MERLIN ADVISORS, INC.
Exhibit d
INVESTMENT ADVISORY AGREEMENT
FOR
MERLIN FUNDS GROUP
This Agreement (the "Agreement") is made this 17th of June, 1999, between
Merlin Advisors, Inc., a Delaware corporation (the "Advisor"), and Merlin Funds
Group, a business trust organized and existing under the laws of the State of
Delaware (the "Client").
WHEREAS, the Client desires to employ its capital by investing and
reinvesting the same in investments of the type and in accordance with the
limitations specified in its Prospectus as from time to time in effect and in
such manner and to such extent as may from time to time be approved by the board
of trustees (the "Board") of the Client; and
WHEREAS, the Client desires to employ Advisor to act as the investment
advisor and administrator for its investment portfolio The Merlin US Community
Bank Stock Fund and such other investment portfolios as the Client may from time
to time create (individually a "Fund" and collectively the "Funds"); and
WHEREAS, Advisor is willing to provide investment advice and administrative
services to the Client in accordance with the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth in this
Agreement, the Client and Advisor hereby agree as follows:
ARTICLE I
APPOINTMENT OF ADVISOR
The Client desires to, and hereby does, employ advisor as the investment
advisor to manage the Funds. By executing this Agreement, Advisor accepts the
appointment as investment advisor and agrees to provide investment management
services to the Funds in accordance with the terms of this Agreement.
ARTICLE II
ADVISOR DUTIES AND SCOPE OF AUTHORITY
Section 1. Types of Investments
The Advisor, subject to the supervision and approval of the Board, will
provide investment management services for each Fund in accordance with each
Fund's investment objective and policies as stated in such Fund's most recent
Prospectus delivered to the Advisor by the Client. The Client shall have the
duty to deliver to the Advisor a current Prospectus for each Fund, from time to
time, to ensure that the Advisor has a current Prospectus for each Fund. The
Advisor shall be entitled to rely on the most recent Prospectus for a Fund which
has been delivered to the Advisor by the Client.
Section 2. Advisor's Duties
The Advisor shall be each Fund's investment advisor and will provide each
Fund with management and advisory services. Advisor will be responsible for the
actual management of the Funds and will constantly review the Funds in light of
its own research analysis and those from other relevant sources.
Section 3. Advisor's Discretionary Authority
The responsibility for making decisions to buy, sell or hold a particular
security rests with the Advisor. The Advisor is hereby authorized in the name of
and on behalf of each Fund, as its agent and attorney-in-fact, without obtaining
the consent of or consulting with the Fund or any other person, to issue
instructions to purchase, sell, and otherwise trade or deal with, any security
in the Fund; to purchase from or sell to any person any security in the Fund; to
instruct any trustee or custodian of any security or other asset in the Fund to
deliver securities sold, exchanged, or otherwise disposed of from the Fund and
to pay cash for securities delivered to any trustee or custodian upon
acquisition for the Fund; and generally, to perform any other act necessary to
enable the Advisor to carry out its obligations under this Agreement. Such
authorization, however, does not include authority to deliver or pay securities
or cash to the Advisor.
Section 4. Use of Brokers
The Advisor shall select broker-dealers to effect transactions for each
Fund on a best execution basis. In doing so, the Advisor shall consider the
price as well as the quality of brokerage services, including such factors as
execution capability, willingness to commit capital, creditworthiness and
financial stability, financial responsibility and strength, the broker-dealer's
facilities, reliability, clearance and settlement capability and any research
products or services provided by the broker-dealer. Accordingly, if the Advisor
determines in good faith that the amount of commissions charged by a
broker-dealer is reasonable in relation to the value of the brokerage and
research products or services provided by such broker-dealer, transactions by a
Fund may not always be executed at the lowest available commission. Research
products or services provided to the Advisor may include research reports on
particular industries or companies, economic surveys or analyses,
recommendations as to specific securities, and other products or services (e.g.,
quotation equipment and computer related costs and expenses), providing lawful
and appropriate assistance to the Advisor in the performance of its investment
decision-making responsibilities. The research products and services provided by
broker-dealers may benefit other clients of the Advisor, and not all such
products and services may be used by the Advisor in connection with the Client.
Where a product or service obtained with commission dollars provides both
research and non-research assistance to Advisor, the Advisor will make a
reasonable allocation of the cost which may be paid for with commission dollars.
With respect to transactions, Advisor routes to brokers for execution or directs
to particular exchanges, it is Advisor's policy not to receive payment for order
flow.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Advisor may select a broker which provides brokerage and research services to
the Fund for an amount of disclosed commission in excess of the commission which
another broker would have charged for effecting that transaction. This practice
is subject to a good faith determination that such price is reasonable in light
of the services provided and to such policies as the Board may adopt from time
to time.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its obligation of seeking the best
qualitative execution, the Advisor may give consideration to sales of shares of
the Client as a factor in selecting broker-dealers to executive portfolio
transactions.
