EXHIBIT (5)
INVESTMENT ADVISORY AGREEMENT
BETWEEN
THE CRM FUNDS
AND
XXXXXX XXXXXXXXX XXXXXXX, LLC
THIS AGREEMENT is made as of the 1st day of January, 1998, by and between THE
CRM FUNDS, a Delaware business trust which may issue one or more series and
classes of shares of beneficial interest (the "Trust"), on behalf of each of the
funds listed in Exhibit A (individually a "Fund" and collectively the "Funds"),
and Xxxxxx Xxxxxxxxx XxXxxxx, LLC, a New York limited liability company (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended; and WHEREAS, the Trust wishes to retain the Adviser
to act as investment adviser with respect to shares of
the Funds, and the Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt whereof
is hereby acknowledged, it is agreed between the parties hereto as follows:
SECTION 1. APPOINTMENT. The Trust hereby appoints the Adviser,
and the Adviser hereby undertakes, to act as investment adviser of the Funds
and, subject to the supervision of the Trust's Board of Trustees, to direct the
investments of the Funds in accordance with the investment objectives, policies,
and limitations provided in each Fund's Prospectus (as defined herein) or other
governing instruments, as amended from time to time, under the 1940 Act and
rules thereunder, and such other limitations as the Fund may impose by notice in
writing to the Adviser.
SECTION 2. DELIVERY OF DOCUMENTS. The Trust has furnished the
Adviser with copies properly certified or authenticated of each of the
following:
(a) Resolutions of the Trust's Board of Trustees authorizing
the appointment of the Adviser to provide certain advisory services to the Funds
and approving this Agreement;
(b) The Trust's Trust Instrument and all amendments thereto;
(c) The Trust's By-Laws and all amendments thereto;
(d) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") and under the 1940 Act (File
Nos.
33-91498 and 811-9034), as filed with the Securities and Exchange Commission
(the "Commission") relating to the Trust's shares of beneficial interest, .001
par value ("Shares"), and all amendments thereto;
(e) Notification of Registration of the Trust under the 1940
Act on Form N-8A as filed with the Commission; and
(f) Each Fund's most recent prospectus and statement of
additional information and all amendments and supplements thereto (the
"Prospectuses").
The Trust will furnish the Adviser from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to the foregoing, if any.
SECTION 3. INVESTMENT ADVISORY SERVICES. On behalf of each Fund, the
Adviser is authorized, in its discretion and without prior consultation with the
Trust, to buy, sell, lend and otherwise trade, consistent with the Fund's then
current investment objective, policies and restrictions, any stocks, bonds and
other securities and investment instruments subject to the control and direction
of the Trust's Board of Trustees.
The Adviser shall furnish such reports, evaluations, information or
analyses to the Trust with respect to each Fund as the Trust's Board of Trustees
may request from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Trust's Board of Trustees with respect
to Fund policies, and shall carry out such policies as are adopted by the
Trustees. The Adviser shall, subject to review by the Board of Trustees, furnish
such other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement, including
but not limited to, the appointment and supervision of any sub-adviser.
The Adviser shall place all orders for the purchase and sale of
portfolio securities for each Fund with brokers or dealers selected by the
Adviser, which may include brokers or dealers affiliated with the Adviser to the
extent permitted by the 1940 Act. The Adviser shall use its best efforts to seek
to execute portfolio transactions at prices which are advantageous to the Funds
and at commission rates which are reasonable in relation to the benefits
received.
In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended) to the Funds and/or the other accounts over
which the Adviser or its affiliates exercise investment discretion. The Adviser
is authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for a Fund which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction or
the overall responsibilities which the Adviser and its affiliates have with
respect to accounts over which they exercise investment discretion. The Board of
Trustees shall periodically review the commissions paid by the Funds to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to each Fund.
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The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Trust or the Funds.
