HIGHMARK CAPITAL MANAGEMENT, INC.
INTERIM SUB-ADVISORY AGREEMENT
This AGREEMENT is executed as of January 18, 2006 and made effective as of
February 1, 2006, by and between HIGHMARK CAPITAL MANAGEMENT, INC. (the
"Adviser") and Trusco Capital Management, Inc., a Georgia corporation, which is
an investment adviser registered under the laws of the United States as an
investment adviser under the Investment Advisers Act of 1940 ("Sub-Adviser").
WHEREAS, Adviser is the investment adviser for HighMark Funds (the "Trust"), an
open-end diversified management investment company registered under the
Investment Company Act of 1940, as amended;
WHEREAS, Adviser's parent, Union Bank of California N.A., ("Bank") serves as
Custodian for HighMark Funds ("Custodian") and provides certain other services
for the HighMark Funds series of mutual funds (the "Funds");
WHEREAS, Adviser is the Administrator for the Funds, SEI Investments Global
Funds Resources is the Sub-Administrator, and SEI Investment Distribution Co. is
the Distributor of the Funds (the latter two companies called collectively, the
"SEI Companies");
WHEREAS, the previous sub-advisory agreement with respect to the Trust's Small
Cap Growth Fund (the "Fund") was terminated pursuant to a resolution of the
Board of Trustees of the Trust;
WHEREAS, Adviser desires to retain Sub-Adviser as its agent to furnish
investment sub-advisory services for certain assets of the Fund, and must enter
into this Interim Sub-Advisory Agreement until a proxy vote is completed by the
shareholders of the Fund; and
WHEREAS, upon completion of the Fund's shareholder proxy vote, then Adviser and
Sub-Adviser intend to amend or replace this Interim Sub-Advisory Agreement with
a revised or new Sub-Advisory Agreement, as the case may be.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the meanings set
forth:
1.1 "33 Act" shall mean the Securities Act of 1933, the rules and regulations
issued thereunder, as they may be amended from time to time.
1.2 "40 Act" shall mean the Investment Company Act of 1940, the rules and
regulations issued thereunder, as they may be amended from time to time.
1.3 "Adviser" and "Administrator" shall mean HighMark Capital Management, Inc.
1.4 "Advisers Act" shall mean the Investment Advisers Act of 1940 and the rules
and regulations promulgated thereunder, as they may be amended from time to
time.
1.5 "Bank" and "Custodian" shall mean Union Bank of California, N.A., a national
banking association organized under the laws of the United States.
1.6 "Sub-Administrator" and "Distributor" shall mean SEI Investments Global
Funds Resources and SEI Investments Distribution Co, respectively.
1.7 "Sub-Adviser" shall mean Trusco Capital Management, Inc., a corporation
formed under Georgia law and registered as an investment adviser under the
Advisers Act.
2. APPOINTMENT. Adviser hereby appoints Sub-Adviser to provide certain
sub-advisory services to the Fund for the period and on the terms set forth in
this Agreement. Sub-Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
3. DELIVERY OF DOCUMENTS.
3.1 Adviser has furnished or will furnish Sub-Adviser with copies properly
certified or authenticated of each of the following:
(a) Copies of the Declarations of Trust establishing the HighMark Funds
and the By-Laws of the Trust;
(b) Resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement;
(c) The Trust's Registration Statement on Form N-1A under the 33 Act (File
No. 33-37687) and the 40 Act as filed with the SEC, and all amendments thereto
insofar as such Registration Statement and such amendments relate to the Funds;
(d) The Trust's most recent prospectus and Statement of Additional
Information for the Fund (such prospectus and Statement of Additional
Information, as presently in effect, and all amendments and supplements thereto
are herein collectively called the "Prospectus");
(e) Adviser's Form ADV Part II; and
(f) Such other materials and documents as Sub-Adviser shall reasonably
request.
Adviser will furnish Sub-Adviser with copies of all amendments of or supplements
to the foregoing promptly following adoption of such amendments or supplements
and to the extent practicable, a reasonable time in advance of such amendment.
3.2 Sub-Adviser has furnished or will furnish Adviser with copies properly
certified or authenticated of each of the following:
(a) Sub-Adviser's Form ADV Part II; and
(b) Such other materials and documents as Adviser shall reasonably
request.
