FORM OF ADMINISTRATIVE AGENCY AGREEMENT
[Exhibit
10.4]
FORM
OF ADMINISTRATIVE AGENCY AGREEMENT
THIS
ADMINISTRATIVE AGENCY AGREEMENT (the
“Agreement”)
is
made as of _______________, by and among XXXXX
BROTHERS XXXXXXXX & CO.,
a
limited partnership organized under the laws of the State of New York (the
“Administrator”),
VICTORIA
BAY ASSET MANAGEMENT, LLC,
a
Delaware limited liability company (the “General
Partner”)
and
UNITED
STATES NATURAL GAS FUND, LP,
a
limited partnership organized under the laws of the State of Delaware (the
“Fund”).
WITNESSETH:
WHEREAS,
the
Fund is a limited partnership that is registered as a commodity
pool;
WHEREAS,
the
General Partner has exclusive responsibility for the management and control
of
the business and affairs of the Fund; and
WHEREAS,
the
Fund and the General Partner desire to retain the Administrator to render
certain services to the Fund and/or the General Partner, as the case may be,
and
the Administrator is willing to render such services.
NOW,
THEREFORE,
in
consideration of the premises and mutual covenants herein contained, the parties
hereto agree as follows:
1. Appointment
of Administrator.
The
Fund and the General Partner hereby employ and appoint the Administrator to
act
as administrative agent on the terms set forth in this Agreement, and the
Administrator accepts such appointment.
2. Delivery
of Documents.
The
Fund and the General Partner will on a continuing basis provide the
Administrator with:
2.1 properly
certified or authenticated copies of resolutions of the General Partner’s Board
of Directors (including Xx. Xxxxxxxx X. Xxxxxx) authorizing the appointment
of
the Administrator as administrative agent of the Fund and approving this
Agreement;
2.2 a
copy of
the Fund’s most recent registration statement under the Securities Act of 1933,
as amended;
2.3 copies
of
all agreements between the Fund and its service providers, including without
limitation, advisory, distribution and administration agreements and
distribution and/or unitholder;
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2.4 a
copy of
the Fund’s valuation procedures;
2.5 a
copy of
the Fund’s Limited Partnership Agreement, as may be amended from time to
time;
2.6 a
copy of
the General Partner’s First Amended and Restated Limited Liability Company
Agreement, as may be amended from time to time;
2.7 any
other
documents or resolutions (including, but not limited to directions or
resolutions of the General Partner’s Board of Directors, Management Directors,
and/or Audit Committee) which relate to or affect the Administrator’s
performance of its duties hereunder or which the Administrator may at any time
reasonably request; and
2.8 copies
of
any and all amendments or supplements to the foregoing.
3. Duties
as Administrator. Subject
to the supervision and direction of the General Partner’s Board of Directors,
Management Directors and Audit Committee, the Administrator will perform the
administrative services described in Appendix A hereto. Additional services
may
be provided by the Administrator upon the request of the Fund as mutually agreed
from time to time. In performing its duties and obligations hereunder, the
Administrator will act in accordance with the General Partner’s instructions as
defined in Section 5 (“Instructions”). It is agreed and understood that the
Administrator shall not be responsible for the Fund’s or the General Partner’s
compliance with any applicable documents, laws or regulations, or for losses,
costs or expenses arising out of the Fund’s or the General Partner’s failure to
comply with said documents, laws or regulations or the Fund’s or the General
Partner’s failure or inability to correct any non-compliance therewith. The
Administrator shall in no event be required to take any action, which is in
contravention of any applicable law, rule or regulation or any order or judgment
of any court of competent jurisdiction.
3.1
Records.
The
Administrator will maintain
and retain such records as required by the Securities Exchange Act of 1934,
as
amended, the Rules of the American Stock Exchange, 17 C.F.R 4.23, and other
applicable federal securities laws and created pursuant to the performance
of
the Administrator’s obligations under this Agreement. The Administrator will
maintain such other records as requested by the Fund or the General Partner
and
received by the Administrator. The Administrator shall not be responsible for
the accuracy and completeness of any records not created by the Administrator.
The Administrator acknowledges that the records maintained and preserved by
the
Administrator pursuant to this Agreement are the property of the Fund and will
be, at the Fund’s expense, surrendered promptly upon reasonable request. In
performing its obligations under this Section, the Administrator may utilize
micrographic and electronic storage media as well as independent third party
storage facilities.
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4. Duties
of the Fund and the General Partner.
The
Fund and the General Partner shall notify the Administrator promptly of any
matter affecting the performance by the Administrator of its services under
this
Agreement. Where the Administrator is providing fund accounting services
pursuant to this Agreement, the Fund and the General Partner shall promptly
notify the Administrator as to the accrual of liabilities of the Fund and of
liabilities of the Fund not appearing on the books of account kept by the
Administrator, as well as to the existence, status and proper treatment of
reserves, if any, authorized by the Fund or the General Partner. The Fund and
the General Partner agree to provide such information to the Administrator
as
may be requested under the banking and securities laws of the United States
or
other jurisdictions relating to “Know Your Customer” and money laundering
prevention rules and regulations (collectively, the “KYC Requirements”). For
purposes of this subsection, and in connection with all applicable KYC
Requirements, the Fund is the “client” or “customer” of the
Administrator. The
Fund
and the General Partner further represent that each will perform all obligations
required under applicable KYC Requirements with respect to the Fund’s
“customers” (as defined in the KYC Requirements) and that, because these
customers do not constitute “customers” or “clients” of the Administrator under
such applicable rules and regulations, the Administrator is under no such
similar obligations.
5.
Instructions.
5.1 The
Administrator shall not be liable for, and shall be indemnified by the Fund
against any and all losses, costs, damages or expenses arising from or as a
result of, any action taken or omitted in reliance upon Instructions or upon
any
other written notice, request, direction, instruction, certificate or other
instrument believed by it to be genuine and signed or authorized by the proper
party or parties. A list of persons so authorized by the General Partner
(“Authorized Persons”) is attached hereto as Appendix B and upon which the
Administrator may rely until its receipt of notification to the contrary by
the
General Partner.
5.2 Instructions
shall include a written request, direction, instruction or certification signed
or initialed on behalf of the Fund by one or more Authorized Persons.
5.3 Telephonic
or other oral instructions or instructions given by telefax transmission may
be
given by any one of the above Authorized Persons and will also be considered
Instructions if the Administrator believes them to have been given by a person
authorized to give such Instructions with respect to the transaction involved.
5.4 With
respect to telefax transmissions, the Fund and the General Partner hereby
acknowledge that (i) receipt of legible instructions cannot be assured, (ii)
the
Administrator cannot verify that authorized signatures on telefax instructions
are original, and (iii) the Administrator shall not be responsible for losses
or
expenses incurred through actions taken in reliance on such telefax
instructions. The Fund and the General Partner agree that such telefax
instructions shall be conclusive evidence of the Fund’s/General Partner’s
Instruction to the Administrator to act or to omit to act.
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5.5 Instructions
given orally will not be confirmed in writing and the lack of such confirmation
shall in no way affect any action taken by the Administrator in reliance upon
such oral Instructions. The Fund and the General Partner authorize the
Administrator to tape record any and all telephonic or other oral Instructions
given to the Administrator by or on behalf of the Fund (including any of the
Fund’s or the General Partner’s officers, directors, trustees, employees or
agents or any investment manager or adviser or person or entity with similar
responsibilities which is authorized to give Instructions on behalf of the
Fund
to the Administrator.)
6. Expenses
and Compensation.
For the
services to be rendered and the facilities to be furnished by the Administrator
as provided for in this Agreement, the Fund shall pay the Administrator rendered
pursuant to this Agreement a fee based on such fee schedule as may from time
to
time be agreed upon in writing among the General Partner, Fund and the
Administrator. Additional services performed by the Administrator as requested
by the Fund shall be subject to additional fees as mutually agreed from time to
time. In addition to any such fees, the Administrator shall xxxx the Fund
separately for any out-of-pocket disbursements of the Administrator based on
an
out-of-pocket disbursement schedule as may from time to time be agreed upon
in
writing among the General Partner, the Fund and the Administrator. The initial
fee schedule and out of pocket disbursement schedule are attached as Appendix
D
to this Agreement. The foregoing fees and disbursements shall be billed to
the
Fund by the Administrator and shall be paid promptly by wire transfer or other
appropriate means to the Administrator.
7. Standard
of Care.
The
Administrator shall be held to the exercise of reasonable care and diligence
in
carrying out the provisions of this Agreement, provided that the Administrator
shall not thereby be required to take any action which is in contravention
of
any applicable law, rule or regulation or any order or judgment of any court
of
competent jurisdiction.
8. General
Limitations on Liability.
The
Administrator shall incur no liability with respect to any telecommunications,
equipment or power failures, or any failures to perform or delays in performance
by postal or courier services or third-party information providers (including,
without limitation those listed on Appendix C).
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8.1 The
Administrator shall also incur no liability under this Agreement if the
Administrator or any agent or entity utilized by the Administrator shall be
prevented, forbidden or delayed from performing, or omits to perform, any act
or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of causes or events beyond its control, including but
not
limited to:
8.1.1 any
Sovereign Event. A “Sovereign Event” shall mean any nationalization;
expropriation; devaluation; revaluation; confiscation; seizure; cancellation;
destruction; strike; act of war, terrorism, insurrection or revolution; or
any
other act or event beyond the Administrator’s control;
8.1.2 any
provision of any present or future law, regulation or order of the United States
or any state thereof, or of any foreign country or political subdivision
thereof, or of any securities depository or clearing agency; and
8.1.3 any
provision of any order or judgment of any court of competent jurisdiction.
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8.2 The
Administrator shall not be held accountable or liable for any losses,
damages or expenses the General Partner, the Fund or any unitholder
or
former unitholder of the Fund or any other person may suffer or incur
arising from acts, omissions, errors or delays of the Administrator
in the
performance of its obligations and duties as provided in Section
3 hereof,
including without limitation any error of judgment or mistake of
law,
except a loss, damage or expense directly resulting from the
Administrator’s willful malfeasance, bad faith or negligence in the
performance of such Administrator’s obligations and duties.
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9.
Specific
Limitations on Liability. In
addition to, and without limiting the application of the general limitations
on
liability contained in Section 8, above, the following specific limitations
on
the Administrator’s liability shall apply to the particular administrative
services set forth on Appendix A hereto.
9.1 Liability
for Fund Accounting Services. Without
limiting the provisions in Section 8 hereof, the Administrator’s liability for
acts, omissions, errors or delays relating to its fund accounting obligations
and duties shall be limited to the amount of any expenses associated with a
required recalculation of net asset value per unit (“NAV”) or any direct damages
suffered by unitholders in connection with such recalculation. The
Administrator’s liability or accountability for such acts, omissions, errors or
delays shall be further subject to clauses 9.1.1 through 9.1.4 below.
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9.1.1 The
parties hereto acknowledge that the Administrator’s causing an error or delay in
the determination of NAV may, but does not in and of itself, constitute
negligence or reckless or willful misconduct. The parties further acknowledge
that in accordance with industry practice the liability of the Administrator
for
fund accounting services shall accrue and the recalculation of NAV shall be
performed in accordance with this Section 9.1 only with regard to errors in
the
calculation of the NAV that are (i) greater than or equal to $.01 per unit
of
the Fund and (ii) greater than or equal to ½% of the total net assets of the
Fund.
9.1.2 In
no
event shall the Administrator be liable or responsible to the General Partner,
the Fund, any present or former unitholder of the Fund, or any other person
for
any error or delay that continued or was undetected after the date of an audit
performed by the certified public accountants employed by or on behalf of the
Fund if, in the exercise of reasonable care in accordance with generally
accepted accounting standards, such accountants should have become aware of
such
error or delay in the course of performing such audit.
9.1.3 The
Administrator shall not be held accountable or liable to the General Partner,
the Fund, any unitholder or former unitholder thereof or any other person for
any delays or losses, damages or expenses any of them may suffer or incur
resulting from (i) the Administrator’s usage of a third party service provider
for the purpose of storing records delivered to the Administrator by or on
behalf of the Fund and which the Administrator did not create in the performance
of its obligations hereunder; (ii) the Administrator’s failure to receive timely
and suitable notification concerning quotations or corporate actions relating
to
or affecting portfolio securities of the Fund; or (iii) any errors in the
computation of NAV based upon or arising out of quotations or information as
to
corporate actions if received by the Administrator either (a) from a source
which the Administrator was authorized to rely upon (including those sources
listed on Appendix C), or (b) from a source which in the Administrator’s
reasonable judgment was as reliable a source for such quotations or information
as such authorized sources; or (iv) any errors in the computation of NAV as
a
result of relevant information known to the General Partner, the Fund, a futures
commission merchant, securities brokers or dealers, or any of the Fund’s other
service providers including futures commission merchants in contract with the
Fund, which would impact the calculation of NAV, but was not communicated to
the
Administrator. To the extent that Fund assets are not in the custody of the
Administrator, the Administrator may conclusively rely on any reporting in
connection with such assets provided to the Administrator by a third party
on
behalf of the Fund, including, without limitation any futures commission
merchant.