Section 5. Other Interests
The Advisor and its related persons may have conflicts of interest with a
Fund as a result of other present or future business activities. In the event of
any potential conflict of interest, the Advisor will act in the manner that it
in good faith believes to be in or not opposed to the best interests of the
Funds, consistent with its duty of fair dealing. The Advisor and its related
persons may engage in other investment and service activities for entities other
than the Funds. Any fees received by the Advisor or its related persons for such
services will not be shared with the Funds.
The Advisor and its related persons may, from time to time, purchase or
sell securities or other investments for their own accounts. Each such person
may take actions different for his own account than actions taken for the Funds.
Moreover, the Advisor and its related persons may purchase or sell or make
recommendations to purchase or sell securities, futures, options on futures or
other investments for the benefit of some clients that may not necessarily be
consistent with action taken for the other clients. The Advisor is not under any
obligation to share any investment opportunity, idea, or strategy with the
Funds. The activities or strategies used for some accounts managed by the
Advisor could conflict with the transactions and strategies employed by the
Advisor in managing other accounts and affect the prices and availability of the
securities and other investments in which clients will invest.
Section 6. Aggregate Sales
On occasions when the Advisor deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients, the Advisor, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Advisor in a manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to such other clients.
Section 7. Custodian
The Advisor shall not act as custodian for the Funds and shall not take
possession of cash or securities of the Funds.
Section 8. Review of Accounts
The Advisor will monitor each Fund's performance at least weekly. Such
review shall be made by an officer of the Advisor.
The Advisor will report to the Client no less frequently than quarterly.
Each such report shall contain sufficient information to assess the historic
performance of the Funds and shall contain sufficient detail of fees and
expenses paid out of the Funds to allow the Client to assess the reasonableness
of such fees and expenses.
Section 9. Other Services
The Advisor or its affiliates will furnish office facilities and clerical
and administrative services, pay the salaries of all officers and employees who
are employed by both the Advisor and the Client and, subject to the supervision
of the Board, is responsible for the overall management of the business affairs
of the Client, including the provision of personnel for record keeping, the
preparation of governmental reports and responding to shareholder
communications. The Advisor will pay all of the operating expenses of the client
with the exception of brokerage, taxes, interest, distribution (12b-1) fees and
extraordinary expenses, all of which shall be paid by the Client.
Section 10. Instructions from the Client.
The Advisor may rely on all instructions (whether oral or written) given by
the Client or its agents which the Advisor believes to be genuine. The Advisor's
records of such a transaction will be conclusive as to the content of any
instruction. Instructions may be given to the Advisor by any officer or agent of
the Client. The Client agrees to hold harmless, and to indemnify and defend, the
Advisor, as well as any of its officers, directors, shareholders, affiliates,
employees and agents, against any and all losses sustained by the Advisor
resulting from, and against any and all claims, liabilities, losses, damages,
charges, costs, fees and expenses (including, without limitation, attorneys'
fees and costs, including fees of attorneys who may be the Advisor's employees
or employees of the Advisor's affiliates) arising out of or in connection with,
any action taken in reliance upon any instruction or inquiry believed genuine.
The Advisor reserves the right to refuse to act on any oral instructions.
Section 11. Proxies and Other Legal Notices
The Advisor shall not render any advice or take any action on behalf of the
Client with respect to securities or other investments held in the Funds or the
issuers thereof, which become the subject of any legal proceedings, including
bankruptcies. The Client retains the right and obligation to take any action
relating to the securities held in the Funds. Furthermore, except to the extent
otherwise required by law, the Advisor shall not take any action or render any
advice with respect to the voting of proxies solicited by, or with respect to,
the issuers of any securities held in the Funds. The Client hereby expressly
retains the right and obligation to vote proxies relating to the securities held
in the Funds; provided however, that the Client may delegate said rights and
obligations to a properly authorized agent.
ARTICLE III
FEES
Section 1. Fees and Costs of Advisors
As consideration for the services provided by the Advisor under this
Agreement, the Advisor will be entitled to a fee for each Fund equal to 2% per
annum of the average daily net asset value of the Fund. The advisory fee will be
payable monthly in arrears and shall be computed based upon the average daily
net assets under management for each Fund during such month. The advisory fee
for the initial period shall be prorated based upon the number of days between
the date of the initial public offering and the end of the month. In the event
this Agreement is terminated prior to the end of a month, the advisory fee shall
be prorated. The advisory fee is exclusive of brokerage, taxes, interest,
distribution (12b-1) fees and extraordinary expenses (including, but not limited
to, litigation and indemnification costs and obligations) incurred by the
Advisor as a result of providing the investment services to the Client under
this Agreement.
