CORNERSTONE GROWTH FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 9th day of September, 1992, by and between Cornerstone
Growth Fund (the "Fund"), a Massachusetts business trust, and Cornerstone
Capital Corp. (the "Advisor").
W I T N E S S E T H:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
1. IN GENERAL
The Advisor agrees, all as more fully set forth herein, to act as managerial
investment advisor to the Fund with respect to the investment of its assets and
to supervise and arrange the purchase and sale of securities held in the
portfolio of the Fund and generally administer the affairs of the Fund.
2. DUTIES AND OBLIGATION OF THE ADVISOR WITH RESPECT TO MANAGEMENT OF THE
FUND
(a) Subject to the succeeding provisions of this section and subject
to the direction and control of the Board of Trustees of the
Fund, the Advisor shall:
(i) Decide what securities shall be purchased or sold by the
Fund and when; and
(ii) Arrange for the purchase and the sale of securities held
in the portfolio of the Fund by placing purchase and
sale orders for the Fund.
(b) Any investment purchases or sales made by the Advisor shall at
all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Investment
Company Act of 1940 (the "Act") and any of the rules or
regulations in force thereunder, (2) any other applicable
provisions of law, (3) the provisions of the Declaration of
Trust and By-Laws of the Fund as amended from time to time; (4)
any policies and determinations of the Board of Trustees of the
Fund; and (5) the fundamental policies of the Fund, as reflected
in its registration statement under the Act, or as amended by
the shareholders of the Fund.
(c) The Agreement states that the Advisor shall give the Fund the
benefit of its best judgment and effort in rendering services
thereunder, but the Advisor shall not be liable for any loss
sustained by reason of the purchase, sale or retention of any
security, whether or not such purchase, sale or retention shall
have been based upon its own investigation and research or upon
investigation and research made by any other individual, firm or
corporation shall have been selected in good faith. The
Agreement also states that nothing contained therein shall,
however, be construed to protect the Advisor against any
liability to the Fund or its security holders by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless
disregard of its obligations and duties under the Agreement.
(d) Nothing in this agreement shall prevent the Advisor or any
affiliated person (as defined in the Act) of the Advisor from
acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and shall
not in any way limit or restrict
the Advisor or any such affiliated person from buying, selling,
or trading any securities for its or their own accounts or the
accounts of others for whom it or they may be acting, provided,
however, that the Advisor expressly represents that it will
undertake no activities which, in its judgment, will adversely
affect the performance of its obligation to the Fund under this
Agreement.
(e) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Fund's
Registration Statement under the Act or the Securities Act of
1933 except for information supplied by the Advisor for
inclusion therein. The Fund agrees to indemnify the Advisor to
the full extent permitted by the Fund's Declaration of Trust.
3. BROKER-DEALER RELATIONSHIPS
In connection with its duties set forth in Section 2(a)(ii) of this Agreement to
arrange for the purchase and the sale of securities held in the portfolio of the
Fund by placing purchase and sale orders for the Fund, the Advisor shall select
such broker dealers ("broker") as shall, in the Advisor's judgment, implement
the policy of the Fund to achieve "best execution", i.e. prompt and efficient
execution at the most favorable securities price. In making such selection, the
Advisor is authorized to consider the reliability, integrity and financial
condition of the broker. The Advisor is also authorized to consider whether the
broker provides brokerage and/or research services to the Fund and/or other
accounts of the Advisor. The commissions paid to such brokers may be higher than
another broker would have charged if a good faith determination is made by the
Advisor that the commission is reasonable in relation to the services provided,
viewed in terms of either that particular transaction or the Advisor's overall
responsibilities as to the account as to which it exercises investment
discretion, the Advisor shall use its judgment in determining the amount of
commissions paid are reasonable in relation to the value of brokerage and
research services provided and need not place or attempt to place a specific
dollar value on such services or on the portion of commission rates reflecting
such services. To demonstrate that such determinations were in good faith, and
to show the overall reasonableness of commissions paid, the Advisor shall be
prepared to show that commissions paid (i) were for purposes contemplated by
this agreement; (ii) were not allocated or paid for products or services which
were readily and customarily available and offered to the public on a commercial
basis; and (III) were within a reasonable range as compared to the rates charged
by qualified brokers to other institutional investors as such rates may become
known from available information. The Fund recognizes that, on any particular
transaction, a higher than usual commission may be paid due to the difficulty of
the transaction in question. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers to execute brokerage and
principal transactions, subject to the requirements of "best execution", as
defined above.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Fund, at the Advisor's expense, with
all office space and facilities, and equipment and clerical personnel necessary
for carrying out its duties under this Agreement The Advisor will also pay all
compensation of all Trustees, officers and employees of the Fund who are
affiliated persons of the Advisor. All costs and expenses not expressly assumed
by the Advisor under this Agreement shall be paid by the Fund, including, but
not limited to
(i) interest and taxes;
(ii) brokerage commissions;
(iii) insurance premiums;
(iv) compensation and expenses of its Trustees other than
those affiliated with the Advisor,
(v) legal and audit expenses;
(vi) fees and expenses of the Fund's custodian, shareholder
servicing or transfer agent and accounting services
agent;
(vii) expenses incident to the issuance of its shares,
including stock certificates and issuance of shares on
the payment of, or reinvestment of dividends;
(viii) fees and expenses incident to the registration under
Federal or state securities laws of the Fund or its
shares;
(ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Fund;
(x) all other expenses incidental to holding meetings of the
Fund's shareholders;
(xi) dues or assessments of or contributions to the
Investment Company Institute or any successor,
(xii) such nonrecurring expenses as may arise, including
litigation affecting the Fund and the legal obligations
which the Fund may have to indemnify its officers and
Trustees with respect thereto; and
(xiii) all expenses which the Fund agrees to bear in any
distribution agreement or in any plan adopted by the
Fund pursuant to Rule 12b-l under the Act.
5. COMPENSATION OF THE ADVISOR
(a) The Fund agrees to pay the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the
Advisor hereunder, and annual management fee payable monthly and
computed on the net asset value of the Fund as of the close of
business each business day at the annual rate of 1% of such net
asset value.
(b) In the event the expenses of the Fund (including the fees of the
Advisor and amortization of organization expenses but excluding
interest, taxes, brokerage commission, extraordinary expenses
and sales charges and distribution fees) for any fiscal year
exceed the limits set by applicable regulation of state
securities commission, the Advisor will reduce its fee by the
amount of such excess. Any such reductions are subject to
readjustment during the year. The payment of the management fee
at the end of any month will be reduced or postponed or, if
necessary a refund will be made to the Fund so that at no time
will there by any accrued but unpaid liability under this
expense limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date set forth above
and shall, unless terminated as hereinafter provided, continue
in effect until September 9, 1994 and thereafter from year to
year, but only so long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees,
including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons* (as defined in
the Act) of any such party cast in person at a meeting called by
the purpose of voting on such approval, or by vote of the
holders of a "majority" (as so defined) of the outstanding
voting securities of the Fund and by such a vote of the
Trustees.
(b) This Agreement may be terminated by the Advisor at any time
without penalty upon giving the Fund sixty (60) days written
notice (which notice may be waived by the Fund), and may be
terminated by the Fund at any time without penalty upon giving
the Advisor 60 days' written notice (which notice may be waived
by the Advisor), provided that such termination by the Fund
shall be directed or approved by the vote of a majority of all
its Trustees in office at the time or by the vote of the holders
of a majority (as defined in the Act) of the voting securities
of the Fund at the time outstanding and entitled to vote. This
Agreement shall automatically terminate in the event of its
assignment (as so defined).
7. AGREEMENT BINDING ONLY ON FUND PROPERTY
The Advisor understands that the obligations of this Agreement are not binding
upon any shareholder of the Fund personally, but bind only the Fund's property;
the Advisor represents that it has notice of the provisions of the Fund's
Declaration of Trust disclaiming shareholder liability for acts or obligations
of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused the forgoing instrument to be
executed by duly authorized persons and their seals to be hereunto affixed, all
as of the day and year first above written.
CORNERSTONE GROWTH FUND
By:
Attest:
CORNERSTONE CAPITAL CORP.
By:
Attest:
SECOND AMENDMENT TO
INVESTMENT ADVISORY AGREEMENT
This Second Amendment to the Investment Advisory Agreement by and between The
CornerCap Group of Funds (the "Trust") and CornerCap Investment Counsel, Inc.
(the "Adviser") for the CornerCap Growth Fund, dated September 9, 1992 (the
"Advisory Agreement"), is made as of August 23, 1999.
W I T N E S S E T H:
WHEREAS, in Release No. 34-12257 (1976), the Securities and Exchange Commission
(the "Commission") indicated its position that the soft dollar safe harbor set
forth in Section 28(e) of the Securities Exchange Act of 1934 was only available
for products or services not available to the public on a commercial basis (the
"1976 Soft Dollar Interpretation"); and
WHEREAS, the Fund incorporated the 1976 Soft Dollar Interpretation into the
Advisory Agreement in an effort to reflect the state of the law with respect to
Section 28(e) as interpreted by the Commission; and
WHEREAS, in Release No. 34-23170 (1986), the Commission withdrew the
"commercially available" standard of the 1976 Soft Dollar Interpretation calling
it "difficult to apply" and "unduly restrictive," and presented its new
interpretation that the safe harbor of Section 28(e) is only available for
products or services which provide lawful and appropriate assistance in the
investment decision-making process (the "1986 Soft Dollar Interpretation"); and
WHEREAS, in keeping with the parties' original intent, the Fund and the Adviser
wish to amend the Advisory Agreement to incorporate the Commission's current
interpretation of Section 28(e) as set forth in the 1986 Soft Dollar
Interpretation;
NOW, THEREFORE, in consideration of these premises, the mutual covenants and
agreements hereinafter contained and other good and valuable consideration, the
amount and sufficiency of which are hereby acknowledged, the Trust and
Administrator agree as follows:
1. BROKER-DEALER RELATIONSHIPS. Item (ii) in the sixth sentence of Section
3 of the Advisory Agreement is hereby deleted in its entirety and replaced with
the following language: "(ii) were for products or services which provide lawful
and appropriate assistance to the Adviser's decision-making process; and."
2. NO FURTHER AMENDMENTS. Except as amended herein, the Advisory Agreement
shall continue in full force and effect pursuant to its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the
Advisory Agreement to be executed by their duly authorized officers as of the
day and year first above written.
CORNERCAP INVESTMENT COUNSEL, INC. THE CORNERCAP GROUP OF FUNDS
By: _______________________________ By: ______________________________
Title: _______________________________ Title: ______________________________
ATTEST: ATTEST:
By: _______________________________ By: ______________________________
Title: _______________________________ Title: ______________________________
