EXHIBIT 5
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (this "Agreement"), made this ____ day
of _________________, 1996, by and between THE COLORADO DOUBLE TAX-EXEMPT BOND
FUND, INC., a Maryland corporation (the "Fund"), and FUNDS MANAGEMENT
CORPORATION, a Colorado corporation (the "Manager").
W I T N E S S E T H:
1. Investment Advisory and Management Services. The Fund hereby engages the
Manager, and the Manager hereby agrees to act, as investment adviser for, and to
manage the affairs, business, and the investment of the assets of, the Fund.
The investment of the assets of the Fund shall at all times be subject to
the applicable provisions of the Articles of Incorporation, the Bylaws, the
Prospectus and Statement of Additional Information of the Fund, as from time to
time in effect, and shall conform to the investment objective and policies of
the Fund as set forth in the Prospectus and Statement of Additional Information
of the Fund and as interpreted from time to time by the Board of Directors of
the Fund. Within the framework of the investment objective and policies and
restrictions of the Fund, the Manager shall have the sole and exclusive
responsibility for the management of the Fund portfolio and the making and
execution of all investment decisions for the Fund. The Manager shall report to
the Board of Directors regularly at such times and in such detail as the Board
may from time to time determine to be appropriate, in order to permit the Board
to determine the adherence of the Manager to the investment policies of the
Fund.
The Manager shall obtain and provide investment research and supervise the
Fund's investments and conduct a continuous program of investment, evaluation,
and if appropriate, sale and reinvestment of the Fund's assets. The Manager
shall furnish to the Fund such statistical information, with respect to the
investments which the Fund may hold or contemplate purchasing, as the Fund may
reasonably request. The Fund wishes to be informed of important developments
materially affecting its portfolio and shall expect the Manager, on its own
initiative, to furnish to the Fund from time to time such information as it may
believe appropriate for this purpose.
In addition, the Manager shall supply office facilities, clerical staff,
and stationery and office supplies; prepare reports to the Fund's shareholders,
tax returns, reports to and filings with the Securities and Exchange Commission
and state blue sky authorities; and generally assist in all aspects of the
Fund's operations.
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The Manager hereby acknowledges that all records necessary in the operation
of the Fund, including records pertaining to its shareholders and investments,
are the property of the Fund, and in the event that a transfer of management or
investment advisory services to someone other than the Manager should ever
occur, the Manager will promptly, and at its own cost, take all steps necessary
to segregate such records and deliver them to the Fund.
The Manager shall exercise its best judgment in rendering the services to
be provided to the Fund hereunder and the Fund agrees as an inducement to its
undertaking the same that the Manager shall not be liable hereunder for any
error of judgment or mistake of law or for any loss suffered by the Fund,
provided that nothing herein shall be deemed to protect or purport to protect it
against any liability to the Fund or to its shareholders to which the Manager
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder, or by reason of its
reckless disregard of its obligations and duties hereunder.
2. Compensation for Services. In payment for the investment advisory
services to be rendered by the Manager hereunder, the Fund shall pay to the
Manager a monthly fee, which fee shall be paid to the Manager not later than the
fifth business day following the end of each month in which said services were
rendered. Said monthly fee shall be based on the average of the net asset values
of all of the issued and outstanding shares of the Fund as determined as of the
close of each business day of the month pursuant to the Articles of
Incorporation, Bylaws, Prospectus and Statement of Additional Information of the
Fund and shall be equal to an annual rate of .23 of 1% of the Fund's average
daily net assets. Net asset value shall be computed on such days and at such
time or time as described in the Fund's then-current Prospectus and Statement of
Additional Information. The fee for the period from the date of the commencement
of the initial public sale of the Fund's shares to the end of the month during
which such sale shall have been commenced shall be pro-rated according to the
proportion which such period bears to the full monthly period, and upon any
termination of this Agreement before the end of any month, the fee for such part
of a month shall be pro-rated according to the proportion which such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
For the purpose of determining fees payable to the Manager, the value of
the Fund's net assets shall be computed in the manner specified in the Fund's
Articles of Incorporation for the computation of the value of the Fund's net
assets.
