PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 4th day of December 2000 between Xxxxxxxx Xxxxxxxx Capital
Management, Inc. ("Xxxxxxxx Xxxxxxxx") a limited partnership organized under the
laws of Delaware (" Specialist Manager") and THE XXXXXX XXXXXXXXX TRUST, a
Delaware business trust ("Trust").
WHEREAS, the Trust is registered as an open-end, diversified, management series
investment company under the Investment Company Act of 1940, as amended
("Investment Company Act") which currently offers five series of beneficial
interests ("shares") representing interests in separate investment portfolios,
and may offer additional portfolios in the future; and
WHEREAS, the Trust desires to retain the Specialist Manager to provide a
continuous program of investment management for The Small Cap Equity Portfolio
of the Trust ("Portfolio") and Specialist Manager is willing, in accordance with
the terms and conditions hereof, to provide such services to the Trust,
effective in accordance with Section 7 hereof;
NOW THEREFORE, in consideration of the promises and covenants set forth herein
and intending to be legally bound hereby, it is agreed between the parties as
follows:
1. Appointment of Specialist Manager.
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The Trust hereby retains Specialist Manager to provide the investment services
set forth herein and Specialist Manager agrees to accept such appointment. In
carrying out its responsibilities under this Agreement, the Specialist Manager
shall at all times act in accordance with the investment objectives, policies
and restrictions applicable to the Portfolio as set forth in the then current
Registration Statement of the Trust, applicable provisions of the Investment
Company Act and the rules and regulations promulgated under that Act and other
applicable federal securities laws.
2. Duties of Specialist Manager.
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(a) Specialist Manager shall provide a continuous program of investment
management for that portion of the assets of the Portfolio ("Account") that may,
from time to time be allocated to it by the Trust's Board of Trustees, in
writing, by an authorized officer of the Trust. It is understood that the
Account may consist of all, a portion of or none of the assets of the Portfolio,
and that the Board of Trustees has the right to allocate and reallocate such
assets to the Account at any time, and from time to time, upon such notice to
the Specialist Manager as may be reasonably necessary, in the view of the Trust,
to ensure orderly management of the Account or the Portfolio.
(b) Subject to the general supervision of the Trust's Board of Trustees,
Specialist Manager shall have sole investment discretion with respect to the
Account, including investment research, selection of the securities to be
purchased and sold and the portion of the Account, if any, that shall be held
uninvested, and the selection of brokers and dealers through which securities
transactions in the Account shall be executed. Specifically, and without
limiting the generality of the foregoing, Specialist Manager agrees that it
will:
(i) promptly advise the Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as the case
may be, made on behalf of the Account, specifying the name and quantity of
the security purchased or sold, the unit and aggregate purchase or sale
price, commission paid, the market on which the transaction was effected,
the trade date, the settlement date, the identity of the effecting broker
or dealer and/or such other information, and in such manner, as may from
time to time be reasonably requested by the Trust;
(ii) maintain all applicable books and records with respect to the
securities transactions of the Account. Specifically, Specialist Manager
agrees to maintain with respect to the Account those records required to be
maintained under Rule 31a-1(b)(1), (b)(5) and (b)(6) under the Investment
Company Act with respect to transactions in the Account including, without
limitation, records which reflect securities purchased or sold in the
Account, showing for each such transaction, the name and quantity of
securities, the unit and aggregate purchase or sale price, commission paid,
the market on which the transaction was effected, the trade date, the
settlement date, and the identity of the effecting broker or dealer.
Specialist Manager will preserve such records in the manner and for the
periods prescribed by Rule 31a-2 under the Investment Company Act.
Specialist Manager acknowledges and agrees that all records it maintains
for the Trust are
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The Small Capitalization Equity Portfolio
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the property of the Trust and Specialist Manager will surrender promptly to
the Trust any such records upon the Trust's request. The Trust agrees,
however, that Specialist Manager may retain copies of those records that
are required to be maintained by Specialist Manager under federal or state
regulations to which it may be subject or are reasonably necessary for
purposes of conducting its business;
(iii) provide, in a timely manner, such information as may be reasonably
requested by the Trust or its designated agents in connection with, among
other things, the daily computation of the Portfolio's net asset value and
net income, preparation of proxy statements or amendments to the Trust's
registration statement and monitoring investments made in the Account to
ensure compliance with the various limitations on investments applicable to
the Portfolio and to ensure that the Portfolio will continue to qualify for
the special tax treatment accorded to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended; and
(iv) render regular reports to the Trust concerning the performance of
Specialist Manager of its responsibilities under this Agreement. In
particular, Specialist Manager agrees that it will, at the reasonable
request of the Board of Trustees, attend meetings of the Board or its
validly constituted committees and will, in addition, make its officers and
employees available to meet with the officers and employees of the Trust at
least quarterly and at other times upon reasonable notice, to review the
investments and investment program of the Account.
3. Portfolio Transaction and Brokerage.
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In placing orders for portfolio securities with brokers and dealers, Specialist
Manager shall use its best efforts to execute securities transactions on behalf
of the Account in such a manner that the total cost or proceeds in each
transaction is the most favorable under the circumstances. Specialist Manager
may, however, in its discretion, direct orders to brokers that provide to
Specialist Manager research, analysis, advice and similar services, and
Specialist Manager may cause the Account to pay to those brokers a higher
commission than may be charged by other brokers for similar transactions,
provided that Specialist Manager determines in good faith that such commission
is reasonable in terms either of the particular transaction or of the overall
responsibility of the Specialist Manager to the Account and any other accounts
with respect to which Specialist Manager exercises investment discretion, and
provided further that the extent and continuation of any such practice is
subject to review by the Trust's Board of Trustees. Specialist Manager shall not
execute any portfolio transactions for the Trust with a broker or dealer which
is an "affiliated person" of the Trust or Specialist Manager, including any
other investment advisory organization that may, from time to time act as a
Specialist Manager for the Portfolio or any of the Trust's other Portfolios,
without prior written approval of the Trust. The Trust shall provide a list of
such affiliated brokers and dealers to Specialist Manager and will promptly
advise Specialist Manager of any changes in such list.
4. Expenses and Compensation.
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Specialist Manager shall pay all of its expenses incurred in the performance of
its duties under this Agreement and shall not be required to pay any other
expenses of the Trust. For its services under this Agreement, Specialist Manager
shall be entitled to receive a fee, payable monthly, and calculated at the
annual rate of .40% of the average net assets of the Account's average net
assets.
5. Limitation of Liability and Indemnification.
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(a) Specialist Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates including, without limitation, losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security or other investment by the Trust except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Specialist Manager in
the performance of its duties or from reckless disregard by it of its duties
under this Agreement.
(b) Notwithstanding the foregoing, Specialist Manager expressly agrees that the
Trust may rely upon information provided, in writing, by Specialist Manager to
the Trust (including, without limitation, information contained in Specialist
Manager's then current Form ADV) in accordance with Section 9 of the Agreement
or otherwise, in preparing the Trust's registration statement and amendments
thereto and certain periodic reports relating to the Trust and its Portfolios
that are required to be furnished to shareholders of the Trust and/or filed with
the Securities and Exchange Commission ("SEC Filings"), provided that a copy of
any such filing is provided to Specialist Manager (i) at least 10 business days
prior to the date on which it will become effective, in the case of a
registration
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statement; (ii) at least 10 business days prior to the date upon which it is
filed with the SEC in the case of the Trust's semi-annual report on Form N-SAR
or any shareholder report or proxy statement.
(c) Specialist Manager agrees to indemnify and hold harmless the Trust and each
of its Trustees, officers and employees from any claims, liabilities and
expenses, including reasonable attorneys' fees, (collectively, "Losses") to the
extent that Losses are incurred as a result of statements contained in an SEC
Filing ("Disputed Statements") that are misleading either because they are (i)
untrue statements of material fact; or (ii) omitted to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading. For purposes of the
indemnification obligation set forth in this Section 5(c), a Disputed Statement
will be deemed misleading if so declared by a decision of a court or
administrative law judge or in an order of settlement issued by any court or
administrative body.
