INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT
made as of the 13th day of December 2007, by and among X.X. XxXxx, LP, a Limited
Partnership located at Xxx Xxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 (the
“Sub-Adviser”), and FundQuest Incorporated, a Delaware
corporation located at 000 Xxxx Xxxxxx, Xxxxxx, XX 00000 (the
“Manager”).
WHEREAS,
the Manager and the Sub-Adviser are each registered as investment
advisers under the Investment Advisers Act of 1940; and
WHEREAS,
the Advisors Series Trust, a Delaware statutory Trust located at
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000 (the
“Trust”) is engaged in business as an open-end investment
company with one or more series of shares and is registered under the Investment
Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS,
the Trust has retained the Manager to perform investment advisory services
for
the certain funds within the Trust (the “Funds”) under the terms of an
investment advisory agreement, dated _____________, between the Manager and
the
Trust on behalf of the Funds (the “Management Agreement”);
and
WHEREAS,
the Manager, acting pursuant to the Management Agreement, wishes to retain
the
Sub-Adviser, and the Trust’s Board has approved the retention of the
Sub-Adviser, to provide the investment advisory services described in this
document to a portion of the assets (the “Allocated Portion”)
the Fund(s) listed on Schedule A (as it may be amended from time to time is
engaged in the business of creating and marketing mutual funds;
WHEREAS,
each Fund listed in Schedule A is a separate series of the Trust having separate
assets and liabilities; and
WHEREAS,
THE Trust and the Fund(s) are third party beneficiaries of such
arrangements;
NOW,
THEREFORE, WITNESSETH: That the parties, which shall include the Trust
on behalf of the Fund(s) for the purposes of the indemnification provisions
of
section 6, hereby agree as follows:
|
1.
|
APPOINTMENT
OF SUB-ADVISER.
|
|
(a)
|
Acceptance. The
Sub-Adviser is hereby appointed and the Sub-Adviser hereby accepts
the
appointment, on the terms herein set forth and for the compensation
herein
provided, to act as investment adviser to the Fund’s
assets.
|
|
(b)
|
Independent
Contractor. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or
be
deemed an agent of the Fund.
|
|
(c)
|
The
Sub-Adviser’s Representations. The Sub-Adviser represents,
warrants and agrees that it has all requisite power and authority
to enter
into and perform its obligations under this Agreement, and has taken
all
necessary corporate action to authorize its execution, delivery and
performance of this Agreement. The Sub-Adviser represents,
warrants and agrees that it is registered as an adviser under the
Investment Advisers Act of 1940, as
amended.
|
|
(d)
|
The
Manager’s Representations. The Manager represents, warrants
and agrees that it has all requisite power and authority to enter
into and
perform its obligations under this Agreement, and has taken all necessary
corporate action to authorize its execution, delivery and performance
of
this Agreement. The Manager further represents, warrants and
agrees that it has the authority under the Management Agreement to
appoint
the Sub-Adviser. The Manager further represents and
warrants that it has received a copy of Part II of the
Sub-Adviser’s Form ADV. The Manager further represents and
warrants that the Fund is either (i) excluded from the
definition of the term “pool” under Section 4.5 of the General Regulations
under the Commodity Exchange Act (“Rule 4.5”), or (ii) a
qualifying entity under Rule 4.5(b) for which a notice of eligibility
has
been filed.
|
|
(e)
|
Plenary
authority of the Board of Trustees. The Sub-Adviser and
Manager both acknowledge that the Fund is a mutual fund that operates
as a
series of the Trust under the authority of the Board of
Trustees.
|
|
2.
|
PROVISION
OF INVESTMENT SUB-ADVISORY
SERVICES.
