Exhibit 5(xii)
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Investment Advisory and Management Agreement dated as of
, 1998 between MENTOR FUNDS, a Massachusetts business trust (the
"Trust"), and MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited liability
company (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Mentor High Income Portfolio, a series of the Trust
(the "Portfolio"), will determine what investments shall be purchased, held,
sold, or exchanged by the Portfolio and what portion, if any, of the assets of
the Portfolio shall be held uninvested and shall make changes in the Portfolio's
investments. In the performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and Bylaws of the Trust and
the Portfolio's stated investment objectives, policies, and restrictions, and
will use its best efforts to safeguard and promote the welfare of the Portfolio
and to comply with other policies which the Trustees may from time to time
determine and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Portfolio as provided in Section 1(e), will furnish all necessary investment and
related management facilities, including salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Agreement.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for the Portfolio the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
doing so, the Manager, bearing in mind the Portfolio's best interests at all
times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience, and financial
stability of the broker or dealer involved, and the quality of service rendered
by the broker or dealer in other transactions. Subject to such policies as the
Trustees of the Trust may determine, the
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Manager 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 the Portfolio to pay a broker or dealer that provides brokerage and
research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission that
another broker or dealer would have charged for effecting that transaction, if
the Manager 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 Manager's overall responsibilities with respect to the
Portfolio and to other clients of the Manager as to which the Manager exercises
investment discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934, as amended and Rule 11a2-2(T) thereunder, and the Portfolio hereby
consents to the retention of compensation for such transactions in accordance
with Rule 11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Portfolio. It is also understood that the Manager and any person controlled
by or under common control with the Manager have and may have advisory,
management, service, or other agreements with other organizations and persons,
and may have other interests and business.
3. COMPENSATION TO BE PAID BY THE PORTFOLIO TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, at the
annual rate of 0.70% of the Portfolio's average daily net assets. The first
payment of the fee shall be made as promptly as possible at the end of the month
next succeeding the effective date of this Agreement, and shall constitute a
full payment of the fee due the Manager for all services prior to that date. If
this Agreement is terminated as of any date that is not the last day of a month,
such fee shall be paid as promptly as possible after such date of termination,
shall be based on the average daily net assets of the Portfolio in that period
from the beginning of such month to such date of termination, and shall be that
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proportion of such average daily net assets as the number of business days in
such period bears to the number of business days in such month. The average
daily net assets of the Portfolio shall in all cases be based only on business
days and be computed as of the time of the regular close of business of the New
York Stock Exchange, or such other time as may be determined by the Trustees.
Each such payment shall be accompanied by a report of the Trust prepared either
by the Trust or by a reputable firm of independent accountants which shall show
the amount properly payable to the Manager under this Agreement and the detailed
computation thereof.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS
AGREEMENT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Portfolio, and 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 Trust who are not interested persons of the
Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Agreement shall become effective upon its execution and shall
remain in full force and effect continuously thereafter until the close of
business on , 2000 (unless terminated automatically as set forth in Section 4),
and shall continue for successive one-year periods thereafter, if approved in
accordance with Section 6, until terminated by either party hereto at any time
by not more than sixty days nor less than thirty days written notice delivered
or mailed by registered mail, postage prepaid, to the other party. Such action
by the Trust with respect to termination may be taken either (i) by vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Portfolio.
Termination of this Agreement pursuant to this Section 5 will be
without the payment of any penalty.
6. ANNUAL APPROVAL.
For additional terms after the initial term of this Agreement, this
Agreement shall be submitted for approval to the Trustees annually and shall
continue in effect only so long as specifically approved annually by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval.
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7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Portfolio means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of 67% or
more of the shares of the Portfolio present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio entitled to vote at such meeting are present in person
or by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
8. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of Mentor
Institutional Trust (the "Trust") is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust for the Portfolio as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers, or shareholders of the Fund but are binding
only upon the assets and property of the Portfolio.
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IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR INVESTMENT
ADVISORS, LLC, have each caused this instrument to be signed in duplicate in its
behalf by its President or Vice President thereunto duly authorized, all as of
the day and year first above written.
MENTOR FUNDS
on behalf of Mentor High Income Portfolio
By:_____________________________________
MENTOR INVESTMENT ADVISORS, LLC
By:______________________________________
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