FORM OF
THE INVESTMENT MANAGEMENT AGREEMENT
THE UNITED KINGDOM FUND INC.
AGREEMENT dated as of December 11, 1997 between THE UNITED
KINGDOM FUND INC., a Maryland corporation (the "Company"), whose principal
office is c/o Mercury Asset Management International Ltd., 000 Xxxx Xxxxxx,
Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, and MERCURY ASSET MANAGEMENT
INTERNATIONAL CHANNEL ISLANDS LTD., a corporation organized under the laws of
Jersey, Channel Islands (the "Investment Manager"), whose principal office is
at Forum House, Grenville Street, St. Helier, Jersey JE4 8RL, Channel Islands.
WHEREBY IT IS AGREED AND DECLARED as follows:
ARTICLE 1
Interpretation
Section 1.01. In this Agreement the following words and
expressions shall have the following meanings:
"Assignment Date" means the first date that Xxxxxxx Xxxxx &
Co., Inc. controls Mercury Asset Management Group plc;
"Charter" means the Articles of Incorporation and By-Laws of
the Company as in effect from time to time;
"Commission" means the Securities and Exchange Commission;
"Custodian" means Custodial Trust Company acting in the
capacity of Custodian of the Investments of the Company, or any other
corporation for the time being acting as Custodian of the Investments of the
Company;
"Directors" means the Board of Directors of the Company,
including any duly appointed committee thereof;
"1940 Act" means the Investment Company Act of 1940, as amended;
"Investment Adviser" means Mercury Asset Management
International Ltd., an English corporation.
"Investments" means the assets and rights from time to time of
the Company;
"Issuance Date" means the date on which the Commission grants
the exemptive order application of Mercury Asset Management Group plc, Xxxxxxx
Xxxxx & Co., Inc., the Investment Manager and the Investment Adviser filed
with the Commission on December 10, 1997 seeking an exemption from compliance
with certain provisions of Section 15(a) of the 1940 Act;
"Laws" means the laws of the State of Maryland, the United
States of America and any other applicable laws and regulations for the time
being in force;
"Prospectus" means the prospectus included within the Company's
Registration Statement relating to the Company's offering of up to 6,900,000
Shares at the time the Registration Statement is declared effective by the
Commission, as amended;
"Shares" means shares of common stock of the Company ($0.01 par
value).
Section 1.02. Any reference to the Company, the Investment
Manager or the Custodian includes a reference to its or their directors,
officers and duly authorized agents.
Section 1.03. References to Articles and Sections are to
Articles and Sections, respectively, of this Agreement.
Section 1.04. The headings to the Articles and Sections of
this Agreement are for convenience only and shall not affect the construction
or interpretation thereof.
Section 1.05. The terms "affiliated person", "interested
person", "assignment", "controls" and "vote of a majority of the outstanding
voting securities" shall have the same meanings as set forth in the 1940 Act.
ARTICLE 2
Appointment of the Investment Manager
The Company hereby appoints the Investment Manager as the
manager of the Investments of the Company from time to time upon the terms
hereinafter contained and in accordance with the Laws, the Charter, the
Company's investment objective and policies as from time to time in effect,
and overall supervision and direction of, and guidelines established by, the
Directors until its appointment shall be terminated as hereinafter provided
and the Investment Manager hereby accepts such appointment and agrees to
assume the obligations and duties set forth herein.
ARTICLE 3
Functions, Powers, Duties and Obligations of the Investment Manager
Section 16.01. During the continuance of its appointment the
Investment Manager shall, subject to the Laws, the Charter, the Company's
investment objective and policies as from time to time in effect, and overall
supervision and direction of, and guidelines established by, the Directors,
have full power, authority and right to:
(a) manage the investment and re-investment of the
Investments of the Company consistent with the Company's investment
objective and policies as from time to time in effect;
(b) provide or procure the provision of research and
statistical data in relation to the Investments and other matters within
the scope of the investment objective and policies of the Company as from
time to time in effect;
(c) prepare or procure the preparation of reports on the
Company's investment performance and such other matters as the Directors
may from time to time reasonably determine for consideration by the
Directors;
(d) select and place orders with brokers and dealers to
execute Investment transactions in the manner set forth in the Prospectus
under the heading "Portfolio Transactions and Brokerage", and
(e) provide such other services in connection with the
business of the Company as the Directors may reasonably require.
