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EXHIBIT (5)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this May 31, 1997, by and between XXX XXXXXX
AMERICAN CAPITAL FOREIGN SECURITIES FUND, a Delaware business trust (hereinafter
referred to as the "Fund"), and XXX XXXXXX AMERICAN CAPITAL INVESTMENT ADVISORY
CORP., a Delaware corporation (hereinafter referred to as the "ADVISER").
1. (a) RETENTION OF ADVISER BY FUND. Subject to the terms and
conditions set forth herein, the Fund hereby employs the Adviser to act as the
investment adviser for and to manage the investment and reinvestment of the
assets of the Fund in accordance with the Fund's investment objectives and
policies and limitations, and to administer its affairs to the extent requested
by, and subject to the review and supervision of, the Board of Trustees of the
Fund for the period and upon the terms herein set forth. The investment of funds
shall be subject to all applicable restrictions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the Fund as may from time to time be in force and delivered or made
available to the Adviser.
(b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The Adviser accepts such
employment and agrees during such period to render such services, to supply
investment research and portfolio management (including without limitation the
selection of securities for the Fund to purchase, hold or sell and the selection
of brokers through whom the Fund's portfolio transactions are executed, in
accordance with the policies adopted by the Fund and its Board of Trustees), to
administer the business affairs of the Fund, to furnish offices and necessary
facilities and equipment to the Fund, to provide administrative services for the
Fund, to render periodic reports to the Board of Trustees of the Fund, and to
permit any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions.
(c) ESSENTIAL PERSONNEL. For a period of one year commencing on the
effective date of this Agreement, the Adviser and the Fund agree that the
retention of (i) the chief executive officer, president, chief financial officer
and secretary of the Adviser and (ii) each director, officer and employee of the
Adviser or any of its Affiliates (as defined in the Investment Company Act of
1940, as amended (the "1940 Act")) who serves as an officer of the Fund (each
person referred to in (i) or (ii) hereinafter being referred to as an "Essential
Person"), in his or her current capacities, is in the best interest of the Fund
and the Fund's shareholders. In connection with the Adviser's acceptance of
employment hereunder, the Adviser hereby agrees and covenants for itself and on
behalf of its Affiliates that neither the Adviser nor any of its Affiliates
shall make any material or significant personnel changes or replace or seek to
replace any Essential Person or cause to be replaced any Essential Person, in
each case without first informing the Board of Trustees of the Fund in a timely
manner. In Addition, neither the Adviser nor any Affiliate of the Adviser shall
change or seek to change or cause to be changed, in any material respect, the
duties and responsibilities of any Essential Person, in each case without first
informing the Board of Trustees of the Fund in a timely manner.
(d) INDEPENDENT CONTRACTOR. The Adviser shall be deemed to be an
independent contractor under this Agreement and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the Fund
in any way or otherwise be deemed as agent of the Fund.
(e) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the Adviser shall
be free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.
2. (a) FEE. The Adviser shall provide to the Fund the services
described herein without charge.
(b) EXPENSE LIMITATION. The adviser's compensation for any fiscal year
of the Fund shall be reduced by the amount, if any, by which the Fund's expense
for such fiscal year exceeds the most restrictive applicable expense limitation
in any jurisdiction in which the Fund's shares are qualified for offer and sale,
as such limitations set forth in the most recent notice thereof furnished by the
Adviser to
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the Fund. For purposes of this paragraph there shall be excluded from
computation of the Fund's expenses any amount borne directly or indirectly by
the Fund which is permitted to be excluded from the computation of such
limitation by such statue or regulatory authority. If for any month expenses of
the Fund properly included in such calculation exceed 1/12 of the amount
permitted annually by the most restrictive applicable expense limitation, the
payment to the Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund, so that the total net expense
for the month will not exceed 1/12 of such amount. As of the end of the Fund's
fiscal year, however, the computations and payments shall be readjusted so that
the aggregate compensation payable to the Adviser for the year is equal to the
fee set forth in subsection (a) of this Section 2, diminished to the extent
necessary so that the expenses for the year do not exceed those permitted by the
applicable expense limitation.
(c) DETERMINATION OF NET ASSET VALUE. The net asset value of the Fund
shall be calculated as of on each day the Exchange is open for trading or such
other time or times as the trustees may determine in accordance with the
provisions of applicable law and the Declaration of Trust and By-Laws of the
Trust, and resolutions of the Board of Trustees of the Fund as from time to time
in force. For the purpose of the foregoing computations, on each such day when
net asset value is not calculated, the net asset value of a share of beneficial
interest of the Fund shall be deemed to be the net asset value of such share as
of the close of business of the last day on which such calculation was made.
