INVESTMENT ADVISORY AGREEMENT-CHICKASAW CAPITAL MANAGEMENT, LLC.

Transcription

1 TULSA COUNTY PURCHASING DEPARTMENT MEMO DATE: OCTOBER 3, 2012 FROM: TO: SUBJECT: LINDA R. DORRELL PURCHASING DIRECTOR BOARD OF COUNTY COMMISSIONERS INVESTMENT ADVISORY AGREEMENT-CHICKASAW CAPITAL MANAGEMENT, LLC. SUBMITTED FOR YOUR APPROVAL AND EXECUTION IS THE ATTACHED AG REEMENT BETWEEN THE BOARD OF COUNTY COMMISSIONERS ON BEHALF OF THE EMPLOYEES' RETIREMENT SYSTEM AND CHICKASAW CAPITAL MANAGEMENT, LLC. OF INVESTMENT MANAGEMENT SERVICES FOR TULSA COUNTY. RESPECTFULLY SUBMITTED FOR YOUR APPROVAL AND EXECUTION. LRD/sks ORlGINAL: COPIES: EARLENE WILSON, COUNTY CLERK, FOR THE OCTOBER 8, 2012 AGENDA. COMMISSIONER JOHN M. SMALlGO COMMISSIONER KAREN KEITH COMMISSIONER FRED R. PERRY MARK LIOTTA, CHIEF DEPUTY Form 4363 (Rev. 4-98)

2 C., CHIeKA AW (. \1'1' I I I.., I" I Investment Advisory Agreement Chickasaw Capital Management, LLC 6075 Poplar Ave, Ste 402 Memphis, TN (901) phonel(901) fax Agreement for the furnishing to Tulsa County Board of County Commissioners on behalf the Employees' Retirement System of Tulsa County (the "Client") by Chickasaw Capital Management, LLC (the "Investment Manager") of investment management services upon the following terms and conditions: 1. Establishment of the Account. As of, Client shall transfer assets beneficially owned by Client in the form of cash and/or securities acceptable to the Investment Manager to an account (the "Account") in Client's name at The Bank of Oklahoma (the "Custodian"), to be managed by the Investment Manager on a discretionary basis in accordance with Section 2 below. The Account will be maintained with the Custodian or with such other Custodian as the Investment Manager may choose from time to time. Arrangements will be made with such firm to have original copies of all confirmations of purchases, sales or exchanges of Securities for the Account and monthly statements of all transactions in the Account sent to Client at such address as Client requests. Dividends and interest income received in respect of the Account shall be reinvested in the Account. 2. Investment Management Services. Subject only to the investment guidelines attached to this Agreement as Schedule A, the Investment Manager, with respect to the Account, shall have full authority in its discretion to purchase, sell, tender, exchange, convert or exercise and otherwise acquire or dispose of and trade and deal in or with stocks, bonds, master limited partnership ("MLP") interests, including MLP common units, interests in MLP general partners and MLP I-shares, cash and cash equivalents, currencies, swaps and other securities or financial instruments of every name and nature and rights in respect thereof, to sell short, on margin or otherwise, and to cover such short sales, to write, buy and sell options of any type (all of the foregoing hereinafter called "Securities"), and to borrow funds from the brokerage firm with which the Account is maintained or other financial institutions for the purpose of trading on margin and to execute such assignments, instruments of transfer, orders and other instruments and to enter into such agreements as may be necessary or proper in connection with the management of the Account by the Investment Manager. Client represents that MLP investments are consistent with Client's investment guidelines. Client and its advisers or consultants are solely responsible for determining the allocation of its investments, and Investment Manager shall have no responsibility for the manner in which the Client's assets shall be allocated or diversified; provided, however, that Investment Manager acts in accordance with the Guidelines as set forth in Schedule A of this Agreement. If the Client is subject to any legal, regulatory or other restriction on selling, purchasing or owning MLPs or any other particular security or class of securities held in the Account, the Client shall inform the Investment Manager about such restriction by a separate writing delivered to the Investment Manager. The Investment Manager may rely on such information until notified by the Client in writing. The Investment Manager shall have no responsibility for any loss, penalty or expense that may result from the Client's failure to inform the Investment Manager of the restriction in a timely manner. The Client understands that the Investment Manager does not guarantee investment performance and is not liable for any investment losses that might occur in the Account. The Client recognizes that investments in MLPs and securities are subject to risk, including possible loss of principal. The Client agrees that the Investment Manager does not give tax or legal advice