Sub-Adviser will furnish Adviser with copies of all amendments of or supplements
to the foregoing promptly following adoption of such amendments or supplements.
4. MANAGEMENT:
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4.1 Subject always to the supervision of the Trust's Board of Trustees and of
Adviser, Sub-Adviser will furnish an investment program in respect of, and make
investment decisions for, the assets of the Fund entrusted to it hereunder.
Sub-Adviser may place all orders for the purchase and sale of securities, on
behalf of the Fund. Sub-Adviser is also authorized, subject to periodic
approvals of authorized persons by the Board of Trustees, to instruct Custodian
to settle trades executed on behalf of the Fund. In the performance of its
duties, Sub-Adviser will satisfy its fiduciary duties to the Fund, will monitor
the Fund investments that are assigned or entrusted to Sub-Adviser by Adviser,
and will comply with the investment objectives, policies and restrictions of the
Fund stated in the Fund Prospectus and compliance policies and procedures
furnished to the Sub-Adviser by Adviser from time to time.
4.2 Sub-Adviser and Adviser will each make its officers and employees available
to the other from time to time at reasonable times to review investment policies
of the Fund and to consult with each other regarding the investment affairs of
the Fund. Sub-Adviser shall also make itself reasonably available to the Trust's
Board of Trustees at such times as the Board of Trustees shall request.
4.3 Sub-Adviser represents and warrants that it is and shall remain in
compliance with all applicable United States Securities and Exchange Commission
("SEC") Rules and Regulations pertaining to its investment advisory activities
and agrees that it:
(a) will use at least the same skill and care in providing such services
as it uses in providing services to fiduciary accounts in the United States for
which it has investment responsibilities;
(b) will maintain registration with the SEC as an investment adviser under
the Advisers Act and will conform with all applicable laws, rules and
regulations pertaining to its investment advisory activities;
(c) will place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or dealer including, as
permitted by law, with the affiliates of the Sub-Adviser or Fund and brokers who
sell shares of the Fund. In providing the Fund with investment supervision,
Sub-Adviser will give primary consideration to securing the most favorable price
and efficient execution. Within the framework of this policy, Sub-Adviser may
consider the financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a party to
any such transaction or other transactions to which Sub-Adviser's other clients
may be a party. It is understood that it is desirable for the Fund and the Trust
that Sub-Adviser or Adviser have access to supplemental investment and market
research and security and economic analysis provided by brokers who may execute
brokerage transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers solely on the basis of seeking the most
favorable price and efficient execution. Therefore, Sub-Adviser is authorized to
place orders for the purchase and sale of securities for the Fund with such
brokers, subject to the general supervision of, and guidelines from time to time
established by, Adviser, and reviewed by the Trust's Board of Trustees with
respect to the extent and continuation of this practice.
On occasions when Sub-Adviser deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients of Sub-Adviser,
Sub-Adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be so purchased
or sold in order to obtain favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so
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purchased or sold, as well as the expenses incurred in the transaction, will be
made by Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other clients.
In no instance will portfolio securities be purchased from or sold to Adviser,
Sub-Adviser, the SEI Companies, or any affiliated person of any of the Trust,
Adviser, the Sub-Adviser, the Administrator, the Sub-Administrator, the
Distributor, or any entity that Adviser has identified to the Sub-Adviser in
writing, except as may be permitted under the 40 Act.
