FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 1st day of
September, 1997 by and between FLAG INVESTORS SHORT-INTERMEDIATE INCOME FUND,
INC. (formerly, Flag Investors Intermediate-Term Income Fund, Inc.), a Maryland
corporation (the "Fund") and INVESTMENT COMPANY CAPITAL CORP., a Maryland
corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund and the Advisor desire to enter into an agreement to
provide investment advisory and administrative services for the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the Fund's investment advisor. The Advisor shall manage the
Fund's affairs and shall supervise all aspects of the Fund's operations (except
as otherwise set forth herein), including the investment and reinvestment of the
cash, securities or other properties comprising the Fund's assets, subject at
all times to the policies and control of the Fund's Board of Directors. The
Advisor shall give the Fund the benefit of its best judgment, efforts and
facilities in rendering its service as Advisor.
2. Delivery of Documents. The Fund has furnished the Advisor with
copies properly certified or authenticated of each of the following:
a. The Fund's Articles of Incorporation, filed with the State
of Maryland on April 16, 1990 and all amendments thereto (such Articles of
Incorporation, as presently in effect and as they shall from time to time be
amended, are herein called the "Articles of Incorporation");
b. The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
c. Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Advisor and approving this
Agreement;
d. The Fund's Notification of Registration filed pursuant to
Section 8(a) of the Investment Company Act of 1940 on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission (the "SEC") on April
17, 1990;
e. The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-34275) and
under the 1940 Act as filed with the SEC on April 17, 1990 relating to the
shares of the Fund, and all amendments thereto; and
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f. The Fund's most recent prospectus (such prospectus, as
presently in effect, and all amendments and supplements thereto, are herein
called "Prospectus").
The Fund will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties of Investment Advisor. In carrying out its obligations under
Section 1 hereof, the Advisor shall:
a. supervise and manage all aspects of the Fund's operations,
except for distribution services;
b. formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Fund;
c. provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;
d. provide the Fund with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, utilities, stationery, supplies and similar items for the Fund's
principal office;
e. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Fund, and whether
concerning the individual issuers whose securities are included in the Fund's
portfolio or the activities in which they engage, or with respect to securities
which the Advisor considers desirable for inclusion in the Fund's portfolio;
f. determine which issuers and securities shall be represented
in the Fund's portfolio and regularly report thereon to the Fund's Board of
Directors;
g. take all actions necessary to carry into effect the Fund's
purchase and sale programs;
h. supervise the operations of the Fund's transfer and
dividend disbursing agent;
i. provide the Fund with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and
j. arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the Fund's shareholders and reports to and filings with the SEC and state Blue
Sky authorities.
4. Broker-Dealer Relationships. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Fund, broker-dealer
selection, and negotiation of its brokerage commission rates, the Advisor's
primary consideration in effecting securities transactions will be to obtain the
best price and execution on an overall basis. In performing this function the
Advisor shall comply with applicable policies established by the Board of
Directors and shall provide the Board of Directors with such reports as the
Board of Directors may require in order to monitor the Fund's portfolio
transaction activities. In certain instances the Advisor may make purchases of
underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the
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reliability, integrity and financial condition of the broker-dealer; the size of
and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Fund. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Fund to
such broker-dealers other than the distributor of the Fund's shares, Alex. Xxxxx
& Sons Incorporated ("Alex. Xxxxx"), who also provide research or statistical
material or other services to the Fund or the Advisor. Such allocation shall be
in such amounts and proportions as the Advisor shall determine and the Advisor
will report on said allocation regularly to the Board of Directors of the Fund,
indicating the broker-dealers to whom such allocations have been made and the
basis therefor.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Advisor may consider services in connection with the sale of shares of the Fund
as a factor in the selection of broker-dealers to execute portfolio transactions
for the Fund.
Subject to the policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct Alex. Xxxxx to execute
portfolio transactions for the Fund on an agency basis. The commissions paid to
Alex. Xxxxx must be, as required by Rule 17e-1 under the 1940 Act, "reasonable
and fair compared to the commission, fee or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." If the purchase or sale
of securities consistent with the investment policies of the Fund or one or more
other account of the Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Advisor. Alex. Xxxxx and the Advisor may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution.
