INVESTMENT SUBADVISORY AGREEMENT
This Investment Subadvisory Agreement is made the ____ day of
_____________, 2002 by and between Xxxxxx Asset Management, Inc., an Ohio
corporation (the "Adviser"), and Norwich Union Investment Management Limited, a
United Kingdom corporation (the "Subadviser").
RECITALS
--------
X. Xxxxxx Advisor Funds, a business trust organized and existing under the
laws of the State of Massachusetts, is an open-end management investment company
(the "Trust"), one of whose series is designated the Opportunity Fund (the
"Fund").
B. The Trust is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act").
C. The Adviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the 1940 Act.
D. The Adviser has been retained by the Fund to provide investment advisory
services to the Fund.
E. The Adviser desires to retain the Subadviser to furnish it with
portfolio management services in connection with the Adviser's investment
advisory activities on behalf of the Fund, and the Subadviser is willing to
furnish such services to the Adviser, in the manner and on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants of the parties herein, the parties agree as follows:
I
INVESTMENT RESPONSIBILITY
In accordance with and subject to the Investment Advisory Agreement between
the Fund and the Adviser, attached hereto as Exhibit A (the "Advisory
Agreement"), the Adviser hereby appoints the Subadviser to perform the portfolio
management services described herein for the investment and reinvestment of the
Fund's assets, subject to the control and direction of the Adviser and the
Trust's Board of Trustees, for the period and on the terms hereinafter set
forth. The Subadviser shall provide the Adviser with such investment advice and
supervision as the latter may from time to time consider necessary or
appropriate for the proper supervision of the Fund's investment assets. The
Subadviser shall furnish continuously an investment program and shall determine
from time to time
what securities shall be purchased, sold or exchanged and what portion of the
assets of the Fund shall be held uninvested, subject always to the restrictions
of the Trust's Declaration of Trust and By-Laws, as each may be amended from
time to time (respectively, the "Declaration" and the "By-Laws"), to the
provisions of the 1940 Act and to the Fund's then-current prospectus and
statement of additional information. The Adviser shall provide the Subadviser
with all information concerning the investment policies and restrictions of the
Fund as the Subadviser may from time to time request or which the Trust deems
necessary. In the event of any change in the investment policies or restrictions
of the Fund, the Adviser will promptly provide Subadviser with all information
concerning such change including, but not limited to, copies of all documents
regarding the Fund filed by the Trust with the Securities and Exchange
Commission.
In particular, the Subadviser shall (i) continuously review, supervise and
administer the investment program of the Fund; (ii) shall monitor regularly the
relevant securities for the Fund (all such designated securities to be as
defined from time to time in the Fund's current prospectus and statement of
additional information) to determine if adjustments are warranted and, if so, to
make such adjustments on a periodic basis; (iii) shall determine, in the
Subadviser's discretion, the securities to be purchased or sold or exchanged in
order to keep the Fund in balance with its designated investment strategy; (iv)
shall determine, in the Subadviser's discretion, whether to exercise warrants or
other rights with respect to the Fund's securities; (v) shall determine, in the
Subadviser's discretion, whether the merit of an investment has been
substantially impaired by extraordinary events or financial conditions, thereby
warranting the removal of such securities from the Fund; (vi) shall provide the
Fund with records concerning the Subadviser's activities which the Fund is
required to maintain by law; and (vii) shall render regular reports to the
Trust's officers and Trustees concerning the Subadviser's discharge of the
foregoing responsibilities. The Subadviser shall also make recommendations as to
the manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's securities shall be exercised.
The Subadviser shall take, on behalf of the Fund, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it, and to that end the Subadviser is authorized as the agent of the Fund to
give instructions to the custodian of the Fund as to deliveries of securities
and payments of cash for the account of the Fund. The use of such discretion
shall be subject to review by the Trustees of the Trust at any time and from
time to time. The Trust, acting by its Trustees, may withdraw said discretion at
any time, and may direct the execution of portfolio transactions for the Fund in
any lawful manner different from that provided for herein. In connection with
the selection of such brokers or dealers and the placing of such orders, the
Subadviser is directed to seek for the Fund, in its best judgment, prompt
execution in an effective manner at the most favorable price. Subject to this
requirement of seeking the most favorable price, securities may be bought from
or sold to broker-dealers who have furnished statistical, research and other
information or services to the Subadviser or the Fund, subject to any applicable
laws, rules and regulations.
2
II
ALLOCATION OF EXPENSES
----------------------
The Subadviser shall furnish at its own expense all necessary services,
facilities and personnel in connection with its responsibilities under Section I
above. It is understood that the Fund will pay all of its own expenses
including, without limitation:
a. The regular fees or special charges of any Custodian, Transfer
Agent, Administrator, Registrar, Accounting Services Agent or Dividend
Disbursing Agent allocable to the Fund.
b. The Fund's pro rata share of the compensation or fees of the
Trust's auditors and legal counsel, and compensation and costs relating to
legal or administrative proceedings or to litigation.
c. Income, franchise, stock transfer and other taxes attributable to
the Fund.
d. Initial or renewal fees payable to governmental agencies in
connection with the filing of reports, notices, registration statements,
and other material required to be filed in connection with the Fund's
business.
e. The Fund's pro rata share of any insurance or bond premiums.
f. The Fund's pro rata share of association dues or assessments.
g. Brokerage fees or commissions on all Fund transactions.
h. The Fund's pro rata share of interest on borrowed funds or
otherwise.
i. The Fund's distribution (12b-1) and service fees to the extent
permitted by the Fund's distribution (12b-1) and service plan.
j. The Fund's pro rata share of the fees and meeting expenses of the
non-interested Trustees of the Trust.
k. The Fund's pro rata share of any of the Trust's or the Fund's
printing and postage expenses attributable to the preparation and
dissemination of reports, prospectuses and confirmations to Fund
shareholders.
3
l. Any extraordinary expenses attributable directly to the Fund.
III
COMPENSATION
------------
For the services to be rendered by the Subadviser hereunder prior to the
time the Subadviser gives the Adviser the "Notice" (as defined below), the
Adviser shall pay to the Subadviser an annual investment subadvisory fee,
computed and paid monthly, in an amount equal to $100.
For the services to be rendered by the Subadviser hereunder after the
Subadviser, in its sole discretion, gives the Adviser written notice that it has
elected to charge the optional subadvisory fee schedule (the "Notice"), the
Adviser shall pay to the Subadviser an annual investment subadvisory fee,
computed and paid monthly, in an amount equal to 100% of the investment advisory
fees received by the Adviser under the Advisory Agreement with regard to
$10,000,000 of average net assets of the Fund, 30% of such advisory fees
received by the Adviser with regard to the next $10 million of average net
assets of the Fund and 65% of such advisory fees received by the Adviser with
regard to average net assets of the Fund greater than $20,000,000.
Before the Notice is given by the Subadviser to the Adviser, the Adviser
shall reimburse the Fund for the following ordinary and customary expenses of
the Fund: (a) the contractual fees of any Custodian, Transfer Agent,
Administrator, Registrar, Accounting Services Agent or Dividend Disbursing Agent
allocable to the Fund; (b) the Fund's pro rata share of the fees of the Trust's
auditors and legal counsel (excluding fees and costs relating to legal or
administrative proceedings or litigation); (c) renewal fees payable to
governmental agencies in connection with the filing of reports, notices,
registration statements, and other material required to be filed in connection
with the Fund's business; (d) the Fund's pro rata share of any insurance or bond
premiums; (e) the Fund's distribution (12b-1) and service fees to the extent
permitted by the Fund's distribution (12b-1) and service plan; and (f) the
Fund's pro rata share of the fees of the non-interested Trustees of the Trust
and their meeting expenses; and (g) the Fund's pro rata share of any of the
Trust's or the Fund's printing and postage expenses attributable to the
preparation and dissemination of reports, prospectuses and confirmations to Fund
shareholders. When the Notice is given by the Subadviser to the Adviser, the
Adviser shall no longer be obligated to reimburse any of the Fund's expenses.
4
IV
COVENANTS OF THE SUBADVISER
---------------------------
The Subadviser agrees that it will not deal with itself, or with the Board
of Trustees of the Trust or the Adviser in making purchases or sales of
securities or other property for the account of the Fund, and except as
permitted by the 1940 Act, will not take a long or short position in the
interests of the Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
prospectus and statement of additional information of the Fund relative to the
Subadviser, Adviser and the Trust's Trustees and officers. The Adviser will
provide the Subadviser with the names of all related parties of the Board of
Trustees of the Trust or the Adviser with whom the Subadviser may not deal. In
the event of any change in these related parties, the Adviser will promptly
notify the Subadviser.
