1
Exhibit 5.6
INVESTMENT ADVISORY AGREEMENT, made this 1st day of November 1997 by
and between XXXXXX MUTUAL FUNDS, a Kentucky Business Trust, for and on behalf of
its Tennessee Tax-Free Short-to-Medium Series, (hereinafter called
"Short-to-Medium Series"), and XXXXXX & COMPANY, INC., a corporation organized
and existing under the laws of the State of Kentucky (hereinafter called the
"Adviser").
WITNESSETH:
WHEREAS, the Short-to-Medium Series is engaged in business as part of
an open-end management investment company which is registered as such under the
federal Investment Company Act of 1940; and
WHEREAS, the Adviser is engaged in the business of rendering investment
supervisory services with respect to municipal securities and is registered as
an investment adviser under the federal Investment Advisers Act of 1940; and
WHEREAS, the Short-to-Medium Series desires to retain the Adviser to
render investment supervisory services and provide office space and facilities
and corporate administration to the Income Series in the manner and on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. The Adviser shall act as investment adviser and render investment
supervisory services to the Short-to-Medium Series and shall provide the
Short-to-Medium Series with office space and facilities and corporate
administration, subject to and upon the terms and conditions set forth in this
Agreement.
2. The Adviser shall obtain and evaluate such information relating to
the economy, industries, businesses, municipal issuers, securities markets and
securities as it may deem necessary or useful in the discharge of its
obligations hereunder; shall formulate a continuing program for the management
of the assets and resources of the Short-to-Medium Series in a manner consistent
with its investment objectives; shall determine the securities to be purchased
and sold by the Short-to-Medium Series, and the portion of its assets to be held
in cash or cash equivalents, in order to carry out such program; and generally
shall take such other steps, including the placing of orders for the purchase or
sales of securities on behalf of the Short-to-Medium Series, as the Adviser may
deem necessary or appropriate for the implementation of such program. The
Adviser shall also furnish to or place at the disposal of the Short-to-Medium
Series such of he information, reports evaluations, analyses and opinions
formulated or obtained by the Adviser in the discharge of its duties hereunder
as the Short-to-Medium Series may, at the time or from time to time, reasonably
request or as the Adviser may deem helpful to the Short-to-Medium Series.
3. (a)The Adviser shall:
(i) Pay or provide for and furnish to the Short-to-Medium Series
such office space, equipment facilities, personnel and services (exclusive of
and in addition to those provided by any custodian, transfer agent or other
institutional agent retained by the Short-to-Medium Series) as the
Short-to-Medium Series may reasonably require in the conduct of its business;
(ii)Maintain and preserve on behalf of the Short-to-Medium Series,
for such periods and in such forms as are prescribed by rules and regulations of
the Securities and Exchange Commission (the "Commission"), all of the accounts,
books and other documents the Short-to-Medium Series is required to maintain and
preserve pursuant to Section 31(a) of the Investment
2
Company Act of 1940 and the rules and regulations of the Commission thereunder
which are not maintained and preserved on behalf of the Short-to-Medium Series
by any custodian, transfer agent or other institutional agent retained by the
Short-to-Medium Series;
(iii) Furnish the services and pay or provide for the compensation
and expenses of individuals competent (A) to perform for the Short-to-Medium
Series all executive and administrative functions that are not assigned to any
custodian, transfer agent or other institutional agent retained by the
Short-to-Medium Series, and (B) to supervise and coordinate the activities of
such institutional agents and the other agents (e.g., independent accountants
and legal counsel) retained by the Short-to-Medium Series; and
(iv)Permit officers or employees of the Adviser who are duly
elected or appointed as officers, trustees, members of any committee of trustees
or members of any advisory board or committee of the Short-to-Medium Series to
serve as such without remuneration from or other cost to the Short-to-Medium
Series.
(b) The adviser shall pay all sales and promotional expenses
incurred in the distribution of shares of the Short-to-Medium Series. The
expenses to be assumed and paid by the Adviser include the costs of:
(i) Media and direct mail advertising;
(ii) Printing copies of the prospectus of Xxxxxx Mutual Funds
and shareholder reports which are used in its sales or promotional efforts; it
being understood that the Short-to-Medium Series will bear printing costs
relating to copies of its prospectus and reports which are distributed to its
shareholders;
(iii) Printing share purchase order forms to accompany the
prospectus of Xxxxxx Mutual Funds and
(iv) Corresponding and dealing with prospective investors, up
to and including receipt of their orders for the purchase of Short-to-Medium
Series shares.