The Fund will not deal with the Advisor or Alex. Xxxxx in any
transaction in which the Advisor or Alex. Xxxxx acts as a principal with respect
to any part of the Fund's order. If Alex. Xxxxx is participating in an
underwriting or selling group, the Fund may not buy portfolio securities from
the group except in accordance with policies established by the Board of
Directors in compliance with the rules of the SEC.
5. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Fund pursuant
thereto, shall at all times be subject to any applicable directives of the Board
of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
a. all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
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b. the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
c. the provisions of the Articles of Incorporation;
d. the provisions of the By-Laws; and
e. any other applicable provisions of state and federal law.
7. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and the Advisor as follows:
a. The Advisor shall, subject to compliance with applicable
banking regulations, furnish, at its expense and without cost to the Fund, the
services of one or more officers of the Fund, to the extent that such officers
may be required by the Fund, for the proper conduct of its affairs.
b. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to the
Advisor and the Fund's distributor under the Fund's plan of distribution; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions, chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to Federal, State or other governmental agencies; the costs and the expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with registration and maintenance of registration of
the Fund and its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the costs and
expenses of printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Directors or Director members of any
advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
Directors of the Fund who are not "interested persons" (as defined in the 0000
Xxx) of the Fund and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
8. Delegation of Responsibilities. The Advisor may, but shall not be
under any duty to, perform services on behalf of the Fund which are not required
by this Agreement upon the request of the Fund's Board of Directors. Such
services will be performed on behalf of the Fund and the Advisor's charge in
rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its obligations to
the Fund nor obligate the Advisor to pay or assume any similar Fund expense on
any subsequent occasions.
9. Compensation. For the services to be rendered and the expenses
assumed by the Advisor hereunder, the Fund shall pay to the Advisor monthly
compensation at an annual rate of .35% of the first $1 billion of the Fund's
average net assets, .30% of the Fund's average net assets in excess of $1
billion but not exceeding $1.5 billion and .25% of the Fund's average net assets
in excess of $1.5 billion.
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Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. 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 the part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Payment of the Advisor's compensation for the preceding month shall be
made as promptly as possible.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory or other services to others (including other investment companies) and
to engage in other activities, so long as its services under this Agreement are
not impaired thereby. It is understood and agreed that officers or directors of
the Advisor may serve as officers or Directors of the Fund, and that officers or
Directors of the Fund may serve as officers or directors of the Advisor to the
extent permitted by law; and that the officers and directors of the Advisor are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, trustees or
directors of any other firm, trust or corporation, including other investment
companies.
11. Term and Renewal. This Agreement shall become effective as of the
date hereof and shall continue in force and effect, subject to Section 12
hereof, for two years from the date hereof. Following the expiration of its
initial two-year term, this Agreement shall continue in force and effect from
year to year, provided that such continuance is specifically approved at least
annually:
a. (i) by the Fund's Board of Directors or (ii) by the vote of
a majority of the outstanding voting securities (as defined in the 1940 Act);
and
b. by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" (as defined in the
0000 Xxx) of a party to this Agreement (other than as Directors of the Fund) by
votes cast in person at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated without the payment
of any penalty, by the Fund upon vote of the Fund's Board of Directors or a vote
of a majority of the Fund's outstanding voting securities (as defined in the
0000 Xxx) or by the Advisor, upon sixty (60) days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
13. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under the Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
of the Advisor for this purpose shall be Xxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx
00000.
15. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise the provisions of this Agreement shall be
interpreted in accordance with the laws of Maryland.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective offices as of the day and year first
above written.
[SEAL] FLAG INVESTORS SHORT-INTERMEDIATE
INCOME FUND, INC.
Attest: /s/Xxx X. Xxxxxx By: /s/ Xxxxx Xxxxx
------------------------ ----------------------------
Name:
Title:
[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/ Xxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------ ----------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President
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