Exhibit 5(a)
AGREEMENT
between
Xxxxxxx Xxxxxxx
International Fund, Inc.,
an open end investment
company, having its
principal place of
business at 000 Xxxx
Xxxxxx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, X.X.X.
(hereinafter called "the
Company") OF THE ONE PART
and
GUARDIAN XXXXXXX XXXXXXX
LIMITED, a company
incorporated under the
Companies Acts and having
its registered office at 0
Xxxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxx
(hereinafter called "the
Manager") OF THE OTHER
PART
W H E R E A S:
(A) The Company proposes to engage in business as an open-end management
investment company and to register as such under the U.S. Investment
Company Act of 1940, as amended.
(B) The Company is authorised to issue shares of capital stock in one or more
series, the shares of which will represent and correspond to interests in
one or more separate portfolios of securities and other assets held by the
Company.
(C) The Manager is engaged principally in the business of rendering investment
management services and is registered as an investment adviser under the
U.S. Investment Advisers Act of 1940, as amended, and is a member of, and
regulated in the conduct of its investment business by, the Investment
Management Regulatory Organisation Limited.
(D) The Company desires the Manager to render investment
2
management services to the Company in the manner and on the terms and
conditions hereinafter set forth.
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
1.1 In this Agreement the following words and expressions shall where not
inconsistent with the context have the following meanings respectively:
(a) "Associate" means and includes any corporation which in relation to
the person concerned (being a corporation) is a Holding Company or a
Subsidiary or a Subsidiary of any such Holding Company or a
corporation (or a Subsidiary of a corporation) at least one-third
of the issued share capital of which is beneficially owned by the
person concerned or an Associate thereof under the preceding part of
this definition and includes any firm the partners of which or any
one or more of them are beneficially entitled whether directly or
indirectly or through the medium of a corporation or corporations to
at least three-quarters of the issued equity share capital of the
person concerned (being a corporation) and includes any partner in
any such firm. Where the person concerned is an individual, firm or
other unincorporated body the expression "Associate" means and
includes any corporation directly or indirectly or through the
medium of a corporation or corporations controlled by such person
and any partner in any such firm;
(b) "Xxxxxxx Xxxxxxx Overseas Limited" means Xxxxxxx Xxxxxxx
3
Overseas Limited, a company incorporated under the Companies Acts
and having its registered office at 0 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx
XX0 0XX;
(c) "Business Day" means a day on which the New York Stock Exchange is
open for business;
(d) "Commencement Date" means [ ] 1990 or, if later, the date on which a
copy of this Agreement signed by or on behalf of the Manager has
been signed by or on behalf of the Company and returned to the
Manager;
(e) "Custodian" means State Street Bank and Trust Company, Boston,
Massachusetts, U.S.A. and its agents and sub-custodian banks or such
other bank or banks as may in the future serve as custodian of the
investments'
(f) "Directors" means the Board of Directors of the Company from time to
time including any duly appointed committee thereof;
(g) "Holding Company" means a holding company as defined in Section 736
of the Companies Xxx 0000;
(h) "IMRO" means Investment Management Regulatory Organisation Limited;
(i) "Investments" means the assets and rights from time to time of the
Company comprised in the Portfolio;
(j) "Investment Policy" means the investment objective, policies and
restrictions which are set out in the
4
current Registration Statement on Form N-1A as filed with the SEC
and as amended from time to time following written notice given by
the Company to the Manager;
(k) "Portfolio" means the investments and cash which may from time to
time comprise the Company's assets;
(1) "Rules" means the rules (including any regulations) made by the
board of IMRO, as altered, amended, added to or cancelled from time
to time whether by the board of IMRO or pursuant to the Financial
Services Xxx 0000, together with the Statutory Rules;
(m) "SEC" means the U.S. Securities and Exchange Commission;
(n) "Statutory Rules" means rules or regulations made under Chapter V of
the Financial Services Xxx 0000 which are binding on the Manager;
(o) "Sub-Investment Management Agreement" means the sub-investment
management agreement between the Manager and Xxxxxxx Xxxxxxx
Overseas Limited of even date herewith;
(p) "Subsidiary" means a subsidiary as defined in Section 736 of the
Companies Xxx 0000;
(q) "U.S." means the United States of America;
(r) "1940 Act" means the U.S. Investment Company Act of 1940, as
amended;
(s) any reference to the Company or the Manager includes a
5
reference to its or their duly authorised agents or delegates;
(t) words importing the singular number shall be deemed to include the
plural number and vice versa;
(u) words importing the masculine gender only shall include the feminine
gender and vice versa; and
(v) words importing persons shall include companies or associations or
bodies of persons, whether corporate or not.
1.2 The headings to the Clauses of this Agreement are for convenience only and
shall not affect the construction or interpretation thereof.
1.3 References herein to statutory provisions shall be construed as references
to those provisions as respectively amended or re-enacted from time to
time and shall include any provision of which they are re-enactments
(whether with or without modification).
2. Appointment and functions of the Manager
2.1 With effect from the Commencement Date the Company hereby appoints the
Manager to be the investment manager of the Portfolio, all upon the terms
contained herein and the Manager hereby accepts such appointment and
agrees to assume the obligations set forth herein.
2.2 In exercising its functions under this Agreement the Manager shall at all
relevant times consider advice given to it by
6
Xxxxxxx Xxxxxxx Overseas Limited under the Sub-Investment Management
Agreement.
2.3 Notwithstanding Clause 2.2 above, any investment activity undertaken by
the Manager pursuant to this Agreement and any other activities undertaken
by the Manager on behalf of the Company shall at all times be subject to
any written directives of the Directors, any duly constituted committee
thereof or any officer of the Company acting pursuant to written
directives of the Directors.
3. Investment Management Functions of the Manager
3.1 During the continuance of its appointment as investment manager of the
Portfolio of the Company and without prejudice to the generality of
Clauses 2.1 and 2.3 above the Manager shall:-
(a) manage the investment and re-investment of the Portfolio on a
discretionary basis with a view to achieving the investment
objective contained in the Investment Policy;
(b) provide valuations of the Investments in accordance with the
provisions of Clause 12;
(c) as and when requested by the Company supply the Company with such
information in connection with the Company as may be in the
possession of the Manager or may reasonably be obtained from or
provided by them;
3.2 The Manager shall subject to Clause 4.1 take such steps as necessary to
implement the Investment Policy and regularly
7
report to the Directors on the implementation of said Investment Policy
and the Manager's activities in accordance with Clause 12 below in
connection with the administration of the Company.
3.3 The Manager shall keep or cause to be kept on behalf of the Company such
books, records and statements to give a complete record of all
transactions carried out by the Manager on behalf of the Company in
relation to the investment and re-investment of the Portfolio and such
other books, records and statements as may be required by law and as may
be necessary to give a complete record of all other transactions carried
out by the Manager on behalf of the Company and shall permit the Company
and its employees and agents and the auditors for the time being of the
Company to inspect such books, records and statements at all reasonable
times.
3.4 All records required to be maintained and preserved by the Manager on
behalf of the Company or the Portfolio pursuant to the provisions of rules
or regulations of the SEC under Section 31(a) of the 1940 Act are the
property of the Company and will be surrendered by the Manager promptly on
request by the Company.
3.5 The Manager hereby warrants that it holds and undertakes that it will
continue to hold, all licences, permissions, authorisations and consents
necessary to enable it to carry out its duties hereunder in the ordinary
course of business and that all such licences, permissions, authorisations
and consents are and will remain in full force and effect during the
continuance of this Agreement.
8
3.6 The services to be provided under this Agreement shall be so provided on
the basis that the Company is a "Professional Investor" as defined in the
Rules.
4. Manager's specific powers and obligations in relation to investment
management
4.1 Consistent with the Investment Policy and subject to any written
directions (in accordance with Clause 2.3 above) communicated to the
Manager, the Manager shall have and is hereby granted the authority, power
and right for the Portfolio and in the name of the Company to supervise
and direct the investments of the Company in its discretion and without
prior consultation with the Company to:-
(a) to issue orders and instructions with respect of the disposition of
Investments, moneys and other assets of the Portfolio;
(b) to purchase (or otherwise acquire), sell (or otherwise dispose of)
and invest in investments, moneys and other assets for the account
of the Company and effect foreign exchange transactions on behalf of
the Company and for the account of the Company in connection with
any such purchase, other acquisition, sale or other disposal;
(c) to enter into, make and perform all contracts, agreements and other
undertakings as may in the opinion of the Manager be necessary or
advisable or incidental to the carrying out of the objectives of
this Agreement;
(d) subject to the Rules, to aggregate transactions for the
9
Portfolio with those of other clients and Associates without prior
reference to the Company or such other clients. Aggregation may
operate on some occasions to the advantage of the Company and on
other occasions to the Company's disadvantage. Also the Manager may
act as agent for the Company in relation to transactions in which it
is also acting as agent for its Associates;
(e) to purchase and sell Investments on any Recognised or Designated
Investment Exchange as defined in the Rules (including for this
purpose over the counter markets) or through such other intermediary
as the Manager may in its discretion consider;
(f) to purchase or subscribe for Investments Not Readily Realisable (as
defined in the Rules). However, such investments carry a high risk
of not being readily realisable, market-makers may not be prepared
to deal in them and proper information for determining their current
value may not be available. The purchase of such investments is
subject to such restrictions as may be set out in this Agreement not
inconsistent with the Investment Policy;
(g) to accept offers of new issues, or rights issues and offers of paper
and/or cash alternatives in takeover bids on behalf of the Company;
(h) to invest in futures, options and contracts for differences,
including margined transactions (as defined in the Rules) effected
otherwise than under the rules of
10
a Recognised or Designated Investment Exchange (as defined in the
Rules) or in a contract traded thereon.
(i) for the purposes of carrying out transactions in futures and options
only, to deposit or pledge investments comprised in the Portfolio
and such other documents of title and certificates evidencing title
to such investments and other property as may be required in order
to satisfy the counterparty's margin or collateral requirements. In
all other circumstances and except (a) with the written consent of
and on terms agreed with the Company or (b) if appropriate, as may
be provided in the Company's current Registration Statement filed
with the SEC (as amended from time to time) investments comprised in
the Portfolio and documents of title and certificates evidencing
title to such investments and other property acquired under this
Agreement may not be lent to a third party nor may money be borrowed
on the Company's behalf against the security of such investments,
documents and property.
4.2 As Investments may be denominated in different currencies, a movement of
exchange rates may have a separate effect, unfavourable as well as
favourable, on the gain or loss otherwise experienced in the Investments.
4.3 The Company understands that markets involving futures and contracts for
differences and options can be highly volatile and that such instruments
carry a high risk of loss and that a relatively small adverse market
movement may result not
11
only in loss of the original investment but also an unquantifiable further
loss exceeding any margin deposited. The Company further understands that
it may be required to pay a deposit or margin in support of a transaction
or to supplement that payment after the transaction has been effected and
that the consequence of non-payment may result in the loss of deposit or
margin.
4.4 The Company acknowledges receipt of the Risk Disclosure Statements set out
in Schedule 1 hereto.
4.5 The Manager shall observe and comply with all resolutions of the Directors
of which it has written notice and other lawful orders and directions
given in writing to it from time to time by the Directors and all
activities engaged in by the Manager hereunder pursuant to Clause 3 above
shall at all times be subject to the control of and review by the
Directors and without limiting the generality of the foregoing the
Directors may from time to time:
(a) prohibit the Manager from investing the Portfolio in any investment
or in any currency or country or in or with any person;
(b) require the Manager to sell any investment or (subject to the
availability of funds) to purchase, on behalf of the Company, any
investment;
(c) amend the Investment Policy and notify the Manager of this in
writing;
and the Manager shall and shall procure that any person, firm or company
to whom it delegates any of its functions
12
hereunder shall give effect to all such decisions.
5. Payments due on Investments
The Company shall be responsible for any unpaid calls or other sums which
may become payable upon any of the Investments or any rates, taxes or
other imposts or similar liabilities levied or arising on or in respect of
any of the Investments.
6. Unsolicited Calls
The Company and the Manager are free under this Agreement to telephone,
visit or otherwise communicate with each other without express invitation
to discuss the Portfolio, its composition and investment policy or changes
therein, or any individual investment current or proposed. This may
constitute an "Unsolicited Call" in terms of the Rules.
7. Custody Arrangements
7.1 The Company will at the written request of the Manager arrange for
the opening of bank accounts in the name of the Company with the
Custodian. All sums belonging to the Company including proceeds of
sales and income received on investments shall be credited directly
to such accounts. The Manager will hold no moneys on behalf of the
Company, and accepts no liability for any default by the Custodian.
These bank accounts and moneys are not Client Bank Accounts or
Clients' Money (as defined in the Rules).
7.2 Securities forming part of the Portfolio will be
13
registered in the name of the Custodian or held to its order. The
Manager accepts no liability for any default by the Custodian or
sub-custodian banks.
8. Settlement
The Manager will attend to the settlement and delivery of all purchases
and sales of Investments and deal with issues, rights entitlements and any
other matters affecting such investments. The Manager will also be
entitled to instruct the Custodian to make delivery of documents of title
or certificates evidencing title when settling transactions.
9. Voting
Any rights conferred by Investments of the Company shall be exercised in
such manner as the Manager may determine after having considered the
advice of Xxxxxxx Xxxxxxx Overseas Limited, (subject to the rights of the
Directors to give instruction to the Manager regarding the exercise of
such rights) and subject as aforesaid the Manager may in its discretion
refrain from the exercise of such rights. The Company shall from time to
time, upon request from the Manager, execute and deliver or cause to be
executed and delivered to the Manager or its nominee(s) such powers of
attorney or proxies as may reasonably be required authorising such
attorneys or proxies to exercise any rights or otherwise act in respect of
all or any part of the Investments. Without prejudice to the generality of
the foregoing the Manager will be entitled to give voting instructions to
the
14
Custodian in respect of the exercise of any voting or other rights
attached to any Investment at the discretion of the Manager or as the
Company may instruct from time to time.
10. Lending and Borrowing
10.1 Subject to the Investment Policy and as provided in this Clause 10,
investments comprised in the Portfolio and documents of title and
certificates evidencing title to such investments and other property
acquired under this Agreement may not be lent to a third party nor
may money be borrowed on the Company's behalf against the security
of such investments, documents and property.
10.2 Subject to the Investment Policy, an overdraft facility or line of
credit may be established on behalf of the Company and may be used
as a temporary measure for the extraordinary or emergency needs of
the Company.
10.3 Subject to the Investment Policy and to the temporary borrowing
facility provided for in 10.2 above, the Manager may not commit the
Company to supplement the monies in the Portfolio either by
borrowing on its behalf or by committing it to a contract the
performance of which may require them to supplement the Portfolio.
11. Reporting
11.1 The Manager shall arrange to notify the Company by fax of transactions on
a daily basis and will instruct brokers to send the original contract note
to the Custodian and copies to the Company and the Manager.
15
11.2 The Manager shall supply quarterly to the Company the following:
(a) reports incorporating inter alia, advice as to future policy, which
will be sent within twenty five working days of the end of the
quarter to which the report relates;
(b) a Portfolio valuation prepared by Datastream or some other mutually
agreed and reputable supplier of valuation services. Such valuations
will show the number of units of each investment or other asset
held, the book cost and the aggregate value of each as at the
valuation date and will normally use middle market prices for listed
investments. In the event of any change in this method the Manager
will notify the Company accordingly;
(c) a statement of any income received on the investments held;
(d) a schedule detailing the performance of the Company broken down into
major sectors and comparing the return of the relevant index against
the return of the Company. The returns will be compiled by the WM
Company using information supplied by the Manager; and
(e) schedules showing transactions undertaken during the period under
review.
11.3 The Manager shall attend meetings with the Company from time to time
as required by the Directors. Instructions
16
transactions on a daily basis and will instruct brokers to send the
original contract note to the Custodian and copies to the Company and the
Manager.
11.2 The Manager shall supply quarterly to the Company the following:
(a) reports incorporating inter alia advice as to future policy, which
will be sent within twenty five working days of the end of the
quarter to which the report relates;
(b) a Portfolio valuation prepared by Datastream or some other mutually
agreed and reputable supplier of valuation services. Such valuations
will show the number of units of each investment or other asset
held, the book cost and the aggregate value of each as at the
valuation date and will normally use middle market prices for listed
investments. In the event of any change in this method the Manager
will notify the Company accordingly;
(c) a statement of any income received on the investments held;
(d) a schedule detailing the performance of the Company broken down into
major sectors and comparing the return of the relevant index against
the return of the Company. The returns will be compiled by the WM
Company using information supplied by the Manager; and
(e) schedules showing transactions undertaken during the period under
review.
11.3 The Manager shall attend meetings with the Company from time to time
as required by the Directors. Instructions
17
as to the management of the Portfolio given orally to the Manager at
such meetings will be confirmed in writing to the Manager as
provided for in Clause 23.
12. Material Interests
12.1 Except as provided in Clause 4.1(d) of this Agreement, the Manager may not
effect transactions for the Portfolio in which it has directly or
indirectly a material interest or any relationship with another party
which may involve a conflict of the Manager's duty to the Company without
prior reference to the Company, other than transactions in units in unit
trusts managed by Xxxxxxx Xxxxxxx & Co Limited, an Associate of the
Manager, in accordance with the provisions of sub-clause 12.2 of this
Agreement.
12.2 For the purposes of sub-clause 12.1 of this Agreement the Manager may not
effect transactions for the Portfolio in units in unit trusts managed by
Xxxxxxx Xxxxxxx & Co. Limited unless the Manager shall first have been
issued with an order of exemption by SEC in accordance with sub-section
17(a)(1)(b) of the 1940 Act.
13. Relevant Arrangements
The Manager may not effect transactions for the Portfolio with or through
the agency of a person who provides services under any arrangement where
that person will from time to time provide to or procure for the Manager
services or other benefits which result, or are designed to result, in an
improvement in the services which the Manager provides to its clients and
for which it may make no direct payment but may undertake to place
business with that person.
18
14. Fees
14.1 In consideration for the services to be provided by the Manager
under this Agreement the Company shall, during the continuance of
this Agreement, pay to the Manager in the manner hereinafter
provided, fees calculated by reference to the value of the Portfolio
all in accordance with the following provisions of this Clause
14.
14.2 Subject to sub-clause 14.3 of this Clause, the Company shall pay to
the Manager in respect of each calendar month a fee (exclusive of
Value Added Tax) calculated at the rate of one fifteenth of one per
cent (0.067%) of:-
A
- where:
B
"A" means the aggregate of the Values of the Portfolio as at the
close of business on each Business Day falling in that
calendar month; and
"B" means the number of Business Days falling in that calendar
month.
14.3 From the fee calculated above there shall be deducted sums
representing a pro rata share of the management charge arising on
any unit trust managed by Xxxxxxx Xxxxxxx & Co Limited in which the
Portfolio may be invested from time to time.
Each such deduction shall be calculated as follows:
M x C x D
-
365
Where M is the average daily market value of a holding in a unit
trust managed by Xxxxxxx Xxxxxxx & Co Limited
19
included in the valuation on which the calculation of the fee is
based.
C is the factor described as a percentage and applied to the value
of assets of the unit trust managed by Xxxxxxx Xxxxxxx & Co Limited
in calculating its annual management fee.
D is the number of days in which the holding in the fund has been
held during the period to which the fee relates.
No initial charge will be made for any investment in such unit
trust.
14.4 The Manager shall procure that a sum equal to each deduction under
sub-clause 14.3 above shall be paid by Xxxxxxx Xxxxxxx & Co Limited
to the Manager. Said sum payable to the Manager shall be invoiced by
the Manager to Xxxxxxx Xxxxxxx & Co Limited following the end of
each calendar month and shall be due and payable within ten days of
the relevant invoice.
14.5 Said fees due to the Manager shall be invoiced by the Manager to the
Company following the end of each calendar month and shall be due
and payable within ten days of the relevant invoice. The Company
shall be entitled to make such payments on account as it may in its
absolute discretion determine.
14.6 For the purposes of sub-clause 14.2 of this clause:
(i) the "Value of the Portfolio" means the aggregate of the values
of the assets of the Portfolio at the close of business on a
Business Day. The aggregate of the value of the assets shall
be
20
calculated by taking the value of securities held in the
Portfolio, plus any cash or other assets (including dividends
payable and declared but not collected) less all liabilities
(including accrued expenses, but excluding capital and
surplus);
(ii) the "value of an asset" shall be taken:-
(1) in the case of an investment quoted on a Stock Exchange
where market price is the recognised basis of quotation,
at the price of such investment at the close of business
of the appropriate exchange on the relevant Valuation
Date or, if there have been no sales during the day, at
the mean of the closing bid and asked prices;
(2) in the case of an investment traded only on the
over-the-counter market, at the mean between the bid and
asked prices;
(3) in the case of unquoted investments and other
investments for which market quotations are not readily
available, at the value ascertained in accordance with
such manner as the Directors have deemed appropriate to
reflect the fair value thereof;
(iii) when any asset is held or liability is outstanding in a
currency other than U.S. dollars, such asset or liability
shall be notionally converted into the U.S. dollar
21
equivalents at the prevailing market rates quoted by the
Custodian at the close of business on the Business Day, on the
relevant Valuation Date or, if such Valuation Date is not a
Business Day, on the immediately preceding Business Day.
14.7 The Manager shall procure that Xxxxxxx Xxxxxxx & Co shall be
responsible for furnishing such office space, facilities and
equipment and such clerical help, administrative and bookkeeping
services in Edinburgh as the Company shall reasonably require in the
conduct of its business in accordance with the Administrative and
Secretarial Agreement between Xxxxxxx Xxxxxxx & Co. and the Manager
of even date herewith.
14.8 The Company shall bear all expenses of its organization, operations
and business not specifically assumed or agreed to be paid by the
Manager as provided in this Agreement. In particular, but without
limiting the generality of the foregoing, the Company shall pay all
of the expenses relating to the following expense categories:
custody and accounting services; shareholder servicing agent;
transfer and dividend disbursing agent; shareholder communications;
shareholder meetings; prospectuses; calculation of net asset value;
legal fees and expenses; accounting fees and expenses; directors'
fees and expenses; federal and state registration fees; bonding and
insurance; brokerage commissions; taxes; trade association fees;
nonrecurring and extraordinary expenses (including but not limited
to, legal claims and liabilities and
22
litigation costs and any indemnification related thereto); and all
other charges relating to the operation of the Company unless
otherwise specifically provided herein. All such expenses shall be
paid out of the assets of the Company.
15. Taxation
Bank statements and vouchers will be sent to the [Company] to enable the
Company to reclaim any credits in respect of or tax deducted from the
income of the Portfolio.
16. Ten and Termination of the Agreement
16.1 The term of this Agreement shall begin on [ ], subject to the approval of
the Directors, including a majority of the Directors who are not
"interested persons" (as defined in the 0000 Xxx) and to the approval of a
majority of the outstanding voting securities of the Company (as defined
in the 0000 Xxx) and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect until [ ]. Thereafter, this
Agreement shall continue in effect from year to year, with respect to the
Company, subject to the termination provisions and all other terms and
conditions hereof, provided such continuance is approved at least annually
by the vote of holders of a majority of the outstanding voting securities
of the Company (as defined in the 0000 Xxx) or by the Directors, provided
that in either event, such continuance is also approved annually by the
vote of a majority of the Directors who are not parties to this Agreement
and are not "interested persons" (as defined in the
23
1940 Act) of any party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval. The Manager shall
furnish to the Company, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
16.2 Subject to Clauses 16.3 and 16.4 below, the Company may, at any time and
without the payment of any penalty, terminate this Agreement upon sixty
(60) days written notice to the Manager, either by majority vote of the
Directors or by the vote of a majority of the outstanding voting
securities of the Company (as defined in the 1940 Act).
16.3 The Company shall also be entitled to terminate forthwith the appointment
of the Manager hereunder notwithstanding any period remaining in
accordance with this Clause or, no notice having been given:
i) if the Manager shall commit any material breach of its obligations
under this Agreement and (if such breach shall be capable of remedy)
shall fail within thirty days of receipt of notice in writing served
by the Company requiring it so to do to make good such breach;
ii) if an order is made or a resolution passed to wind up the Manager or
if a receiver is appointed to the whole or any part of the property
and undertaking of the Manager;
iii) if the Shareholders Agreement between the Guardian Insurance &
Annuity Company, Inc., Xxxxxxx Xxxxxxx
24
Overseas Limited and the Manager dated 7 November 1990 is
terminated.
16.4 The Manager may terminate this Agreement without payment of penalty upon
sixty days written notice to the Company.
16.5 The Manager shall also be entitled to terminate forthwith this Agreement,
notwithstanding any period remaining in accordance with this Clause or, no
notice having been given, if (i) the said Shareholders Agreement between
the Guardian Insurance & Annuity Company, Inc., Xxxxxxx Xxxxxxx Overseas
Limited and the Manager is terminated or expires by effluxion of time, or
(ii) an order is made or a resolution passed to wind up the Company, or
(iii) if the Company shall commit any material breach of its obligations
under this Agreement and (if such breach shall be capable of remedy) shall
fail within 30 days of receipt of notice in writing served by the Firm
requiring it so to do to make good such breach.
16.6 This Agreement shall immediately terminate in the event of its assignation
or assignment (as that term is defined in the 1940 Act) by either party
unless such automatic termination shall be prevented by an exemptive order
or rule of the SEC.
16.7 On the termination of the appointment of the Manager under the provisions
of this Clause the Manager shall be entitled to receive all fees accrued
due up to the date of such termination but shall not, in the case of
termination under any sub-clauses 16.2,16.3 or 16.4 above, be entitled to
compensation in respect of such termination.
16.8 On termination of the appointment of the Manager under the
25
provisions of this Clause the Manager shall deliver to the Company, or as
it shall direct, all books of account, records, registers, correspondence,
documents and assets in relation to the affairs of or belonging to the
Company in possession of or under the control of the Manager as investment
manager and take all necessary steps to vest in the Company any assets
previously held in the name of or to the order of the Manager as
investment manager on behalf of the Company.
16.9 Termination of the appointment of the Manager hereunder shall be without
prejudice to transactions already initiated, which transactions shall be
completed.
16.10 The Company and the Manager will co-operate with each other to ensure
that transactions in progress at the date of termination of the Manager's
appointment hereunder shall be completed by the Company in accordance with
the terms of such transactions and, to this end, the Manager shall provide
the Company with all necessary information and documentation to secure
implementation thereof.
17. Continuation and exercise of Manager's powers
The authorities herein contained are continuing ones and shall remain in
full force and effect until revoked by termination of this Agreement as
hereinbefore provided but such revocation shall not affect any liability
in any way resulting from transactions initialled prior to such
revocation.
26
18. Non-exclusivity
18.1 The services of the Manager hereunder are not to be deemed exclusive and
the Manager or any Associate thereof shall be free to render investment
management services, investment advisory services and corporate
administrative services to other parties (including without prejudice to
the generality of the foregoing other investment companies) on such terms
as the Manager or such Associate may arrange so long as its services under
this Agreement are not thereby impaired and to retain for its own use and
benefit fees or other moneys payable thereby. The Manager shall not be
deemed to be affected with notice of or to be under any duty to disclose
to the Company any fact or thing which may come to the notice of it or any
servant or agent of it in the course of the Manager rendering the said
services to others or in the course of its business in any other capacity
or in any manner whatsoever otherwise than in the course of carrying out
its duties under this Agreement.
18.2 The Manager agrees to permit individuals who are directors or officers of
the Manager to serve as directors or officers of the Company.
19. Indemnity
19.1 Neither the Manager nor any of its officers, directors, or employees, nor
any person performing executive, administrative, trading, or other
functions for the Company (at the direction or request of the Manager) or
the Manager in connection with the Manager's discharge of its obligations
undertaken or reasonably assumed with respect to this
27
Agreement, shall be liable for any error of judgment or mistake of law or
for any loss suffered by the Company in connection with the matters to
which this Agreement relates, except for loss resulting from wilful
misfeasance or misconduct, wilful default, bad faith, or gross negligence
in the performance of its or his/her duties on behalf of the Company or
from reckless disregard by the Manager or any such person of the duties of
the Manager under this Agreement.
19.2 The Manager shall not be liable for the consequences of any investment
decision made hereunder or in respect of any other fund managed by the
Manager or any of its Associates which is a permitted investment
hereunder. The Manager acts only as agent for the Company and the Company
hereby undertakes to indemnify the Manager against all actions,
proceedings, claims, demands, costs and expenses which may be brought
against, suffered or incurred by the Manager by reason of its performance
of such duties, including all legal, professional and other expenses
incurred.
19.3 Notwithstanding the provisions of Clause 19.2 the Manager will indemnify
the Company in respect of any loss incurred as a result of negligence or
fraud by the Manager or any of its Associates or their respective
employees in their performance of the duties under the terms of this
Agreement.
20. Complaints
20.1 The Manager has established procedures in accordance with the requirements
of IMRO for the effective consideration of complaints by the Company.
28
20.2 Should the Company wish to make a complaint to the Manager about any
aspect of the Manager's carrying out of its duties under this Agreement or
otherwise, it shall, in the first instance, do so by letter addressed to
the director or directors of the Manager responsible for the management of
the Portfolio. If no satisfactory resolution of the complaint is achieved
within five days, the Company may reiterate the complaint by letter
addressed to the Chairman of the Manager. If no satisfactory resolution is
achieved within ten days of the original complaint, the Company shall then
make its complaint to IMRO.
Notwithstanding the above provisions the Company has a right of complaint
direct to IMRO at any time.
20.3 A booklet setting out the Company's right to investor's compensation under
the Securities and Investments Board's Scheme is available on request from
the Manager.
21. Delegation
The Manager is authorised to delegate any or all of the obligations
incumbent upon it in terms of this Agreement to Xxxxxxx Xxxxxxx Overseas
Limited provided that such delegation is effected by way of a sub
investment management agreement in the form or as near as in the form of
Schedule 2 annexed hereto.
22. Confidentiality
Neither of the parties hereto shall during the continuance of this
Agreement or after its termination disclose to any person firm or fund
whatsoever (except with the authority of
29
the relevant party or unless ordered to do so by a court of competent
jurisdiction or any regulatory body) any information relating to the
business, investments, finances or other matters of a confidential nature
of the other party of which it may in the course of its duties hereunder
or otherwise become possessed and each party shall use all reasonable
endeavours to prevent any such disclosure as aforesaid.
23. Reliance on documents
Whenever pursuant to any provision of this Agreement any notice,
instruction or other communication is to be given by, or on behalf of, the
Company (or its Directors) to the Manager, the Manager may accept as
sufficient evidence thereof:
i) a document signed or purporting to be signed on behalf of the
issuing party by such person or persons whose signature the Manager
is for the time being authorised by such issuing party to accept; or
ii) a message by tested telexcopier, facsimile machine or cable
transmitted by, or on behalf of, the Company (or its Directors) by
such person or persons whose messages the Manager is for the time
being authorised by the Company or its Directors to accept, and the
Manager shall not be obliged to accept any document or message
signed or transmitted or purporting to be signed or transmitted by
any other person.
30
24. Severability
If any of the provisions of this Agreement is found by an arbiter, court
or other competent authority to be void or unenforceable, such provision
shall be deemed to be deleted from this Agreement and the remaining
provisions of this Agreement shall continue in full force and effect.
Notwithstanding the foregoing the parties shall thereon negotiate in good
faith in order to agree the terms of a mutually satisfactory provision to
be substituted for the provision so found to be void or unenforceable.
25. Notices
Any notice required to be given under this Agreement shall be in writing,
delivered personally or sent by first class prepaid letter or transmitted
by telex or facsimile and shall be deemed duly served if left at or served
if left at or sent or (as appropriate) transmitted to the following
addresses (or to the most recent of any other address of which a party
hereto shall have given notice to the other party pursuant to this
Clause):-
(a) if to the Company at:
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx 00000
X.X.X.
For the attention of: X.X. Xxxxx
Facsimile number: 000-000-0000
(b) if to the Manager at:-
0 Xxxxxxxxxx Xxxxxx,
Xxxxxxxxx XX0 0XX
For the attention of: G Xxxxxxx
Facsimile number: 031-225-2358
Notices sent by first class prepaid letter shall be deemed to
31
be served seven business days after posting. Evidence that the Notice was
properly addressed, stamped and put into post shall be conclusive evidence
of posting. A notice sent by facsimile transmission shall be deemed to
have been served at the time when a complete and legible copy is received
by the addressee. In this Clause "business day" means a day on which
normal banking business is carried on in Edinburgh and New York City.
26. Arbitration
If any dispute shall arise between the parties as to the true intent or
meaning or the implementation or termination of this Agreement or any part
thereof in any manner of way, such dispute shall be referred to a single
Arbiter to be nominated by the President for the time being of the Law
Society of Scotland on the application of either party hereto and all
decisions and awards of such arbiter both interim and final shall be
binding upon all parties who hereby respectively undertake to implement
and fulfil the same. Section 3(3) of the Administration of Justice
(Scotland) Act 1972 shall not apply to this Agreement.
27. Governing Law
Notwithstanding any conflict of laws, principles or provisions which may
otherwise apply, this Agreement and the rights and obligations of the
parties shall be governed by and are to be construed in accordance with
the law of
32
Scotland and, to the extent applicable, in accordance with the 1940 Act:
IN WITNESS WHEREOF these presents typewritten on this and the thirty
preceding pages are, together with the Schedule, executed as follows:-
33
SCHEDULE 1
GENERAL RISK DISCLOSURE STATEMENT
PART 1
This statement is made in compliance with the rules of the Securities and
Investments Board.
The risk of loss in investing in commodity, financial or other futures, options
or contracts for differences can be substantial. You should carefully consider
whether such investments are suitable for you in the light of your circumstances
and financial resources. You should be aware of the following points:-
1. In a relatively short time you may sustain a total loss of the deposits
and of the margin placed with your broker to establish or maintain an open
position if the market moves against you. You may be called upon to
deposit a substantial additional margin, at short notice, to maintain your
position. If you do not provide such additional funds within the time
required, your position may be liquidated at a loss and you will be liable
for any resulting deficit.
2. If you deposit collateral as security for calls made upon you by your
broker it will lose its identity as your property once dealings on your
behalf are undertaken and may be passed to an exchange's clearing house or
other brokers. Even if your dealings should ultimately prove profitable,
you may have to accept payment in cash and not get back the actual assets
which you have deposited. Nor will your deposit be protected to the same
extent as would a cash deposit held on trust in a segregated client bank
account.
34
3. Under certain market conditions it may be difficult or impossible to
liquidate a position. This may occur, for example, at times of rapid price
movement if the price rises or falls in one trading session to such an
extent that, under the rules of the relevant exchange, trading is
suspended or restricted.
4. Placing a stop-loss order will not necessarily limit your losses to the
intended amounts, for market conditions may make it impossible to execute
such orders at the stipulated price.
5. A spread or straddle position may be as risky as a single long or short
position and can be more complex.
6. Markets in futures, options and contracts for differences can be highly
volatile and investment in them carries a high risk of loss. The high
degree of "gearing" or "leverage" is a particular feature of this type of
transaction. This stems from the margining system applicable to such
contracts which generally involves a comparatively modest deposit or
margin in terms of the overall contract value, so that a relatively small
market movement can have a disproportionately dramatic effect on your
investment. If the market movement is in your favour, you may achieve a
good profit return, but an equally small adverse market movement can
result not only in the loss of your entire original investment, but may
also expose you to the distinct possibility of an unquantifiable loss
exceeding your original investment.
7. If you take (buy) an option, your risk in most cases will be less than
trading in futures since you should not lose more
35
than the premium you paid plus any commission or other transaction
charges. However, there are many different types of options with different
peculiarities and subject to different conditions. You should accordingly
require your broker to inform you of all relevant details before
committing yourself. In all cases you can easily lose your entire
investment in the option.
If you grant (sell) an option, your risk of loss may be at least as great
as your exposure in trading futures. Although you will receive a premium
payment for granting (selling) the option, a relatively small adverse
market movement can quickly eradicate that premium. You may be liable to
pay substantial additional margins which could involve you in significant
losses. Moreover, the buyer of an option acquires certain rights which may
limit your ability to protect yourself. Only experienced traders should
contemplate granting options and then only after securing full details
from their broker of the applicable conditions and potential risk
exposure.
8. Unless you have effectively agreed otherwise in circumstances where this
is permitted under the rules of the Board when your broker deals for you
he should do so only in contracts of the types dealt with on one of the
recognised or designated exchanges. If you instruct a broker to deal on
foreign markets, he will probably instruct a broker in the country
concerned. Normally that broker will not be subject to the rules or
regulations of the Securities and Investments Board and the exchange on
which he effects the transaction
36
may not be subject to as strict regulations as a recognised investment
exchange in the United Kingdom. Hence the degree of protection afforded to
you may be less than if you restrict your transactions to the United
Kingdom markets. You should ensure that your broker explains the
protections which will operate and ascertain whether he accepts liability
for any default of the foreign broker that he employs. If he does not
accept such liability you could lose all that you have invested or stand
to gain if the foreign broker defaults.
9. You should require of your broker prior to the commencement of trading
written confirmation of all commission and other transaction charges for
which you will be liable. In the event that any charges are not expressed
in money terms (but, for example, as a percentage of contract value) you
should obtain a clear written explanation, including appropriate examples,
to establish what such charges are likely to mean in specific money terms.
You should realise that when commission is charged as a percentage it will
normally be as a percentage of the total contract value and not simply a
percentage of your deposit.
10. Brokers may also be dealers trading for their own account and they may
accordingly be involved in the same markets as you. Under such
circumstances you should be aware that their own account involvement could
be contrary to your interests. Your broker is required to inform you in
advance if he deals on his own behalf in relevant markets.
37
11. The guarantee of performance by the exchanges' clearing houses applies
only to their contracts with members. They do not guarantee performance of
your brokers' contracts with you.
12. Your broker's insolvency or that of any other brokers involved may lead to
your positions being closed out without your consent.
13. You have agreed that your money held by your broker need not be segregated
in a client bank account and you will lack that protection should your
broker become insolvent.
14. This brief statement cannot disclose all risks of investments in futures,
options and contracts for differences. They are not suitable for many
members of the public and you should carefully study such investments
before you commit funds to them. They may also have tax consequences and
on this you should consult your lawyer, accountant or other tax adviser.
PART II
Limited Liability Transaction
1. Before entering into a limited liability transaction, you should obtain
from your broker or the firm with which you are dealing a formal written
statement confirming that the extent of your loss liability on each
transaction will be limited to an amount agreed by you prior to entering
into the transaction.
2. The amount of such agreed liability must be indicated in the contract or
confirmation note of the transaction.
38
3. You are required under the rules of the Board to deposit in cash the
amount of the agreed maximum liability assumed by you in relation to each
transaction.
4. The amount you can lose in limited liability transactions will be less
than in other margined transactions where there is no guaranteed loss
limit. Such costs must be included in (and not additional to) your agreed
loss liability, and you should be aware that higher charges increase the
likelihood and extent of your loss.
39
ADDITIONAL RISK DISCLOSURE STATEMENT
This Statement is made in compliance with the rules of the Securities and
Investments Board because you have authorised your broker to deal with or for
you in futures, options or contracts for differences which are not undertaken
under the rules of a recognised or designated investment exchange and in
contracts traded thereon. Its purpose is to warn you of the risks, additional to
those referred to in the General Risk Disclosure Statement, inherent in such
dealings.
1. In general it is only if you are a business, professional or experienced
investor within the meaning of the Board's rules and have agreed to be
treated as such that your broker will be entitled to undertake such
dealings with or for you. There are only three other circumstances in
which this is permissible subject to your agreement:-
(a) if the dealings are undertaken under a limited liability transaction
(see the General Risk Disclosure Statement) and your broker has
required you to deposit with him a sum in cash equivalent to the
amount of your limited liability prior to the entry into the
transaction,
(b) if your broker carries on investment business only as an
"execution-only dealer", acts only on your unsolicited instructions
and offers not advice or recommendation of any kind, or
(c) your broker is managing your investment portfolio under an agreement
which provides that such transactions may be entered into but only
with a view to protecting
40
against possible adverse fluctuations in the value of other
investments or cash in the portfolio.
Unless you are a business, professional or experienced investor or one or more
of circumstances (a), (b) and (c) apply your broker will not be entitled to
undertake such transactions with or for you.
2. Such transactions may involve you in substantially greater risks than you
might incur by investing in futures, options or contracts for differences
under the rules of a recognised or designated investment exchange and in
contracts of a type traded thereon.
3. There is no regulated market in such contracts and the bid and offer
prices will be established solely by dealers in these contracts. Hence you
may not be able to sell what you have bought or buy what you have sold or
to ascertain whether you are doing so at a fair price.
4. Before entering into any such transactions you should obtain from your
broker a written explanation as to how dealing is to be conducted, the
nature of the contracts offered, the facilities which will be made
available to you and the applicable procedures for entering into the
liquidating transactions, the method of calculating prices and other
relevant material. This you should study carefully, in conjunction with
the General Risk Disclosure Statement and this Additional Risk Disclosure
Statement. You should satisfy yourself that dealing is conducted
throughout in strict conformity with that written explanation and report
to
41
the Board if you have reason to believe it is not. (The Securities and
Investments Board, 0 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxxx XX0X 0XX Tel: 283
2474).
5. If you deal in contracts which are traded solely by one dealer you will
have no alternative other than to liquidate your position with the same
dealer and to accept the price he offers. You should ensure that this
price will be based on objective criteria and that your broker undertakes
that deals will be done at that price.
6. You are also reminded that if you have agreed that your money held by your
broker need not be segregated in a client bank account you will lack that
protection should your broker become insolvent.
42
RISK DISCLOSURE STATEMENT - OPTIONS
This statement is made in compliance with the rules of the Securities and
Investments Board.
The risk of loss in investing in options can be substantial. You should
carefully consider whether such investments are suitable for you in light of
your circumstances and financial resources. You should be aware of the following
points:
Risk Disclosure Statement
1. There are many different types of options with different peculiarities and
subject to different conditions. You should accordingly require your
broker to inform you of all relevant details before committing yourself.
If you take (buy) an option, the extent of your risk should not be more
than the amount of the premium you paid plus any commission or other
transaction charges. However, if you write or grant (sell) an uncovered
option, a relatively small adverse market movement can quickly eradicate
that premium. You may be liable to pay substantial additional margins
which could involve you in significant losses. You may be obliged to make
or take delivery of the underlying investment. Moreover, the buyer of an
option acquires certain rights which may limit your ability to protect
yourself. Only experienced persons should contemplate selling options and
then only after securing full details from their broker of the applicable
conditions and potential risk exposure.
2. If you are required to deposit collateral as security with your broker in
respect of your options transactions, the way
43
in which it will be treated will vary widely according to the type of
option and where it is traded. If you trade options on a recognised or
designated investment exchange, the rules of that exchange and its
clearing house are likely to apply, but entirely different practices and
conditions are likely to be applicable in the case of off-exchange
options. You are strongly advised in either case to ascertain from your
broker prior to entering into the transaction how your collateral will be
dealt with, whether or not it will retain its identity as your property,
and under what circumstances you may be called upon for additional
collateral or other forms of security deposit.
3. Under certain market conditions it may be difficult or impossible to
liquidate positions. This may occur, for example, at times of rapid price
movement if the price rises or falls in one trading session to such an
extent that, under the rules of the relevant exchange, trading is
suspended or restricted.
4. A spread or straddle position may be as risky as a single long or short
position and can be more complex.
5. Unless you have effectively agreed otherwise in circumstances where this
is permitted under the rules of the Board when your broker deals for you
he should do so only in contracts of the type dealt with on one of the
recognised or designated exchanges. If you instruct your broker to deal on
foreign markets, he will probably instruct a broker in the country
concerned. Normally that broker will not be subject to the rules or
regulations of the Securities and Investments Board
44
and the exchange on which he effected the transaction may not be subject
to as strict regulations as a recognised investment exchange in the United
Kingdom. Hence the degree of protection afforded to you may be less than
if you restrict your transactions to the United Kingdom markets. You
should ensure that your broker explains the protections which operate and
ascertain whether he accepts liability for any default of the foreign
broker that he employs. If he does not accept such a liability you could
lose all that you have invested or stand to gain if the foreign broker
defaults.
6. You should require of your broker prior to the commencement of trading
written confirmation of all commission and other transaction charges for
which you will be liable. In the event that any charges are not expressed
in money terms (but, for example, as a percentage of contract value) you
should obtain a clear written explanation, including appropriate examples,
to establish what such charges are likely to mean in specific money terms.
7. Brokers may also be dealers trading for their own account and they may
accordingly be involved in the same markets as you. Under such
circumstances you should be aware that their own account involvement could
be contrary to your interests. Your broker is required to inform you in
advance if he deals on his own behalf in relevant markets.
8. The guarantee of performance by the exchanges' clearing houses applies
only to their contracts with members. They do not guarantee performance of
your contracts.
45
9. Your broker's insolvency or that of any other firm involved in the
transaction may lead to your positions being closed out without your
consent.
10. You have agreed that your money held by your broker need not be segregated
in a client bank account and you will lack that protection should your
broker become insolvent.