Section 2. Transaction Costs.
The Client shall be responsible for payment of all ticketing or other
transaction costs incurred to the custodian, or other third parties, from the
purchase and sale of securities under this Agreement. Such costs are not
included as part of the advisory fee. Such transaction costs shall be noted on
the trade confirmations. The Client shall authorize the custodian of the Funds
to pay any ticketing charges and other transaction costs directly from the
Accounts upon settlement of the trades.
Section 3. Reporting.
On a monthly basis, the Advisor will send to the Client a statement for
each Fund for the advisory fee, which shall include the specific manner in which
the advisory fee is calculated. In addition, all trade confirmations will
include (i) a list and explanation of costs incurred by the Client, and (ii) a
list of ticketing charges and other transaction costs incurred by the Client.
The Advisor shall promptly send (or cause to be sent) all trade confirmations to
the Client after the settlement of the trades.
ARTICLE IV
ADVISOR LIABILITY LIMITATIONS
Advisor and its officers, directors or employees shall not be liable for
any loss arising out of any act or omission unless arising out of their
negligence, misfeasance or bad faith. Any stated limitations on liability shall
not relieve the Advisor from any responsibility or liability the Advisor may
have under state or federal statutes.
ARTICLE V
TERM AND TERMINATION OF THE AGREEMENT
Section 1. Term
This Agreement shall become effective on the date hereof and shall continue
in force for a period of two (2) years and from year to year thereafter,
provided such continuance is specifically approved at least annually by (i) the
Board or (ii) as to any Fund, by a vote of a majority (as defined in the
Investment Company Act of 1940) of such Fund's outstanding voting securities;
provided that in either event the continuance is also approved by a majority of
the Client's trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
Section 2. Termination by the Advisor
The Advisor may terminate this Agreement without penalty upon thirty days'
written notice to the Client.
Section 3. Termination by the Client
The Client may terminate this Agreement without penalty at any time by
written notice to the Advisor.
ARTICLE VI
ASSIGNMENT
No assignment (as that term is defined in the Investment advisors Act of
1940) of this Agreement shall be made by the Advisor without the consent of the
Client.
ARTICLE VII
INTERRELATIONSHIPS
Section 1. Broker-Dealer Services and Xxxxxxx Xxxxxxxxx, Inc.
The Advisor may, consistent with Section 4 of Article II of this Agreement,
select Xxxxxxx Xxxxxxxxx, Inc. to act as broker to effect security transactions
for the Client for a fee. Xxxxxxx X. Xxxxxxxxx wholly owns Xxxxxxx Xxxxxxxxx,
Inc. and is the Chairman and Chief Executive Officer of Xxxxxxx Xxxxxxxxx, Inc.,
a director of Xxxxxxx Xxxxxxxxx, Inc., the Chief Executive Officer, Chairman and
Secretary of the Advisor, a director of the Advisor, an indirect owner of 55% of
the Advisor, a Trustee of the Client and the Chairman and the Secretary of the
Client.
Xxxxxx X. XxXxxxx is the President, Chief Financial Officer and Treasurer
of the Advisor, a director of the Advisor, an indirect owner of 15% of the
Advisor, a broker employed by Xxxxxxx Xxxxxxxxx, Inc., a Vice President of
Xxxxxxx Xxxxxxxxx, Inc., a Trustee of the Client and the President and Treasurer
of the Client.
Xxxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxx are also indirect owners of the
Advisor and are brokers employed by Xxxxxxx Xxxxxxxxx, Inc.
Section 2. Allocation of Brokerage
The Client agrees that when the Advisor places orders for the execution of
securities transactions for the Funds, the Advisor may allocate such
transactions to such brokers and dealers for execution on such markets, at such
prices and at such commission rates as in the judgment of the Advisor will be in
the best interests of the Client, taking into consideration in the selection of
such brokers and dealers the available prices and rates of brokerage commissions
and other relevant factors (such as without limitations, execution capabilities,
research and other services provided by such brokers or dealers which are
expected to enhance the general portfolio and management capabilities of the
Advisor, and the value of any ongoing relationship of the Advisor with such
brokers and dealers), without having to demonstrate that such factors are of a
direct benefit to the Client.
Section 3. Transactions for the Advisor and Other Accounts
The Client hereby acknowledges that the Advisor's services under this
Agreement are non-exclusive, and that the Advisor shall be free to render the
same or similar services to other clients. The Client further acknowledges that
the Advisor renders investment advice based upon each client's representations
as to the client's investment objectives. Therefore, the Advisor, in the
performance of its advisory duties, may give advice to other clients and take
action which may differ from the advice given, or the timing and nature of the
action taken, with respect to the Funds. Nothing in this Agreement shall be
deemed to impose upon the Advisor any obligation to purchase or sell or to
recommend for purchase or sale for the Funds any security or other property
which it or its affiliates may purchase or sell for their own account or for the
accounts of any other client, if in the sole discretion of the Advisor, it is
for any reason undesirable or impractical to take such action or make such
recommendation for the Funds. The Client also acknowledges that the Advisor may
charge other clients different fees, which may be higher or lower than the fees
charged with respect to the Funds for similar services.
