FORM OF
INVESTMENT ADVISORY AGREEMENT
BETWEEN
GUINNESS FLIGHT INVESTMENT FUNDS
AND
GUINNESS FLIGHT INVESTMENT MANAGEMENT LIMITED
INVESTMENT ADVISORY AGREEMENT, dated as of ________, 1997, by and
between GUINNESS FLIGHT INVESTMENT FUNDS, a Delaware business trust which may
issue one or more series of shares of beneficial interest (the "Trust"), and
GUINNESS FLIGHT INVESTMENT MANAGEMENT LIMITED (the "Adviser").
W I T N E S S E T H
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WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (collectively with
the rules and regulations promulgated thereunder, the "Act"); and
WHEREAS, the Adviser is an investment adviser under the Investment
Advisers Act of 1940, as amended, and engages in the business of acting as an
investment adviser; and
WHEREAS, the Adviser is a member of the Investment Management
Regulatory Organization Limited ("IMRO") of the United Kingdom and is thereby
regulated by IMRO in the conduct of its investment business for United Kingdom
investors and engages in the business of acting as an investment adviser; and
WHEREAS, the Trust wishes to engage the Adviser to provide certain
investment advisory services to the series of the Trust listed on Schedule A
(each, a "Fund" and collectively, the "Funds"), and the Adviser is willing to
provide such investment advisory services for the Funds on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, 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. Appointment.
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Funds with respect to the investment of their assets
and to supervise and arrange the purchase of securities for and the sale of
securities held in the portfolios of the Funds.
2. Duties and Obligations of the Adviser With Respect to the Invest-
ment of Assets of the Funds.
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Trust, the Adviser
shall:
(i) supervise continuously the investment program of each Fund
and the composition of its portfolio;
(ii) determine what securities be purchased or sold by each Fund;
and
(iii) arrange for the purchase and the sale of securities held in
the portfolio of each Fund; and
(b) Any investment program furnished by the Adviser under this section
shall at all times conform to, and be in accordance with, any requirements
imposed by:
(i) the provisions of the Act and of any rules or regulations in
force thereunder;
(ii) any other applicable provisions of state and Federal law;
(iii) the provisions of the Trust's Trust Instrument and By-Laws,
as amended from time to time;
(iv) any policies and determinations of the Board of Trustees of
the Trust; and
(v) the fundamental policies of each Fund, as reflected in its
Registration Statement under the Act, as amended from time
to time.
(c) The Adviser shall give each Fund the benefit of its best judgment
and effort in rendering services hereunder, and in connection therewith the
Adviser shall not be liable to any Fund or its security holders for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission in the execution of portfolio transactions for such
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Fund, except for wilful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder. As used in this subsection (c), the term "Adviser" shall
include board members, officers and employees of the Adviser as well as the
entity referred to as the "Adviser" itself.
(d) Nothing in this Agreement shall prevent the Adviser or any
affiliated person (as defined in the Act) of the Adviser from acting as
investment adviser or manager for any other person, firm or corporation
(including other investment companies) and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying, selling or
trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that the Adviser
expressly represents that it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to the Funds
under this Agreement. The Adviser agrees that it will not deal with itself, or
with the Trustees of the Trust or the Funds' principal underwriter or
distributor, as principals in making purchases or sales of securities or other
property for the account of the Funds, except as permitted by the Act, and will
comply with all other provisions of the Trust's Trust Instrument and By-Laws and
the then-current prospectus and statement of additional information applicable
to each Fund relative to the Adviser and its board members and officers.
(e) The Funds will supply the Adviser with certified copies of the
following documents: (i) the Trust's Trust Instrument and By-Laws; (ii)
resolutions of the Trust's Board of Trustees and shareholders authorizing the
appointment of the Adviser and approving this Agreement; (iii) the Funds'
Registration Statement, as filed with the Securities and Exchange Commission;
and (iv) the Funds' most recent prospectus and statement of additional
information. The Funds will furnish the Adviser from time to time with copies of
all amendments or supplements to the foregoing, if any, and all documents,
notices and reports filed with the Securities and Exchange Commission.
(f) The Funds will supply, or cause its custodian bank to supply, to
the Adviser such financial information as is necessary or desirable for the
functions of the Adviser hereunder.
3. Broker-Dealer Relationships.
The Adviser is responsible for decisions to buy and sell securities for
each Fund, broker-dealer selection and negotiation of its brokerage commission
rates. The Adviser's primary consideration in effecting a security transaction
will be execution at the most favorable price. Each Fund understands that many
of its portfolio transactions will be transacted with primary market makers
acting as principal on a net basis, with no brokerage commissions being paid by
the Fund. Such principal transactions may, however, result in a profit to the
market makers. In certain instances, the Adviser may make purchases of
underwritten issues at prices which include underwriting fees. In selecting a
broker or dealer to execute each particular transaction, the Adviser will take
the following into consideration: the best price available; the reliability,
integrity and financial condition of the broker or dealer; the size of and
difficulty in executing the
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order; and the value of the expected contribution of the broker or dealer to the
investment performance of a Fund on a continuing basis. Accordingly, the price
to a Fund in any transaction may be less favorable than that available from
another broker or dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered. Subject to such policies as
the Board of Trustees may determine, the Adviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused a Fund to pay a broker or dealer
that provides brokerage and research services to the Adviser an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund. The Adviser is further authorized to allocate the orders placed by it
on behalf of a Fund to an affiliated broker-dealer, if any, or to such brokers
and dealers who also provide research or statistical material, or other services
to the Fund (which material or services may also assist the Adviser in rendering
services to other clients). Such allocation shall be in such amounts and
proportions as the Adviser shall determine and the Adviser will report on said
allocations regularly to the Board of Trustees indicating the brokers to whom
such allocations have been made and the basis therefor.
4. Allocation of Expenses.
The Adviser agrees that it will furnish each Fund, at its expense, all
office space and facilities, equipment and clerical personnel necessary for
carrying out its duties under this Agreement. The Adviser agrees that it will
supply to any administrator (the "Administrator") of the Funds all necessary
financial information in connection with the Administrator's duties under any
agreement between the Administrator and the Trust on behalf of the Funds. All
costs and expenses associated with any administrative functions delegated by the
Adviser to the Administrator that are not pursuant to any agreement between the
Administrator and a Fund or the Adviser and a Fund will be paid by the Adviser.
All other costs and expenses not expressly assumed by the Adviser under this
Agreement or by the Administrator under the administration agreement between it
and the Trust on behalf of a Fund shall be paid by the Fund from the assets of
the Fund, including, but not limited to (i) fees paid to the Adviser and the
Administrator; (ii) interest and taxes; (iii) brokerage commissions; (iv)
insurance premiums; (v) compensation and expenses of the directors other than
those affiliated with the adviser or the administrator; (vi) legal, accounting
and audit expenses; (vii) fees and expenses of any transfer agent, distributor,
registrar, dividend disbursing agent or shareholder servicing agent of the Fund;
(viii) expenses, including clerical expenses, incident to the issuance,
redemption or repurchase of shares of the Fund, including issuance on the
payment of, or reinvestment of, dividends; (ix) fees and expenses incident to
the registration under Federal or state securities laws of the Fund or its
shares; (x) expenses of preparing, setting in type, printing and mailing
prospectuses, statements of additional information, reports and notices and
proxy material to shareholders of the Fund; (xi) all other expenses incidental
to holding meetings of the Fund's shareholders; (xii) expenses connected with
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the execution, recording and settlement of portfolio securities transactions;
(xiii) fees and expenses of the Fund's custodian for all services to the Fund,
including safekeeping of funds and securities and maintaining required books and
accounts; (xiv) expenses of calculating net asset value of the shares of the
Fund; (xv) industry membership fees allocable to the Fund; and (xvi) such
extraordinary expenses as may arise, including litigation affecting the Fund and
the legal obligations which the Fund may have to indemnify the officers and
directors with respect thereto.
5. Compensation of the Adviser.
For the services to be rendered, each Fund shall pay to the Adviser
from the assets of the Fund an investment advisory fee paid monthly at an annual
rate set forth opposite each Fund's name on Schedule A which shall be a
percentage of the Fund's average daily net assets for the Fund's then-current
fiscal year. Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If the Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of subsection (b) hereof, payment of the
Adviser's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by subsection (b)
hereof.
6. Duration Amendment and Termination.
(a) This Agreement shall go into effect as to each Fund on the date set
forth above (the "Effective Date") and shall, unless terminated as hereinafter
provided, continue in effect for two years from the Effective Date and shall
continue from year to year thereafter, but only so long as such continuance is
specifically approved at least annually by the 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 for the purpose of voting on such approval, or by the vote of
the holders of a "majority" (as so defined) of the outstanding voting securities
of a Fund and by such a vote of the trustees.
(b) This Agreement may be amended only if such amendment is approved by
the vote of the holders of a "majority" (as defined in the Act) of the
outstanding voting securities of a Fund.
(c) This Agreement may be terminated as to a Fund by the Adviser at any
time without penalty upon giving such Fund sixty (60) days' written notice
(which notice may be waived by the Fund) and may be terminated by a Fund at any
time without penalty upon giving the Adviser sixty (60) days' written notice
(which notice may be waived by the Adviser), provided that such termination by
such Fund shall be approved by the vote of a majority of all the trustees in
office at the time or by the vote of the holders of a "majority" (as defined in
the Act) of the
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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
defined in the Act).
7. Board of Trustees' Meeting.
Each Fund agrees that notice of each meeting of the Board of Trustees
will be sent to the Adviser and that each Fund will make appropriate
arrangements for the attendance (as persons present by invitation) of such
person or persons as the Adviser may designate.
8. Use of the Name "Guinness Flight".
Each Fund acknowledges that it is adopting its name through permission
of the Adviser, and agrees that the Adviser reserves to itself and any successor
to its business the right to withdraw the right to use the name "Guinness
Flight" from a Fund if the Adviser no longer advises the Fund. The Adviser also
reserves the right to grant the nonexclusive right to use the name "Guinness
Flight" or any similar name to any other corporation or entity, including, but
not limited to, any investment company. In the event this Agreement is
terminated, each Fund shall immediately delete "Guinness Flight" from its name
and may not use the name "Guinness Flight" in any manner thereafter.
9. Notices.
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice.
10. Questions of Interpretation.
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 Act, as amended, shall be resolved by reference to such term or provision
of the 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 Securities and Exchange Commission issued pursuant
to said Act. In addition, where the effect of a requirement of the Act,
reflected in any provision of this Agreement is revised by rule, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names on their names on their behalf by the
undersigned, thereunto duly authorized, all as of the day and year first above
written.
GUINNESS FLIGHT INVESTMENT FUNDS
By___________________________________
Title:
GUINNESS FLIGHT INVESTMENT MANAGEMENT LIMITED
By____________________________________
Title:
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Schedule A
Name of Fund Fee*
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1. Guinness Flight Asia Blue Chip Fund 1.00%
2. Guinness Flight Asia Small Cap Fund 1.00%
3. Guinness Flight China & Hong Kong Fund 1.00%
4. Guinness Flight Global Government Bond Fund .75%
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* As a percentage of average daily net assets. Note, however, that the
Adviser shall have the right, but not the obligation, to voluntarily waive
any portion of the advisory fee from time to time. Any such voluntary
waiver will be irrevocable and determined in advance of rendering
investment advisory services by the Adviser, and shall be in writing and
signed by the parties hereto.