Section 3.02. The Investment Manager shall keep or cause to
be kept on behalf of the Company such books, records, statements and accounts
as may be required by the Laws and the Charter and as otherwise may be
necessary to give a complete record of all transactions carried out by the
Investment Manager on behalf of the Company; shall permit the Company and its
employees and agents to inspect such books, records and statements at all
reasonable times; and shall promptly surrender to the Company such books,
records and statements upon the Company's request.
Section 3.03. The Investment Manager shall have and is
hereby granted the authority, power and right for the account and in the name
of the Company but subject to the Laws, the Charter, the Company's investment
objective and policies as from time to time in effect, and overall supervision
and direction of, and guidelines established by, the Directors:
(a) to issue orders and instructions with respect to the
disposition of the Investments, moneys and other assets of the Company;
(b) to purchase or otherwise acquire, sell or otherwise
dispose of, and invest in, the Investments, moneys and other assets for the
account of the Company and effect foreign exchange transactions on behalf
of the Company and for the account of the Company in connection with any
such purchase or other acquisition, sale or other disposal or the
protection of the value of Investments;
(c) to enter into, make and perform all contracts,
agreements and other undertakings as may in the opinion of the Investment
Manager be necessary or advisable or incidental to the carrying out of the
objectives of this Agreement; and
(d) to negotiate all borrowing arrangements of the Company
and to supervise the implementation of such arrangements.
Section 3.04. In exercising its rights and carrying out its
duties hereunder the Investment Manager is authorized to act for the Company
and on the Company's behalf either itself or wholly or in part through its
authorized agents as it shall determine; provided, however, that the
appointment of any agent shall not relieve the Investment Manager of its
responsibilities or liabilities hereunder.
Section 3.05. The Investment Manager, in the performance of
its duties and obligations hereunder, shall act in conformity with the
Charter, the Prospectus, instructions and directions of the Directors, the
Laws (including specifically the 0000 Xxx) and all other applicable laws,
regulations and requirements of regulatory authorities.
Section 3.06. The Investment Manager agrees that it will not
make a short sale of any Shares or purchase any Shares otherwise than for
investment.
Section 3.07. Nothing herein shall be construed as
constituting the Investment Manager an agent of the Company.
ARTICLE 4
Continuation and the Exercise of Investment Manager's Powers
Section 4.01. The authorities herein contained are
continuing ones and shall remain in full force and effect until revoked by
termination of this Agreement as hereinafter provided, but such revocation
shall not affect any liability in any way resulting from transactions
initiated prior to such revocation.
Section 4.02. The Investment Manager will perform its
powers, duties and obligations hereunder primarily within Jersey, Channel
Islands, but in no event within the United Kingdom unless it shall have first
delivered to the Company an opinion of English lawyers acceptable to the
Company to the effect that such performance will not cause the Company to
become liable to pay any United Kingdom taxes that it would not otherwise be
liable to pay; provided that nothing in this Section 4.02 shall limit the
activities of the Investment Adviser on behalf of the Investment Manager and
the Company pursuant to the Investment Advisory Agreement dated as of December
11, 1997 (the "Investment Advisory Agreement") between the Investment Manager
and the Investment Adviser.
