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EXHIBIT (g)(1)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___ day of October, 1995, by and between XXXXXXX
XXXXX MUNICIPAL STRATEGY FUND, INC., a Maryland corporation (the "Fund"), 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 Fund is engaged in business as a closed-end,
non-diversified, management investment company registered 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 Fund desires to retain the Investment Adviser to provide
management and investment advisory services to the Fund 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 Fund on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:
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ARTICLE I
Duties of the Investment Adviser
The Fund hereby employs the Investment Adviser to act as investment
adviser of the Fund and to furnish, or arrange for its affiliates to furnish,
the investment advisory services described below, subject to the policies of,
review by and overall control of the Board of Directors of the Fund, 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 for all
purposes herein shall be deemed to be independent contractors and, unless
otherwise expressly provided or authorized, shall have no authority to act for
or represent the Fund in any way or otherwise be deemed agents of the Fund.
(a) Administrative Services. The Investment Adviser shall perform,
or arrange for its affiliates to perform, the management and administrative
services necessary for the operation of the Fund, including administering
shareholder accounts and handling shareholder relations pursuant to an
Administration Agreement of even date herewith.
(b) Investment Advisory Services. The Investment Adviser shall
provide, or arrange for its affiliates to provide, the Fund with such
investment research, advice and supervision as the
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latter from time to time may consider necessary for the proper supervision of
the assets of the Fund, shall furnish continuously an investment program for
the Fund and shall determine from time to time which securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall
be held in the various securities in which the Fund invests, options, futures,
options on futures or cash, subject always to the restrictions of the Articles
of Incorporation and the By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions as
the same are set forth in filings made by the Fund under the Federal securities
laws. The Investment Adviser shall make decisions for the Fund as to the
manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's portfolio securities shall be exercised.
Should the Board of Directors 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 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 for the Fund's account with
brokers or
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dealers selected by it, and to that end, the Investment Adviser is authorized
as the agent of the Fund to give instructions to the custodian of the Fund as
to deliveries of securities and payments of cash for the account of the Fund.
In connection with the selection of such brokers or dealers and the placing of
such orders with respect to assets of the Fund, the Investment Adviser is
directed at all times to seek to obtain execution and prices within the policy
guidelines determined by the Board of Directors and set forth in filings made
by the Fund under the Federal securities laws. 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 Fund is affiliated.
(c) 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 Fund 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 shall provide the
staff and personnel necessary to perform its obligations under this Agreement,
shall assume and pay or cause
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to be paid all expenses incurred in connection with the maintenance of such
staff and personnel, and, at its own expense, shall provide the office space,
facilities, equipment and necessary personnel which it is obligated to provide
under Article I hereof, and shall pay all compensation of officers of the Fund
and all Directors of the Fund who are affiliated persons of the Investment
Adviser.
(b) The Fund. The Fund assumes, and shall pay or cause to be paid,
all other expenses of the Fund including, without limitation: taxes, expenses
for legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports and prospectuses, charges of the custodian, any
sub-custodian and transfer agent, charges of any auction agent and broker
dealers in connection with preferred stock of the Fund, expenses of portfolio
transactions, Securities and Exchange Commission fees, expenses of registering
the shares of common stock and preferred stock under Federal, state and foreign
laws, fees and actual out-of-pocket expenses of Directors who are not
affiliated persons of the Investment Adviser, accounting and pricing costs
(including the daily calculation of the net asset value), insurance, interest,
brokerage costs, litigation and other extraordinary or nonrecurring expenses,
and other expenses properly payable by the Fund. It also is understood that
the Fund will reimburse the Investment Adviser for its costs incurred in
providing accounting services to the Fund.
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ARTICLE III
Compensation of the Investment Adviser
(a) Investment Advisory Fee. For the services rendered, the
facilities furnished and the expenses assumed by the Investment Adviser, the
Fund shall pay to the Investment Adviser at the end of each calendar month a
fee based upon the average daily value of the net assets of the Fund at the
annual rate of 0.50 of 1.0% (0.50%) of the average daily net assets of the Fund
(i.e., the average daily value of the total assets of the Fund, minus the sum
of accrued liabilities of the Fund and accumulated dividends on shares of
outstanding preferred stock), commencing on the day following effectiveness
hereof. It is understood that the liquidation preference of any outstanding
preferred stock (other than accumulated dividends) is not considered a
liability in determining the Fund's average daily net assets. 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
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 by subsection (b) hereof. During any period when the
determination of net asset value is suspended by the Board of Directors, the
average net asset value of a share for the last
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day prior to such suspension for this purpose shall be deemed to be the net
asset value at the close of each succeeding day until it is again determined.
(b) Expense Limitations. In the event the operating expenses of the
Fund, 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 Fund
imposed by applicable state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Investment 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 the Fund 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,
distribution fees, brokerage fees and 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. Whenever
the expenses of the Fund 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
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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 Fund, 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 "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Fund contemplated hereby and
directors, officers and employees of the Investment Adviser and of such
affiliates.
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Fund 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 Directors, officers, employees and shareholders of the Fund are
or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees,
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partners and shareholders or otherwise, and that directors, officers,
employees, partners and shareholders of the Investment Adviser and of its
affiliates are or may become similarly interested in the Fund, and that the
Investment Adviser and directors, officers, employees, partners and
shareholders of its affiliates may become interested in the Fund 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 until September 30, 1997 and thereafter, but
only so long as such continuance specifically is approved at least annually by
(i) the Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) by the vote of 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 or by vote of a majority of the
outstanding voting securities of the Fund, or by the Investment Adviser, on
sixty days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment.
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ARTICLE VII
Amendment of this Agreement
This Agreement may be amended by the parties only if such amendment
specifically is approved by the vote of (i) a majority of the outstanding
voting securities of the Fund, 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.
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 governed by and 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
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of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
XXXXXXX XXXXX MUNICIPAL STRATEGY
FUND, INC.
By:
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Authorized Signatory
ATTEST:
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Secretary
FUND ASSET MANAGEMENT, L.P.
By:
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Authorized Signatory
ATTEST:
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Secretary
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