|
The
Sub-Adviser will provide for the Fund a continuing and suitable investment
program consistent with the investment policies, objectives and restrictions
of
the Fund, as established by the Fund and the Manager and provided to the
Sub-Adviser in writing. The current policies, objectives and
restrictions are attached hereto as Exhibit A. From time to
time, the Manager or the Fund may provide the Sub-Adviser with written copies
of
additional or amended investment policies, guidelines and restrictions, which
shall become effective at such time as agreed upon by both
parties. The Sub-Adviser will manage the investment
recommendations for the Allocated Portion of the assets in the Fund, and perform
the functions set forth below, subject to the overall supervision, direction,
control and review of the Manager, consistent with the applicable investment
policies, guidelines and restrictions, or any directions or instructions
delivered to the Sub-Adviser in writing by the Manager or the Fund from time
to
time, and further subject to the plenary authority of the Fund’s Board of
Trustees.
The
Sub-Adviser will, at its own expense:
|
(a)
|
The
Sub-Adviser shall provide the Manager with purchase and sale
recommendations and security rankings (the “Recommendations”), in the form
of model portfolios or otherwise as appropriate pursuant to investment
strategies of the Sub-Adviser specified in Exhibit A (the
“Investment Strategies”). This information and/or data shall be provided
to the Manager on a prompt basis, once available to the Sub-Adviser’s
clients generally, to allow the Manager to effect on a timely basis
purchases and sales plus portfolio weightings and asset allocations
for
the Fund. In addition, the Sub-Adviser shall provide updated
Recommendations when requested by the Manager if the Manager believes
that
market conditions require such updates. The Managing Advisor will,
as
Manager, provide the Sub-Adviser with written instructions concerning
transmission of the Recommendations and other communications to the
Manager. In providing Research under this
Agreement, the Sub-Adviser shall comply with all of the Managing
Advisor’s
reasonable operating requirements, as the same may be communicated
in
writing by the Managing Advisor to the Sub-Adviser from time to
time;
|
2
|
(b)
|
The
Sub-Adviser shall render to the Manager written recommendations for
each
of the Investment Strategies listed in Appendix A, based upon the
information received from the Manager regarding the The
Fund;
|
|
(c)
|
From
time to time at the request of the Manager, the Sub-Adviser will
meet,
either in person or via teleconference, with the Manager and with
such
other persons as the Manager may designate on reasonable notice and
at
reasonable times and locations, to discuss general economic conditions,
performance, investment strategy and other matters relating to the
Program;
|
|
(d)
|
The
Sub-Adviser shall keep accurate and detailed records concerning its
services under this Agreement, including records of all Recommendations
made during its performance of this Agreement, and all such records
shall
be open to inspection at all reasonable times by the Manager or Fund
and
any appropriate regulatory authorities. The Sub-Adviser shall provide
to
the Manager or Fund copies of any and all documentation relating
to the
Recommendations upon reasonable
request;
|
|
(e)
|
At
the request of the Manager from time to time, the Sub-Adviser shall
provide pricing and valuation information with respect to particular
securities it has recommended for The Fund if the Manager has determined
that such pricing and valuation information is not otherwise reasonably
available to it through standard pricing
services;
|
|
(f)
|
The
Manager and the Sub-Adviser agree that only the Manager will exercise
“investment discretion” over The Fund within the meaning of Section 13(f)
of the Securities Exchange Act of 1934, and the Manager shall be
responsible for filing any required reports on it’s behalf with the
Securities and Exchange Commission pursuant to Section 13(f) and
the rules
and regulations thereunder;
|
|
(g)
|
The
Manager shall be responsible for taking action on behalf of clients
for
all matters in which a shareholder vote is solicited by, or with
respect
to, issuers of securities beneficially held in The Fund, including,
but
not limited to, optional tender offers, Dutch auctions, and odd lot
tender
offers, in accordance with the Manager’s written proxy voting policies and
procedures;
|
|
(h)
|
To
the extent reasonably requested by the Trust, use its best efforts
to
assist the Chief Compliance Officer of the Trust in respect of Rule
38a-1
under the 1940 Act, as amended (the “1940 Act”)
including, without limitation, providing the Chief Compliance Officer
of
the Trust with (a) current copies of the compliance policies and
procedures of the Sub-Adviser in effect from time to time (including
prompt notice of any material changes thereto), (b) a summary of
such
policies and procedures in connection with the annual review thereof
by
the Trust required under Rule 38a-1, and (c) upon request, a certificate
of the chief compliance officer of the Sub-Adviser to the effect
that the
policies and procedures of the Sub-Adviser are reasonably designed
to
prevent violation of the Federal Securities Laws (as such term is
defined
in Rule 38a-1); and
|
3
|
(i)
|
Except
as permitted by the Trust’s policies and procedures, not disclose but
shall treat confidentially all information in respect of the portfolio
investments of the Fund, including, without limitation, the identification
and market value or other pricing information of any and all portfolio
securities or other financial instruments held by the Fund, and any
and
all trades of portfolio securities or other transactions effected
for the
Fund (including past, pending and proposed
trades).
