EXHIBIT 99.5
MASTER INVESTMENT ADVISORY AGREEMENT
This Master Investment Advisory Agreement is made this ___ day of
_______________, 1996 by and between the Crabbe Huson Funds, a Delaware business
trust (the "Trust"), and The Crabbe Huson Group, Inc., an Oregon corporation
(the "Adviser").
RECITALS
1. The Trust is organized to operate as an open-end management
investment company and during the term of this Agreement will be so registered
under the Investment Company Act of 1940 (the "1940 Act").
2. The Adviser is engaged in the business of rendering investment
management services under the Investment Advisers Act of 1940.
3. The Trust will operate as a "series company" as contemplated by
Rule 18f-2 under the 1940 Act and is authorized to issue shares of beneficial
interest ("Shares") in separate series and sub-series with each such series and
sub-series representing an interest in a separate portfolio of securities and
other assets during the term of this Agreement.
4. The Trust intends initially to offer Shares in one Series: The
Crabbe Huson Small Cap Fund. Shortly thereafter, The Crabbe Huson Special Fund,
Inc., The Crabbe Huson Real Estate Investment Fund, Inc., The Crabbe Huson
Equity Fund, Inc., The Crabbe Huson Asset Allocation Fund, Inc., The Oregon
Municipal Bond Fund, Inc., The Crabbe Huson Income Fund, Inc., The Crabbe Huson
U.S. Government Income Fund, Inc., and The Crabbe Huson U.S. Government Money
Market Fund, Inc. (the "Existing Funds"), intend to transfer substantially all
their assets into the Trust, and the Trust will issue shares in the following
eight additional series to the shareholders of the Existing Funds, (1) The
Crabbe Huson Special Fund; (2) The Crabbe Huson Real Estate Investment Fund; (3)
The Crabbe Huson Equity Fund; (4) The Crabbe Huson Asset Allocation Fund; (5)
The Crabbe Huson Income Fund; (6) The Crabbe Huson Municipal Bond Fund; (7) The
Crabbe Huson U.S. Government Income Fund; and (8) The U.S. Government Money
Market Fund together with The Crabbe Huson Small Cap Fund Series (the "Initial
Series"). The Initial Series, together with all other Series subsequently
established by the Trust with respect to which the Trust desires to retain the
Adviser to render investment advisory services hereunder and with respect to
which the Adviser is willing to provide such services, shall hereinafter be
referred to collectively as the "Series."
1 - INVESTMENT ADVISORY AGREEMENT
AGREEMENT
In consideration of the mutual covenants contained in this Agreement,
it is hereby agreed as follows:
1. DUTIES OF THE MANAGER.
1.1 GENERAL DUTIES OF ADVISER. The Trust hereby retains the
Adviser to act as its manager and investment adviser and to furnish the Trust
with the management and investment advisory services described below, subject to
the policies of, review by and overall control of the Board of Trustees of the
Trust, for the period and on the terms and conditions set forth in this
Agreement. The Adviser hereby accepts such employment and agrees during such
period, at its own expense, to render such services, and to arrange for the
rendering of such services, and to assume the obligations herein set forth for
the compensation provided for herein.
1.2 MANAGEMENT AND ADMINISTRATIVE SERVICES. The Adviser shall
perform, or supervise the performance of, the management and administrative
services necessary for the operation of each Series to the extent requested by
the Trustees and to the extent such services are not already performed by State
Street Bank and Trust Company ("State Street") pursuant to the Administration
Agreement, dated _______________, between State Street and the Trust.
1.3 INVESTMENT ADVISORY SERVICES. The Adviser shall provide
each Series with, or supervise the provision of, such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of each Series. The Adviser shall act
as investment adviser to each Series and as such shall furnish continuously an
investment program for each Series and shall make determinations, or supervise
the making of determinations, as to which securities shall be purchased, sold or
exchanged and what portion of the assets of each Series shall be held in the
various securities in which each Series invests or in cash, subject always to
the restrictions of the Declaration of Trust and By-Laws of the Trust, as
amended from time to time, the provisions of the 1940 Act and the statements
relating to each Series' investment objective, investment policies and
investment restrictions as the same are set forth in the Prospectus and
Statement of Additional Information. The Adviser shall make determinations, or
supervise the making of determinations, as to the manner in which voting rights,
rights to consent to corporate action and any other rights pertaining to each
Series' portfolio securities shall be exercised. Should the Board of Trustees,
however, make any definite determination as to investment policy and notify the
Adviser thereof in writing, the Adviser shall be bound by such determination for
the period, if any, specified in
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such notice or until similarly notified that such determination has been
revoked. The Adviser shall take, on behalf of each Series, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place, or supervise the placing of, all orders for
the purchase or sale of portfolio securities for each Series' account with
brokers or dealers selected by it, and to that end, the Adviser is authorized as
the agent of the Trust to give instructions to the custodian of the Trust as to
deliveries of securities and payments of cash for the account of each Series.
