1
EXHIBIT 5(y)
[HARBOR FUND LETTERHEAD]
August 4, 1995
XxXxxxxx, Race & Xxxxx, Inc.
000 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
INVESTMENT ADVISORY AGREEMENT FOR SUBADVISER
(HARBOR VALUE FUND)
________________________________________________________
Dear Sirs:
Harbor Capital Advisors, Inc. (the "Adviser"), a Delaware corporation,
with its principal offices at Xxx XxxXxxx, Xxxxxx, Xxxx 00000, is the
investment adviser to Harbor Fund (the "Trust") on behalf of Harbor Value Fund
(the "Fund"). The Trust has been organized under the laws of Delaware to
engage in the business of an investment company. The shares of beneficial
interest of the Trust ("Shares") are divided into multiple series including the
Fund, as established pursuant to a written instrument executed by the Trustees
of the Trust. The Trust is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). Pursuant to authority granted the Adviser by the
Trust's Trustees, the Adviser has selected you to act as a sub-investment
adviser of the Fund and to provide certain other services, as more fully set
forth below. You are willing to act as such a sub-investment adviser and to
perform such services under the terms and conditions hereinafter set forth, and
you represent and warrant that you are an investment adviser registered under
the Investment Advisers Act of 1940, as amended. Accordingly, the Adviser and
the Trust on behalf of the Fund agree with you as follows:
1. DELIVERY OF FUND DOCUMENTS. The Adviser has furnished you with
copies, properly certified or authenticated, of each of the following:
(a) Agreement and Declaration of Trust of the Trust, as amended
and restated from time to time, and the Certificate of Trust
which was filed with the Delaware Secretary of State dated
June 8, 1993 (the "Declaration of Trust").
(b) By-Laws of the Trust as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Trustees selecting the Adviser as
investment adviser and you as a sub-investment adviser and
approving the form of this Agreement.
2
The Adviser will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, including future resolutions of the Trustees approving the
continuance of the items listed in (c) above.
2. ADVISORY SERVICES. You will regularly provide the Fund with
advice concerning the investment management of that portion of the Fund's
portfolio which the Board of Trustees determines to allocate to you from time
to time, which advice shall be consistent with the investment objective and
policies of the Fund as set forth in the Fund's Prospectus and Statement
of Additional Information and any investment guidelines or other instructions
received in writing from the Adviser. The Board of Trustees may, from time to
time, make additions to and withdrawals from the assets of the Fund allocated
to you. You will determine what securities shall be purchased for such portion
of the Fund's assets, what securities shall be held or sold, and what portion
of such assets shall be held uninvested, subject always to the provisions of
the Trust's Declaration of Trust and By-Laws and the Investment Company Act and
to the investment objective, policies and restrictions (including, without
limitation, the requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code") for qualification as a regulated investment
company) of the Fund, as each of the same shall be from time to time in effect
as set forth in the Fund's Prospectus and Statement of Additional Information,
or any investment guidelines or other instructions received in writing from the
Adviser, and subject, further, to such policies and instructions as the Board
of Trustees may from time to time establish and deliver to you. In accordance
with paragraph 5, you or your agent shall arrange for the placing of all orders
for the purchase and sale of portfolio securities with brokers or dealers
selected by you for that portion of the Fund's assets for which you serve as
sub-investment adviser.
The Adviser shall provide you with written statements of the
Declaration of Trust; By-laws; investment objective and policies; prospectus
and statement of additional information and instructions, as in effect from
time to time; and you shall have no responsibility for actions taken in
reliance on any such documents. You will conform your conduct in accordance
with and will ensure that the portion of the portfolio of the Fund allocated to
you conforms with the Investment Company Act and all rules and regulations
thereunder, the requirements for qualification as a regulated investment
company of Subchapter M of the Code, all other applicable federal and state
laws and regulations and with the provisions of the Fund's Registration
Statement as amended or supplemented under the Securities Act of 1933, as
amended, and the Investment Company Act.
2
3
In the performance of your duties hereunder, you are and shall be an
independent contractor and unless otherwise expressly provided herein or
otherwise authorized in writing, shall have no authority to act for or
represent the Trust or the Fund in any way or otherwise be deemed to be an
agent of the Trust or the Fund or of the Adviser. You will make your officers
and employees available to meet with the Trust's officers and Trustees at least
quarterly on due notice to review the investments and investment program of the
portion of the Fund's assets allocated to you in the light of current and
prospective economic and market conditions.