|
The
Fund
or its agent will provide timely information to the Sub-Adviser regarding such
matters as inflows to and outflows from the Fund and the cash requirements
of,
and cash available for investment in, the Fund. The Fund or its agent
will timely provide the Sub-Adviser with copies of monthly accounting statements
for the Fund, and such other information as may be reasonably necessary or
appropriate in order for the Sub-Adviser to perform its responsibilities
hereunder.
Manager
will be responsible for all class actions and lawsuits involving the Fund or
securities held, or formerly held, in the Fund. Sub-Adviser is not
required to take any action or to render investment-related advice with respect
to lawsuits involving the Fund, including those involving securities presently
or formerly held in the Fund, or the issuers thereof, including actions
involving bankruptcy. In the case of notices of class action suits
received by Sub-Adviser involving issuers presently or formerly held in the
Fund, Sub-Adviser shall promptly forward such notices to Manager and, with
the
consent of the Manager, may provide information about the Fund to third parties
for purposes of participating in any settlements relating to such class
actions.
|
3.
|
ALLOCATION
OF EXPENSES.
|
Each
party to this Agreement shall bear the costs and expenses of performing its
obligations hereunder. In this regard, the Manager specifically
agrees that the Fund shall assume the expense of:
|
(a)
|
brokerage
commissions for transactions in the portfolio investments of the
Fund and
similar fees and charges for the acquisition, disposition, lending
or
borrowing of such portfolio
investments;
|
|
(b)
|
custodian
fees and expenses;
|
|
(c)
|
all
taxes, including issuance and transfer taxes, and reserves for taxes
payable by the Fund to federal, state or other government agencies;
and
|
|
(d)
|
interest
payable on any Fund borrowings.
|
The
Sub-Adviser specifically agrees that with respect to the operation of the Fund,
the Sub-Adviser shall be responsible for (i) providing the personnel, office
space and equipment reasonably necessary to provide its sub-advisory services
to
the Fund hereunder, and (ii) the costs of any special Board of Trustees meetings
or shareholder meetings convened for the primary benefit of the Sub-Adviser.
If
the Manager has agreed to limit the operating expenses of the Fund,
the Manager shall also be solely responsible on a monthly basis for any
operating expenses that exceed the agreed upon expense limit. Nothing
in this Agreement shall alter the allocation of expenses and costs agreed upon
between the Fund and the Manager in the Management Agreement or any other
agreement to which they are parties.
4
|
4.
|
SUB-ADVISORY
FEES.
|
For
all
of the services rendered with respect to the Fund as herein provided, the
Manager shall pay to the Sub-Adviser a fee (for the payment of which the Fund
shall have no obligation or liability), based on the Current Net Assets of
the
Fund (as defined below), as set forth in Schedule A attached hereto and made
a
part hereof. Such fee shall be accrued daily and payable quarterly,
as soon as practicable after the last day of each calendar
quarter. In the case of termination of this Agreement with respect to
the Fund during any calendar month, the fee with respect to such Portfolio
accrued to, but excluding, the date of termination shall be paid promptly
following such termination. For purposes of computing the amount of
advisory fee accrued for any day, “Current Net Assets” shall mean the Fund’s net
assets, managed by the Sub-Adviser, as of the most recent preceding day for
which the Fund’s net assets were computed.
|
5.
|
LIABILITY;
STANDARD OF CARE.
|
The
Sub-Adviser, its affiliates, agents and employees, shall be indemnified by
the
Manager against all liabilities, losses or claims (including reasonable expenses
arising out of defending such liabilities, losses or claims):
|
(a)
|
arising
from Fund’s or the Manager’s directions to the Sub-Adviser or Custodian,
or brokers, dealers or others with respect to the making, retention
or
sale of any investment or reinvestment hereunder;
or
|
|
(b)
|
arising
from the acts or omissions of the Manager, the Custodian or the Fund,
their respective affiliates, agents or
employees;
|
except
for any such liability or loss which is due to the gross negligence, willful
misconduct, or lack of good faith of the Sub-Adviser, its affiliates, agents
and
employees, or the Sub-Adviser’s reckless disregard of its duties and
obligations.
The
Sub-Adviser shall comply with all applicable laws and regulations in the
discharge of its duties under this Agreement; shall (as provided in Section
2
above) comply with the investment policies, guidelines and restrictions of
the
Fund; shall act at all times in the best interests of the Fund; and shall
discharge its duties with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of a similar
enterprise.
However,
the Sub-Adviser shall not be obligated to perform any service not described
in
this Agreement, and shall not be deemed by virtue of this Agreement to have
made
any representation or warranty that any level of investment performance or
level
of investment results will be achieved.
Except
as
otherwise provided in this Agreement, each party to this Agreement (as an
“Indemnifying Party”), including the Trust on behalf of the Fund, shall
indemnify and hold harmless the other party and the shareholders, directors,
officers, and employees of the other party (any such person, an “Indemnified
Party”) against any loss, liability, claim, damage, or expense (including the
reasonable cost of investigating and defending any alleged loss, liability,
claim, damage, or expense and reasonable counsel fees incurred in connection
therewith) arising out of the Indemnifying Party’s performance or
non-performance of any duties under this Agreement, provided, however, that
indemnification shall not be paid hereunder with respect to any matter to the
extent to which the loss, liability, claim, damage, or expense was determined
by
a court of competent jurisdiction to have been caused by the Indemnified Party’s
willful misfeasance, bad faith, or negligence in the performance of duties
hereunder or reckless disregard of obligations and duties under this Agreement,
and provided further, however, that the Sub-Adviser shall only be required
to
indemnify and hold harmless an Indemnified Party to the extent the loss,
liability, claim, damage, or expense of such Indemnified Party was attributable
to the willful misfeasance, bad faith, gross negligence, or reckless disregard
of the Sub-Adviser’s obligations or duties hereunder.
5
If
indemnification is to be sought hereunder, then the Indemnified Party shall
promptly notify the Indemnifying Party of the assertion of any claim or the
commencement of any action or proceeding in respect thereof; provided,
however, that the failure so to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability that it may otherwise have
to
the Indemnified Party provided such failure shall not affect in a material
adverse manner the position of the Indemnifying Party or the Indemnified Party
with respect to such claim. Following such notification, the Indemnifying Party
may elect in writing to assume the defense of such action or proceeding and,
upon such election, it shall not be liable for any legal costs incurred by
the
Indemnified Party (other than reasonable costs of investigation previously
incurred) in connection therewith, unless (i) the Indemnifying Party has failed
to provide counsel reasonably satisfactory to the Indemnified Party in a timely
manner or (ii) counsel which has been provided by the Indemnifying Party
reasonably determines that its representation of the Indemnified Party would
present it with a conflict of interest. Notwithstanding the foregoing, the
Indemnified Party shall be entitled to employ separate counsel at its own
expense and, in such event, the Indemnified Party may participate in such
defense as it deems necessary.
The
provisions of this paragraph 6 shall not apply in any action where the
Indemnified Party is the party adverse, or one of the parties adverse, to the
other party.
|
6.
|
TERM
AND TERMINATION OF THIS AGREEMENT; NO
ASSIGNMENT
|
(a) This
Agreement shall go into effect as to the Fund on the date set forth above and
shall, unless terminated as hereinafter provided, continue in effect for a
period of two years from the date of approval by shareholders of the Fund at
a
meeting called for the purpose of such approval. This Agreement shall
continue in effect thereafter for additional periods not exceeding one (l)
year
so long as such continuation is approved for the Fund at least annually by
(i)
the Board of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Fund and (ii) the vote of a majority of
the
Trustees of the Trust who are not parties to this Agreement nor interested
persons thereof, cast in person at a meeting called for the purpose of voting
on
such approval. The terms “majority of the outstanding voting securities” and
“interested persons” shall have the meanings as set forth in the 1940
Act;
(b) This
Agreement may be terminated by the Trust on behalf of the Fund at any time
without payment of any penalty, by the Board of Trustees of the Trust, by the
Manager, or by vote of a majority of the outstanding voting securities of a
Fund
without the payment of any penalties, upon sixty (60) days’ written notice to
the Sub-Adviser, and by the Sub-Adviser upon sixty (60) days’ written notice to
the Fund and the Manager. In the event of a termination, the
Sub-Adviser shall cooperate in the orderly transfer of the Fund’s affairs and,
at the request of the Board of Trustees or the Manager, transfer any and all
books and records of the Fund maintained by the Sub-Adviser on behalf of the
Fund; and
6
(c) This
Agreement shall terminate automatically in the event of any transfer or
assignment thereof, as defined in the 1940 Act. This Agreement will
also terminate in the event that the Management Agreement is
terminated.
|
7.
|
SERVICES
NOT EXCLUSIVE
|
The
services of the Sub-Adviser to the Manager and the Fund are not to be deemed
exclusive and it shall be free to render similar services to others so long
as
its services hereunder are not impaired thereby. It is specifically
understood that directors, officers and employees of the Sub-Adviser and of
its
subsidiaries and affiliates may continue to engage in providing portfolio
management services and advice to other investment advisory
clients. The Manager agrees that Sub-Adviser may give advice and take
action in the performance of its duties with respect to any of its other clients
which may differ from advice given or the timing or nature of action taken
with
respect to the Fund. Nothing in this Agreement shall be deemed to
require Sub-Adviser, its principals, affiliates, agents or employees to purchase
or sell for the Fund any security which it or they may purchase or sell for
its
or their own account or for the account of any other client.
|
8.
|
AMENDMENT
|
No
provision of this Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by all parties.
|
9.
|
NONPUBLIC
PERSONAL INFORMATION.
|
Notwithstanding
any provision herein to the contrary, the Sub-Adviser hereto agrees on behalf
of
itself and its directors, trustees, shareholders, officers, and employees (1)
to
treat confidentially and as proprietary information of the Fund (a) all records
and other information relative to the Fund’s prior, present, or potential
shareholders (and clients of said shareholders) and (b) any Nonpublic Personal
Information, as defined under Section 248.3(t) of Regulation S-P
(“Regulation S-P”), promulgated under the Xxxxx-Xxxxx-Xxxxxx
Act (the “G-L-B Act”), and (2) except after prior notification
to and approval in writing by the Trust, not to use such records and information
for any purpose other than the performance of its responsibilities and duties
hereunder, or as otherwise permitted by Regulation S-P or the G-L-B Act, and
if
in compliance therewith, the privacy policies adopted by the Trust and
communicated in writing to the Sub-Adviser. Such written approval
shall not be unreasonably withheld by the Trust and may not be withheld where
the Sub-Adviser may be exposed to civil or criminal contempt or other
proceedings for failure to comply after being requested to divulge such
information by duly constituted authorities.
|
10.
|
CERTIFICATIONS;
DISCLOSURE CONTROLS AND
PROCEDURES
|
The
Sub-Adviser acknowledges that, in compliance with the Xxxxxxxx-Xxxxx Act of
2002
(the “Xxxxxxxx-Xxxxx Act”), and the implementing regulations
promulgated thereunder, the Trust and the Fund are required to make certain
certifications and have adopted disclosure controls and procedures. To the
extent reasonably requested by the Trust, the Sub-Adviser agrees to use its
best
efforts to assist the Trust and the Fund in complying with the Xxxxxxxx-Xxxxx
Act and implementing the Trust’s disclosure controls and
procedures.
