H&Q HEALTHCARE INVESTORS
INVESTMENT ADVISORY AGREEMENT
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THIS INVESTMENT ADVISORY AGREEMENT, dated as of April 21, 1987 between
H & Q HEALTHCARE INVESTORS, a Massachusetts business trust (the "Fund"), and
XXXXXXXXX & XXXXX CAPITAL MANAGEMENT INCORPORATED, a California corporation (the
"Investment Adviser"),
W I T N E S S E T H:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. Services To Be Rendered by Investment Adviser to Fund.
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Subject to the supervision and direction of the Board of Trustees of
the Fund, the Investment Adviser will
a. act in strict conformity with the Fund's Declaration of
Trust, the Investment Company Act of 1940 (the "1940 Act") and the
Investment Advisers Act of 1940, as the same may from time to time be
amended;
b. manage the portfolio in accordance with the Fund's
investment objective and policies as stated in the Fund's Prospectus;
c. make investment decisions for the Fund;
d. place purchase and sale orders for portfolio transactions
for the Fund;
e. supply the Fund with office facilities (which may be in the
Investment Adviser's own offices), statistical and research data, data
processing services, clerical, internal executive and administrative
services, and stationery and office supplies;
f. supply or direct and supervise a third party administrator
or custodian in the provision to the Fund of accounting and bookkeeping
services, the calculation of the net asset value of shares of the Fund,
internal auditing services, and other clerical services in connection
therewith; and
g. prepare or supervise and direct a third party administrator
or custodian in the preparation of reports to shareholders of the Fund,
tax returns and reports to and filings with the Securities and Exchange
Commission and state Blue Sky authorities.
In providing these services, the Investment Adviser will provide investment
research and supervision of the Fund's investment and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets. In addition, the Investment Adviser will furnish the Fund
with whatever statistical information the Fund may reasonably request with
respect to the securities that the fund may hold or contemplate purchasing.
2. Brokerage.
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In executing transactions for the portfolio and selecting brokers or
dealers (which brokers or dealers may include any affiliate of the Investment
Adviser to the extent permitted by the 0000 Xxx) the Investment Adviser will use
its best efforts to obtain the best price and execution for the Fund. In
assessing the best price and execution available for any portfolio transaction,
the Investment Adviser will consider all factors it deems relevant including,
but not limited to, price (including any applicable brokerage commission or
dealer spread), size of order, difficulty of execution, and operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. In selecting brokers or dealers to execute a particular transaction
and in evaluating the best price and execution available, the Investment Adviser
may consider the brokerage and research services (as those terms of are defined
in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which the Investment Adviser exercises investment
discretion. It is understood that such services may be useful to the Investment
Adviser in connection with its services to other clients.
On occasions when the Investment Adviser deems the purchase or sale of
a security to be in the best interest of the Fund as well as other clients, the
Investment Adviser, 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, will
be made by the Investment Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to such
other clients.
3. Other Agreements; Use of Name, Etc.
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It is understood that any of the shareholders, Trustees, officers,
agents and employees of the Fund may be a shareholder, director, officer, agent
or employee of or be otherwise interested in the Investment Adviser and in any
affiliate thereof with the Investment Adviser and that the Investment Adviser
and any affiliate thereof with the Investment Adviser may have an interest in
the Fund. It is also understood that the Investment Adviser and persons
affiliated with the Investment Adviser have and may have advisory, management
service or other contracts with other organizations and persons, and may have
other interests and businesses and that the Fund shall have no
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interest in the profits or opportunities derived from the same, that the
Investment Adviser may give advice and take action in the performance of its
duties with respect to such other clients that may differ from advice given on
the timing or nature of action taken with respect to the Fund. Nothing in this
Agreement shall be deemed to confer upon the Investment Adviser any obligation
to acquire for the account of the Fund a position in any security that the
Investment Adviser or any affiliate thereof may acquire for its own account or
for the account of any other client, if in the sole and absolute discretion of
the Investment Adviser it is not for any reason practical or desirable to
acquire a position in such security for the Fund's account.
