EXHIBIT (5)
ADVISORY AGREEMENT
AGREEMENT made this 13th day of December, 1996 by and between CGM
CAPITAL DEVELOPMENT FUND, a Massachusetts business trust (the "Fund"), and
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP, a Massachusetts
partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Fund and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Fund;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Original Series of the Fund (the "Series") and
to perform the other services herein set forth, subject to the supervision of
the Board of Trustees of the Fund. The Adviser hereby accepts such employment
and agrees, at its own expense, to render the services and to assume the
obligations herein set forth, for the compensation herein provided. The Adviser
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.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial
data and information and undertake such additional investment research
as it shall believe necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series, investment objective and policies;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including
the placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Fund acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Fund at the Adviser's own
expense or pay the expenses of the Fund for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by
the bank selected to perform such services and exclusive of any
managerial functions described in section 5); and
(c) compensation, if any, of Trustees of the Fund who are directors,
officers, partners or employees of the Adviser or any affiliated
person (other than a registered investment company) of the Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or
to reimburse the Fund for:
(a) any of the costs of printing and distributing the items referred
to in subsection (m) of this section 5, except as otherwise provided
in any agreement between the Fund and its principal underwriter in
effect from time to time relating to distribution of shares of the
Series;
(b) compensation of Trustees of the Fund who are not directors,
officers, partners or employees of the Adviser or of any affiliated
person (other than a registered investment company) of the Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the Custodian appointed by the Fund
for custodial services;
(e) charges and expenses of independent accountants retained by the
Fund;
(f) charges and expenses of any transfer agents, paying agents, plan
agents and registrars appointed by the Fund;
(g) brokers, commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund
is a party;
(h) taxes and fees payable by the Fund to Federal, State or other
governmental agencies;
(i) the cost of certificates representing shares of the Series;
(j) expenses of meetings of shareholders and Trustees of the Fund;
(k) charges and expenses of legal counsel retained by the Fund;
(l) interest, including interest on borrowings by the Fund;
(m) the cost of services, including services of counsel, required in
connection with the preparation of the Fund's registration statements
and prospectuses with respect to shares of the Series, including
amendments and revisions thereto, annual, semiannual and other
periodic reports of the Fund, and notices and proxy solicitation
material furnished to shareholders of the Fund or regulatory
authorities, to the extent that any such materials relate to the Fund
or to the shareholders thereof; and
(n) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses with respect
to the Series.
6. The services of the Adviser to the Fund hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities
furnished and expenses borne by the Adviser hereunder, the Fund shall pay the
Adviser compensation at the annual percentage rates of the corresponding levels
of the Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
--------------- ----------------------
1.00% of the first $500,000,000;
0.95% of the next $500,000,000; and
0.80% of such assets in excess of $1,000,000,000.
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Fund may from time to time determine and specify in writing to the Adviser. The
Adviser hereby acknowledges that the Fund's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Fund as a whole (including investment advisory fees but excluding taxes
portfolio brokerage commissions and interest) for any fiscal year exceeds the
lowest applicable percentage of average net assets limitation prescribed by any
state in which shares of the Series are qualified for sale, the total fee
otherwise due the Adviser for such fiscal year pursuant to section 7 hereof
shall be reduced by the amount of such excess belonging to the Series, and, if,
after giving effect to such reduction, the total of all ordinary business
expenses continues to exceed any such applicable limitation, the Adviser shall
pay any such continuing excess belonging to the Series; provided, however, that
the Adviser will not reduce its fees nor pay any such expenses to an extent or
under circumstances which would result in the inability of the Series to qualify
as a regulated investment company under the Internal Revenue Code. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund and the
Partnership Agreement of the Adviser, respectively, or by specific provisions of
applicable law.
10. The Adviser consents to the use by the Fund of the name "CGM
Capital Development Fund," or other names embodying the words "Capital Growth
Management" or "CGM" in such forms as the Adviser shall in writing approve, but
only on condition that so long as this Agreement shall remain in force the Fund
shall fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No such name
shall be used by the Fund at any time or in any place for any purposes or under
any conditions except as in this paragraph provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Fund, it will, at the request of the
Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
"Capital Growth Management" or "CGM" and will not thereafter transact any
business in a name containing "Capital Growth Management" or "CGM" in any form
or combination whatsoever, or designate itself as the same business trust as or
successor to a business trust of such name, or otherwise use the name "Capital
Growth Management" or "CGM" or any other reference to the Adviser. Such
covenants on the part of the Fund shall be binding upon it, its Trustees,
officers, shareholders, creditors and all other persons claiming under or
through it.
11. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, after two years from the date of
its execution this Agreement shall continue in effect only so long as
such continuance is specifically approved at least annually (i) by the
Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the Trustees of the Fund who are not interested persons of
the Fund or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty days
written notice to the Adviser either by vote of the Board of Trustees
of the Fund or by vote of a majority of the outstanding voting
securities of the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days
written notice to the Fund.
Termination of this Agreement pursuant to this section 11 shall be
without payment of any penalty.
12. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Fund who are not
interested persons of the Fund or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
13. For the purpose of this Agreement, the terms "vote of a majority
of the outstanding voting securities", "interested person", "affiliated person"
and "assignment" shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities "belonging to" the Series shall
have the meaning defined in the Fund's Agreement and Declaration of Trust.
14. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Fund, to any shareholder of the Fund or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CGM CAPITAL DEVELOPMENT FUND
By:/s/ G. Xxxxxxx Xxxxxxx
Title: Vice President
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
By:/s/ Xxxxxx X. Xxxx
President, Kenbob, Inc.,
General Partner
A copy of the Agreement and Declaration of Trust establishing CGM
Capital Development Fund is on file with the Secretary of State of the
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed with respect to the Series on behalf of the Fund by officers of the
Fund as officers and not individually and that the obligations of or arising out
of this Agreement are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property
belonging to the Series.
298812.c2
