SUB-ADVISORY AGREEMENT
(QUINTARA SMALL CAP VALUE FUND)
This AGREEMENT is made as of the 31st day of January, 2002, by and among
Quintara Funds, a Delaware Business Trust (the "Trust"), Quintara Capital
Management, a California corporation (the "Adviser"), and Xxxxxx Associates, LP
(the "Sub-Adviser").
WHEREAS, the Adviser and the Sub-Adviser are registered investment advisers
under the Investment Advisers Act of 1940, as amended (the "Advisers Act") and
engage in the business of providing investment management services; and
WHEREAS, the Adviser has been retained to act as investment adviser
pursuant to an Investment Advisory Agreement dated January 31, 2002 (the
"Advisory Agreement") with the Trust, which is registered with the U.S.
Securities and Exchange Commission (the "SEC") as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act")
WHEREAS, the Trust currently consists of separate series of shares, each
having its own investment objectives and policies and is authorized to create
more series; and
WHEREAS, the Advisory Agreement permits the Adviser, subject to the
supervision and direction of the Trust's Board of Trustees, to delegate certain
of its duties under the Advisory Agreement to other investment sub-advisers,
subject to the requirements of the 1940 Act; and
WHEREAS, the Adviser desires to retain Sub-Adviser to assist it in the
provision of a continuous investment program for one of the Trust's series of
shares (the "Fund");
WHEREAS, the Adviser will assign to the Sub-Adviser a portion of the assets
of the Fund as described on Schedule B to this Agreement (the "Sub-Adviser
Assets") for management by the Sub-Adviser, and the Sub-Adviser is willing to
render such services subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of mutual covenants recited below, the
parties agree and promise as follows:
1. Appointment as Sub-Adviser. The Adviser hereby retains the Sub-Adviser
to act as investment adviser for, and to manage, the Sub-Adviser Assets, subject
to the supervision of the Adviser and the Board of Trustees of the Trust, and
subject to the terms of this Agreement. The Sub-Adviser hereby accepts such
retention. In such capacity, the Sub-Adviser shall be responsible for the
investment management of the Sub-Adviser Assets. The Sub-Adviser agrees to
exercise the same skill and care in performing its services under this Agreement
as the Sub-Adviser exercises in performing similar services with respect to
other fiduciary accounts for which the Sub-Adviser has investment
responsibilities.
2. Duties of Sub-Adviser.
(a) Investments. The Sub-Adviser is hereby authorized and directed,
and hereby agrees, subject to the stated investment policies and
restrictions of the Fund as set forth in the Fund's prospectus and
statement of additional information as currently in effect and as
supplemented or amended from time to time and provided to the Sub-Adviser
(collectively referred to as the "Prospectus"), and subject to the
directions of the Adviser and the Trust's Board of Trustees, as set forth
more particularly in Schedule A hereto, as may be amended from time to
time, to purchase, hold and sell investments for the Sub-Adviser Assets and
to monitor on a continuous basis the performance of the Sub-Adviser Assets.
In providing these services, the Sub-Adviser will conduct a continual
program of investment, evaluation and, if appropriate, sale and
reinvestment of the Sub-Adviser Assets. The Adviser agrees to provide the
Sub-Adviser with current Prospectus and other information reasonably
requested by the Sub-Adviser concerning the Fund, its assets available or
to become available for investment, and generally as to the conditions of a
Fund's or the Trust's affairs.
(b) Compliance with Applicable Laws and Governing Documents. In the
performance of its duties and obligations under this Agreement, the
Sub-Adviser shall with respect to Sub-Adviser Assets, act in conformity
with the Trust's Declaration of Trust and Bylaws as provided to the
Sub-Adviser, the Prospectus(es) as provided to the Sub-Adviser, and with
the instructions and directions received in writing from the Adviser or the
Trustees of the Trust and will conform to and comply with the requirements
of the 1940 Act, the Advisers Act, the Internal Revenue Code of 1986, as
amended (the "Code"), and all other applicable federal and state laws and
regulations. The Adviser will provide the Sub-Adviser with a copy of the
minutes of the meetings of the Board of Trustees of the Trust to the extent
they may affect the Fund or the duties of the Sub-Adviser, and with the
copies of any financial statements or reports made by a Fund to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its functions
under this Agreement.
