PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of ________, 2000, among BDT
Investment Management Limited, a London company (the "Subadvisor"); Fremont
Investment Advisors, Inc., a Delaware corporation (the "Advisor"); and Fremont
Mutual Funds, Inc., a Maryland corporation (the "Fund").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company and is authorized to issue separate series (the "Series"), each of which
may offer a separate class of shares of beneficial interest, each Series having
its own investment objective, policies and limitations; and
WHEREAS, the Fund presently offers shares of a particular series named the
Fremont Emerging Markets Fund (the "Emerging Markets Series"); and
WHEREAS, the Fund has retained the Advisor to render investment management
and administrative services to the Emerging Markets Series; and
WHEREAS, the Advisor and the Fund desire to retain the Subadvisor to
furnish portfolio management services to the Emerging Markets Series in
connection with Advisor's investment management activities on behalf of the
Series, and the Subadvisor is willing to furnish such services to the Advisor
and the Emerging Markets Series;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Subadvisor, the Advisor and the Fund as
follows:
1. APPOINTMENT. The Advisor and the Fund hereby appoint Subadvisor to
provide sub-investment advisory services to the Advisor and the Fund with
respect to certain assets of the Emerging Markets Series for the periods and on
the terms set forth in this Agreement. The Subadvisor accepts such appointment
and agrees to furnish the services herein set forth, for the compensation herein
provided.
2. SUBADVISOR DUTIES. Subject to the supervision of the Advisor, the
Subadvisor shall have full discretionary authority as agent and attorney-in-fact
with respect to the portion of assets of the Emerging Markets Series' portfolio
assigned to the Subadvisor, from time to time by the Advisor or the Board of
Directors, including authority to: (a) buy, sell, exchange, convert or otherwise
trade in any stocks without limitation and (b) place orders for the execution of
such securities transactions with or through such brokers, dealers, or issuers
as Subadvisor may select. The Subadvisor will provide the services under this
Agreement in accordance with the Emerging Markets Series' registration statement
filed with the Securities and Exchange Commission ("SEC"), as amended. The
Advisor will provide the Subadvisor with a copy of each registration statement
promptly after it has been filed with the SEC. Investments by the Subadvisor
shall conform with the provisions of Appendix B attached hereto, as such may be
revised from time to time at the discretion of the Advisor and the Fund. Subject
to the foregoing, the Subadvisor will vote proxies with respect to the
securities and investments purchased with
the assets of the Emerging Markets Series' portfolio managed by the Subadvisor.
The Subadvisor further agrees that it will:
(a) conform with all applicable rules and regulations of the
Securities and Exchange Commission.
(b) select brokers and dealers to execute portfolio transactions for
the Emerging Markets Series and select the markets on or in which the
transaction will be executed. In providing the Emerging Markets Series with
investment management, it is recognized that the Subadvisor will give primary
consideration to securing the most favorable price and efficient execution
considering all circumstances. Within the framework of this policy, the
Subadvisor may consider the financial responsibility, research and investment
information and other research services and products provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which the Subadvisor's other clients may be a party. It is
understood that it is desirable for the Fund that the Subadvisor have access to
brokerage and research services and products and security and economic analysis
provided by brokers who may execute brokerage transactions at a higher cost to
the Emerging Markets Series than broker-dealers that do not provide such
brokerage and research services. Therefore, in compliance with Section 28(e) of
the Securities Exchange Act of 1934 (the "1934 Act"), the Subadvisor is
authorized to place orders for the purchase and sale of securities for the
Emerging Markets Series with such brokers, that provide brokerage and research
products and/or services that charge an amount of commission for effecting
securities transactions in excess of the amount of commission another broker
would have charged for effecting that transaction, provided the Subadvisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research products and/or services
provided by such broker viewed in terms of either that particular transaction or
the overall responsibilities of the Subadvisor for this or other advisory
accounts, subject to review by the Fund from time to time with respect to the
extent and continuation of this practice. It is understood that the information,
services and products provided by such brokers may be useful to the Subadvisor
in connection with the Subadvisor's services to other clients. On occasions when
the Subadvisor deems the purchase or sale of a security to be in the best
interest of the Emerging Markets Series as well as other clients of the
Subadvisor, the Subadvisor, 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 of 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 the Subadvisor in the manner the Subadvisor
considers to be the most equitable and consistent with its fiduciary obligations
to the Emerging Markets Series and to such other clients.
(c) make available to the Advisor and the Fund's Board of Directors
promptly upon their request all its investment records and ledgers relating to
the Emerging Markets Series to assist the Advisor and the Fund in their
compliance with respect to the Emerging Markets Series' securities transactions
as required by the 1940 Act and the Investment Advisers Act of 1940 ("Advisers
Act"), as well as other applicable laws. The Subadvisor will furnish the Fund's
Board of Directors with respect to the Emerging Markets Series such periodic and
special reports as the Advisor and the Directors may reasonably request in
writing.
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(d) maintain detailed records of the assets managed by the Subadvisor
as well as all investments, receipts, disbursements and other transactions made
with such assets. Such records shall be open to inspection and audit during
Subadvisor's normal business hours upon reasonable notice by any person
designated by the Advisor or the Fund. The Subadvisor shall provide to the
Advisor or the Fund and any other party designated by either the Advisor or the
Fund: (i) monthly statements of the activities with regard to the assets for the
month and of the assets showing each asset at its cost and, for each security
listed on any national securities exchange, its value at the last quoted sale
price reported on the composite tape on the valuation date or, in the cases of
securities not so reported, by the principal exchange on which the security
traded or, if no trade was made on the valuation date or if such security is not
listed on any exchange, its value as determined by a nationally recognized
pricing service used by the Subadvisor specified by such pricing service on the
valuation date, and for any other security or asset in a manner determined in
good faith by the Subadvisor to reflect its then fair market value; (ii)
statements evidencing any purchases and sales as soon as practicable after such
transaction has taken place, and (iii) a quarterly review of the assets under
management.
3. EXPENSES. During the term of this Agreement, the Subadvisor will pay
all expenses incurred by it, its staff and their activities, in connection with
its portfolio management activities under this Agreement. The Subadvisor shall
not be responsible for any expense incurred by the Advisor or the Fund, except
as provided in Section 6 below.
4. COMPENSATION. For the services provided to the Emerging Markets
Series, the Advisor will pay the Subadvisor the fees as set forth in Appendix A
hereto at the times set forth in Appendix A hereto.
5. BOOKS AND RECORDS; CUSTODY. (a) In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Subadvisor hereby agrees that all records
which it maintains for the Emerging Markets Series are the property of the Fund
and further agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Subadvisor further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by Rule 204-2 under the Advisers Act for the period specified in the Rule.
(b) Title to all investments shall be made in the name of the Fund,
provided that for convenience in buying, selling, and exchanging securities
(stocks, bonds, commercial paper, etc.), title to such securities may be held in
the name of the Fund's custodian bank, or its nominee. The Fund shall advise the
Subadvisor of the identity of its custodian bank and shall give the Subadvisor
15 days' written notice of any changes in such custody arrangements.
Neither the Subadvisor, nor any parent, subsidiary or related firm,
shall take possession of or handle any cash, securities, mortgages or deeds of
trust, or other indicia of ownership of the Fund's investments, or otherwise act
as custodian of such investments. All cash and the indicia of ownership of all
other investments shall be held by the Fund's custodian bank.
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The Fund shall instruct its custodian bank to (a) carry out all
investment instructions as may be directed by the Subadvisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Subadvisor with all operational information necessary for the Subadvisor to
trade on behalf of the Fund.
6. INDEMNIFICATION. The Subadvisor agrees to indemnify and hold harmless
the Advisor, the Fund, any affiliated person within the meaning of Section
2(a)(3) of the 1940 Act ("affiliated person") of the Advisor or the Fund (other
than the Subadvisor) and each person, if any, who, within the meaning of Section
15 of the Securities Act of 1933 (the "1933 Act"), controls ("controlling
person") the Advisor or the Fund against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Advisor, the Fund or such affiliated person or controlling person may
become subject under the 1933 Act, 1940 Act, the Advisers Act, or under any
other statute, at common law or otherwise, which (1) may be based upon any
wrongful act or omission by the Subadvisor, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Subadvisor or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering the shares of the Fund or any amendment thereof or any supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Fund or any affiliated person of the Fund by the
Subadvisor or any affiliated person of the Subadvisor; provided, however, that
in no case is the Subadvisor's indemnity in favor of the Advisor or the Fund or
any affiliated person or controlling person of the Advisor or the Fund deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of his or its duties or by reason of his or its
reckless disregard of obligations and duties under this Agreement or under any
law.
The Fund agrees not to hold the Subadvisor or any of its officers or
employees liable for, and to indemnify and hold harmless, the Subadvisor and its
directors, officers, employees, affiliated persons and controlling persons
("Indemnified Parties") against, any act or omission of any other subadvisor
providing investment management services to the Fund, and against any costs and
liabilities the Indemnified Parties may incur as a result of a claim against the
Indemnified Parties regarding actions taken in good faith exercise of their
powers hereunder excepting matters as to which the Indemnified Parties have been
grossly negligent, engaged in willful misfeasance, bad faith, reckless disregard
of the obligations and duties under this Agreement or have been in violation of
applicable law or regulations.
7. OTHER INVESTMENT ACTIVITIES OF SUBADVISOR. The Fund and Advisor
acknowledge that Subadvisor, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities ("Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the Fund agrees
that the Subadvisor or its affiliates may give advice or exercise investment
responsibility and take other action with respect to other Affiliated Accounts
which may differ from advice given or the timing or nature of action taken with
respect to the Emerging Markets Series; provided that the Subadvisor acts in
good faith, and provided further that it is the Subadvisor's policy to allocate,
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within its reasonable discretion, investment opportunities to the Emerging
Markets Series over a period of time on a fair and equitable basis relative to
the Affiliated Accounts, taking into account the investment objectives and
policies of the Emerging Markets Series and any specific investment restrictions
applicable thereto. The Fund acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Emerging Markets
Series may have an interest from time to time, whether in transactions which may
involve the Emerging Markets Series or otherwise. Subadvisor shall have no
obligation to acquire for the Emerging Markets Series a position in any
investment which any Affiliated Account may acquire, and the Fund shall have no
first refusal, co-investment or other rights in respect of any such investment
either for the Emerging Markets Series or otherwise.
8. (a) DURATION. This Agreement shall become effective on the date
hereof. Unless terminated as herein provided, this Agreement shall remain in
full force and effective for a period of two years from the date of this
Agreement, and shall continue in full force and effect for periods of one year
thereafter so long as such continuance is approved at least annually (i) by
either the Board of Directors of the Fund or by a vote of a majority (as defined
in the 0000 Xxx) of the outstanding voting securities of the Emerging Markets
Series, and (ii) by the Advisor, and (iii) by the vote of a majority of the
Board of Directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the 0000 Xxx) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Directors of the Fund or by the vote of
a majority (as defined in the 0000 Xxx) of the outstanding voting securities of
the Emerging Markets Series, or by the Advisor, on thirty (30) days' written
notice to the Subadvisor, or by the Subadvisor on like notice to the Board of
Directors of the Fund and to the Advisor. Payment of fees earned through the
date of termination shall not be construed as a penalty.
(c) AUTOMATIC TERMINATION. This Agreement shall automatically and
immediately terminate in the event of its assignment.
9. AMENDMENTS. No provision of this agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by a vote of a majority of the outstanding voting securities of
the Emerging Markets Series, if such approval is required by applicable law.
10. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
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(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Subadvisor
as an agent of the Fund or the Advisor.
(e) This Agreement supersedes any prior agreement relating to the
subject matter hereof between the parties.
(f) This Agreement may be executed in counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered, shall be deemed an original and all of which
counterparts shall constitute but one and the same agreement.
11. USE OF NAME. It is understood that the name "BDT Investment Management
Limited" or the name of any of its affiliates, or any derivative associated with
those names, are the valuable property of the Subadvisor and its affiliates and
that the Fund and/or the Fund's distributor have the right to use such name(s)
or derivative(s) in offering materials and sales literature of the Fund so long
as this Agreement is in effect. Upon termination of the Agreement the Fund shall
forthwith cease to use such name(s) or derivative(s).
12. RECEIPT OF BROCHURE. The Advisor and the Fund have received from BDT
Investment Management Limited the disclosure statement or "brochure" required to
be delivered pursuant to Rule 204-3 of the Advisers Act, which disclosure
statement or brochure was received by the Advisor and the Fund more than 48
hours prior to entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written. BDT INVESTMENT MANAGEMENT
LIMITED
By:
------------------------------------
----------------------------------------
(Title)
FREMONT INVESTMENT ADVISORS, INC.
By:
------------------------------------
----------------------------------------
(Title)
FREMONT MUTUAL FUNDS, INC.
By:
------------------------------------
----------------------------------------
(Title)
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APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
BDT Investment Management Limited ("BDT Invest")
Subadvisor to the Fremont Emerging Markets Fund
SCHEDULE OF FEES
----------------
Fremont Investment Advisors, Inc. will pay to BDT Invest a fee computed at the
annual rate of 0.50% (50 basis points) of the average value of the daily assets
of the Fremont Emerging Markets Fund under management by BDT Invest.
Fee will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month. Fees shall be due and payable within thirty
(30) days after an invoice has been delivered to Fremont Investment Advisors,
Inc.
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XXXXXXXX X
TO PORTFOLIO MANAGEMENT AGREEMENT
BDT Investment Management Limited
Subadvisor to the Fremont Emerging Markets Fund
INVESTMENT OBJECTIVES AND GUIDELINES
------------------------------------
Overall Investment Objective:
----------------------------
The objective of the Fremont Emerging Markets Fund is to achieve long-term
capital appreciation by investing, in normal market conditions, at least 65% of
its total assets in equity securities of issuers domiciled in emerging market
countries. In normal market conditions, at least three different emerging market
countries will be represented in the Fund's portfolio.
Policy and Guidelines for Subadvisor:
-------------------------------------
The Subadvisor will adhere to the Investment Objective and to policies in the
Fremont Emerging Markets Fund prospectus.
Performance Objective for Subadvisor:
-------------------------------------
The Subadvisor is expected to achieve a competitive rate of return over a 3 to 5
year time horizon and/or a complete market cycle, relative to other emerging
market funds as compiled by Lipper Analytical Services and/or Morningstar. A
competitive rate of return is defined as Fund performance in the top one-third
of such funds. Performance will also be compared to the Xxxxxx Xxxxxxx Capital
International Emerging Markets Free Index.
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