INVESTMENT ADVISORY AGREEMENT
Exhibit
(d)(3)
THIS AGREEMENT, made as of this 20th
day of August, 2009, by and between Keystone Mutual Funds, a Delaware statutory
trust (the “Fund”) and Cornerstone Capital Management, Inc., a corporation (the
“Adviser”).
1. INVESTMENT ADVISORY
SERVICES
The Fund hereby engages the Adviser,
and the Adviser hereby agrees to act as investment adviser for, and to manage
the affairs, business and the investment of the assets of the Fund.
The investment of the assets of the
Fund shall at all times be subject to the applicable provisions of the Articles
of Incorporation, By-Laws, Registration Statement on Form N-1A and any
representations contained in the Prospectus of the Fund and shall conform to the
policies and purposes of the Fund as set forth in such Registration Statement
and Prospectus and (i) as interpreted from time to time by the Board of
Trustees of the Fund and (ii) as may be amended from time to time by the
Board of Trustees and/or the shareholders of the Fund as permitted by the
Investment Company Act of 1940, as amended. Within the framework of
the investment policies of the Fund, the Adviser shall have the sole and
exclusive responsibility for the management of the Fund’s assets and making and
execution of all investment decisions for the Fund. The Adviser shall
report to the Board of Trustees of the Fund regularly at such times and in such
detail as the Board may from time to time determine to be appropriate, in order
to permit the Board to determine the adherence of the Adviser to the investment
policies of the Fund.
The Adviser shall, at its own expense,
furnish the Fund with suitable office space, and all necessary office
facilities, equipment and personnel for servicing the investments of the
Fund. The Adviser shall arrange, if requested by the Fund, for
officers, employees or other Affiliated Persons (as defined in Section 2(a)(3)
of the Investment Company Act of 1940, as amended and the rules, regulations and
releases relating thereto) of the Adviser to serve without compensation from the
Fund as directors, officers, or employees of the Fund if duly elected to such
positions by the shareholders or directors of the Fund.
The Adviser hereby acknowledges that
all records necessary in the operation of the Fund, including records pertaining
to its shareholders and investments, are the property of the Fund, and in the
event that a transfer of management or investment advisory services to someone
other than the Adviser should ever occur, the Adviser will promptly, and at its
own cost, take all steps necessary to segregate such records and deliver them to
the Fund.
2. COMPENSATION FOR
SERVICES
In payment for all services,
facilities, equipment and personnel, and for other costs of the Adviser
hereunder, the Fund shall pay to the Adviser a monthly investment advisory fee
determined by applying the annual rate of .70% to the Fund’s average daily net
assets.
For purposes of the calculation of such
fee, the Fund’s net assets shall be computed at the times and in the manner
specified in the Fund’s Registration Statement on Form N-1A. Such fee
shall be payable on the fifth day of each calendar month for service performed
hereunder during the preceding month.
3. ALLOCATION OF
EXPENSES
(a) In
addition to the fees described in Section 2 hereof, the Fund shall pay all
its expenses which are not assumed by the Adviser in its capacity as the Fund’s
investment adviser. These Fund expenses include, by way of example,
but not by way of limitation, (a) brokerage and commission expenses;
(b) interest charges on borrowings; (c) fees and expenses of legal
counsel and independent auditors; (d) the Fund’s organizational and
offering expenses, whether or not advanced by the Adviser; (e) Federal,
state, local and foreign taxes, including issue and transfer taxes incurred by
or levied on the Fund; (f) cost of certificates representing common shares
of the Fund and any other expenses (including clerical expenses) of issuance,
sale or repurchase of the common shares of the Fund; (g) association
membership dues; (h) fees and expenses of registering the Fund’s shares
under the appropriate Federal securities laws and of qualifying the Fund’s
shares under applicable state securities laws; (i) expenses of printing and
distributing reports, notices and proxy materials to shareholders;
(j) costs of annual and special shareholders’ meetings; (k) expenses
of filing reports and other documents with governmental agencies;
(l) charges and expenses of the Fund’s Administrator, custodian and
registrar, transfer agent and dividend disbursing agent; (m) expenses of
disbursing dividends and distributions; (n) compensation of the Fund’s
officers, directors and employees that are not Affiliated Persons or Interested
Persons (as defined in Section 2(a) of the Investment Company Act of 1940, as
amended and the rules, regulations and releases relating thereto) of the
Adviser; (o) the cost of other personnel providing services to the Fund;
(p) travel expenses for attendance of Board of Trustees meetings by all
members of the Board of Trustees of the Fund; (q) insurance expenses;
(r) costs of stationery and supplies; and (s) any extraordinary
expenses of a nonrecurring nature.
