CDC Kobrick Investment Trust
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
July 1, 0000
Xxxxxxx, Xxxxxx, Xxxxxxxxxxx & XxXxxxxxxx, X.X.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Re: Interim Advisory Agreement
Ladies and Gentlemen:
CDC Kobrick Investment Trust (the "Trust") is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Trust is entering into this Agreement on behalf of
Kobrick Capital Fund ("Fund"). The Trust's shares of beneficial interest
represent an undivided interest in the assets, subject to the liabilities,
allocated to that Fund.
1. Appointment as Adviser. The Trust being duly authorized hereby appoints
and employs Vaughan, Nelson, Scarborough & XxXxxxxxxx, X.X. ("Adviser") as
discretionary portfolio manager, on the terms and conditions set forth herein,
of the Fund.
2. Acceptance of Appointment; Standard of Performance. Adviser accepts the
appointment as discretionary portfolio manager and agrees to use its best
professional judgment to make timely investment decisions for the Fund in
accordance with the provisions of this Agreement.
3. Portfolio Management Services of Adviser. Adviser is hereby employed and
authorized to select portfolio securities for investment by the Trust on behalf
of the Fund, to purchase and sell securities of the Fund, and upon making any
purchase or sale decision, to place orders for the execution of such portfolio
transactions in accordance with paragraphs 5 and 6 hereof. In providing
portfolio management services to the Fund, Adviser shall be subject to such
investment restrictions as are set forth in the Act and the rules thereunder,
the Internal Revenue Code of 1986, the supervision and control of the Trustees
of the Trust, such specific instructions as the Trustees may adopt and
communicate to Adviser and the investment objectives, policies and restrictions
of the Trust applicable to the Fund furnished pursuant to paragraph 4. Adviser
is not authorized by the Trust to take any action, including the purchase or
sale of securities for the Fund, in contravention of any restriction,
limitation, objective, policy or instruction described in the previous sentence.
Adviser shall maintain on behalf of the Trust the records listed in Schedule A
hereto (as amended from time to time). At the Trust's reasonable request,
1
Adviser will consult with the Trust with respect to any decision made by it with
respect to the investments of the Fund.
4. Investment Objectives, Policies and Restrictions. The Trust will provide
Adviser with the statement of investment objectives, policies and restrictions
applicable to the Fund as contained in the Trust's registration statements under
the Act and the Securities Act of 1933, and any instructions adopted by the
Trustees supplemental thereto. The Trust will provide Adviser with such further
information concerning the investment objectives, policies and restrictions
applicable thereto as Adviser may from time to time reasonably request. The
Trust retains the right, on written notice to Adviser from the Trust, to modify
any such objectives, policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be consummated by payment
to or delivery by State Street Bank and Trust Company or any successor custodian
(the "Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Trust, of all cash and/or securities
due to or from the Fund, and Adviser shall not have possession or custody
thereof. Adviser shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated by
the Adviser.
6. Allocation of Brokerage. Adviser shall have authority and discretion to
select brokers and dealers to execute portfolio transactions initiated by
Adviser and to select the markets on or in which the transactions will be
executed.
In doing so, the Adviser will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this policy,
the Adviser may consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who may effect or
be a party to any such transaction or other transactions to which other clients
of the Adviser may be a party. It is understood that neither the Trust nor the
Adviser has adopted a formula for allocation of the Trust's investment
transaction business. It is also understood that it is desirable for the Trust
that the Adviser 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 commission to the Trust than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such certain brokers, subject
to review by the Trust's 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 the Adviser in connection with its services to
other clients.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the 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
2
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Trust and to such other clients.
For each fiscal quarter of the Trust, Adviser shall prepare and render
reports to the Trust's Trustees of the total brokerage business placed and the
manner in which the allocation has been accomplished. Such reports shall set
forth at a minimum the information required to be maintained by Rule 31a-1(b)(9)
under the Act.
7. Proxies. The Trust will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Fund may be invested from time
to time. At the request of the Trust, Adviser shall provide the Trust with its
recommendations as to the voting of such proxies.
8. Reports to Adviser. The Trust will provide Adviser with such periodic
reports concerning the status of the Fund as Adviser may reasonably request.
9. Fees for Services. For all of the services to be rendered and payments
made as provided in this Agreement, the Kobrick Capital Fund will pay the
Adviser a monthly advisory fee computed daily at the annual rate of 1.00% of the
average of the values of that portion of the net assets of the Fund which the
Adviser manages as determined at the close of each business day during the
month.
10. Allocation of Charges and Expenses. Adviser shall employ or provide and
compensate the executive, administrative, secretarial and clerical personnel
necessary to provide the services set forth herein, and shall bear the expense
thereof. Adviser shall compensate all Trustees, officers and employees of the
Trust who are also shareholders or employees of Adviser.
The Fund will be responsible for the payment of all operating expenses
of the Trust, including fees and expenses incurred by the Trust in connection
with membership in investment company organizations, brokerage fees and
commissions, legal, auditing and accounting expenses, expenses of registering
shares under federal and state securities laws, insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, the transfer, shareholder
service and dividend disbursing agent and the accounting and pricing agent of
the Fund, expenses including clerical expenses of issue, sale, redemption or
repurchase of shares of the Fund, the fees and expenses of Trustees of the Trust
who are not interested persons of the Trust, the cost of preparing, printing and
distributing prospectuses, statements, reports and other documents to
shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including litigation
to which the Trust may be a party and indemnification of the Trust's officers
and Trustees with respect thereto, or any other expense not specifically
described above incurred in the performance of the Trust's obligations. All
other expenses not expressly assumed by Adviser herein incurred in connection
with the organization, registration of shares and operations of the Fund will be
3
borne by the Fund unless otherwise agreed to separately in writing by the Fund
and the Adviser.
11. Other Investment Activities of Adviser. The Trust acknowledges that
Adviser 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 and that Adviser, its affiliates or any of its or
their directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts"). Subject
to the provisions of paragraph 2 hereof, the Trust agrees that Adviser or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to other Affiliated Accounts which may differ from the
advice given or the timing or nature of action taken with respect to the Fund,
provided that Adviser acts in good faith, and provided further, that it is
Adviser's policy to allocate, within its reasonable discretion, investment
opportunities to the Fund 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 Fund and any specific investment restrictions
applicable thereto. The Trust 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 Fund may have an
interest from time to time, whether in transactions which involve the Fund or
otherwise. Adviser shall have no obligation to acquire for the Fund a position
in any investment which any Affiliated Account may acquire, and the Trust shall
have no first refusal, co-investment or other rights in respect of any such
investment, either for the Fund or otherwise.
12. Certificate of Authority. The Trust and the Adviser shall furnish to
each other from time to time certified copies of the resolutions of their
Trustees or Board of Directors or executive committees, as the case may be,
evidencing the authority of officers and employees who are authorized to act on
behalf of the Trust, the Fund and/or the Adviser.
13. Limitation of Liability. Adviser shall not be liable for any action
taken, omitted or suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement, or in accordance with (or in the
absence of) specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted from Adviser's
willful misfeasance, bad faith or gross negligence, a violation of the standard
of care established by and applicable to Adviser in its actions under this
Agreement or breach of its duty or of its obligations hereunder. Nothing in this
paragraph 13 shall be construed in a manner inconsistent with Sections 17(h) and
(i) of the Act.
14. Confidentiality. Subject to the duty of Adviser and the Trust to comply
with applicable law, including any demand of any regulatory or taxing authority
having jurisdiction, the parties hereto shall treat as confidential all
information pertaining to the Fund and the actions of Adviser and the Trust in
respect thereof.
4
15. Assignment. No assignment of this Agreement shall be made by Adviser,
and this Agreement shall terminate automatically in the event of such
assignment. Adviser shall notify the Trust in writing sufficiently in advance of
any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Trust to consider whether an assignment will occur, and to take
the steps necessary to enter into a new contract with Adviser.
16. Representation, Warranties and Agreements of the Trust. The Trust
represents, warrants and agrees that:
A. Adviser has been duly appointed by the Trustees of the Trust to provide
investment services to the Fund as contemplated hereby.
B. The Trust will deliver to Adviser true and complete copies of its then
current prospectuses and statements of additional information as effective from
time to time and such other documents or instruments governing the investments
of the Fund and such other information as is necessary for Adviser to carry out
its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all times comply with
the requirements imposed upon the Trust by applicable law and regulations.
17. Representations, Warranties and Agreements of Adviser. Adviser
represents, warrants and agrees that:
A. Adviser is registered as an investment adviser under the Investment
Advisers Act of 1940.
B. Adviser will maintain, keep current and preserve on behalf of the Trust,
in the manner and for the time periods required or permitted by the Act, the
records identified in Schedule A. Adviser agrees that such records (unless
otherwise indicated on Schedule A) are the property of the Trust, and will be
surrendered to the Trust promptly upon request.
C. Adviser will complete such reports concerning purchases or sales of
securities on behalf of the Fund as the Trust may from time to time require to
ensure compliance with the Act, the Internal Revenue Code of 1986 and applicable
state securities laws.
D. Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and will provide the Trust with a copy
of the code of ethics and evidence of its adoption. Within forty-five (45) days
of the end of the last calendar quarter of each year while this Agreement is in
effect, an officer of Adviser shall certify to the Trust that Adviser has
complied with the requirements of Rule 17j-1 during the previous quarter and
that there has been no violation of the Adviser's code of ethics or, if such a
5
violation has occurred, that appropriate action was taken in response to such
violation. Upon the written request of the Trust, Adviser shall permit the
Trust, its employees or its agents to examine the reports required to be made to
Adviser by Rule 17j-1(c)(1).
E. Adviser will, promptly after filing with the Securities and Exchange
Commission an amendment to its Form ADV, furnish a copy of such amendment to the
Trust.
F. Upon request of the Trust, Adviser will provide assistance to the
Custodian in the collection of income due or payable to the Fund.
G. Adviser will immediately notify the Trust of the occurrence of any event
which would disqualify Adviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the Act or otherwise.
18. Amendment. This Agreement may be amended at any time, but only by
written agreement between Adviser and the Trust, which amendment, other than
amendments to Schedule A, is subject to the approval of the Trustees and the
shareholders of the Fund in the manner required by the Act and the rules
thereunder, subject to any applicable exemptive order of the Securities and
Exchange Commission modifying the provisions of the Act with respect to approval
of amendments to this Agreement.
19. Effective Date; Term. This Agreement shall become effective on July 1,
2001 and shall remain in force until the earlier of the expiration of the time
period provided by Rule 15a-4 under the Act or until replaced by a new Advisory
Agreement approved by the vote of a majority of shareholders of the Fund.
20. Termination. This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon written notice to the other
in the event of a breach of any provision thereof by the party so notified, or
otherwise upon sixty (60) days' written notice to the other, but any such
termination shall not affect the status, obligations or liabilities of any party
hereto to the other.
21. Limitation of Liability. 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. The execution and delivery of this Agreement
have been authorized by the trustees of the Trust and signed by an officer of
the Trust, acting as such, and neither such authorization by such trustees nor
such execution and delivery by such officer 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.
22. Definitions. As used in paragraphs 15 and 19 of this Agreement, the
terms "assignment," "interested person" and "vote of a majority of the
6
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
23. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
24. Multiple Advisers. For purposes of compliance with the investment
objectives, policies and restrictions, the Adviser shall be entitled to treat
the component of the Fund which it manages (the "Component") as though the
Component constituted the entire Fund, and the Adviser shall not be responsible
in any way for the compliance of any assets of the Fund, other than the
Component, with the investment objectives, policies and restrictions, or for the
compliance of the Fund, taken as a whole, with the investment objectives,
policies and restrictions. Notwithstanding the foregoing sentence, however, the
Adviser shall, upon written instructions from an officer of the Trust, effect
such portfolio transactions for the Component as the officer shall determine are
necessary in order for the Fund as a whole to comply with the investment
objectives, policies and restrictions.
Without limiting the foregoing, it is expressly understood and agreed
that the Adviser shall not be liable for any loss arising out of any act or
omission of any other adviser to the Fund, or for any loss arising out of the
failure of the Fund to comply with the investment objectives, policies and
restrictions, except for losses arising out of the Adviser's failure to comply
with the investment objectives, policies and restrictions with respect to the
Component or the Adviser's failure to comply with written instructions from an
officer of the Trust. Nothing in this paragraph 24 shall be construed in a
manner inconsistent with Sections 17(h) and 17(i) of the Act.
25. Use of Non-Public Personal Information. In accordance with Regulation
S-P, if non-public personal information regarding either party's customers or
consumers is disclosed to the other party in connection with this Agreement, the
party receiving such information will not disclose or use that information other
than as necessary to carry out the purposes of this Agreement.
7
CDC KOBRICK INVESTMENT TRUST
On behalf of Kobrick Capital Fund
By: /S/ XXXX X. XXXXXX
Name: Xxxx X. Xxxxxx
Title: President
ACCEPTANCE
The foregoing Agreement is hereby accepted.
Vaughan, Nelson, Scarborough & XxXxxxxxxx, X.X.
By: /S/ XXX X. XXXXXXXXXX
Name: Xxx X. Xxxxxxxxxx
Title: President and CEO
8
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Adviser on behalf of
the Fund for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modification
or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the
Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing the basis or bases
upon which the allocation of orders for the purchase and sale of
portfolio securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Trust by brokers or
dealers.
(ii) The supplying of services or benefits by brokers or
dealers to:
(a) The Trust;
(b) The Adviser; and,
(c) Any person affiliated with the foregoing
persons.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made
available.
9
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage
commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is
made by a committee or group, a record shall be kept of the names of
its members who participate in the authorization. There shall be
retained as part of this record any memorandum, recommendation or
instruction supporting or authorizing the purchase or sale of portfolio
securities and such other information as is appropriate to support the
authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Fund.
* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendation; I.E., buy, sell, hold)
or any internal reports or portfolio adviser reviews.
10