In connection with the selection of such brokers or dealers and the placing of
such orders, the Adviser is directed at all times to seek to obtain executions
and price within the policy guidelines determined by the Board of Trustees of
the Trust and set forth in the Prospectus and Statement of Additional
Information. Subject to this requirement and the provisions of the 1940 Act,
the Securities Exchange Act of 1934, as amended, and other applicable provisions
of law, the Adviser or subadviser, if any, may select brokers or dealers with
which it, the subadviser or the Trust, is affiliated.
1.4 ADDITION OF A SERIES. In the event that the Trust
establishes one or more Series of Shares other than the Initial Series with
respect to which it desires to retain the Adviser to render management and
investment advisory services hereunder, it shall so notify the Adviser in
writing, indicating the advisory fee which will be payable with respect to the
additional Series of Shares and indicating any further information it may need
to approve the retention of the Adviser. If the Adviser is willing to render
such services, it shall so notify the Trust in writing and supply any requested
information. If the information is satisfactory, the Board of Trustees shall,
at a duly called meeting, retain the Adviser and such series shall become a
Series under this Agreement.
2. ALLOCATION OF CHARGES AND EXPENSES.
2.1 PROVISION OF FACILITIES AND PERSONNEL BY ADVISER. Adviser
agrees to furnish such investment advice described in paragraph 1, above, and to
furnish, for the use of the Trust, office space and all necessary office
facilities, equipment and personnel for servicing the investments of each
Series, maintaining its organization and assisting in providing shareholder
communications and information services and to permit any of its officers and
employees to serve, without compensation, as trustees, or officers of the Trust
if elected to such positions. Adviser shall pay the salaries and fees, if any,
of all officers of the Trust and of all trustees of the Trust who are
"interested persons" as defined in the 1940 Act of the Trust or of the Adviser
and of all personnel of the Trust or Adviser performing services relating to
research, statistical and investment activities.
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2.2 RESPONSIBILITY FOR EXPENSES. The Trust shall pay all its
expenses other than those expressly stated to be payable by Adviser herein or
the Trust's Distributor pursuant to the Distribution Agreement (as defined in
the Fund's current Prospectus). The expenses payable by the Trust shall
include, without limitation, (a) interest and taxes; (b) fees payable hereunder;
(c) brokerage commissions and other costs in connection with the purchase or
sale of securities; (d) fees and expenses of its Trustees other than those who
are "interested persons" of the Trust or the Adviser; (e) legal and audit
expenses; (f) transfer agent expenses and expenses for servicing shareholder
accounts; (g) expenses of computing the net asset value of the Shares of the
Trust and the amount of dividends payable thereon; (h) custodian fees and
expenses; (i) fees and expenses related to the registration and qualification of
the Trust and its Shares for distribution under state and federal securities
laws; (j) expenses of printing and mailing reports, notices and proxy materials
to shareholders of the Trust; (k) the cost of share certificates, if any; (l)
reports, membership and dues in the Investment Company Institute or any similar
organization; (m) expenses of preparing and type setting prospectuses; (n)
expenses of printing and mailing prospectuses sent to existing shareholders; (o)
such nonrecurring expenses as may arise, including expenses incurred in actions,
suits or proceedings to which the Trust is a party and the legal obligation
which the Trust may have to indemnify its officers and Trustees in respect
thereto; (p) costs of State Street; and (q) such other expenses as the Trustees
may, from time to time, determine to be properly payable by the Trust.
2.3 EXPENSES IN EXCESS OF LIMITATIONS. If the operating
expenses of a Series, including amounts payable to the Adviser pursuant to
Section 5 of this Agreement, for any fiscal year ending on a date on which this
Agreement is in effect exceed the expense limitations applicable to the Series
imposed by any state securities laws, or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Adviser shall reduce
its management fee to the extent of such excess and, if required by any such
laws or regulations, will reimburse the Trust for annual operating expenses in
excess of any expense limitation that may be applicable; provided, however,
there shall be excluded from such expenses the amount of any interest, taxes,
brokerage 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 Trust. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis and shall be
based upon the expense limitation applicable to the Series as of the end of the
last business day of the month. Should two or more such expense limitations be
applicable as of the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Adviser's fee shall be
applicable.