(d) will report regularly to Adviser and will make appropriate persons
available for the purpose of reviewing at reasonable times the management of the
Fund with representatives of Adviser and the Board of Trustees, including,
without limitation, review of the general investment strategy of the Fund, the
overall performance of the Fund in relation to standard industry indices which
have been agreed upon between Adviser and Sub-Adviser and general conditions
affecting the marketplace, and will provide various other reports from time to
time as reasonably requested by Adviser;
(e) will maintain books and records with respect to the Trust's securities
transactions required by subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 40 Act and will furnish Adviser and the
Trust's Board of Trustees such periodic and special reports as Adviser or the
Board of Trustees may request;
(f) will act upon instructions from Adviser that are not inconsistent with
the fiduciary duties undertaken hereunder; and
(g) will treat confidentially and as proprietary information of the Trust
all such records and other information relative to the assets of the Fund
maintained by Sub-Adviser, and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder, in
response to legally submitted regulatory or other governmental submissions or
actions, or in any manner Sub-Adviser deems necessary in order to transact
business on behalf of the Fund, except after prior notification to and approval
in writing by the Board of Trustees, which approval shall not be unreasonably
withheld and may not be withheld where Sub-Adviser may be exposed to civil or
criminal proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities. In addition, Sub-Adviser agrees not
to disclose or deliver the Funds' portfolio holdings to any third party without
the prior written consent of the Adviser and/or in contravention of the Trust
policy on portfolio holdings.
Sub-Adviser shall have the right to execute and deliver, or cause its nominee to
execute and deliver, all proxies and notices of meetings and other notices
affecting or relating to the securities of the Fund purchased or sold by
Sub-Adviser except that Adviser will retain responsibility and obligations for
executing and filing all corporate or similar class actions that may arise as a
result of Sub-Adviser's purchase or sale of any security, provided Sub-Adviser
gives notice of same to Adviser promptly following receipt.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the 40 Act, Sub-Adviser hereby agrees that certain records which it maintains
for the Fund are also the property of the Fund, and further agrees to surrender
promptly to the Trust a duplicate of any of such records, upon the Trust's
request. Sub-Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 40 Act the records required to be maintained by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule
31a-1 under the 40 Act for the Fund. Sub-Adviser may delegate its
responsibilities under this paragraph to affiliates that perform custody and/or
fund accounting services for the Fund, which delegation shall not, however,
relieve Sub-Adviser of its responsibilities under this paragraph 5.
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6. EXPENSES. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities and other Fund expenses (including brokerage
commissions, if any) purchased for the Trust, unless otherwise stated in this
Agreement.
7. COMPENSATION. For the services provided and the expenses assumed pursuant to
this Agreement, Adviser will pay Sub-Adviser, and Sub-Adviser agrees to accept
as full compensation therefor, a sub-advisory fee, accrued and payable in
accordance with Schedule A hereto.
8. SERVICES TO OTHERS. Adviser understands, and has advised the Trust's Board of
Trustees, that Sub-Adviser now acts and may in the future act, as an investment
adviser to fiduciary and other managed accounts, and as investment adviser,
sub-investment adviser, and/or administrator to other investment companies.
Adviser has no objection to Sub-Adviser's acting in such capacities, as long as
such services do not impair the services rendered to Adviser or the Fund, and
Adviser recognizes and has advised the Trust's Board of Trustees that, in some
cases, this may adversely affect the size of the position that the Fund may
obtain in a particular security. In addition, Adviser understands, and has
advised the Trust's Board of Trustees, that the persons employed by Sub-Adviser
to assist in Sub-Adviser's duties under this Agreement will not devote their
full time to such service, and nothing contained in this Agreement will be
deemed to limit or restrict the right of Sub-Adviser or any of its affiliates to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
9. LIMITATION OF LIABILITY. Sub-Adviser shall not be liable for any error or
judgment or for any loss suffered by the Fund or Adviser in connection with the
performance of its obligations under this Agreement or for having executed
Adviser's instructions , except a loss resulting from a breach of Sub-Adviser's
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 40 Act), or a loss resulting from
Sub-Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or reckless disregard of its obligations and duties
under this Agreement, except as may otherwise be provided under provisions of
applicable state or federal law which cannot be waived or modified hereby.
10. INDEMNIFICATION. Adviser and Sub-Adviser each agree to indemnify the other
against loss or liability to such other party (including reasonable attorneys'
fees) arising out of any third party claim based on any action taken or not
taken in the performance of its obligations under this Agreement on the part of
the indemnified party unless the indemnified party's action or inaction involves
willful misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations and duties under this Agreement.
11. DURATION AND TERMINATION. This Agreement will become effective as of the
date hereof, and, unless sooner terminated as provided herein, will continue in
effect for 150 days.
Notwithstanding the foregoing, this Agreement may be terminated as to the Fund
at any time, without penalty, on sixty (60) days' written notice to Sub-Adviser
by Adviser, by vote of the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund. This Agreement may be
terminated at any time, without penalty, on 120 days' written notice by
Sub-Adviser to Adviser. This Agreement will immediately terminate in the event
of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting
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securities", "interested persons" and "assignment" have the same meaning as when
such terms appear in the 40 Act.)
12. 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.
13. SUB-ADVISER INFORMATION. During the term of this Agreement, Adviser agrees
to furnish Sub-Adviser at Sub-Adviser's principal office, all prospectuses,
proxy statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of the Fund, the Trust, or the public,
that refer to Sub-Adviser. Adviser agrees that materials prepared by its
employees, agents, its affiliates, or the Bank that refer to Sub-Adviser in any
way are consistent with those materials previously approved by Sub-Adviser.
Sales literature may be furnished to Sub-Adviser by first-class or overnight
mail, facsimile transmission equipment or hand delivery.
14. SEVERABILITY. Should any part of this Agreement be held 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 inure to the
benefit of the parties hereto and their respective successors.
15. NOTICES. Any notice, advice or report to be given pursuant to this Agreement
shall be delivered or mailed as set forth below:
TO ADVISER AT:
HighMark Capital Management, Inc.
000 Xxxxxxxxxx Xxxxxx - Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx XX, President & CEO
TO THE SUB-ADVISER AT:
Trusco Capital Management, Inc.
00 Xxxx Xxxxx; Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
TO THE TRUST OR THE FUND AT:
HighMark Funds
c/o SEI Investments Fund Resources
and SEI Investments Distribution Co.
Xxx Xxxxxxx Xxxxxx Xx.
Xxxx, Xxxxxxxxxxxx 00000
Attention: Legal Department
Parties agree that they shall not be bound by the terms of any changes in
policies, procedures, or contracts until notice has been received as set forth
in this Agreement.
16. CHANGE OF LAW . Where the effect of a requirement of the 40 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of
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special or general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
17. MISCELLANEOUS.
The captions in this Agreement are 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. If any provision of this Agreement is held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby. This Agreement will be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and will be governed by the laws of the Commonwealth of Massachusetts.
The names "HighMark Funds" and "Trustees of the HighMark Funds" refer,
respectively, to the Trust created, and the Trustees as trustees (but not
individually or personally), acting from time to time under, the Declaration of
the Trust dated March 10, 1987, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of HighMark Funds entered
in the name or on behalf thereof by any of the Trustees, or its representatives
or agents, are made not individually but only in such capacities, and are not
binding upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
the Fund must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officer designated below as of the day and year first above
written.
HIGHMARK CAPITAL MANAGEMENT, INC. TRUSCO CAPITAL MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxx XX By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------- -----------------------------------
Xxxxx X. Xxxx XX Name: Xxxxxxx Xxxxxxxxx
Title: President & CEO -------------------------
Title: Managing Director
-------------------------
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SUB-ADVISORY AGREEMENT
BETWEEN HIGHMARK CAPITAL MANAGEMENT, INC.
AND TRUSCO CAPITAL MANAGEMENT, INC.
SCHEDULE A
HIGHMARK SMALL CAP GROWTH FUND
Sub-Advisory Fee:
The Sub-Advisory fee shall be payable out of the Advisory Fee. It shall be
computed on the average daily net assets of the Fund subject to the Agreement,
and calculated as of the last business day of each calendar month ("Calculation
Date"). The fee shall be payable within 30 days of the end of each month.
When assets are less than $100 million, Sub-Advisory Fee is 65 basis points;
and,
When assets are at least $100 million but less than $200 million, Sub-Advisory
Fee on all assets is 58 basis points; and,
When assets are at least $200 million but less than $400 million, Sub-Advisory
Fee on all assets becomes 50 basis points; and,
When assets are $400 million or over, Sub-Advisory Fee on all assets is 45 basis
points.
This asset-based tiered fee schedule is retroactive to the first dollar for each
monthly fee period. Thus, the fee would be calculated at 0.58% of all assets
commencing the month in which the portfolio surpassed the $100 million xxxx as
measured on the Calculation Date, notwithstanding the date during the month on
which the portfolio surpassed $100 million.
