77Q1: EXHIBITS -- Investment Advisory Agreement with Diamond Hill Capital
Management, Inc.
INVESTMENT ADVISORY AGREEMENT
This AGREEMENT is made as of the day of January 3, 2008 by and between the
Financial Trends Fund, Inc., a Maryland corporation (the "Fund") and Diamond
Hill Capital Management, Inc., an Ohio corporation (the "Investment Adviser").
WHEREAS, the Fund is a closed-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act"), and the shares of the Fund are registered for sale to the public under
the Securities Act of 1933; and
WHEREAS, the Fund desires to engage the Investment Adviser to render
investment management services to the Fund and the Investment Adviser is willing
to render such services;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF INVESTMENT ADVISER. The Investment Adviser agrees to perform
the following services (the "Services") for the Fund:
(a) manage the investment and reinvestment of the Fund's assets;
(b) continuously review, supervise, and administer the investment
program of the Fund;
(c) determine, in its discretion, the securities to be purchased,
retained or sold (and implement those decisions);
(d) provide the Fund with records concerning the Investment
Adviser's activities which the Fund is required to maintain;
(e) render regular reports to the Fund's officers and Directors
concerning the Investment Adviser's discharge of the foregoing responsibilities;
The Investment Adviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Fund and in
compliance with such policies as the Directors may from time to time establish,
and in compliance with the objectives, policies, and limitations of the Fund set
forth in the Fund's prospectus, as amended from time to time, and with all
applicable laws and regulations. All Services to be furnished by the Investment
Adviser under this Agreement may be furnished through the medium of any
directors, officers or employees of the Investment Adviser or through such other
parties as the Investment Adviser may determine from time to time.
The Investment Adviser agrees, at its own expense or at the expense of one
or more of its affiliates, to render the Services and to provide the office
space, furnishings and equipment and the personnel as may be reasonably required
in the judgment of the Board of Directors of the Fund to perform the Services on
the terms and for the compensation provided herein. The Investment Adviser shall
authorize and permit any of its officers, directors and employees, who may be
elected as directors or officers of the Fund, to serve in the capacities in
which they are elected.
Except to the extent expressly assumed by the Investment Adviser herein
and except to the extent required by law to be paid by the Investment Adviser,
the Fund shall pay all costs and expenses in connection with its operations and
organization. Without limiting the generality of the foregoing, such costs and
expenses include the following:
(a) all brokers' commissions, issue and transfer taxes, and other
costs chargeable to the Fund in connection with securities transactions to which
the Fund is a party or with securities owned by the Fund;
(b) the fees, charges and expenses of any independent public
accountants, custodian and depository, dividend disbursing agent, dividend
reinvestment agent, transfer agent, registrar, and legal counsel for the Fund;
(c) the interest on indebtedness, if any, incurred by the Fund;
(d) the taxes, including franchise, income, issue, transfer,
business license, and other corporate fees payable by the Fund to Federal,
State, County, City, or other governmental agents;
(e) the fees and expenses involved in maintaining the registration
and qualification of the Fund and of its shares under laws administered by the
Securities and Exchange Commission or under other applicable regulatory
requirements, including the preparation and printing of prospectuses;
(f) the compensation and expenses of its directors;
(g) the costs of printing and distributing reports, notices of
stockholders' meetings, proxy statements, dividend notices, prospectuses and
other communications to the Fund's stockholders, as well as all expenses of
stockholders and Board of Directors' meetings;
(h) all costs, fees or other expenses arising in connection with the
organization and Incorporation of the Fund including initial registration and
qualification under the 1940 Act and under the Securities Act of 1933, as
amended, the initial determination of its tax status and any rulings obtained
for this purpose, the initial registration and qualification of its securities
under the laws of any State and the approval of the Fund's operations by any
other Federal or State authority;
(i) the expenses of repurchasing and, if applicable, redeeming
shares of the Fund;
(j) insurance premiums;
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(k) the costs of designing, printing, and issuing certificates
representing shares of the Fund;
(l) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund; and
(m) premiums for the fidelity bond maintained by the Fund pursuant
to Section 17(g) of the 1940 Act and rules promulgated thereunder.
2. PORTFOLIO TRANSACTIONS. The Investment Adviser is authorized to select
the brokers or dealers that will execute the purchases and sales of portfolio
securities for the Fund and is directed to use its best efforts to obtain the
best net results as described in the Fund's prospectus from time to time. The
Investment Adviser may, in its discretion, purchase and sell portfolio
securities from and to brokers and dealers who provide the fund with research,
analysis, advice and similar services, and the Investment Adviser may pay to
these brokers, in return for research and analysis, a higher commission or
spread than may be charged by other brokers, provided that the Investment
Adviser determines in good faith that such commission is reasonable in terms
either of that particular transaction or of the overall responsibility of the
Investment Adviser to the Fund and its other clients and that the total
commission paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long-term. The Investment Adviser will promptly communicate to
the officers and the Directors of the Fund such information relating to
portfolio transactions as they may reasonably request.