(d) Specialist Manager further agrees to indemnify and hold harmless the Trust
and each of its Trustees, from any Losses to the extent that such Losses are
incurred as a result of Disputed Statements that are alleged (i) to be untrue
statements of material fact; or (ii) to have omitted to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading, provided that the
indemnification obligation set forth in this Section 5(d) is expressly limited
to Losses arising from Disputed Statements that accurately reflect information
provided to the Trust in writing by the Specialist Manager and that cannot be
independently verified by the Trust. Further, the indemnification set forth in
this Section 5(d) will not require reimbursement of fees or expenses other than
those incurred by the Trust's regular counsel in connection with such counsel's
representation of the Trust or its Trustees.
(e) The indemnification obligations set forth in Sections 5(c) and (d) shall not
apply unless (i) Disputed Statements accurately reflect information provided to
the Trust in writing by the Specialist Manager; (ii) Disputed Statements were
included in an SEC Filing in reliance upon written information provided to the
Trust by the Specialist Manager; (iii) the Specialist Manager was afforded the
opportunity to review Disputed Statements in connection with the 10 business day
review requirement set forth in Section 5(b) above; and (iv) upon receipt by the
Trust of any notice of the commencement of any action or the assertion of any
claim to which the indemnification obligations set forth in Section 5(c) and (d)
may apply, the Trust notifies the Specialist Manager, within 30 days and in
writing, of such receipt and provides to Specialist Manager the opportunity to
participate in the defense and/or settlement of any such action or claim.
Further, Specialist Manager will not be required to indemnify any person under
this Section 5 to the extent that Specialist Manager relied upon statements or
information furnished to the Specialist Manager, in writing, by any officer,
employee or Trustee of the Trust, or by the Trust's Custodian, Administrator or
Accounting Agent or any other agent of the Trust, in preparing written
information provided to the Trust and upon which the Trust relied in preparing
any Disputed Statement.
6. Permissible Interest.
--------------------
Subject to and in accordance with the Trust's Declaration of Trust and Bylaws
and corresponding governing documents of Specialist Manager, Trustees, officers,
agents and shareholders of the Trust may have an interest in the Specialist
Manager as officers, directors, agents and/or shareholders or otherwise.
Specialist Manager may have similar interests in the Trust. The effect of any
such interrelationships shall be governed by said governing documents and the
provisions of the Investment Company Act.
7. Duration, Termination and Amendments.
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This Agreement shall become effective as of the date on which the shareholders
of the Portfolio approve this agreement in accordance with the Investment
Company Act and shall continue in effect for two years. Thereafter, this
Agreement shall continue in effect from year to year for so long as its
continuance is specifically approved, at least annually, by (i) a majority of
the Board of Trustees or the vote of the holders of a majority of the
Portfolio's outstanding voting securities; and (ii) the affirmative vote, cast
in person at a meeting called for the purpose of voting on such continuance, of
a majority of those members of the Board of Trustees ("Independent Trustees ")
who are not "interested persons" of the Trust or any investment adviser to the
Trust.
This Agreement may be terminated by the Trust or by Specialist Manager at any
time and without penalty upon sixty days written notice to the other party,
which notice may be waived by the party entitled to it. This Agreement may not
be amended except by an instrument in writing and signed by the party to be
bound thereby provided that if the Investment Company Act requires that such
amendment be approved by the vote of the Board, the Independent
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Trustees and/or the holders of the Trust's or the Portfolio's outstanding
shareholders, such approval must be obtained before any such amendment may
become effective. This Agreement shall terminate upon its assignment.
For purposes of this Agreement, the terms "majority of the outstanding voting
securities, "assignment" and "interested person" shall have the meanings set
forth in the Investment Company Act.
