PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of August 1, 1998, among Xxxxxx
Associates, Inc., a California corporation (the "Sub-Advisor"); Fremont
Investment Advisors, Inc., a Delaware corporation (the "Advisor"); and Fremont
Mutual Funds, Inc., a Maryland corporation (the "Fund").
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company and is authorized to issue separate series (the "Series"),
each of which may offer a separate class of shares of beneficial interest, each
Series having its own investment objective, policies and limitations; and
WHEREAS, the Fund presently offers shares of a particular series named
the Fremont California Intermediate Tax-Free Fund (the "California Tax-Free
Series"); and
WHEREAS, the Fund has retained the Advisor to render investment
management and administrative services to the California Tax-Free Series; and
WHEREAS, the Advisor and the Fund desire to retain the Sub-Advisor to
furnish portfolio management services to the California Tax-Free Series in
connection with the Advisor's investment management activities on behalf of the
Series, and the Sub-Advisor is willing to furnish such services to the Advisor
and the California Tax-Free Series;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Sub-Advisor, the Advisor and the Fund
as follows:
1. Appointment. The Advisor and the Fund hereby appoint the Sub-Advisor
to provide sub-investment advisory services to the Advisor and the Fund with
respect to certain assets of the California Tax-Free Series for the periods and
on the terms set forth in this Agreement. The Sub-Advisor accepts such
appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. Sub-Advisor Duties. Subject to the supervision of the Advisor, the
Sub-Advisor shall have full discretionary authority as agent and
attorney-in-fact with respect to the portion of assets of the California
Tax-Free Series' portfolio assigned to the Sub-Advisor, from time to time by the
Advisor or the Board of Directors, including authority to: (a) buy, sell,
exchange, convert or otherwise trade in any securities without limitation and
(b) place orders for the execution of such securities transactions with or
through such brokers, dealers, or issuers as Sub-Advisor may select. The
Sub-Advisor will provide the services under this Agreement in accordance with
the California Tax-Free Series' registration statement filed with the Securities
and Exchange Commission ("SEC"), as amended. The Advisor will provide the
Sub-Advisor with a copy of each registration statement promptly after it has
been filed with the SEC. Investments by the Sub-Advisor shall conform with the
provisions of Appendix B attached hereto, as such may be revised from time to
time at the discretion of the Advisor and the Fund. Subject to the foregoing,
the Sub-Advisor will vote proxies with respect to the securities and investments
purchased with
the assets of the California Tax-Free Series' portfolio managed by the
Sub-Advisor. The Sub-Advisor further agrees that it will:
(a) conform with all applicable rules and regulations of the
SEC.
(b).place orders pursuant to its investment determinations for
the California Tax-Free Series either directly with the issuer or with any
broker or dealer. In placing orders with the issuer or dealers, the Sub-Advisor
will attempt to obtain the best net price and the most favorable execution of
its orders. Consistent with this obligation, when the execution and price
offered by two or more brokers or dealers are comparable, the Sub-Advisor may,
in its discretion, purchase and sell portfolio securities to and from brokers
and dealers who provide it with research advice and other services of lawful
assistance to the Sub-Advisor in serving the California Tax-Free Series as the
Sub-Advisor or who sell the California Tax-Free Series' shares.
(c) make available to the Advisor and the Fund's Board of
Directors promptly upon their request all its investment records and ledgers
relating to the California Tax-Free Series to assist the Advisor and the Fund in
their compliance with respect to the California Tax-Free Series' securities
transactions as required by the 1940 Act and the Investment Advisers Act of 1940
("Advisers Act"), as well as other applicable laws. The Sub-Advisor will furnish
the Fund's Board of Directors with respect to the California Tax-Free Series
such periodic and special reports as the Advisor and the Directors may
reasonably request in writing.
(d) maintain detailed records of the California Tax-Free
Series' assets managed by the Sub-Advisor as well as all investments, receipts,
disbursements and other transactions made with such assets. Such records shall
be open to inspection and audit during the Sub-Advisor's normal business hours
upon reasonable notice by any person designated by the Advisor or the Fund. The
Sub-Advisor shall provide to the Advisor or the Fund and any other party
designated by either the Advisor or the Fund: (i) monthly statements of the
activities with regard to the assets for the month and of the assets showing
each asset at its cost and, for each security listed on any national securities
exchange, its value at the last quoted sale price reported on the composite tape
on the valuation date or, in the cases of securities not so reported, by the
principal exchange on which the security traded or, if no trade was made on the
valuation date or if such security is not listed on any exchange, its value as
determined by a nationally recognized pricing service used by the Sub-Advisor
specified by such pricing service on the valuation date, and for any other
security or asset in a manner determined in good faith by the Sub-Advisor to
reflect its then fair market value; (ii) statements evidencing any purchases and
sales as soon as practicable after such transaction has taken place, and (iii) a
quarterly review of the assets under management.
3. Expenses. During the term of this Agreement, the Sub-Advisor will
pay all expenses incurred by it, its staff and their activities, in connection
with its portfolio management activities under this Agreement. The Sub-Advisor
shall not be responsible for any expense incurred by the Advisor or the Fund,
except as provided in Section 6 below.
4. Compensation. For the services provided to the California Tax-Free
Series, the Advisor will pay the Sub-Advisor the fees as set forth in Appendix A
hereto at the times set forth in Appendix A hereto.
5. Books and Records; Custody.
(a) In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Advisor hereby agrees that all records which it maintains
for the California Tax-Free Series are the property of the Fund and further
agrees to surrender promptly to the Fund any of such records upon the Fund's
request. The Sub-Advisor further agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act and to preserve the records required by Rule 204-2
under the Advisers Act for the period specified in the Rule.
(b) Title to all investments shall be made in the name of the
Fund, provided that for convenience in buying, selling, and exchanging
securities (stocks, bonds, commercial paper, etc.), title to such securities may
be held in the name of the Fund's custodian bank, or its nominee. The Fund shall
advise the Sub-Advisor of the identity of its custodian bank and shall give the
Sub-Advisor 15 days' written notice of any changes in such custody arrangements.
Neither the Sub-Advisor, nor any parent, subsidiary or related
firm, shall take possession of or handle any cash, securities, mortgages or
deeds of trust, or other indicia of ownership of the Fund's investments, or
otherwise act as custodian of such investments. All cash and the indicia of
ownership of all other investments shall be held by the Fund's custodian bank.
The Fund shall instruct its custodian bank to (a) carry out
all investment instructions as may be directed by the Sub-Advisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Sub-Advisor with all operational information necessary for the Sub-Advisor to
trade on behalf of the Fund.
6. Indemnification. The Sub-Advisor agrees to indemnify and hold
harmless the Advisor, the Fund, any affiliated person within the meaning of
Section 2(a)(3) of the 1940 Act ("affiliated person") of the Advisor or the Fund
(other than the Sub-Advisor) and each person, if any, who, within the meaning of
Section 15 of the Securities Act of 1933 (the "1933 Act"), controls
("controlling person") the Advisor or the Fund against any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) to which the Advisor, the Fund or such affiliated person or
controlling person may become subject under the 1933 Act, 1940 Act, the Advisers
Act, or under any other statute, at common law or otherwise, which (1) may be
based upon any wrongful act or omission by the Sub-Advisor, any of its employees
or representatives or any affiliate of or any person acting on behalf of the
Sub-Advisor or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering the shares of the Fund or any amendment thereof or any supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Fund or any affiliated person of the Fund by the
Sub-Advisor or any affiliated person of the Sub-Advisor; provided, however, that
in no case is the Sub-Advisor's indemnity in favor of
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the Advisor or the Fund or any affiliated person or controlling person of the
Advisor or the Fund deemed to protect such person against any liability to which
any such person would otherwise be subject by reason of willful misfeasance, bad
faith or negligence in the performance of his or its duties or by reason of his
or its reckless disregard of obligations and duties under this Agreement or
under any law.
The Fund agrees not to hold the Sub-Advisor or any of its
officers or employees liable for, and to indemnify and hold harmless, the
Sub-Advisor and its directors, officers, employees, affiliated persons and
controlling persons ("Indemnified Parties") against, any act or omission of any
other Sub-Advisor providing investment management services to the Fund, and
against any costs and liabilities the Indemnified Parties may incur as a result
of a claim against the Indemnified Parties regarding actions taken in good faith
exercise of their powers and responsibilities hereunder excepting matters as to
which the Indemnified Parties have been grossly negligent, engaged in willful
misfeasance, bad faith, reckless disregard of the obligations and duties under
this Agreement or have been in violation of applicable law or regulations.
7. Other Investment Activities of Sub-Advisor. The Fund and Advisor
acknowledge that the Sub-Advisor may have investment responsibilities or render
investment advice to, or perform other investment advisory services for, other
individuals or entities ("Affiliated Accounts"). It is also understood that the
services of the Sub-Advisor provide a competitive advantage to the Fund and the
Advisor, and the Sub-Advisor agrees that it will not provide investment advisory
or Sub-Advisory services to any other United States, publicly offered, SEC
registered investment company with investment objectives and policies similar to
those of the California Tax-Free Series for the duration of this agreement.
Subject to the provisions of paragraph 2 hereof, the Fund agrees that the
Sub-Advisor may give advice or exercise investment responsibility and take other
action with respect to other Affiliated Accounts which may differ from advice
given or the timing or nature of action taken with respect to the California
Tax-Free Series; provided that the Sub-Advisor acts in good faith, and provided
further that it is the Sub-Advisor's policy to allocate, within its reasonable
discretion, investment opportunities to the California Tax-Free Series over a
period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objectives and policies of the
California Tax-Free Series and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more of the Affiliated Accounts may
at any time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the California Tax-Free Series may have an
interest from time to time, whether in transactions which may involve the
California Tax-Free Series or otherwise. The Sub-Advisor shall have no
obligation to acquire for the California Tax-Free Series a position in any
investment which any Affiliated Account may acquire, and the Fund shall have no
first refusal, co-investment or other rights in respect of any such investment
either for the California Tax-Free Series or otherwise.