Section 4. Agency Cross Transactions
The Client understands that, to the extent permitted by applicable law, the
Advisor may, in transactions involving the Client's securities, act as principal
or may act as agent while also representing another client of the Advisor on the
other side of the transaction, hereinafter referred to as an "agency cross
transaction". The Client hereby consents to the Advisor so acting as principal
or as agent for both sides of a transaction. The Client may revoke its consent
to the Advisor's participation in an agency cross transaction at any time by
providing written notice to the Advisor.
ARTICLE VIII
GOVERNMENTAL REGULATIONS
Section 1. Ownership Limitations
The Client agrees not to exceed the ownership limitations set by any
federal agency, exchange or regulatory authority for each of the Funds, acting
alone or in concert with others. The Client acknowledges that the Advisor has
the right to limit the holdings of specific securities in the Funds. The Client
agrees to abide by all other applicable laws, rules and regulations with respect
to maintaining Funds with the custodian, including reporting requirements.
Furthermore, the Client acknowledges that, under applicable rules, the Advisor
and the custodian may be required to provide the Securities and Exchange
Commission ("SEC"), self-regulatory agencies, state regulatory agencies or
exchanges with information concerning the Client's securities and options
positions and related data.
Section 2. Transactions Subject to Industry Regulations and Standards.
All transactions shall be subject to the regulations of all applicable
government authorities and self-regulatory agencies including, but not limited
to, the constitutions and rules of the clearing house, exchange, or market where
executed. The Client understands that the Advisor is registered as an investment
advisor under the Investment Advisors Act of 1940, as amended, and as such is
obligated to comply with all applicable laws and regulations including those of
the SEC and other regulatory and self-regulatory agencies and agrees that the
Advisor shall not be liable to the Client as a result of any action taken by the
Advisor to comply with any ruling, interpretation or directive of such
organization.
ARTICLE IX
MISCELLANEOUS
Section 1. Confidential Relationship
All information and advice furnished by either party to the other
hereunder, including their respective agents and employees, shall be treated as
confidential and shall not be disclosed to third parties except as required by
law.
Section 2. Representation by Advisor
By execution of this Agreement, the Advisor represents that it is
registered as an investment advisor under the Investment Advisors Act of 1940.
Section 3. Acknowledgment of Disclosure
The Fund hereby acknowledges receipt of the Advisor's Disclosure Statement
(Form ADV Part II) as required pursuant to Rule 204-3 under the Investment
Advisors Act of 1940 prior to or on the date of the Fund's signing of this
Agreement.
Section 4. Entire Agreement
This Agreement constitutes the entire agreement between the parties hereto
with respect to the investment and management of the Funds.
Section 5. Construction
Headings used in this Agreement are for convenience only, and shall not
affect the construction or interpretation of any of its provisions. Each of the
provisions of this Agreement is severable, and the invalidity or inapplicability
of one or more provisions, in whole or in part, shall not affect any other
provision.
Section 6. Notices
All notices required or permitted to be sent under this Agreement shall be
sent to the address appearing beside the signature of the party to be notified
on the signature page of this Agreement, or to such other name or address as may
be given in writing to the other party. Any notice shall be deemed to be given
or received on the third day after deposit in U.S. mails or when actually
received, whichever is earlier.
Section 7. Authority
Each of the parties to this Agreement hereby represents that it is duly
authorized and empowered to execute, deliver, and perform this Agreement and
that such action does not conflict with or violate any provision of law, rule or
regulation, contract, deed of trust, or other instrument to which it is a party
or to which any of its property is subject.
Section 8. Governing Law.
The laws of the state of Ohio shall control all matters relating to this
Agreement and shall apply to the extent not preempted by the laws of the United
States of America.
Section 9. Counterparts
This Agreement may be executed in several counterparts, each of which shall
be considered as an original.
Addresses: Signatures:
Merlin Advisors, Inc. MERLIN ADVISORS, INC.
Attn: Xxxxxx X. XxXxxxx
0000 Xxx Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000 By: /s/ Xxxxxx X. XxXxxxx
Xxxxxx X. XxXxxxx, President
Merlin Funds Group MERLIN FUNDS GROUP
Attn: Xxxxxx X. XxXxxxx
0000 Xxx Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000 By: /s/ Xxxxxx X. XxXxxxx
Xxxxxx X. XxXxxxx, President