(c) The Short-to-Medium Series shall bear all expenses of its
operation not specifically assumed by the Adviser as hereinabove set forth or as
provided elsewhere in this Agreement. The Adviser, in its sole discretion, may
at any time or from time to time pay or assume any expense that the
Short-to-Medium Series would or might otherwise be required to bear. However,
the Adviser's payment or assumption of any such expenses on one or more occasion
shall neither relieve the Adviser of any obligation to the Short-to-Medium
Series pursuant to paragraph 6(b) hereof nor obligate the Adviser to pay or
assume the same or any similar expense of the Short-to-Medium Series on any
subsequent occasion.
4. The Adviser may employ, retain or otherwise avail itself of the
services or facilities of other persons or organizations for the purpose of
providing the Adviser or the Short-to-Medium Series with such statistical and
other factual information, such advice regarding economic factors and trends,
such advice as to occasional transactions in specific securities or such other
information, advice or assistance as the Adviser may deem necessary, appropriate
or convenient for the discharge of its obligations hereunder or for the
discharge of Adviser's overall responsibilities with respect to the other
accounts which it serves as investment adviser. The Adviser and any individual
performing executive or administrative functions for the Short-to-Medium Series
whose services were made available to it by the Adviser are specifically
authorized to allocate brokerage and principal business to firms that provide
such services or facilities and to cause the Short-to-Medium Series to pay a
member of a securities exchange, or any other securities broker or dealer, an
amount of commission for effecting a securities transaction in
3
excess of the amount of commission another member of an exchange or another
broker or dealer would have charged for effecting that transaction, if the
Adviser or the individual allocating such brokerage determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services (as such services are defined in Section 28(e)
of the Securities Exchange Act of 1934) provided by such member, broker or
dealer, viewed in terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to the accounts as to which the
Adviser exercises investment discretion (as such term is defined in Section
3(a)(35) of the Securities Exchange act of 1934).
5. All accounts, books and other documents maintained and preserved by
the Adviser on behalf of the Short-to-Medium Series pursuant to paragraph
3(a)(i) hereof are the property of the Short-to-Medium Series and shall be
surrendered by the Adviser promptly on request by the Short-to-Medium Series.
The Short-to-Medium Series shall furnish or otherwise make available to the
Adviser such financial reports, proxy statements and other information relating
to the business and affairs of the Short-to-Medium Series as the Adviser may, at
any time or from time to time, reasonably require in order to discharge its
obligations under this Agreement.
6. As full compensation for all services rendered, facilities furnished
and expenses paid or assumed hereunder by the Adviser, the Short-to-Medium
Series shall pay the Adviser a fee at the annual rate of one-half of one percent
(1/2 of 1%) of the first $100,000,000 average daily net asset value, .45 of 1%
of the average daily net assets between $100,000,001 and $150,000,000, and .4 of
1% of the average daily net assets in excess of $150,000,000 of the
Short-to-Medium Series, as determined in accordance with the Declaration of
Trust of Xxxxxx Mutual Funds. The amounts due the Adviser in payment of such
fees shall be accrued daily by the Short-to-Medium Series on the basis of the
net asset value of the Short-to-Medium Series applicable to the close of each
business day, and in the case of any day which is not a business day, the net
asset value of the Short-to-Medium Series applicable to the close of the last
preceding business day; and the total amount thus accrued with respect to each
calendar month or portion thereof during which this Agreement remains in effect
shall become due and payable to the Adviser in the first business day of the
next succeeding calendar month. The term "business day" means a day for all or
part of which the New York Stock Exchange is open for unrestricted trading.
7. The Adviser agrees that neither it nor any of its officers or
directors shall take any long or short position in the shares of the
Short-to-Medium Series; but this prohibition shall not prevent the purchase by
or for the Adviser or any of its officers or directors of shares of the
Short-to-Medium Series at the price at which such shares are available to the
public at the moment of purchase.
8. Nothing herein contained shall be deemed to require the
Short-to-Medium Series to take any action to the Declaration of Trust of Xxxxxx
Mutual Funds or the Trust By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the Board of Trustees of Xxxxxx Mutual Funds of its responsibility for
and control of the conduct of the Short-to-Medium Series.
