Exhibit (h) 3.2
EXPENSE LIMITATION AGREEMENT
Xxxxx Xxxxxxx Investment Company
Xxxxxxx Multi-Manager Principal Protected Fund
EXPENSE LIMITATION AGREEMENT, effective as of January 17, 2003 by and
between Xxxxx Xxxxxxx Investment Management Company ("FRIMCo") and Xxxxx Xxxxxxx
Investment Company (the "Trust"), on behalf of the Trust's series, Xxxxxxx
Multi-Manager Principal Protected Fund (the "Fund").
WHEREAS, the Trust is a Massachusetts business trust, and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end investment management company; and
WHEREAS, the Trust and FRIMCo have entered into an Advisory Agreement
("Advisory Agreement"), pursuant to which FRIMCo provides investment management
services to the Fund for compensation based on the value of the average daily
net assets of the Fund; and
WHEREAS, the Trust and FRIMCo have determined that it is appropriate and in
the best interests of the Fund and its shareholders to maintain the expenses of
the Fund at a level below the level to which the Fund may otherwise be subject.
NOW THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. During the Guarantee Period (as defined in
the Fund's Prospectus), to the extent that the ordinary operating expenses
incurred by a class of the Fund in any fiscal year, including but not limited to
advisory fees payable to FRIMCo, but excluding extraordinary expenses such as
litigation and other expenses not incurred in the ordinary course of the Fund's
business ("Fund Operating Expenses"), exceed the Operating Expense Limit, as
defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be
the liability of FRIMCo.
1.2. Operating Expense Limit. The Operating Expense Limit in any fiscal
year with respect to each class of the Fund shall be the amount specified in
Schedule A hereto based on a percentage of the average daily net assets of such
class of the Fund.
1.3. Method of Computation. To determine FRIMCo's obligation with respect
to the Excess Amount, the Fund Operating Expenses for each class of the Fund
shall be calculated each day. If the annualized value of that calculation
exceeds the Operating Expense Limit for any class of the Fund, the expenses
shall be capped as specified in
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Schedule A, and a receivable from FRIMCo for that day's Excess Amount shall be
recorded. The Fund may offset amounts owed to the Fund pursuant to this
Agreement against the advisory fee payable to FRIMCo from the Fund.
1.4. Adjustments. From time to time, as better or more complete information
becomes available, adjustments to expenses may be made in order to more
accurately reflect the actual expense environment in which the Fund operates.
Such adjustments may temporarily cause the Fund's annualized expense ratio on a
given day to exceed the Operating Expense Limit. In such cases, subsequent
adjustments will be made to ensure that the Fund's expense ratio for the fiscal
year will not exceed the Operating Expense Limit.
1.5 Payment. If necessary, on or before the last day of the first month of
each fiscal year, an adjustment payment shall be made by the appropriate party
in order that the amount of the investment advisory fees waived or reduced and
other payments remitted by FRIMCo to each class of the Fund with respect to the
previous fiscal year shall equal the Excess Amount.
2. Recoupment of Fee Waivers and Expense Reimbursement
2.1. Recoupment. If on any day during which the Advisory Agreement is in
effect, the estimated annualized Fund Operating Expenses of a class of the Fund
for that day are less than the Operating Expense Limit, FRIMCo may be entitled
to recoup from the Fund the advisory fees waived or reduced and other payments
remitted by FRIMCo to such class of the Fund pursuant to Section 1 hereof (the
"Recoupment Amount") during any of the previous thirty-six (36) months, to the
extent that such class' annualized Fund Operating Expenses plus the amount so
recouped equals, for such day, the Operating Expense Limit provided in Schedule
A, provided that (a) such amount paid to FRIMCo will in no event exceed the
total Recoupment Amount and the Recoupment Amount will not include any amounts
previously recouped and (b) the Advisor has make a written request for the
Recoupment Amount and the Board of Trustees of the Fund approves the Recoupment
Amount at the time of such request as not inconsistent with the best interests
of the Fund.
2.2. Adjustments. If necessary, appropriate adjustments shall be made in
order to ensure that the actual Fund Operating Expenses of each class of the
Fund for the fiscal year (including any recoupment payments hereunder with
respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall have an initial term of five years beginning on the
second business day after the end of the Fund's offering period, or if that day
is not a business day, the first business day thereafter (as determined pursuant
to the prospectus for the Fund). Thereafter, this Agreement shall automatically
renew for one-year terms unless FRIMCo provides written notice to the Fund of
the termination of this Agreement at least
2
30 days prior to the end of the then-current term. In addition, this Agreement
shall terminate upon termination of the Advisory Agreement with respect to the
Fund, or it may be terminated by the Fund, without payment of any penalty, upon
ninety (90) days' prior written notice to FRIMCo at its principal place of
business. The Operating Expense Limit specified in Schedule A is effective until
the Guarantee Maturity Date (as defined in the Fund's prospectus); thereafter
the maximum Operating Expense Limit may be changed upon the extension of this
Agreement as contemplated by this paragraph and paragraph 4.4.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require
the Fund or the Trust to take any action contrary to the Trust's Master Trust
Agreement, or any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the Trust's Board of
Trustees of its responsibility for and control of the conduct of the affairs of
the Fund.
4.3. Definitions. Any question of interpretation of any term or provision
of this Agreement, including but not limited to the advisory fee and the
computations of net asset values, having a counterpart in or otherwise derived
from the terms and provisions of the Advisory Agreement or the 1940 Act, shall
have the same meaning as and be resolved by reference to such Advisory Agreement
or the 1940 Act.
4.4. Amendments. This Agreement may be amended only by a written agreement
signed by each of the parties hereto.
The undersigned officer of the Trust has executed this Agreement not
individually, but as an officer under the Master Trust Agreement and the
obligations of this Agreement are not binding upon any of the Trustees, officers
or shareholders of the Trust individually.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the day and year first
above written.
XXXXX XXXXXXX INVESTMENT COMPANY
On behalf of Xxxxxxx Multi-Manager Principal Protected Fund
By:
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Name:
Title:
XXXXX XXXXXXX INVESTMENT MANAGEMENT COMPANY
By:
------------------------
Name:
Title:
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Schedule A
OPERATING EXPENSE LIMITS
Maximum Operating Expense Limit
(as a percentage of average net assets)*
Class A Class B Class C
Xxxxxxx Multi-Manager Principal
Protected Fund 2.10%** 2.85%** 2.85%**
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* Effective through to the Guarantee Maturity Date; thereafter this limit is
subject to change if the Agreement is extended as contemplated in paragraph
4.4.
** During any period in which the Fund's assets are required to be invested in
a Defeasance Portfolio (as defined below) pursuant to the Financial
Guarantee Agreement referred to below, the Maximum Operating Expense Limit
(as a percentage of average net assets) with respect to those assets
comprising the Defeasance Portfolio shall be: 1.45% Class A, 2.20% Class B
and 2.20% Class C.
As used herein the terms Defeasance Portfolio, shall have the meaning
ascribed thereto in that certain Financial Guarantee Agreement, dated as of
January 17, 2003, among FRIMCo, the Trust and Ambac Assurance Corporation,
as such agreement is in effect from time to time.