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9.1.4 In
the
event of any error or delay in the determination of such NAV for which the
Administrator may be liable, the General Partner, the Fund and the Administrator
will consult and make good faith efforts to reach agreement on what actions
should be taken in order to mitigate any loss suffered by the Fund or its
present or former unitholders, in order that the Administrator’s exposure to
liability shall be reduced to the extent possible after taking into account
all
relevant factors and alternatives. It is understood that in attempting to reach
agreement on the actions to be taken or the amount of the loss which should
appropriately be borne by the Administrator, the General Partner, the Fund
and
the Administrator will consider such relevant factors as the amount of the
loss
involved, the Fund’s/General Partner’s desire to avoid loss of unitholder
goodwill, the
fact
that other persons or entities could have been reasonably expected to have
detected the error sooner than the time it was actually discovered, the
appropriateness of limiting or eliminating the benefit which unitholders or
former unitholders might have obtained by reason of the error, and the
possibility that other parties providing services to the Fund might be induced
to absorb a portion of the loss incurred.
10.
Indemnification.
10.1 The
General Partner and the Fund hereby agree to indemnify and hold harmless the
Administrator, its partners, stockholders, members, directors, officers and
employees and any subsidiary or affiliate of the foregoing (“Affiliate”), and
the successors and assigns of all of the foregoing persons, against any and
all
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) resulting from any act, omission, error or delay or any
claim, demand, action or suit, in connection with or arising out of performance
of its obligations and duties under this Agreement, not resulting from the
willful malfeasance, bad faith or negligence of the Administrator in the
performance of such obligations and duties. The provisions of this Section
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shall survive the termination of this Agreement.
10.1.1 If
any
action, suit or proceeding (each, a “Proceeding”) is brought against the
Administrator or any such person in respect of which indemnity may be sought
against the General Partner pursuant to the foregoing subsection, the
Administrator or such person shall promptly notify the General Partner in
writing of the institution of such Proceeding and the General Partner shall
assume the defense of such Proceeding, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses; provided, however, that the omission to so notify the General Partner
shall not release the General Partner from any liability which it may have
to
the Administrator or any such person except to the extent that it has been
materially prejudiced by such failure and has not otherwise learned of such
Proceeding. The Administrator or such person shall have the right to employ
its
own counsel in any such case, but the fees and expenses of such counsel shall
be
at the expense of the Administrator or of such person unless the employment
of
such counsel shall have been authorized in writing by the General Partner in
connection with the defense of such Proceeding or the General Partner shall
not
have, within a reasonable period of time in light of the circumstances, employed
counsel to have charge of the defense of such Proceeding or such indemnified
party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from, additional to or in conflict
with those available to the General Partner (in which case the General Partner
shall not have the right to direct the defense of such Proceeding on behalf
of
the indemnified party or parties), in any of which events such fees and expenses
shall be borne by the General Partner and paid as incurred (it being understood,
however, that the General Partner shall not be liable for the expenses of more
than one separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such Proceeding).
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10.1.2 The
General Partner shall not be liable for any settlement of any Proceeding
effected without the General Partner’s written consent but if settled with the
General Partner’s written consent, the General Partner agrees to indemnify and
hold harmless the Administrator and any such person from and against any loss
or
liability by reason of such settlement. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second sentence of this subsection, then the indemnifying
party agrees that it shall be liable for any settlement of any Proceeding
effected without its written consent if (i) such settlement is entered into
more
than 60 Business Days (defined as any day other than a day on which the American
Stock Exchange (“AMEX”), the New York Mercantile Exchange (“NYMEX”) or the New
York Stock Exchange (“NYSE”) is closed for regular trading
(each a
“Business Day”)),
after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall not have fully reimbursed the indemnified party in
accordance with such request prior to the date of such settlement and (iii)
such
indemnified party shall have given the indemnifying party at least 30 Business
Days’ prior notice of its intention to settle. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes
an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault, culpability or a failure to act, by or on behalf of such indemnified
party.
10.2 Subject
to Sections 7, 8 and 9 of this Agreement, the Administrator agrees to indemnify
and hold harmless the General Partner and the Fund, its partners, stockholders,
members, directors, officers and employees and any Affiliate of the foregoing,
and the successors and assigns of all of the foregoing persons, against any
and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any act, omission, error or delay
or
any claim, demand, action or suit, in connection with or arising out of
performance of its obligations and duties under this Agreement, resulting from
the willful malfeasance, bad faith or negligence of the Administrator in the
performance of such obligations and duties. The provisions of this Section
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shall survive the termination of this Agreement.
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10.2.1 If
any
Proceeding is brought against the General Partner or any such person in respect
of which indemnity may be sought against the Administrator pursuant to the
foregoing subsection, the General Partner or such person shall promptly notify
the Administrator in writing of the institution of such Proceeding and the
Administrator shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses; provided, however, that the omission to so
notify the Administrator shall not relieve the Administrator from any liability
which it may have to the General Partner or any such person except to the extent
that it has been materially prejudiced by such failure and has not otherwise
learned of such Proceeding. The General Partner or such person shall have the
right to employ its own counsel in any such case, but the fees and expenses
of
such counsel shall be at the expense of the General Partner or of such person
unless the employment of such counsel shall have been authorized in writing
by
the Administrator in connection with the defense of such Proceeding or the
Administrator shall not have, within a reasonable period of time in light of
the
circumstances, employed counsel to have charge of the defense of such Proceeding
or such indemnified party or parties shall have reasonably concluded that there
may be defenses available to it or them which are different from, additional
to
or in conflict with those available to the Administrator (in which case the
General Partner shall not have the right to direct the defense of such
Proceeding on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the Administrator and paid
as
incurred (it being understood, however, that the Administrator shall not be
liable for the expenses of more than one separate counsel (in addition to any
local counsel) in any one Proceeding or series of related Proceedings in the
same jurisdiction representing the indemnified parties who are parties to such
Proceeding).
10.2.2 The
Administrator shall not be liable for any settlement of any Proceeding effected
without the Administrator’s written consent but if settled with the
Administrator’s written consent, the Administrator agrees to indemnify and hold
harmless the General Partner and any such person from and against any loss
or
liability by reason of such settlement. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second sentence of this subsection, then the indemnifying
party agrees that it shall be liable for any settlement of any Proceeding
effected without its written consent if (i) such settlement is entered into
more
than 60 Business Days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall not have fully reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 Business Days’ prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened Proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such Proceeding and does not include
an
admission of fault, culpability or a failure to act, by or on behalf of such
indemnified party.
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11. Reliance
by the Administrator on Opinions of Counsel and Opinions of Certified Public
Accountants.
The
Administrator may consult with its counsel or the Fund/General Partner’s counsel
in any case where so doing appears to the Administrator to be necessary or
desirable. The Administrator shall not be considered to have engaged in any
misconduct or to have acted negligently and shall be without liability in acting
upon the advice of its counsel or of the Fund’s/General Partner’s
counsel.
The
Administrator may consult with a certified public accountant or the Fund’s
Treasurer (or persons performing such function) in any case where so doing
appears to the Administrator to be necessary or desirable. The Administrator
shall not be considered to have engaged in any misconduct or to have acted
negligently and shall be without liability in acting upon the advice of such
certified public accountant or of the Fund’s Treasurer or persons performing
such function.
12. Termination
of Agreement. This
Agreement may be terminated by any of the parties in accordance with the
provisions of this Section 12.
12.1 This
Agreement shall have an initial term of two (2) years from the date hereof.
Thereafter, this Agreement shall automatically renew for successive one (1)
year
periods unless any party terminates this Agreement by written notice effective
no sooner than seventy-five (75) days following the date that notice to such
effect shall be delivered to the other parties at their address set forth
herein. Notwithstanding the foregoing provisions, any party may terminate this
Agreement at any time (a) for cause, which is a material breach of the Agreement
not cured within sixty (60) days, in which case termination shall be effective
upon written receipt of notice by the non-terminating parties, or (b) upon
thirty (30) days’ written notice to the other parties in the event that a party
is adjudged bankrupt or insolvent, or there shall be commenced against such
party a case under any applicable bankruptcy, insolvency, or other similar
law
now or hereafter in effect. In the event a termination notice is given by a
party hereto, all expenses associated with the movement of records and materials
and the conversion thereof shall be paid by the Fund for which services shall
cease to be performed hereunder. The Administrator shall be responsible for
completing all actions in progress when such termination notice is given unless
otherwise agreed.
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12.2. Upon
termination of this Agreement in accordance with this Section 12, the Fund
may
request the Administrator to promptly deliver to the Fund or to any designated
third party all records created and maintained by the Administrator pursuant
to
Section 3.1 of this Agreement, as well as any Fund records maintained but not
created by the Administrator. If such request is provided in writing by the
Fund
to the Administrator within seventy-five (75) days of the date of termination
of
the Agreement, the Administrator shall provide to the Fund a certification
that
all records created by the Administrator pursuant to its obligations under
Section 3.1 of this Agreement are accurate and complete. After seventy-five
(75)
days of the date of termination of this Agreement, no such certification will
be
provided to the Fund by the Administrator and the Administrator is under no
further obligation to ensure that records created by the Administrator pursuant
to Section 3.1 of this Agreement are maintained in a form that is accurate
or
complete.
13. Confidentiality
and Privacy.
13.1 The
parties hereto agree that each shall treat confidentially the terms and
conditions of this Agreement and all information provided by each party to
the
other regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely for
the purpose of rendering or obtaining services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be disclosed
to any third party without the prior consent of such providing party. The
foregoing shall not be applicable to any information that is publicly available
when provided or thereafter becomes publicly available other than through a
breach of this Agreement, or that is required to be disclosed by or to any
regulatory authority, any auditor of the parties hereto, or by judicial or
administrative process or otherwise by applicable law.
13.2 In
the
course of carrying out its obligations under this Agreement, Administrator
shall
maintain physical, procedural and electronic safeguards to protect information
regarding the Fund and its investors that Administrator has obtained or to
which
the Administrator
has
gained access.
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14. Tape-recording.
The
parties consent to recording of any and all telephonic or other oral
instructions. This authorization will remain in effect until and unless revoked
by the Fund, the General Partner or the Administrator in writing. Each party
further agrees to solicit valid written or other consent from any of its
employees, officers, directors or agents with respect to telephone
communications to the extent such consent is required by applicable
law.
15. Procedures. Procedures
applicable to the Administrator’s services to be performed hereunder may be
established from time to time by agreement among the Fund, the General Partner
and the Administrator. The Administrator shall have the right to utilize any
unitholder accounting and recordkeeping systems that, in its opinion, enables
it
to perform any services to be performed hereunder.
16. Entire
Agreement; Amendment.
This
Agreement constitutes the entire understanding and agreement of the parties
hereto and supersedes any other oral or written agreements heretofore in effect
between the parties with respect to the subject matter hereof. No provision
of
this Agreement may be amended or terminated except by a statement in writing
signed by the party against which enforcement of the amendment or termination
is
sought.
17. Severability.
In the
event any provision of this Agreement is determined to be void or unenforceable,
such determination shall not affect the remainder of this Agreement, which
shall
continue to be in force.
18. Headings.
The
section headings in this Agreement are for the convenience of reference only
and
shall not modify, define, expand or limit any of the terms or provisions
thereof.
19. Governing
Law.
This
Agreement shall be governed by and construed according to the laws of the State
of New York without giving effect to conflicts of law provisions thereof and
each of the parties hereto irrevocably consents to the exclusive jurisdiction
of
the United States District Court for the Southern District of New York or if
that court lacks or declines to exercise subject matter jurisdiction, the
Supreme Court of the State of New York, New York County. The General Partner
and
the Fund irrevocably waive any objection each may now or hereafter have to
the
laying of venue of any action or proceeding in any of the aforesaid courts
and
any claim that any such action or proceeding has been brought in an inconvenient
forum. Furthermore, each party hereto irrevocably waives any right that it
may
have to trial by jury in any action, proceeding or counterclaim arising out
of
or related to this Agreement or the services contemplated hereby.
20. Notices.
Notices
and other writings delivered or mailed postage prepaid to the General Partner
and Fund shall be addressed to the Fund/General Partner at Victoria Bay Asset
Management, LLC, x/x Xxxxxxxx X. Xxxxxx, X.X. Xxx 0000, Xxxxxx, CA 94570, or
such other address as the General Partner or the Fund may have designated to
the
Administrator in writing, or to the Administrator at 00 Xxxxx Xxxxxx, Xxxxxx,
XX
00000, Attention: Manager, Fund Administration Department, or to such other
address as the Administrator may have designated to the General Partner and
the
Fund in writing, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.
12
21. Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the General Partner,
the Fund and the Administrator and their respective successors and assigns,
provided that no party hereto may assign this Agreement or any of its rights
or
obligations hereunder without the written consent of the other parties. Each
party agrees that only the parties to this Agreement and/or their successors
in
interest shall have a right to enforce the terms of this Agreement. Accordingly,
no client of the General Partner, unitholder of the Fund or other third party
shall have any rights under this Agreement and such rights are explicitly
disclaimed by the parties.
22. Counterparts.
This
Agreement may be executed in any number of counterparts each of which shall
be
deemed to be an original. This Agreement shall become effective when one or
more
counterparts have been signed and delivered by each of the parties. A photocopy
or telefax of this Agreement shall be acceptable evidence of the existence
of
this Agreement and the Administrator shall be protected in relying on the
photocopy or telefax until the Administrator has received the original of this
Agreement.
23. Exclusivity.
The
services furnished by the Administrator hereunder are not to be deemed
exclusive, and the Administrator shall be free to furnish similar services
to
others.
24. Authorization.
The
General Partner hereby represents and warrants that the Management Directors
of
its Board of Directors including Xx. Xxxxxxxx X. Xxxxxx have authorized the
execution and delivery of this Agreement and that Authorized Persons of the
General Partner and the Fund have signed this Agreement, Appendices A, B and
C
and the fee schedule hereto.
13
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their duly authorized officers as of the date first
written above.
The
undersigned acknowledges that (I/we) have received a copy of this
document.
XXXXX
BROTHERS XXXXXXXX & CO.
By:
Name:
Title:
Date:
By:
Victoria Bay Asset Management, LLC, as General Partner
By:
Name:
Title:
Date:
VICTORIA
BAY ASSET MANAGEMENT, LLC
By:
Name:
Xxxxxxxx X. Xxxxxx
Title:
Manager and Management Director
Date:
14
APPENDIX
A
ADMINISTRATIVE
SERVICES OF THE ADMINISTRATIVE AGENT
Dated
as
of ________________________
Fund
Accounting Services
The
Administrator will provide the following fund accounting services to the Fund
on
any Business Day: transaction processing and review, custodial reconciliation,
securities pricing and investment accounting.
Transaction
Processing and Review.
The
Administrator shall input and reconcile the Fund’s investment activity including
with respect to:
|
·
|
Investment
taxlots
|
|
·
|
Income
|
|
·
|
Dividends
|
|
·
|
Principal
paydowns
|
|
·
|
Capital
activity
|
|
·
|
Expense
accruals
|
|
·
|
Cash
activity
|
|
·
|
Corporate
Reorganizations
|
Custodial
Reconciliation.
The
Administrator shall reconcile the following positions of the Fund against the
records of the Custodian:
|
·
|
Securities,
Futures and Over-the-Counter Contract (“OTC”)
holdings
|
|
·
|
Cash
including cash transfers, fees assessed and other investment related
cash
transactions
|
|
·
|
Trade
settlements
|
Securities,
Futures and OTC Valuation.
Using
the Valuation Procedures set forth in Appendix D, the Administrator shall update
each security, Futures and OTC position of the Fund as to the
following:
|
·
|
Market
prices obtained from approved sources including those listed on Appendix
C
or Fair Valuations obtained from an Authorized Person of the
Fund
|
|
·
|
Xxxx
to market of non-base receivables/payables utilizing approved foreign
exchange quotations as quoted in Appendix
C
|
|
·
|
Xxxx
to market of non-base currency positions utilizing the approved sources
quoted in Appendix C or Fair Valuations obtained from an Authorized
Person
of the Fund
|
Investment
Accounting.
The
Administrator shall provide the following investment accounting services to
each
Portfolio:
|
·
|
Amortization/accretion
at the individual tax lot level
|
|
·
|
General
ledger entries
|
|
·
|
Book
value calculations
|
|
·
|
Trade
Date + 1 accounting
|
|
·
|
15
Financial
Reporting Services
|
·
|
The
Administrator shall accumulate information for and prepare
|
|
·
|
Within
a 30 day period following the end of the Fund’s required monthly reporting
period, an Account Statement in compliance with the requirements
CFTC Rule
§4.22(a) including a Statement of Income (Loss) and Statement of Changes
in Net Asset Value; such preparation includes the coordination and
review
of all printer and author edits. The Fund and/or General Partner
shall
make arrangements for the printing and mailing of the Account Statements.
|
|
·
|
Within
a 45 day production cycle, one first fiscal quarter report of the
Fund,
one second fiscal quarter report of the Fund and one third fiscal
quarter
report of the Fund, each on Form
10-Q.
|
|
·
|
Within
a 90-day production cycle, or shorter time period as required by
the U.S.
Securities and Exchange Commission (“SEC”), Commodities Futures Trading
Commission, AMEX or NFA rules and communicated to the Administrator
by the
Fund and/or General Partner, one annual report of the Fund on Form
10-K
per fiscal year, such preparation includes the coordination of all
printer
and author edits, the review of printer drafts and the coordination
of the
audit of the Fund by its independent public accountant (e.g. manage
open
items lists, host weekly audit meeting, etc.). The Fund and/or General
Partner shall make arrangements for the printing and mailing of the
annual
report on Form 10-K.
|
|
·
|
Within
90 days after the end of the fiscal year, an Annual Report of the
Fund in
compliance with the requirements of CFTC Rule §4.22(c); such preparation
includes the coordination of all printer and author edits, the review
of
printer drafts and the coordination of the audit of the Fund by its
independent public accountant (e.g. manage open items lists, host
weekly
audit meeting, etc.). The Fund and/or General Partner shall make
arrangements for the printing and mailing of the Annual
Report.
|
|
·
|
Upon
acceptance of each above-mentioned report by the Fund’s Treasurer and/or
Chief Financial Officer (or such person performing such functions),
the
Administrator shall Edgarize and file such reports with the SEC,
CFTC
and/or NFA as required, including any applicable executed officer
certifications or other exhibits
|
The
Administrator shall assist the Fund in preparing Fund press releases with
respect to interim statements and quarterly results and transmitting such press
releases to the American Stock Exchange and such other entities as requested
by
the Fund or the General Partner.