Section 4.03. In addition to any limitations set forth
above, all activities engaged in by the Investment Manager hereunder shall at
all times be subject to the control of and review by the Directors and,
without limiting the generality of the foregoing, the Directors may from time
to time:
(a) prohibit the Investment Manager from investing in any
security or class of securities;
(b) require the Investment Manager to purchase or sell any
security or class of securities;
(c) consistent with the Laws and the Charter, define the
investment policy of the Company and specify the manner in which it wishes
the Investment Manager to give effect to such policy;
(d) require the Investment Manager to report to it from time
to time the manner in which the investment policy of the Company is being
implemented by the Investment Manager or the investment policy the
Investment Manager is recommending for implementation in relation to the
Company for approval by the Directors; and
(e) withdraw money or other assets managed by the Investment
Manager for the purpose of managing such money or other assets itself.
ARTICLE 5
Fees of the Investment Manager
Section 5.01. In consideration of the services to be
performed by the Investment Manager hereunder the Investment Manager shall be
entitled to receive from the Company a fee at the annual rate of .75% of the
Company's average weekly net assets up to $150 million and .65% of such assets
in excess of $150 million payable on the last day of each month.
Section 5.02. If the fees payable to the Investment Manager
pursuant to Section 5.01 begin to accrue before the end of any month or if
this Agreement terminates before the end of any month, the fees for the period
from that date to the end of that month or from the beginning of that month to
the date of termination, as the case may be, shall be prorated according to
the proportion that the period bears to the full month in which the
effectiveness or termination occurs. For purposes of calculating the monthly
fees, the value of the net assets of the Fund shall be computed in the manner
specified in the Prospectus for the computation of net asset value.
Section 5.03. Any fees payable by the Company pursuant to
Section 5.01 during the period commencing on the later of the Assignment Date
and the Issuance Date and ending on the date of the initial approval of this
Agreement by a majority of the outstanding voting securities of the Company
shall be paid into an interest-bearing escrow account with an unaffiliated
financial institution, as the Company and Investment Manager may establish, to
be released to the Investment Manager only upon such initial approval of this
Agreement, or, if such approval shall not occur prior to the earlier of (i)
the 150th day following the later of the Assignment Date and the Issuance Date
and (ii) July 15, 1998, to the Company.
ARTICLE 6
Expenses
Section 6.01. The Investment Manager shall pay the expenses
incurred by it in connection with the performance of its services hereunder
but shall not be responsible for any of the Company's expenses other than as
herein provided. The Investment Manager shall pay the fees and expenses of
its authorized agents including, without limitation, the fees and expenses of
the Investment Adviser payable under the Investment Advisory Agreement and no
obligation shall be incurred on the Company's behalf in any such respect.
Section 6.02. The Investment Manager agrees to pay all
salaries and fees of Directors and officers of the Company (in connection with
the performance of their duties as such) who are interested persons of the
Investment Manager.
Section 6.03. Subject to the foregoing, the Company shall
be responsible for all of its expenses, including: (i) expenses of
organizing the Company; (ii) fees of the Directors who are not interested
persons of the Investment Manager or the Investment Adviser; (iii) out-of-
pocket travel expenses for all Directors and officers in connection with
their attendance at, and other expenses incurred by the Company relating
to, meetings of the Directors or committees thereof; (iv) interest
expense; (v) taxes and governmental fees; (vi) brokerage commissions, and
other expenses incurred in acquiring or disposing of Investments; (vii)
expenses of preparing stock certificates; (viii) expenses in connection
with the issuance, offering, distribution, sale or underwriting of
securities issued by the Company (which will be charged to capital); (ix)
expenses of registering and qualifying Shares for sale with the Commission
and in various states and foreign jurisdictions; (x) auditing, accounting,
insurance and legal costs; (xi) custodian, dividend disbursing and
transfer agent expenses; (xii) expenses of obtaining and maintaining stock
exchange listings of the Shares; (xiii) expenses of shareholders' meetings
and preparing and distributing proxies and reports to shareholders; and
(xiv) costs of information obtained from sources other than the Investment
Manager or its affiliated persons relating to the valuation of securities.
