XXXX XXXXXXX PREFERRED INCOME FUND II
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
November 29, 2002
Xxxx Xxxxxxx Advisers, LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Investment Management Contract
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Ladies and Gentlemen:
Xxxx Xxxxxxx Preferred Income Fund II (the "Trust") has been organized as a
business trust under the laws of The Commonwealth of Massachusetts to engage in
the business of an investment company.
The Board of Trustees of the Trust (the "Trustees") has selected Xxxx
Xxxxxxx Advisers, LLC (the "Adviser") to provide overall investment advice and
management for the Trust, and to provide certain other services, as more fully
set forth below, and the Adviser is willing to provide such advice, management
and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Declaration of Trust dated September 12, 2002, as amended from time to
time (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as investment adviser
for the Trust and approving the form of this Agreement;
(d) The Trust's Code of Ethics.
The Trust will furnish to the Adviser from time to time copies, properly
certified or otherwise authenticated, of all amendments of or supplements to the
foregoing, if any.
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use its best
efforts to provide to the Trust continuing and suitable investment programs with
respect to investments, consistent with the investment objectives, policies and
restrictions of the Trust. In the performance of the Adviser's duties hereunder,
subject always (x) to the provisions contained in the documents delivered to the
Adviser pursuant to Section 1, as each of the same may from time to time be
amended or supplemented, and (y) to the limitations set forth in the Trust's
then-current Prospectus and Statement of Additional Information included in the
registration statement of the Trust as in effect from time to time under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Trust with advice and recommendations, consistent with
the investment objectives, policies and restrictions of the Trust,
with respect to the purchase, holding and disposition of portfolio
securities, alone or in consultation with any subadviser or
subadvisers appointed pursuant to this Agreement and subject to the
provisions of any sub-investment management contract respecting the
responsibilities of such subadviser or subadvisers;
(b) advise the Trust in connection with policy decisions to be made by
the Trustees or any committee thereof with respect to the Trust's
investments and, as requested, furnish the Trust with research,
economic and statistical data in connection with the Trust's
investments and investment policies;
(c) submit such reports relating to the valuation of the Trust's
securities as the Trustees may reasonably request;
(d) assist the Trust in any negotiations relating to the Trust's
investments with issuers, investment banking firms, securities brokers
or dealers and other institutions or investors;
(e) consistent with the provisions of Section 7 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser, PROVIDED
that in connection with the placing of such orders and the selection
of such brokers or dealers the Adviser shall seek to obtain execution
and pricing within the policy guidelines determined by the Trustees;
(f) from time to time or at any time requested by the Trustees, make
reports to the Trust of the Adviser's performance of the foregoing
services and furnish advice and recommendations with respect to other
aspects of the business and affairs of the Trust;
(g) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the
Adviser may deem necessary or useful in the discharge of the Adviser's
duties hereunder;
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(h) give instructions to the Trust's custodian as to deliveries of
securities to and from such custodian and transfer of payment of cash
for the account of the Trust; and
(i) appoint and employ one or more sub-advisers satisfactory to the
Trust under sub-investment management agreements.
Subject to the general supervision of the Board of Trustees of the Trust, the
Adviser will provide certain administrative services to the Trust. The Adviser
will, to the extent such services are not required to be performed by others
pursuant to the investment advisory agreement, custodian agreements or transfer
agency agreement, (i) provide supervision of all aspects of the Trust's
operations; (ii) provide the Trust with personnel to perform such executive,
administrative and clerical services as are reasonably necessary to provide
effective administration of the Trust; (iii) arrange for, at the Trust's
expense, (a) the preparation for the Trust of all required tax returns, (b) the
preparation and submission of reports to existing shareholders and (c) the
preparation of reports filed with the Securities and Exchange Commission and
other regulatory authorities; (iv) maintain all of the Trust's records; and (v)
provide the Trust with adequate office space and all necessary office equipment
and services including telephone service, heat, utilities, stationery supplies
and similar items. The Adviser will also provide to the Trust's Board of
Trustees such periodic and special reports as the Board may reasonably request.
3. EXPENSES PAID BY THE ADVISER. The Adviser will pay:
(a) the compensation and expenses of all officers and employees of the
Trust; and
(b) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder.
4. EXPENSES OF THE TRUST NOT PAID BY THE ADVISER. The Adviser will not be
required to pay any expenses which this Agreement does not expressly make
payable by it. In particular, and without limiting the generality of the
foregoing but subject to the provisions of Section 3, the Adviser will not be
required to pay under this Agreement:
(a) any and all expenses, taxes and governmental fees incurred by
the Trust prior to the effective date of this Agreement;
(b) without limiting the generality of the foregoing clause (a),
the expenses of organizing the Trust (including without
limitation, legal, accounting and auditing fees and expenses
incurred in connection with the matters referred to in this
clause (b)), of initially registering shares of the Trust under
the Securities Act of 1933, as amended, and of qualifying the
shares for sale under state securities laws for the initial
offering and sale of shares;
(c) the compensation and expenses of Trustees who are not
interested persons (as used in this Agreement, such term shall
have the meaning specified in the 1940 Act) of the Adviser and of
independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Trust
other than through the Adviser;
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(d) legal, accounting, financial management, tax and auditing
fees and expenses of the Trust (including an allocable portion of
the cost of its employees rendering such services to the Trust);
(e) the fees and disbursements of custodians and depositories of
the Trust's assets, transfer agents, disbursing agents, plan
agents and registrars;
(f) taxes and governmental fees assessed against the Trust's
assets and payable by the Trust;
(g) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the
Trust;
(h) brokers' commissions and underwriting fees;
(i) the expense of periodic calculations of the net asset value
of the shares of the Trust; and
(j) insurance premiums on fidelity, errors and omissions and
other coverages.
5. COMPENSATION OF THE ADVISER. For all services to be rendered and
expenses paid or assumed by the Adviser as herein provided, the Adviser shall be
entitled to a fee, paid daily, at an annual rate equal to 0.75% of the average
daily managed asset value of the Trust.
"Managed assets" means the total assets of the Trust (including any assets
attributable to any leverage that may be outstanding) minus the sum of accrued
liabilities (other than liabilities representing financial leverage). The
liquidation preference of any preferred shares is not a liability. The "average
daily managed assets" of the Trust shall be determined on the basis set forth in
the Trust's Prospectus or otherwise consistent with the 1940 Act and the
regulations promulgated thereunder.
Notwithstanding the forgoing, the Adviser agrees that for the following
calendar years, the Adviser will limit its fees under this Agreement to the
following percentages of the Trust's average daily-managed assets:
Year Effective Advisory Fee After Waiver
Until November 28, 2007 0.55%
November 29, 2007 until November 28, 2008 0.60%
November 29, 2008 until November 28, 2009 0.65%
November 29, 2009 until November 28, 2010 0.70%
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In addition, the Adviser may agree not to impose all or a portion of its
fee (in advance of the time its fee would otherwise accrue) and/or undertake to
make any other payments or arrangements necessary to limit the Trust's expenses
to any level the Adviser may specify. Any fee reduction or undertaking shall
constitute a binding modification of this Agreement while it is in effect but
may be discontinued or modified prospectively by the Adviser at any time.
6. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Adviser or any affiliate or associate of the Adviser
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or portfolios similar to the Trust's; and it is specifically
understood that officers, directors and employees of the Adviser and those of
its parent company, Xxxx Xxxxxxx Financial Services, Inc., or other affiliates
may continue to engage in providing portfolio management services and advice to
other investment companies, whether or not registered, to other investment
advisory clients of the Adviser or of its affiliates and to said affiliates
themselves.
The Adviser shall have no obligation to acquire with respect to the Trust a
position in any investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the account of
another client, if, in the sole discretion of the Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of the Trust.
Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or
sales of portfolio securities for the account of the Trust, neither the Adviser
nor any of its investment management subsidiaries, nor any of the Adviser's or
such investment management subsidiaries' directors, officers or employees will
act as principal or agent or receive any commission, except as may be permitted
by the 1940 Act and rules and regulations promulgated thereunder. If any
occasions shall arise in which the Adviser advises persons concerning the shares
of the Trust, the Adviser will act solely on its own behalf and not in any way
on behalf of the Trust. Nothing herein contained shall limit or restrict the
Adviser or any of its officers, affiliates or employees from buying, selling or
trading in any securities for its or their own account or accounts.
8. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust nor the Adviser are
partners of or joint venturers with each other and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on any of them.
9. NAME OF THE TRUST. The Trust may use the name "Xxxx Xxxxxxx" or any name
or names derived from or similar to the names "Xxxx Xxxxxxx Advisers, Inc.",
"Xxxx Xxxxxxx Life Insurance Company", or "Xxxx Xxxxxxx Financial Services,
Inc." only for so long as this Agreement remains in effect. At such time as this
Agreement shall no longer be in effect, the Trust will (to the extent that they
lawfully can) cease to use such a name or any other name indicating that the
Trust is advised by or otherwise connected with the Adviser. The Trust
acknowledges that it has adopted its name through permission of Xxxx Xxxxxxx
Life Insurance Company, a Massachusetts insurance company, and agrees that Xxxx
Xxxxxxx Life Insurance Company reserves to itself and any successor to its
business the right to grant the nonexclusive right to use the name "Xxxx
Xxxxxxx" or any similar name or names to any other corporation or entity,
including but not limited to any investment company of which Xxxx Xxxxxxx Life
Insurance Company or any subsidiary or affiliate thereof shall be the investment
adviser.
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10. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also employed by the Adviser, who may be or become an employee of and
paid by the Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely for the Trust
and not as the Adviser's employee or agent.
11. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain
in force until November 28, 2004, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the Adviser or (other
than as Board members) of the Trust, cast in person at a meeting called for the
purpose of voting on such approval, and (b) either (i) the Trustees or (ii) a
majority of the outstanding voting securities of the Trust. This Agreement may,
on 60 days' written notice, be terminated at any time without the payment of any
penalty by the vote of a majority of the outstanding voting securities of the
Trust, by the Trustees or by the Adviser. Termination of this Agreement shall
not be deemed to terminate or otherwise invalidate any provisions of any
contract between the Adviser and any other series of the Trust. This Agreement
shall automatically terminate in the event of its assignment. In interpreting
the provisions of this Section 11, the definitions contained in Section 2(a) of
the 1940 Act (particularly the definitions of "assignment," "interested person"
and "voting security") shall be applied.
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, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser or (other than as Trustees) of the Trust, cast
in person at a meeting called for the purpose of voting on such approval, and
(b) a majority of the outstanding voting securities of the Trust, as defined in
the 1940 Act.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts.
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14. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The Declaration of Trust has been filed with the
Secretary of State of The Commonwealth of Massachusetts. The obligations of the
Trust are not personally binding upon, nor shall resort be had to the private
property of, any of the Trustees, shareholders, officers, employees or agents of
the Trust, but only upon the Trust and its property. The Trust shall not be
liable for the obligations of any other series of the Trust and no other series
shall be liable for the Trust's obligations hereunder.
Yours very truly,
XXXX XXXXXXX PREFERRED INCOME FUND II
By: ___________________________
Xxxxxxx X. Xxxx
President
The foregoing contract
is hereby agreed to as
of the date hereof.
XXXX XXXXXXX ADVISERS, LLC
By: ___________________________
Xxxxx X. Xxxxxx
Vice President and Secretary
