Lake Shore Fund Group, LLC
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Re: Advisory Agreement
Ladies and Gentlemen:
The Lake Shore Family of Funds (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), and subject to the rules and regulations promulgated
thereunder. The Trust's shares of beneficial interest are divided into two
separate series, the Equity Fund and the Balanced Fund, referred to individually
as the "Fund" and collectively as the "Funds". Each share of a Fund represents
an undivided interest in the assets, subject to the liabilities, allocated to
that Fund. Each Fund has a separate investment objective and separate investment
policies.
1. APPOINTMENT AS ADVISER. The Trust being duly authorized hereby appoints
and employs Lake Shore Fund Group, LLC (the "Adviser") as discretionary
portfolio manager on the terms and conditions set forth herein of the Funds.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Adviser accepts
the appointment as discretionary portfolio manager and agrees to use its best
professional judgement to make timely investment decisions for the Funds in
accordance with the provisions of this Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF THE ADVISER. The Adviser is hereby
employed and authorized to select portfolio securities for investment by the
Trust on behalf of the Funds, to
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purchase and sell securities of the Funds, and, upon making any purchase or sale
decision, to place orders for the execution of such portfolio transactions in
accordance with paragraphs 5 and 6 hereof. In providing portfolio management
services to the Funds, the Adviser shall be subject to such investment
restrictions as are set forth in the Act and the rules thereunder, the Internal
Revenue Code of 1986, applicable state securities laws, the supervision and
control of the Trustees of the Trust, such specific instructions as the Trustees
may adopt and communicate to the Adviser and the investment objectives, policies
and restrictions of the Trust applicable to the Funds furnished pursuant to
paragraph 4. The Adviser is not authorized by the Trust to take any action,
including the purchase or sale of securities for the Funds, in contravention of
any restriction, limitation, objective, policy or instruction described in the
previous sentence. The Adviser shall maintain on behalf of the Trust the records
listed in Schedule A hereto (as amended from time to time). At the Trust's
reasonable request, the Adviser will consult with the Trust with respect to any
decision made by it with respect to the investments of the Funds.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust will provide
the Adviser with the statement of investment objectives, policies and
restrictions applicable to the Funds as contained in the Trust's registration
statement under the Act and the Securities Act of 1933, and any instructions
adopted by the Trustees supplemental thereto. The Trust will provide the Adviser
with such further information concerning the investment
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objectives, policies and restrictions applicable thereto as the Adviser may from
time to time reasonably request. The Trust retains the right, on written notice
to the Adviser from the Trust, to modify any such objectives, policies or
restrictions in any manner at any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated by payment
to or delivery by Star Bank, N.A., or any successor custodian (the "Custodian"),
or such depositories or agents as may be designated by the Custodian in writing,
as custodian for the Trust, of all cash and/or securities due to or from the
Funds, and the Adviser shall not have possession or custody thereof. The Adviser
shall advise the Custodian and confirm in writing to the Trust and to
Countrywide Fund Services, Inc. or any other designated agent of the Trust, all
investment orders for the Funds placed by it with brokers and dealers. The
Adviser shall issue to the Custodian such instructions as may be appropriate in
connection with the settlement of any transaction initiated by the Adviser.
6. ALLOCATION OF BROKERAGE. The Adviser shall have authority and discretion
to select brokers and dealers to execute portfolio transactions initiated by the
Adviser and to select the markets on or in which the transactions will be
executed.
In doing so, the Adviser will give primary consideration to securing the
most favorable price and efficient execution. Consistent with this policy, the
Adviser may consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who may effect or
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be a party to any such transaction or other transactions to which other clients
of the Adviser may be a party. It is understood that neither the Trust nor the
Adviser has adopted a formula for allocation of the Funds' investment
transaction business. It is also understood that it is desirable for the Trust
that the Adviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Funds than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Funds with such certain brokers, subject
to review by the Trust's Trustees from time to time with respect to the extent
and continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Adviser in connection with its services to
other clients.
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Funds as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, 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 expenses incurred in the transaction, will be made by the Adviser in the
manner it
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considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to such other clients.
