INVESTMENT SUBADVISORY AGREEMENT
Agreement
made effective as of the 30th
day of
April, 2007 between Capital Mortgage Management, Inc., a Delaware corporation
(“Manager”), and Richmond Capital Management, Inc., a Virginia corporation
(“Subadviser”).
WHEREAS,
the Manager has entered into a Management Agreement dated October 17, 1997,
as
subsequently amended, with the Builders Fixed Income Fund, Inc. (the “Fund”), an
open-end management investment company registered under the Investment Company
Act of 1940, as amended (“1940 Act”);
WHEREAS,
the Manager wishes to retain the Subadviser as subadviser to furnish certain
investment advisory services to the Manager for the benefit of the existing
and
future portfolios of the Fund as the Manager and the Subadviser shall agree
upon
(collectively, the “Portfolios”) in connection with the Manager’s management of
the Portfolios, and the Subadviser is willing to furnish such services;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. Manager
hereby retains the Subadviser as its subadviser for the Fund and any future
Portfolio(s) of the Fund as the Manager and the Subadviser shall agree upon
for
the period and on the terms set forth in this Agreement. Subadviser accepts
such
appointment and agrees to render the services to the Manager for the benefit
of
the Portfolios herein set forth, for the compensation provided herein. In the
performance of its duties, the Subadviser will act in the best interests of
the
Portfolios, and will comply with (a) applicable laws and regulations including,
but not limited to, the 1940 Act, (b) the terms of this Agreement, (c) the
Fund’s Articles of Incorporation, By-Laws and currently effective registration
statement under the 1940 Act and the Securities Act of 1933, as amended (the
“Registration Statement”), (d) the stated investment objective, policies and
restrictions of each applicable Portfolio, and (e) such other guidelines as
the
Board of Directors of the Fund (the “Board”) reasonably may establish in
writing.
The
Manager agrees to provide to the Subadviser current and effective copies of
the
Fund’s prospectus and statement of additional information as filed on Form N-1A
with the Securities and Exchange Commission. The Manager further agrees to
provide the Subadviser with notice prior to a proposed change in any of the
Fund’s investment objectives, policies or restrictions.
2. |
Duties
as Investment Subadviser.
|
(a) |
Subject
to the supervision of the Board and the Manager, the Subadviser will
provide a continuous investment program for each Portfolio, including
investment research and management with respect to all securities,
investments and cash equivalents in each Portfolio consistent with
the
Fund’s prospectus and statement of additional information. The Subadviser
will determine from time to time what securities and other investments
will be purchased, retained or sold by each Portfolio for which Subadviser
has discretion. The Subadviser will exercise full discretion and act
for
each Portfolio in the same manner and with the same force and effect
as
such Portfolio itself might or could do with respect to purchases,
sales,
or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases,
sales or other transactions.
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(b) |
The
Subadviser will place orders pursuant to its investment determinations
for
each Portfolio either directly with the issuer or through brokers or
dealers. In the selection of brokers or dealers and the placement of
orders for the purchase and sale of investments for the Portfolios,
the
Subadviser shall use its best efforts to obtain for the Portfolios
the
most favorable price and execution available, except to the extent
it may
be permitted to pay higher brokerage commissions for brokerage and
research services to the extent permitted by Section 28(e) of the
Securities Exchange Act of 1934 and applicable SEC guidance. In using
its
best efforts to obtain the most favorable price and execution available,
the Subadviser, bearing in mind the Portfolio’s best interests at all
times, shall consider all factors it deems relevant, including by way
of
illustration, price, the size of the transaction, the nature of the
market
for the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker or dealer involved
and
the quality of service rendered by the broker or dealer in other
transactions. The Subadviser shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise
solely
by reason of its having caused a Portfolio to pay a broker or dealer
that
provides brokerage and research services to the Subadviser an amount
of
commission for effecting a portfolio investment transaction in excess
of
the amount of commission another broker or dealer would have charged
for
effecting that transaction if the Subadviser determines in good faith
that
such amount of commission was reasonable in relation to the value of
the
brokerage and research services provided by such broker or dealer,
viewed
in terms of either that particular transaction or the Subadviser’s overall
responsibilities with respect to the Portfolios and to other clients
of
the Subadviser as to which it exercises investment discretion. The
Subadviser may place portfolio transactions with brokers or dealers
that
promote or sell the Fund’s shares so long as such placements are made
pursuant to policies approved by the Board that are designed to ensure
that the selection is based on the quality of the broker or dealer’s
execution and not on its sales efforts. In no instance will portfolio
securities of the Fund be purchased from or sold to the Subadviser,
Manager, the Fund’s distributor or any affiliated person of the foregoing
persons.
