1
INVESTMENT ADVISORY AGREEMENT
QUINTARA FUNDS
This AGREEMENT is made this as of the 31st day of January, 2002, by and
between Quintara Funds, a Delaware business trust (the "Trust"), and Quintara
Capital Management, a California Corporation (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust
is authorized to create and currently consists of several separate series of
shares, each series having its own investment objectives and policies; and
WHEREAS, the Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended, and engages in the business of
providing investment management services; and
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to each series on whose behalf the Trust
executes an Exhibit to this Agreement attached hereto and made a part of this
Agreement (each a "Fund" and collectively the "Funds"), and the Adviser is
willing to render such services on the following terms and conditions.
NOW, THEREFORE, in consideration of mutual covenants recited below, the
parties agree as follows:
1. DUTIES OF THE TRUST.
(a) The Trust, except as otherwise provided in this Agreement, is
responsible for conducting its own business and affairs and for all
necessary and incidental expenses and salaries including, but not
limited to, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer
of stock, including issuance, redemption and repurchase of shares;
preparation of share certificates; preparation and filing of such
forms as may be required by the various jurisdictions in which the
Trust's shares may be sold; preparation, printing and mailing of
reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage
commissions; custodian fees; legal and accounting fees; taxes, and
state and federal registration fees.
(b) In the conduct of the respective businesses of the parties and in the
performance of this Agreement, the Trust and the Adviser may share
facilities common to each, with appropriate proration of expenses
between them.
(c) To the extent the Adviser incurs any costs by assuming expenses that
are an obligation of the Trust as set forth herein, the Trust shall
promptly reimburse the Adviser for such costs and expenses, except to
the extent the Adviser has otherwise agreed to bear such expenses. To
the extent the services for which the Trust is obligated to pay are
performed by the Adviser, the Adviser shall be entitled to recover
from the Trust to the extent of the Adviser's actual costs for
providing such services.
2. DUTIES OF THE ADVISER.
(a) The Trust employs the Adviser generally to manage the investment and
reinvestment of the assets of the Funds. In so doing, the Adviser may
hire one or more sub-advisers for each Fund to carry out the
investment program of the Fund(s) (subject to the approval of the
Trust's Board of Trustees and, except as otherwise permitted under the
terms of any exemptive relief obtained by the Adviser from the U.S.
Securities and Exchange Commission, or by rule or regulation, a
majority of the outstanding voting securities of any affected
Fund(s)). To the extent that the Adviser does hire any sub-adviser, it
will thereafter continuously review, supervise and (where appropriate)
administer the investment program of the Fund(s).
(b) The Adviser will provide, or direct any sub-adviser to provide, to the
Trust's administrator and the Trust records concerning the Adviser's
and sub-adviser(s)' activities which the Trust is required to
maintain, and to render regular reports to the Trust's administrator
and to the Trust's officers and Trustees concerning the Adviser's and
sub-adviser(s)' performance of the foregoing responsibilities. The
retention of a sub-adviser by the Adviser shall not relieve the
Adviser of its responsibilities under this Agreement.
(c) The Adviser shall discharge the foregoing responsibilities subject to
the control of the Board of Trustees of the Trust and in compliance
with such policies as the Trustees may from time to time establish,
and in compliance with the objectives, policies, and limitations for
each such Fund set forth in the Trust's prospectus and statement of
additional information, as amended from time to time (referred to
collectively as the "Prospectus"), and applicable laws and
regulations. The Trust will furnish the Adviser from time to time with
copies of all amendments or supplements to the Prospectus, if any.
(d) The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel (excluding the Sub-Advisory Fees for any
sub-advisers) required by it to perform the services on the terms and
for the compensation provided herein. The Adviser will not, however,
pay for the cost of securities, commodities, and other investments
(including brokerage commissions and other transaction charges, if
any) purchased or sold for the Trust.
3. DELIVERY OF DOCUMENTS.
(a) The Trust has furnished Adviser with copies properly certified or
authenticated of each of the following and will furnish any amendments
and restatements as they are effected:
(i) The Trust's Declaration of Trust, as filed with the Secretary of
the Trust (such Declaration of Trust, as presently in effect and
as it shall from time to time be amended, is herein called the
"Declaration of Trust");
(ii) ByLaws of the Trust (such ByLaws, as in effect on the date of
this Agreement and as amended from time to time, are herein
called the "ByLaws");
(iii) Prospectus(es) of the Fund(s).