9. The term of this Agreement shall begin on November 1, 1997 subject
to approval by the shareholders of the Short-to-Medium Series at the 1997 Annual
Meeting, and, unless sooner terminated as provided in paragraph 10 hereof, this
Agreement shall remain in effect through the close of business on October 31,
1999, and thereafter subject to the termination provisions and other terms and
conditions hereof; if: (a) such continuation shall be specifically approved at
least annually by the Board of Trustees, or by vote of a majority of the
outstanding voting securities of the Short-to-Medium Series, and concurrently
with such approval by the Board of Trustees or prior to such approval by the
holders of the outstanding voting securities of the Short-to-Medium Series, as
the case may be, 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 Xxxxxx Mutual
Funds who are not parties to this
4
Agreement or interested persons of any such party; and (b) the Adviser shall
have not notified the Short-to-Medium Series, in writing, at least sixty (60)
days prior to October 31 of each year after 1998 that it does not desire such
continuation. The Adviser shall furnish to the Short-to-Medium Series, promptly
upon its request such information in the possession of or readily available to
the Adviser as the Trustees of Xxxxxx Mutual Funds may at any time from time to
time deem reasonably necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
10. This Agreement may not be amended, transferred, assigned, sold or
in any manner hypothecated or pledged, without the affirmative vote of a
majority of the outstanding voting securities of the Short-to-Medium Series, and
this Agreement shall automatically and immediately terminate in the event of its
assignment.
11. This Agreement may be terminated by either party hereto, without
the payment of any penalty, upon sixty (60) day notice in writing to the other
party; provided that in the case of termination by the Short-to-Medium Series,
such action shall have been authorized by resolution of the Board of Trustees of
Xxxxxx Mutual Funds or by vote of a majority of the outstanding voting
securities of the Short-to-Medium Series.
12. Neither the Adviser, any affiliated person of the Adviser, nor any
other person performing executive or administrative functions for the
Short-to-Medium Series whose services were made available to the Short-to-Medium
Series by the Adviser shall be liable to the Short-to-Medium Series for any
error of judgment or mistake of law or for any loss suffered by the
Short-to-Medium Series by reason of any action taken or omission to act
committed in connection with the matters to which this Agreement relates, except
that nothing herein contained shall be construed (i) to protect the Adviser or
any affiliated person of the Adviser (whether or not such affiliated person is
or was an officer, director or member of any advisory board of the
Short-to-Medium Series and/or Xxxxxx Mutual Funds) against any liability to the
Short-to-Medium Series or its security holders for any breach of fiduciary duty
with respect to the Adviser's receipt of compensation for services to the
Short-to-Medium Series, (ii) to protect the Adviser or any affiliated person of
the Adviser who is or was an officer, trustee or member of any advisory board of
the Short-to-Medium Series and/or Xxxxxx Mutual Funds against any liability to
the Short-to-Medium Series or its security holders for any act or practice (
other than the Adviser's receipt of compensation for services to the
Short-to-Medium Series) constituting a breach of fiduciary duty involving
personal misconduct in respect of the Short-to-Medium Series, (iii) to protect
the Adviser against any liability to the Short-to-Medium Series or its security
holders to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations or duties, under this
Agreement, or (iv) to protect any affiliated person of the Adviser who is or was
a Trustee or officer of the Short-to-Medium Series or its security holders for
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office with the Short-to-Medium Series and/or Xxxxxx Mutual
Funds. In the event that any affiliated person of the Adviser shall become a
Trustee, officer or employee of the Short-to-Medium Series and/or Xxxxxx Mutual
Funds, then all actions taken or omissions to act made by such person in
connection with the discharge of his duties to the Short-to-Medium Series shall
be deemed to have been taken or made by such person solely in his capacity as
such Trustee, officer or employee of said entity, notwithstanding the fact that
the services of such person are being or have been furnished by the Adviser to
said entity as provided in this Agreement or that the compensation and expenses
of such person are being or have been paid by the Adviser or any other
affiliated person of the Adviser.
13. Nothing herein contained shall limit the freedom of the Adviser or
any affiliated person of the Adviser to render investment supervisory services
and provide corporate administration to other investment companies, to act as
investment adviser or investment counselor to other
5
persons, firms or corporations or to engage in other business activities; but so
long as this Agreement or any extension, renewal or amendment hereof shall
remain in effect and until the Adviser shall otherwise consent, the Adviser
shall be the only investment adviser to the Short-to-Medium Series.
14. 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 Investment Company Act of 1940 shall be resolved by reference to such
term or provision of that 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 Commission validly issued pursuant
to said Act. Specifically, the terms "vote of a majority of the outstanding
voting securities", "interested person", assignment" and "affiliated person", as
used in paragraphs 9, 10, 11, 12 and 13 hereof, shall have the meanings assigned
to them by Section 2(a) of the Investment Company Act of 1940, as amended. In
addition, where the effect of a requirement of the Investment Company Act of
1940, as amended, reflected in any provision of this Agreement is relaxed by a
rule, regulation or order of the Commission, whether of special or of general
application, 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
signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
XXXXXX MUTUAL FUNDS for and on behalf of
Tennessee Tax-Free Short-to-Medium Series
By:
---------------------------------------
Vice President
Attest
--------------------------
XXXXXX & COMPANY, INC.
By:
---------------------------------------
President
Attest
--------------------------