3 and that the Client should consult with the Client's professional advisers for such advice on the Account. Client delegates all proxy voting rights to the Investment Manager. Client shall inform the custodian in writing to direct all proxy related materials, including proxy solicitation material, annual reports, interim reports, and other issuer mailings to the Investment Manager. 3. Fees and Expenses. There shall be paid to the Investment Manager out of the Account fees in accordance with Schedule B attached and expenses shall be treated as described in Schedule B. This Agreement constitutes authorization for the Custodian to pay the fees to the Investment Manager directly from the Account. Client hereby instructs the Custodian to remit the entire amount of such fees to the Investment Manager, and accepts responsibility to review such charges. The Custodian will not verify the accuracy of the fees and the Client agrees to hold the Custodian and its parents, affiliates, officers and employees free and harmless against any claim or liability that may arise as a result of the Custodian acting in accordance with this instruction. This fee instruction is a continuing one that will remain in effect for the duration of the Account being held by the Custodian and is subject to the provisions of any customer agreement that the Client has with the Custodian. Client acknowledges that Investment Manager's standard fee may be negotiated depending on the level of services provided and assets under management, and that Client is not entitled to any such negotiated fee breakpoints unless set forth and agreed to in writing between the Investment Manager and Client. 4. Brokerage Fees. Client understands and acknowledges that brokerdealers effecting transactions for the Account will be selected by the Investment Manager and will be paid transaction fees from the Account at levels to be negotiated by the Investment Manager. In effecting transactions for the Account, the Investment Manager is specifically authorized to select a broker-dealer or broker-dealers who, in recognition of transaction fees received on transactions for the Account and other accounts managed by the Investment Manager, are willing to provide the Investment Manager with research and related services. Research or related services furnished by broker-dealers may include, but are not limited to, written information and analyses concerning specific securities, companies or sectors; market, financial and economic studies and forecasts as well as discussions with research personnel; financial publications; statistic and pricing services; hardware, software, data bases and other technical and telecommunication services, lines and equipment utilized in the investment management process. Research and related services obtained by the use of commissions arising from the Account's portfolio transactions may be used by the Investment Manager in its other investment activities. In selecting broker-dealers and negotiating commission rates, the Investment Manager will take into account the financial stability and reputation of brokerage firms and the brokerage, execution and research or related services provided by such brokers, although the Account may not, in any particular instance, be the direct or indirect beneficiary of the research services provided. Client recognizes that since commission rates are generally negotiable, selecting brokers on the basis of considerations which are not limited to applicable commission rates may result in higher transaction costs than would otherwise be obtainable. 5. Liability and Force Majeure. The Investment Manager will give Client the benefit of its best judgment and efforts in rendering these services to Client, and it is agreed as an inducement to its undertaking these services that the Investment Manager and its principals, officers and employees shall not be liable hereunder for any action taken or omitted, any mistake of judgment, or in any event whatsoever, including losses arising from investment performance, except for lack of good faith by the Investment Manager in connection with this Account; provided that nothing herein shall be deemed to protect or purport to protect the Investment Manager or its principals, officers or employees against any liability to Client which any such persons would otherwise be subject by reason of misfeasance, bad faith, negligence or violation of applicable law in the performance of the obligations and duties hereunder, provided, however, further that nothing herein shall be deemed to constitute a waiver or limitation of any