The Investment Adviser shall authorize and permit any of its officers,
directors and employees who may be elected as Trustees or officers of the Fund
to serve in the capacities in which they are elected. Services to be furnished
by the Investment Adviser under this Agreement may be furnished through the
medium of any of such officers, directors or employees.
The Fund acknowledges that the terms "Xxxxxxxxx & Xxxxx" and "H&Q" are
property rights of the Investment Adviser and its affiliates and that such
entities may permit other entities to use such terms as part of their names. The
Fund agrees that, if the Investment Adviser ceases to act as investment adviser
to the Fund, the Fund's license to use the terms "Xxxxxxxxx & Xxxxx" or "H&Q" as
part of its name will terminate and the Fund will take all necessary actions to
change its name to a name not including such terms.
4. Compensation.
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The Fund will pay to the Investment Adviser as compensation for the
Investment Adviser's services rendered a fee, computed monthly, equal when
annualized to (1) 1.0% of the average net asset value for such month of all
assets of the Fund other than venture capital and other restricted securities
which do not exceed 25% of total net assets and (2) 2.5% of the average net
asset value for such month of venture capital and other restricted securities of
the Fund that constitute up to 25% of total net assets; provided that in no
event shall such monthly fee when annualized exceed 1.375% of the average total
net asset value for such month of the Fund. For purposes of this section,
"average net asset value" and "average total net asset value" for any month
shall be equal to the average of the net asset value of the appropriate assets
at the last business day of such month and the net asset value of the
appropriate assets at the last business day of the prior month. In determining
average net asset value for purposes of clauses (1) and (2) above, liabilities
and expenses of the Fund shall be allocated pro rata based on the ratio that the
assets referred to in each clause bear to the total assets of the Fund. Such fee
shall be payable for each month within five business days after the end of the
such month.
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For purposes of this Section 4, "venture capital and other restricted
securities" shall be securities of issuers for which no market quotations are
readily available and securities of companies for which market quotations are
readily available but which are subject to legal or contractual restrictions on
resale. Securities of companies for which public information is available but as
to sale of which the safe harbor provided by Rule 144(k) is not available shall
be considered to be subject to legal or contractual restrictions on resale.
In the event that expenses of the Fund for any fiscal year should
exceed the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the Fund
are qualified for offer and sale, the compensation due the Investment Adviser
for such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof. In the event that the expenses of the Fund exceed
any expense limitation which the Investment Adviser may, by written notice to
the Fund, voluntarily declare to be effective subject to such terms and
conditions as the Investment Adviser may prescribe in such notice, the
compensation due the Investment Adviser shall be reduced and if necessary the
Investment Adviser shall assume expenses of the Fund, to the extent required by
such expense limitation. In no event shall the provisions of this Section 4
require the Investment Adviser to reduce its fee if not so required by an
applicable statute or regulatory authority.
If the Investment Adviser shall serve for less than the whole of a
month, the foregoing compensation shall be prorated.
5. Expenses.
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The Investment Adviser will bear all expenses in connection with the
performance of its services under this Agreement, including compensation of and
office space for officers and employees of the Fund connected with investment
and economic research, trading and investment management of the Fund, as well as
the fees of all Trustees of the Fund who are "affiliated persons" of the
Investment Adviser, as that term is defined in the 1940 Act, or any of its
"affiliated persons."
The Fund shall pay (or, in the event that such expenses are paid by the
Investment Adviser, shall reimburse the Investment Adviser for) all other
expenses incurred in the organization and operation of the Fund including, among
other things, expenses for legal and auditing services, costs of printing proxy
statements, prospectuses, stock certificates and shareholder reports, charges of
the custodian, any sub-custodian and transfer agent, expenses in connection with
the Dividend Reinvestment and Cash Purchase plan, Securities and Exchange
Commission and National Association of Securities Dealers, Inc. fees, fees and
expenses of Trustees of the Trust who are not "affiliated persons" of the
Investment Adviser or any of its "affiliated persons," accounting and valuation
costs, administrator's fees membership fees in trade associations, fidelity bond
coverage for the Fund's officers and employees, errors and omissions insurance
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coverage for Trustees and officers, interest, brokerage costs, taxes, stock
exchange listing fees and expenses, expenses of qualifying the Fund's shares for
sale in various states, expenses associated with personnel performing
exclusively shareholder servicing functions, certain other organization expenses
and litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable by the Fund.
