INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of September 21, 1999 between XXXXXXXXX & XXXXX FUND
MANAGEMENT, LLC, a California limited liability company and registered
investment adviser ("HQFM"), and SYMPHONY ASSET MANAGEMENT, LLC, a California
limited liability company and registered investment adviser ("Symphony").
WHEREAS, HQFM is the investment adviser for Xxxxxxxxx & Xxxxx Fund
Trust (the "Trust"), an open-end management investment company registered under
the Investment Company Act of 1940, as amended, (the "1940 Act"); and
WHEREAS, HQFM desires to retain Symphony as HQFM's agent to furnish
investment sub-advisory services to the H&Q IPO & Emerging Company Fund, a
series of the Trust (the "Fund");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT. HQFM hereby appoints Symphony to provide investment
sub-advisory services to the Fund for the period and on the terms set forth in
this Agreement. Symphony accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. HQFM has furnished Symphony with copies
properly certified or authenticated of each of the following:
a. the Trust's Agreement and Declaration of Trust, as filed
with the Secretary of State of the State of Delaware on June 7, 1999, and all
amendments thereto or restatements thereof (such Agreement and Declaration of
Trust, as presently in effect and as it shall from time to time be amended or
restated, herein called the "Declaration of Trust");
b. the Trust's By-Laws and amendments thereto (the "By-Laws");
c. resolutions of the Trust's Trustees (the "Trustees")
authorizing the appointment of Symphony 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 (the "SEC") on
June 11, 1999, and all amendments thereto;
e. the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 333-80473) and under
the 1940 Act (File No. 811-09383), as filed with the SEC on June 11, 1999 and
all
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amendments thereto insofar as such Registration Statement and such
amendments relate to the Fund; and
f. the Trust's most recent prospectuses and statement of
additional information for the Fund (such prospectuses and statement of
additional information, as presently in effect, and all amendments and
supplements thereto, herein collectively called the "Prospectus").
HQFM will furnish Symphony from time to time with copies of all
amendments of or supplements to the foregoing.
3. SERVICES. Subject to the supervision of the Trustees and HQFM,
Symphony will furnish an investment program in respect of the Fund, determine
what securities and other investments will be purchased, retained or sold by the
Fund, and place orders for the purchase and sale of these investments; furnish
statistical and research data; help prepare filings and reports for the Fund;
and generally assist HQFM and the Fund's other service providers in all aspects
of the administration of the Fund.
Symphony will utilize quantitative techniques, proprietary software
models and real-time databases (collectively, "quantitative models") in the
performance of the services to be provided under this Agreement. Symphony
represents and warrants that it maintains the full right and authority to use
these quantitative models in connection with the investment management of the
Fund. Symphony further covenants that it will not take any action, or fail to
take any action, including entering into any third party arrangement, that would
restrict its use of the quantitative models in connection with the investment
management of the Fund. Notwithstanding the provisions of Sections 9 and 10
hereto, Symphony agrees to indemnify and hold HQFM and its affiliates and the
Trust harmless from any and all damages, liabilities, costs and expenses,
including attorneys' fees, resulting from a breach of the above representation,
warranty and covenant.
