SUB-INVESTMENT ADVISORY AGREEMENT
Exhibit (5)(e)
(International Equity Fund)
AGREEMENT made as of January 9, 1998 between XXXXXXX CAPITAL ADVISORS,
INC. (herein called the "Adviser"), and XXXXXXX INVESTMENT PARTNERS, L.P., a
California limited partnership (herein called the "Sub-Adviser").
WHEREAS, EMERALD FUNDS, a Massachusetts business trust (herein called
the "Trust"), is registered as an open-end, management investment company under
the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, pursuant to an Investment Advisory Agreement by and between
the Trust and the Adviser (herein called the "Investment Advisory Agreement"),
the Adviser has agreed to furnish investment advisory services to the Trust with
respect to its International Equity Fund investment portfolio (the "Fund"); and
WHEREAS, the Investment Advisory Agreement authorizes the Adviser to
sub-contract investment advisory services with respect to the International
Equity Fund to the Sub-Adviser pursuant to a sub-advisory agreement agreeable to
the Trust and approved in accordance with the provisions of the 1940 Act; and
WHEREAS, this Agreement has been so approved, and the Sub-Adviser is
willing to furnish sub-advisory services to the Fund upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Adviser hereby appoints the Sub-Adviser to act as sub-investment
adviser to the Trust's International Equity Fund for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.
2. SERVICES OF SUB-ADVISER.
Subject to the oversight and supervision of the Adviser and the
Trust's Board of Trustees, the Sub-Adviser will provide a continuous investment
program for the Fund, including investment research and management with respect
to all securities and
investments, except for such cash balances of the Fund as are managed by the
Adviser. Pursuant to the foregoing, the Sub-Adviser will determine from time
to time what securities and other investments will be purchased, retained or
sold by the Fund. The Sub-Adviser will provide the services rendered by it
under this Agreement in accordance with the investment criteria and policies
established from time to time for the Fund by the Adviser, the Fund's
investment objective, policies and restrictions as stated in the Trust's
Prospectus and Statement of Additional Information for the Fund, and
resolutions of the Trust's Board of Trustees.
The Sub-Adviser further agrees that it will:
(a) Provide information to the Fund's accountant for the purpose of
updating the Fund's cash availability throughout the day as required;
(b) Maintain historical tax lots for each portfolio security held by
the Fund;
(c) Transmit trades to the Trust's custodian for proper settlement;
(d) Maintain all books and records with respect to the Fund that are
required to be maintained under Rule 31a-1(f) under the 1940 Act;
(e) Supply the Adviser, the Trust and the Trust's Board of Trustees
with reports, statistical data and economic information as requested; and
(f) Prepare a quarterly broker security transaction summary and, if
requested in advance, monthly security transaction listing for the Fund.
3. OTHER COVENANTS.
The Sub-Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition conduct its activities
under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has investment
responsibilities;
(c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or dealer.
In executing portfolio transactions
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and selecting brokers or dealers, the Sub-Adviser will use its best efforts
to seek on behalf of the Fund the best overall terms available. In assessing
the best overall terms available for any transaction, the 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 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 the Fund or
other accounts over which the Sub-Adviser or an affiliate of the Sub-Adviser
exercises investment discretion. The Sub-Adviser is authorized, subject to
the prior approval of the Adviser and 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 the Fund which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, the 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 in terms of the
overall responsibilities of the Sub-Adviser to the Fund. In addition, the
Sub-Adviser is authorized to take into account the sale of shares of the
Trust in allocating purchase and sale orders for portfolio securities to
brokers or dealers (including brokers and dealers that are affiliated with
the Adviser, Sub-Adviser or the Trust's principal underwriter), provided that
the Sub-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 portfolio securities be purchased from or sold
to the Adviser, Sub-Adviser, the Trust's principal underwriter or any
affiliated person of either the Trust, the Adviser, Sub-Adviser, or the
principal underwriter, acting as principal in the transaction, except to the
extent permitted by the Securities and Exchange Commission; and
(d) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust maintained by the
Sub-Adviser, and will not use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld where the Sub-Adviser may
be exposed to civil or criminal contempt proceeding for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
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(e) will maintain a policy and practice of conducting its
sub-investment advisory services hereunder independently of its, and any of
its affiliates', commercial banking operations. When the Sub-Adviser makes
investment recommendations for the Fund, its investment advisory personnel
will not inquire or take into consideration whether the issuers of securities
proposed for purchase or sale for the Fund's account are customers of its, or
any of its affiliates', commercial department. In dealing with commercial
customers, the commercial department of the Sub-Adviser, or any of its
affiliates, will not inquire or take into consideration whether securities of
those customers are held by the Fund.