(b) The Adviser has furnished to the Trust, a copy of its Form ADV as filed with
the U.S. Securities and Exchange Commission, and will furnish any amendment
thereto as it may be effected.
4. OTHER COVENANTS. The Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of the U.S.
Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with other applicable
law;
(b) will place or will direct the sub-advisers to place orders pursuant to
its/their investment determinations for the Fund(s) either directly
with the issuer or with any broker or dealer. In executing portfolio
transactions and selecting brokers or dealers, the Adviser will, or
will direct the sub-advisers to use its/their best efforts to seek on
behalf of a Fund the best overall terms available. In assessing the
best overall terms available for any transaction, the Adviser (or any
sub-adviser) shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction the Adviser (or any
sub-adviser) may also consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to a Fund and/or other accounts over which the
Adviser or an affiliate of the Adviser may exercise investment
discretion. The Adviser (or any sub-adviser) is authorized, subject to
the prior approval of the Trust's Board of Trustees, to pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for any of the Funds
that is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Adviser (or any sub-adviser) determines in good faith that such
commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer - - viewed in
terms of that particular transaction or terms of the overall
responsibilities of the Adviser to a Fund. In addition, the Adviser
(or any sub-adviser) is authorized to allocate purchase and sale
orders for portfolio securities to brokers or dealers (including
brokers and dealers that are affiliated with the Adviser or the
Trust's principal underwriter) to take into account the sale of shares
of the Trust if the Adviser believes that the quality of the
transaction and the commission are comparable to what they would be
with other qualified firms. In no instance, however, will any Fund's
securities be purchased from or sold to the Adviser, any sub-adviser
engaged with respect to that Fund, the Trust's principal underwriter,
or any affiliated person of either the Trust, the Adviser, and
sub-adviser or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the U.S. Securities and
Exchange Commission and the 1940 Act. The Adviser (and any
sub-adviser) is also authorized to enter into brokerage/service
arrangements with broker-dealers whereby certain broker-dealers agree
to pay all or a portion of a Fund's custodian, administrative,
transfer agency, and/or other fees in exchange for such Fund directing
certain minimum brokerage amounts to such broker-dealer, if, and only
if, the Adviser (or any sub-adviser) determines in good faith that
such arrangement was reasonable - viewed in terms of that particular
transaction or terms of the overall responsibilities of the Adviser
(or sub-adviser) to a Fund.
5. COMPENSATION OF THE ADVISER.
(a) For the services to be rendered by the Adviser as provided in Sections
1 and 2 of this Agreement, the Trust shall pay to the Adviser
compensation at the rate(s) equal to the amount and in the manner set
forth on the applicable Exhibit for the Fund(s), attached hereto and
made a part of this Agreement. Such compensation shall be calculated
by applying a daily rate to the assets of each of the Funds, based on
the annual percentage rates as specified in the applicable Exhibit for
the Fund(s) and payable in arrears no later than the seventh business
day following the end of each month. The fee shall be based on the
average daily net assets for the month involved.
(b) Any advisory fees, which may be charged by sub-advisers hired jointly
by the Adviser and the Trust, are the sole obligation of the Trust.
(c) If this Agreement is terminated prior to the end of any calendar
month, the management fee shall be prorated for the portion of any
month in which this Agreement is in effect according to the proportion
which the number of calendar days, during which the Agreement is in
effect, bears to the number of calendar days in the month, and shall
be payable within 10 days after the date of termination.
(d) The Adviser may voluntarily or contractually agree to reduce any
portion of the compensation or reimbursement of expenses due to it
pursuant to this Agreement and may similarly agree to make payments to
limit expenses which are the responsibility of the Trust under this
Agreement. Any such reduction or payment shall be applicable only to
such specific reduction or payment and shall not constitute an
agreement to reduce any future compensation or reimbursement due to
the Adviser hereunder or to continue future payments. Any such
reduction will be agreed upon prior to accrual of the related expense
or fee and will be estimated daily. Any fee withheld shall be
voluntarily reduced and any Fund expense paid by the Adviser
voluntarily or pursuant to an agreed expense limitation shall be
reimbursed by the Fund to the Adviser in the first, second, or third
(or any combination thereof) fiscal year next succeeding the fiscal
year of the withholding, reduction, or payment to the extent permitted
by applicable law if the aggregate expenses for the next succeeding
fiscal year, second fiscal year or third succeeding fiscal year do not
exceed any limitation to which the Adviser has agreed.
