PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of June 11, 1999, among Xxxx Capital
Management LLC (the "Sub-Advisor"), a Delaware Limited Liability Company;
Fremont Investment Advisors, Inc. (the "Advisor"), a Delaware corporation; and
Fremont Mutual Funds, Inc. (the "Fund"), a Maryland corporation.
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 Global Fund (the "Global Series"); and
WHEREAS, the Fund has retained the Advisor to render investment management
and administrative services to the Global Series; and
WHEREAS, the Advisor and the Fund desire to retain the Sub-Advisor to
furnish portfolio management services to the Global Series in connection with
Advisor's investment management activities on behalf of the Series, and the
Sub-Advisor is willing to furnish such services to the Advisor and the Global
Series;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Sub-Advisor, the Advisor and the Fund as
follows:
1. APPOINTMENT. The Advisor and the Fund hereby appoint Sub-Advisor to act
as Sub-Advisor with respect to certain assets of the Global Series for the
periods and on the terms set forth in this Agreement. The Sub-Advisor accepts
such appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. SUB-ADVISOR DUTIES. Subject to the supervision of the Advisor and the
Fund's Board of Directors, the Sub-Advisor shall have full discretionary
authority as agent and attorney-in-fact with respect to the portion of assets of
the Global Series' portfolio assigned to the Sub-Advisor, 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 Sub-Advisor may select. The Sub-Advisor
will provide the services under this Agreement in accordance with the Global
Series' registration statement filed with the Securities and Exchange Commission
("SEC"), as amended. Investments by the Sub-Advisor 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 Sub-Advisor will vote proxies with respect to the securities and investments
purchased with the assets of
-1-
the Global Series' portfolio managed by the Sub-Advisor and will provide regular
reports of proxy voting. The Sub-Advisor 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
Global Series either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Sub-Advisor 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 Sub-Advisor 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
Sub-Advisor in serving the Global Series as the Sub-Advisor or who sell the
Global 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 Global 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 Sub-Advisor will furnish
the Fund's Board of Directors with respect to the Global Series such periodic
and special reports as the Advisor and the Directors may reasonably request.
(d) maintain detailed records of the assets managed by the Sub-Advisor
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
Sub-Advisor 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 Sub-Advisor 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 Sub-Advisor 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 Sub-Advisor 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 Global Series, the
-2-
Advisor will pay the Sub-Advisor the fees as set forth in Appendix B hereto at
the times set forth in Appendix B hereto.
5. BOOKS AND RECORDS; CUSTODY. (a) In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records
which it maintains for the Global 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 Sub-Advisor 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
Sub-Advisor of the identity of its custodian bank and shall give the Sub-Advisor
15 days' written notice of any changes in such custody arrangements.
Neither the Sub-Advisor, 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 Sub-Advisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Sub-Advisor with all operational information necessary for the Sub-Advisor to
trade on behalf of the Fund.
6. INDEMNIFICATION. The Sub-Advisor 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 Sub-Advisor) 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 Sub-Advisor, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Sub-Advisor 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 Global 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
-3-
upon information furnished to the Fund or any affiliated person of the Fund by
the Sub-Advisor or any affiliated person of the Sub-Advisor; provided, however,
that in no case is the Sub-Advisor'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 Sub-Advisor or any of its officers or
employees liable for, and to indemnify or insure the Sub-Advisor and its
officers and employees ("Indemnified Parties") against any act or omission of
any other Sub-Advisor 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
Sub-Advisor are not exclusive, and nothing in this Agreement shall prevent the
Sub-Advisor from providing similar services to other investment companies
(subject to such restrictions as Sub-Advisor may agree to separately) or from
engaging in other activities. When the Sub-Advisor recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Sub-Advisor recommends the purchase or sale of the same security
for the Global 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 Global 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 Global Series, or by the Advisor, on thirty (30) days' written notice to the
Sub-Advisor, or by the Sub-Advisor 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.
-4-
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 Global 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 Sub-Advisor
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 LLC
BY:
-------------------------------------
----------------------------------------
(Title)
FREMONT INVESTMENT ADVISORS, INC.
BY:
-------------------------------------
----------------------------------------
(Title)
FREMONT MUTUAL FUNDS, INC.
BY:
-------------------------------------
----------------------------------------
(Title)
-5-
APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Xxxx Capital Management LLC
Sub-Advisor to the Fremont Global Fund
INVESTMENT OBJECTIVES AND GUIDELINES
Overall Investment Objective:
----------------------------
The objective of the Fremont Global Fund is to maximize total return while
reducing risk. The Fund seeks to provide a systematic, disciplined approach to
reduce overall portfolio risk through asset diversification and to weight the
portfolio toward asset categories which, at the time of evaluation, appear to
have the best expected total return.
Policy and Guidelines for Sub-advisor:
--------------------------------------
The Sub-Advisor will manage two account sectors, one small and one micro-cap
type account. These accounts will invest their assets in equity securities of U.
S. companies of relatively small capitalization. The small cap account will
consist of companies with market capitalizations ranging from $10 million to $2
billion. The micro-cap account will consist of companies with market
capitalizations of less than $550 million.
The Sub-Advisor will adhere to the Investment Objectives and to the policies in
the Fremont Global Fund prospectus and Statement of Additional Information.
Performance Objective for Sub-Advisor:
--------------------------------------
The Sub-Advisor 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.
-0-
XXXXXXXX X
TO PORTFOLIO MANAGEMENT AGREEMENT
Xxxx Capital Management, LLC
Sub-Advisor to the Fremont Global Fund
SCHEDULE OF FEES
Fremont Investment Advisors, Inc. will pay to Xxxx Capital Management, LLC a fee
computed at the annual rate of 0.50% (50 basis points) of the average value of
the daily assets of the Fremont Global Series under management by Xxxx Capital
Management, LLC. The Portfolio Management Agreement with the Sub-Advisor may be
terminated by the Advisor or the Fund upon 30 days' written notice. The Advisor
has day-to-day authority to increase or decrease the amount of the Global
Series' assets under management by the Sub-Advisor.
Fees will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month and shall be due and payable within thirty
(30) days after an invoice has been delivered to the Advisor.
-7-
PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of September 29, 1999, among Sit
Investment Associates, Inc. (the "Sub-Advisor"), a Minnesota corporation;
Fremont Investment Advisors, Inc. (the "Advisor"), a Delaware corporation; and
Fremont Mutual Funds, Inc. (the "Fund"), a Maryland corporation.
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 Global Fund (the "Global Series"); and
WHEREAS, the Fund has retained the Advisor to render investment management
and administrative services to the Global Series; and
WHEREAS, the Advisor and the Fund desire to retain the Sub-Advisor to
furnish portfolio management services to the Global Series in connection with
Advisor's investment management activities on behalf of the Series, and the
Sub-Advisor is willing to furnish such services to the Advisor and the Global
Series;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Sub-Advisor, the Advisor and the Fund as
follows:
1. APPOINTMENT. The Advisor and the Fund hereby appoint Sub-Advisor to act
as Sub-Advisor with respect to certain assets of the Global Series for the
periods and on the terms set forth in this Agreement. The Sub-Advisor accepts
such appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. SUB-ADVISOR DUTIES. Subject to the supervision of the Advisor and the
Fund's Board of Directors, the Sub-Advisor shall have full discretionary
authority as agent and attorney-in-fact with respect to the portion of assets of
the Global Series' portfolio assigned to the Sub-Advisor, 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 Sub-Advisor may select. The Sub-Advisor
will provide the services under this Agreement in accordance with the Global
Series' registration statement filed with the Securities and Exchange Commission
("SEC"), as amended. Investments by the Sub-Advisor 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 Sub-Advisor will vote proxies with respect to the securities and investments
purchased with the assets of
-1-
the Global Series' portfolio managed by the Sub-Advisor and will provide regular
reports of proxy voting. The Sub-Advisor 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
Global Series either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Sub-Advisor 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 Sub-Advisor 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
Sub-Advisor in serving the Global Series as the Sub-Advisor or who sell the
Global 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 Global 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 Sub-Advisor will furnish
the Fund's Board of Directors with respect to the Global Series such periodic
and special reports as the Advisor and the Directors may reasonably request.
(d) maintain detailed records of the assets managed by the Sub-Advisor
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
Sub-Advisor 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 Sub-Advisor 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 Sub-Advisor 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 Sub-Advisor 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 Global Series, the
-2-
Advisor will pay the Sub-Advisor the fees as set forth in Appendix B hereto at
the times set forth in Appendix B hereto.
5. BOOKS AND RECORDS; CUSTODY. (a) In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records
which it maintains for the Global 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 Sub-Advisor 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
Sub-Advisor of the identity of its custodian bank and shall give the Sub-Advisor
15 days' written notice of any changes in such custody arrangements.
Neither the Sub-Advisor, 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 Sub-Advisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Sub-Advisor with all operational information necessary for the Sub-Advisor to
trade on behalf of the Fund.
6. INDEMNIFICATION. The Sub-Advisor 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 Sub-Advisor) 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 Sub-Advisor, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Sub-Advisor 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 Global 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
-3-
upon information furnished to the Fund or any affiliated person of the Fund by
the Sub-Advisor or any affiliated person of the Sub-Advisor; provided, however,
that in no case is the Sub-Advisor'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
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 Sub-Advisor or any of its officers or
employees liable for, and to indemnify or insure the Sub-Advisor and its
officers and employees ("Indemnified Parties") against any act or omission of
any other Sub-Advisor 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
Sub-Advisor are not exclusive, and nothing in this Agreement shall prevent the
Sub-Advisor from providing similar services to other investment companies
(subject to such restrictions as Sub-Advisor may agree to separately) or from
engaging in other activities. When the Sub-Advisor recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Sub-Advisor recommends the purchase or sale of the same security
for the Global 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 Global 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 Global Series, or by the Advisor, on thirty (30) days' written notice to the
Sub-Advisor, or by the Sub-Advisor 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.
-4-
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 Global 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 Sub-Advisor
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.
SIT INVESTMENT ASSOCIATES, INC.
BY:
-------------------------------------
----------------------------------------
(Title)
FREMONT INVESTMENT ADVISORS, INC.
BY:
-------------------------------------
Xxxxx X. Redo, President
FREMONT MUTUAL FUNDS, INC.
BY:
-------------------------------------
Xxxxxxx X. Xxxxxx, President
-5-
APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Sit Investment Associates, Inc.
Sub-Advisor to the Fremont Global Fund
INVESTMENT OBJECTIVES AND GUIDELINES
Overall Investment Objective:
----------------------------
The objective of the Fremont Global Fund is to maximize total return while
reducing risk. The Fund seeks to provide a systematic, disciplined approach to
reduce overall portfolio risk through asset diversification and to weight the
portfolio toward asset categories which, at the time of evaluation, appear to
have the best expected total return.
Policy and Guidelines for Sub-Advisor:
--------------------------------------
The Sub-Advisor will manage a portfolio of mid-cap domestic stocks. The
portfolio will consist of companies with market capitalizations ranging from
$500 million to $20 billion and will concentrate on equity holdings in rapid
"real" growth companies or companies that offer unusual value relative to future
earnings, dividends or underlying assets.
The Sub-Advisor will adhere to the Investment Objectives and to the policies in
the Fremont Global Fund prospectus and Statement of Additional Information.
Performance Objective for Sub-Advisor:
--------------------------------------
The Sub-Advisor is expected to achieve a competitive rate of return of at least
5 percentage points greater than the S&P MidCap 400 Index over a complete market
cycle. The S&P MidCap 400 Index consists of 400 domestic stocks chosen for
market size, liquidity, and industry group representation, and measures the
performance of the mid-size company segment of the U.S. market.
FIA ____________ SIA _____________
Initial Initial
-6-
Amended and Restated
APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Sit Investment Associates, Inc.
Sub-Advisor To The Fremont Global Fund
This Appendix A, dated and effective as of August ____, 2000 amends and restates
as to the Fremont Global Fund the Appendix A to the Portfolio Management
Agreement dated and effective September 29, 1999.
INVESTMENT OBJECTIVES AND GUIDELINES
I. Overall Investment Objective:
-----------------------------
The objective of the Fremont Global Fund is to maximize total return while
reducing risk. The Fund seeks to provide a systematic, disciplined approach
to reduce overall portfolio risk through asset diversification and to
weight the portfolio toward asset categories which, at the time of
evaluation, appear to have the best expected total return.
II. General Policy and Guidelines for the Sub-Advisor:
--------------------------------------------------
The Sub-Advisor will manage a portfolio of mid-cap domestic growth stocks.
The portfolio will concentrate on equity holdings in rapid "real" growth
companies or companies that offer unusual value relative to future
earnings, dividends, or underlying assets.
It is recognized that the above policies generally result in greater
volatility of investment returns than the overall stock market as
represented by S&P 500 companies. However, the portfolio is expected to
achieve a higher long-term rate of return than the overall stock market in
view of the greater level of concentration on the companies' growth
potential.
The Sub-Advisor will adhere to the Investment Objectives and to the
policies in the Fremont Global Fund prospectus and Statement of Additional
Information.
III. SPECIFIC POLICY AND GUIDELINES FOR THE SUB-ADVISOR:
---------------------------------------------------
A. The following investments will not be used:
o Securities purchased on margin.
o Short sales
o Puts and calls.
o Letter stock/private placements.
o Securities of the sponsor organization, or its subsidiaries or
affiliates.
o Common stocks of companies with market capitalization of less
than $15 million.
-7-
B. No more than 10 percent at cost, or 15 percent at market, shall be
invested in equity securities of any one issuer.
C. Investments shall not exceed 5 percent of the market capitalization of
any one issuer.
D. There shall be no restrictions regarding:
o Portfolio asset turnover.
o Realization of gains or losses.
o Dividends or earnings on the stock of companies held in the
portfolio.
E. Short-term assets will be diversified by issuer, above-average in
quality, and have a maturity of no more than one year.
IV. PERFORMANCE OBJECTIVES FOR THE SUB-ADVISOR:
-------------------------------------------
The Sub-Advisor is expected to achieve a competitive rate of return of at
least FIVE percentage points greater than the S&P MidCap 400 Index over a
complete market cycle. The S&P 400 MidCap Index consists of 400 domestic
stocks chosen for market size, liquidity, and industry group
representation, and measures the performance of the mid-size company
segment of the U.S. market.
Given the growth style of the portfolio, the Xxxxxxx XxxXxx Growth Index
will be used as a second benchmark for performance, and the portfolio is to
earn an annual rate of return of at least TWO percentage points greater
than this index over a complete market cycle.
BY: BY:
FREMONT INVESTMENT ADVISORS, INC. SIT INVESTMENT ASSOCIATES, INC.
-------------------------------- -------------------------------
Xxxxx X. Redo
President
-------------------------------
Name & Title
-8-
APPENDIX B
TO PORTFOLIO MANAGEMENT AGREEMENT
Sit Investment Associates, Inc.
Sub-Advisor to the Fremont Global Fund
SCHEDULE OF FEES
Fremont Investment Advisors, Inc. will pay to Sit Investment Associates, Inc. a
fee computed at the annual rate of 0.45% (45 basis points) of the average value
of the daily assets of the Fremont Global Series under management by Sit
Investment Associates, Inc. The Portfolio Management Agreement with the
Sub-Advisor may be terminated by the Advisor or the Fund upon 30 days' written
notice. The Advisor has day-to-day authority to increase or decrease the amount
of the Global Series' assets under management by the Sub-Advisor.
Fees will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month and shall be due and payable within thirty
(30) days after an invoice has been delivered to the Advisor.
FIA ____________ SIA ____________
Initial Initial
-9-
PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of May 5, 2000, among Pacific
Investment Management Company LLC, (the "Sub-Advisor") a Delaware limited
liability company; Fremont Investment Advisors, Inc. (the "Advisor"), a Delaware
corporation; and Fremont Mutual Funds, Inc. (the "Fund"), a Maryland
corporation.
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 Global Fund (the "Global Series"); and
WHEREAS, the Fund has retained the Advisor to render investment management
and administrative services to the Global Series; and
WHEREAS, the Advisor and the Fund desire to retain the Sub-Advisor to
furnish portfolio management services to the Global Series in connection with
Advisor's investment management activities on behalf of the Series, and the
Sub-Advisor is willing to furnish such services to the Advisor and the Global
Series;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Sub-Advisor, the Advisor and the Fund as
follows:
1. APPOINTMENT. The Advisor and the Fund hereby appoint the Sub-Advisor to
act as Sub-Advisor with respect to certain assets of the Global Series for the
periods and on the terms set forth in this Agreement. The Sub-Advisor accepts
such appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. SUB-ADVISOR DUTIES. Subject to the supervision of the Advisor and the
Fund's Board of Directors, the Sub-Advisor shall have full discretionary
authority as agent and attorney-in-fact with respect to the portion of assets of
the Global Series' portfolio assigned to the Sub-Advisor, 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 Sub-Advisor may select. The Sub-Advisor
will provide the services under this Agreement in accordance with the Global
Series' registration statement filed with the Securities and Exchange Commission
("SEC"), as amended. Investments by the Sub-Advisor 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 Sub-Advisor will vote proxies with respect to the securities and investments
purchased with the assets of
-1-
the Global Series' portfolio managed by the Sub-Advisor and will provide regular
reports of proxy voting. The Sub-Advisor 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
Global Series either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Sub-Advisor 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 Sub-Advisor 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
Sub-Advisor in serving the Global Series as the Sub-Advisor or who sell the
Global Series' shares; and
(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 Global 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 Sub-Advisor will furnish
the Fund's Board of Directors with respect to the Global Series such periodic
and special reports as the Advisor and the Directors may reasonably request; and
(d) maintain detailed records of the assets managed by the Sub-Advisor
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
Sub-Advisor 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 Sub-Advisor 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 Sub-Advisor 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 Sub-Advisor 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 Global Series, the
-2-
Advisor will pay the Sub-Advisor the fees as set forth in Appendix B hereto at
the times set forth in Appendix B hereto.
5. BOOKS AND RECORDS; CUSTODY.
(a) In compliance with the requirements of Rule 31a-3 under the 1940
Act, the Sub-Advisor hereby agrees that all records which it maintains for the
Global 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
Sub-Advisor 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
Sub-Advisor of the identity of its custodian bank and shall give the Sub-Advisor
15 days' written notice of any changes in such custody arrangements.
Neither the Sub-Advisor, 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 Sub-Advisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Sub-Advisor with all operational information necessary for the Sub-Advisor to
trade on behalf of the Fund.
6. INDEMNIFICATION. The Sub-Advisor 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 Sub-Advisor) 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 Sub-Advisor, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Sub-Advisor 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 Global 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
-3-
upon information furnished to the Fund or any affiliated person of the Fund by
the Sub-Advisor or any affiliated person of the Sub-Advisor; provided, however,
that in no case is the Sub-Advisor'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 and the Advisor agree not to hold the Sub-Advisor or any of
its officers or employees liable for, and to indemnify or insure the Sub-Advisor
and its officers and employees ("Indemnified Parties") against any act or
omission of any other Sub-Advisor 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
Sub-Advisor are not exclusive, and nothing in this Agreement shall prevent the
Sub-Advisor from providing similar services to other investment companies
(subject to such restrictions as Sub-Advisor may agree to separately) or from
engaging in other activities. When the Sub-Advisor recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Sub-Advisor recommends the purchase or sale of the same security
for the Global 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 one (1) year 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 Global 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 Global Series, or by the Advisor, on thirty (30) days' written notice to the
Sub-Advisor, or by the Sub-Advisor 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,
-4-
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 Global Series, if such approval is required by applicable law.
10. AGGREGATION OF ORDERS. Provided the investment objectives, policies and
restrictions of the Fund are adhered to, the Advisor agrees that the Sub-Advisor
may aggregate sales and purchase orders of securities held in the Fund with
similar orders being made simultaneously for other accounts managed by the
Sub-Advisor or with accounts of the affiliates of the Sub-Advisor, if in the
Sub-Advisor's reasonable judgment such aggregation shall result in an overall
economic benefit to the Fund taking into consideration the advantageous selling
or purchase price, brokerage commission and other expenses. The Advisor
acknowledges that the determination of such economic benefit to the Fund by the
Sub-Advisor represents the Sub-Advisor's evaluation that the Fund is benefited
by relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
11. INVESTMENT IN FUTURES AND OPTIONS ON FUTURES. The Fund will: (i) open
and maintain brokerage accounts for financial futures and options (such accounts
hereinafter referred to as "Brokerage Accounts") on behalf of and in the name of
the Fund; and (ii) execute for and on behalf of the Brokerage Account, standard
customer agreements with a broker or brokers. The Sub-Advisor may, using such of
the securities and other property in the Brokerage Account as the Sub-Advisor
deems necessary or desirable, direct the custodian to deposit on behalf of the
Fund, original and maintenance brokerage deposits and otherwise direct payments
of cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Sub-Advisor deems desirable or appropriate.
The Sub-Advisor has delivered to the Fund and the Advisor a copy of
its Disclosure Document, as amended, dated December 31, 1998, on file with the
Commodity Futures Trading Commission. The Business Manager and the Company
hereby acknowledge receipt of such copy.
12. DELIVERY OF ADV. Concurrently with the execution of this Agreement, the
Sub-Advisor is delivering to the Fund and the Advisor a copy of Part II of its
Form ADV, as revised, on file with the Securities and Exchange Commission. The
Fund and the Advisor hereby acknowledge receipt of such copy.
13. 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.
-5-
(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 Sub-Advisor
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.
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
BY:
-------------------------------------
----------------------------------------
(Title)
FREMONT INVESTMENT ADVISORS, INC.
BY:
-------------------------------------
Xxxxx X. Redo, President
FREMONT MUTUAL FUNDS, INC.
BY:
-------------------------------------
Xxxxxxx X. Xxxxxx, President
-6-
APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Pacific Investment Management Company LLC
Sub-Advisor to the Fremont Global Fund
INVESTMENT OBJECTIVES AND GUIDELINES
Overall Investment Objective:
----------------------------
The objective of the Fremont Global Fund is to maximize total return while
reducing risk. The Fund seeks to provide a systematic, disciplined approach to
reduce overall portfolio risk through asset diversification and to weight the
portfolio toward asset categories which, at the time of evaluation, appear to
have the best expected total return.
Policy and Guidelines for Sub-Advisor:
--------------------------------------
The Sub-Advisor will manage a portfolio of fixed income securities denominated
in major foreign currencies, baskets of foreign currencies and the U.S. dollar.
FOREIGN BONDS: - Under normal circumstances, at least 65% of the
portfolio's assets will be invested in fixed income securities of issuers
located in at least three countries (one of which may be the United
States). Dependent on the Sub-Advisor's outlook for interest rates and
currency trends investments in the securities of issuers located outside
the United States will normally vary between 25% and 75% of the portfolio's
assets. Based on the Sub-Advisor's forecast for interest rates, the average
portfolio duration will normally vary within a three- to six-year time
frame. This portfolio will also be able to utilize futures, options, OTC
options, and foreign currency forwards.
U.S. DOLLAR-DENOMINATED DEBT SECURITIES: - The Sub-Advisor may invest in
the following: obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; U.S. dollar-denominated corporate debt
securities of domestic or foreign issuers; mortgage and other asset-backed
securities; variable and floating rate debt securities; convertible bonds;
U.S. dollar-denominated obligations of a foreign government, or any of its
political subdivisions, authorities, agencies or instrumentalities or by
supranational organizations (such as the World Bank); and securities that
are eligible as short-term cash equivalents. The Sub-Advisor will not
invest more than 5% of its net assets in variable and floating rate debt
securities, nor will the Sub-Advisor invest more than 5% of its net assets
in guaranteed investment contracts. The Sub-Advisor may invest in interest
rate futures and options on such futures. The Sub-Advisor also may invest
up to 10% of its assets in corporate debt securities rated Ba by Xxxxx'x or
BB by S&P, (sometimes referred to as "junk bonds") which will have
speculative characteristics, including the possibility of default or
bankruptcy of the issuers of
-7-
such securities, market price volatility based upon interest rate
sensitivity, questionable creditworthiness and relative liquidity of the
secondary trading market.
The Sub-Advisor will adhere to the Investment Objectives and to the policies set
forth in the Fremont Global Fund prospectus and Statement of Additional
Information
Performance Objective for Sub-Advisor:
--------------------------------------
The Sub-Advisor 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 the X.X.
Xxxxxx Government Index - 100% hedged.
-0-
XXXXXXXX X
TO PORTFOLIO MANAGEMENT AGREEMENT
Pacific Investment Management Company LLC
Sub-Advisor to the Fremont Global Fund
SCHEDULE OF FEES
Fremont Investment Advisors, Inc. will pay to Pacific Investment Management
Company a fee computed at the annual rate of 0.30% (30 basis points) of the
average value of the daily assets of the Fremont Global Series under management
by Pacific Investment Management Company. The Portfolio Management Agreement
with the Sub-Advisor may be terminated by the Advisor or the Fund upon 30 days'
written notice. The Advisor has day-to-day authority to increase or decrease the
amount of the Global Series' assets under management by the Sub-Advisor.
Fees will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month and shall be due and payable within thirty
(30) days after an invoice has been delivered to the Advisor.
-9-
PORTFOLIO MANAGEMENT AGREEMENT
THIS AGREEMENT dated and effective as of ______________ 1999, among Capital
Guardian Trust Company, a California corporation (the "Sub-Advisor"); 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 Global Fund (the "Global Series"); and
WHEREAS, the Fund has retained the Advisor to render investment management
and administrative services to the Global Series; and
WHEREAS, the Advisor and the Fund desire to retain the Sub-Advisor to
furnish portfolio management services to the Global Series in connection with
Advisor's investment management activities on behalf of the Series, and the
Sub-Advisor is willing to furnish such services to the Advisor and the Global
Series;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Sub-Advisor, the Advisor and the Fund as
follows:
1. APPOINTMENT. The Advisor and the Fund hereby appoint Sub-Advisor to
provide sub-investment advisory services to the Advisor and the Fund with
respect to certain assets of the Global Series for the periods and on the terms
set forth in this Agreement. The Sub-Advisor accepts such appointment and agrees
to furnish the services herein set forth, for the compensation herein provided.