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3. Allocation of Expenses.
(a) All costs and expenses (other than those specifically referred to
herein as being borne by the Manager or Xxxxx Xxxx Investments, Inc.,
underwriter of the Funds's shares (the "Underwriter")) incurred in the
operation of the Fund shall be borne by the Fund. These expenses include,
but are not limited to, all expenses incurred in the operation of the Fund
and any public offering of its shares, including, among others, interest,
taxes, brokerage fees and commissions, fees of the directors who are not
employees of the Manager or the Underwriter, or any of their affiliates,
expenses of directors' and shareholders' meetings, including the cost of
printing and mailing proxies, expenses of insurance premiums for fidelity
and other coverage, expenses of redemption of Fund shares, expenses of
issue and sale of Fund shares (to the extent not borne by the Underwriter
under its agreement with the Fund), expenses of printing and mailing stock
certificates representing shares of the Fund, association membership dues,
charges of custodian, transfer agent, dividend disbursing agent, accounting
services agent, investor servicing agent, and bookkeeping, auditing, and
legal expenses. The Fund will also pay the fees and bear the expense of
registering and maintaining the registration of the Fund and its shares
with the Securities and Exchange Commission and registering or qualifying
its shares under state or other securities laws and the expense of
preparing and mailing prospectuses and reports to shareholders.
(b) The Underwriter shall bear all advertising promotional expenses in
connection with the distribution of the Fund's shares, including paying for
prospectuses for new shareholders.
4. Limit on Expenses. In the event that the Fund's operating expenses
(including the investment advisory and management fee but excluding taxes,
interest, brokerage and extraordinary expenses, if any) exceed 1% of the Fund's
average daily net assets on an annual basis, the Manager shall reduce the amount
of the investment advisory and management fee or assume expenses of the Fund in
the amount of such excess, up to the amount of the investment advisory and
management fee payable by the Fund to the Manager. The Manager shall directly
incur and pay all expenses relating to the Fund, and the Fund in turn shall
reimburse the Manager to the extent of the lesser of (a) the actual expenses or
(b) the 1% expense limitation. This expense reimbursement shall be paid monthly
by the Fund to the Manager.
5. Freedom to Deal with Third Parties. The Manager shall be free to render
services to others similar to those rendered under this Agreement or of a
different nature except as such services may conflict with the services to be
rendered or the duties to be assumed hereunder.
6. Effective Date, Duration and Termination of Agreement. The effective
date of this Agreement shall be ______________, 1996. Wherever referred to in
this Agreement, the vote or approval of the holders of a majority of the
outstanding voting securities of the Fund shall mean (a) the vote of 67% or more
of such securities if the holders of more than 50% of such securities are
present in person or by proxy or (b) the vote of more than 50% of such
securities, whichever is the lesser.
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Unless sooner terminated and hereinafter provided, this Agreement shall
continue in effect until _______________ and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by
the Board of Directors of the Fund or by the vote of the holders of a majority
of the outstanding voting securities of the Fund; provided that in either event
the continuance also is approved by a majority of the Board of Directors who are
not "interested persons" of the Manager, the Underwriter, or the Fund, as
defined by the provisions of the Investment Company Act of 1940, as amended (the
"1940 Act"), 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 vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
the Manager, upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its assignment
as such term is defined by the 1940 Act, as amended.
7. Amendments to Agreement. No material amendment to this Agreement shall
be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Fund.
8. Notices. Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.
9. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Colorado.
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IN WITNESS WHEREOF, the Fund and the Manager have caused this Agreement to
be executed by their duly authorized officers and their respective corporate
seals affixed hereto all as of the day and year first above written.
THE COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
By
Xxxxxx X. Xxxxx, President
FUNDS MANAGEMENT CORPORATION
By
Xxxxxx X. Xxxxx, President
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