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Such reimbursement, if any, shall be made by the Adviser within 30 days of the
date upon which audited financial statements in the fiscal year as to which such
reimbursement is due are first available to the Trust.
2.4 COMPUTATION OF EXPENSE LIMITATION. For purposes of this
provision, should any applicable expense limitation be based upon the gross
income of a Series, such gross income shall include, but not be limited to,
interest on debt securities in the Series' portfolio accrued to and including
the last day of the Series' fiscal year, the record dates for which fall on or
prior to the last day of such fiscal year, but shall not include gains from the
sales of securities.
3. CONTROL OF INVESTMENT POLICIES. The investment policies and all
other actions of each Series are, and shall at all times be, subject to the
control and direction of the Board of Trustees of the Trust.
4. PLACEMENT OF ORDERS. With respect to services performed in
connection with the purchase and sale of portfolio securities on behalf of each
Series, the Adviser may place transaction orders for each Series with brokers or
dealers selected by the Adviser. In connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser 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 a Series to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser has determined 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 or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibility with respect to the Series and to other accounts of the Adviser
as to which the Adviser exercises investment discretion.
5. COMPENSATION. The Trust shall pay the Adviser as full
compensation for all services rendered to a Series a management fee for that
Series determined in accordance with Schedule A attached hereto, which schedule
shall be amended any time a Series is added to the Initial Series.
6. RELATIONSHIP OF PARTIES. In acting under this Agreement, the
Adviser shall be an independent contractor and shall not be an agent of the
Trust. The services of the Adviser under this Agreement are not to be deemed
exclusive, and the Adviser shall be free to render similar services or other
services to others, including other investment companies, so long as its
5 - INVESTMENT ADVISORY AGREEMENT
services under this Agreement are not impaired by the delivery of such services.
7. LIABILITY OF ADVISER.
7.1 LIMITATION OF LIABILITY. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement.
The 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
execution and management of the Fund, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 0000 Xxx) or loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties, or from reckless disregard by it of its obligations and duties
hereunder. The Adviser shall not be liable for any losses caused by
disturbances of its operations by virtue of force majeure, war, riot, or damage
caused by nature or due to other events for which the Adviser is not responsible
(E.G., strike, lock-out or losses caused by the imposition of foreign exchange
controls, expropriation of assets or other acts of domestic or foreign
authorities). As used in this Section 7.1, the term Adviser shall include any
affiliates of the Adviser performing services for the Trust contemplated hereby
and directors, officers, partners and employees of the Adviser and of such
affiliate.
7.2 INDEMNIFICATION. The Trust shall indemnify the Adviser, its
officers, directors, shareholders and employees (each, "Indemnitees") and hold
Indemnitees harmless from and against all damages, liabilities, costs and
expenses (including reasonable attorneys' fees and amounts reasonably paid in
settlement) incurred by the Indemnitees or by reason of any pending, threatened
or completed action, suit, investigation or other proceeding (including an
action or suit by or in the right of the Trust or its security holders) arising
out of or otherwise based upon any action actually or allegedly taken or omitted
to be taken by the Indemnitees in connection with the performance of any of its
duties or obligations under this Agreement; provided, however, that nothing
contained herein shall protect or be deemed to protect the Indemnitees against
or entitle or be deemed to entitle the Indemnitees to indemnification in respect
of any liability to the Trust or its security holders to which the Indemnitees
would otherwise be subject by reason of a breach of fiduciary duty with respect
to the receipt of compensation for services or of willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under this Agreement
(hereinafter "Disabling Conduct"). The determination whether the actions of an
Indemnitee constituted Disabling Conduct shall be established (a) by a final
6 - INVESTMENT ADVISORY AGREEMENT
decision on the merits by a court or other body before whom the proceeding was
brought that the Indemnitee did not engage in Disabling Conduct or (b) in the
event of a settlement or other disposition not involving a final decision on the
merits and resulting in a payment by an Indemnitee (unless there has been a
determination that such Indemnitee did not engage in Disabling Conduct by the
court or other body approving the settlement or other disposition) a reasonable
determination, based on a review of readily available facts that Indemnitee did
not engage in Disabling Conduct, such determination being made by: (i) a vote
of a majority of the Disinterested Trustees acting on the matter (provided that
a majority of Disinterested Trustees act on the matter) or (ii) written opinion
of independent legal counsel. Expenses of preparation and presentation of a
defense to any claim, suit or proceeding subject to a claim for indemnification
under this Section shall be advanced by the Trust prior to final disposition
thereof upon receipt of an undertaking by or on behalf of the recipient to repay
such amount if it is ultimately determined that he is not entitled to
indemnification under this Section, provided that either: (a) such undertaking
is secured by a surety bond or some other appropriate security or the Trust
shall be insured against such losses arising out of any such advances; or (b) a
majority of the Disinterested Trustees acting on the matter (provided that a
majority of Disinterested Trustees act on the matter) or independent legal
counsel in a written opinion shall determine, based upon a review of the readily
available facts that there is reason to believe that the recipient ultimately
will be found entitled to indemnification. For purposes of this Section, a
Disinterested Trustee is one (i) who is not an Interested Person of the Trust as
such term is defined in the 1940 Act and (ii) against whom none of such actions,
suits or other proceedings or another action, suit or proceeding on the same or
similar ground is then or has been pending.