The Adviser will provide the Sub-Adviser with reasonable advance
notice of any change in a Fund's investment objectives, policies and
restrictions as stated in the Prospectus, and the Sub-Adviser shall, in the
performance of its duties and obligations under this Agreement, manage the
Sub-Adviser Assets consistent with such changes, provided the Sub-Adviser
has received prior notice of the effectiveness of such changes from the
Trust or the Adviser. In addition to such notice, the Adviser shall provide
to the Sub-Adviser a copy of a modified Prospectus reflecting such changes.
The Sub-Adviser will provide, to the Trust, the Fund or to the Adviser,
such information as may be necessary for the Trust, the Fund or the Adviser
to comply with all disclosure requirements under all applicable federal and
state laws and regulations specifically for inclusion in the Prospectus.
The Sub-Adviser hereby agrees to provide to the Adviser in a timely manner
such information relating to the Sub-Adviser and its relationship to, and
actions for, the Fund as may be required to be contained in the Prospectus
or in the Trust's registration statement on Form N-1A.
(c) Voting of Proxies. The Sub-Adviser shall have the power to vote,
either in person or by proxy, all securities in which the Sub-Adviser
Assets may be invested from time to time, and shall not be required to seek
instructions from the Adviser, the Trust or a Fund. At the request of the
Fund, the Sub-Adviser shall provide the Fund with its recommendations as to
the voting of such proxies. If both the Sub-Adviser and another entity
managing assets of the Fund have invested in the same security, the
Sub-Adviser and such other entity will each have the power to vote its pro
rata share of the security.
(d) In the performance of its duties hereunder, the Sub-Adviser is and
shall be an independent contractor and except as expressly provided for
herein or otherwise expressly provided or authorized shall have no
authority to act for or represent the Fund, the Trust, or the Adviser in
any way or otherwise be deemed to be an agent of the Fund, the Trust or of
the Adviser. If any occasion should arise in which the Sub-Adviser gives
any advice to its clients concerning the shares of the Fund, the
Sub-Adviser will act solely as investment counsel for such clients and not
in any way on behalf of the Trust of the Fund.
(e) Brokerage. The Sub-Adviser will place orders pursuant to the
Sub-Adviser's investment determinations for the Fund either directly with
the issuer or with any broker or dealer. The Sub-Adviser shall arrange for
the placing of all orders for the purchase and sale of securities and other
investments for the Fund's account and will exercise full discretion and
act for the Trust in the same manner and with the same force and effect as
the Trust might or could do with respect to such purchases, sales or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales or
transactions. In executing portfolio transactions and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek on behalf of the
Fund the best overall execution 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, as amended) provided
to the Fund and/or other accounts over which the Sub-Adviser may exercise
investment discretion. The Sub-Adviser is authorized, subject to such
procedures as may be approved by 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 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 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 and/or other
accounts over which the Sub-Adviser may exercise investment discretion. In
addition, the 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, the Sub-Adviser, or the
Fund's principal underwriter) to take into account the sale of shares of
the Fund if the Sub-Adviser believes that the quality of the transaction
and the commission are comparable to what they would be with other
qualified firms.
(f) Securities Transactions. 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, the Sub-Adviser or
the Trust's principal underwriter, acting as principal in the transaction,
except to the extent permitted by the SEC and the 1940 Act.
The Sub-Adviser, including its Access Persons (as defined in
subsection (e) of Rule 17j-1 under the 1940 Act), agrees to observe and
comply with Rule 17j-1 and its Code of Ethics (which shall comply in all
material respects with Rule 17j-1), as the same may be amended from time to
time. On at least an annual basis, the Sub-Adviser will comply with the
reporting requirements of Rule 17j-1, which may include either (i)
certifying to the Adviser that the Sub-Adviser and its Access Persons have
complied with the Sub-Adviser's Code of Ethics with respect to the
Sub-Adviser Assets, or (ii) identifying any violations which have occurred
with respect to the Sub-Adviser Assets and (iii) certifying that it has
adopted procedures reasonably necessary to prevent Access Persons from
violating the Sub-Adviser's Code of Ethics. The Sub-Adviser will also
submit its Code of Ethics for its initial approval by the Board of Trustees
and subsequently within six months of any material change of thereto.