ARTICLE 7
Services of the Investment Manager Not to Be Exclusive
The services of the Investment Manager to the Company hereunder
are not to be deemed exclusive and the Investment Manager shall be free to
render similar services to others and to retain for its own use and benefit
all fees or other moneys payable thereby and the Investment Manager shall not
be deemed to be affected with notice of or to be under any duty to disclose to
the Company any fact or thing that comes to the notice of the Investment
Manager or any employee or agent of the Investment Manager in the course of
the Investment Manager rendering similar services to others or in the course
of its business in any other capacity or in any manner whatsoever otherwise
than in the course of carrying out its duties hereunder. Nothing in this
Agreement shall limit or restrict the right of any directors, officers or
employees of the Investment Manager to engage in any other business or to
devote time and attention in part to the management or other aspects of any
other business, whether of a similar or dissimilar nature. The Investment
Manager agrees that in the event that purchases or sales of Investments by the
Company shall coincide with purchases or sales of the same securities by other
clients of the Investment Manager, the Investment Manager will make such
allocation in a manner believed by the Investment Manager on recommendations of
the Investment Adviser to be equitable to each client.
ARTICLE 8
Investment Adviser
The Investment Manager is hereby authorized to obtain
investment advice from the Investment Adviser on the terms of the Investment
Advisory Agreement. In addition, the Investment Manager may contract or
consult with such banks, other securities firms or other parties in the United
Kingdom or elsewhere as it may deem appropriate regarding investment advice,
clerical assistance or otherwise.
ARTICLE 9
Liability of the Investment Manager
The Investment Manager may rely on information reasonably
believed by the Investment Manager to be accurate and reliable. Except as may
otherwise be provided by the 1940 Act, the Investment Manager shall not be
subject to any liability for any act or omission in the course of, connected
with or arising out of any services to be rendered hereunder, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of
the Investment Manager's obligations and duties or by reason of reckless
disregard of the Investment Manager's obligations and duties under this
Agreement.
ARTICLE 10
Legal Action by the Investment Manager
The Investment Manager shall not be required to take any legal
action unless fully indemnified to the Investment Manager's reasonable
satisfaction for all costs and liabilities that may be incurred or suffered by
the Investment Manager and not attributable to its willful misfeasance, bad
faith or gross negligence in the performance of its obligations and duties
under this Agreement or to its reckless disregard of its obligations and
duties under this Agreement, and if the Company requires the Investment
Manager to take any action of whatever nature that in the reasonable opinion
of the Investment Manager might make the Investment Manager liable for the
payment of money or liable in any other way, the Investment Manager shall be
and be kept indemnified in any reasonable amount and form satisfactory to the
Investment Manager as a prerequisite to taking such action.
ARTICLE 11
Assignment
This Agreement shall terminate automatically in the event of
its assignment.
ARTICLE 12
Resignation, Termination and Term
Section 12.01. This Agreement shall remain in effect for a
period of two years from its effective date. If not sooner terminated, this
Agreement will continue in effect for successive periods of 12 months
thereafter, provided that each continuance is specifically approved annually
by (i) the vote of a majority of the Directors who are neither parties to this
Agreement nor are interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval and (ii) either (a)
the vote of a majority of the outstanding voting securities of the Company or
(b) the vote of a majority of the Directors. This Agreement may be terminated
at any time on 60 days' written notice by the Company, without the payment of
any penalty, by a vote of a majority of the Directors or a majority of the
outstanding voting securities of the Company. The Investment Manager may
terminate this Agreement on 90 days' written notice to the Company.
Section 12.02. The appointment of the Investment Manager
shall automatically terminate forthwith if the Investment Manager shall become
or be deemed to become resident for tax purposes or carry on business within
the United Kingdom in circumstances that cause the Company to become liable to
pay any United Kingdom taxes that it would not otherwise be liable to pay.
