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INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of September 1, 1998 between HIGHMARK FUNDS
(formerly, THE HIGHMARK GROUP), a Massachusetts business trust (herein called
the "Trust"), and HighMark Capital Management, Inc., a California corporation
registered under the Investment Adviser's Act of 1940 with its principal offices
in San Francisco, California (herein called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory and administrative services to certain investment portfolios
of the Trust (the "Funds") and the Investment Adviser represents that it is
willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to the Funds identified on Schedule A hereto for the
period and on the terms set forth in this Agreement. The Investment Adviser
accepts such appointment and agrees to furnish the services herein set forth for
the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
(a) the Trust's Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts on March 10,
1987, and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Declaration of Trust");
(b) the Trust's Code of Regulations and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing
the appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission
on March 12, 1987 and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act
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of 1933, as amended ("1933 Act"), (File No. 33-12608) and under the
1940 Act as filed with the Securities and Exchange Commission and all
amendments thereto; and
(f) the Trust's most recent prospectuses and Statement of
Additional Information (such prospectuses and Statement of Additional
Information, as presently in effect, and all amendments and supplements
thereto are herein collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide a continuous investment program
for each Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Funds. The
Investment Adviser will provide the services under this Agreement in accordance
with each Fund's investment objective, policies, and restrictions as stated in
the Prospectus and resolutions of the Trust's Board of Trustees. The Investment
Adviser further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for
which it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission and in addition will conduct its
activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment
advisory activities of the Investment Adviser;
(c) will not make loans to any person to purchase or carry
units of beneficial interest in the Trust or make loans to the Trust;
(d) will place orders pursuant to its investment
determinations for the Trust either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers, the
Investment Adviser will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent with this
obligation, when the execution and price offered by two or more brokers
or dealers are comparable, the Investment Adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers
and dealers who provide the Investment Adviser with research advice and
other services. Unless and until appropriate procedures are adopted by
the Trustees of the Trust under Rule 17e-1 of the 1940 Act and unless
the provisions of such Rule are complied with, portfolio securities
will not be purchased from or sold through SEI Investments Distribution
Co., HighMark Capital Management, Inc., or any affiliated person of
either the Trust, SEI Investments
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Distribution Co., or HighMark Capital Management, Inc.;
(e) will maintain all books and records with respect to the
Trust's securities transactions and will furnish the Trust's Board of
Trustees such periodic and special reports as the Board may request;
(f) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust
and prior, present or potential interestholders; and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification
to and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Investment
Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust; and
(g) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment recommendations
for the Trust, the Investment Adviser's personnel will not inquire or
take into consideration whether the issuers of securities proposed for
purchase or sale for the Trust's account are customers of the
Investment Adviser or of its parent or its subsidiaries or affiliates.
In dealing with such customers, the Investment Adviser and its parent,
subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Trust.
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 31a-3 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Trust.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee
computed daily and paid monthly at the applicable
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annual rate set forth on Schedule A hereto. Each Fund's obligation to pay the
above-described fee to the Investment Adviser will begin as of the date of the
initial public sale of shares in that Fund.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such state, the Investment
Adviser will reimburse the Fund for a portion of such excess expenses equal to
such excess times the ratios of the fees otherwise payable by the Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by the Fund
to the Investment Adviser hereunder and to SEI Investments Mutual Funds Services
under the Administration Agreement between SEI Investments Mutual Funds Services
and the Trust. The obligation of the Investment Adviser to reimburse the Funds
hereunder is limited in any fiscal year to the amount of its fee hereunder for
such fiscal year, provided, however, that notwithstanding the foregoing, the
Investment Adviser shall reimburse the Funds for such proportion of such excess
expenses regardless of the amount of fees paid to it during such fiscal year to
the extent that the securities regulations of any state having jurisdiction over
the Trust so require. Such expense reimbursement, if any, will be estimated
daily and reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by the Investment Adviser
of its obligations and duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as to
a particular Fund as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
such Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect until October 31,
1999.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Fund for successive periods of twelve months each ending on
October 31st of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of the outstanding voting
securities of such Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to a particular Fund at any time on sixty days' written notice,
without the payment of any penalty, by the Trust (by vote of the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of
such Fund) or by the Investment Adviser. This Agreement
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will immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning of such terms
in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the Commonwealth of Massachusetts.
The names "HighMark Funds" and "Trustees of the HighMark Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of March 10, 1987 to which reference is hereby made and a copy of
which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The HighMark Funds"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, interestholders or representatives of
the Trust personally, but bind only the assets of the Trust, and all persons
dealing with any Fund of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
HIGHMARK FUNDS
Seal By:________________________
Title: President
HIGHMARK CAPITAL MANAGEMENT, INC.
Seal By:________________________
Title: President
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Schedule A
to the
Investment Advisory Agreement
between the HighMark Funds and
HighMark Capital Management, Inc.
dated September 1, 1998
Name of Fund Compensation*
The U.S. Government Money Market Fund Annual rate of thirty
one-hundredths of one
percent (.30%) of the U.S.
Government Obligations Money
Market Fund's average daily
net assets.
The Diversified Money Market Fund Annual rate of thirty
one-hundredths of one
percent (.30%) of the
Diversified Money Market
Fund's average daily net
assets.
The 100% U.S. Treasury Money Market Fund Annual rate of thirty one-
hundredths of one percent
(.30%) of the 100% U.S.
Treasury Money Market Fund's
average daily net assets.
The Income Equity Fund Annual rate of sixty
one-hundredths of one
percent (.60%) of the Income
Equity Fund's average daily
net assets.
The Bond Fund Annual rate of fifty
one-hundredths of one
percent (.50%) of the Bond
Fund's average daily net
assets.
* All fees are computed daily and paid monthly.
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Schedule A (Con't.)
to the
Investment Advisory Agreement
Between the HighMark Funds and
HighMark Capital Management, Inc.
dated September 1, 1998
Name of Fund Compensation*
------------ -------------
The California Tax-Free Money Market Fund Annual rate of thirty one-
hundredths of one percent
(.30%) of the California
Tax-Free Money Market Fund's
average daily net assets.
The Growth Fund Annual rate of sixty
one-hundredths of one
percent (.60%) of the Growth
Fund's average daily net
assets.
The Balanced Fund Annual rate of sixty
one-hundredths of one
percent (.60%) of the
Balanced Fund's average
daily net assets.
The Value Momentum Fund Annual rate of sixty
one-hundredths of one
percent (.60%) of the Value
Momentum Fund's average
daily net assets.
The Blue Chip Growth Fund Annual rate of sixty
one-hundredths of one
percent (.60%) of the Blue
Chip Growth Fund's average
daily net assets.
The Emerging Growth Fund Annual rate of eighty
one-hundredths of one
percent (.80%) of the
Emerging Growth Fund's
average daily net assets.
* All fees are computed daily and paid monthly.
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Schedule A (Con't.)
to the
Investment Advisory Agreement
Between the HighMark Funds and
HighMark Capital Management, Inc.
dated September 1, 1998
Name of Fund Compensation*
The International Equity Fund Annual rate of ninety-five
one-hundredths of one
percent (.95%) of the
International Equity Fund's
average daily net assets.
The Intermediate-Term Bond Fund Annual rate of fifty
one-hundredths of one
percent (.50%) of the
Intermediate-Term Bond
Fund's average daily net
assets.
The Government Securities Fund Annual rate of fifty
one-hundredths of one
percent (.50%) of the
Government Securities Fund's
average daily net assets.
The Convertible Securities Fund Annual rate of sixty
one-hundredths of one
percent (.60%) of the
Convertible Securities
Fund's average daily net
assets.
The California Intermediate Tax-Free Bond Fund Annual rate of fifty
one-hundredths of one
percent (.50%) of the
California Intermediate
Tax-Free Bond Fund's average
daily net assets.
The Small Cap Value Fund Annual rate of one hundred
one-hundredths of one
percent (1.00%) of the Small
Cap Value Fund's average
daily net assets.
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* All fees are computed daily and paid monthly.
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HIGHMARK FUNDS
By:______________________
Title:___________________
Date:____________________
HIGHMARK CAPITAL MANAGEMENT,
INC.
By:______________________
Title:___________________
Date:____________________