The Sub-Advisor shall have no duty with respect to the management or operation
of the Fund or the Global Series except as expressly provided under this
Agreement. The Advisor and the Fund hereby represent and warrant that they
shall: (1) file all required registration statements and other documents for the
Fund with the U.S. Securities and Exchange Commission and any other relevant
state or federal agencies or commissions, and will be responsible for the
adequacy and accuracy of the content thereof (except for any materials supplied
by the Sub-Advisor in writing that have been provided for the express purpose of
inclusion in such documents); and (2) file any sales literature used in
connection with the sale or distribution of shares of the Fund with all
appropriate regulatory agencies as required.
2. SUB-ADVISOR DUTIES. Subject to the supervision of the Advisor, the
Sub-Advisor shall have full discretionary authority as agent and attorney-in-
fact with respect to the portion of assets
1
of the Global Series' portfolio assigned to the Sub-Advisor, from time to time
by the Advisor, 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 Sub-Advisor may select. The Sub-Advisor will provide the services
under this Agreement in accordance with the Global Series' registration
statement filed with the Securities and Exchange Commission ("SEC"), as amended.
The Advisor will provide the Sub-Advisor with a copy of each registration
statement promptly after it has been filed with the SEC. Investments by the
Sub-Advisor 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 and as provided to the Sub-Advisor. Subject to the foregoing, the
Sub-Advisor will vote proxies with respect to the securities and investments
purchased with the assets of the Global Series' portfolio managed by the
Sub-Advisor. The Sub-Advisor further agrees that it will:
(a) conform with all requirements set out in the Fund's compliance
manual to be mutually agreed upon by the Advisor and the Sub-Advisor.
(b) select brokers and dealers to execute portfolio transactions for
the Global Series and select the markets on or in which the transaction will be
executed. In providing the Global Series with investment management, it is
recognized that the Sub-Advisor will give primary consideration to seeking best
execution for all portfolio transactions and in doing so the Sub-Advisor may
consider the financial responsibility, research and investment information and
other research services and products provided by brokers or dealers who may
effect or be a party to any such transaction or other transactions to which the
Sub-Advisor's other clients may be a party. It is understood that it is
desirable for the Fund that the Sub-Advisor have access to brokerage and
research services and products and security and economic analysis provided by
brokers who may execute brokerage transactions at a higher cost to the Global
Series than broker-dealers that do not provide such brokerage and research
services. Therefore, in compliance with Section 28(e) of the Securities Exchange
Act of 1934 (the "1934 Act"), the Sub-Advisor is authorized to place orders for
the purchase and sale of securities for the Global Series with such brokers,
that provide brokerage and research products and/or services that charge an
amount of commission for effecting securities transactions in excess of the
amount of commission another broker would have charged for effecting that
transaction, provided the Sub-Advisor determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research products and/or services provided by such broker viewed in terms of
either that particular transaction or the overall responsibilities of the
Sub-Advisor for this or other advisory accounts, subject to review by the Fund
from time to time with respect to the extent and continuation of this practice.
It is understood that the information, services and products provided by such
brokers may be useful to the Sub-Advisor in connection with the Sub-Advisor's
services to other clients. On occasions when the Sub-Advisor deems the purchase
or sale of a security to be in the best interest of the Global Series as well as
other clients of the Sub-Advisor, the Sub-Advisor, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be sold or purchased subject to best execution. In
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, shall be made by the Sub-Advisor in the
manner the Sub-Advisor considers to be the most equitable and consistent with
its fiduciary obligations to the Global Series and to such other clients.
2
(c) make available to the Advisor and the Fund's Board of Directors
promptly upon their request all its investment records and ledgers relating to
the Global Series to assist the Advisor and the Fund in their compliance with
respect to the Global 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 Sub-Advisor will furnish the Fund's Board of Directors with
respect to the Global Series such periodic and special reports as the Advisor
and the Directors may reasonably request in writing.
(d) maintain detailed records of the assets managed by the Sub-Advisor
as well as all investments, receipts, disbursements and other transactions made
with such assets. Such records shall be open to inspection and audit during
Sub-Advisor's normal business hours upon reasonable notice by any person
designated by the Advisor or the Fund. The Sub-Advisor shall provide to the
Advisor or the Fund and any other party designated by either the Advisor or the
Fund: (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 its fair market value
as determined according to the reasonable procedures established by the
Sub-Advisor and (ii) a quarterly review of the assets under management.
3. EXPENSES. During the term of this Agreement, the Sub-Advisor will pay
all expenses incurred by it, its staff and their activities, in connection with
its portfolio management activities under this Agreement. The Sub-Advisor shall
not be responsible for any expense incurred by the Advisor or the Fund, except
as provided in paragraph 6 below.
4. COMPENSATION. For the services provided to the Global Series, the
Advisor will pay the Sub-Advisor the fees as set forth in Appendix B hereto at
the times set forth in Appendix B hereto.
5. BOOKS AND RECORDS; CUSTODY. (a) In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records
which it maintains for the Global 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 Sub-Advisor 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
Sub-Advisor of the identity of its custodian bank and shall give the Sub-Advisor
15 days' written notice of any changes in such custody arrangements.
Neither the Sub-Advisor, 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 Sub-Advisor
shall have no liability with respect to custody arrangements or the acts,
conduct or omission of the Fund's custodian.