Assistant
Treasurer Services
The
Administrator shall perform the following services as requested by the Fund’s
Treasurer (or person performing such function):
|
·
|
Prepare
and obtain authorization of Fund expense invoices on a bi-monthly
basis
|
|
·
|
Prepare
the Fund’s quarterly budget and make recommendations for adjustments as
appropriate
|
|
·
|
Prepare
a monthly expense pro forma for the
Fund
|
|
·
|
Provide
consultative services with respect to financial matters of the Fund
as may
be requested and agreed to by the Fund and Administrator from time
to
time
|
16
Corporate
Secretarial Services
The
Administrator shall perform the following secretarial services:
|
·
|
Provide
an “Assistant Secretary” who may be approved as an officer of the Fund by
the Board of Directors
|
|
·
|
Maintain
calendar for Board and Audit Committee matters/approvals in the form
of
Exhibit
A
|
|
·
|
Prepare
quarterly Board and Audit Committee meeting materials, including
notices,
scripts, agendas, resolutions, memoranda, minutes, and mail to Board
of
Directors and such other persons as instructed by the General
Partner
|
|
·
|
Attend
quarterly Board and Audit Committee meetings, take minutes of the
meetings, make presentations as required and follow up on matters
raised
at the meetings
|
Regulatory
Support Services
The
Administrator shall perform the following regulatory services for the
Fund:
|
·
|
Maintain
calendar for all SEC, CFTC, NFA and AMEX regulatory matters in the
form of
Exhibit
B;
provided that the Fund and/or General Partner shall notify the
Administrator of additional regulatory matters to be added to such
calendar as soon as practicable
|
|
·
|
Prepare
one annual update to the Fund’s registration statement per calendar year
and file the same with the SEC (includes coordination of the update
with
Fund personnel, Fund counsel and independent
auditors)
|
The
Administrator shall perform the following additional regulatory services for
the
Fund:
|
·
|
Prepare
the materials for and attend one unitholder meeting per calendar
year
(including preparation of the proxy statement, notice and other
solicitation materials and filing such materials with the SEC and
taking
minutes of the meeting)
|
|
·
|
Coordinate
with the Fund’s transfer agent or solicitor in monitoring the unitholder
vote solicitation and tabulation for one unitholder meeting per calendar
year
|
|
·
|
Prepare
and file the following regulatory
notices/forms:
|
|
·
|
With
the SEC, Forms 3, 4 and 5 and Schedules 13D and 13G for Fund/General
Partner officers and directors and such other persons as requested
by the
Fund
|
|
·
|
With
the AMEX, such notices/forms as agreed to by the Fund and
Administrator
|
Transfer
Agency Services
The
Administrator shall perform the following transfer agency services:
I. Issuance
and Redemption of Fund Units. It is agreed and understood that the Fund, and
the
Administrator on the Fund’s behalf, shall issue and redeem Units of the Fund in
blocks of 100,000 Units (“Creation Baskets” and “Redemption Baskets,”
respectively) to and from such persons as are identified by the Fund as
“Authorized Purchasers” or “Authorized Participants.”
| A. |
Pursuant
to such purchase orders that the Administrator as the Index Receipt
Agent
shall receive from the ALPS Distributors, Inc. (“Marketing Agent”) and
pursuant to the procedures set forth in the Authorized Purchaser
Agreement
entered into by the Fund, Administrator shall transfer appropriate
trade
instructions to the Fund’s custodian, Xxxxx Brothers Xxxxxxxx & Co.
(“Custodian”) and pursuant to such orders register the appropriate number
of book entry only Fund Units in the name of The Depository Trust
Company
(“DTC”) or its nominee as a unitholder (each a “Unitholder”) of the Fund
and deliver the Units of the Fund on the business.
|
| B. |
Pursuant
to such redemption orders that Index Receipt Agent shall receive
from the
Marketing Agent, pursuant to the procedures set forth in the Authorized
Purchaser Agreement entered into by the Fund, Administrator shall
transfer
appropriate trade instructions to the Custodian and, pursuant to
such
orders, redeem the appropriate number of Fund Units that are delivered
to
the designated DTC Participant Account of the Custodian for redemption
and
debit such Units from the account of the Unitholder on the register
of the
Fund.
|
17
|
C.
|
On
behalf of the Fund, Administrator shall issue Fund Units in Creation
Baskets for settlement with purchasers through DTC as the purchaser
is
authorized to receive. Beneficial ownership of Fund Units shall be
shown
on the records of DTC and DTC Participants and not on any records
maintained by the Administrator. In issuing Fund Units through DTC
to a
purchaser, Administrator shall be entitled to rely upon the latest
Instructions that are received from the Marketing Agent by the
Administrator as Index Receipt Agent concerning the issuance and
delivery
of such Units for settlement.
|
| D. |
Administrator
shall not issue on behalf of the Fund any Fund Units where it has
received
an Instruction from the Fund, the General Partner or the Marketing
Agent
or written notification from any federal or state authority that
the sale
of the Fund Units has been suspended or discontinued, and Administrator
shall be entitled to rely upon such Instructions or written
notification.
|
| E. |
Upon
the issuance of Fund Units as provided herein, Administrator shall
not be
responsible for the payment of any original issue or other taxes,
if any,
required to be paid by the Fund, the General Partner or the Marketing
Agent in connection with such
issuance.
|
| F. |
Fund
Units may be redeemed in accordance with the procedures set forth
in the
relevant Authorized Purchaser Agreement and Administrator shall duly
process all redemption requests.
|
| G. |
Administrator
will act only upon Instruction from the Fund and/or the General Partner
in
addressing any failure in the delivery of cash, treasuries and/or
Shares
in connection with the issuance and redemption of Fund
Units.
|
II. Payment
of Dividends and Distributions on Fund Units.
| A. |
As
instructed by the Fund and/or the General Partner, the Administrator
shall
prepare and make payments for dividends and distributions declared
by the
Fund or the General Partner.
