XXXXXXXXX CHINA WORLD FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 3rd day of December, 2002, by and between
XXXXXXXXX CHINA WORLD FUND (hereinafter referred to as the "Company"), and
XXXXXXXXX ASSET MANAGEMENT LTD. (hereinafter referred to as the "Manager").
In consideration of the mutual agreements herein made, the Company and
the Manager understand and agree as follows:
(1) The Manager agrees, during the life of this Agreement, to manage the
investment and reinvestment of the Company's assets consistent with the
provisions of the Agreement and Declaration of Trust of the Company and the
investment policies adopted and declared by the Company's Board of Trustees. In
pursuance of the foregoing, the Manager shall make all determinations with
respect to the investment of the Company's assets and the purchase and sale of
its investment securities, and shall take all such steps as may be necessary to
implement those determinations. It is understood that all acts of the Manager in
performing this Agreement are performed by it outside of the United States.
(2) The Manager is not required to furnish any personnel, overhead items or
facilities for the Company.
(3) The Manager shall be responsible for selecting members of securities
exchanges, brokers and dealers (such members, brokers and dealers being
hereinafter referred to as "brokers") for the execution of the Company's
portfolio transactions consistent with the Company's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with the following
principles:
A. Purchase and sale orders will usually be placed with brokers which
are selected by the Manager as able to achieve "best execution" of such
orders. "Best execution" shall mean prompt and reliable execution at the
most favorable security price, taking into account the other provisions
hereinafter set forth. The determination of what may constitute best
execution and price in the execution of a securities transaction by a
broker involves a number of considerations, including, without limitation,
the overall direct net economic result to the Company (involving both price
paid or received and any commissions and other costs paid), the efficiency
with which the transaction is effected, the ability to effect the
transaction at all where a large block is involved, availability of the
broker to stand ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the Manager
shall take into account its past experience as to brokers qualified to
achieve "best execution," including brokers who specialize in any foreign
securities held by the Company.
C. The Manager is authorized to allocate brokerage and principal
business to brokers who have provided brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), for the Company and/or other
accounts, if any, for which the Manager exercises investment discretion (as
defined in Section 3(a)(35) of the 0000 Xxx) and, as to transactions for
which fixed minimum commission rates are not applicable, to cause the
Company to pay a commission for effecting a securities transaction in
excess of the amount another broker would have charged for effecting that
transaction, if the Manager determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with
respect to the Company and the other accounts, if any, as to which it
exercises investment discretion. In reaching such determination, the
Manager will not be required to place or attempt to place a specific dollar
value on the research or execution services of a broker or on the portion
of any commission reflecting either of said services. In demonstrating that
such determinations were made in good faith, the Manager shall be prepared
to show that all commissions were allocated and paid for purposes
contemplated by the Company's brokerage policy; that the research services
provide lawful and appropriate assistance to the Manager in the performance
of its investment decision-making responsibilities; and that the
commissions paid were within a reasonable range. Whether commissions were
within a reasonable range shall be based on any available information as to
the level of commissions known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Company's policies
that (i) obtaining a low commission is deemed secondary to obtaining a
favorable securities price, since it is recognized that usually it is more
beneficial to the Company to obtain a favorable price than to pay the
lowest commission; and (ii) the quality, comprehensiveness and frequency of
research studies that are provided for the Manager are useful to the
Manager in performing its advisory activities under this Agreement.
Research services provided by brokers to the Manager are considered to be
in addition to, and not in lieu of, services required to be performed by
the Manager under this Agreement. Research furnished by brokers through
which the Company effects securities transactions may be used by the
Manager for any of its accounts, and not all research may be used by the
Manager for the Company. When execution of portfolio transactions is
allocated to brokers trading on exchanges with fixed brokerage commission
rates, account may be taken of various services provided by the broker.
D. Purchases and sales of portfolio securities within the United
States other than on a securities exchange shall be executed with primary
market makers acting as principal, except where, in the judgment of the
Manager, better prices and execution may be obtained on a commission basis
or from other sources.
E. Sales of the Company's shares (which shall include also shares of
other registered investment companies that have either the same adviser or
an investment adviser affiliated the Manager) by a broker are one factor
among others to be taken into account in deciding to allocate portfolio
transactions (including agency transactions, principal transactions,
purchases in underwritings or tenders in response to tender offers) for the
account of the Company to that broker; provided that the broker shall
furnish "best execution," as defined subparagraph A above, and that such
allocation shall be within the scope of the Company's brokerage policy as
stated above; provided further, that in every allocation made to a broker
in which the sale of Company shares is taken into account, there shall be
no increase in the amount of the commissions or other compensation paid to
such broker beyond a reasonable commission or other compensation
determined, as set forth in subparagraph C above, on the basis of best
execution alone or best execution plus research services, without taking
account of or placing any value upon such sale of the Company's shares.
(4) The Company agrees to pay to the Manager a monthly fee in dollars at an
annual rate of 1.25% of the Company's average weekly net assets, payable at the
end of each calendar month.
(5) This Agreement shall be effective as of the date first written above
and shall continue in effect until November 30, 2004. If not sooner terminated,
this Agreement shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Company's Board of Trustees who are
not parties to this Agreement or "interested persons" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of any such party,
cast in person at a meeting called for the purpose of voting on such approval
and either the vote of (a) a majority of the outstanding voting securities of
the Company, as defined in the 1940 Act, or (b) a majority of the Company's
Board of Trustees as a whole.
(6) Notwithstanding the foregoing, this Agreement may be terminated by
either party at any time, without the payment of any penalty, on sixty (60)
days' written notice to the other party, provided that termination by the
Company is approved by vote of a majority of the Company's Board of Trustees in
office at the time or by vote of a majority of the outstanding voting securities
of the Company.
(7) This Agreement will terminate automatically and immediately in the
event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the Manager no longer
acts as Manager to the Company, the Manager reserves the right to withdraw from
the Company the use of the name "Xxxxxxxxx" or any name misleadingly implying a
continuing relationship between the Company and the Manager or any of its
affiliates.
(9) Except as may otherwise be provided by the 1940 Act, neither the
Manager nor its officers, directors, employees or agents shall be subject to any
liability for any error of judgment, mistake of law, or any loss arising out of
any investment or other act or omission in the performance by the Manager of its
duties under this Agreement or for any loss or damage resulting from the
imposition by any government of exchange control restrictions which might affect
the liquidity of the Company's assets, or from acts or omissions of custodians,
or securities depositories, or from any war or political act of any foreign
government to which such assets might be exposed, or for failure, on the part of
the custodian or otherwise, timely to collect payments or to exercise rights
with respect to emerging country securities, except for any liability, loss or
damage resulting from willful misfeasance, bad faith or gross negligence on the
Manager's part or by reason of reckless disregard of the Manager's duties under
this Agreement. It is hereby understood and acknowledged by the Company that the
value of the investments made for the Company may increase as well as decrease
and are not guaranteed by the Manager. It is further understood and acknowledged
by the Company that investment decisions made on behalf of the Company by the
Manager are subject to a variety of factors that may affect the values and
income generated by the Company's portfolio of securities, including general
economic conditions, market factors and currency exchange rates, and that
investment decisions made by the Manager will not always be profitable or prove
to have been correct.
(10) It is understood that the services of the Manager are not deemed to be
exclusive, and nothing in this Agreement shall prevent the Manager, or any
affiliate thereof, from providing similar services to other investment companies
and other clients, including clients which may invest in the same types of
securities as the Company, or, in providing such services, from using
information furnished by others. When the Manager determines to buy or sell the
same security for the Company that the Manager or one or more of its affiliates
has selected for clients of the Manager or its affiliates, the orders for all
such security transactions shall be placed for execution by methods determined
by the Manager, with approval by the Company's Board of Trustees, to be
impartial and fair.
(11) Pursuant to Section 6.2 of the Code of Conduct for Persons Registered
with the Securities and Futures Commission (the "SFC"), the following
information is included in this Agreement:
A. UNDERTAKINGS. Each party undertakes to notify the other party in
the event of any material change to the information provided in this
Agreement.
B. CERTAIN INFORMATION ABOUT THE MANAGER.
(i) The Manager's full name and address is:
Xxxxxxxxx Asset Management Ltd. Xxxxxxxxx Asset Management Ltd.
0 Xxxxxxx Xxxxxxxxx Two Exchange Square
#00-00 Xxxxxx Xxxxx Xxx Xxxxx 0000-00
Xxxxxxxxx 000000 Connaught Road, Central
Hong King
(ii) The Manager's registration status with the SFC is active.
C. CERTAIN INFORMATION ABOUT THE COMPANY. The Company's full name and
verified address is:
Xxxxxxxxx China World Fund
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
(12) This Agreement shall be construed in accordance with the laws of the
State of Delaware, PROVIDED that nothing herein shall be construed as being
inconsistent with applicable Federal and state securities laws and any rules,
regulations and orders thereunder.
(13) 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.
(14) Nothing herein shall be construed as constituting the Manager an agent
of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers as of the date first written
above.
XXXXXXXXX CHINA WORLD FUND
By /s/XXXXXXX X. XXXXX
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Name: Xxxxxxx X. Xxxxx
Title: Secretary
XXXXXXXXX ASSET MANAGEMENT LTD.
By /s/XXXXXXX X. XXXXXXX
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Name: Xxxxxxx X. XxXxxxx
Title:
