PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of September 22, 1997, among Xxxx
Capital Management L.L.C. (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 U.S. Small Cap Fund (the "U.S. Small Cap Series"); and
WHEREAS, the Fund has retained the Advisor to render investment
management and administrative services to the U.S. Small Cap Series; and
WHEREAS, the Advisor and the Fund desire to retain the
Subadvisor to furnish portfolio management services to the U.S. Small Cap 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 U.S. Small Cap 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 act as Subadvisor with respect to certain assets of the U.S. Small
Cap 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
and the Fund's Board of Directors, the Subadvisor shall have full discretionary
authority as agent and attorney-in-fact with respect to the portion of assets of
the U.S. Small Cap 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 U.S. Small
Cap Series' registration statement filed with the Securities and Exchange
Commission ("SEC"), as amended. Investments by the Subadvisor shall conform with
the provisions of Appendix A 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 U.S. Small Cap Series' portfolio managed by the
Subadvisor and will provide regular reports of proxy voting. The Subadvisor
further agrees that it will:
(a) conform with all applicable rules and regulations of the
Securities and Exchange Commission.
(b) place orders pursuant to its investment determinations
for the U.S. Small Cap Series either directly with the issuer or with any broker
or dealer. In placing orders with brokers and dealers, the Subadvisor will
attempt to obtain the best net price and the most favorable execution of its
orders. Consistent with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, the Subadvisor may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide it with research advice and other services of lawful
assistance to the Subadvisor in serving the U.S. Small Cap Series as the
Subadvisor or who sell the U.S. Small Cap Series' shares.
(c) make available to the Advisor and the Fund promptly upon
their request all its investment records and ledgers to assist the Advisor and
the Fund in their compliance with respect to the U.S. Small Cap 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 U.S. Small
CapSeries such periodic and special reports as the Advisor and the Directors may
reasonably request.
(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 at reasonable times by any person designated by the Advisor or the Fund.
The Subadvisor shall provide to the Advisor or the Fund and any other party
either the Advisor or the Fund designates: (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 is 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 to
value securities in their client accounts, at the value 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; (iii) a quarterly review of
the assets under management; and (iv) tax information as requested, on a monthly
basis, to the Fund's custodian bank.
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.
4. Compensation. For the services provided to the U.S. Small Cap
Series, the Advisor will pay the Subadvisor a fee equal to .65% per annum of the
average daily value of assets under management by the Subadvisor. Fees shall be
billed and payable after the end of each calendar month. Fees will be prorated
for any period of less than one month.
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 U.S. Small Cap 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.
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 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 U.S. Small Cap Series 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 duties or by reason of his reckless
disregard of obligations and duties under this Agreement.
The Fund agrees not to hold the Subadvisor or any of its
officers or employees liable for, and to indemnify or insure the Subadvisor and
its officers and employees ("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 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. Services Not Exclusive. It is understood that the services of
the Subadvisor are not exclusive, and nothing in this Agreement shall prevent
the Subadvisor from providing similar services to other investment companies
(subject to such restrictions as Subadvisor may agree to separately) or from
engaging in other activities. When the Subadvisor recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Subadvisor recommends the purchase or sale of the same security
for the U.S. Small Cap Series, it is understood that such transactions will be
executed on a basis that is fair and equitable to the Series.
8. (a) Duration. This Agreement shall become effective on the
date first written above. Unless terminated as herein provided, this Agreement
shall remain in full force and effective for no more than two (2) years 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
Directors of the Fund or by a vote of a majority (as defined in the 0000 Xxx) of
the outstanding voting securities of the U.S. Small Cap Series, and (ii) by the
Advisor, and (iii) in either event by the vote of a majority of the Directors of
the Fund who are not parties of 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 Trustees of the Fund or by
the vote of a majority (as defined in the 0000 Xxx) of the outstanding voting
securities of the U.S. Small Cap Series, or by the Advisor, on thirty (30) days'
written notice to the Subadvisor, or by the Subadvisor on like notice to the
Fund and to the Advisor.
(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 U.S. Small Cap 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.
(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.
XXXX CAPITAL MANAGEMENT L.L.C.
By: ______________________________
(Title)
FREMONT INVESTMENT ADVISORS, INC.
By: ______________________________
(Title)
FREMONT MUTUAL FUNDS, INC.
By: ______________________________
(Title)
APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Xxxx Capital Management L.L.C.
Subadvisor to the Fremont U.S. Small Cap Fund
INVESTMENT OBJECTIVES AND GUIDELINES
Overall Investment Objective:
The objective of the Fremont U.S. Small Cap 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 U.S. companies of relatively small
capitalization. The Fund's investment objective reflects the belief that an
investment in companies with small stock market capitalizations which are not as
well-known to the general public provides an opportunity for greater reward than
an investment in common stocks of larger, better-known companies.
Policy and Guidelines for Subadvisor:
The Subadvisor will adhere to the Investment Objective and to policies in the
Fremont U.S. Small Cap 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, when compared to other
managers of similar size and with similar investment objectives.