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(c) |
The
Subadviser will be responsible for periodically determining the interest
rates and discount points for mortgages originated by financial
institutions and other mortgage lenders who participate in the ProLoan
Program (as described in the Registration Statement) pursuant to the
terms
of a ProLoan Master Agreement between the Fund and each participating
lender. The
Manager will coordinate with home builders and local building trade
unions
to ensure that residential homes are eligible to be included in the
ProLoan program. The
Manager also will provide regular status reports to the Subadviser
on
ProLoans originated by mortgage lenders participating in the ProLoan
program and the lenders’ progress in submitting pools of mortgage loans to
GNMA, FNMA or FHLMC, for the appropriate government agency’s guarantee and
to be securitized by the government agency. The Subadviser will have
sole
discretion to grant extensions of time or waive extension fees due
from
borrowers who are locked into a forward interest rate commitment provided
by the Fund through the ProLoan Program.
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(d) |
The
Subadviser will cause its portfolio manager responsible for managing
the
Fund’s investment portfolio to meet with the Manager and the Board at
least quarterly and will provide the manager and the Board on a regular
basis with economic and investment analyses and reports and make available
to the manager upon request any economic, statistical and investment
services normally available to institutional or other customers of
the
Subadviser.
|
(e) |
The
Subadviser will be responsible for voting proxies with respect to
securities held by the Fund and reporting the Fund’s proxy voting record
to the Fund’s administrator in the form required by the Securities and
Exchange Commission (“SEC”) or its staff on Form
N-PX.
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3. Services
Not Exclusive. The
services furnished by the Subadviser hereunder are not to be deemed exclusive
and the Subadviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby. It is understood
that the Subadviser shall not have any obligation to purchase or sell or to
recommend for purchase or sale, on behalf of the Fund, any security which the
Subadviser or its principals may purchase or sell for their accounts or for
the
account of any other client.
4. Compensation. For
the
services provided and the expenses assumed pursuant to this Agreement with
respect to a Portfolio, the Subadviser shall receive an annual subadvisory
fee
as set forth on Schedule
A.
The
subadvisory fee shall be accrued daily and paid monthly by a Portfolio at the
direction of the Manager. If this Agreement becomes effective or terminates
with
respect to a Portfolio before the end of any month, the fee for the period
from
the effective date to the end of the month or from the beginning of such month
to the date of termination, as the case may be, shall be prorated according
to
the proportion that such period bears to the full month in which such
effectiveness or termination occurs.
5. Limitation
of Liability of the Subadviser. The
Subadviser shall not be liable for any error of judgement or mistake of law
or
for any loss suffered by any Portfolio in connection with the matters to which
this Agreement related except a loss resulting from the willful misfeasance,
bad
faith or negligence on the Subadviser’s part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement. Further, it is understood and agreed by the Manager that the
Subadviser does not in any way guarantee the Fund from loss or depreciation,
nor
does the Subadviser guarantee any minimum performance by the Fund. In this
regard, the
Manager agrees to indemnify, release, hold
and
save the Subadviser, its principals,
agents,
servants and employees, free and harmless from any
and
all claims, costs and expenses (including without limitation, attorneys’ fees,
court costs and damages),
arising
directly or indirectly out of this Agreement, and the limited agency
relationship created by this Agreement, when
the
Subadviser is acting pursuant to the expressed or implied directions of the
current Registration Statement. This indemnification provision shall
not
apply
where there has been a finding by an arbitrator or a court of competent
jurisdiction that the Subadviser, its principals, agents, servants or employees
have engaged in: (i) fraud, willful misfeasance or bad faith, (ii) intentional
unlawful acts or omissions not expressly or impliedly permitted by the current
Registration Statement, and (iii) acts of gross negligence
or
reckless disregard of the Subadviser’s duties under this Agreement. This
indemnification provision shall not act
as a
waiver of, or be deemed to limit in any way, (i) the obligations of the
Subadviser under federal or state securities laws (including, specifically,
laws
relating to the regulation of investment advisors); (ii) or any fiduciary
obligation owed by the Subadviser to the Manager or the Fund under applicable
laws.
6. |
Duration
and Termination.
|
(a) |
As
used in this Agreement, the terms “assignment” and “vote of a majority of
the outstanding voting securities” shall have the meanings given to them
by Section 2(a)(4) and 2(a)(42), respectively, of the 1940 Act. This
Agreement shall terminate automatically in the event of its assignment,
or
upon termination of the Management Agreement between the Fund and the
Manager. This agreement may be terminated at any time, without the
payment
of any penalty, (i) with respect to the Fund, by the Board of Directors
of
the Fund, or by vote of a majority of the outstanding voting securities
of
the Fund, or by the manager on not less than 30 or more than 60 days’
written notice addressed to the Subadviser at its principal place of
business; and (ii) by the Subadviser, without the payment of any penalty,
on not less than 120 days written notice addressed to the Manager at
the
Manager’s principal place of business.
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(b) |
This
Agreement shall take effect on the date set forth above, and shall
remain
in force for a period of two (2) years from such date, and from year
to
year thereafter, subject to annual approval by: (i) the Board; or (ii)
a
vote of a “majority of the outstanding voting securities” of the Fund (as
defined in the 1940 Act); provided that in either event continuance
is
also approved by a majority of the Trustees who are not “interested
persons” (as defined in the 0000 Xxx) of the Subadviser or the Fund, by a
vote cast in person at a meeting called for the purpose of voting such
approval.
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(c) |
Any
question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision
of
the 1940 Act shall be resolved by reference to such term or provision
of
the 1940 Act and to interpretation thereof, if any, by the U.S. courts
or
in the absence of any controlling decision of any such court, by the
SEC
or its staff. In addition, where the effect of a requirement of the
1940
Act, reflected in any provision of this Agreement, is revised by rule,
regulation, order or interpretation of the SEC or its staff, such
provision shall be deemed to incorporate the effect of such rule,
regulation, order or interpretation.
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7. Advertising. Neither
party will use any advertising that refers to the other party or its affiliates
without the prior consent of such party.
8. 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.
9. Governing
Law. This
Agreement shall be construed in accordance with the 1940 Act and the laws of
the
State of Missouri, without giving effect to the conflicts of laws principles
thereof.
10. Notice. Any
notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To
the
Manager:
Capital
Mortgage Management, Inc.
000
Xxxxx
Xxxxxx
Xxxxxxxxxx,
XX 00000
Attention:
Xxxx X. Xxxxxxx
(000)
000-0000
With
a
copy
to:
Xxxxxxxx
Xxxxxx LLP
One
XX
Xxxx Xxxxx
Xx.
Xxxxx, XX 00000
Attention:
Dee Xxxx Xxxxxxx, Esq.
(000)
000-0000
To
the
Subadviser: Richmond
Capital Management
00000
Xxxxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxx, Jr., CFA
11. Severability. 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.
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.
13. Counterparts. This
Agreement may be executed in counterparts by the parties hereto, each of which
shall constitute an original counterpart, and all of which, together, shall
constitute one Agreement.
14. Arbitration.
If
a
dispute arises out of or relates to this Agreement, or the breach thereof,
and
if said dispute cannot be settled through direct discussions, the parties agree
that any controversy or claim arising out of or relating to this Agreement
or
the breach thereof, or involving the construction or application of any of
the
terms, covenants or conditions of this Agreement, will upon the written request
of one party served on the other, be settled by arbitration to be held in St.
Louis, Missouri in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may
be
entered in any court having jurisdiction thereof.
15.
Receipt
of Form ADV Part II.
The
Manager acknowledges receipt of the Subadvisor’s Disclosure Statement (ADV Part
II) as required by Rule 204-3 under the Investment Advisors Act of 1940. The
Manager can terminate the Agreement without penalty within five business days
after entering into the Agreement.
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.
CAPITAL
MORTGAGE MANAGEMENT,
INC.
By:_________________________________
Xxxx
X.
Xxxxxxx, President
RICHMOND
CAPITAL MANAGEMENT,
INC.
By:
___________________________________
Xxxxxx
X.
Xxxxx, Xx., Principal
Schedule
A
to
the
Subadvisory
Agreement
by
and
between
Capital
Mortgage Management, Inc.
and
Richmond
Capital Management, Inc.
FEE
SCHEDULE
Name
of Portfolio
Builders
Fixed Income Fund
Average
Daily Net Assets Subadvisory
Fee
Up
to and
including $750
million
0.150%
Over
$750
million
0.145%