EXHBIT (d)(3)
INVESTMENT ADVISORY AGREEMENT BETWEEN AAI AND THE TRUST,
COVERING THE ASSET ALLOCATION FUND
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this 1st day of March,
2002 by and between Aon Funds, a Delaware business trust (hereinafter the
"Trust"), an open-ended management company registered under the Investment
Company Act of 1940, as amended (hereinafter the "1940 Act"), and Aon Advisors,
Inc., a Virginia corporation (hereinafter the "Advisor"), an investment advisor
registered under the Investment Advisers Act of 1940.
1. Furnishing of Documents.
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1.1 The Trust has furnished the Advisor with copies of each of the
following documents:
(a) Agreement and Declaration of Trust of the Trust;
(b) Bylaws of the Trust as in effect on the date hereof;
(c) The Trust's effective registration statement on Form N-lA as filed
with the Securities and Exchange Commission ("SEC"), which includes
all statements of the investment objective, policies and restrictions
of the Fund of the Trust referred to below.
1.2 The Trust will furnish the Advisor, from time to time, with copies of
all amendments of or supplements to the foregoing, if any.
1.3 The Advisor will be entitled to rely on all documents so furnished by
the Trust.
2. Investment Advisory Services.
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2.1 Subject to the supervision and approval of the Trust's trustees (the
"Trustees"), the Trust hereby employs the Advisor to act as the investment
advisor to, and manager of, the Trust's Asset Allocation Fund (hereinafter the
"Fund").
2.2 The Advisor hereby agrees to manage the investment and reinvestment of
the assets of the Fund, at its own expense, in accordance with the Fund's
investment objective, policies and restrictions as stated in the documents
referred to in Section l.1(a), (b) and (c) and Section 1.2 hereof.
2.3 The Advisor agrees, for the term of this Agreement, to assume the
obligations set forth in this Agreement for the compensation provided and on the
other terms and conditions set forth in this Agreement.
2.4 The Advisor shall:
(a) provide, or obtain, and evaluate such economic, statistical and
financial data and information and undertake such additional
investment research as it shall believe necessary or advisable;
(b) conduct a continuous program of investment and reinvestment with
respect to the Fund's assets and, with respect thereto, the Advisor is
hereby granted full authority by the Trust to place orders for
purchases, sales, exchanges or other dispositions of securities and
other instruments for the Fund's account and to manage the investments
and any other property of the Fund, and to provide or obtain such
services as may be necessary in managing, acquiring or disposing of
investments;
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(c) consult with and report to the Trustees, or any committees or officers
acting pursuant to authority of the Trustees, at such times and in
such manner as the Trustees may deem appropriate, with respect to the
implementation of the investment objective, policies and restrictions
of the Fund; and
(d) at the Trust's request, provide persons to serve as trustees and
officers of the Trust.
2.5 Subject to the approval of the Trustees and to other applicable legal
requirements, the Advisor may enter into any advisory or sub-advisory agreement
or contract with another affiliated or unaffiliated entity pursuant to which
such entity will carry out some or all of the Advisor's responsibilities listed
above.
3. Investment Advisory Fee.
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3.1 In consideration of all services rendered pursuant to Section 2 of this
Agreement, the Fund shall pay to the Advisor, after the end of each calendar
month, a fee, accrued daily and based upon the average daily net asset value of
the Fund for the month (or portion thereof during which this Agreement is in
effect), at an annual rate of 0.75% of the first $25 million of such daily net
asset value, 0.60% of the next $25 million of such daily net asset value, 0.45%
of the next $50 million of such daily net asset value; and 0.35% thereafter.
3.2 If on any day there is no determination of the net asset value of the
Fund as a result of a suspension of the right of redemption of Fund shares or
for any other reason, then for the purpose of this Section 3, the net asset
value of the Fund as last determined will be deemed to be the net asset value
for such day.
4. Expenses.
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4.1 The Advisor will bear all expenses in connection with the performance
of its services under this Agreement.
