INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
AGREEMENT made as of September 21, 1999 between XXXXXXXXX & XXXXX FUND
TRUST, a Delaware business trust (herein called the "Trust"), and XXXXXXXXX &
XXXXX FUND MANAGEMENT, LLC, a California limited liability company and
registered investment adviser ("HQFM").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain HQFM to furnish investment
advisory and administrative services to the H&Q IPO & Emerging Company Fund, a
series of the Trust (the "Fund");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints HQFM to act as investment
adviser and administrator to the Fund for the period and on the terms set forth
in this Agreement. HQFM accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Trust has furnished HQFM with copies
properly certified or authenticated of each of the following:
(a) the Trust's Agreement and Declaration of Trust, as filed
with the Secretary of State of the State of Delaware on June 7, 1999, and all
amendments thereto or restatements thereof (such Agreement and Declaration of
Trust, as presently in effect and as it shall from time to time be amended or
restated, herein called the "Declaration of Trust");
(b) the Trust's By-Laws and amendments thereto (the "By-Laws");
(c) resolutions of the Trust's Trustees (the "Trustees")
authorizing the appointment of HQFM and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act, as filed with the Securities and Exchange Commission ("SEC") on
June 11, 1999, and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 333-80473), and under
the 1940 Act (File No. 811-09383), as filed with the SEC on June 11, 1999, and
all amendments thereto insofar as such Registration Statement and amendments
relate to the Fund; and
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(f) the Trust's most recent prospectuses and statement of
additional information for the Fund (such prospectuses and statement of
additional information, as presently in effect, and all amendments and
supplements thereto, herein collectively called the "Prospectus").
The Trust will furnish HQFM from time to time with copies of all
amendments of or supplements to the foregoing.
3. SERVICES. Subject to the supervision of the Trustees, HQFM will
monitor or perform for the Fund all aspects of the operations of the Fund,
except for those performed by the distributor for the Fund. More particularly,
HQFM will furnish an investment program in respect of the Fund, determine what
securities and other investments will be purchased, retained or sold by the Fund
and place orders for the purchase and sale of these investments; maintain office
facilities for the Fund; furnish statistical and research data, clerical
services and stationery and office supplies; help prepare filings and reports
for the Fund; and generally assist the Fund's other service providers in all
aspects of the administration of the Fund.
Subject to the provisions of the Declaration of Trust and the 1940
Act, HQFM, at its expense, may select and contract with one or more investment
sub-advisers (the "Sub-Advisers") for the Fund. HQFM may also delegate or
subcontract some or all of HQFM's other duties under this Agreement.
HQFM further agrees that it:
(a) will monitor the Fund's investments and will comply with the
provisions of the Declaration of Trust, the By-Laws and the Fund's stated
investment objectives, policies and restrictions, as they may be amended from
time to time;
(b) will comply with all applicable federal and state statutes,
rules and regulations pertaining to its services under this Agreement;
(c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with an underwriter, market
maker, or broker or dealer. In placing orders with brokers and dealers, HQFM
will attempt to obtain prompt execution of orders in an effective manner at the
most favorable price. Consistent with this obligation, when the execution and
price offered by two or more brokers are comparable, HQFM may, in its
discretion, purchase or sell portfolio securities through brokers who provide
HQFM with research advice and other services. In no instance will portfolio
securities be purchased or sold through, from or to HQFM or any Sub-Adviser, or
any affiliated person of the Trust, HQFM, or any Sub-Adviser, except as may be
permitted under the 1940 Act;
(d) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust, and will not
use such records and information for any purpose other than performance of its
responsibilities and duties
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hereunder, except after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld and may not be withheld
where HQFM (i) may be exposed to civil or criminal contempt proceedings for
failure to comply, (ii) is requested to divulge such information by duly
constituted authorities or (iii) is so requested by the Trust;
(e) will not make loans to any person to purchase or carry units
of beneficial interest in the Trust or make loans to the Trust;
(f) will direct its personnel, when making investment
recommendations for the Trust, not to inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for the Trust's accounts
are customers of HQFM, any Sub-Adviser or their affiliates. In dealing with such
customers, HQFM and its affiliates will not inquire or take into consideration
whether securities of those customers are held by the Trust;
(g) will provide regular written reports to the Trustees
(including, without limitation, reports on the general investment strategy of
the Fund, the performance of the Fund in relation to standard industry indices
and general conditions affecting the equity markets), will make appropriate
persons available for the purpose of reviewing such reports with the Trustees on
a regular basis at reasonable times, and will provide various other written and
oral reports from time to time as requested by the Trustees; and
(h) will vote proxies received by it in connection with
securities held by the Fund consistent with its fiduciary duties hereunder.
4. BOOKS AND RECORDS. HQFM hereby agrees to maintain and preserve
all accounts, books and records required under the 1940 Act and the Investment
Advisers Act of 1940 and rules thereunder with respect to HQFM's duties
hereunder. HQFM understands and agrees that all records it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request.
