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Exhibit 5(b)
ADVISORY AGREEMENT
THE HANOVER INVESTMENT FUNDS, INC.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
September 1, 0000
Xxxxx Xxxxxxxx Bank, National Association
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Dear Sirs:
This will confirm the agreement between the undersigned (the
"Company") and you (the "Adviser") as follows:
1. The Company is an open-end investment company which
currently has ten investment portfolios -- The Hanover Short Term U.S.
Government Fund, The Hanover U.S. Government Securities Fund, The Hanover Tax
Free Income Fund, The Hanover New York Tax Free Income Fund, The Hanover Blue
Chip Growth Fund, The Hanover Small Capitalization Growth Fund, American Value
Fund, New Jersey Tax Free Income Fund, International Growth Fund and
International Equity Fund. The Company proposes to engage in the business of
investing and reinvesting the assets of The Hanover Short Term U.S. Government
Fund (the "Fund") in the manner and in accordance with the investment objectives
and limitations specified in the Company's Articles of Incorporation, as amended
(the "Articles"), and the currently effective prospectus, including the
documents incorporated by reference therein (the "Prospectus"), relating to the
Company and the Fund, included in the Company's Registration Statement, as
amended from time to time (the "Registration Statement"), filed by the Company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and the
Securities Act of 1933, as amended. Copies of the documents referred to in the
preceding sentence have been furnished to the Adviser. Any amendments to these
documents shall be furnished to the Adviser promptly.
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2. The Company employs the Adviser to (a) make investment
strategy decisions for the Fund, (b) manage the investing and reinvesting of the
Fund's assets as specified in paragraph 1, (c) place purchase and sale orders on
behalf of the Fund, and (d) provide continuous supervision of the Fund's
investment portfolio.
3. (a) The Adviser shall, at its expense, employ or
associate with itself such persons as it believes appropriate to
assist it in performing its obligations under this agreement.
(b) Except as provided in subparagraph 3(a), the
Company shall be responsible for all of the Fund's expenses and liabilities,
including organizational expenses; taxes; interest; fees (including fees paid to
its directors); fees payable to the Securities and Exchange Commission; state
securities qualification fees; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; advisory and
administration fees; charges of the custodian and transfer agent; charges of any
shareholder servicing agents; certain insurance premiums; auditing and legal
expenses; costs of shareholders' reports and shareholder meetings; any
extraordinary expenses; brokerage fees and commissions, if any, in connection
with the purchase of portfolio securities; and payments to the Fund's
distributor for activities intended to result in the sale of Fund shares.
4. As manager of the Fund's assets, the Adviser shall make
investments for the Fund's account in accordance with the investment objectives
and limitations set forth in the Articles, the Prospectus, the 1940 Act, the
provisions of the Internal Revenue Code relating to regulated investment
companies, applicable banking laws and regulations, and policy decisions adopted
by the Company's Board of Directors from time to time. The Adviser shall advise
the Company's officers and Board of Directors, at such times as the Company's
Board of Directors may specify, of investments made for the Fund's account and
shall, when requested by the Company's officers or Board of Directors, supply
the reasons for making such investments.
5. The Adviser is authorized on behalf of the Company, from
time to time when deemed to be in the best interests of the Company and to the
extent permitted by applicable law, to purchase and/or sell securities in which
the Adviser or any of its affiliates underwrites, deals in and/or makes a market
and/or may perform or seek to perform investment banking services for issuers of
such securities. The Adviser is further authorized, to the extent permitted by
applicable law, to select brokers for the execution of trades for the Company,
which broker may be an affiliate of the Adviser, provided that the best
competitive execution price is obtained at the time of the trade execution.
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6. In consideration of the Adviser's undertaking to render the
services described in this agreement, the Company agrees that the Adviser shall
not be liable under this agreement for any error of judgment or mistake of law
or for any loss suffered by the Company in connection with the performance of
this agreement, provided that nothing in this agreement shall be deemed to
protect or purport to protect the Adviser against any liability to the Company
or its stockholders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties under this agreement or by reason of the Adviser's reckless
disregard of its obligations and duties hereunder.
