SUBADVISORY AGREEMENT
Xxxxx Xxxxxx Investment Trust
Xxxxx Xxxxxx Classic Values Fund
Xxxxxxx & Associates, L.P.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Dear Ladies/Gentlemen:
THIS AGREEMENT is made this 10th day of February 2003, by and between Xxxxx
Xxxxxx Fund Management LLC, a limited liability company (the "Manager") and
Xxxxxxx & Associates, L.P., a limited partnership (the "Subadviser").
WHEREAS, the Manager has been retained by Xxxxx Xxxxxx Investment Trust
(the "Trust"), a business trust organized under the laws of the Commonwealth of
Massachusetts, to act as manager to the Trust with respect to the series of the
Trust designated as Xxxxx Xxxxxx Classic Values Fund (the "Fund");
WHEREAS, the Trust engages in business as an open-end, diversified
management investment company, consisting of multiple series of investment
portfolios, and is registered as such under the Investment Company Act of 1940,
as amended (the "1940 Act");
WHEREAS, the Manager represents that it is registered under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), as an investment adviser
and engages in the business of acting as an investment adviser;
WHEREAS, the Subadviser represents that it is registered under the Advisers
Act as an investment adviser and engages in the business of acting as an
investment adviser; and
WHEREAS, the Manager wishes to engage the Subadviser to provide certain
investment advisory services for the Fund, and the Subadviser is willing to
provide such investment advisory services for 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 Description; Appointment
The Trust desires to employ its capital relating to the Fund by investing
and reinvesting in investments of the kind and in accordance with the investment
objective(s), policies and limitations specified in the prospectus (the
"Prospectus") and the statement of additional information (the "Statement")
describing the Fund filed with the Securities and Exchange Commission as part of
the Trust's Registration Statement on Form N-1A, as amended or supplemented from
time to time, and in the manner and to the extent as may from time to time be
approved by the Board of Trustees of the Trust (the "Board"). Copies of the
Prospectus and the Statement have been or will be submitted to the Subadviser.
The Manager agrees promptly to
provide copies of all amendments and supplements to the current Prospectus and
the Statement to the Subadviser on an on-going basis. Until the Manager delivers
any such amendment or supplement to the Subadviser, the Subadviser shall be
fully protected in relying on the Prospectus and Statement of Additional
Information as previously furnished to the Subadviser. The Trust employs the
Manager as the manager to the Fund pursuant to a management agreement dated
February 10, 2003 (the "Management Agreement"), and the Manager hereby appoints
the Subadviser to act as subadviser to the Fund. The Subadviser accepts the
appointment and agrees to furnish the services for the compensation set forth
below.
2. Services as Subadviser
Subject to the supervision, direction and approval of the Board of the
Trust and the Manager, the Subadviser shall conduct a continual program of
investment, evaluation and, if appropriate in the view of the Subadviser, sale
and reinvestment of the Fund's assets. The Subadviser is authorized, in its sole
discretion and without prior consultation with the Manager, to: (a) manage the
Fund's assets in accordance with the Fund's investment objective(s) and policies
as stated in the Prospectus and the Statement; (b) make investment decisions for
the Fund; (c) select brokers and dealers, and place purchase and sale orders for
portfolio transactions on behalf of the Fund; and (d) employ professional
portfolio managers and securities analysts who provide research services to the
Fund.
In addition, (i) the Subadviser shall furnish the Manager daily information
concerning portfolio transactions and quarterly and annual reports concerning
transactions and performance of the Fund in such form as may be mutually agreed
upon, and the Subadviser agrees to review the Fund and discuss the management of
it with the Manager and the Board of Trustees of the Trust whenever the Manager
or the Board may reasonably request. The Subadviser will assist the Manager and
the Board of Trustees in valuing and monitoring the valuation of portfolio
securities held by the Fund. The Subadviser will meet periodically with the
Manager and the Board of Trustees of the Trust at such times as may be
reasonably requested by the Manager or the Board. The Subadviser will meet with
third parties at the request of the Manager at such times as the Subadviser and
the Manager may agree in writing from time to time.