5. EXPENSES. During the term of this Agreement, HQFM will pay all
expenses incurred by it in connection with its activities under this Agreement,
including, without limitation, all compensation of any Sub-Adviser and any
person employed by or associated with HQFM to assist in the performance of
HQFM's obligations under this Agreement, whether or not such person is also an
officer or employee of the Trust. Other expenses incurred in the operation of
the Fund, including, without limitation, taxes, interest, brokerage fees and
commissions, fees of Trustees who are not officers, directors, shareholders,
members or employees of HQFM or any Sub-Adviser or any affiliate thereof, SEC
and state "blue sky" fees, costs of pricing portfolio securities, fees of the
Fund's investment adviser, distributor, administrator, accounting agent,
transfer and dividend disbursing agent, custodian and other service providers,
insurance premiums, outside auditing and legal expenses, costs of maintaining
the Trust's existence as a
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Delaware business trust, typesetting and printing prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund, costs of
shareholders' and Trustees' reports and meetings and any extraordinary expenses,
will be borne by the Fund.
6. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay HQFM, and HQFM will accept as
full compensation therefor, an advisory fee, accrued daily and payable monthly
in arrears, of sixty-five one hundredths of one percent (0.65%) of the Fund's
average daily net assets. From time to time, HQFM may agree to waive or reduce
some or all of the compensation to which it is entitled under this Agreement.
Through December 31, 2000, HQFM will waive its advisory fee and reimburse
expenses so that the total annual operating expenses of the Class A shares of
the Fund will not exceed 1.60%, the total annual operating expenses of the Class
B shares of the Fund will not exceed 2.30% and the total annual operating
expense of the Common Class shares of the Fund will not exceed 1.60%, of such
class's average daily net assets.
7. SERVICES TO OTHERS. The Trust understands that HQFM may in the
future act as an investment adviser, sub-investment adviser, and/or
administrator to other accounts, including other investment companies. The Trust
has no objection to HQFM's acting in such capacities, provided that whenever the
Fund and one or more other investment accounts advised by HQFM have available
funds for investment, investments suitable and appropriate for each will be
allocated in a manner believed by HQFM to be equitable to each account. The
Trust recognizes that in some cases this procedure may adversely affect the size
of the position that the Fund may obtain in a particular security. In addition,
the Trust understands that the persons employed by HQFM to assist in HQFM's
duties under this Agreement will not devote their full time to such service and
nothing contained in this Agreement will be deemed to limit or restrict the
right of HQFM or any of its affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. YEAR 2000 COMPLIANCE. HQFM, or its affiliates on behalf of HQFM,
have (i) initiated a review and assessment of all areas within HQFM's business
and operations (including those affected by its suppliers and vendors) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by HQFM (or its suppliers, vendors and customers) may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan substantially in accordance with that
timetable. Based on the foregoing, HQFM believes that all computer applications
(including those of its suppliers and vendors) that are material to its business
and operations applicable to this Agreement will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"). HQFM shall obtain a similar
representation from any investment sub-adviser or service provider to whom it
delegates any duties under this Agreement.
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9. LIMITATION OF LIABILITY. HQFM will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of HQFM in the performance of its duties or from reckless disregard by it
of its obligations and duties under this Agreement. Notwithstanding the
foregoing, the Trust does not waive any right it may have at common law or under
the federal or state securities laws.
10. DURATION AND TERMINATION. This Agreement will become effective as
of the later of (i) the date the Trust's Registration Statement as it relates to
the Fund is declared effective by the SEC, (ii) the date this Agreement has
been approved by a vote of a majority of the outstanding voting securities of
the Fund in accordance with the requirements under the 1940 Act, and (iii)
October 1, 1999.
This Agreement will remain in effect for two years and thereafter
continue for successive one year periods, provided such continuance is
specifically approved at least annually (a) by the vote of a majority of those
Trustees who are not parties to this Agreement or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of the Trustees or by the vote of a majority of
the outstanding voting securities of the Fund. Notwithstanding the foregoing,
this Agreement may be terminated at any time, without the payment of any
penalty, on sixty days' written notice by the Trust (by vote of the Trustees or
by vote of a majority of the outstanding voting securities of the Fund) or by
HQFM. This Agreement will immediately terminate in the event of its assignment.
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same meaning
as such terms in the 1940 Act.)
11. AMENDMENT OF THIS AGREEMENT. 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.
12. MISCELLANEOUS. 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 is 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 laws of the State of California.
The names "Xxxxxxxxx & Xxxxx Fund Trust" and "Trustees of Xxxxxxxxx &
Xxxxx Fund Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under the
Declaration of Trust, to which reference is hereby made. The obligations of the
Trust entered into in the name or on behalf thereof by any of its Trustees,
officers, representatives or agents are made not
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individually, but in such capacities, and are not binding upon any of the
Trustees, officers, representatives, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series of shares of the Trust must look solely to the assets of the Trust
belonging to such series for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
XXXXXXXXX & XXXXX FUND TRUST
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President
XXXXXXXXX & XXXXX FUNDMANAGEMENT, LLC
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President
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