|
| B. |
The
Fund and/or the General Partner shall promptly notify the Administrator
of
the declaration of any dividend or distribution. The Fund and/or
the
General Partner shall furnish to the Administrator a statement signed
by
an Authorized Person: (i) indicating that dividends have been declared
on
a specific periodic basis and Instructions specifying the date of
the
declaration of such dividend or distribution, the date of payment
thereof,
the record date as of which unitholders shall be entitled to payment,
the
total amount payable to the unitholders and the total amount payable
to
Administrator as transfer agent on the payment date; or (ii) setting
forth
the date of the declaration of any dividend or distribution, the
date of
payment thereof, the record date as of which the unitholders are
entitled
to payment, and the amount payable per unit to each unitholder as
of that
date and the total amount payable to Administrator as transfer agent
on
the payment date.
|
| C. |
Based
upon the amount of Fund Units outstanding on its books and records,
the
Fund and/or the General Partner shall calculate the total dollar
amount of
the dividend or distribution and notify the Administrator of this
amount.
The Fund and/or the General Partner shall then instruct the Administrator
to direct the Custodian to place in a separate cash account maintained
by
the Administrator funds equal to the total cash amount of the dividend
or
distribution to be paid out. Should the Custodian determine that
it does
not have sufficient cash in the Custody Account to pay the total
amount of
the dividend or distribution to the Administrator, the Administrator
shall
advise the Fund and/or the General Partner and the Fund and/or the
General
Partner shall either adjust the rate of the dividend or distribution
or
provide additional cash directly to the Custodian for credit to the
separate cash account maintained by the Custodian. When instructed
by the
Fund and/or the General Partner, the Administrator shall direct the
Custodian to make payment of such dividend or distribution to the
account
of each unitholder.
|
18
| D. |
Should
the Administrator or the Custodian not receive from the Fund sufficient
cash to make payment as provided in the immediately preceding Subsection,
the Administrator shall notify the Fund and/or the General Partner,
and
the Administrator shall withhold payment to the unitholders until
sufficient cash is provided to the Custodian and the Administrator
shall
not be liable for any claim arising out of such
withholding.
|
III. Maintenance
of Registry of Limited Partners and Persons Applying to Become Limited
Partners.
Pursuant
to the Limited Partnership Agreement for the Fund, all purchasers of Units
who
wish to become limited partners or record holders and receive cash distributions
(if any) must deliver an executed transfer application in which the purchaser
or
transferee must certify that, among other things, he/she agrees to be bound
by
the Funds Limited Partnership Agreement and is eligible to purchase the Fund’s
securities. Any transfer of Units will not be recorded by the transfer agent
unless a completed transfer application is delivered to the General Partner
or
the Administrator.
The
Administrator shall keep a record of all transfer applications received, with
each applicant deemed as a holder of record until the application is approved
by
the Fund. All applications will be forwarded by the Administrator to the General
Partner to obtain its consent. Once such consent is obtained, the holder shall
become Limited Partners. The Administrator shall maintain a registry of all
Limited Partners and holders of record of the Fund.
IV. Recordkeeping.
| A. |
The
Administrator shall record the issuance of Fund Creation Baskets
and
maintain, pursuant to Rule 17Ad-14(e) under the Securities Exchange
Act of
1934, as amended, a record of the total number of Fund Creation Baskets
that are authorized, based upon data provided to Administrator by
the Fund
and/or the General Partner, issued and outstanding. The Administrator
shall also provide the Fund and/or the General Partner on a regular
basis
with the total number of Fund Units authorized, issued and outstanding;
provided however that the Administrator shall not be responsible
for
monitoring the issuance of such Units or compliance with any laws
relating
to the validity of the issuance or the legality of the sale of such
Units.
|
By:
Victoria Bay Asset Management, LLC, as General Partner
By:
Name:
Title:
Date:
19
VICTORIA
BAY ASSET MANAGEMENT, LLC
By:
Name:
Xxxxxxxx X. Xxxxxx
Title:
Manager and Management Director
Date:
20
BOARD
OF DIRECTORS’ AND AUDIT COMMITTEE’S CALENDAR
FOR
BOARD
MEETINGS
Quarterly
Items
|
·
|
Approve
Minutes of Previous Board Meeting
|
|
·
|
Report
of Chief Compliance Officer
|
|
·
|
Report
of Audit Committee (if applicable)
|
|
·
|
Report
of Administrator
|
|
·
|
Review
Investor Relations Matters
|
|
·
|
Regulatory
Update
|
|
·
|
Ratify
Filings with the U.S. Securities and Exchange Commission (“SEC”), the
Commodities Futures Trading Commission (“CFTC”), American Stock Exchange
(“AMEX”), National Futures Association (“NFA”) and any other regulatory
body
|
|
·
|
General
Implementation Resolution
|
|
·
|
Approve/Review
Next Meeting Date
|
Initial
Items
|
Approve
Code of Conduct and Ethics (pursuant to Item 406 of SEC Regulation
S-K)
|
Annual
Items
|
Last
Approved
|
Next
Approved
|
|
|
Approve
annual meeting and record date for annual meeting, proxies, notice
and
form of proxy 2
|
||
|
Approve
Annual Report to unitholders /Form 10-K to be filed with the SEC
and NFA,
and sent to limited partners/unitholders no later than 90 days after
fiscal year end so long as LP is a non-accelerated filer, and 60
days
after fiscal year end, when and if LP is an accelerated
filer.
|
||
|
Approve
items to be considered at annual meeting, if annual meeting is
required
|
1
Pursuant to the rules of the American Stock Exchange (“AMEX Company Guide”), the
Board of Directors and the Audit Committee of any listed company is required
to
meet at least quarterly. In addition, the independent directors of the Board
of
Directors are required to meet as least annually in executive
session.
2
Section 704 of the AMEX Company Guide states that “A listed company is required
to hold meetings of its stockholders annually
to
elect directors and to take action on other corporate matters in accordance
with
its charter, by-laws and applicable state or other laws.” The LP Agreement
specifically provides that limited partners and/or the ultimate unitholders
have
no right to participate in management and does not expressly provide for
the
election of directors. This issue can be resolved by communicating with the
LP’s
liaison at AMEX.