For each fiscal quarter of the Trust, the Adviser shall prepare and render
reports to the Trust's Trustees of the total brokerage business placed and the
manner in which the allocation has been accomplished. Such reports shall set
forth at a minimum the information required to be maintained by Rule 31a-1(b)(9)
under the Act.
7. PROXIES. The Trust will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Funds may be invested from time
to time. At the request of the Trust, the Adviser shall provide the Trust with
its recommendations as to the voting of such proxies.
8. REPORTS TO THE ADVISER. The Trust will provide the Adviser with such
periodic reports concerning the status of the Funds as the Adviser may
reasonably request.
9. FEES FOR SERVICES. For all of the services to be rendered and payments
made as provided in this Agreement, each Fund will pay the Adviser a fee,
computed and accrued daily and paid monthly, at the annual rate of 1.00% of its
average daily net assets.
10. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall employ or provide
and compensate the executive, administrative, secretarial and clerical personnel
necessary to provide the services set forth herein, and shall bear the expense
thereof. The Adviser shall compensate all Trustees, officers and employees
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of the Trust who are also employees of the Adviser. The Adviser will pay all
expenses incurred in connection with the sale or distribution of the Funds'
shares to the extent such expenses are not assumed by the Funds under the
Trust's Distribution Expense Plan.
The Funds will be responsible for the payment of all operating expenses of
the Funds, including fees and expenses incurred by the Funds in connection with
membership in investment company organizations, brokerage fees and commissions,
legal, auditing and accounting expenses, expenses of registering shares under
federal and state securities laws, insurance expenses, taxes or governmental
fees, fees and expenses of the custodian, the transfer, shareholder service and
dividend disbursing agent and the accounting and pricing agent of the Funds,
expenses including clerical expenses of the issue, sale, redemption or
repurchase of shares of the Funds, the fees and expenses of Trustees of the
Trust who are not employees, members, or officers of the Lake Shore Fund Group,
LLC (the "Adviser"), the cost of preparing, printing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Trust may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto, or any other expense not specifically described above incurred in the
performance of the Trust's obligations. All other expenses not
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expressly assumed by the Adviser herein incurred in connection with the
organization, registration of shares and operations of the Funds will be borne
by the Funds.
11. OTHER INVESTMENT ACTIVITIES OF THE ADVISER. The Trust acknowledges that
the Adviser or one or more of its affiliates may have investment
responsibilities or render investment advice to or perform other investment
advisory services for other individuals or entities and that the Adviser, its
affiliates or any of its or their directors, officers, agents or employees may
buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph 2 hereof, the
Trust agrees that the Adviser or its affiliates may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Funds, provided that the Adviser acts
in good faith, and provided further, that it is the Adviser's policy to
allocate, within its reasonable discretion, investment opportunities to the
Funds over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Funds and any specific investment restrictions applicable thereto. The
Trust acknowledges that one or more of the Affiliated Accounts may at any time
hold, acquire, increase, decrease, dispose of or otherwise deal with positions
in investments in which the Funds may have an interest from time to time,
whether in transactions which involve the Funds or
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otherwise. The Adviser shall have no obligation to acquire for the Funds a
position in any investment which any Affiliated Account may acquire, and the
Trust shall have no first refusal, co-investment or other rights in respect of
any such investment, either for the Funds or otherwise.
12. CERTIFICATE OF AUTHORITY. The Trust and the Adviser shall furnish to
each other from time to time certified copies of the resolutions of their
Trustees or Board of Directors or executive committees, as the case may be,
evidencing the authority of officers and employees who are authorized to act on
behalf of the Trust, the Funds and/or the Adviser.
13. LIMITATION OF LIABILITY. The Adviser shall not be liable for any action
taken, omitted or suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement, or in accordance with (or in the
absence of) specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted from the Adviser's
willful misfeasance, bad faith or gross negligence, a violation of the standard
of care established by and applicable to the Adviser in its actions under this
Agreement or breach of its duty or of its obligations hereunder. Nothing in this
paragraph 13 shall be construed in a manner inconsistent with Sections 17(h) and
(i) of the Act.