The Sub-Adviser may buy securities for the Fund at the same time it is
selling such securities for another client account and may sell securities
for the Fund at the time it is buying such securities for another client
account subject always to the Sub-Adviser's obligation as the fiduciary to
the Fund. In such cases, subject to applicable legal and regulatory
requirements and in compliance with such procedures of the Trust or Fund as
may be in effect from time to time, the Sub-Adviser may effectuate cross
transactions between the Fund and such other account if it deems this to be
advantageous. The Sub-Adviser also may cause the Fund to enter into other
types of investment transactions (e.g., a long position on a particular
securities index) at the same time it is causing other client accounts to
take opposite economic positions (e.g., a short position on the same index)
subject always to the Sub-Advisers obligation as the fiduciary to the
Trust.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients,
the Sub-Adviser, to the extent permitted by applicable laws and
regulations, and in compliance with such procedures of the Trust as may be
in effect from time to time, may aggregate the securities to be sold or
purchased in order to obtain the best execution and lower brokerage
commissions, if any. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Sub-Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to
such clients.
The Sub-Adviser will advise the Fund's custodian or such depository or
agents as may be designated by the custodian and the Adviser promptly of
each purchase and sale of a portfolio security, specifying the name of the
issuer, the description and amount or number of shares of the security
purchased, the market price, the commission and gross or net price, the
trade date and settlement date and the identity of the effecting broker or
dealer. The Sub-Adviser shall not have possession or custody of the Fund
investments. The Trust or Fund shall be responsible for all custodial
agreements and the payment of all custodial charges and fees and, upon the
Sub-Adviser giving proper instructions to the custodian, the Sub-Adviser
shall have no responsibility or liability for the acts, omissions or other
conduct of the custodian.
(g) Books and Records. The Sub-Adviser shall maintain separate
detailed records of all matters pertaining to the Sub-Adviser Assets,
including, without limitation, brokerage and other records of all
securities transactions. Any such records required to be maintained and
preserved pursuant to the provisions of Rule 31a-1 and Rule 31a-2
promulgated under the 1940 Act are prepared or maintained by the
Sub-Adviser on behalf of the Trust and Fund and copies of which will be
made available promptly to the Trust or Fund on request. The Sub-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 with respect to the Sub-Adviser Assets.
(h) Information Concerning Sub-Adviser Assets and the Sub-Adviser.
From time to time as the Adviser, and any consultants designated by the
Adviser, or the Fund or Trust may request, the Sub-Adviser will furnish the
requesting party reports on transactions involving Sub-Adviser Assets and
reports on Sub-Adviser Assets held in the portfolio, all in such detail as
the Adviser, its consultant(s) or the Fund or Trust may reasonably request.
The Sub-Adviser also will inform the Adviser in a timely manner of material
changes in portfolio managers responsible for Sub-Adviser Assets, any
material changes in the ownership or management of the Sub-Adviser, or of
material changes in the control of the Sub-Adviser. Upon reasonable
request, the Sub-Adviser will make available its officers and employees to
meet with the Trust's Board of Trustees to review the Sub-Adviser Assets.
Upon request, the Sub-Adviser also will provide such information or
perform such additional acts as are reasonably and customarily provided or
performed by a Sub-Adviser and may be required for a Fund or the Adviser to
comply with their respective obligations under applicable laws, including,
without limitation, the Code, the 1940 Act, the Advisers Act, the
Securities Act of 1933, as amended (the "Securities Act") and any federal
or state securities laws, and any rule or regulation thereunder.
(i) Custody Arrangements. The Sub-Adviser shall on each business day
provide the Adviser, its consultant(s) and the Fund's and Trust's custodian
such information as the Adviser and the Fund's and Trust's custodian may
reasonably request relating to all transactions concerning the Sub-Adviser
Assets.
(j) Historical Performance Information. The Adviser may request
performance information for a specific use subject to approval by the
Sub-Adviser.