6. Assignment Terminates This Agreement; Amendments of This Agreement.
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This Agreement shall automatically terminate, without the payment of
any penalty in the event of its assignment, and this Agreement shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Fund who are not interested persons of the Fund
or of the Investment Adviser.
7. Effective Period and Termination of This Agreement.
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This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 6) until terminated as follows:
a. Either party hereto may at any time terminate this
Agreement by not less than thirty days' nor more than sixty days'
written notice delivered or mailed by registered mail, postage prepaid,
to the other party; or
b. If (i) the Trustees of the Fund or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Fund
and (ii) a majority of the Trustees of the Fund who are not interested
persons of the Fund or of the Investment Adviser, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Agreement, then this Agreement shall automatically terminate at the
close of business on April 21, 1988 or the expiration of one year from
the effective date of the last such continuance, whichever is later.
Action by the Fund under (a) above may be taken either by (i) vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 7 shall be
without the payment of any penalty.
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8. Certain Definitions.
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For the purposes of this Agreement, the "affirmative vote of a majority
of outstanding shares of the Fund" means the affirmative vote, at a duly called
and held meeting of shareholders of the Fund, (a) of the holders of 67% or more
of the shares of the Fund present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the outstanding shares of
the Fund entitled to vote at such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however to such exemptions as may be granted by
the Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations thereunder; and the
term "brokerage and research services" shall have the meaning given in the
Securities and Exchange Act of 1934 and the Rules and Regulations thereunder.
9. Nonliability of Investment Adviser.
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The Investment Adviser shall not be held responsible for any loss
incurred by any act or omission of any broker. The Investment Adviser also shall
not be liable to the Fund or to any shareholder of the Fund for any error or
judgment or for any loss suffered by the Fund in connection with rendering
services hereunder except (a) a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 0000 Xxx) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Investment
Adviser, or reckless disregard of its obligations and duties hereunder. Subject
to the foregoing, the Fund also shall indemnify the Investment Adviser, and any
officer, director and employee thereof to the maximum extent permitted by
Article V of the Fund's Declaration of Trust.
10. Limitation of Liability of the Trustees and Shareholders.
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A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Fund as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees or shareholders individually but are binding only upon
the assets and property of the Fund.
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11. Furnishing of Materials.
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During the term of this Agreement, the Fund agrees to furnish the
Investment Adviser at its principal executive office all prospectuses, proxy
statements, report to shareholders, sales literature, or other material prepared
for distribution to shareholders of the Fund or the public, which refer to the
Investment Adviser in any way, prior to use thereof and not to use such material
if the Investment Adviser reasonably objects in writing within five business
days (or such other time as may be mutually agreed) after receipt thereof. In
the event of termination of this Agreement, the Fund will continue to furnish to
the Investment Adviser copies of any of the above-mentioned materials which
refer in any way to the Investment Adviser. The Fund shall furnish or otherwise
make available to the Investment Adviser such other information relating to the
business affairs of the Fund as the Investment Adviser at any time, or from time
to time, reasonably requests in order to discharge its obligations hereunder.
12. Governing Law.
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This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, H&Q Healthcare Investors and Xxxxxxxxx & Xxxxx
Capital Management Incorporated have each caused this instrument to be signed in
duplicate in its behalf by its President or a Vice President thereunto duly
authorized, all as of the date first hereinabove written.
H&Q HEALTHCARE INVESTORS
By:
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Title:
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XXXXXXXXX & XXXXX CAPITAL
MANAGEMENT INCORPORATED
By:
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Title:
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