3. COMPENSATION OF THE INVESTMENT ADVISER. For the Services to be rendered
by the Investment Adviser as provided in Sections 1 and Section 2 of this
Agreement, the Fund shall pay to the Investment Adviser, as promptly as
possible, after the last day of each month, but in no event later than 15
business days after such last day of each month, a fee at the annual rate of
..65% of the Fund's average weekly net assets or a flat fee of $50,000, whichever
is higher. The first payment of the fee shall be made as promptly as possible at
the end of the month next succeeding the effective date of this Agreement, and
shall constitute a full payment of the fee due the Investment Adviser for all
services rendered pursuant to this Agreement prior to that date. In the event
that the Investment Adviser's right to such fee commences to accrue on a date
other than the first day of the month, the fee for such month shall be based on
the average weekly net assets of the Fund in that month from the date of
commencement to the last day of the month. In the event of termination of this
Agreement, the fee provided in this Section shall be computed on the basis of
the period ending on the last business day on which this Agreement is in effect
subject to a pro rata adjustment based on the number of days elapsed in the
current month as a percentage of the total number of days in such month. The
weekly net assets of the Fund shall be determined on the second to last business
day of each week, or on the next business day on which the New York Stock
Exchange is open for business, and be computed as of the time of the regular
close of business of the New York Stock Exchange, or such other time as may be
determined by the Board of Directors of the Fund.
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If, in any given year, the sum of the Fund's expenses exceeds two (2%)
percent of the value of the Fund's average net assets during such year the Fund
may require the Investment Adviser to reimburse the Fund for such excess
expenses promptly and in any event prior to the publication of the Fund's annual
report to stockholders; provided, however, that if after such reimbursement the
Investment Adviser's annual compensation would be less than $50,000, then a
minimum advisory fee of $50,000 will be paid. Interest, taxes and extraordinary
items such as litigation costs are not deemed expenses for purposes of the
foregoing limitations and shall be borne by the Fund in any event. Expenditures,
including costs incurred in connection with the purchase or sale of portfolio
securities, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are accounted for as
capital items and not expenses.
4. OTHER SERVICES. At the request of the Fund, the Investment Adviser in
its discretion may make available to the Fund, office facilities, equipment,
personnel, and other services. Such office facilities, equipment, personnel, and
services shall be provided for or rendered by the Investment Adviser and billed
to the Fund at Investment Adviser's cost.
5. REPORTS. The Fund and the Investment Adviser agree to furnish to each
other, if applicable, current prospectuses, proxy statements, reports to
stockholders, certified copies of their financial statements, and such other
information with regard to their affairs as each may reasonably request and as
may be required by law.
6. STATUS OF INVESTMENT ADVISER. The services of the Investment Adviser to
the Fund are not to be deemed exclusive, and the Investment Adviser shall be
free to render similar services to others so long as its services to the Fund
are not impaired thereby. The Investment Adviser shall 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. Nothing in this Agreement shall limit
or restrict the right of any director, officer or employee of the Investment
Adviser, who may also be a director, officer or employee of the Fund, to engage
in any other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar nature
or a dissimilar nature.
7. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the
1940 Act which are prepared or maintained by the Investment Adviser on behalf of
the Fund are the property of the Fund and will be surrendered promptly to the
Fund on request.
8. LIABILITY OF INVESTMENT ADVISER. The Investment Adviser assumes no
responsibility under this Agreement other than to render the services called for
hereunder in good faith. The Investment Adviser shall not be liable for any
error of judgment or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to receipt of compensation for services (in which
case any award of damages shall be limited to the period and the amount set
forth in Section 36(b)(3) of the 0000 Xxx) or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of, or
from reckless disregard by it of its obligations and duties under, this
Agreement.
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9. PERMISSIBLE INTERESTS. Directors, agents, and stockholders of the Fund
are or may be interested in the Investment Adviser (or any successor thereof) as
Directors, partners, officers, or stockholders, or otherwise; Directors,
partners, officers, agents, and stockholders of the Investment Adviser are or
may be interested in the Fund as Directors, stockholders or otherwise; and the
Investment Adviser (or any successor) is or may be interested in the Fund as a
stockholder or otherwise.
10. DURATION AND TERMINATION; NOTICE; CERTAIN DEFINITIONS. This Agreement
shall become effective as of the date hereof and, unless sooner terminated as
provided herein, shall continue in effect for a period of two (2) years and
thereafter from year to year, but only so long as such continuation is
specifically approved at least annually (a) by the vote of a majority of those
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Directors of the Fund or by a vote of
the holders of a majority of the outstanding voting securities of the Fund.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Directors of the Fund in office at the
time or by vote of the holders of a majority of the voting securities of the
Fund at the time outstanding and entitled to vote or, on sixty (60) days'
written notice to the Investment Adviser (which notice may be waived by the
Investment Adviser), or by the Investment Adviser at any time, without the
payment of any penalty, on sixty (60) days' written notice to the Fund (which
notice may be waived by the Fund). This Agreement will automatically and
immediately terminate in the event of its assignment.
Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postage-paid, to the other party at any office of such
party.
As used in this Agreement, the terms "assignment", "interested persons",
and a "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exceptions as may be granted by the Securities and
Exchange Commission under the 1940 Act.
11. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the Fund's outstanding
voting securities.
13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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14. APPLICATION OF OHIO LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and the year first written above.
DIAMOND HILL CAPITAL FINANCIAL TRENDS FUND, INC.
MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxxx Xxxxxx
Title: CFO Title: Chairman
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