(d) PRORATION. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.
3. EXPENSES. In addition to the fee of the Adviser, the Fund shall
assume and pay any expenses for services rendered by a custodian for the
safekeeping of the Fund's securities or other property, for keeping its books of
account, for any other changes of the custodian and for calculating the net
asset value of the Fund as provided above. The adviser shall not be required to
pay, and the Fund shall assume and pay, the charges and expenses of its
operations, including compensation of the trustees (other than those who are
interested persons of the Adviser and other than those who are interested
persons of the distributor of the Fund but not of the Adviser, if the
distributor has agreed to pay such compensation), charges and expenses of
independent accountants, of legal counsel and of any transfer or dividend
disbursing agent, costs of acquiring and disposing of portfolio securities, cost
of listing shares on the New York Stock Exchange or other exchange, interest (if
any) on obligations incurred by the Fund, costs of shares certificates,
membership dues in the Investment Company Institute or any similar organization,
costs of reports and notices to shareholders, cost of registering shares of the
Fund under the federal securities laws, miscellaneous expenses and all taxes and
fees to federal, state or other governmental agencies on account of the
registration of securities issued by the Fund, filing of corporate documents or
otherwise. The Fund shall not pay or incur any obligation for any management or
administrative expenses for which the Fund intends to seek reimbursement from
the Adviser without first obtaining the written approval of the Adviser. The
Adviser shall arrange, if desired by the Fund, for officers or employees of the
Adviser to serve, without compensation from the Fund, as trustees, officers or
agents of the Fund if duly elected or appointed to such positions and subject to
their individual consent and to any limitations imposed by the law.
4. INTERESTED PERSONS. Subject to applicable statutes and regulations,
it is understood that trustees, officers, shareholders and agents of the Fund
are or may be interested in the Adviser as directors, officers, shareholders,
agents or otherwise and that the directors, officers, shareholders and agents of
the Adviser may be interested in the Fund as trustees, officers, shareholders,
agents or otherwise.
5. LIABILITY. The Adviser shall not be liable for any error of judgment
or of law, or for any loss suffered by the Fund in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
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6. (a) TERM. This Agreement shall become effective on the date hereof
and shall remain in full force until May 31, 1999 unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter, but only for so long as such continuance is specifically approved as
least annually, in the manner required by the 1940 Act.
(b) TERMINATION. This Agreement shall automatically terminate in the
event of its assignment. This Agreement may be terminated at any time without
the payment of any penalty by the Fund or by the Adviser on sixty (60) days
written notice to the other party. The Fund may effect termination by action of
the Board of Trustees or by vote of a majority of the outstanding shares of
stock of the Fund, accompanied by appropriate notice. This Agreement may be
terminated at any time without the payment of any penalty and without advance
notice by the Board of Trustees or by vote of a majority of the outstanding
shares of the Fund in the event that it shall have been established by a court
of competent jurisdiction that the Adviser or any officer or director of the
Adviser has taken any action which results in a breach of the covenants of the
Adviser set forth herein.
(c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not
affect the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
7. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statue, rule or otherwise, the remainder shall
not thereby be affected.
8. 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.
9. DISCLAIMER. The Adviser acknowledges and agrees that, as provided by
Section 8.1 of the Declaration of Trust of the Trust, (i) this Agreement has
been executed by officers of the Trust in their capacity as officers, and not
individually, and (ii) the shareholders, trustees, officers, employees and other
agents of the Trust and the Fund shall not personally be bound by or liable
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder and that any such resort may
only be had upon the assets and property of the Fund.
10. GOVERNING LAW. All questions concerning the validity, meaning and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-law principles thereof) of the State
of Delaware applicable to contracts made and to be performed in that state.
11. NAME. In connection with its employment hereunder, the Adviser
hereby agrees and covenants not to change its name without the prior consent of
the Board of Trustees of the Fund.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
XXX XXXXXX AMERICAN CAPITAL XXX XXXXXX AMERICAN CAPITAL
INVESTMENT ADVISORY CORP. FOREIGN SECURITIES FUND
By:/s/ Xxxxxx X. XxXxxxxxx By:/s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. XxXxxxxxx Name: Xxxxxx X. Xxxxxx
Title: President Title: Vice President & Secretary