8. (a) Duration. This Agreement shall become effective on the date
hereof. Unless terminated as herein provided, this Agreement shall remain in
full force and effective for a period of two years from the date of this
Agreement, and shall continue in full force and effect for periods of one year
thereafter so long as such continuance is approved at least annually (i) by
either the Board of Directors of the Fund or by a vote of a majority (as defined
in the 0000 Xxx) of the outstanding voting securities of the California Tax-Free
Series, and (ii) by the Advisor,
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and (iii) by the vote of a majority of the Board of Directors of the Fund who
are not parties to this Agreement or "interested persons" (as defined in the
0000 Xxx) of any such party, cast in person at a meeting called for the purpose
of voting on such approval.
(b) Termination. This Agreement may be terminated at any time,
without payment of any penalty, by the Board of Directors of the Fund or by the
vote of a majority (as defined in the 0000 Xxx) of the outstanding voting
securities of the California Tax-Free Series, or by the Advisor, on thirty (30)
days' written notice to the Sub-Advisor, or by the Sub-Advisor on like notice to
the Board of Directors of the Fund and to the Advisor. Payment of fees earned
through the date of termination shall not be construed as a penalty.
(c) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment.
9. Amendments. No provision of this agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by a vote of a majority of the outstanding voting securities of
the California Tax-Free Series, if such approval is required by applicable law.
10. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State
of California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the
Sub-Advisor as an agent of the Fund or the Advisor.
(e) This Agreement supersedes any prior agreement relating to
the subject matter hereof between the parties.
(f) This Agreement may be executed in counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered, shall be deemed an original and all of which
counterparts shall constitute but one and the same agreement.
11. Use of Name. It is understood that the name "Xxxxxx Associates,
Inc." or the name of any of its affiliates, or any derivative associated with
those names, are the valuable property of the Sub-Advisor and its affiliates and
that the Fund and/or the Fund's distributor have the right to
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use such name(s) or derivative(s) in offering materials and sales literature of
the Fund so long as this Agreement is in effect. Upon termination of the
Agreement the Fund shall forthwith cease to use such name(s) or derivative(s).
12. Receipt of Brochure. The Advisor and the Fund have received from
Xxxxxx Associates, Inc. the disclosure statement or "brochure" required to be
delivered pursuant to Rule 204-3 of the Advisers Act, which disclosure statement
or brochure was received by the Advisor and the Fund more than 48 hours prior to
entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
XXXXXX ASSOCIATES, INC.
By:____________________________
Title:_________________________
FREMONT INVESTMENT ADVISORS, INC.
By:____________________________
Title:_________________________
FREMONT MUTUAL FUNDS, INC.
By:____________________________
Title:_________________________
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APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Xxxxxx Associates, Inc.
Sub-Advisor to the Fremont California Intermediate Tax-Free Fund
SCHEDULE OF FEES
Fremont Investment Advisors, Inc. will pay to Xxxxxx Associates, Inc. a fee
computed at the annual rate of 0.20% (20 basis points) of the average value of
the daily assets of the California Intermediate Tax-Free Fund under management
by Xxxxxx Associates, Inc. The Portfolio Management Agreement with the
Sub-Advisor may be terminated by the Advisor or the Investment Company upon 30
days' written notice. The Advisor has day-to-day authority to increase or
decrease the amount of the California Tax-Free Series' assets under management
by the Sub-Advisor.
Fees will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month and shall be due and payable within thirty
(30) days after an invoice has been delivered to the Advisor.
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XXXXXXXX X
TO PORTFOLIO MANAGEMENT AGREEMENT
Xxxxxx Associates, Inc.
Sub-Advisor to the Fremont California Intermediate Tax-Free Fund
INVESTMENT OBJECTIVES AND GUIDELINES
Overall Investment Objective:
The objective of the Fremont California Intermediate Tax-Free Fund is to obtain
as high a level of interest income exempt from federal income tax and California
personal income tax as is consistent with prudent investment management. The
California Tax-Free Series seeks to achieve its objective by investing in debt
securities, the interest income from which is not includable in gross income for
federal income tax purposes ("exempt from federal income tax") and is exempt
from California personal income taxes.
Policy and Guidelines for Sub-Advisor:
The Sub-Advisor will adhere to the Investment Objective and to policies in the
Fremont California Intermediate Tax-Free Fund prospectus and Statement of
Additional Information.
Performance Objective for Sub-Advisor:
The Sub-Advisor is expected to achieve a competitive rate of return over a 3 to
5 year time horizon and/or a complete market cycle, relative to other California
Intermediate Tax-Free Funds as compiled by Lipper Analytical Services and/or
Morningstar. A competitive rate of return is defined as fund performance in the
top one-third of such funds. Performance may be compared to other investments or
indices of comparable quality as outlined in the Statement of Additional
Information.
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