INVESTMENT ADVISORY AGREEMENT
BETWEEN
THE ROYCE FUND
(ROYCE SELECT FUND)
AND
ROYCE & ASSOCIATES, INC.
Agreement made this ____ day of ______ 1998, by and between THE ROYCE
FUND, a Delaware business trust (the "Fund"), and ROYCE & ASSOCIATES, INC., a
New York corporation (the "Adviser").
The Fund and the Adviser hereby agree as follows in respect of ROYCE
SELECT FUND, a series of the Fund (the "Series"):
1. Duties of the Adviser. The Adviser shall, during the term and
subject to the provisions of this Agreement, (a) determine the composition of
the portfolio of the Series, the nature and timing of the changes therein and
the manner of implementing such changes, and (b) provide the Series with such
investment advisory, research and related services as the Series may, from
time to time, reasonably require for the investment of its funds. The
Adviser shall perform such duties in accordance with the applicable
provisions of the Fund's Declaration of Trust, By-Laws and current prospectus
and any directions it may receive from the Fund's Trustees. The Adviser shall
also furnish the services of those of its officers and employees who may be
duly elected officers or Trustees of the Fund, subject to their individual
consent to serve and to any limitations imposed by law.
2. Fund Responsibilities and Expenses Payable by the Series. The Fund
shall be responsible for effecting sales and redemptions of the Series'
shares, for determining the net asset value thereof and for all of the
Series' other operations and shall cause the Series to pay all costs and
expenses attributable to its operations and transactions that are not payable
by the Adviser under Paragraph 3 hereof.
3. Expenses Payable by the Adviser. The Adviser shall be responsible for
paying all of the Series' operating expenses, except for (a) the compensation
payable to the Adviser under Paragraph 4 hereof, (b) brokerage commissions,
interest and dividends on securities sold short, (c) distribution fees, (d)
Federal, state, local and other taxes, (e) amortization of organization
expenses and (f) litigation and indemnification expenses and any other
extraordinary expenses not incurred in the ordinary course of the Series'
business. The Adviser shall also pay all expenses which it may incur
in performing its duties under Paragraph 1 hereof and shall reimburse
the Fund for any space leased by the Fund and occupied by the Adviser.
4. Compensation of the Adviser. As compensation for its services to
the Series and for agreeing to pay the Series' operating expenses as set
forth under Paragraph 3 hereof, the Fund agrees to cause the Series to pay to
the Adviser a performance fee of 12.5% of the Series' pre-fee total return.
Such fee shall be calculated and accrued daily, based on the value of the
Series' then current net assets, and shall be payable as of December 31,
1999, for the period from the date on which the Series commences operations
through December 31, 1999, and as of the close of each calendar quarter
ending after December 31, 1999. Such fees shall be payable to the Adviser
both in respect of Series shares outstanding throughout the applicable period
and in respect of Series shares purchased or redeemed during the applicable
period and shall not be reimbursable by the Adviser because of any negative
total returns occurring after the date as of which they are payable.
However, such fees shall be subject to a high water benchmark test, so that
Series shares shall not bear a fee during any period when the Series' pre-fee
cumulative total return for the period from the date on which the Series
commences operations to the date of calculation does not exceed the Series'
pre-fee cumulative total return to the date as of which a performance fee was
last payable to the Adviser.
5. Excess Brokerage Commissions. The Adviser is hereby authorized, to
the fullest extent now or hereafter permitted by law, to cause the Series to
pay a member of a national securities exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of such exchange, 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/or research services provided by such member, broker or
dealer, viewed in terms of either that particular transaction or its overall
responsibilities with respect to its accounts.
6. Limitations on the Employment of the Adviser. The services of the
Adviser to the Series shall not be deemed exclusive, and the Adviser may
engage in any other business or render similar or different services to
others so long as its services to the Series hereunder are not impaired
thereby, and nothing in this Agreement shall limit or restrict the right of
any director, officer or employee of the Adviser to engage in any other
business or to devote his time and attention in part to any other business,
whether of a similar or dissimilar nature. So long as this Agreement or any
extension or renewal remains in effect, the Adviser shall be the only
investment adviser for the Series, subject to the Adviser's right to enter
into sub-advisory agreements. The Adviser assumes no responsibility under
this Agreement other than to render the services called for hereunder, and
shall not be responsible for any action of or directed by the Fund's
Trustees, or any committee thereof, unless such action has been caused by the
Adviser's gross negligence, willful malfeasance, bad faith or reckless
disregard of its obligations and duties under this Agreement.
7. Responsibility of Dual Directors, Officers and/or Employees. If any
person who is a director, officer or employee of the Adviser is or becomes a
Trustee, officer and/or employee of the Fund and acts as such in any business
of the Fund pursuant to this Agreement, then such
director, officer and/or employee of the Adviser shall be deemed to be acting
in such capacity solely for the Fund, and not as a director, officer or
employee of the Adviser or under the control or direction of the Adviser,
although paid by the Adviser.
8. Protection of the Adviser. The Adviser shall not be liable to the
Fund or to any portfolio series thereof for any action taken or omitted to be
taken by the Adviser in connection with the performance of any of its duties
or obligations under this Agreement or otherwise as an investment adviser of
the Fund or such series, and the Fund or each portfolio series thereof
involved, as the case may be, shall indemnify the Adviser and hold it
harmless from and against all damages, liabilities, costs and expenses (in
cluding reasonable attorneys' fees and amounts reasonably paid in settlement)
incurred by the Adviser in 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 Fund or any portfolio series thereof
or its security holders) arising out of or otherwise based upon any action
actually or allegedly taken or omitted to be taken by the Adviser in
connection with the performance of any of its duties or obligations under
this Agreement or otherwise as an investment adviser of the Fund or such
series. Notwithstanding the preceding sentence of this Paragraph 8 to the
contrary, nothing contained herein shall protect or be deemed to protect the
Adviser against or entitle or be deemed to entitle the Adviser to
indemnification in respect of, any liability to the Fund or to any portfolio
series thereof or its security holders to which the Adviser would otherwise
be subject by reason 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.
Determinations of whether and the extent to which the Adviser is
entitled to indemnification hereunder shall be made by reasonable and fair
means, including (a) a final decision on the merits by a court or other body
before whom the action, suit or other proceeding was brought that the Adviser
was not liable by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of its duties, or (b) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that
the Adviser was not liable by reason of such misconduct by (i) the vote of a
majority of a quorum of the Trustees of the Fund who are neither "interested
persons" of the Fund (as defined in Section 2(a)(19) of the Investment
Company Act of 1940) nor parties to the action, suit or other proceeding, or
(ii) an independent legal counsel in a written opinion.
9. Effectiveness, Duration and Termination of Agreement. This
Agreement shall become effective immediately upon approval by a majority of
the outstanding voting securities of the Series, and the Investment Advisory
Agreement made September 24, 1992 by and between the Fund and the Adviser
shall not apply as to the Series. This Agreement shall remain in effect
until April 30, 2000, and thereafter shall continue automatically for
successive annual periods, provided that such continuance is specifically
approved at least annually by (a) the vote of the Fund's
Trustees, including a majority of such Trustees who are not parties to this
Agreement or "interested persons" (as such term is defined in Section
2(a)(19) of the Investment Company Act of 1940) of any such party, cast in
person at a meeting called for the purpose of voting on such approval, or (b)
the vote of a majority of the outstanding voting securities of the Series and
the vote of the Fund's Trustees, including a majority of such Trustees who
are not parties to this Agreement or "interested persons" (as so defined) of
any such party. This Agreement may be terminated at any time, without the
payment of any penalty, on 60 days' written notice by the vote of a majority
of the outstanding voting securities of the Series, or by the vote of a
majority of the Fund's Trustees or by the Adviser, and will automatically
terminate in the event of its "assignment" (as such term is defined for
purposes of Section 15(a)(4) of the Investment Company Act of 1940);
provided, however, that the provisions of Paragraph 8 of this Agreement shall
remain in full force and effect, and the Adviser shall remain entitled to the
benefits thereof, notwithstanding any such termination. The Adviser or
Xxxxxxx X. Xxxxx may, upon termination of this Agreement, require the Fund to
refrain from using the name "Royce" in any form or combination in its name or
in its business, and the Fund shall, as soon as practicable following its
receipt of any such request from the Adviser or Xxxxxxx X. Xxxxx, so refrain
from using such name.
Any notice under this Agreement shall be given in writing, addressed and
delivered or mailed, postage prepaid, to the other party at its principal
office.
10. Shareholder Liability. Notice is hereby given that this Agreement
is entered into on the Fund's behalf by an officer of the Fund in his
capacity as an officer and not individually and that the obligations of or
arising out of this Agreement are not binding upon any of the Fund's
Trustees, officers, employees, agents or shareholders individually, but are
binding only upon the assets and property of the Series.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
THE ROYCE FUND
By: _______________________________
Xxxxxxx X. Xxxxx, President
ROYCE & ASSOCIATES, INC.
By: _______________________________
Xxxxxxx X. Xxxxx, President
