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Exhibit 5.3
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 North Carolina Tax-Free Income Series, (hereinafter called "Income 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 Income 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 Income Series desires to retain the Adviser to render
investment supervisory services and provide office space and facilities and
corporate administration to the Income 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 Income Series and shall provide the Income 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 Income Series in a manner consistent with its
investment objectives; shall determine the securities to be purchased and sold
by the Income 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 Income 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 Income 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 Income Series
may, at the time or from time to time, reasonably request or as the Adviser may
deem helpful to the Income Series.
3. (a)The Adviser shall:
(i) Pay or provide for and furnish to the Income 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 Income Series) as the Income Series may
reasonably require in the conduct of its business;
(ii)Maintain and preserve on behalf of the Income 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 Income 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
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behalf of the Income Series by any custodian, transfer agent or other
institutional agent retained by the Income Series;
(iii) Furnish the services and pay or provide for the compensation
and expenses of individuals competent (A) to perform for the Income Series all
executive and administrative functions that are not assigned to any custodian,
transfer agent or other institutional agent retained by the Income 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 Income 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 Income Series to serve as
such without remuneration from or other cost to the Income Series.
(b) The adviser shall pay all sales and promotional expenses
incurred in the distribution of shares of the Income 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 Income 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 Income Series
shares.
(c) The Income 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 Income 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 Income Series pursuant to paragraph 6(b)
hereof nor obligate the Adviser to pay or assume the same or any similar expense
of the Income 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 Income 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 Income 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 Income Series to pay a member of a securities
exchange, or any other 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
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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 Income Series pursuant to paragraph 3(a)(i) hereof
are the property of the Income Series and shall be surrendered by the Adviser
promptly on request by the Income Series. The Income 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 Income 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 Income 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 Income 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 Income Series on the basis of the net asset value of the Income 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 Income 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 Income
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 Income 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 Income
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 Income Series.
9. The term of this Agreement shall begin on November 1, 1997 subject
to approval by the shareholders of the Income 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 Income 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 Income Series, as the case may be, by the
vote, cast in person at a meeting called for the purpose of 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 Income Series, in writing, at least sixty
(60) days prior to October 31 of each year after 1998 that it does not desire
such
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continuation. The Adviser shall furnish to the Income 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 Income 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 Income 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 Income Series.
12. Neither the Adviser, any affiliated person of the Adviser, nor any
other person performing executive or administrative functions for the Income
Series whose services were made available to the Income Series by the Adviser
shall be liable to the Income Series for any error of judgment or mistake of law
or for any loss suffered by the Income 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 Income Series and/or Xxxxxx Mutual Funds) against any liability to the
Income Series or its security holders for any breach of fiduciary duty with
respect to the Adviser's receipt of compensation for services to the Income
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 Income
Series and/or Xxxxxx Mutual Funds against any liability to the Income Series or
its security holders for any act or practice ( other than the Adviser's receipt
of compensation for services to the Income Series) constituting a breach of
fiduciary duty involving personal misconduct in respect of the Income Series,
(iii) to protect the Adviser against any liability to the Income 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 Income 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 Income 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 Income 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 Income 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 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 Income Series.
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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
North Carolina Tax-Free Income 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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