4 rights which Client may have against the undersigned under any federal securities laws, even in circumstances where the undersigned's actions were taken in good faith. The Investment Manager shall not be liable for any loss due to forces beyond the Investment Manager's reasonable control, including (but not limited to) delays, errors or interruptions in service caused by strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or radiation, court order, failure or fluctuation in electrical power, heat, light, air conditioning, computers or telecommunications equipment, or an act of God. The Investment Manager shall have no duty or authority to take any action under this agreement at any time that it is not open for business for any reason. 6. Outside Securities Activities. It is recognized that the Investment Manager or its principals, employees or affiliates may have and continue to have investments in their own name, that the Investment Manager or any such persons may engage in investment advisory activities for others, and that the Investment Manager or any of its principals, employees or affiliates may serve as investment adviser or as an officer, director, stockholder or partner of one or more investment funds or investment advisers. It is also recognized that it may not always be possible or in the best interests of the various persons or funds to whom the Investment Manager gives investment advice or of which the Investment Manager or any of its principals, employees or affiliates serve as an investment adviser, officer, director, stockholder or partner to take or liquidate the same investment positions at the same time. 7. Notification of Change in Chickasaw Capital Management. LLC The Investment Manager will notify you of any change in the Investment Manager's voting, equity members within a reasonable time after such change. 8. Assignment. Neither Investment Manager nor Client may transfer or assign (as defined in the Investment Advisers Act of 1940) in whole or in part, its rights and obligations hereunder without the consent of the other party. In the event of a change in control or ownership of Investment Manager that would result in an "assignment" of this Agreement under the Advisers Act or its rules, Investment Manager will provide written notice to Client, and Client will be deemed to consent to the change in control or ownership of Investment Manager unless Client provides Investment Manager with written notice of termination of this Agreement within 30 days from the date of notice. 9. Termination. This agreement may be terminated by Client at any time and by the Investment Manager on 30 days prior written notice. 10. Governing Law. To the extent Federal law does not apply to this Agreement, it shall be construed in accordance with the laws of the State of Oklahoma for contracts to be performed entirely therein and without regard to the choice of law principles thereof. 11. Controversies/Disputes. The parties to this Agreement agree that any controversy or dispute arising out of this agreement can be submitted to Financial Industry Regulatory Authority ("FINRA") arbitration, in accordance with the FINRA By - Laws, Rules, and Code of Arbitration Procedure, as long as both parties mutually agree. If so, the arbitrator's decision shall be final and legal binding and judgment may be entered thereon. If FINRA arbitration is not chosen, then any controversy or dispute arising out of this agreement can be submitted to a court of competent jurisdiction. 12. Form ADV. Client acknowledges receipt of Part 2A and 2B of the Investment Manager's Form ADV as filed with the Securities and Exchange Commission.

5 13. Electronic Deliverv. Client hereby acknowledges and agrees to Investment Manager delivering communications and documents by electronic means rather than traditional mailing of paper copies. By consenting to the electronic delivery of all information relating to this Agreement, Client authorizes Investment Manager to deliver all communications by at the address specified by Client. Client acknowledges possessing the technical ability and resources to receive electronic delivery of documents and also acknowledges that electronic transmissions may not always be secure. Client agrees that Investment Manager may provide in any electronic medium (including via ) any disclosure or document that is required by applicable securities laws to be provided by Investment Manager. The consent granted herein will last until revoked by Client in writing. 14. Notices. All notices shall be in writing and shall be deemed to have been duly given (i) if delivered in person or by courier, on the date it is delivered; (ii) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; and (iii) if sent by facsimile, or , on generation of confirmation, to the following respective addresses until a different address is specified in writing by one party to the other party: To the Investment Manager: To the Client: Chickasaw Capital Management, LLC 6075 Poplar Avenue, Suite 402 Memphis, Tennessee telephone: (901) facsimile: (901) telephone: facsimile:

6 ~"CHI KAS (' I I I,. ' \ II I IN WITNESS WHEREOF, the parties have executed this Agreement as of this Very truly yours, S,,,,,,,,,l,*,, ~ ()I ~. P.6-1< day of Chickasaw Capital Management, LLC Client: Tulsa Board of County Commissioners on behalf of Employees' Retirement System of Tulsa County Signature: Name: J_o_h_n S_m_a_l_l~ g~o Title: Chairman for Board of County Commissioners ~ -- --