8. Confidentiality; Use of Name.
----------------------------
(a) Specialist Manager acknowledges and agrees that during the course of its
responsibilities hereunder, it may have access to certain information that is
proprietary to the Trust or to one or more of the Trust's agents or service
providers. Specialist Manager agrees that Specialist Manager, its officers and
its employees shall treat all such proprietary information as confidential and
will not use or disclose information contained in, or derived from such material
for any purpose other than in connection with the carrying out of Specialist
Manager's responsibilities hereunder. In addition, Specialist Manager shall use
its best efforts to ensure that any agent or affiliate of Specialist Manager who
may gain access to such proprietary materials shall be made aware of the
proprietary nature of such materials and shall likewise treat such materials as
confidential.
(b) The Trust acknowledges and agrees that during the course of this Agreement,
it or its agents may have access to certain information that is proprietary to
Specialist Manager. The Trust agrees that it shall treat all such proprietary
information as confidential and will not use or disclose information contained
in, or derived from such material for any purpose other than in connection with
the carrying out of this Agreement. In addition, the Trust shall use its best
efforts to ensure that any agent or affiliate of the Trust who may gain access
to such proprietary materials shall be made aware of the proprietary nature of
such materials and shall likewise treat such materials as confidential.
(c) It is acknowledged and agreed that the names "Xxxxxx Xxxxxxxxx," "Xxxxxx
Xxxxxxxxx Chief Investment Officers" (which is a registered trademark of Xxxxxx,
Xxxxxxxxx & Co., Inc. ("HCCI")), and derivatives of either, as well as any logo
that is now or shall later become associated with either name ("Marks") are
valuable property of HCCI and that the use of the Marks, or any one of them, by
the Trust or its agents is subject to the license granted to the Trust HCCI.
Specialist Manager agrees that it will not use any Xxxx without the prior
written consent of the Trust. Specialist Manager consents to use of its name,
performance data, biographical data and other pertinent data by the Trust for
use in marketing and sales literature, provided that any such marketing and
sales literature shall not be used by the Trust without the prior written
consent of Specialist Manager, which consent shall not be unreasonably withheld.
The provisions of this Section 8 shall survive termination of this Agreement.
(d) It is acknowledged and agreed that the name " Xxxxxxxx Xxxxxxxx" and its
derivatives, as well as any logo that is now or shall later become associated
with the name of the Specialist Manager ("Manager Marks") are valuable property
of Specialist Manager and that the use of the Manager Marks, or any one of them,
by the Trust or its agents shall not be permitted without the prior written
consent of the Specialist Manager. Specialist Manager consents to use of its
name, performance data, biographical data and other pertinent data by the Trust
for use in marketing and sales literature, provided that any such marketing and
sales literature shall not be used by the Trust without the prior written
consent of Specialist Manager, which consent shall not be unreasonably withheld.
Portfolio Manager similarly acknowledges and agrees that the Trust is permitted
to refer to Specialist Manager in its prospectus and other documents required to
be filed by the Trust with the SEC or state regulatory agencies. The provisions
of this Section 8 shall survive termination of this Agreement.
9. Representation, Warranties and Agreements of Specialist Manager.
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Specialist Manager represents and warrants that:
(a) It is registered as an investment adviser under the Investment Advisers Act
of 1940 ("Investment Advisers Act"), it will maintain such registration in full
force and effect and will promptly report to the Trust the commencement of any
formal proceeding that could render the Specialist Manager ineligible to serve
as an investment adviser to a registered investment company under Section 9 of
the Investment Company Act.
(b) It understands that, as a result of its services hereunder, certain of its
employees and officers may be deemed "access persons" of the Trust within the
meaning of Rule 17j-1 under the Investment Company Act and that each such access
person is subject to the provisions of the code of ethics ("Trust's Code")
adopted by the Trust in compliance with such rule. Specialist Manager further
represents that it is subject to a written code of ethics (" Specialist
Manager's Code") complying with the requirements of Rule 204-2(a)(12) under the
Investment Advisers
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Act and will provide the Trust with a copy of such code of ethics. During the
period that this Agreement is in effect, an officer or director of Specialist
Manager shall certify to the Trust, at least quarterly, that Specialist Manager
has complied with the requirements of the Specialist Manager's Code during the
prior year; and that either (i) that no violation of such code has occurred or
(ii) if such a violation occurred, that appropriate action was taken in response
to such violation. Upon the written reasonable request of the Trust, Specialist
Manager shall permit the Trust, or it designated agents, to examine the reports
required to be made by Specialist Manager under rule 17j-1(c)(1) under the
Investment Company Act. In addition, Specialist Manager acknowledges that the
Trust may, in response to regulations or recommendations issued by the
Securities and Exchange Commission or other regulatory agencies, from time to
time, request additional information regarding the personal securities trading
of its directors, partners, officers and employees and the policies of
Specialist Manager with regard to such trading. Specialist Manager agrees that
it will make every effort to respond to the Trust's reasonable requests in this
area.
(c) Upon request of the Trust, Specialist Manager shall promptly supply the
Trust with any information concerning Specialist Manager and its stockholders,
employees and affiliates that the Trust may reasonably require in connection
with the preparation of its registration statements, proxy materials, reports
and other documents required, under applicable state or Federal laws, to be
filed with state or Federal agencies or to be provided to shareholders of the
Trust.
10. Status of Specialist Manager.
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The Trust and Specialist Manager acknowledge and agree that the relationship
between Specialist Manager and the Trust is that of an independent contractor
and under no circumstances shall any employee of Specialist Manager be deemed an
employee of the Trust or any other organization that the Trust may, from time to
time, engage to provide services to the Trust, its Portfolios or its
shareholders. The parties also acknowledge and agree that nothing in this
Agreement shall be construed to restrict the right of Specialist Manager or its
affiliates to perform investment management or other services to any person or
entity, including without limitation, other investment companies and persons who
may retain Specialist Manager to provide investment management services and the
performance of such services shall not be deemed to violate or give rise to any
duty or obligations to the Trust.
11. Counterparts and Notice.
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This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original. Any notice required to be given under this
Agreement shall be deemed given when received, in writing addressed and
delivered, by certified mail, by hand or via overnight delivery service as
follows:
If to the Trust:
Xx. Xxxxxx X. Xxxxxxxxx, President
The Xxxxxx Xxxxxxxxx Trust
000 Xxxx Xxxxx Xxxxxxxxx Xxxxxx
Xxxx Xxxxxxxxxxxx, XX 00000
If to Specialist Manager:
Mr. Xxxxx Xxxxxxxx Xxxxxxxx
Xxxxxxxx Xxxxxxxx Capital Management, Inc.
One Sansome Street (Suite 1800)
Xxx Xxxxxxxxx, XX 00000
12. Miscellaneous.
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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. 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. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by the law of the state of Delaware provided
that nothing herein shall be construed as inconsistent with the Investment
Company Act or the Investment Advisers Act.
Specialist Manager is hereby expressly put on notice of the limitations of
shareholder and Trustee liability set forth in the Declaration of Trust of the
Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the assets of The Small Cap Equity
Portfolio. Specialist Manager further agrees that
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it will not seek satisfaction of any such obligations from the shareholders or
any individual shareholder of the Trust, or from the Trustees of the Trust or
any individual Trustee of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their officers thereunto duly authorized as of the day and year first written
above.
ATTEST: XXXXXXXX XXXXXXXX CAPITAL MANAGEMENT, INC.
BY: /S/ XXXXX X. XXXXXXXX DATE: 12/4/00
ATTEST: THE XXXXXX XXXXXXXXX TRUST
ON BEHALF OF THE SMALL CAPITALIZATION EQUITY PORTFOLIO
BY: /S/ XXXXXX X. XXXX DATE: 12/4/00
Xxxxxxxx Xxxxxxxx Portfolio Management Agreement
The Small Capitalization Equity Portfolio
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