3
The Fund shall instruct its custodian bank to (a) carry out all
investment instructions as may be directed by the Sub-Advisor with respect
thereto (which may be orally given if confirmed in writing); and (b) provide the
Sub-Advisor with all operational information necessary for the Sub-Advisor to
trade on behalf of the Fund. The Advisor and the Fund hereby acknowledge that as
of the inception of the Sub-Advisor's management duties with respect to the
Global Series, the Sub-Advisor shall be relying on the Fund Custodian's
identification of the assets and liabilities in the Global Series as well as
their availability for sale and settlement. The Sub-Advisor may reasonably rely
without further inquiry upon any information furnished to it by the Fund's
Custodian, and the Sub-Advisor shall not be responsible for any errors or
omission arising from any inaccuracies or incompleteness in such information.
6. SUB-ADVISOR'S LIABILITIES. In the absence of willful misconduct, bad
faith, negligence or reckless disregard of obligations and duties under this
Agreement, the Sub-Advisor shall not be subject to liability to the Advisor or
the Fund for any act or omission in the course of rendering services under this
Agreement.
7. INDEMNIFICATION. The Sub-Advisor 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 Sub-Advisor) 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 (collectively, the "Indemnified
Advisor Parties") against any and all losses, claims, damages, liabilities or
litigation (including reasonable 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 the willful misconduct, bad
faith or gross negligence by the Sub-Advisor, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Sub-Advisor (it being understood that broker/dealers are not deemed to be acting
on behalf of the Sub-Advisor) 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 Fund 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 with reasonable
reliance upon written information furnished to the Fund or any affiliated person
of the Fund by the Sub-Advisor or any affiliated person of the Sub-Advisor
supplied for the express purpose of inclusion in such registration statement or
prospectus; provided, however, that in no case is the Sub-Advisor'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
misconduct, bad faith or negligence in the performance of his or its duties or
by reason of his or its reckless disregard of obligations and duties under this
Agreement or under any law applicable to the Advisor.
The Advisor and the Fund agree to indemnify and hold harmless the
Sub-Advisor, its affiliates, and their respective directors, officers, employees
and affiliated persons and controlling persons (collectively, the "Indemnified
Sub-Advisor Parties") against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses) to which any of
4
the Indemnified Sub-Advisor Parties may become subject under the 1933 Act, 1940
Act, the Advisers Act, or under any other statute, at common law or otherwise
which does not require the Sub-Advisor to provide an indemnity under the
previous paragraph, provided that none of the Indemnified Sub-Advisor Party has
acted in a manner that involves willful misconduct, bad faith or negligence in
the performance of his or its duties or by reason of his or its reckless
disregard of obligations and duties under this Agreement or under any law
applicable to the Sub-Advisor.
In order to provide for just and equitable contribution in
circumstances in which the indemnities provided above are for any reason
unenforceable or unavailable to or otherwise insufficient to hold harmless an
indemnified party, the Indemnified Advisor Parties and the Indemnified
Sub-Advisor Parties shall contribute to the aggregate losses, claims, damages,
liabilities and legal and other expenses based upon the relative fault of the
Indemnified Advisor Parties and the Indemnified Sub-Advisor Parties shall be
determined by reference to amongst other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact or the inaccurate or alleged inaccurate representation and or
warranty relates to information supplied by the Indemnified Advisor Parties or
the Indemnified Sub-Advisor Parties.
8. OTHER INVESTMENT ACTIVITIES OF SUB-ADVISOR. The Fund and Advisor
acknowledge that Sub-Advisor, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities ("Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the Fund agrees
that the Sub-Advisor or its affiliates may give advice or exercise investment
responsibility and take other action with respect to other Affiliated Accounts
which may differ from advice given or the timing or nature of action taken with
respect to the Global Series; provided that the Sub-Advisor acts in good faith,
and provided further that it is the Sub-Advisor's policy to allocate, within its
reasonable discretion, investment opportunities to the Global Series over a
period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objectives and policies of the
Global Series and any specific investment restrictions applicable thereto. The
Fund acknowledges that one or more of the Affiliated Accounts may at any time
hold, acquire, increase, decrease, dispose of or otherwise deal with positions
in investments in which the Global Series may have an interest from time to
time, whether in transactions which may involve the Global Series or otherwise.
Sub-Advisor shall have no obligation to acquire for the Global Series a position
in any investment which any Affiliated Account may acquire, and the Fund shall
have no first refusal, co-investment or other rights in respect of any such
investment either for the Global Series or otherwise.
9. (a) DURATION. This Agreement shall become effective on the date
hereof. Unless terminated as herein provided, this Agreement shall remain in
full force and effective for a period of two years from the date of this
Agreement, 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 Board of Directors of the Fund or by a vote of a majority (as defined
in the 0000 Xxx) of the outstanding voting securities of the Global Series, and
(ii) by the Advisor, and (iii) by the vote of a majority of the Board of
Directors of the Fund who are not parties to 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.
5
(b) TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Directors of the Fund or by the vote of
a majority (as defined in the 0000 Xxx) of the outstanding voting securities of
the Global Series, or by the Advisor, on thirty (30) days' written notice to the
Sub-Advisor, or by the Sub-Advisor on like notice to the Board of Directors of
the Fund and to the Advisor. Payment of fees earned through the date of
termination shall not be construed as a penalty.
(c) AUTOMATIC TERMINATION. This Agreement shall automatically and
immediately terminate in the event of its assignment.
10. 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 Global Series, if such approval is required by applicable law.
