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Exhibit 5.7
INVESTMENT ADVISORY AGREEMENT, made this 1st day of November 1997 by
and between XXXXXX MUTUAL FUNDS, a Kentucky Business Trust, for and on behalf of
its Intermediate Government Bond Series, (hereinafter called "Government Bond
Series"), and XXXXXX & COMPANY, INC., a corporation organized and existing under
the laws of the State of Kentucky (hereinafter called the "Adviser").
WITNESSETH:
WHEREAS, the Government Bond Series is engaged in business as part of
an open-end management investment company which is registered as such under the
federal Investment Company Act of 1940; and
WHEREAS, the Adviser is engaged in the business of rendering investment
supervisory services with respect to municipal securities and is registered as
an investment adviser under the federal Investment Advisers Act of 1940; and
WHEREAS, the Government Bond Series desires to retain the Adviser to
render investment supervisory services and provide office space and facilities
and corporate administration to the Government Bond Series in the manner and on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. The Adviser shall act as investment adviser and render investment
supervisory services to the Government Bond Series and shall provide the
Government Bond Series with office space and facilities and corporate
administration, subject to and upon the terms and conditions set forth in this
Agreement.
2. The Adviser shall obtain and evaluate such information relating to
the economy, industries, businesses, municipal issuers, securities markets and
securities as it may deem necessary or useful in the discharge of its
obligations hereunder; shall formulate a continuing program for the management
of the assets and resources of the Government Bond Series in a manner consistent
with its investment objectives; shall determine the securities to be purchased
and sold by the Government Bond Series, and the portion of its assets to be held
in cash or cash equivalents, in order to carry out such program; and generally
shall take such other steps, including the placing of orders for the purchase or
sales of securities on behalf of the Government Bond Series, as the Adviser may
deem necessary or appropriate for the implementation of such program. The
Adviser shall also furnish to or place at the disposal of the Government Bond
Series such of the information, reports evaluations, analyses and opinions
formulated or obtained by the Adviser in the discharge of its duties hereunder
as the Government Bond Series may, at the time or from time to time, reasonably
request or as the Adviser may deem helpful to the Government Bond Series.
3. (a)The Adviser shall:
(i) Pay or provide for and furnish to the Government Bond Series
such office space, equipment facilities, personnel and services (exclusive of
and in addition to those provided by any custodian, transfer agent or other
institutional agent retained by the Government Bond Series) as the Government
Bond Series may reasonably require in the conduct of its business;
(ii)Maintain and preserve on behalf of the Government Bond Series,
for such periods and in such forms as are prescribed by rules and regulations of
the Securities and Exchange Commission (the "Commission"), all of the accounts,
books and other documents the Government
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Bond Series is required to maintain and preserve pursuant to Section 31(a) of
the Investment company Act of 1940 and the rules and regulations of the
Commission thereunder which are not maintained and preserved on behalf of the
Government Bond Series by any custodian, transfer agent or other institutional
agent retained by the Government Bond Series;
(iii) Furnish the services and pay or provide for the compensation
and expenses of individuals competent (A) to perform for the Government Bond
Series all executive and administrative functions that are not assigned to any
custodian, transfer agent or other institutional agent retained by the
Government Bond Series, and (B) to supervise and coordinate the activities of
such institutional agents and the other agents (e.g., independent accountants
and legal counsel) retained by the Government Bond Series; and
(iv)Permit officers or employees of the Adviser who are duly
elected or appointed as officers, trustees, members of any committee of trustees
or members of any advisory board or committee of the Government Bond Series to
serve as such without remuneration from or other cost to the Government Bond
Series.
(b) The adviser shall pay all sales and promotional expenses
incurred in the distribution of shares of the Government Bond Series. The
expenses to be assumed and paid by the Adviser include the costs of:
(i) Media and direct mail advertising;
(ii) Printing copies of the prospectus of Xxxxxx Mutual Funds
and shareholder reports which are used in its sales or promotional efforts; it
being understood that the Government Bond Series will bear printing costs
relating to copies of its prospectus and reports which are distributed to its
shareholders;
(iii) Printing share purchase order forms to accompany the
prospectus of Xxxxxx Mutual Funds and
(iv) Corresponding and dealing with prospective investors, up
to and including receipt of their orders for the purchase of Government Bond
Series shares.