(ii) Unless the Manager gives the Subadviser written instructions to the
contrary, the Subadviser shall use its good faith judgment in a manner which it
reasonably believes best serves the interests of the Fund's shareholders to vote
or abstain from voting all proxies solicited by or with respect to the issuers
of securities in which assets of the Fund may be invested.
(iii) The Subadviser shall maintain compliance procedures for the Fund that
it reasonably believes are adequate to ensure that the Subadviser's management
of the Fund's assets is in compliance with (A) the 1940 Act and the rules and
regulations promulgated thereunder and (B) the Fund's investment objective(s)
and policies as stated in the Prospectus and Statement. The Subadviser shall
maintain compliance procedures that it reasonably believes are adequate to
ensure its compliance with the Advisers Act.
(iv) The Subadviser has adopted a written code of ethics that it reasonably
believes complies with the requirements of Rule 17j-1 under the 1940 Act, which
it will provide to the Trust. The Subadviser has policies and procedures
regarding the detection and prevention and the misuse of material, nonpublic
information by the Subadviser and its employees as required by the Xxxxxxx
Xxxxxxx and Securities Fraud Enforcement Act of 1988.
(v) The Subadviser shall maintain and preserve all books and records
required to be kept by the Subadviser with respect to the services provided
pursuant to this Agreement as are required by rules adopted by the Securities
and Exchange Commission (the "Commission") under
Section 31(a) of the 1940 Act. The Subadviser shall also furnish to the Manager
any other information relating to the assets of the Fund that is required to be
filed by the Manager or the Trust with the Commission or sent to shareholders
under the 1940 Act and the rules thereunder. The Subadviser agrees that all
records it maintains on behalf of the Fund are the property of the Fund and the
Subadviser will surrender promptly to the Fund any of such records upon the
Fund's request, provided, however, that the Subadviser may retain a copy of such
records.
(vi) Subject to the limitations on services for other registered investment
companies provided in section 10 hereof, the Manager understands that the
Subadviser now acts, will continue to act and may act in the future as
investment manager or adviser to fiduciary and other managed accounts, and as
investment manager or adviser to other investment companies, including any
offshore entities, or accounts, and the Manager has no objection to the
Subadviser's so acting, provided that whenever the Fund and one or more other
investment companies or accounts managed or advised by the Subadviser have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a formula believed by the Subadviser to be
equitable to each company and account. The Manager recognizes that in some cases
this procedure may adversely affect the size of the position obtainable for the
Fund. In addition, the Manager understands that the persons employed by the
Subadviser to assist in the performance of the Subadviser's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the
Subadviser or any affiliate of the Subadviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
3. Brokerage
In selecting brokers or dealers (including, if permitted by applicable law,
Xxxxxxx Xxxxx Xxxxxx Inc. or any other broker or dealer affiliated with the
Manager or the Subadviser) to execute transactions on behalf of the Fund, the
Subadviser will seek the best overall terms available. In assessing the best
overall terms available for any transaction, the Subadviser will consider
factors it deems relevant, including, but not limited to, 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, for the specific transaction and on a continuing basis. In
selecting brokers or dealers to execute a particular transaction, and in
evaluating the best overall terms available, the Subadviser is authorized to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which the Subadviser or its affiliates exercise
investment discretion. Nothing in this paragraph shall be deemed to prohibit the
Subadviser from paying an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker, or dealer would have charged for effecting that transaction, if the
Subadviser determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker, or dealer, viewed in terms of either that
particular transaction or its overall responsibilities with respect to the Fund
and/or other accounts over which the Subadviser or its affiliates exercise
investment discretion.
4. Information Provided to the Trust and the Manager
The Subadviser shall keep the Trust and the Manager informed of
developments materially affecting the Fund's holdings, and shall, on its own
initiative, furnish the Trust and the Manager from time to time with whatever
information the Subadviser believes is appropriate for this purpose. In
addition, the Subadviser shall supply all such information to the Board of the
Trust as the Board may request to enable the Board to review this Agreement
consistent with Sections 15 and 36 of the 1940 Act.