21
|
Ratify
appointment of independent auditors by the Audit Committee and associated
fees
|
||
|
Ratify
annual designation of Audit Committee Financial Expert, as defined
under
Item 401(h) of Regulation S-K
|
||
|
Approve
any changes to the Audit Committee Charter recommended by the Audit
Committee
|
||
|
Approve
D&O/E&O Insurance for members of the Board and Audit Committee, if
such insurance in obtained
|
||
|
Other
Items
|
||
|
Review
and approve related party transactions
|
||
|
Approve
service provider agreements between LP and BBH&Co
|
AUDIT
COMMITTEE
Initial
Items
|
Approve
formal written charter of Audit Committee
|
||
|
Determine
that at least one member of the Audit Committee is “Financially
Sophisticated” pursuant to the rules of AMEX and is an Audit Committee
Financial Expert, as defined under Item 401(h) of Regulation S-K
|
||
|
Determine
that at least three members of the Audit Committee are Independent
(under
both Section 121A of the AMEX Company Guide and Rule 10A-3 of the
Securities Exchange Act of 1934)
|
||
|
Approve
independent auditors
|
||
|
Approve
procedures for handling “Whistleblower” complaints
|
Monthly
Items
|
Last
Approved
|
Next
Approved
|
|
|
Review
Account Statements (prepared in accordance with CFTC rules) provided
to
unitholders/ limited partners
|
Quarterly
Items
|
Last
Approved
|
Next
Approved
|
|
|
Approve
minutes of previous meeting
|
||
|
Pre-Approval
of non-audit services provided by the independent auditors pursuant
to
pre-approval procedures & fees
|
||
|
Review
Annual Report on Form 10-K to be filed with the SEC and NFA and Quarterly
Reports on Form 10-Q to be filed with the SEC
|
22
Annual
Items
|
Last
Approved
|
Next
Approved
|
|
|
Review/Approve
audited financial statements included in Annual Report on Form 10-K
and in
form to be filed with the NFA
|
||
|
Approve
independent auditors for the following calendar year
|
||
|
Review
and evaluate the qualifications, independence and performance of
the
independent auditors
|
||
|
Approve
fees associated with the engagement of independent auditors for the
following calendar year
|
||
|
Review
and assess adequacy of the Audit Committee Charter
|
||
|
Evaluate
Audit Committee’s performance
|
||
|
Review
services and fees of LP’s counsel and other service providers
|
||
|
Report
of Independent Auditors: review of arrangements for and scope of
audit
plan/provide next year’s fees and engagement letter
|
00
XXXXXXXX
X TO THE
List
of Authorized Persons
By:
Victoria Bay Asset Management, LLC, as General Partner
By:
Name:
Title:
Date:
VICTORIA
BAY ASSET MANAGEMENT, LLC
By:
Name:
Xxxxxxxx X. Xxxxxx
Title:
Manager and Management Director
Date:
24
APPENDIX
C TO THE
ADMINISTRATIVE AGENCY AGREEMENT
ADMINISTRATIVE AGENCY AGREEMENT
AUTHORIZED
SOURCES
The
General Partner and the Fund hereby acknowledge that the Administrator is
authorized to use the following authorized sources for financial reporting,
pricing (including corporate actions, dividends and rights offering), and
foreign exchange quotations, to assist it in fulfilling its obligations under
the aforementioned Agreement.
BLOOMBERG
EXTEL
(LONDON)
FUTURES
COMMISSION MERCHANTS
FUND
MANAGERS
INTERACTIVE
DATA CORPORATION
BROKERS
REUTERS
SUBCUSTODIAN
BANKS
TELEKURS
VALORINFORM
(GENEVA)
REPUTABLE
FINANCIAL PUBLICATIONS
STOCK
EXCHANGES
FINANCIAL
INFORMATION INC. CARD
XX
XXXXX
FRI
CORPORATION
By:
Victoria Bay Asset Management, LLC, as General Partner
By:
Name:
Title:
Date:
VICTORIA
BAY ASSET MANAGEMENT, LLC
By:
Name:
Xxxxxxxx X. Xxxxxx
Title:
Manager and Management Director
Date:
25
APPENDIX
D
BBH
Pricing Policies
Futures,
Forwards, Swaps, Options and Treasuries
The
pricing policies stated below are used for all BBH clients ,
including Mutual Fund Registered Investment Companies. These policies have
been
audited by numerous accounting firms during annual fund audits.
Futures
Futures
traded on exchanges are valued using the closing settlement prices quoted on
the
relevant exchange and obtained from pricing sources, typically Bloomberg or
Reuters.
Forward
Currency Contracts
BBH
obtains
the WM Reuters London Close closing spot rates and the WM Reuters London Close
forward point rates on a daily basis. The currency forward contract pricing
model derives the differential in point rates to the expiration date of the
forward and calculates its present value. The forward is valued at the net
of
the present value and the spot rate.
Swaps
Swaps
and
other similar derivative or contractual type instruments are valued at a price
provided by a single broker or dealer, typically the counterparty. If no such
price is available, the contract is valued at a price at which the counterparty
to such contract would repurchase the instrument or terminate the
contract.
Options
Option
contracts on securities, currencies, indices, futures contracts, commodities
and
other instruments shall be valued at the last sale price on the exchange or
market that is the Primary Market. If a contract did not trade on the Primary
Market, it shall be valued at the last sale price on another exchange or market
where it did trade. If there is no such sale price, the value shall be the
most
recent bid quotation.
Sale
prices and bid quotations indicated above shall be supplied by a Pricing Service
(Reuters, Bloomberg, IDC, etc.). If a Pricing Service is not able to provide
such sale prices or bid quotations, the value shall be determined by taking
the
mean between the bid and the asked quotations provided by a single broker or
dealer, unless the broker or dealer can only provide a bid quotation, in which
case the value shall be such bid quotation.
Except
as
provided below, OTC currency options are valued by uploading the applicable
implied volatility rates from Reuters or Bloomberg. Other inputs are either
uploaded (interest rates, spots) or are specified when the ticker symbols are
set up (expiration date, strike). OTC currency options are then priced by using
the Xxxxxx-Xxxxxxxxx modified Black-Scholes formula, which adjusts for a
constant yield versus a fixed dividend.
Except
as
provided below, OTC equity/index options are priced according to the contract
specifications (days to expiration, current spot index level, interest rates,
dividends, strike price) using the Black-Scholes pricing model, modified for
dividends. The volatility input assumption is interpolated from the previous
day’s price.
26
US
Treasuries
BBH
uses
an evaluated bid supplied by IDC for treasury prices.
27