3. 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, commodities and other investments (including
brokerage commissions and other transaction or custodial charges, if any)
purchased for the Fund. The Sub-Adviser shall, at its sole expense, employ or
associate itself with such persons as it believes to be particularly fitted to
assist it in the execution of its duties under this Agreement. The Trust, the
Fund, or the Adviser, as the case may be, shall reimburse the Sub-Adviser for
any expenses as may be reasonably incurred by the Sub-Adviser, at the request of
and on behalf of the Fund or the Adviser. The Sub-Adviser shall keep and supply
to the Trust, the Fund and the Adviser reasonable records of all such expenses.
4. Compensation. For the services provided and the expenses assumed with
respect to the Fund pursuant to this Agreement, the Sub-Adviser will be entitled
to the fee listed for the Fund on Exhibit A. Such fees will be computed daily
and payable in arrears no later than the seventh business day following the end
of each month, from the Fund, calculated at an annual rate based on the
Sub-Adviser Assets' average daily net assets.
If this Agreement is terminated prior to the end of any calendar month, the
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 this 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.
5. Representations and Warranties of the Sub-Adviser. The Sub-Adviser
represents and warrants to the Adviser and the Trust as follows:
(a) The Sub-Adviser is registered as an investment adviser under the
Advisers Act;
(b) The Sub-Adviser is a duly organized and validly existing under the
laws of the State of ____________ with the power to own and possess its
assets and carry on its business as it is now being conducted;
(c) The execution, delivery and performance by the Sub-Adviser of this
Agreement are within the Sub-Adviser's powers and have been duly authorized
by all necessary action on the part of its Board of Directors and no action
by or in respect of, or filing with, any governmental body, agency or
official is required on the part of the Sub-Adviser for the execution,
delivery and performance by the Sub-Adviser of this Agreement, and the
execution, delivery and performance by the Sub-Adviser of this Agreement do
not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Sub-Adviser's governing
instruments, or (iii) any agreement, judgment, injunction, order, decree or
other instrument binding upon the Sub-Adviser; and
(d) The Form ADV of the Sub-Adviser previously provided to the Adviser
(a copy of Section 1 is available online and Section 2 is attached as
Exhibit B to this Agreement) is a true and complete copy of the form as
currently filed with the SEC and the information contained therein is
accurate and complete in all material respects and does not omit to state
any material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading. The
Sub-Adviser will promptly provide the Adviser and the Trust with a complete
copy of all subsequent amendments to its Form ADV.
6. Representations and Warranties of the Adviser. The Adviser represents
and warrants to the Sub-Adviser and the Trust as follows:
(a) The Adviser is registered as an investment Adviser under the
Advisers Act;
(b) The Adviser is a corporation duly organized and validly existing
under the laws of the State of California with the power to own and possess
its assets and carry on its business as it is now being conducted;
(c) The execution, delivery and performance by the Adviser of this
Agreement are within the Adviser's powers and have been duly authorized by
all necessary action on the part of its Board of Directors and by the
Trust, and no action by or in respect of, or filing with, any governmental
body, agency or official is required on the part of the Adviser for the
execution, delivery and performance by the Adviser of this Agreement, and
the execution, delivery and performance by the Adviser of this Agreement do
not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Adviser's governing
instruments or the Trust's governing instruments, or (iii) any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Adviser or the Trust;
(d) The Form ADV of the Adviser as provided to the Sub-Adviser is a
true and complete copy of the form as currently filed with the SEC and the
information contained therein is accurate and complete in all material
respects and does not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they
were made, not misleading;
(e) The Adviser acknowledges that it received a copy of the
Sub-Adviser's Form ADV (a copy of which is attached as Exhibit B) prior to
the execution of this Agreement; and
(f) The Adviser and the Trust have duly entered into the Advisory
Agreement pursuant to which the Trust authorized the Adviser to enter into
this Agreement.
7. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Sub-Adviser and the Adviser
pursuant to Sections 5 and 6, respectively, shall survive for the duration of
this Agreement and the parties hereto shall promptly notify each other in
writing upon becoming aware that any of the foregoing representations and
warranties are no longer true.
8. Liability and Indemnification.
(a) Liability. The duties of the Sub-Adviser shall be confined to
those expressly set forth herein, with respect to the Sub-Adviser Assets.