Symphony further agrees that it:
a. will monitor the Fund's investments and comply with the
provisions of the Declaration of Trust, the By-Laws and the Fund's stated
investment objectives, policies and restrictions, as they may be amended from
time to time;
b. will comply with all applicable federal and state statutes,
rules and regulations pertaining to its services under this Agreement;
c. will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with an underwriter, market
maker, or broker or dealer. In placing orders with brokers and dealers, Symphony
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 ordered by two or more brokers are comparable, Symphony may, in its
discretion, purchase or sell portfolio securities through brokers who provide
Symphony with research advice and other services. In no
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instance will portfolio securities be purchased or sold through, from or to HQFM
or Symphony, or any affiliated person of the Trust, HQFM or Symphony, except as
may be permitted under the 1940 Act;
d. will treat confidentially and as proprietary information of
the Trust and HQFM and its affiliates all records and other information relative
to the Trust and HQFM and its affiliates, as applicable, 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, or HQFM and its affiliates, as applicable,
which approval shall not be unreasonably withheld and may not be withheld where
Symphony (i) may be exposed to civil or criminal contempt proceedings for
failure to comply, (ii) is requested to divulge such information by duly
constituted authorities, or (iii) is so requested by the Trust, or HQFM and
affiliates, as applicable;
e. will not make loans to any person to purchase or carry units
of beneficial interest in the Trust or make loans to the Trust;
f. will direct its personnel, when making investment
recommendations for the Trust, not to inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for the Trust's accounts
are customers of HQFM, Symphony or their affiliates. In dealing with such
customers, Symphony and its affiliates will not inquire or take into
consideration whether securities of those customers are held by the Trust;
g. will provide regular written reports to HQFM and to the
Trustees (including, without limitation, reports on the general investment
strategy of the Fund, the performance of the Fund in relation to standard
industry indices and general conditions affecting the equity markets), will make
appropriate persons available for the purpose of reviewing such reports with
representatives of HQFM and the Trustees on a regular basis at reasonable times,
and will provide various other written and oral reports from time to time as
requested by HQFM or the Trustees;
h. will vote proxies received by it in connection with
securities held by the Fund consistent with its fiduciary duties hereunder;
i. will act upon instructions from HQFM not inconsistent with
its fiduciary duties hereunder, provided that HQFM shall have no authority to
direct the manner in which the Fund's assets are invested;
j. will not use the name of the Trust, the Fund, HQFM or their
affiliates in any prospectus, advertisement, sales literature or other
communication to the public, except (i) in a general listing of its clients,
(ii) as may be required by law or (iii) as may be agreed to in writing by HQFM,
which agreement shall not be unreasonably withheld;
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k. will promptly notify HQFM in writing of the occurrence of
any event which could have a material impact on the performance of Symphony's
obligations hereunder, including without limitation:
(1) an event which could disqualify it from serving as an
investment adviser of a registered investment company;
(2) a change in control, as deferred in the 1940 Act;
(3) a change in the portfolio manager of the Fund; or
(4) any pending or threatened audit, investigation,
complaint, examination or other inquiry relating to the Fund conducted by
any state or federal regulatory authority;
l. will maintain, with an insurer reasonably acceptable to
HQFM, professional liability insurance in amounts reasonably acceptable to HQFM;
and
m. will adopt and maintain a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act.
4. BOOKS AND RECORDS. Symphony agrees to maintain and preserve all
accounts, books and records required under the 1940 Act and the Investment
Advisers Act of 1940 and rules thereunder with respect to Symphony's duties
hereunder. Symphony understands and agrees that all records 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.
5. EXPENSES. During the term of this Agreement, Symphony will pay
all expenses incurred by it in connection with its activities under this
Agreement, including, without limitation, the cost of the quantitative models
and all compensation of any person employed by or associated with Symphony to
assist in the performance of Symphony's duties under this Agreement, whether or
not such person is also an officer or employee of the Trust.
6. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, HQFM will pay Symphony, and Symphony will accept as
full compensation therefor, a sub-advisory fee, accrued daily and payable
monthly in arrears, of thirty-five one hundredths of one percent (0.35%) of the
Fund's average daily net assets not in excess of $100 million, and three hundred
seventy-five thousandths of one percent (0.375%) of the Fund's average daily net
assets thereafter. From time to time, Symphony may agree to waive or reduce some
or all of the compensation to which it is entitled under this Agreement. In the
event that HQFM waives any portion of its advisory fee to satisfy any expense
guarantee (as set forth in the Fund's then current registration statement),
Symphony shall waive a pro rata portion of its advisory fee from
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HQFM, subject to receiving a minimum fee of twenty one hundredths of one percent
(0.20%) of the Fund's average daily net assets.