Nothing in this Agreement shall limit or restrict the right of any of
your directors, officers and employees who may also be a trustee, officer or
employee of the Trust to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any business,
whether of a similar or a dissimilar nature, nor limit or restrict your right
to engage in any other business or to render service of any kind to any other
corporation, firm, individual or association.
3. ALLOCATION OF CHARGES AND EXPENSES. You will bear your own costs
of providing services hereunder. Other than as herein specifically
indicated, you will not be required to pay any expenses of the Fund.
4. COMPENSATION OF THE SUBADVISER. For all investment management
services to be rendered hereunder, the Adviser will pay a fee, as set forth in
Schedule A attached hereto, quarterly in April, July, October and January,
based on a percentage of the average of the actual net asset values of the
portion of the Fund that you managed at the close of the last business day
of each month within the quarter. Determination of net asset value of the Fund
is computed daily by the Fund's custodian, State Street Bank and Trust Company,
and is consistent with the provisions of Rule 22c-1 under the Investment
Company Act. Your fee will be based on the average of the net asset values of
the portion of the Fund that you manage, computed in the manner specified in
the Fund's Prospectus and Statement of Additional Information for the
computation of the net assets of the Fund by State Street Bank and Trust
Company, on the last business day of each month within the quarter. If the
determination of net asset value is suspended for the last business day of the
month, then for the purposes of this paragraph 4, the value of the net assets
of the Fund as last determined shall be deemed to be the value of the net
assets. If State Street Bank and Trust Company determines the value of the net
assets of the Fund's portfolio more than once on any day, the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this paragraph 4.
3
4
You will offer to the Adviser any more favorable asset based fee
agreements that are provided to other investment clients. Such offer shall be
made as soon as it is practicable after a more favorable asset based fee
agreement is provided for any other investment clients.
5. AVOIDANCE OF INCONSISTENT POSITION AND BROKERAGE. In connection
with purchases or sales of portfolio securities for the account of the portion
of the Fund allocated to you, neither you nor any of your directors, officers
or employees will act as a principal or agent or receive any compensation in
connection with the purchase or sale of investment securities by the Fund,
other than the compensation provided for in this Agreement. You or your agent
shall arrange for the placing of all orders for the purchase and sale of
portfolio securities for the portion of the Fund's account allocated to you
with brokers or dealers selected by you. 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 most favorable execution and net price available. It is also
understood that it is desirable for the Fund that you have access to
supplemental investment and market research and security and economic analyses
provided by certain brokers who may execute brokerage transactions at a higher
cost to the Fund than may result when allocating brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, you are authorized to place orders for the purchase and sale of
securities for the Fund with such certain brokers, subject to review by the
Board of Trustees from time to time with respect to the extent and continuation
of this practice. It is understood that the services provided by such brokers
may be useful to you in connection with your services to other clients. 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 clients 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 understood that you may render investment advice, management and other
services to others.
You will advise the Trust's custodian and the Adviser on a prompt
basis of each purchase and sale of a portfolio security specifying the name of
the issuer, the description and amount or number of shares of the security
purchased, the market price, commission and gross or net price, trade date,
settlement date and identity of the effecting broker or dealer and such other
information as may be reasonably required. From time to time as the Board of
Trustees or the Adviser may reasonably request, you will furnish to the Trust's
officers and to each of its Trustees reports on portfolio transactions and
reports on issues of securities held in the portfolio, all in such detail as
the Trust or the Adviser may reasonably request.
4
5
On occasions when you deem the purchase or sale of a security to be in
the best interest of the Fund as well as other of your clients, you, to the
extent permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold,
as well as the expenses incurred in the transaction, shall be made by you in
the manner you consider to be the most equitable and consistent with your
fiduciary obligations to the Fund and to such other clients.
6. LIMITATION OF LIABILITY OF SUBADVISER. You will not be liable for
any loss sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security on your recommendation, whether or
not such recommendation shall have been based upon your own investigation and
research or upon investigation and research made by any other individual, firm
or corporation, if such recommendation shall have been made, and such other
individual, firm or corporation shall have been selected without gross
negligence and in good faith; but nothing herein contained will be construed to
protect you against any liability to the Adviser, the Trust, the Fund or its
shareholders by reason of your gross negligence or bad faith or willful
misfeasance in the performance of your duties or by reason of your reckless
disregard of your obligations and duties under this Agreement. Any person,
even though also employed by you, who may be or become an employee of and paid
by the Fund shall be deemed, when acting within the scope of his employment by
the Fund, to be acting in such employment solely for the Fund and not as your
employee or agent.