(b) Notwithstanding
the foregoing, 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, provided that Adviser’s reimbursement obligation will be
limited to the amount of fees it receives from the Fund 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 3(b) shall be made once a year promptly after the end of the
Fund’s fiscal year.
4. FREEDOM TO DEAL WITH THIRD
PARTIES
The Adviser shall be free to render
services to others similar to those rendered under this Agreement or of a
different nature except as such services may conflict with the services to be
rendered or the duties to be assumed hereunder.
5. EFFECTIVE DATE, DURATION AND
TERMINATION OF AGREEMENT
This Agreement shall become effective
upon signature by both parties (the “Effective Date”). Wherever
referred to in this Agreement, the vote or approval of the holders of a majority
of the outstanding shares of the Fund shall mean the vote of 67% or more of such
shares if the holders of more than 50% of such shares are present in person or
by proxy or the vote of more than 50% of such shares, whichever is
less.
Unless sooner terminated as hereinafter
provided, this Agreement shall continue in effect through June 1, 2010, and
thereafter shall continue in effect for successive periods of 12 months
thereafter, provided that each continuance is specifically approved annually by
(a) the vote of a majority of the Fund’s Board of Trustees who are not
parties to the Agreement or interested persons (as defined in the Investment
Company Act of 1940, as amended and the rules, regulations and releases relating
thereto), cast in person at a meeting called for the purpose of voting on
approval and (b) either (i) the vote of a majority of the outstanding
voting securities of the Fund or (ii) the vote of a majority of the Fund’s
Board of Trustees.
This Agreement may be terminated at any
time without the payment of any penalty by the vote of the Board of Trustees of
the Fund or by the vote of the holders of a majority of the outstanding shares
of the Fund, upon sixty (60) days written notice to the Adviser. The
Adviser may terminate this Agreement without penalty on ninety (90) days written
notice to the Fund. This Agreement shall automatically terminate in
the event of its assignment as defined in the Investment Company Act of 1940 and
the rules thereunder. This Agreement shall automatically terminate
upon completion of the dissolution, liquidation and winding up of the
Fund.
6. LIMITATION OF
LIABILITY
The Adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund or its
shareholders in connection with the performance of its duties under this
Agreement, except a loss resulting from willful misfeasance, bad faith or
negligence on its part in the performance of its duties or from reckless
disregard by it of its duties under this Agreement. Notwithstanding
the above, the Adviser acknowledges that federal and state securities laws
impose liability under certain circumstances when a person acts in good faith,
and nothing herein shall be construed as a limitation or waiver on any rights
that the Fund may have under federal or state securities laws.
7. AMENDMENTS TO
AGREEMENT
No material amendment to this Agreement
shall be effective until approved by vote of the holders of a majority of the
outstanding shares of the Fund.
8. NOTICES
Any notice under this Agreement shall
be in writing, addressed, delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate in writing for receipt
of such notice.
IN WITNESS WHEREOF, the Fund and the
Adviser have caused this Agreement to be executed by their duly authorized
officers as of the day and year first above written.
| KEYSTONE MUTUAL FUNDS | ||
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| CORNERSTONE CAPITAL MANAGEMENT, LLC | ||
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