4. SERVICES NOT EXCLUSIVE.
The services furnished by the Sub-Adviser hereunder are deemed not to
be exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
To the extent that the purchase or sale of securities or other investments of
the same issuer may be deemed by the Sub-Adviser to be suitable for two or more
accounts managed by the Sub-Adviser, the available securities or investments may
be allocated in a manner believed by the Sub-Adviser to be equitable to each
account. It is recognized that in some cases this procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtainable for or disposed of by the Fund.
5. BOOKS AND RECORDS.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records which it maintains for the Fund
are the property of the Trust and further agrees to surrender promptly to the
Trust any of such records upon the Trust's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by it under this Agreement.
6. EXPENSES.
During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities and other investments (including
brokerage commissions, custodial charges and other transaction costs, if any)
purchased or sold for the Fund.
7. COMPENSATION.
For the services provided and the expenses assumed pursuant to this
Agreement, the Adviser will pay the Sub-Adviser,
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and the Sub-Adviser will accept as full compensation therefor, a fee,
computed daily and payable monthly, at the annual rate of .50% of the average
daily net assets of the Fund. Such fee shall be a separate charge to the
Fund and shall be the several (and not joint or joint and several) obligation
of the Fund. The fees payable by the Adviser under this Section 7 for the
period beginning on the date of this Agreement and ending on the date the
shareholders of the Fund approve this Agreement shall be maintained in an
interest-bearing escrow account until such time as the Fund's shareholders
approve the payment of such fees to the Sub-Adviser. If the Fund's
shareholders do not approve the payment to the Sub-Adviser of such fees for
such period, the balance of the escrow account shall be paid to the Fund.
The Sub-Adviser acknowledges that it shall not be entitled to any further
compensation from either the Adviser or the Trust in respect of the services
provided and expenses assumed by it under this Agreement.
8. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
performance of this Agreement, except that the Sub-Adviser shall be liable to
the Trust for any loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or any loss resulting from willful
misfeasance, bad faith or negligence on the part of the Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. DURATION AND TERMINATION.
This Agreement will become effective as of the date first above
written. Unless sooner terminated as provided herein this Agreement shall
continue in effect until May 9, 1998 and, if approved by the shareholders of the
Fund on or before such date, shall continue in effect for an additional period
ending on November 30, 1998. Thereafter, if not terminated, this Agreement
shall automatically continue in effect for successive annual periods ending on
November 30, PROVIDED such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting such approval, and (b) by
the Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to the Fund at any time, without the payment of any penalty, by
the Adviser or by the Trust (by vote of the Trust's Board of Trustees or by vote
of a majority of the outstanding voting securities of the Fund), on sixty days'
written notice to the
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Sub-Adviser, or by the Sub-Adviser, on sixty days' written notice to the
Trust, provided that in each such case, notice shall be given simultaneously
to the Adviser. In addition, notwithstanding anything herein to the
contrary, in the event of the termination of the Investment Advisory
Agreement with respect to the Fund for any reason (whether by the Trust, by
the Adviser or by operation of law) this Agreement shall terminate upon the
effective date of such termination of the Investment Advisory Agreement.
This Agreement will also immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall
have the same meaning as such terms have in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. To the extent required by the 1940 Act, no amendment of this Agreement
shall be effective until approved by vote of a majority of the outstanding
voting securities of the Fund.
11. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. 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. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by Delaware law.
12. NAMES.
The names "Emerald Funds" and "Trustees of Emerald Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated March 15, 1988, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of "Emerald Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the
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Trust must look solely to the Trust Property belonging to such class for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
XXXXXXX CAPITAL ADVISORS, INC.
BY: /s/ Xxxx X. Xxxxx
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TITLE: PRESIDENT
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XXXXXXX INVESTMENT PARTNERS, L.P.
BY: /s/ Xxxx Xxxxx
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TITLE: MANAGING PARTNER
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