INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of December 8, 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 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 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;
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 defined 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
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.
11. DURATION AND TERMINATION. This Agreement will become effective as of
the date first set forth above.
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
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