V
LIMITATION OF LIABILITY OF THE SUBADVISER
-----------------------------------------
The Subadviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates (including, but not limited to, loss sustained by reason
of the adoption or implementation of any investment policy or the purchase, sale
or retention of any security, in accordance with the then current prospectus and
statement of additional information of the Fund), except for loss resulting from
willful misfeasance, bad faith or gross negligence of the Subadviser in the
performance of its duties or from recklesss disregard by the Subadviser of its
obligations and duties under this Agreement. As used in this Section V, the term
"Subadviser" shall include directors, officers and employees of the Subadviser
as well as that corporation itself.
VI
ACTIVITIES OF THE SUBADVISER
----------------------------
The services of the Subadviser to the Adviser are not to be deemed to be
exclusive, the Subadviser being free to render investment advisory and/or other
services to others. It is understood that Trustees, officers and employees of
the Trust and holders of interests of the Fund are or may be or may become
interested in the Subadviser, as directors, officers, employees, shareholders or
otherwise and that directors, officers and employees of the Subadviser are or
may become similarly interested in the Trust.
VII
DURATION AND TERMINATION
------------------------
A. This Agreement shall become effective as of the day and year first above
written and shall govern the relations between the parties hereto thereafter,
and, except as otherwise provided below, shall remain in effect for a period of
two years.
B. This Agreement may be terminated immediately by the Adviser, by the
Trustees of the Trust or by the "vote of a majority of the outstanding voting
securities" of the Fund upon the occurrence of any of the following events:
5
(1) the continuance of this Agreement after such two-year term is not
"specifically approved at least annually" (a) by the vote of a majority of
the Trustees who are not "interested persons" of the Fund or of the
Subadviser or the Adviser at a meeting specifically called for the purpose
of voting on such approval, and (b) by the Board of Trustees of the Trust
or by "vote of a majority of the outstanding voting securities" of the
Fund. However, if the shareholders of the Fund fail to approve this
Agreement as provided herein, the Subadviser may continue to serve
hereunder in the manner and to the extent permitted by the 1940 Act and
rules thereunder;
(2) a material breach of this Agreement by the Subadviser;
(3) the falsity in any material respect of any warranty,
representation or statement made by or on behalf of the Subadviser in
connection with this Agreement;
(4) there is an "assignment" of this Agreement;
(5) the Subadviser fails to achieve and maintain the performance
standard to be mutually agreed upon and specified in writing by the Adviser
and the Subadviser as specified in Section VIII hereof; or
(6) the Advisory Agreement is terminated or not renewed.
C. This Agreement may be terminated at any time by the Adviser, by the
Trustees of the Trust or by the "vote of a majority of the outstanding voting
securities" of the Fund, upon at least 60 days written notice to the Subadviser.
D. This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Fund and by
vote of a majority of the Board of 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.
E. The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission thereunder.
F. This Agreement may be terminated at any time by the Subadviser, without
the payment of any penalty, upon at least 60 days written notice to the Adviser.
G. This Agreement may be terminated immediately by the Subadviser upon the
occurrence of any of the following:
(i) a material breach of this agreement by the Adviser; or
(ii) the falsity in any material respect of any warranty,
representation or statement made by or on behalf of the Adviser in
connection with this Agreement.
6
VIII
PERFORMANCE
-----------
The Adviser and the Subadviser shall negotiate in good faith and use their
best efforts to agree on a performance standard against which the Subadviser's
investment performance shall be measured. The performance standard to be agreed
upon by the Adviser and the Subadviser shall be specified in writing and shall
be attached hereto and incorporated by reference herein as Exhibit B.
IX
MISCELLANEOUS
-------------
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 adopted under the 1940 Act which are
prepared or maintained by the Subadviser on behalf of the Fund are the property
of the Fund and shall be surrendered promptly to the Fund on request.
The holders of the record interests, Trustees, officers, employees and
agents of the Trust shall not be personally bound by or liable hereunder, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder.
Except to the extent the provisions of this Agreement are governed by
federal law, they shall be governed by the law of Ohio without reference to its
choice of law principles.
This Agreement represents the entire agreement between the parties hereto
with respect to the subject matter hereof.
This Agreement may be executed in two or more counterparts, each of which
shall be considered an original.
If there are any conflicts between the provisions of this Agreement and the
provisions of the 1940 Act or the regulations promulgated thereunder, the
provisions of the 1940 Act and such regulations shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first above written.
XXXXXX ASSET MANAGEMENT, INC.
By:______________________________
Its:_____________________________
NORWICH UNION INVESTMENT
MANAGEMENT LIMITED
By:_______________________________
Its:______________________________
7