SECTION 4. COMPENSATION. As compensation for the services which the
Adviser is to provide or cause to be provided pursuant to Paragraph 3, each Fund
shall pay to the Adviser out of Fund assets an annual fee equal to the amount
opposite its name in Exhibit A of the average daily net asset value of such Fund
(computed in the manner set forth in the Fund's most recent Prospectus and
determined as of the close of business on each business day throughout the
month) which shall be accrued daily and paid in arrears on the first business
day of every month. The fee for any partial month under this Agreement shall be
calculated on a proportionate basis. In the event that the total expenses of a
Fund exceed the limits on investment company expenses imposed by any state or
any regulatory authority of any jurisdiction in which shares of such Fund are
qualified for offer and sale, the Adviser will bear the amount of such excess,
except: (i) the Adviser shall not be required to bear such excess to an extent
greater than the compensation due to the Adviser for the period for which such
expense limitation is required to be calculated unless such state or regulatory
authority shall so require, and (ii) the Adviser shall not be required to bear
the expenses of a Fund to an extent which would result in the Fund's inability
to qualify as a regulated investment company under the provisions of Subchapter
M of the federal Internal Revenue Code of 1986, as amended.
SECTION 5. INTERESTED PERSONS. It is understood that the Trustees,
officers and shareholders of the Trust are or may be or become interested
persons of the Adviser as directors, officers or otherwise and that directors,
officers and shareholders of the Adviser are or may be or become similarly
interested persons of the Trust.
SECTION 6. PAYMENT OF EXPENSES. Each Fund will pay, or contract with
persons not parties to this Agreement to pay for, all its expenses other than
those expressly stated to be payable by the Adviser hereunder, which expenses
payable by a Fund shall include, without limitation, (i) interest and taxes;
(ii) brokerage commissions and other costs in connection with the purchase or
sale of securities and other investment instruments, which the parties
acknowledge might be higher than other brokers would charge if the Fund pays a
broker which provides research services to the Adviser for use in rendering
services to the Fund; (iii) fees and expenses of the Trustees of the Trust; (iv)
legal and audit expenses; (v) administrator, custodian, pricing and bookkeeping,
registrar and transfer agent fees and expenses; (vi) compensation of the Trust's
officers and employees who are not employees of the Adviser, the distributor or
their respective affiliates and the costs of other personnel performing services
for the Fund; (vii) fees payable under this Advisory Agreement and the
Administration and Distribution Agreements; (viii) fees and expenses related to
the registration and qualification of the Trust and the Fund's shares for
distribution under state and federal securities laws; (ix) expenses of printing
and mailing reports and notices and proxy material to shareholders of the Fund;
(x) all other expenses incidental to holding meetings of the Fund's
shareholders, including proxy solicitations therefor; (xi) expenses of
typesetting for printing Prospectuses and supplements thereto; (xii) expenses of
printing and mailing Prospectuses and supplements thereto sent to existing
shareholders; (xiii) insurance premiums for fidelity bonds and other coverage to
the extent approved by the Board of Trustees; (xiv) association membership dues
authorized by the Board of Trustees; and (xv) such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Trust is a party (or the Fund's assets are subject)
and any legal obligation which the Trust may have to indemnify the Trust's
Trustees and officers with respect thereto.
SECTION 7. NON-EXCLUSIVE SERVICES. The services of the Adviser to each
Fund are not to be deemed exclusive and the Adviser shall be free to render
similar services to others and engage in other activities. The Adviser shall be
free to enter into other agreements with the Trust for providing additional
services to the Funds and the Trust which are not covered by this Agreement, and
to receive additional compensation for such services.
SECTION 8. STANDARD OF CARE. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, neither the Adviser nor any of its
directors, officers, shareholders, agents, or employees shall be liable or
responsible to the Funds or the Trust or to any shareholder of a Fund or the
Trust for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
SECTION 9. TERM OF AGREEMENT.