5. Compensation
In consideration of the services rendered pursuant to this Agreement, the
Manager shall pay to the Subadviser out of the management fee it receives from
the Fund, and only to the extent thereof, an annual fee calculated at the rate
of 0.50% of the Fund's average daily net assets up to $1.5 billion and 0.40% of
the Fund's average daily net assets in excess of $1.5 billion; the fee is
calculated daily and paid monthly. The Subadviser shall have no right to obtain
compensation directly from the Trust for services provided hereunder and agrees
to look solely to the Manager for payment of fees due. The fee for the period
from the Effective Date (defined below) of the Agreement to the end of the month
during which the Effective Date occurs shall be prorated according to the
proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Subadviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Prospectus and/or the Statement.
6. Expenses
The Subadviser shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expenses to be borne by the Fund or the
Trust) in connection with the performance of its services under this Agreement.
The Fund will bear certain other expenses to be incurred in its operation,
including, but not limited to, investment advisory fees, sub-advisory fees
(other than sub-advisory fees paid pursuant to this Agreement) and
administration fees; fees for necessary professional and brokerage services;
costs relating to local administration of securities; fees for any pricing
service; the costs of regulatory compliance; and pro rata costs associated with
maintaining the Trust's legal existence and shareholder relations. All other
expenses not specifically assumed by the Subadviser hereunder or by the Manager
under the Management Agreement are borne by the Fund or the Trust.
7. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to the Management Agreement and any other investment advisory or
administration agreement, but excluding interest, taxes, brokerage and
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Fund, the Subadviser shall reduce its fee by the
proportion of such excess expense equal to the proportion that its fee hereunder
bears to the aggregate of fees paid by the Fund for management services in that
year, to the extent required by state law. A fee reduction pursuant to this
paragraph 7, if any, shall be estimated, reconciled and paid on a monthly basis.
The Manager confirms that, as of the date of this Agreement, no such expense
limitation is applicable to the Fund.
8. Standard of Care
The Subadviser shall exercise its best judgment and shall act in good faith
in rendering the services listed in paragraphs 2 and 3 above. The Subadviser
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or the Manager in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Subadviser against any liability to the
Manager, the Trust or to the shareholders of the Fund to which the Subadviser
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of the
Subadviser's reckless disregard of its obligations and duties under this
Agreement.
9. Term of Agreement
This Agreement shall become effective on February 10, 2003 (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually as required by the 1940 Act. This Agreement is terminable, without
penalty, (i) on 180 days' written notice by the Manager unless there has been a
material breach of any of the provisions of this Agreement by the Subadviser, in
which case this Agreement is terminable on 60 days' written notice by the
Manager, (ii) on 60 days' written notice by the Board of the Trust or by vote of
holders of a majority (as defined in the 1940 Act and the rules thereunder) of
the outstanding voting securities of the Fund, or (iii) upon 60 days' written
notice by the Subadviser. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
10. Exclusivity
During the term of this Agreement and any extension, renewal, or amendment
hereof, the Subadviser shall not serve as adviser, manager or subadviser for any
other investment company registered under the 1940 Act and offered to retail
investors, other than The Olstein Financial Alert Fund, provided, however, that
the foregoing shall not apply if the Agreement has been terminated by the
Manager or the Trust, and provided, further, that the foregoing shall not
prevent the Subadviser from rendering services as adviser, manager or subadviser
to any registered investment company approved in writing by the Manager and the
Board of Trustees of the Trust.
11. 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 each party is as follows:
(a) To the Manager:
Xxxxx Xxxxxx Fund Management LLC
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
(b) To the Subadviser:
Xxxxxxx & Associates, L.P.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
12. Representations
Each party hereto represents that the Agreement has been duly authorized,
executed and delivered by all required corporate action.
The Subadviser is organized as a partnership, and the Subadviser agrees to
notify the Manager of any changes in the Subadviser's general partners within a
reasonable time after such change. The Subadviser will promptly notify the
Manager of any financial condition that is likely to impair the Subadviser's
ability to fulfill its obligations under this Agreement.
13. Governing Law
This Agreement is being made pursuant to, and shall be construed in
accordance with, the laws of the State of New York, without giving effect to
principles of conflict of laws.
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance of this Agreement by signing and returning the enclosed copy of
this Agreement.
Very truly yours,
XXXXX XXXXXX FUND MANAGEMENT
LLC
By:_____________________________
Accepted:
Xxxxxxx & Associates, L.P.
By: ___________________________________
Name: _________________________________
Title: ________________________________