8. LICENSE TO USE THE CRABBE HUSON NAMES. The Trust is named the
Crabbe Huson Funds and each Series may be identified, in part, by the name
"Crabbe Huson." The Trust acknowledges that prior to the date hereof, the name
"Crabbe Huson" has been used by each of the Trust's predecessors, and, along
with the name "The Crabbe Huson Family of Mutual Funds" and certain other names
which include the words "Crabbe Huson" (the "Crabbe Huson Names"), were used and
will be used with the permission of the Adviser or its predecessors-in-
interests. The Adviser hereby grants to the Trust a nonexclusive right and
license to use the Crabbe Huson Names and the words "Crabbe Huson" as part of
the name of the Trust and each Series of the Trust only for so long as this
Agreement or any extension, renewal or amendment hereof remains in effect,
including any similar agreement with any organization which shall have succeeded
to the Adviser's business as Adviser or any extension, renewal or amendment
thereof remain in effect. The Trust agrees that it shall acquire no interest in
the name "Crabbe Huson," that
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all uses thereof by the Trust shall inure to the benefit of the Adviser and that
it shall not challenge the validity or Adviser's ownership thereof.
9. ACKNOWLEDGEMENT OF INTERESTED STATUS. Subject to all applicable
statutes and regulations, it is understood that directors, officers or agents of
the Trust are or may be interested in the Adviser as officers, directors,
agents, shareholders or otherwise and that the officers, directors, shareholders
and agents of the Adviser may be interested in the Trust as officers, directors,
agents, shareholders or otherwise.
10. TERMINATION. This Agreement shall become effective on the date
hereof and shall remain in full force and effect until the annual anniversary of
the date of this Agreement, unless sooner terminated as provided below. This
Agreement shall continue in force from year to year thereafter, but only as long
as such continuance is specifically approved at least annually in the manner
required by the 1940 Act. This Agreement shall automatically terminate in the
event of its assignment, and may be terminated at any time without payment of
any penalty by the Trust or by the Adviser on 60 days written notice to the
other party. This Agreement may be terminated at any time without notice by the
Trust if it is established by a court of competent jurisdiction that the Adviser
or any officer or director of the Adviser has taken action which results in a
breach of the covenants of the Adviser set forth in this Agreement. Termination
of this Agreement shall not affect the right of the Adviser to receive payments
on any unpaid balance of the compensation described in Section 5 earned prior to
such termination.
11. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not thereby be affected.
12. NOTICES. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
IN WITNESS WHEREOF, the Fund and Adviser have caused this Agreement to
be executed as of the date first written above.
CRABBE HUSON FUNDS THE CRABBE HUSON GROUP, INC.
----------------------------------- ----------------------------------------
By: Xxxxxxx X. Xxxxx By: Xxxxx X. Xxxxxx
Its: President Its: President
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SCHEDULE A
Each Series shall pay the Adviser as compensation for its services, a
fee determined and accrued daily and paid bi-monthly, based on a stated
percentage of the average daily net assets of such Series per annum as set forth
below
CRABBE HUSON SPECIAL FUND
CRABBE HUSON SMALL CAP FUND
CRABBE HUSON REAL ESTATE FUND
CRABBE HUSON EQUITY FUND SERIES
CRABBE HUSON ASSET ALLOCATION FUND SERIES
Net Asset Value Annual Rate
--------------- -----------
First $100 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Next $400 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.85%
Amounts over $500 Million . . . . . . . . . . . . . . . . . . . . . . . . 0.60%
CRABBE HUSON INCOME FUND
Net Asset Value Annual Rate
--------------- ------------
First $100 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Next $400 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60%
Amounts over $500 Million . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
OREGON MUNICIPAL BOND FUND
CRABBE HUSON U.S. GOVERNMENT INCOME FUND
CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND
Net Asset Value Annual Rate
--------------- -----------
First $100 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Next $400 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45%
Amounts over $500 Million . . . . . . . . . . . . . . . . . . . . . . . . 0.40%