6. EXCESS EXPENSES.
If the expenses for any Fund for any fiscal year (including fees and other
amounts payable to the Adviser, but excluding interest, taxes, brokerage costs,
litigation, and other extraordinary costs) as calculated every business day
would exceed the expense limitations imposed on investment companies by any
applicable statute or regulatory authority of any jurisdiction in which Shares
are qualified for offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Trust or any Fund which
would result in the Trust's inability to qualify as a regulated investment
company under provisions of the Internal Revenue Code. Payment of expenses by
the Adviser pursuant to this Section 6 shall be settled on a monthly basis
(subject to fiscal year end reconciliation) by a waiver of the Adviser's fees
provided for hereunder, and such waiver shall be treated as a reduction in the
purchase price of the Adviser's services.
7. REPORTS.
The Trust and the Adviser agree to furnish to each other, if applicable,
current prospectuses, proxy statements, reports to shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs as each may reasonably request. The Adviser further agrees to
furnish to the Trust, if applicable, the same such documents and information
pertaining to any sub-adviser as the Trust may reasonably request.
8. STATUS OF THE ADVISER.
The services of the Adviser to the Trust are not to be deemed exclusive,
and the Adviser shall be free to render similar services to others so long as
its services to the Trust are not impaired thereby. The Adviser shall be deemed
to be an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust. To the extent that the purchase or
sale of securities or other investments of any issuer may be deemed by the
Adviser to be suitable for two or more accounts managed by the Adviser, the
available securities or investments may be allocated in a manner believed by the
Adviser to be equitable to each account. It is recognized that in some cases
this may adversely affect the price paid or received by the Trust or the size or
position obtainable for or disposed by the Trust or any Fund.
9. USE OF QUINTARA NAME.
In accordance with the Trust's Declaration of Trust, in the event that the
Adviser ceases to be the Trust's investment manager for any reason, the Trust
will (unless the Adviser otherwise agrees in writing) take all necessary steps
to cause the Trust to change to a name not including the word "Quintara" within
a reasonable period of time, but not to exceed six months.
10. CERTAIN RECORDS.
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the 1940 Act which are
prepared or maintained by the Adviser (or any sub-adviser) on behalf of the
Trust are the property of the Trust and will be surrendered promptly to the
Trust on request. The Adviser further agrees to preserve for the periods
prescribed in Rule 31a-2 under the 1940 Act the records required to be
maintained under Rule 31a-1 under the 1940 Act.
11. LIMITATION OF LIABILITY OF THE ADVISER.
The duties of the Adviser shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against the
Adviser hereunder. The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except a loss resulting from
willful malfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions of applicable
state law which cannot be waived or modified hereby. (As used in this Section
11, the term "Adviser" shall include directors, officers, employees and other
corporate agents of the Adviser as well as that corporation itself).
12. PERMISSIBLE INTERESTS.
Trustees, agents, and shareholders of the Trust are or may be interested in
the Adviser (or any successor thereof) as directors, partners, officers, or
shareholders, or otherwise; directors, partners, officers, agents, and
shareholders of the Adviser are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Trust as a shareholder or otherwise subject to the
provisions of applicable law. All such interests shall be fully disclosed
between the parties on an ongoing basis and in the Trust's Prospectus as
required by law. In addition, brokerage transactions for the Trust may be
effected through affiliates of the Adviser or any sub-adviser if approved by the
Board of Trustees, subject to the rules and regulations of the U.S. Securities
and Exchange Commission.
13. DURATION AND TERMINATION.
This Agreement, unless sooner terminated as provided herein, shall for each
Fund listed on the applicable Exhibit for the Fund(s) attached hereto remain in
effect from the date of execution of the applicable Exhibit or, if later, the
date the initial capital to a series of the Trust is first provided (the
"Effective Date"), until two years from the Effective Date, and thereafter, for
periods of one year so long as such continuance thereafter is specifically
approved at least annually (a) by the vote of a majority of those Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of each Fund; provided, however, that if the
shareholders of any Fund fail to approve the Agreement as provided herein, the
Adviser may continue to serve hereunder in the manner and to the extent
permitted by the 1940 Act and rules and regulations thereunder. The foregoing
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder.
