INVESTMENT ADVISORY AGREEMENT
between
THE GUINNESS XXXXXXXX FUNDS
and
GUINNESS XXXXXXXX ASSET MANAGEMENT, LLC
INVESTMENT ADVISORY AGREEMENT, dated as of April 25, 2003 by and between
GUINNESS XXXXXXXX FUNDS, a Delaware statutory trust which may issue one or more
series of shares of beneficial interest (the "Trust"), and GUINNESS XXXXXXXX
ASSET MANAGEMENT, LLC (the "Adviser"), a Delaware limited liability company.
WITNESSETH
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WHEREAS, the Trust is engaged in the 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 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 Investment of
Assets of the Funds
(a) Subject to the succeeding provision 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 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 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 Instruments 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 benefits 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 Fund, except for willful 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 for 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 persons
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; providing, 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 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 appoint 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 their 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 areas, 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 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 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 provided by
such broker or dealer, viewed in terms of either that particular transaction
order 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
therefore.
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 in
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 Trustees 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 purchase 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 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 Trustees with
respect thereto.
5. Compensation to the Adviser
For the Services to be rendered, each Fund shall pay to the Adviser from
the assets of the Fund an investment 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 the 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 the 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 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 defined by 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 Xxxxxxxx"
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 Xxxxxxxx"
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 Xxxxxxxx" 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 Xxxxxxxx" from its name and may not use the
name "Guinness Xxxxxxxx" 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 as 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 Unites 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
Guinness Xxxxxxxx Funds
By: _____________________________
Title:
Guinness Xxxxxxxx Asset Management, LLC
By: ____________________________
Title:
Schedule A
Name of Fund
Fee*
1. Guinness Xxxxxxxx China & Hong Kong Fund 1.00%
2. Guinness Xxxxxxxx Asia Focus Fund 1.00%
3. Guinness Xxxxxxxx Global Innovators Fund 0.90%**
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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 or defer any
portion of the advisory fee from time to time.
** of the average daily net assets of the Fund up to $100 million; 0.75% of
average daily net assets between $100 and $500 million, and 0.60% of average
daily net assets in excess of $500 million.
