1
EXHIBIT (5)
================================================================================
--------------------------------------------
MANAGEMENT AND INVESTMENT ADVISORY AGREEMENT
BETWEEN
HOSPITAL AND HEALTH FACILITIES TRUST
AND
AMBAC INVESTMENT MANAGEMENT, INC.
December 30, 1996
--------------------------------------------
================================================================================
2
TABLE OF CONTENTS
Page
ARTICLE 1 DELIVERY OF DOCUMENTS.......................................... 1
1.1 Documents Delivered............................................ 1
ARTICLE 2 APPOINTMENT, DUTIES AND COMPENSATION.................. 2
2.1 Appointment as Adviser and Manager............................. 2
2.2 Investment Advisory Services................................... 2
2.3 Management Services............................................ 4
2.4 Compensation................................................... 5
ARTICLE 3 EXPENSES....................................................... 5
3.1 Expenses Paid by AIMI.......................................... 5
3.2 Expenses Paid by Fund.......................................... 5
3.3 Reimbursement of Expenses by AIMI.............................. 6
ARTICLE 4 LIMITATION OF LIABILITY........................................ 6
4.1 AIMI........................................................... 6
4.2 Trust.......................................................... 6
4.3 Insurance...................................................... 6
ARTICLE 5 DURATION, TERMINATION AND AMENDMENT............................ 6
5.1 Duration of Agreement........................................... 6
5.2 Amendments, Etc................................................. 7
ARTICLE 6 MISCELLANEOUS.................................................. 7
6.1 Certain Relationships.......................................... 7
6.2 Third Parties.................................................. 7
6.3 Captions....................................................... 8
6.4 Severability................................................... 8
6.5 Binding Effect................................................. 8
6.6 Notices........................................................ 8
6.7 Entire Agreement............................................... 8
6.8 Applicable Law................................................. 8
6.9 Counterparts................................................... 9
i
3
MANAGEMENT AND INVESTMENT ADVISORY AGREEMENT
This Agreement, executed on December ___, 1996, is made by and between the
Hospital and Health Facilities Trust, a California trust (the "Trust"), on
behalf of its Portfolio known as the California Hospital and Health Facilities
Liquid Asset Fund (the "Fund"), and AMBAC Investment Management, Inc., a
Delaware corporation, ("AIMI"):
RECITALS
The Fund is a Portfolio under the Hospital and Health Facilities
Trust existing pursuant to a Declaration of Trust dated as of February 12,
1992 made by the Hospital Council of Northern and Central California;
The Trust is registered with the Securities and Exchange Commission
as an open-end, diversified investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the Fund's Shares
are registered under the Securities Act of 1933, as amended; and
The Trust desires to avail itself of the experience, resources,
advice and assistance of AIMI and, subject to the supervision of the Board
of Trustees of the Trust, AIMI is willing to undertake the duties and
responsibilities hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DELIVERY OF DOCUMENTS
1.1 DOCUMENTS DELIVERED. The Trust has delivered, or will cause to be
delivered, to AIMI true and complete copies of the following documents and all
future amendments thereto:
(a) Declaration of Trust dated as of February 12, 1992;
(b) Certified resolutions of the Board of Trustees of the Trust
authorizing the appointment of AIMI as the manager and
investment adviser of the Fund pursuant to this Agreement and
approving this Agreement;
(c) Registration Statement of the Fund on Form N-1A (the
"Registration Statement"), including the Prospectus contained
in Part A thereof (the
4
"Prospectus") and the Statement of Additional Information
contained in Part B thereof (the "Statement of Additional
Information"), all amendments to the Registration Statement
and the current Prospectus and Statement of Additional
Information;
(d) Distribution Agreement between the Trust and AMBAC Securities,
Inc. ("AMBAC Securities") of even date herewith;
(e) Custody Agreement between the Trust and Mellon Bank N.A. (the
"Custodian") dated July 10, 1992; and
(f) Certificate of the Secretary of the Trust setting forth the
names and specimen signatures of the individuals authorized at
the time of delivery of such certificate to act on behalf of
the Trust and the Fund in connection with matters arising
hereunder.
ARTICLE 2
APPOINTMENT, DUTIES AND COMPENSATION
2.1 APPOINTMENT AS ADVISER AND MANAGER. The Trust hereby appoints AIMI as
the investment adviser and manager of the Fund on the terms and for the period
set forth in this Agreement, and AIMI hereby accepts such appointment as set
forth in this Agreement.
2.2 INVESTMENT ADVISORY SERVICES.
(a) Subject to the direction and control of the Board of Trustees of
the Trust, AIMI will manage the investment and reinvestment of the assets of the
Fund and will:
(i) maintain a continuous investment program for the Fund;
(ii) determine what securities shall be purchased or sold by
the Fund;
(iii) arrange for the purchase and sale of securities held in
the portfolio of the Fund by placing orders pursuant to its
determinations either directly with the issuer or with any
broker or dealer who deals in the securities in which the Fund
invests; and
(iv) determine what portion, if any, of the Fund shall be held
uninvested.
2
5
(b) Any investment program maintained by AIMI under this Agreement
shall at all times conform to, and be in accordance with any requirements
imposed by: (i) the provisions of the 1940 Act, and the rules or regulations
thereunder, and all other applicable federal and state laws; (ii) the provisions
of the Declaration of Trust; (iii) any policies or determinations of the Board
of Trustees of the Trust as in effect from time to time; and (iv) the investment
objectives and policies of the Fund as reflected in the Trust's Registration
Statement, including the Prospectus and Statement of Additional Information, as
in effect from time to time. AIMI shall invest the assets of the Fund in the
manner provided above and shall have no duty or responsibility with respect to
the diversification of the assets of the Fund, except with respect to the
diversification of the assets as contemplated by the Prospectus and Statement of
Additional Information.
(c) AIMI shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder, but shall not be liable for any loss
sustained by reason of the adoption of any investment policy or the purchase,
sale or retention of any security, whether or not such purchase, sale or
retention shall have been based upon (i) its own investigation and research or
(ii) upon investigation and research made by any other individual, firm or
corporation selected in good faith by AIMI. Nothing herein contained shall,
however, be construed to protect AIMI against any liability to the Trust, the
Fund or the holders of its outstanding securities by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Agreement. AIMI will be under no liability or obligation to anyone with respect
to any failure on the part of the Board of Trustees of the Trust to perform any
of its obligations under the Declaration of Trust or any agreement affecting the
Trust or under the terms of this Agreement or for any error or omission
whatsoever on the part of the Board of Trustees.
(d) The Fund will have the benefit of the investment analysis and
research, the review of current economic conditions and trends and the
consideration of investment policy now generally available to investment
advisory customers of AIMI. It is understood that AIMI will not use any inside
information pertinent to investment decisions undertaken in connection with this
Agreement that may be in its possession or in the possession of any of its
affiliates, nor will the Fund seek to obtain any such information.
(e) AIMI shall maintain books and records with respect to the
securities transactions of the Fund and shall render to the Fund such periodic
and other reports as the Fund may reasonably request. AIMI shall assist in the
preparation of reports to shareholders and to the Securities and Exchange
3
6
Commission, and in all audits of the Fund. AIMI shall calculate the net asset
value of the Fund in accordance with the terms of the Registration Statement,
the Prospectus, the Statement of Additional Information and the methods and
policies adopted by the Board of Trustees of the Trust.
2.3 MANAGEMENT SERVICES. Subject to the direction and control of the Board
of Trustees of the Trust, AIMI shall:
(a) Assist in supervising all aspects of the Fund's operations,
other than those which are to be managed by the Custodian pursuant to the
Custodian Agreement;
(b) Act, in performing its duties as administrator, in conformity
with the Declaration of Trust, the Registration Statement, Prospectus and
Statement of Additional Information, the instructions and directions of the
Board of Trustees of the Trust and in compliance with all applicable federal and
state laws and regulations;
(c) Furnish to the Fund, at AIMI's sole expense, the services of
such persons competent to perform such administrative and clerical functions as
may be necessary from time to time in order to provide effective administration
of the Fund and maintain or provide for the maintenance of such accounts, books
and records as are required under this Agreement or reasonably requested by the
Board of Trustees of the Trust;
(d) Arrange for the preparation on behalf of the Fund of any and all
required Fund or Trust tax returns and reports to the Fund's shareholders and
the periodic amending of the Registration Statement, Prospectus and Statement of
Additional Information;
(e) Furnish to the Fund, at AIMI's sole expense, adequate office
facilities (which may be AIMI's own offices), data processing services,
clerical, accounting and bookkeeping services, stationery and office supplies
and all other necessary office equipment and related services;
(f) At least once each quarter, provide the Board of Trustees of the
Trust with a detailed evaluation of the performance of the Fund based upon such
factors as AIMI shall deem appropriate in light of its knowledge and experience;
(g) Each fiscal quarter furnish to the Board of Trustees of the
Trust with a copy of the Fund's financial statements for the fiscal quarter most
recently ended, furnish to the Board of Trustees of the Trust and Fund's
shareholders such financial statements and other periodic reports as are
required by applicable law, and furnish to the Board of Trustees of the Trust
such other reports and information as they may from time to time reasonably
request; and
4
7
(h) Act as transfer agent, dividend disbursing agent and shareholder
servicing agent for the Fund, without special compensation, in accordance with
the terms of a Transfer Agency Agreement between the Trust, on behalf of the
Fund, and AIMI.
2.4 COMPENSATION. The Trust agrees to pay to AIMI, and AIMI agrees to
accept, as full compensation for its services under this Agreement, a fee, which
shall be payable monthly and computed at an annual percentage rate of the Fund's
average daily net assets, in an amount equal to the following percentages of
such average daily net assets:
AVERAGE DAILY NET ASSETS PERCENTAGE
Up to $250,000,000............ .4000%
$250,000,001 - $500,000,000 ... .3675%
$500,000,001 and above......... .3350%
ARTICLE 3
EXPENSES
3.1 EXPENSES PAID BY AIMI. AIMI shall pay all of the costs and expenses
required to perform the services to be provided to the Fund pursuant this
Agreement.
3.2 EXPENSES PAID BY FUND. All expenses of the Fund not required to be
borne by AIMI pursuant to Section 3.1 shall be paid by the Fund, including, but
not limited to, the following:
(a) interest and taxes;
(b) expenses of Board of Trustees of the Trust (other than those, if
any, who are "interested persons" of AIMI (as defined by the 1940 Act);
(c) outside legal and audit expenses;
(d) fees and expenses of the Custodian or any successor custodian;
(e) cost of insurance maintained by or for the Trust and the Fund;
(f) expenses of preparing and filing (including filing fees)
amendments to the Registration Statement, the Prospectus and Statement of
Additional Information, reports, notices and shareholders' meeting material, and
the costs of printing and mailing Prospectuses, Statements of Additional
Information, proxy statements and reports that are sent to shareholders of the
Fund;
(g) expenses incidental to holding meetings of the Fund's
shareholders; and
5
8
(h) such nonrecurring expenses as may arise, including litigation
affecting the Fund or the Trust, and the legal obligations which the Fund may
have to indemnify its officers and Board of Trustees with respect thereto.
3.3 REIMBURSEMENT OF EXPENSES BY AIMI. During the period ending December
31, 1997, and thereafter subject to revision or termination upon ninety (90)
days' written notice to the Fund, AIMI shall waive all or a portion of its fees
and take other action, to the extent necessary, to maintain the Fund's
annualized expenses (including management and distribution fees, but excluding
interest, taxes, brokerage commissions, and extraordinary expenses) at not more
than .85% of the average daily net assets of the Fund for any fiscal year or for
a portion of such year if this Agreement is terminated or revised.
ARTICLE 4
LIMITATION OF LIABILITY
4.1 AIMI. AIMI shall not be liable for any error in judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith, gross negligence or negligence on its part in the performance of its
duties or from reckless disregard by AIMI of its obligations and duties under
this Agreement; provided, the foregoing shall not limit AIMI's liability to the
Fund with respect to any breaches by AIMI of this Agreement.
4.2 TRUST. Article 5 of the Declaration of Trust contains provisions
limiting the liability of the Trustees, officers, employees and agents of the
Trust. The obligations of the Trust created hereunder are not personally binding
upon, nor shall resort be had to the property of, any of the Trustees, officers,
employees or agents of the Trust or of the Shareholders of the Fund, and only
that portion of the Fund property necessary to satisfy the obligations of the
Trust arising hereunder shall be bound or affected by the operation of this
Agreement.
4.3 INSURANCE. AIMI shall, at its expense, maintain policies of insurance
with limits of not less than one million dollars which provide officer's and
director's liability coverage and errors and omissions coverage. Upon request,
AIMI shall provide evidence that such insurance is in effect.
ARTICLE 5
DURATION, TERMINATION AND AMENDMENT
5.1 DURATION OF AGREEMENT. This Agreement shall become effective on the
date first set forth above; provided that it has been approved by a majority of
the outstanding voting securities
6
9
of the Fund, as defined by the 1940 Act, and by the vote of a majority of the
members of the Board of Trustees who are not parties to this Agreement or
"interested persons" of any such party (as that term is defined by the 1940 Act
and the rules thereunder), cast in person at a meeting of the Board of Trustees
called for the purpose of voting on the approval of this Agreement. This
Agreement shall remain in effect for two years from the date of its execution
and shall continue from year to year thereafter, but only so long as such
continuance is approved at least annually by the vote of a majority of the
members of the Board of Trustees or by vote of a majority of the outstanding
voting securities of the Fund (as defined by the 1940 Act), and is in each case
also approved by the vote of a majority of the members of the Board of Trustees
who are not parties to this Agreement or "interested persons" of any such party
(as that term is defined by the 1940 Act and the rules thereunder), cast in
person at a meeting called for such purpose.
This Agreement may be terminated at any time, without the payment of any
penalty, by AIMI or the Board of Trustees or by vote of a majority of the Fund's
outstanding voting securities, in each case, on sixty (60) days' written notice.
This Agreement shall automatically terminate in the event of its "assignment,"
as defined by the 1940 Act and the rules thereunder.
5.2 AMENDMENTS, ETC. No provision of this Agreement may be waived, amended
or terminated as to the Fund except by an instrument in writing signed by the
Trust and AIMI and no amendment of this Agreement shall be effective until
approved by the Board of Trustees of the Trust in the manner required by Section
5.1 and, if required by the 1940 Act, by vote of a majority of the outstanding
voting securities of the Fund.
ARTICLE 6
MISCELLANEOUS
6.1 CERTAIN RELATIONSHIPS. Nothing in this Agreement shall prevent AIMI or
any officer, director or employee thereof from acting as investment adviser or
manager for any other person, firm, corporation or entity and shall not in any
way limit or restrict AIMI or any of its directors, officers, partners or
employees or any of its affiliates or their respective directors, officers,
partners or employees from buying, selling or trading any investment instruments
for its or their own accounts or for the accounts of others for whom it or they
may be acting; provided, that AIMI represents that it will undertake no
activities which, in its judgment, will materially adversely affect the
performance of its obligations under this Agreement.
6.2 THIRD PARTIES. When dealing with third parties on behalf of the Fund,
AIMI shall include such recitals in written documents as may be reasonably
requested by the Trust regarding
7
10
the limitation of liability of the Board of Trustees, the Fund's shareholders,
and the Trust's officers, employees and agents to third parties.
6.3 CAPTIONS. The captions in this Agreement are included for convenience
of reference only and shall in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
6.4 SEVERABILITY. If any provision of this Agreement shall be held invalid
under any applicable statute or regulation or by a decision of a court of
competent jurisdiction, such invalidity shall not affect any other provision of
this Agreement that can be given effect without the invalid provision, and, to
this end, the provisions hereof are severable.
6.5 BINDING EFFECT. Except as otherwise provided in Article 5, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
6.6 NOTICES. Notices or consents of any kind required or permitted under
this Agreement shall be in writing and shall be deemed duly delivered if
delivered in person or if mailed, two (2) days following mailing by certified
mail, return receipt requested, postage prepaid to the appropriate party as
follows:
a. If to the Trust:
Hospital and Health Facilities Trust
x/x Xxxxxxxx Xxxxxxx xx Xxxxxxxx xxx
Xxxxxxx Xxxxxxxxxx
0000 Xxxxxxxxxx Xx., Xxx. 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
b. If to AIMI:
AMBAC Investment Management, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
or at such other address as may be specified by either party to the other in the
manner required under this Section 6.6.
6.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof.
6.8 APPLICABLE LAW. This Agreement shall be deemed to have been executed
in the State of California and the substantive laws of the State of California
shall govern the construction of this Agreement and the rights and remedies of
the respective parties
8
11
hereto; provided, however, in the event of any conflict between such laws and
the 1940 Act, the provisions of the 1940 Act shall govern.
6.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have executed this Agreement as of the date first above written.
AMBAC INVESTMENT MANAGEMENT, INC.
By /s/ Xxxxxxx Xxxxxxxxx
-------------------------------------
Its Managing Director
-------------------------------
HOSPITAL AND HEALTH FACILITIES
TRUST
By /s/ J. Xxxxxxx Xxxxxxxx
--------------------------------------
Its Secretary
--------------------------------
9