7 Client's Investment Objectives SCHEDULE A: Investment Guidelines Client's investment objective for the Account is total return. To achieve the Client's investment objective, the Investment Manager intends to invest the Account primarily in Master Limited Partnership ("MLP") interests including MLP common units, interests in MLP general partners and MLP I-Shares, as well as cash and cash equivalents. Concentration The Account will concentrate its investments in MLPs, typically MLPs in the energy sector. The Account will not be diversified, which means that its investment results will be dependent upon the results solely of its MLP investments. Types of MLPs MLPs are pubbcly traded partnerships primarily engaged in the transportation, storage, processing, refining, marketing, exploration, production, and mining of minerals and natural resources. By confining their operations to these specific activities, MLPs are able to trade on national securities exchanges exactly like the shares of a corporation, without entity I,evel taxation. Ml P interests include: securities such as units and other securities issued by MLPs that are organized as partnerships or limited liability companies which elect to be taxed as a partnership; securities that offer economic exposure to MLPs from entities holding primarily general partner or managing member interests in MLPs; and securities that are derivatives of MLP interests, such as exchange-traded shares and other derivative securities of MLPs. MLPs typically distribute income quarterly and have potential for capital appreciation to the extent that they experience growth in cash flow or earnings or increases in valuations. The Account will typically invest in MLPs that derive their revenues primarily from energy infrastructure assets or energy-related assets or activities, including but not limited to: (i) energyrelated logistical assets, including the gathering, transporting, processing, treating, storing, refining, distributing, mining or marketing of natural gas, natural gas liquids, crude oil, refined products or coal; (ii) businesses primarily engaged in the acquisition, exploitation and development of crude oil, natural gas and natural gas liquids; (iii) businesses that process, treat, and refine natural gas liquids and crude oil; and (iv) businesses engaged in owning, managing, and the transportation of alternative energy infrastructure assets including alternative fuels such as ethanol, hydrogen and biodiesel. The Investment Manager intends to pursue an approach that is focused on investing in MLPs which, in its opinion, own attractive businesses, whose securities are priced reasonably and offer a balance of income and growth opportunities. The Investment Manager generally, but not exclusively, intends to invest in securities which exhibit attractive expected earnings and cash flow growth, book or replacement value, yield, and return on invested capital in relation to their then current market prices. In evaluating potential investments, the Investment Manager also intends to consider a broad range of other factors, such as a company's position in its industry sector, internal growth prospects, its pricing flexibility, possible changes in its operating environment, and management's own equity interest. Although recognizing the possibility of greater investment risk, it is anticipated that the Investment Manager will invest in smaller, less-seasoned companies if the Investment Manager believes there is an opportunity to achieve the overall investment objective by making such investments. Investments in smaller companies may involve greater financial risk and more limited trading liquidity.

8 MLP Risks MLPs involve risks that differ from investments in common stocks, including risks related to limited control and limited rights to vote on matters affecting the MLP, risks related to potential conflicts of interest between the MLP and its general partner, cash flow risks, dilution risks and risks related to the general partner's limited call right. MLPs are subject to various risks related to the underlying operating companies they control, including dependence upon specialized management skills and the risk that such companies may lack or have limited operating histories. When the Account invests in MLPs that operate energy-related businesses, its return on investment may be highly dependent on energy prices, which can be highly volatile. Energy sector companies are highly sensitive to events relating to international politics, governmental regulatory policies, including energy conservation and tax policies, fluctuations in supply and demand, environmental liabilities, threats of terrorism and to changes in exchange rates or interest rates. MLPs that operate energy sector companies also can be affected by supply and demand for oil and gas, costs relating to exploration and production and the success of such explorations, access to capital, as well as by general economic conditions. Investments by MLPs in commodities may subject the Account to greater volatility. The commodities markets may fluctuate widely based on a variety of factors including changes in overall market movements (such as changes in the demand for commodities), domestic and foreign political and economic events and policies, war, acts of terrorism, changes in domestic or foreign interest rates or inflation rates, changes in investor expectations concerning interest rates or inflation rates, and investment and trading activities of mutual funds, hedge funds and commodities funds. MLPs do not typically pay U.S. federal income tax at the partnership level. Rather, each partner is allocated a share of the partnership's income, gains, losses, deductions and expenses. Client will receive a K-1 from each MLP in which the Account invests. Because each Client's tax situation is unique, Client should consult a tax professional about federal, state and local tax consequences ofmlp investments. All investments involve risks, and there can be no assurances that the Client will achieve its investment objectives.

9 SCHEDULE B: Fee Schedule The Client will pay to the Investment Manager out of the Account at the end of each quarter a management fee as set forth below. The Investment Manager may modify or change its fee schedule on at least 30 days' advance written notice to Client, subject to Client's right to terminate the Agreement before any fee increase becomes effective. The management fee will be prorated for periods less than a full quarter and is based upon a percentage of each account's period end gross assets under management, including margin debt, as follows: Annual Fee All Assets 1.15% Expenses: The Account shall bear expenses including the management fee and all investment expenses, including but not limited to, items such as (i) brokerage commissions, commission equivalents, mark-ups, mark-downs, credits, concessions, dealer spreads, issue and transfer taxes, custodial fees, and bank service fees, (ii) interest on margin accounts, (iii) borrowing charges on securities sold short and (iv) any other reasonable expenses (including legal fees) related to the purchase, sale or transmittal of assets of the Account.