11. 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 Sub-Advisor
as an agent of the Fund or the Advisor except to the extent specifically stated
in paragraph 2.
(e) This Agreement supersedes any prior agreement relating to the
subject matter hereof between the parties.
(f) This Agreement may be executed in counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered, shall be deemed an original and all of which
counterparts shall constitute but one and the same agreement.
12. USE OF NAME. It is understood that the name "Capital Guardian" or the
name of any of its affiliates, or any derivative or logo/trademark associated
with those names, are the valuable property of the Sub-Advisor and its
affiliates and that the Fund and/or the Fund's distributor have the right to use
such name(s) or derivative(s) in offering materials and sales literature of the
Fund with the written approval of the Sub-Advisor which shall not be
unreasonably withheld so long as this Agreement is in
6
effect. Upon termination of the Agreement the Fund shall forthwith cease to use
such name(s) or derivative(s). The Advisor agrees that it will review with
Sub-Advisor any advertisement, sales literature or notice prior to its use that
makes reference to the Sub-Advisor.
13. RECEIPT OF BROCHURE. The Advisor and The Fund hereby acknowledge that
the Sub-Advisor is a "bank" under Section 202(a)(2) of the Advisers Act and is
therefore exempt under the Advisors Act from registration and Form ADV filing
and disclosure requirements.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
CAPITAL GUARDIAN TRUST COMPANY
By: ___________________________
(Title) ___________________________
FREMONT INVESTMENT ADVISORS, INC.
By: ___________________________
(Title) ___________________________
FREMONT MUTUAL FUNDS, INC.
By: ___________________________
(Title) ___________________________
7
APPENDIX A
TO PORTFOLIO MANAGEMENT AGREEMENT
Capital Guardian Trust Company
Sub-Advisor to the Fremont Global Fund
INVESTMENT OBJECTIVES AND GUIDELINES
Overall Investment Objective:
----------------------------
The objective of the Fremont Global Fund is to maximize total return while
reducing risk. The Fund seeks to provide a systematic, disciplined approach to
reduce overall portfolio risk through asset diversification and to weight the
portfolio toward asset categories which, at the time of evaluation, appear to
have the best expected total return.
Policy and Guidelines for Sub-Advisor:
The Sub-Advisor will manage the account with an EAFE mandate. The account will
invest in non-U.S. markets, no U.S. equities are allowed. However, American
Depository Receipts (ADRs) are permitted. The account may invest in common
stocks, preferred stocks, securities convertible into common stocks, stock
warrants, forward contracts, options futures and short-term reserves (fixed
income securities with maturities of less than one year). The account is
permitted to hold gold and gold related securities. Emerging market investments
shall be permitted up to 10% of the portfolio. Investments should be made only
in assets, which in the Manager's reasonable judgment at the time of purchase,
have sufficient liquidity to allow daily valuation.
The account may use foreign exchange forward contracts and currency options and
futures. Forward contracts can be negotiated with banks rated "AAA" through "A3"
by Xxxxx'x. Currency futures and option contracts must be transacted on a U.S.
exchange or executed with an appropriate rated bank as an OTC currency option.
The total value of foreign currency positions must be from zero to 100% of the
portfolio's market value. All currency positions must be unleveraged and
covered.
The Sub-Advisor will adhere to the Investment Objective and to policies in the
Fremont Global Fund prospectus and Statement of Additional Information.
Performance Objective for Sub-Advisor:
The Sub-Advisor is expected to achieve a competitive rate of return over a 3 to
5 year time horizon and/or a complete market cycle, relative to other funds as
compiled by a screened Morningstar Foreign Funds Database. A competitive rate of
return is defined as Fund performance in the top quartile of such Database.
8
APPENDIX B
TO PORTFOLIO MANAGEMENT AGREEMENT
Capital Guardian Trust Company
Sub-Advisor to the Fremont Global Fund
SCHEDULE OF FEES
Fremont Investment Advisors, Inc. will pay to Capital Guardian Trust Company, on
an aggregate basis, an annual fee computed as a percentage of the average value
of the daily assets for investment management services for all accounts managed
by the Sub-Advisor for the Advisor. The management fees specified below shall be
the fees charged. The annual rate is determined as follows:
75 basis points (0.75%) of the first $25 million
60 basis points (0.60%) of the next $25 million
42.5 basis points (0.425%) of the next $200 million
37.5 basis points (0.375%) of the average value of the daily assets in
excess of $250 million.
Provided that the Advisor maintains multiple accounts managed by the
Sub-Advisor, fee aggregation shall apply as follows: for the Global Fund and
each new account added in the future (but excluding the Fremont International
Growth Fund), the first $10 million of assets shall be applied to the initial
breakpoint rate, and the rest of the assets would be applied to the aggregation.
Each Fund managed by the Sub-Adviser will pay its pro rata share of the
aggregated fee. The following accounts currently apply to the above fee
schedule:
Fremont International Growth Fund - March 1, 1998
Fremont Global Fund - December 10, 1999
The Portfolio Management Agreement with the Sub-Advisor may be terminated by the
Advisor or the Fund upon 30 days' written notice. The Advisor has day-to-day
authority to increase or decrease the amount of the Global Fund's assets under
management by the Sub-Advisor.
Fee will be billed after the end of each calendar month. Fees will be prorated
for any period less than one month. Fees shall be due and payable within thirty
(30) days after an invoice has been delivered to the Advisors.
9
