or otherwise.
ARTICLE VI
DURATION AND TERMINATION OF THIS CONTRACT
-----------------------------------------
This Agreement shall become effective as of the date first written above
and shall remain in force for a period of two years thereafter and thereafter
continue from year to year, but only so long as such continuance is specifically
approved at least annually by (i) the Trustees, 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 Trustees or by vote of a majority of the outstanding voting
securities of the Trust, 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 VII
AMENDMENTS OF THIS AGREEMENT
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of 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.
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 the
Investment Company Act.
5
ARTICLE IX
GOVERNING LAW
-------------
This Agreement shall be construed in accordance with 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.
ARTICLE X
LIMITATION OF OBLIGATIONS OF THE TRUST
--------------------------------------
The obligations of the Trust shall be limited to the assets of the Trust,
shall be separate from the obligations of any other series of the Trust, and any
one series of the Trust shall not be liable for the obligations of any other
series of the Trust.
6
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
XXXXXXX XXXXX INFLATION PROTECTED FUND
By: ____________________________________
Name: Xxxxx X. Xxxxx
Title: President
FUND ASSET MANAGEMENT, L.P.
By: PRINCETON SERVICES, INC.,
its General Partner
By: ____________________________________
Name:
Title:
