1
Ex-99.5(a)
MANAGEMENT AGREEMENT
AGREEMENT made this 18th day of August, 1992, by and between XXXXXXX
XXXXX FUNDAMENTAL GROWTH FUND, INC., a Maryland corporation (hereinafter
referred to as the "Fund"), and XXXXXXX XXXXX ASSET MANAGEMENT, a Delaware
corporation (hereinafter referred to as the "Manager").
W I T N E S S E T H:
WHEREAS, the Fund 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 Manager 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 Fund desires to retain the Manager to render management
and investment advisory services to the Fund in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Fund on the terms and conditions hereinafter set
forth;
2
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the Fund and the Manager hereby agree as follows:
ARTICLE I
Duties of the Manager
The Fund hereby employs the Manager to act as an investment manager and
investment adviser of the Fund 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
Directors of the Fund (the "Directors"), for the period and on the terms and
conditions set forth in this Agreement. The Manager 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 Manager 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 Fund in any way or otherwise be
deemed an agent of the Fund.
(a) Management Services. The Manager shall perform (or arrange for
the performance by affiliates of) the management and administrative services
necessary for the operation of the Fund including administering shareholder
accounts and handling shareholder relations. The Manager shall provide the
Fund with
3
office space, equipment and facilities and such other services as the
Manager, subject to review by the Directors, shall from time to time determine
to be necessary or useful to perform its obligations under this Agreement. The
Manager shall also, on behalf of the Fund, conduct relations with custodians,
depositories, transfer agents, dividend disbursing agents, other shareholder
service 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 Manager shall generally
monitor the Fund's compliance with investment policies and restrictions as set
forth in the currently effective prospectus and statement of additional
information relating to the shares of the Fund under the Securities Act of
1933, as amended (the "Prospectus" and "Statement of Additional Information",
respectively). The Manager shall make reports to the Directors of its
performance of obligations hereunder and furnish advice and recommendations
with respect to such other aspects of the business and affairs of the Fund as
it shall determine to be desirable.
(b) Investment Advisory Services. The Manager shall provide (or
arrange for affiliates to provide) the Fund 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 Fund, shall furnish
continuously an investment program for the Fund and shall determine from time
to
4
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 set forth in the Articles of Incorporation and 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 objectives,
investment policies and investment restrictions as the same are set forth in
the Prospectus and Statement of Additional Information. The Manager shall also
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 Directors at any time,
however, make any definite determination as to investment policy and notify the
Manager thereof in writing, the Manager 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 Manager 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 dealers selected by it, and to that end, the Manager is authorized
as the agent of the Fund to give instructions to the Custodian of the Fund as
to deliveries
5
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 Manager is directed at all times to
seek to obtain execution and price within the policy guidelines determined by
the Directors as set forth in the Prospectus and Statement of Additional
Information. 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 Manager may select brokers or dealers
with which it or the Fund is affiliated.
ARTICLE II
Allocation of Charges and Expenses
(a) The Manager. The Manager 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 Fund and all Directors who are
affiliated persons of the Manager.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund (except for the expenses paid by the Distributor),
including, without limitation: redemption expenses, expenses of portfolio
transactions, expenses of registering shares under federal and state
securities laws,
6
pricing costs (including the daily calculation of net asset value), expenses
of printing shareholder reports, stock certificates, 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 Directors who are not affiliated persons of the
Manager, 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 Fund. It is also understood that the Fund
will reimburse the Manager for its costs in providing accounting services to
the Fund. The Distributor will pay certain of the expenses of the Fund
incurred in connection with the continuous offering of Fund shares.
ARTICLE III
Compensation of the Manager
(a) Investment Management Fee. For the services rendered, the
facilities furnished and expenses assumed by the Manager, the Fund shall pay to
the Manager at the end of each calendar month a fee based upon the average
daily value of the net assets of the Fund, as determined and computed in
accordance with the description of the determination of net asset value
contained in the Prospectus and Statement of Additional Information, at the
annual rate of 0.65% of the average daily net assets of the Fund, commencing on
the day following effectiveness hereof. If this
7
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 Manager'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 Directors, the net asset
value of a share as of 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.
(b) Expense Limitations. In the event the operating expenses of the
Fund, including amounts payable to the Manager 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 Manager shall reduce its
management 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, brokerage
8
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 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 management fee due to the Manager. 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 Manager's
fee shall be applicable.
ARTICLE IV
Limitation of Liability of the Manager
The Manager 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 "Manager" shall include any affiliates of the Manager performing
services for the Fund contemplated hereby and directors, officers and
employees of the Manager and such affiliates.
9
ARTICLE V
Activities of the Manager
The services of the Manager to the Fund are not to be deemed to be
exclusive, and the Manager and any person controlled by or under common control
with the Manager (for purposes of Article V referred to as "affiliates") is
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
Manager and its affiliates, as directors, officers, employees and shareholders
or otherwise and that directors, officers, employees and shareholders of the
Manager and its affiliates are or may become similarly interested in the Fund,
and that the Manager and directors, officers, employees, partners and
shareholders of its affiliates may become interested in the Fund as shareholder
or otherwise.
ARTICLE VI
Duration and Termination of this Contract
This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force until July 31,
1994 and thereafter, but only so long as such continuance is specifically
approved at least annually by (i) the Directors, or by the vote of 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
10
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 Directors or by vote of a majority of the outstanding
voting securities of the Fund, or by the Manager, 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 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
the Investment Company Act.
11
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.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
XXXXXXX XXXXX FUNDAMENTAL GROWTH FUND, INC.
By /s/ XXXXXX XXXXXX
---------------------------------
XXXXXXX XXXXX ASSET MANAGEMENT, INC.
By /s/ XXXXX X. XXXXX
---------------------------------