(c) The Government Bond Series shall bear all expenses of its
operation not specifically assumed by the Adviser as hereinabove set forth or as
provided elsewhere in this Agreement. The Adviser, in its sole discretion, may
at any time or from time to time pay or assume any expense that the Government
Bond Series would or might otherwise be required to bear. However, the Adviser's
payment or assumption of any such expenses on one or more occasion shall neither
relieve the Adviser of any obligation to the Government Bond Series pursuant to
paragraph 6(b) hereof nor obligate the Adviser to pay or assume the same or any
similar expense of the Government Bond Series on any subsequent occasion.
4. The Adviser may employ, retain or otherwise avail itself of the
services or facilities of other persons or organizations for the purpose of
providing the Adviser or the Government Bond Series with such statistical and
other factual information, such advice regarding economic factors and trends,
such advice as to occasional transactions in specific securities or such other
information, advice or assistance as the Adviser may deem necessary, appropriate
or convenient for the discharge of its obligations hereunder or for the
discharge of Adviser's overall responsibilities with respect to the other
accounts which it serves as investment adviser. The Adviser and any individual
performing executive or administrative functions for the Government Bond Series
whose services were made available to it by the Adviser are specifically
authorized to allocate brokerage and principal business to firms that provide
such services or facilities and to cause the Government Bond Series to pay a
member of a securities exchange, or any other
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securities broker or dealer, an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange
or another broker or dealer would have charged for effecting that transaction,
if the Adviser or the individual allocating such brokerage determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services (as such services are defined in Section
28(e) of the Securities Exchange Act of 1934) provided by such member, broker or
dealer, viewed in terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to the accounts as to which the
Adviser exercises investment discretion (as such term is defined in Section
3(a)(35) of the Securities Exchange act of 1934).
5. All accounts, books and other documents maintained and preserved by
the Adviser on behalf of the Government Bond Series pursuant to paragraph
3(a)(i) hereof are the property of the Government Bond Series and shall be
surrendered by the Adviser promptly on request by the Government Bond Series.
The Government Bond Series shall furnish or otherwise make available to the
Adviser such financial reports, proxy statements and other information relating
to the business and affairs of the Government Bond Series as the Adviser may, at
any time or from time to time, reasonably require in order to discharge its
obligations under this Agreement.
6. As full compensation for all services rendered, facilities furnished
and expenses paid or assumed hereunder by the Adviser, the Government Bond
Series shall pay the Adviser a fee at the annual rate of one-half of one percent
(1/2 of 1%) of the first $100,000,000 average daily net asset value, .45 of 1%
of the average daily net assets between $100,000,001 and $150,000,000, and .4 of
1% of the average daily net assets in excess of $150,000,001 of the Government
Bond Series, as determined in accordance with the Declaration of Trust of Xxxxxx
Mutual Funds. The amounts due the Adviser in payment of such fees shall be
accrued daily by the Government Bond Series on the basis of the net asset value
of the Government Bond Series applicable to the close of each business day, and
in the case of any day which is not a business day, the net asset value of the
Government Bond Series applicable to the close of the last preceding business
day; and the total amount thus accrued with respect to each calendar month or
portion thereof during which this Agreement remains in effect shall become due
and payable to the Adviser in the first business day of the next succeeding
calendar month. The term "business day" means a day for all or part of which the
New York Stock Exchange is open for unrestricted trading.
7. The Adviser agrees that neither it nor any of its officers or
directors shall take any long or short position in the shares of the Government
Bond Series; but this prohibition shall not prevent the purchase by or for the
Adviser or any of its officers or directors of shares of the Government Bond
Series at the price at which such shares are available to the public at the
moment of purchase.
8. Nothing herein contained shall be deemed to require the Government
Bond Series to take any action to the Declaration of Trust of Xxxxxx Mutual
Funds or the Trust By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the Board of Trustees of Xxxxxx Mutual Funds of its responsibility for
and control of the conduct of the Government Bond Series.
9. The term of this Agreement shall begin on November 1, 1997 subject
to approval by the shareholders of the Government Bond Series at the 1997 Annual
Meeting, and, unless sooner terminated as provided in paragraph 10 hereof, this
Agreement shall remain in effect through the close of business on October 31,
1999, and thereafter subject to the termination provisions and other terms and
conditions hereof; if: (a) such continuation shall be specifically approved at
least annually by the Board of Trustees, or by vote of a majority of the
outstanding voting securities of the Government Bond Series, and concurrently
with such approval by the Board of Trustees or prior to such approval by the
holders of the outstanding voting securities of the Government Bond Series, as
the case may be, by the vote, cast in person at a meeting called for the purpose
of
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voting on such approval, of a majority of the trustees of the Xxxxxx Mutual
Funds who are not parties to this Agreement or interested persons of any such
party; and (b) the Adviser shall have not notified the Government Bond Series,
in writing, at least sixty (60) days prior to October 31 of each year after 1998
that it does not desire such continuation. The Adviser shall furnish to the
Government Bond Series, promptly upon its request such information in the
possession of or readily available to the Adviser as the Trustees of Xxxxxx
Mutual Funds may at any time from time to time deem reasonably necessary to
evaluate the terms of this Agreement or any extension, renewal or amendment
hereof.