7. SERVICES TO OTHERS. HQFM understands that Symphony may act as an
investment adviser, sub-investment adviser, and/or administrator to other
accounts, including other investment companies. HQFM has no objection to
Symphony's acting in such capacities, provided that whenever the Trust and one
or more other investment accounts advised by Symphony have available funds for
investment, investments suitable and appropriate for each will be allocated in a
manner believed by Symphony to be equitable to each account. HQFM recognizes
that in some cases this procedure may adversely affect the size of the position
that the Fund may obtain in a particular security. In addition, HQFM understands
that persons employed by Symphony to assist in Symphony's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement will be deemed to limit or restrict the right of Symphony or
any of its affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
8. YEAR 2000 COMPLIANCE. Symphony has (i) initiated a review and
assessment of all areas within its business and operations (including those
affected by its suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Symphony (or its suppliers, vendors and customers) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable. Based on
the foregoing, Symphony represents that, to the best of its knowledge, all
computer applications (including those of its suppliers, vendors and customers)
that are material to its business and operations will on a timely basis be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 compliant").
9. LIMITATION OF LIABILITY. Except as provided in Section 3,
Symphony will not be liable for any error of judgment or mistake of law or for
any loss suffered by HQFM or the Trust 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 Symphony in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Notwithstanding the foregoing,
neither HQFM nor the Trust waives any right it may have at common law or under
the federal or state securities laws.
10. INDEMNIFICATION. HQFM and Symphony each agree to indemnify the
other and their respective affiliates against any claim against or loss or
liability to such other party (including reasonable attorneys' fees) arising out
of any action on the part of the indemnifying party which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard.
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11. DURATION AND TERMINATION. This Agreement will become effective as
of the later of (i) the date the Trust's Registration Statement as it relates to
the Fund is declared effective by the SEC, (ii) the date this Agreement has
been approved by a vote of a majority of the outstanding voting securities of
the Fund in accordance with the requirements under the 1940 Act, and (iii)
October 1, 1999.
This Agreement will remain in effect for two years and thereafter
continue for successive one year periods, provided such continuation is
specifically approved at least annually (a) by the vote of a majority of those
Trustees who are not parties to this Agreement or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of the Trustees or by the vote of a majority of
the outstanding voting securities of the Fund. Notwithstanding the foregoing,
this Agreement may be terminated at any time, without the payment of any
penalty, on sixty days' written notice by the Trust (by vote of the Trustees or
by vote of a majority of the outstanding voting securities of the Fund), by HQFM
or by Symphony. This Agreement will immediately terminate in the event of its
assignment, except as permitted under the 1940 Act. (As used in this Agreement,
the terms "majority of the outstanding voting securities," "interested persons"
and "assignment" have the same meaning as such terms in the 1940 Act.)
12. 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.
13. NOTICES. Any notice, demand, request or other communication which
is required, called for or contemplated to be given or made hereunder shall be
deemed to have been duly given or made for all purposes if (a) in writing and
sent by (i) messenger or a recognized national overnight courier service for
next day delivery with receipt therefor, or (ii) certified or registered mail,
postage paid, return receipt requested, or (b) sent by facsimile transmission
with a written copy thereof sent on the same day by postage paid first-class
mail or (c) by personal delivery at the following address:
To: HQFM
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
To: Symphony
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
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14. 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 is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of California.
The name "Xxxxxxxxx & Xxxxx Fund Trust" and the "Trustees of Xxxxxxxxx
& Xxxxx Fund Trust" refer respectively to the Trust created, and the Trustees,
as trustees but not individually or personally, acting from time to time under
the Declaration of Trust, to which reference is hereby made. The obligations of
the Trust entered into in the name or on behalf thereof by any of its Trustees,
officers, representatives or agents are made not individually, but only in such
capacities, and are not binding upon any of the Trustees, officers,
representatives, agents or shareholders of the Trust personally, but bind only
the assets of the Trust, and persons dealing with any series of shares of the
Trust must look solely to the assets of the Trust belonging to such series for
the enforcement of any claims against the Trust.
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.
XXXXXXXXX & XXXXX FUND
MANAGEMENT, LLC
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President
SYMPHONY ASSET MANAGEMENT, LLC
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Operating Officer
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