EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
XXXX SMALL & MID-CAP GROWTH FUND, INC., a Maryland corporation registered under
the Investment Company Act of 1940 (1940 Act) as an open-end diversified
management investment company (Fund), and L. Xxx Xxxx & Associates, an Arizona
partnership registered under the Investment Advisers Act of 1940 as an
investment adviser (Manager), agree that:
1. Engagement of Manager. Manager shall manage the investment and
reinvestment of the assets, and the other operations, of Fund, subject to the
supervision of the Board of Directors of Fund, for the period and on the terms
set forth in this agreement. Manager shall give due consideration to the
investment objectives, policies and restrictions and the other statements
concerning Fund in Fund's articles of incorporation, bylaws, and registration
statements under the 1940 Act and the Securities Act of 1933 (1933 Act), and to
the provisions of the Internal Revenue Code applicable to Fund as a regulated
investment company. Manager shall be deemed for all purposes to be an
independent contractor and not an agent of Fund, and unless otherwise expressly
provided or authorized, shall have no authority to act or represent Fund in any
way.
Manager is authorized to make decisions to buy and sell securities for
Fund, to place Fund's portfolio transactions with broker-dealers, and to
negotiate the terms of such transactions, including brokerage commissions on
brokerage transactions, on behalf of Fund.
Manager is authorized to exercise discretion within Fund's policy
concerning allocation of the Fund's portfolio brokerage as permitted by law,
including but not limited to section 28(e) of the Securities Exchange Act of
1934, and in so doing shall not be required to make any reduction in its
investment advisory fees.
2. Expenses to be paid by Manager. Manager shall furnish, at its own
expense, office space to Fund and all necessary office facilities, equipment and
personnel for managing the assets of Fund. Manager shall also assume and pay
all other expenses incurred by it in connection with managing the assets of
Fund, all expenses of marketing shares of Fund, all expenses in determination of
daily price computations, placement of securities orders and related
bookkeeping, and one-half of all fees, dues and other expenses related to
membership of Fund in any trade association or other investment company
organization.
3. Expenses to be paid by Fund. Fund shall pay all expenses incident to
its operations and business not specifically assumed by Manager pursuant to
paragraphs 2 and 5, including without limitation: the fees of Manager pursuant
to paragraph 4; all charges of depositories, custodians, and other agencies for
the safekeeping and servicing of its cash, securities, and other property and of
its transfer agents and registrars and its dividend disbursing and redemption
agents, if any; all charges of legal counsel and of independent auditors; all
compensation of directors other than those affiliated with Manager, and all
expenses incurred in connection with their services to Fund; all expenses of
publication of notices and reports to its shareholders and to governmental
bodies or regulatory agencies; all expenses of proxy solicitations of Fund or
its board of directors; all expenses of shareholder meetings; all expenses
1
of typesetting of Fund's prospectus and of printing and mailing copies of the
prospectus furnished to each then-existing shareholder or beneficial owner; all
taxes and corporate fees payable to federal, state or other governmental
agencies, domestic or foreign; all stamp or other transfer taxes; all expenses
of printing and mailing certificates for shares of Fund; all expenses of bond
and insurance coverage required by law or deemed advisable by Fund's board of
directors; all expenses of maintaining the registration of Fund under the 1940
Act; all expenses of maintaining the registration of shares of Fund under the
1933 Act and of qualifying and maintaining qualification of shares of Fund under
the securities laws of such United States jurisdictions as Fund may from time to
time reasonably designate; and one-half of all fees, dues and other expenses
related to membership of Fund in any trade association or other investment
company organization. In addition to the payment of expenses, Fund shall also
pay all brokers' commissions and other charges relative to the purchase and sale
of portfolio securities.
4. Compensation of Manager. For the services to be rendered and the
charges and expenses to be assumed and to be paid by Manager hereunder, Fund
shall pay to Manager a monthly fee out of Fund assets, which is computed and
accrued daily of 1/12 of 1% of the average net assets of Fund as determined as
of the close of each day in the monthly period.
5. Limitation of expenses of Fund. The total expenses of Fund, excluding
taxes, interest and extraordinary litigation expenses, but including fees paid
to Manager, during any of the Fund's fiscal years, shall not exceed 1.25% of its
average daily net asset value in such year and Manager agrees to reimburse Fund
for any sums expended for such expenses in excess of that amount. Brokers'
commissions and other charges relative to the purchase and sale of portfolio
securities shall not be regarded as expenses.
6. Services of Manager not exclusive. The services of Manager to Fund
hereunder are not to be deemed exclusive, and Manager shall be free to render
similar services to others so long as its services under this agreement are not
impaired by such other activities.
7. Limitation of liability of Manager. Manager shall not be liable to
Fund or its shareholders for any loss suffered by Fund or its shareholders from
or as a consequence of any act or omission of Manager, or of any of the
partners, employees or agents of Manager, in connection with or pursuant to this
agreement, except by reason of willful misfeasance, bad faith or gross
negligence on the part of Manager in the performance of its duties or by reason
of reckless disregard by Manager of its obligations and duties under this
agreement.
8. Duration and renewal. Unless terminated as provided in section 9, this
agreement shall continue in effect until September 24, 2000, and thereafter from
year to year only so long as such continuance is specifically approved at least
annually (a) by a majority of those directors who are not interested persons of
Fund or of Manager, voting in person at a meeting called for the purpose of
voting on such approval, and (b) by either the board of directors of Fund or
vote of the holders of a "majority of the outstanding shares of Fund" (which
term as used throughout this agreement shall be construed in accordance with the
definition of "vote of a majority of the outstanding voting securities of a
company" in section 2(a)(42) of the 1940 Act).
2
9. Termination. This agreement may be terminated at any time, without
payment of any penalty, by the board of directors of Fund, or by a vote of the
holders of a majority of the outstanding shares of Fund, upon 60 days' written
notice to Manager. This agreement may be terminated by Manager at any time upon
60 days' written notice to Fund. This agreement shall terminate automatically
in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act).
10. Use of Manager's name. Fund may use the name Xxxx Small & Mid-Cap
Growth Fund, Inc. or any other name using or derived from the name "L. Xxx Xxxx"
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 business of Manager as investment adviser. At such
time as this agreement or any extension, renewal or amendment hereof, or such
other similar agreement shall no longer be in effect, Fund will (by corporate
action, if necessary) cease to use any name using or derived from the name "L.
Xxx Xxxx," any name similar thereto or otherwise connected with Manager, or with
any organization that shall have succeeded to Manager's business as investment
adviser. Manager may at any time permit other investment companies and other
enterprises to use such name, or any name derived from "L. Xxx Xxxx".
11. Amendment. This agreement may not be amended without the affirmative
vote (a) of a majority of those directors who are not "interested persons" (as
defined in section 2(a)(19) of the 0000 Xxx) of Fund or of Manager, voting in
person at a meeting called for the purpose of voting on such approval, and (b)
of the holders of a majority of the outstanding shares of Fund.
Dated September 25, 1998
Xxxx Small & Mid-Cap Growth Fund, Inc.
By /s/ Xxxxx X. Xxxx
----------------------------------
President
L. Xxx Xxxx & Associates
By /s/ Xxxxxx X. Xxxxxxx
----------------------------------
A General Partner
3