7. In consideration of the services to be rendered by the
Adviser under this agreement, the Company shall pay the Adviser a monthly fee on
the first Business Day (as defined in the Prospectus) of each month at an annual
rate of 0.35% of the average daily value (as determined on the days and at the
time set forth in the Prospectus for determining net asset value per share) of
the Fund's net assets during the preceding month. If the fee payable to the
Adviser pursuant to this paragraph 7 begins to accrue before the end of any
month or if this agreement terminates before the end of any month the fee for
the period from such date to the end of such month or from the beginning of such
month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs. For purposes of calculating each such
monthly fee, the value of the Fund's net assets shall be computed in the manner
specified in the Prospectus and the Articles for the computation of the value of
the Fund's net assets in connection with the determination of the net asset
value of shares of the Fund's capital stock.
8. If the aggregate expenses incurred by, or allocated to, the
Fund in any fiscal year shall exceed the expense limitations applicable to the
Fund imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Adviser shall
reimburse the Fund for such excess. The Adviser's reimbursement obligation will
be limited to the amount of fees it received under this agreement during the
period in which such expense limitations were exceeded, unless otherwise
required by applicable laws or regulations. With respect to portions of a fiscal
year in which this contract shall be in effect, the foregoing limitations shall
be prorated according to the proportion which that portion of the fiscal year
bears to the full fiscal year. Any payments required to be made by this
paragraph 8 shall be made once a year promptly after the end of the Company's
fiscal year.
9. This agreement shall continue in effect until two
years from the date hereof and thereafter for successive annual
periods, provided that such continuance is specifically approved
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at least annually (a) by the vote of a majority of each Fund's outstanding
voting securities (as defined in the 0000 Xxx) or by the Company's Board of
Directors and (b) by the vote, cast in person at a meeting called for the
purpose, of a majority of the Company's directors who are not parties to this
agreement or "interested persons" (as defined in the 0000 Xxx) of any such
party. This agreement may be terminated at any time, without the payment of any
penalty, by a vote of a majority of each Fund's outstanding voting securities
(as defined in the 0000 Xxx) or by a vote of a majority of the Company's entire
Board of Directors on 60 days' written notice to the Adviser or by the Adviser
on 60 days' written notice to the Company. This agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
10. Upon expiration or earlier termination of this agreement,
the Company shall, if reference to "Hanover" is made in the corporate name of
the Company or in the name of the Funds and if the Adviser requests in writing,
as promptly as practicable change its corporate name and the name of the Funds
so as to eliminate all reference to "Hanover", thereafter the Company and the
Funds shall cease transacting business in any corporate name using the word
"Hanover" or any other reference to the Adviser or "Hanover." The foregoing
rights of the Adviser and obligations of the Company shall not deprive the
Adviser, or any affiliate thereof which has "Hanover" in its name, of, but shall
be in addition to, any other rights or remedies to which the Adviser and any
such affiliate may be entitled in law or equity by reason of any breach of this
agreement by the Company, and the failure or omission of the Adviser to request
a change of the Company's or the Funds' names or a cessation of the use of the
name of "Hanover" as described in this paragraph 10 shall not under any
circumstances be deemed a waiver of the right to require such change or
cessation at any time thereafter for the same or any subsequent breach.
11. Except to the extent necessary to perform the Adviser's
obligations under this agreement, nothing herein shall be deemed to limit or
restrict the right of the Adviser, or any affiliate of the Adviser, or any
employee of the Adviser, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
12. This Agreement shall be governed by the laws of
the State of New York.
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If the foregoing correctly sets forth the agreement between
the Company and the Adviser, please so indicate by signing and returning to the
Company the enclosed copy hereof.
Very truly yours,
THE HANOVER INVESTMENT FUNDS, INC.
By: /s/ Xxxx X. Xxxxx
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Title: Secretary
ACCEPTED:
TEXAS COMMERCE BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Press
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Title: Senior Vice President