This Agreement may be terminated as to any Fund at any time, without the
payment of any penalty by vote of a majority of the Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the Fund on not less
than 30 days nor more than 60 days written notice to the Adviser, or by the
Adviser at any time without the payment of any penalty, on 90 days written
notice to the Trust. This Agreement will automatically and immediately terminate
in the event of its assignment.
This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
As used in this Section 13, the terms "assignment", "interested persons",
and a "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the U.S. Securities
and Exchange Commission.
14. GOVERNING LAW.
This Agreement shall be governed by the internal laws of the State of
California, without regard to conflict of law principles; provided, however that
nothing herein shall be construed as being inconsistent with the 1940 Act or any
other applicable federal or state law or regulation.
15. NOTICE.
Any notice, advice or report to be given pursuant to this Agreement shall
be deemed sufficient if delivered or mailed by registered, certified or
overnight mail, postage prepaid addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: To the Trust at:
Quintara Capital Management Quintara Funds
000 Xxxxx Xxxxxx 000 Xxxxx Xxxxxx
Xxxxxxxx XX 00000 Xxxxxxxx XX 00000
Attn: Xxxxxxx X. Xxxxxx Attn: Xxxxxxx X. Xxxxxx
16. SEVERABILITY.
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
17. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding between the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
This instrument is executed on behalf of the Trustees of the Trust as
Trustees, and is not binding upon any of the Trustees, officers, or shareholders
of the Trust individually but binding only upon the assets and property of the
Trust.
No series of the Trust shall be liable for the obligations of any other
series of the Trust. Without limiting the generality of the foregoing, the
Adviser shall look only to the assets of a particular Fund for payment of fees
for services rendered to that Fund.
Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
U.S. Securities and Exchange Commission, whether of special or general
application, 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 as of the day and year first written above.
Quintara Capital Management Quintara Funds
By: By:
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Xxxxxxx X. Xxxxxx, President & CEO Xxxxxxx X. Xxxxxx, President
EXHIBIT A
to the
Investment Advisory Agreement
for
Quintara Small Cap Growth Fund
(Separate Series of Quintara Funds)
For all services rendered by the Adviser hereunder, the Trust shall pay the
Adviser, on behalf of the above-named Fund, and the Adviser agrees to accept as
full compensation for all services rendered hereunder, an annual investment
advisory fee of the average daily net assets of the Fund will be paid according
to the following schedule:
0.40% if the Fund underperforms the Xxxxxxx 2000 Growth Index by more than
100 basis points (annualized);
0.50% if the Fund's performance falls below the Xxxxxxx 2000 Growth Index
by 100 basis points or less OR exceeds the Xxxxxxx 2000 Growth Index by 100
basis points or less (annualized);
0.60% if the Fund's performance exceeds the Xxxxxxx 2000 Growth Index by
more than 100 basis points (annualized).
The fee will be set monthly, on or just after the last business day of the
month, for the following month. The fee will be based on the annualized net
performance of the Fund vs. the annualized performance of the Xxxxxxx 2000
Growth Index. The measurement period will be the life of the fund, or 36 months,
whichever is less, except during the first three full months of the fund. For
the first three full months of the fund, the fee will be set at the mid-point,
or 0.50%.
The Adviser: The Trust:
Quintara Capital Management Quintara Funds
By: By:
--------------------------------------- ----------------------------
Xxxxxxx X. Xxxxxx, President & CEO Xxxxxxx X. Xxxxxx, President
EXHIBIT B
to the
Investment Advisory Agreement
for
Quintara Small Cap Value Fund
(Separate Series of Quintara Funds)
For all services rendered by the Adviser hereunder, the Trust shall pay the
Adviser, on behalf of the above-named Fund, and the Adviser agrees to accept as
full compensation for all services rendered hereunder, an annual investment
advisory fee of the average daily net assets of the Fund will be paid according
to the following schedule:
0.40% if the Fund underperforms the Xxxxxxx 2000 Value Index by more than
100 basis points (annualized);
0.50% if the Fund's performance falls below the Xxxxxxx 2000 Value Index by
100 basis points or less OR exceeds the Xxxxxxx 2000 Value Index by 100 basis
points or less (annualized);
0.60% if the Fund's performance exceeds the Xxxxxxx 2000 Value Index by
more than 100 basis points (annualized).