The Adviser shall indemnify you for any damages and related expenses
incurred by you as a result of the performance of your duties hereunder, unless
the same shall result from behavior found by a final judicial determination to
constitute wilful misfeasance, bad faith, gross negligence or a reckless
disregard of your obligations, as specified above.
You shall keep the Fund's books and records to be maintained by you
and shall timely furnish to the Adviser all information relating to your
services hereunder needed by the Adviser to keep the other books and records of
the Fund required by Rule 31a-1 under the Investment Company Act. You agree
that all records which you maintain for the Fund are the property of the Fund
and you shall surrender promptly and without any charge to the Fund any of such
records required to be maintained by you.
5
6
7. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
remain in force until March 17, 1997 and from year to year thereafter, but only
so long as such continuance, and the continuance of the Adviser as investment
adviser of the Fund, is specifically approved at least annually by the vote of
a majority of the Trustees who are not interested persons of you or the Adviser
or the Trust, cast in person at a meeting called for the purpose of voting on
such approval and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act and
the rules and regulations thereunder. This Agreement may, on 60 days' written
notice, be terminated at any time without penalties charged to the Fund, by the
Board of Trustees, by vote of a majority of the outstanding voting securities
of the Fund, by the Adviser, or by you. This Agreement will terminate
immediately upon the assignment of the investment advisory agreement between
the Adviser and the Trust, on behalf of the Fund. In interpreting the
provisions of this Agreement, the definitions contained in Sections 2(a) of the
Investment Company Act (particularly the definitions of "interested person",
"assignment" and "majority of the outstanding voting securities"), as from time
to time amended, shall be applied, subject, however, to such exemptions as may
be granted by the Securities and Exchange Commission by any rule, regulations
or order.
8. AMENDMENT OF THIS AGREEMENT. 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 whom enforcement of the change, waiver,
discharge or termination is sought, and no material amendment of this
Agreement shall be effective until approved by vote of the holders of a
majority of the outstanding voting securities of the Fund and by the Board of
Trustees, including a majority of the Trustees who are not interested persons
of the Adviser or you or of the Trust, cast in person at a meeting called for
the purpose of voting on such approval.
It shall be your responsibility to furnish to the Board of Trustees
such information as may reasonably be necessary in order for the Trustees to
evaluate this Agreement or any proposed amendments thereto for the purposes of
casting a vote pursuant to paragraphs 7 or 8 hereof.
9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
6
7
10. MISCELLANEOUS. It is understood and expressly stipulated that
neither the holders of Shares of the Trust or the Fund nor the Trustees shall
be personally liable hereunder. The name "Harbor Fund" is the designation of
the Trustees for the time being under the Declaration of Trust and all
persons dealing with the Trust or the Fund must look solely to the property of
the Trust or the Fund for the enforcement of any claims against the Trust or
the Fund as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Trust or the
Fund. No series of the Trust shall be liable for any claims against any other
series or assets of the Trust.
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. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return one such
counterpart to the Fund and the other such counterpart to the Adviser,
whereupon this letter shall become a binding contract.
HARBOR FUND
(ON BEHALF OF HARBOR VALUE FUND)
BY XXXXXX X. XXXXXX
----------------------------------
TITLE: PRESIDENT
HARBOR CAPITAL ADVISORS, INC.
BY XXXXXXXXX X. XXXXXXX
----------------------------------
TITLE: SENIOR VICE PRESIDENT
XXXXXXXX, RACE & XXXXX, INC.
BY XXXXXX X. XXXXX, XX.
----------------------------------
TITLE: PRESIDENT
7
8
XXXXXXXX, RACE & XXXXX, INC.
SCHEDULE A
(HARBOR VALUE FUND)
XxXxxxxx, Race and Xxxxx, Inc. ("DRZ") will receive a subadvisory fee
equal on an annual basis to 0.65% of the portion of Harbor Value Fund's average
net assets managed by DRZ up to $10 million; 0.40% of the next $40 million of
such assets; 0.30% on the next $50 million of such assets; and 0.25% on assets
in excess of $100 million. The Adviser will pay DRZ a fee each year which is
not less than $40,000. In the event this Agreement terminates during any
portion of a year, the fee due DRZ shall be prorated based upon the number of
days the Agreement was in effect. For purposes of determining the applicable
fee rate and satisfying the minimum payments, the assets of the Fund and the
payments by the Adviser to DRZ will be combined with the assets and payments of
the accounts of the Xxxxx-Illinois Master Retirement Trust that DRZ manages.