Section 12.03. On termination of the appointment of the
Investment Manager under the provisions of this Article 12, the Investment
Manager shall take all necessary steps to vest in the Company or in any new
investment manager any assets previously held in the name of or to the order
of the Investment Manager on behalf of the Company and shall not be entitled
to any lien in respect of any of the foregoing. In the event that on the
date of such termination a new investment manager has not been selected by the
Company and approved by any necessary authorities, the Investment Manager will
act hereunder solely to maintain the Company's assets and will take only such
action with respect to such assets as the Investment Manager is directed to
take by the Directors.
ARTICLE 13
Confidentiality
Neither of the parties hereto shall (except under compulsion of
any applicable law or regulation made thereunder or as required by the
regulatory authorities of any jurisdiction in which transactions on behalf of
the Company are effected or regulated) either before or after the termination
of this Agreement disclose to any person not authorized by the relevant party
to receive the same any confidential information relating to such party or to
the affairs of such party of which the party disclosing the same shall have
become possessed during the period of this Agreement and each party shall use
all reasonable efforts to prevent any such disclosure as aforesaid.
ARTICLE 14
Miscellaneous Provisions
Section 14.01. No failure on the part of either party to
exercise, and no delay on its part in exercising, any right or remedy under
this Agreement will operate as a waiver thereof nor will any single or partial
exercise of any right or remedy preclude any other or further exercise thereof
or the exercise of any other right or remedy. The rights and remedies
provided in this Agreement are cumulative and not exclusive of any rights or
remedies provided by law.
Section 14.02. This Agreement may be amended by mutual
agreement, but only after authorization of such amendment by the affirmative
vote of (i) the holders of a majority of the outstanding voting securities of
the Company, and (ii) a majority of the Directors who are not interested
persons of the Company or of the Investment Manager or the Investment Adviser
or of any other entity regularly furnishing investment advisory services with
respect to the Company pursuant to an agreement with the Investment Manager,
cast in person at a meeting called for the purpose of voting on such approval.
Section 14.03. The illegality, invalidity or unenforceability
of any provision of this Agreement under the law of any jurisdiction shall not
affect its legality, validity or enforceability under the law of any other
jurisdiction nor the legality, validity or enforceability of any other
provision.
Section 14.04. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
Section 14.05. This Agreement will become effective on the
later of the Assignment Date and the Issuance Date.
ARTICLE 15
Notices
Any notice given hereunder shall be in writing and shall be
served by hand, by telex or facsimile transmission or by first class mail,
postage prepaid, to the principal office for the time being of the addressee.
Any such notice shall be deemed duly served at the time of delivery (if
delivered by hand), at the time of receipt of confirmed answerback (if served
by telex) or acknowledgment of receipt (if served by facsimile transmission),
or seven days after such notice is deposited in the mails.
ARTICLE 16
Law of the Contract
Section 16.01. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York; provided,
however, that nothing herein shall be construed as being inconsistent with the
1940 Act.
Section 16.02. The Investment Manager irrevocably submits to
the jurisdiction of any New York State or Federal court sitting in the City of
New York over any suit, action or proceeding arising out of or relating to
this Agreement. The Investment Manager irrevocably waives, to the fullest
extent permitted by law, any objection that it may have or hereafter have to
the laying of the venue of any such suit, action or proceeding brought in such
a court and any claim that any such suit, action or proceeding brought in such
a court has been brought in an inconvenient forum. The Investment Manager
agrees that final judgment in any such suit, action or proceeding brought in
such a court shall be enforced in any court to the jurisdiction of which the
Investment Manager is subject by a suit upon such judgment. The Investment
Manager hereby consents to process being served in any such suit, action or
proceeding by (i) mailing a copy thereof by registered or certified mail,
postage prepaid, return receipt requested, to its address set forth above or
(ii) by serving a copy thereof in any other manner permitted by law.
IN WITNESS WHEREOF this Agreement has been entered into the day
and year first above written.
THE UNITED KINGDOM FUND INC.
By:
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Name:
Title:
MERCURY ASSET MANAGEMENT
INTERNATIONAL CHANNEL
ISLANDS LTD.
By:
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Name:
Title:
By:
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Name:
Title:
