EXHIBIT 23(F)(VII)
MANAGEMENT AGREEMENT
TO: Diamond Hill Capital Management, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxx 00000
Dear Sirs:
Diamond Hill Funds (the "Trust") herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an investment
company. The Trust currently offers five series of shares to investors, one of
which is the Diamond Hill Bank & Financial Fund.
You have been selected to act as the investment adviser of Diamond Hill
Short Term Fixed Income Fund and each additional series of the Trust which shall
have approved this Agreement, as such series are set forth in Exhibit A hereto
(together, the "Fund") and to provide certain other services, as more fully set
forth below, and you are willing to act as such investment adviser and to
perform such services under the terms and conditions hereinafter set forth.
Accordingly, the Trust agrees with you as follows effective upon the date of the
execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment advice as
you in your discretion deem advisable and will furnish a continuous investment
program for the Fund consistent with the Fund's investment objectives and
policies. You will determine the securities to be purchased for the Fund, the
portfolio securities to be held or sold by the Fund and the portion of the
Fund's assets to be held uninvested, subject always to the Fund's investment
objectives, policies and restrictions, as each of the same shall be from time to
time in effect, and subject further to such policies and instructions as the
Board of Trustees of the Trust ("Board") may from time to time establish. You
will advise and assist the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of the Board and the
appropriate committees of the Board regarding the conduct of the business of the
Fund.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons rendering
any services to the Fund who are officers, directors, stockholders or employees
of your corporation and will make available, without expense to the Fund, the
services of such of your employees as may duly be elected officers or trustees
of the Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any officers,
trustees and employees of the Trust who are not officers, directors, employees
or stockholders of your corporation or its affiliates will be paid by the Fund.
The Fund will be responsible for the payment of all operating
expenses of the Fund, including the compensation and expenses of all trustees of
the Trust who are not interested persons of the Trust ("non-interested
trustees"), as defined in the Investment Company Act of 1940, as amended (the
"Act") and of any employees of the Fund and of any other persons rendering any
services to the Fund; clerical and shareholder service staff salaries; office
space and other office expenses; fees and expenses incurred by the Fund in
connection with membership in investment company organizations; legal, auditing
and accounting expenses; expenses of registering shares under federal and state
securities laws, including expenses incurred by the Fund in connection with the
organization and initial registration of shares of the Fund; insurance expenses;
fees and expenses of the custodian, transfer agent, dividend disbursing agent,
shareholder service agent, plan agent, administrator (including fees and
expenses payable to you under the Administrative Services Agreement between you
and the Trust), accounting and pricing services agent and underwriter of the
Fund; expenses, including clerical expenses, of issue, sale, redemption or
repurchase of shares of the Fund; the cost of preparing and distributing reports
and notices to shareholders, the cost of printing or preparing prospectuses and
statements of additional information for delivery to the Fund's current
shareholders; the cost of printing or preparing stock certificates or any other
documents, statements or reports to shareholders; expenses of shareholders'
meetings and proxy solicitations; advertising, promotion and other expenses
incurred directly or indirectly in connection with the sale or distribution of
the Fund's shares (including expenses which the Fund is authorized to pay
pursuant to Rule 12b-1 under the Act or under any Shareholder Servicing Plan);
and all other operating expenses not specifically assumed by you. The Fund will
also pay all brokerage fees and commissions, taxes, borrowing costs (such as
dividend expense on securities sold short and interest), fees and expenses of
the non-interested trustees and such extraordinary or non-recurring expenses as
may arise, including litigation to which the Fund may be a party and
indemnification of the Trust's trustees and officers with respect thereto.
You may obtain reimbursement from the Fund, at such time or times as
you may determine in your sole discretion, for any of the expenses advanced by
you, which the Fund is obligated to pay, and such reimbursement shall not be
considered to be part of your compensation pursuant to this Agreement.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments to be made as
provided in this Agreement, as of the last business day of each month, the Fund
will pay you a fee at the annual rate calculated as a percentage of the average
value of its daily net assets, as such fee is set forth on Exhibit A hereto.
The average value of the daily net assets of the Fund shall be
determined pursuant to the applicable provisions of the Amended and Restated
Agreement and Declaration of Trust of the Trust or a resolution of the Board, if
required. If, pursuant to such provisions, the determination of net asset value
of the Fund is suspended for any particular business day, then for the purposes
of this paragraph, the value of the net assets of the Fund as last determined
shall be deemed to be the value of the net assets as of the close of the
business day, or as of such other time as the value of the Fund's net assets may
lawfully be determined, on that day. If the determination of the net asset value
of the Fund has been suspended for a period including such month, your
compensation payable at the end of such month shall be computed on the basis of
the value of the net assets of the Fund as last determined (whether during or
prior to such month).
2
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities for
the account of the Fund, it is understood that you will arrange for the placing
of all orders for the purchase and sale of portfolio securities for the account
with brokers or dealers selected by you, subject to review of this selection by
the Board from time to time. You will be responsible for the negotiation and the
allocation of principal business and portfolio brokerage. In the selection of
such brokers or dealers and the placing of such orders, you are directed at all
times to seek for the Fund the best qualitative execution, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer.
You should generally seek favorable prices and commission rates that
are reasonable in relation to the benefits received. In seeking best qualitative
execution, you are authorized, subject to the provisions of the Act, the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, to select brokers or dealers who also provide brokerage
and research services to the Fund and/or the other accounts over which you
exercise investment discretion. You are, subject to the provisions of the Act,
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a Fund portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if you determine in
good faith that the amount of the commission is reasonable in relation to the
value of the brokerage and research services provided by the executing broker or
dealer. The determination may be viewed in terms of either a particular
transaction or your overall responsibilities with respect to the Fund and to
accounts over which you exercise investment discretion. The Fund and you
understand and acknowledge that, although the information may be useful to the
Fund and you, it is not possible to place a dollar value on such information.
The Board shall periodically review the commissions paid by the Fund to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Fund.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best qualitative execution as
described above, you may give consideration to sales of shares of the Fund as a
factor in the selection of brokers and dealers to execute Fund portfolio
transactions.
Subject to the provisions of the Act, and other applicable law, you,
any of your affiliates or any affiliates of your affiliates may retain
compensation in connection with effecting the Fund's portfolio transactions,
including transactions effected through others. If any occasion should arise in
which you give any advice to clients of yours concerning the shares of the Fund,
you will act solely as investment counsel for such client and not in any way on
behalf of the Fund. Your services to the Fund pursuant to this Agreement are not
to be deemed to be exclusive and it is
3
understood that you may render investment advice, management and other services
to others, including other registered investment companies.
5. LIMITATION OF LIABILITY OF ADVISER
You may rely on information reasonably believed by you to be
accurate and reliable. Except as may otherwise be required by the Act or the
rules and regulations thereunder, neither you nor your shareholders, members,
officers, directors, employees, agents, control persons or affiliates of any
thereof shall be subject to any liability for, or any damages, expenses or
losses incurred by the Trust in connection with, any error of judgment, mistake
of law, any act or omission connected with or arising out of any services
rendered under, or payments made pursuant to, this Agreement or any other matter
to which this Agreement relates, except by reason of willful misfeasance, bad
faith or gross negligence on the part of any such persons in the performance of
your duties under this Agreement, or by reason of reckless disregard by any of
such persons of your obligations and duties under this Agreement.
Any person, even though also a director, officer, employee, member,
shareholder or agent of you, who may be or become an officer, director, trustee,
employee or agent of the Trust, shall be deemed, when rendering services to the
Trust or acting on any business of the Trust (other than services or business in
connection with your duties hereunder), to be rendering such services to or
acting solely for the Trust and not as a director, officer, employee, member,
shareholder or agent of you, or one under your control or direction, even though
paid by you.
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall take effect on the date of its execution, and
shall remain in force until May 31, 2005, and from year to year thereafter,
subject to annual approval by (i) the Board or (ii) a vote of a majority of the
outstanding voting securities of the Fund, provided that in either event
continuance is also approved by a majority of the trustees who are not
interested persons of you or the Trust, by a vote cast in person at a meeting
called for the purpose of voting such approval.
This Agreement may, on sixty days written notice, be terminated with
respect to the Fund, at any time without the payment of any penalty, by the
Board, by a vote of a majority of the outstanding voting securities of the Fund,
or by you. This Agreement shall automatically terminate in the event of its
assignment.
7. USE OF NAME
The Trust and you acknowledge that all rights to the name "Diamond
Hill" or any variation thereof belong to you, and that the Trust is being
granted a limited license to use such words in its Fund name or in any class
name. In the event you cease to be the adviser to the Fund, the Trust's right to
the use of the name "Diamond Hill" shall automatically cease on the ninetieth
day following the termination of this Agreement. The right to the name may also
be withdrawn by you during the term of this Agreement upon ninety (90) days'
written notice by you to the Trust. Nothing contained herein shall impair or
diminish in any respect, your right to use the name
4
"Diamond Hill" in the name of, or in connection with, any other business
enterprises with which you are or may become associated. There is no charge to
the Trust for the right to use this name.
8. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, and no amendment of this Agreement shall be effective until
approved by the Board, including a majority of the trustees who are not
interested persons of you or of the Trust, cast in person at a meeting called
for the purpose of voting on such approval, and (if required under
interpretations of the Act by the Securities and Exchange Commission or its
staff) by vote of the holders of a majority of the outstanding voting securities
of the series to which the amendment relates.
9. LIMITATION OF LIABILITY TO TRUST PROPERTY
The term "Diamond Hill Funds" means and refers to the Trustees from
time to time serving under the Trust's Amended and Restated Agreement and
Declaration of Trust as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that the obligations of
the Trust hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust personally, but bind only
the trust property of the Trust, as provided in the Declaration of Trust of the
Trust. The execution and delivery of this Agreement have been authorized by the
trustees and shareholders of the Trust and signed by officers of the Trust,
acting as such, and neither such authorization by such trustees and shareholders
nor such execution and delivery by such officers shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust as provided in
its Declaration of Trust. A copy of the Amended and Restated Agreement and
Declaration of Trust of the Trust is on file with the Secretary of the State of
Ohio.
10. SEVERABILITY
In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
11. QUESTIONS OF INTERPRETATION
(a) This Agreement shall be governed by the laws of the State of
Ohio.
(b) For the purpose of this Agreement, the terms "majority of the
outstanding voting securities," "control" and "interested person" shall have
their respective meanings as defined in the Act and rules and regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under the Act; and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder.
5
(c) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the 1940 Act shall be resolved by reference to such term or provision of the
Act and to interpretation thereof, if any, by the United States courts or in the
absence of any controlling decision of any such court, by the Securities and
Exchange Commission or its staff. In addition, where the effect of a requirement
of the Act, reflected in any provision of this Agreement, is revised by rule,
regulation, order or interpretation of the Securities and Exchange Commission or
its staff, such provision shall be deemed to incorporate the effect of such
rule, regulation, order or interpretation.
12. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust is 000 Xxxxx
Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxx 00000, and your address for this purpose
shall be 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxx 00000.
13. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14. BINDING EFFECT
Each of the undersigned expressly warrants and represents that he
has the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
15. CAPTIONS
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.
6
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
upon the date thereof.
Yours very truly,
Diamond Hill Funds
Dated as of: May 31, 2004 By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx
President
ACCEPTANCE
The foregoing Agreement is hereby accepted.
Diamond Hill Capital Management, Inc.
Dated as of: May 31, 2004 By: /s/ X.X. Xxxxxx
-----------------
X. X. Xxxxxx
President
7
