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Exhibit 5(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. X-X
XXXXXXXXX FUNDS
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 1st day of March, 1996 by and between
VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"), and
MELLON CAPITAL MANAGEMENT CORPORATION, a Delaware corporation (the "Portfolio
Manager" or "MCMC") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Xxxxxxxxx Funds (the "Trust") is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Portfolio Manager is registered as an investment manager
under the Investment Advisers Act of 1940, as amended, and engages in the
business of acting as an investment adviser; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in one series called the Xxxxxxxxx
Asset Allocation Fund (such series, being referred to as the "Fund"); and
WHEREAS, the Trust and the Manager have entered into an agreement of
even date herewith to provide for management services for the Fund on the terms
and conditions set forth therein (the "Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Investment Management. MCMC shall act as a Portfolio Manager for the
Fund and shall, in such capacity, supervise the investment and reinvestment of
the cash, securities or other properties comprising the Fund's portfolio,
subject at all times to the direction of the Manager and the policies and
control of the Trust's Board of Trustees. MCMC shall give the Fund the benefit
of its best judgment, efforts and facilities in rendering its services as
Portfolio Manager.
2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Portfolio Manager shall:
(a) use the same skill and care in providing such service as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
(b) obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy
generally or the Fund's portfolio and whether concerning the
individual issuers whose securities are included in the Fund's
portfolio or the activities in which the issuers engage, or
with respect to securities which the Portfolio Manager
considers desirable for inclusion in the Fund's portfolio;
(c) determine which issuers and securities shall be represented in
the Fund's portfolio and regulary report thereon to the Trust's Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report thereon to the Trust's
Board of Trustees; and
(e) take, on behalf of the Fund, all actions which appear to the
Trust and the Manager necessary to carry into effect such
purchase and sale programs and supervisory functions as
aforesaid, including the placing of orders for the purchase and
sale of securities for the Fund and the prompt reporting to the
Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible
for decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's primary consideration in effecting a security transaction will be its
best efforts to execute at the most favorable price. In selecting a
broker-dealer to execute each particular transaction, the Portfolio Manager will
take the following into consideration: the net price available, the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Trustees may determine, the
Portfolio Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Portfolio Manager determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Portfolio Manager's
overall responsibilities with respect to the Fund and to its other clients as to
which it exercises investment discretion. Subject to the provisions of the
Investment Company Act of 1940, the Portfolio Manager is further authorized to
allocate the orders placed by it on behalf of the Fund to any affiliated
broker-dealer or to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Portfolio Manager.
Such allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine and the Portfolio Manager will report on said
allocations regularly tothe Board of Trustees of the Trust indicating the
brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by
the Portfolio Manager pursuant to this Agreement, as well as any other
activities undertaken by the Portfolio Manager on behalf of the Fund pursuant
thereto, shall at all times be subject to any directives of the Board of
Trustees of the Trust. The Manager shall provide the Portfolio Manager with
written notice of all such directives, so long as this Agreement remains in
effect.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Portfolio Manager shall at all times conform to:
(a) all applicable provisions of the 1940 Act;
and
(b) the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 and the 1940 Act; and
(c) any other applicable provisions of state and federal law.
6. Expenses. The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with
the approval of the Trust's Board of Trustees, the Portfolio Manager may perform
services on behalf of the Fund which are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Portfolio Manager's
cost in rendering such services may be billed monthly to the Manager, subject to
examination by the Manager's independent accountants. Payment or assumption by
the Portfolio Manager of any Fund expense that the Portfolio Manager is not
required to pay or assume under this Agreement shall not relieve the Manager or
the Portfolio Manager of any of their obligations to the Fund or obligate the
Portfolio Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager a monthly fee
at the annual rate of .50% of the Fund's average daily net assets up to $50
million; .375% on net assets between $50 million and $200 million; and .25 % on
net assets in excess of $200 million. Compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of the
Portfolio Manager's compensation for the preceding month shall be made as
promptly as possible after the end of each month.
9. Non-Exclusivity. The services of the Portfolio Manager to the
Manager are not to be deemed to be exclusive, and the Portfolio Manager shall be
free to render investment advisory or other services to others (including other
investment companies) and to engage in other activities, so long as its services
under this agreement are not impaired thereby.
10. Term. This Agreement shall become effective at the close of
business on the date hereof and shall remain in force and effect for an initial
term of two years, and shall remain in effect thereafter if approved in the
manner set forth in Section 11 hereof.
11. Renewal. Following the expiration of its initial two year term, this
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b)by the affirmative vote of a majority of the trustees who are
not parties to this Agreement or interested persons of a party
to this Agreement (other than as a trustee of the Trust), by
votes cast in person at a meeting specifically called for such
purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Trust's Board of Trustees or by vote
of a majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), by the Manager, or by the Portfolio Manager on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate: (a) in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the 1940 Act, or (b) in the event that the
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security. Manager shall jointly and severally indemnify Portfolio Manager and
its directors, officers, employees or agents (the "Covered Parties") against any
and all expenses, losses, damages, liabilities, excise taxes, demands, charges,
and claims of any kind or nature whatsoever (including without limitation,
attorney's fees and expenses) ("Claim") the Covered Parties may incur as a
result of or relating to (i) any investment decision or other action taken or
omitted in the good faith exercise of their powers hereunder or otherwise
related to the Sub-Advisory Agreement, excepting matters as to which Covered
Parties shall be finally adjudged to have been guilty of willful misfeasance,
bad faith, gross negligence or reckless disregard; provided, however, that this
section shall not apply to any Claim alleging willful misfeasance, bad faith,
gross negligence, or reckless disregard that is settled or compromised by, or
dismissed upon motion of, Portfolio Manager without the prior agreement of
Manager with respect to Manager's obligations hereunder or an express written
waiver by Portfolio Manager of Portfolio Manager's rights hereunder, (ii) any
material misrepresentation, omission or inaccuracy of information in any
document related to the Trust giving rise to such Claim, or (iii) any breach by
Manager of any provision of this Sub-Advisory Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Manager
for this purpose shall be 000 Xxxx Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxxxx
00000, that of the Trust for this purpose shall be Federated Xxxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, and the address of the Portfolio Manager
for this purpose shall be 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000.
Attention: Xxxxxxx Xxxxxxx.
15. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: MELLON CAPITAL MANAGMENT CORPORATION
/s/ Xxxxxxx Xxxxxxxxx By/s/ Xxxxxx X. Xxxxxx
Title: Senior Vice President President
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
/s/ X. Xxxxxxxxx Goety By/s/ Xxxxx X. Xxxxx
Title: Senior Vice President President