4.2 The Trust or the Fund will assume and pay, or enter into arrangements
providing for the direct payment subject to reimbursement of, all other expenses
incurred in the operation of the Fund or the Trust that are incurred by or
allocated to the Fund, including:
(a) taxes and fees payable by the Fund or the Trust to federal, state or
other government agencies;
(b) brokerage fees and commissions, and issue and transfer taxes;
(c) interest;
(d) Trustees' annual retainer and meeting attendance fees and expenses of
Trustees who are not directors, officers or employees of the Advisor
or of any affiliated person, other than a registered investment
company, of the Advisor;
(e) registration, qualification, filing and other fees in connection with
securities registration requirements of federal and state regulatory
authorities;
(f) the charges and expenses for custodial, paying agent, transfer agent,
administration, dividend agent and accounting agent services,
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(g) outside legal fees and expenses in connection with the affairs of the
Trust, including, but not limited to, registering and qualifying its
shares with federal and state regulatory authorities;
(h) charges and expenses of outside auditors;
(i) costs of meetings of shareholders and Trustees of the Trust;
(j) costs of maintenance of the Trust's existence as a Delaware business
trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering registration
statements, shareholders' reports and proxy statements;
(n) costs and fees associated with delivering reports to and making
filings with the SEC and state Blue Sky authorities;
(o) costs relating to administration of the Trust's general operations;
(p) costs relating to the Trust's own employees, if any; and
(q) costs of preparing, printing and delivering the Trust's prospectuses
and statements of additional information to existing shareholders of
the Fund.
5. Reimbursement.
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5.1 If in any fiscal year, the aggregate expense of the Fund, including
fees pursuant to this Agreement, but excluding interest, taxes, brokerage
commissions and extraordinary expenses, exceeds 1.25% of the average daily net
assets of the Fund, the Advisor will reimburse the Fund for such excess. This
expense reimbursement obligation is not limited to the amount of the fees
received hereunder and will be estimated, reconciled and paid on a monthly
basis.
6. Fund Transactions and Brokerage.
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6.1 The Fund's transactions in equity securities will usually be executed
through brokers that will receive a commission paid by the Fund. The Fund's
transactions in fixed income and money market securities shall usually be
effected with the issuer or with a dealer in such instruments acting as
principal on a net basis. The Fund also may purchase underwritten issues, which
involve an underwriting discount or commission. Decisions with respect to the
purchase and sale of portfolio securities, including allocation of portfolio
business and the negotiation of the price of the securities and commissions, if
any, are to be made by the Advisor or, if applicable, the appropriate
sub-advisor.
6.2 Neither the Advisor nor any company affiliated with it shall act as a
broker or dealer for the purpose of executing portfolio transactions for the
Fund.
6.3 The primary consideration in allocating transactions to dealers and
brokers shall be prompt and effective execution of orders at the most favorable
security prices obtainable ("best execution"). Consideration also may be given
to additional factors, such as furnishing of supplemental research and other
services deemed to be of value to the Trust, the Fund, the Advisor or, if
applicable, to the appropriate sub-advisor. The Advisor or sub-advisor is
authorized to execute orders with dealers or brokers that provide research and
security and economic analysis that supplements the research and analysis of the
Advisor or sub-advisor, as the case may be, even though the spread or commission
at which an order is executed may be higher than that which another dealer or
broker might charge,
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provided that the Advisor or sub-advisor determines in good faith that the
amount of the spread or commission is reasonable in relation to the value of the
services provided. Such research and research services include advice as to the
value of securities, the advisability of investment in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The research may be
useful to the Advisor or sub-advisor in serving other portfolios of the Trust,
the Fund and other accounts managed by the Advisor or sub-advisor.
7. Similar Activities for Others.
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7.1 The services of the Advisor to the Fund under this Agreement are not to
be deemed exclusive and the Advisor will be free to render similar services to
others so long as its services under this Agreement are not impaired. Investment
decisions for the Fund will be made independently from those of other accounts
that may be managed by the Advisor or sub-advisor. If, however, accounts managed
by the Advisor or sub-advisor are simultaneously engaged in purchases of the
same securities, then, pursuant to the authorization of the Trustees, available
securities may be allocated to each account and may be averaged as to price in
whatever manner the Advisor or sub-advisor deems to be fair.
7.2 The parties to this Agreement understand that this system might
adversely affect the price paid by the Fund, or limit the size of the position
obtainable for the Fund. To the extent that transactions on behalf of more than
one client of the Advisor or sub-advisor during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
the Trust and the Fund recognize that there may be an adverse effect on price.
8. Compliance and Maintenance of Records.
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8.1 The Advisor agrees to manage the investment and reinvestment of the
Fund's assets in compliance with the 1940 Act and rules and regulations
thereunder. The Advisor also agrees to maintain and preserve, in accordance with
the 1940 Act and rules thereunder, and for the periods prescribed by Rule 3la-2
under the 1940 Act, books and records with respect to the Fund's securities
transactions required to be maintained by Rule 3la-1 under the 1940 Act.
8.2 The Advisor further agrees that all records which it maintains for the
Fund are the Trust's property and that the Advisor will surrender them to the
Trust, its independent auditors, the Trustees, or as may be required by any
government agency having jurisdiction over the Trust, promptly upon written
request. The provisions of this Section 8 shall survive any termination of this
Agreement.
9. Dual Interests.
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9.1 It is understood by both parties that any of the shareholders,
trustees, officers, employees and agents of the Trust may be a director,
officer, employee or agent of, or be otherwise interested in, the Advisor, any
affiliated person of the Advisor, or any organization in which the Advisor or
any affiliated person of the Advisor may have an interest; and that the Advisor,
and any such affiliated person or any such organization may have an interest in
the Trust or the Fund.
9.2 It is also understood by both parties that the existence of any such
dual interest shall not affect the validity of any transactions hereunder,
except as otherwise provided by specific provisions of applicable law, including
the 1940 Act.
10. Duration, Termination and Amendment of this Agreement.
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10.1 This Agreement shall not become effective, and the Advisor shall not
serve or act as the Fund's investment advisor, unless and until this Agreement
is approved by the Trust's board of trustees (the "Board"), including a majority
of the Trustees who are not parties to this Agreement or interested persons of
any such party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Fund.
10.2 If approved as provided above, this Agreement shall continue in effect
for two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(a) by the Board; or
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(b) by a vote of a majority of the outstanding voting securities of the
Fund.
In either event such continuance also must be approved by the vote of a majority
of the Trustees who are not parties to this Agreement or interested persons of
the Trust or of the Advisor, cast in person at a meeting called for the purpose
of voting on such approval.
10.3 This Agreement may, on sixty days' written notice, be terminated at
any time, without the payment of any penalty, by the Board, by a vote of a
majority of the Fund's outstanding voting securities of the Fund or by the
Advisor.
10.4 This Agreement shall automatically terminate in the event of its
assignment.
10.5 In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act, particularly the definitions of
"interested person" and "assignment" and a "majority of the outstanding voting
securities," shall be applied.
10.6 Except as may otherwise be permitted by law, this Agreement shall not
be amended without specific approval of such amendment by:
(a) the vote of a majority of the outstanding voting securities of the
Fund; and
(b) the vote of a majority of the Trustees, including a majority of the
Trustees who are not parties to this Agreement and who are not
interested persons of the Trust or of the Advisor, cast in person at a
meeting called for the purpose of voting on such amendment.
11. Liability of the Advisor.
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11.1 In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Advisor, or of
its officers, directors, agents, employees, controlling persons, shareholders,
or any other person or entity affiliated with the Advisor or retained by it to
perform or assist in the performance of its obligations under this Agreement
(each of the foregoing, an "Advisory Affiliate"), neither the Advisor nor any
Advisory Affiliate shall be subject to liability to the Trust or the Fund or to
any shareholder of the Fund or to any other person with a beneficial interest in
the Fund or the Trust for any act or omission in the course of, or connected
with, rendering services hereunder, including without limitation any error of
judgment or mistake of law or for any loss suffered by the Trust or the Fund or
any shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the 1940
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services.
12. Use of Name "Aon," "Combined" and "Combined Specialty" Marks or Symbols.
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12.1 If the Advisor ceases to act as the investment advisor, or, in any
event, if the Advisor so requests in writing, the Trust agrees it will take all
necessary action to change the name of the Trust and/or the Fund to a name not
including the word "Aon," "Combined" and/or "Combined Specialty" and will cease
to use any marks or symbols related thereto.
13. Miscellaneous.
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13.1 The Advisor may from time to time employ or associate with any person
or persons it may believe to be particularly fitted to assist it in the
performance of this Agreement. The compensation of any such persons will be paid
by the Advisor, and no obligation will be incurred by, or on behalf of, the
Trust with respect to them. In addition, the Trust understands that the persons
employed by the Advisor to assist in the performance of its duties hereunder
will not devote their full time to those duties, and that nothing contained
herein will be deemed to limit or restrict the Advisor's right or the right of
any of the Advisor's affiliates to engage in and devote time and attention to
other businesses or to render other services of whatever kind or nature.
13.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
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13.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and same instrument.
13.4 It is intended by the parties that this Agreement be governed by the
law of the State of Illinois; however, this Agreement is also governed by, and
subject to, the 1940 Act, and rules thereunder, including such exemptions
therefrom as the SEC may grant.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
/s/ Xxxxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
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Secretary President
Attest: Aon Advisors, Inc.
/s/ Xxxxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
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Secretary President