(a) The Trust represents that this Agreement as it pertains to
each Fund has been approved by the Board of Trustees and shareholders pursuant
to Section 15 of the 1940 Act. This Agreement as it pertains to each Fund shall
become effective on the date hereof and shall remain in effect for a period of
two years from such date, and thereafter for successive twelve-month periods
with respect to each Fund; provided, however, that such continuance is
specifically approved at least annually by the Board of Trustees of the Trust or
by a majority vote of the holders of the outstanding voting securities (as
defined in the 0000 Xxx) of a Fund, and, in either case, by a majority of the
Board of Trustees of the Trust, who have no direct or indirect financial
interest in this Agreement and who are not interested persons, as defined in the
1940 Act, of any such party, who cast their vote in person at a meeting called
for the purpose of voting on such approval; provided further, however, that if
the continuation of this Agreement is not approved as to a Fund, the Adviser may
continue to render the Fund the services described herein in the manner and to
the extent permitted by the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated (i) by the Trust with respect to a Fund at any
time, without the payment of any penalty, by the vote of a majority of the
outstanding voting securities (as so defined) of the Fund, or by a vote of the
majority of the Board of Trustees of the Trust on sixty days' written notice to
the Adviser; or (ii) by the Adviser with respect to a Fund on sixty days'
written notice to the Trust.
(b) This Agreement may be amended at any time with the
approval of the Trustees of the Trust, provided, however, that any material
amendments of the terms hereof will become effective only upon approval as
provided in the first proviso of Section 8(a) hereof.
SECTION 10. NO ASSIGNMENT. This Agreement may not be assigned, sold or
in any manner hypothecated or pledged by either party hereto and this agreement
shall terminate automatically in the event of any such assignment, sale,
hypothecation or pledge. The terms "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and any
interpretation thereof contained in rules or regulations promulgated by the
Commission thereunder.
SECTION 11. NOTICES. All notices and other communications, including
Written Instructions (collectively referred to as "Notice" or "Notices" in this
Paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex, or facsimile sending device. Notices shall be addressed (a) if to the
Adviser at the Adviser's address, 000 Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxx
Xxxx; (b) if to the Trust, at the address of the Trust; or (c) if to neither of
the foregoing, at such other address as shall have been notified to the sender
of any such Notice or other communication. A Notice may be mailed, in which case
it shall be deemed to have been given three days after it is sent, or if sent by
facsimile sending device, it shall be deemed to have been given immediately, or
if sent by messenger, it shall be deemed to have been given on the day it is
delivered, or if sent by confirming telegram, cable, telex, and facsimile
sending device it shall be deemed to have been given immediately. All postage,
cable, telex, or facsimile sending device charges arising from the sending of a
Notice hereunder shall be paid by the sender.
SECTION 12. NON-EXCLUSIVE USE OF THE NAME "CRM." The Trust acknowledges
that it adopted its name through the permission of the Adviser. The Adviser
hereby consent to the non-exclusive use by the Trust of the name "CRM" only so
long as the Adviser serves as the Funds' adviser. The Trust covenants and agrees
to protect, exonerate, defend, indemnify and hold harmless the Adviser, its
shareholders, officers, directors, agents and employees from and against any and
all costs, losses, claims, damages or liabilities, joint or several, including
all legal expenses, which may arise or have arisen out of the Trust's use or
misuse of the name "CRM", or out of any breach of or failure to comply with this
Section 11.
SECTION 13. FURTHER ACTIONS. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
SECTION 14. AMENDMENTS. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the party against
which enforcement of such change or waiver is sought.
SECTION 15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New York.
SECTION 17. LIMIT OF LIABILITY. The Adviser acknowledges the limitation
of shareholder liability set forth in the Trust's Declaration of Trust. The
obligations of the Trust under this Agreement shall not be binding upon the
Trustees individually or upon holders of shares of the Trust individually but
shall be binding only upon the assets and property of the Fund, and upon the
Trustees insofar as they hold title thereto.
SECTION 18. DEFINITIONS. The terms "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons," when
used herein, shall have the respective meanings specified in the 1940 Act, as
now in effect or as hereafter amended, and subject to such orders as may be
granted by the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
THE CRM FUNDS, on behalf of XXXXXX XXXXXXXXX XXXXXXX,
each of the Funds listed in Exhibit A LLC
By:/s/ Xxxx X. Xxxxxx By:/s/ Xxxxxx X Xxxxxxx III
Name:Xxxx X. Xxxxxx Name:Xxxxxx X. Xxxxxxx
Title:President Title:SVP, CFO
EXHIBIT A
FEE AS A % OF AVERAGE
NAME OF FUND DAILY NET ASSET VALUE
Small Cap Value Fund 0.75%
Large Cap Value Fund 0.75%
Mid Cap Value Fund 0.75%
Value Fund 0.75%