The Sub-Adviser shall not be liable for any loss arising out of any
investment hereunder, except a loss resulting from willful misfeasance, 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 8, the term
"Sub-Adviser" shall include managers, officers, employees and other
corporate agents of the Sub-Adviser as well as that company itself).
(b) Indemnification. The Sub-Adviser shall indemnify the Adviser, the
Trust and the Fund, and their respective affiliates and controlling persons
for any liability and expenses, including reasonable attorneys' fees, which
the Adviser, the Trust or the Fund and their respective affiliates and
controlling persons may sustain as a result of the Sub-Adviser's willful
misfeasance, bad faith, gross negligence, reckless disregard of its duties
hereunder or violation of applicable law, including, without limitation,
the federal and state securities laws. Notwithstanding any other provision
in this Agreement, the Sub-Adviser will indemnify the Adviser, the Trust
and the Fund, and their respective affiliates and controlling persons for
any liability and expenses, including reasonable attorneys' fees, to which
they may be subjected as a result of their reliance upon and use of the
historical performance calculations provided by the Sub-Adviser concerning
the Sub-Adviser's composite account data or historical performance
information on similarly managed investment companies or accounts, except
that the Adviser, the Trust and the Fund and their respective affiliates
and controlling persons shall not be indemnified for a loss or expense
resulting from their negligence or willful misconduct in using such
numbers, or for their failure to conduct reasonable due diligence with
respect to such information.
The Adviser shall indemnify the Sub-Adviser, its affiliates and its
controlling persons, for any liability and expenses, including reasonable
attorneys' fees, arising from the Adviser's breach of this Agreement or its
representations and warranties herein; provided, however, that the
Sub-Adviser, its affiliates and its controlling persons shall not be
indemnified for any liability or expenses which may be sustained as a
result of the Sub-Adviser's willful misfeasance, bad faith, gross
negligence, reckless disregard of its duties hereunder or violation of
applicable law, including, without limitation, the federal and state
securities laws.
9. Duration and Termination. This Agreement may be terminated 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
Sub-Adviser, or by the Sub-Adviser at any time without the payment of any
penalty on 90 days written notice to the Trust.
10. Amendment. This Agreement may be amended by mutual consent of the
parties in writing, provided that the terms of any material amendment shall be
approved by: (a) the Trust's Board of Trustees and (b) the vote of a majority of
those Trustees of the Trust who are not interested persons of any party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law, and unless otherwise
permitted pursuant to exemptive relief granted by the SEC, by a vote of the
majority of a Fund's outstanding securities.
11. Confidentiality. Subject to the duties of the Adviser, the Trust (and
the Fund), and the Sub-Adviser to comply with applicable law, including any
demand of any regulatory or taxing authority having jurisdiction, the parties
hereto shall treat as confidential all information pertaining to the Fund and
the actions of the Sub-Adviser, the Adviser, the Trust, and the Fund in respect
thereof. In accordance with Section 248.11 of Regulation S-P (17 CFR
248.1-248.30), Sub-Adviser will not directly, or indirectly through an
affiliate, disclose any non-public personal information, except as permitted or
required by law, as defined in Reg. S-P, received from the Trust or the Adviser,
regarding any shareholder, to any person that is not affiliated with the Trust
or with Sub-Adviser, and, provided that, any such information disclosed to an
affiliate of Sub-Adviser shall be under the same limitations on non-disclosure.
12. 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:
(a) If to the Adviser:
Quintara Capital Management
000 Xxxxx Xxx.
Xxxxxxxx XX 00000
Attn: Xxxxxxx X. Xxxxxx, President & CEO
(b) If to the Sub-Adviser:
___________________________
___________________________
Attn:______________________
(c) If to the Trust:
Quintara Funds
000 Xxxxx Xxx.
Xxxxxxxx XX 00000
Attn: Xxxxxxx X. Xxxxxx, President
13. Governing Law. This Agreement shall be governed by the internal laws of
the State of Delaware, without regard to conflict of law principles; provided,
however that nothing herein shall be construed as being inconsistent with the
1940 Act. 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
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
14. 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.
15. 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.
16. Certain Definitions. For the purposes of this Agreement and except as
otherwise provided herein, "interested person," "affiliated person,"
"affiliates," "controlling persons" and "assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions as
may be granted by the SEC, and the term "Fund" shall refer to the Fund for which
the Sub-Adviser provides investment management services and as is listed on
Exhibit A to this Agreement.
17. Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. Non-Exclusivity. The services of the Sub-Adviser to the Adviser in
connection with the Fund hereunder are not to be deemed exclusive, and the
Sub-Adviser shall be free to render similar services to others so long as its
services hereunder are not impaired thereby. It is understood that the persons
employed by the Sub-Adviser to assist in the performance of its duties hereunder
will not devote their full time to such services and nothing hereunder contained
shall be deemed to limit or restrict the right of the Sub-Adviser to engage in
or devote time and attention to other businesses or to render services of
whatever kind or nature.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
ADVISER: TRUST:
QUINTARA CAPITAL MANAGEMENT QUINTARA FUNDS
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------- ------------------------------
Xxxxxxx X. Xxxxxx, President & CEO Xxxxxxx X. Xxxxxx, President
SUB-ADVISER:
--------------------------------------------
By:___________________________________
Name:_________________________________
Title:________________________________
EXHIBIT A
TO
SUB-ADVISORY AGREEMENT
Effective ______ __, 2002
Quintara Small Cap Value Fund
FEE SCHEDULE
The Fee Schedule set forth below, as Fee Schedule A, may be a temporary
schedule, put in place until the Quintara Funds is granted relief by the SEC to
pursue Fee Schedule B. If relief is granted, the Quintara Small Cap Value Fund
will move to Fee Schedule B as quickly as possible, but with no less than 30
days notification to the Sub-Adviser.
Fee Schedule A
The Sub-Adviser is entitled to receive an annual management fee, calculated
daily and payable monthly, equal to the "Base Advisory Fee" below. This Base
Advisory Fee is increased or decreased monthly (the "Monthly Sub-Advisory Fee
Adjustment") depending on the investment performance of the Sub-Adviser's
Portfolio ("Portfolio") managed for the Quintara Small Cap Value Fund relative
to the investment performance of the Xxxxxxx 2000 Value Index. The Monthly
Sub-Advisory Fee Adjustment depends on the percentage amount by which the
Portfolio exceeds or trails that of the index ("Sub-Adviser Performance
Differential"). For the purpose of calculating the Sub-Adviser Performance
Differential, both the Portfolio's performance and the performance of the Index
are measured over the immediately preceding 36 calendar months or life of Fund,
whichever is shorter ("Measurement Period").
Base Advisory Annual Fee: 107.5 basis points (first $30 Million in assets)
92.5 basis points (Next $120 Million in assets)
87.5 basis points (assets above $150 Million)
The Monthly Advisory Fee Adjustment is calculated according to the Measurement
Period on the following schedule
Performance Differential Monthly Sub- Advisory Fee Adjustment
vs. Xxxxxxx 2000 Value Index
----------------------------------------- --------------------------------------
1.00% or greater 0.075%
Less than 1.00% but Greater than -1.00% 0.000%
-1.00% or less -0.075%
Performance figures are annualized for the Portfolio and the Index.
For example, in any given month, if the Index for the Measurement Period has a
return of 2.5%, and the Portfolio has a net performance of 3.5% (1.0% or 100
basis points greater than the Index), the Monthly Sub-Advisory Fee Adjustment
would be 0.075%. Likewise, if the Index has a return of 2.5%, and the Portfolio
has a net performance of 1.5% (1.0% or 100 basis points less than the Index),
the Monthly Sub-Advisory Fee Adjustment would be -0.075%. Prior to the
completion of approximately 12 full calendar months of operations, the
short-term investment performance of the Portfolio relative to the Index's
performance will likely have a greater impact on the total annual management fee
than would be the case if a longer Measurement Period were used to compute the
Monthly Sub-Advisory Fee Adjustment. For these reasons, the Monthly Sub-Advisory
Fee Adjustment shall become applicable only after the Fund has completed three
full calendar months of operations.
Fee Schedule B
This fee structure will be used if Quintara Funds is granted relief by the SEC.
The Quintara Small Cap Value Fund will seek to implement Fee Schedule B as
quickly as possible, but with no less than 30 days notification of the
Sub-Adviser.
ASSETS COMPENSATION
------ ------------
First $30 Million 100 basis points per annum
Next $120 Million 85 basis points per annum
Above $150 Million 80 basis points per annum
Plus earned portion of Sub-Advisory Incentive Compensation Pool ("ICP") (if
any, as set forth below).
At the end of each fiscal year of the Fund - so long as Adviser has been
the Adviser to the Fund throughout the entire fiscal year - the Adviser will
fund the ICP in the amount of 15 basis points of all Fund assets, calculated
daily over the entire fiscal year of the Fund, and pay incentive compensation to
eligible sub-advisers which are managing assets of the Fund as of the end of the
fiscal year as follows:
The Adviser will retain four sub-advisers for the Fund. At the end of each
fiscal year of the Fund, the Adviser will calculate the total rate of return of
each Fund sub-adviser on the Fund assets managed by the sub-adviser over the
shorter of (a) the previous 36 months, or (b) the life of the Fund (if the Fund
has been in existence less than 36 months) ("the Measurement Period"). For a
sub-adviser to be eligible for an ICP award, the sub-adviser must be managing
Fund assets at the end of the Fund's fiscal year, and the sub-adviser's total
rate of return net expenses over the Measurement Period must exceed the return
of the Xxxxxxx 2000 Value Index ("Index") over the same period.
From time to time, the Adviser may engage new sub-advisers to replace
departing sub-advisers. When a new sub-adviser is engaged by the Adviser to
replace a previous sub-adviser, the new sub-adviser, for purposes of the
sub-adviser's ICP calculation, will be ascribed a performance ("the Ascribed
Performance") for the period of time in the Measurement Period prior to the
sub-adviser's commencement of management of Fund assets: The Ascribed
Performance will be the lower of (a) the return of the Index less 50 basis
points over the same period, or (b) the average of the total rates of return of
the second best and third best remaining sub-advisers over the same period. The
Ascribed Performance will exactly match the month to month characteristics of
the Index less 50 basis points or the monthly average return of the second and
third best sub-advisers, whichever is used.
The Adviser will pay ICP awards as follows: 60% of the ICP will be paid to
the eligible Fund sub-adviser which, as of the end of the Fund's fiscal year,
has the highest total rate of return over the Measurement Period, compared to
all other Fund sub-advisers which are managing assets of the Fund as of the end
of the Fund's fiscal year. 30% of the ICP will be paid to the eligible Fund
sub-adviser which, as of the end of the Fund's fiscal year, has the second
highest total rate of return over the Measurement Period, compared to all other
Fund sub-advisers which are managing assets of the Fund as of the end of the
Fund's fiscal year. 10% of the ICP will be paid to the eligible Fund sub-adviser
which, as of the end of the Fund's fiscal year, has the third highest total rate
of return over the Measurement Period, compared to all other Fund sub-advisers
which are managing assets of the Fund as of the end of the Fund's fiscal year.
If a sub-adviser, which has been managing Fund assets for less than the
total Measurement Period and has therefore been Ascribed Performance as set
forth above for purposes of calculating the sub-adviser's total rate of return
for the ICP, is entitled to an ICP award at the end of a fiscal year, then that
sub-adviser's ICP award will be reduced to reflect the duration of the
sub-adviser's management of Fund assets. The ICP award that the sub-adviser
would otherwise be entitled to will be reduced by the multiplier of, if the ICP
measurement period is 36 months, x/36 where "x" is the number of whole months
the sub-adviser has managed money for the Fund, or if the ICP measurement period
is the life of the Fund, the multiplier will be x/life of the Fund.
No ICP award will be paid to any sub-advisor, regardless of the
sub-adviser's performance, if (a) the sub-adviser is not managing assets of the
Fund at the end of the Fund's fiscal year, or (b) if the sub-adviser's total
rate of return over the Measurement Period does not exceed the total rate of
return of the Index over the same period. If some or all of the ICP is not paid
out for a fiscal year, because less than three Fund sub-advisers which are
managing Fund assets as of the end of the Fund's fiscal year have exceeded the
Index for the Measurement Period, the remaining money in the ICP will be carried
forward and will reduce the amount assessed to shareholders the following year.