The fee will be set monthly, on or just after the last business day of the
month, for the following month. The fee will be based on the annualized net
performance of the Fund vs. the annualized performance of the Xxxxxxx 2000 Value
Index. The measurement period will be the life of the fund, or 36 months,
whichever is less, except during the first three full months of the fund. For
the first three full months of the fund, the fee will be set at the mid-point,
or 0.50%.
The Adviser: The Trust:
Quintara Capital Management Quintara Funds
By: By:
--------------------------------------- ----------------------------
Xxxxxxx X. Xxxxxx, President & CEO Xxxxxxx X. Xxxxxx, President
SCHEDULE 1
Investment Management Guidelines
Quintara Small Cap Growth Fund
The Fund should be managed in accordance with the guidelines established in
the Prospectus and SAI, and be managed in accordance with the following specific
guidelines:
1. Investment Objective
The objective of the Fund is capital appreciation over the long term. Under
normal market conditions, the Fund will invest at least 80% of its net assets
(including amounts borrowed for investment purposes) in the securities of small
capitalization companies. If the Small Cap Growth Fund changes this investment
policy, it will notify its Adviser at least 60 days in advance of the change. If
there is a change in the investment policy of the fund, and if the Adviser has
hired Sub-Advisers, the Adviser will promptly notify the Sub-Adviser.
The investment in equity securities may include common and preferred
stocks. The Fund may also invest up to 15% of its assets in American Depositary
Receipts ("ADRs"). ADRs are equity securities traded on U.S. exchanges,
including NASDAQ, that are generally issued by banks or trust companies to
evidence ownership of foreign equity securities.
All purchases for the Fund must be made in the equities of companies that
have market capitalization of $2 billion or less. In addition, the Adviser, or
Sub-Advisers hired by the Adviser, is to manage the money in a manner consistent
with investing in value stocks. The Fund will seek to remain in the Small Cap
Growth portion of the Morningstar Style Box. To do so, the Adviser may be
required to reduce the Fund's exposure to stocks that fail to be defined by
Morningstar as "growth stocks". In addition, the Adviser may be required to
reduce the Fund's exposure to stocks that exceed $2 billion market
capitalization. The Fund must maintain at least 80% of its assets in stocks with
$2 billion or less in market capitalization at the time of investment. In the
case where less than 80% of the Fund's assets fall below $2 billion in market
capitalization, the Adviser will be required to reduce their portfolios'
exposure to be in compliance.
Exceptions: Cash & Cash Equivalents may be purchased. Also, stocks that had been
purchased by no longer fit the "small-cap growth" definition may continue to be
held at the discretion of the Adviser. The Adviser should not make any
additional purchases into stocks that are outside of the definition, although
reinvestments of dividends are allowed.
2. Allowable Investments
Fund Assets should consist primarily of small-capitalization common or
preferred equity securities traded on one of the major US exchanges. The
following instruments are allowed:
o Common stock; preferred stock; rights; warrants; restricted or illiquid
securities (15% of portfolio maximum); foreign equity traded as ADRs;
when-issued securities; non-speculative option transactions; and
o Cash & Cash Equivalents: US Government Obligations; Bank Obligations;
Repurchase and Reverse Repurchase Agreements; Commercial Paper; Money
Market Funds.
3. Portfolio Characteristics
All purchases, other then Cash & Cash Equivalents, must be the equities of
companies who fall in the defined universe of Small Cap Growth stocks.
Established positions may be held even if they no longer fit the definitions.
However, no purchases may be made in these non-conforming stocks, other than the
reinvestment of dividends. The Cash & Cash Equivalents may not exceed 20% of the
portfolio.
4. Prohibited Investments
All other investments not specifically listed as Allowable Investments in
Schedule 1.
5. Reporting and Notification
The Trustees of the Fund have the right to a review with the Adviser and
with any sub-adviser at their discretion. Finally, all copies of trading tickets
should be forwarded to the fund and/or its agent.
6. Guideline Review
Adviser shall be responsible for reviewing these guidelines with the
portfolio manager(s) at least annually to assure that they remain appropriate.
Notwithstanding anything to the contrary in this Agreement, in the event of
a conflict between this Schedule 1 and the Quintara Funds' registration
statement filed with the SEC, as amended and supplemented from time to time
(collectively, the "Prospectus"), the term of the Prospectus shall govern.
SCHEDULE 2
Investment Management Guidelines
Quintara Small Cap Value Fund
The Fund should be managed in accordance with the guidelines
established in the Prospectus and SAI, and be managed in accordance with the
following specific guidelines:
1. Investment Objective
The objective of the Fund is capital appreciation over the long term. Under
normal market conditions, the Fund will invest at least 80% of its net assets
(including amounts borrowed for investment purposes) in the securities of small
capitalization companies. If the Small Cap Value Fund changes this investment
policy, it will notify its Adviser at least 60 days in advance of the change. If
there is a change in the investment policy of the fund, and if the Adviser has
hired Sub-Advisers, the Adviser will promptly notify the Sub-Adviser.
The investment in equity securities may include common and preferred
stocks. The Fund may also invest up to 15% of its assets in American Depositary
Receipts ("ADRs"). ADRs are equity securities traded on U.S. exchanges,
including NASDAQ, that are generally issued by banks or trust companies to
evidence ownership of foreign equity securities.
All purchases for the Fund must be made in the equities of companies that
have market capitalization of $2 billion or less. In addition, the Adviser, or
Sub-Advisers hired by the Adviser, is to manage the money in a manner consistent
with investing in value stocks. The Fund will seek to remain in the Small Cap
Value portion of the Morningstar Style Box. To do so, the Adviser may be
required to reduce the Fund's exposure to stocks that fail to be defined by
Morningstar as "value stocks". In addition, the Adviser may be required to
reduce the Fund's exposure to stocks that exceed $2 billion market
capitalization. The Fund must maintain at least 80% of its assets in stocks with
$2 billion or less in market capitalization at the time of investment. In the
case where less than 80% of the Fund's assets fall below $2 billion in market
capitalization, the Adviser will be required to reduce their portfolios'
exposure to be in compliance.
Exceptions: Cash & Cash Equivalents may be purchased. Also, stocks that had been
purchased by no longer fit the "small-cap value" definition may continue to be
held at the discretion of the Adviser. The Adviser should not make any
additional purchases into stocks that are outside of the definition, although
reinvestment of dividends are allowed.
2. Allowable Investments
Fund Assets should consist primarily of small-capitalization common or
preferred equity securities traded on one of the major US exchanges. The
following instruments are allowed:
o Common stock; preferred stock; rights; warrants; restricted or illiquid
securities (15% of portfolio maximum); foreign equity traded as ADRs;
when-issued securities; non-speculative option transactions; and
o Cash & Cash Equivalents: US Government Obligations; Bank Obligations;
Repurchase and Reverse Repurchase Agreements; Commercial Paper; Money
Market Funds.
3. Portfolio Characteristics
All purchases, other then Cash & Cash Equivalents, must be the equities of
companies who fall in the defined universe of Small Cap Value stocks.
Established positions may be held even if they no longer fit the definitions.
However, no purchases may be made in these non-conforming stocks, other than the
reinvestment of dividends. The Cash & Cash Equivalents may not exceed 20% of the
portfolio.
4. Prohibited Investments
All other investments not specifically listed as Allowable Investments in
Schedule 2.
5. Reporting and Notification
The Trustees of the Fund have the right to a review with the Adviser and
with any sub-adviser at their discretion. Finally, all copies of trading tickets
should be forwarded to the fund and/or its agent.
6. Guideline Review
Adviser shall be responsible for reviewing these guidelines with the
portfolio manager(s) at least annually to assure that they remain appropriate.
Notwithstanding anything to the contrary in this Agreement, in the event of
a conflict between this Schedule 2 and the Quintara Funds' registration
statement filed with the SEC, as amended and supplemented from time to time
(collectively, the "Prospectus"), the term of the Prospectus shall govern.