14. CONFIDENTIALITY. Subject to the duty of the Adviser and the Trust to
comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the
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parties hereto shall treat as confidential all information pertaining to the
Funds and the actions of the Adviser and the Trust in respect thereof.
15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in the event of such
assignment. The Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with the Adviser.
16. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust
represents, warrants and agrees that:
A. The Adviser has been duly appointed by the Trustees of the Trust to
provide investment advisory services to the Funds as contemplated hereby.
B. The Trust will deliver to the Adviser true and complete copies of
its then current prospectuses and statements of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Funds and such other information as is necessary for the
Adviser to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all times comply
with the requirements imposed upon the Trust by applicable law and regulations.
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17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
A. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940.
B. The Adviser will maintain, keep current and preserve on behalf of
the Trust, in the manner and for the time periods required or permitted by the
Act, the records identified in Schedule A. The Adviser agrees that such records
(unless otherwise indicated on Schedule A) are the property of the Trust, and
will be surrendered to the Trust promptly upon request.
C. The Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Funds as the Trust may from time to time
require to ensure compliance with the Act, the Internal Revenue Code of 1986 and
applicable state securities laws.
D. The Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and will provide the Trust with a copy
of the code of ethics and evidence of its adoption. Within forty-five (45) days
of the end of the last calendar quarter of each year while this Agreement is in
effect, an executive officer of the Adviser shall certify to the Trust that the
Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Adviser's code of ethics or, if
such a violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of the Trust, the
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Adviser shall permit the Trust, its employees or its agents to examine the
reports required to be made to the Adviser by Rule 17j-1(c)(1).
E. The Adviser will, promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV, furnish a copy of such
amendment to the Trust.
F. Upon request of the Trust, the Adviser will provide assistance to
the Custodian in the collection of income due or payable to the Funds.
G. The Adviser will immediately notify the Trust of the occurrence of
any event which would disqualify the Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the Act or
otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Trust, which amendment, other than
amendments to Schedule A, is subject to the approval of the Trustees and the
shareholders of the Funds in the manner required by the Act and the rules
thereunder, subject to any applicable exemptive order of the Securities and
Exchange Commission modifying the provisions of the Act with respect to approval
of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
of its execution and shall remain in force for a period of two (2) years from
such date, and from year to year thereafter but only so long as such continuance
is specifically approved at least annually by the vote of a majority of the
Trustees who are not interested persons of the Trust or the Adviser, cast in
person at a meeting called for the purpose
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of voting on such approval, and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities of the Funds. The aforesaid
requirement that this Agreement may be continued "annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
20. TERMINATION. This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon written notice to the other
in the event of a breach of any provision thereof by the party so notified, or
otherwise upon sixty (60) days' written notice to the other, but any such
termination shall not affect the status, obligations or liabilities of any party
hereto to the other.
21. OBLIGATIONS OF THE TRUST. It is expressly agreed that the obligations
of the Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust and signed by
an officer of the Trust, acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust.
22. DEFINITIONS. As used in paragraphs 15 and 19 of this Agreement, the
terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations hereunder.
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23. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of Ohio.
LAKE SHORE FAMILY OF FUNDS
By: /s/ Xxxxxxx X. Xxxxx, CFA
----------------------------
Title: Chairman
-------------------------
Date: January 8, 1998
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
LAKE SHORE FUND GROUP, LLC
By: /s/ Xxxxxx X. XxXxxxxxxx
---------------------------
Title: Executive Vice President
------------------------
Date: January 8, 1998
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SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER
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1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases or sales, given by the Adviser on behalf of the Funds
for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modification or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases upon which the allocation of orders for the purchase and sale of
portfolio securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such purchase
and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Funds by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Trust;
(b) The Adviser; and,
(c) Any person affiliated with the foregoing persons.
(iii)Any other consideration other than the technical qualifications
of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
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C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions or
other compensation.
D. The name of the person responsible for making the determination of
such allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made by
a committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation or instruction supporting or
authorizing the purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Adviser's transactions
with respect to the Funds.
-----------------------
* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation; i.e., buy, sell, hold) or any
internal reports or portfolio adviser reviews.
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