7
|
11.
|
REPORTS
AND ACCESS
|
The
Sub-Adviser agrees to supply such information to the Manager and to permit
such
compliance inspections by the Manager or the Fund as shall be reasonably
necessary to permit the administrator to satisfy its obligations and respond
to
the reasonable requests of the Trust.
|
12.
|
NOTIFICATION
|
The
Sub-Adviser agrees that it will provide prompt notice to the Manager and Fund
about material changes in the employment status of key investment management
personnel involved in the management of the Fund, material changes in the
investment process used to manage the Fund and any changes in senior management,
operations or ownership of the Sub-Adviser’s Firm.
|
13.
|
NOTICES
|
Notices
and other communications required or permitted under this Agreement shall be
in
writing, shall be deemed to be effectively delivered when actually received,
and
may be delivered by US mail (first class, postage prepaid), by facsimile
transmission, by hand or by commercial overnight delivery service, addressed
as
follows:
|
MANAGER:
|
FundQuest
Incorporated
000
Xxxx Xxxxxx 00xx
Xx
Xxxxxx
Xxxxxx Xxxxx
Xxxxxx,
XX 00000
Attn:
Compliance Officer
|
|
SUB-ADVISER:
|
X.
X. XxXxx, L.P.
Xxx
Xxxxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
Attn:
Xxxx X. Xxxxxxxxxx
|
|
FUND:
|
On
behalf of ActivePassive Large Cap Value Fund
000
Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx,
XX 00000
Attn:
Secretary
|
|
14.
|
ASSIGNMENT
|
This
Agreement may not be assigned by any party, either in whole or in part, without
the prior written consent of each other party.
8
|
15.
|
SEVERABILITY
|
If
any
provision of this Agreement shall be held or made invalid by a court decision,
statute or rule, or shall be otherwise rendered invalid, the remainder of this
Agreement shall not be affected thereby.
|
16.
|
CAPTIONS
|
The
caption in this Agreement are not 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.
|
17.
|
GOVERNING
LAW
|
This
agreement shall be governed by, and construed in accordance with, the laws
of
the state of Delaware without giving effect to the conflict of laws principles
of Delaware or any other jurisdiction; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation
or
rule, including the 1940 Act and the Investment Advisers Act of 1940, as
amended, and any rules and regulations promulgated thereunder.
[SIGNATURE
PAGE FOLLOWS]
9
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day first set forth above.
|
FUNDQUEST
INCORPORATED:
By:
___________________________
Name:
Title:
|
|
X.
X. XxXxx, L.P.(Sub-Adviser)
By:
___________________________
Name:
Xxxxxx X. Xxxxxx
Title:
President & Chief Executive
Officer
|
|
As
a Third Party Beneficiary, and as a party for purposes of
Section 6
|
|
On
behalf of ActivePassive Large Cap Value Fund
By:
___________________________
Name:
Title:
|
10
EXHIBIT
A
INVESTMENT
GUIDELINES
Investment
Objectives and Policies
As
described in Fund’s current prospectus and SAI provided by Manager and as agreed
to by Sub-advisor.
Investment
Restrictions
As
described in Fund’s current prospectus and SAI provided by Manager and as agreed
to by Sub-advisor.
SCHEDULE
A
FUNDS
AND FEES
|
Series
of Advisors Series Trust
|
Annual
Fee Rate
|
|
ActivePassive
Large Cap Value Fund
|
30
bps
|