10. This Agreement may not be amended, transferred, assigned, sold or
in any manner hypothecated or pledged, without the affirmative vote of a
majority of the outstanding voting securities of the Government Bond Series, and
this Agreement shall automatically and immediately terminate in the event of its
assignment.
11. This Agreement may be terminated by either party hereto, without
the payment of any penalty, upon sixty (60) day notice in writing to the other
party; provided that in the case of termination by the Government Bond Series,
such action shall have been authorized by resolution of the Board of Trustees of
Xxxxxx Mutual Funds or by vote of a majority of the outstanding voting
securities of the Government Bond Series.
12. Neither the Adviser, any affiliated person of the Adviser, nor any
other person performing executive or administrative functions for the Government
Bond Series whose services were made available to the Government Bond Series by
the Adviser shall be liable to the Government Bond Series for any error of
judgment or mistake of law or for any loss suffered by the Government Bond
Series by reason of any action taken or omission to act committed in connection
with the matters to which this Agreement relates, except that nothing herein
contained shall be construed (i) to protect the Adviser or any affiliated person
of the Adviser (whether or not such affiliated person is or was an officer,
director or member of any advisory board of the Government Bond Series and/or
Xxxxxx Mutual Funds) against any liability to the Government Bond Series or its
security holders for any breach of fiduciary duty with respect to the Adviser's
receipt of compensation for services to the Government Bond Series, (ii) to
protect the Adviser or any affiliated person of the Adviser who is or was an
officer, trustee or member of any advisory board of the Government Bond Series
and/or Xxxxxx Mutual Funds against any liability to the Government Bond Series
or its security holders for any act or practice ( other than the Adviser's
receipt of compensation for services to the Government Bond Series) constituting
a breach of fiduciary duty involving personal misconduct in respect of the
Government Bond Series, (iii) to protect the Adviser against any liability to
the Government Bond Series 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 reckless disregard
of its obligations or duties, under this Agreement, or (iv) to protect any
affiliated person of the Adviser who is or was a Trustee or officer of the
Government Bond Series or its security holders for which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office with the Government Bond Series and/or Xxxxxx Mutual Funds. In the event
that any affiliated person of the Adviser shall become a Trustee, officer or
employee of the Government Bond Series and/or Xxxxxx Mutual Funds, then all
actions taken or omissions to act made by such person in connection with the
discharge of his duties to the Government Bond Series shall be deemed to have
been taken or made by such person solely in his capacity as such Trustee,
officer or employee of said entity, notwithstanding the fact that the services
of such person are being or have been furnished by the Adviser to said entity as
provided in this Agreement or that the compensation and expenses of such person
are being or have been paid by the Adviser or any other affiliated person of the
Adviser.
13. Nothing herein contained shall limit the freedom of the Adviser or
any affiliated person of the Adviser to render investment supervisory services
and provide corporate administration to
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other investment companies, to act as investment adviser or investment counselor
to other persons, firms or corporations or to engage in other business
activities; but so long as this Agreement or any extension, renewal or amendment
hereof shall remain in effect and until the Adviser shall otherwise consent, the
Adviser shall be the only investment adviser to the Government Bond Series.
14. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Investment Company Act of 1940 shall be resolved by reference to such
term or provision of that Act and to interpretations thereof, if any, by the
United States courts, or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Commission validly issued pursuant
to said Act. Specifically, the terms "vote of a majority of the outstanding
voting securities", "interested person", assignment" and "affiliated person", as
used in paragraphs 9, 10, 11, 12 and 13 hereof, shall have the meanings assigned
to them by Section 2(a) of the Investment Company Act of 1940, as amended. In
addition, where the effect of a requirement of the Investment Company Act of
1940, as amended, reflected in any provision of this Agreement is relaxed by a
rule, regulation or order of the Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
XXXXXX MUTUAL FUNDS for and on behalf of
Intermediate Government Bond Series
By:
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Vice President
Attest
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XXXXXX & COMPANY, INC.
By:
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President
Attest
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