EXHIBIT B
(Quintara Small Cap Value Fund)
[Sub-Adviser]
FORM ADV
(To Be Attached)
SCHEDULE A
Investment Management Guidelines
[Sub-Adviser]
(Quintara Small Cap Value Fund)
The Fund (including Sub-Adviser Assets) should be managed in accordance
with the guidelines established in the Prospectus and SAI. The Sub-Adviser
Assets should also be managed in accordance with the following specific
guidelines:
1. Investment Objective
The objective of the Sub-Adviser Assets, established in support of the
objectives of the total Fund, is capital appreciation over the long term. Under
normal market conditions, the Sub-Adviser 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, which will promptly notify the Sub-Adviser.
The Fund considers small capitalization companies to be U.S. companies
whose market capitalization is $2 billion or smaller at the time of purchase.
The Sub-Adviser's investment in equity securities may include common and
preferred stocks. The Sub-Adviser 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 Sub-Adviser purchases for the Fund must be made in the equities of
companies that have market capitalization of $2 billion or less. In addition,
the Sub-Adviser has been hired 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 require the
Sub-Advisers to reduce their portfolios' exposure to stocks that fail to be
defined by Morningstar as "value stocks". In addition, the Adviser may require
the Sub-Advisers to reduce their portfolios' exposure to stocks that exceed $2
billion market capitalization.
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 Sub-Adviser. The Sub-Adviser should not make any
additional purchases into stocks that are outside of the definition, although
reinvestments of dividends are allowed.
Finally, the Sub-Adviser may have as few as 8 stocks and as many as 13
stocks in their portfolio at any time. The Sub-Adviser has discretion as to the
weighing of the holdings, but no single holding should exceed 30% nor fall below
2% of the portfolio at the time of purchase, and in no case should a single
holding exceed 50% nor fall below 2% of the portfolio. If the latter is true,
the Adviser will require the Sub-Advisor to reduce exposure to below 50% or
increase exposure to above 2% immediately.
2. Allowable Investments
Sub-Adviser 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; -- all subject
to the small-cap value definition; 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 20.0% of
the portfolio unless approved by the adviser. Any one equity position may not
exceed 50% of the sub-adviser's portfolio nor be less than 2% of the
sub-adviser's portfolio. No purchases may be made into equities, which already
represent in excess of 30% of the sub-adviser's portfolio.
4. Prohibited Investments
All other investments not specifically listed as Allowable Investments in
Schedule A.
5. Reporting and Notification
Any new sales or purchases must have a description of reason within 7-days
of the transaction, via e-mail or mail. This will allow the adviser to inform
shareholders of the change in positions and the reasons. In addition, the fund
intends to publish a quarterly report which will include positions and a
commentary from each sub-adviser. The Trustees of the Fund also have the right
to a review with the sub-adviser at their discretion. Finally, all copies of
trading tickets should be forwarded to the fund and/or its agent.
6. Guideline Review
[Sub-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 A 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 B
(Quintara Small Cap Value Fund)
Allocation:
------------
Each sub-adviser will be allocated an equal amount of the assets of the
Quintara Small Cap Value Fund ("the Fund") on the first day of operation of the
Fund, plus an equal amount of daily net flows (positive and negative) to and
from the Fund. (The Adviser, however, has the right to reallocate the assets
between sub-advisers, if the Adviser deems such reallocation necessary to the
performance of the Fund as a whole.) Sub-advisers may manage more or less than
other sub-advisers of the Fund, depending on their performance. It is expected
that, when new sub-advisers are retained to replace departing sub-advisers, the
sub-adviser assets of the new sub-advisers would be those assets previously
managed by the departing sub-advisers (which may be less or more than other
sub-advisers of the Fund), provided, however, that this general expectation is
subject to the Adviser's discretion to re-allocate assets in the best interest
of the Fund as whole. Thereafter, the new sub-adviser will receive an amount of
the daily net flows (positive and negative) to and from the Fund equal to the
other sub-advisers.
