FORM OF
SUB-ADVISORY AGREEMENT
between
FBR FUND ADVISERS, INC.
and
XXXX CAPITAL MANAGEMENT, LLC
This AGREEMENT made as of the ___ day of _______, 2000, by and between
FBR Fund Advisers, Inc., a Delaware corporation (the "Advisor"), and Xxxx
Capital Management, LLC, a Delaware limited liability company (the
"Sub-Advisor").
WHEREAS, the FBR Family of Funds, a Delaware business trust (the
"Trust"), is authorized to issue one or more series of shares of beneficial
interest;
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor and the Trust have entered into an Investment
Advisory Agreement ("Primary Agreement") under which the Advisor is obligated to
furnish investment advisory services to the Trust's series, and Section 1(c) of
the Primary Agreement permits the Advisor to, from time to time, retain a
sub-adviser to provide day-to-day portfolio management services to all or part
of a series' investment portfolio;
WHEREAS, the Advisor desires to retain the Sub-Advisor to furnish
day-to-day portfolio advisory services to the Trust's series listed on Schedule
A (each, a "Fund" and collectively, the "Funds"), and the Sub-Advisor represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Subject to the approval of the Trust's Board of Trustees
(the "Board"), including a majority of the trustees who are not parties
to this Agreement or "interested persons" of any such party
("Independent Trustees"), and each Fund's shareholders, the Advisor
hereby appoints the Sub-Advisor to provide day-to-day advisory services
to each Fund, or to such assets of each Fund as determined by the
Advisor, for the period and on the terms set forth in this Agreement.
The Sub-Advisor accepts such appointment and agrees to furnish the
services described herein for the compensation described herein.
2. Delivery of Documents. The Sub-Advisor has delivered to the Advisor
copies of each of the following documents along with all amendments
thereto through the date hereof, and will promptly deliver to the
Advisor any future amendments and supplements thereto, if any:
(a) the Sub-Advisor's registration statement, and any amendments
thereto, filed on Form ADV under the Investment Advisers Act of
1940, as amended ("Advisers Act"), as filed with the Securities and
Exchange Commission (the "Commission");
(b) the Sub-Advisor's Trade Allocation Policy; and
(c) the Sub-Advisor's Code of Ethics and Xxxxxxx Xxxxxxx Policy.
3. Sub-Advisory Services.
(a) General. The Sub-Advisor hereby agrees to provide day-to-day
portfolio advisory services to the Fund or Funds. The Sub-Advisor
shall regularly provide investment advice to the Fund or Funds, or
to the assets of any such Fund allocated to the Sub-Advisor by the
Advisor, and shall continuously supervise the investment and
reinvestment of cash, securities and other property composing the
assets of the Fund or Funds and, in furtherance thereof, shall, in a
manner consistent with the investment objective and policies of each
Fund as set forth in the Fund's then-current Prospectus and
Statement of Additional Information:
(i) furnish a continuous investment program for each Fund;
(ii)obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the economy generally, investment
programs of each Fund, and the issuers of securities
included in each Fund's portfolios and the industries in
which each Fund engages, or which may relate to securities
or other investments which the Sub-Advisor may deem
desirable for inclusion in each Fund's portfolio;
(iii) determine which issuers and securities shall be included
in the portfolio of each Fund;
(iv)in its discretion and without prior consultation with the
Advisor, buy, sell, lend and otherwise trade any stocks,
bonds and other securities and investment instruments on
behalf of each Fund; and
(v) take, on behalf of each Fund, all actions the Sub-Advisor
may deem necessary or appropriate in order to carry into
effect such investment program and the Sub-Advisor's
functions as set forth above.
(b) Covenants. The Sub-Advisor shall carry out its investment advisory
and supervisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i)
each Fund's Prospectus and Statement of Additional Information as
revised and in effect from time to time; (ii) the Trust's Trust
Instrument, Bylaws or other governing instruments, as amended from
time to time; (iii) the 1940 Act; (iv) the Advisers Act; (v) other
applicable laws; and (vi) such other investment policies, procedures
and/or limitations as may be adopted by the Trust with respect to a
Fund and provided to the Sub-Advisor in writing by the Advisor or
the Trust. The Sub-Advisor agrees to use reasonable efforts to
manage each Fund so that it will qualify, and continue to qualify,
as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended, and regulations issued thereunder
(the "Code"), except as may be authorized to the contrary by the
Trust's Board of Trustees. The management of each Fund by the
Sub-Advisor shall at all times be subject to the supervision and
review of the Advisor and the Trust's Board of Trustees.
(c) Books and Records. The Sub-Advisor agrees that all records which it
maintains for a Fund are the property of the Trust and agrees to
promptly surrender any of such records to the Trust upon the Trust's
or the Advisor's request. The Sub-Advisor further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act any such
records of the Funds required to be preserved by such Rule and to
keep all records required to be preserved by the Advisers Act.
(d) Reports, Evaluations and other Services. The Sub-Advisor shall
furnish reports, evaluations, information or analyses to the Advisor
or the Trust with respect to the Funds and in connection with the
Sub-Advisor's services hereunder as the Advisor or the Trust's Board
of Trustees may request from time to time or as the Sub-Advisor may
otherwise deem to be necessary or appropriate. The Sub-Advisor shall
make recommendations to the Advisor or the Trust's Board of Trustees
with respect to Trust policies, and shall carry out all policies
that are adopted by the Board of Trustees. The Sub-Advisor shall,
subject to review by the Advisor and the Board of Trustees, furnish
such other services as the Sub-Advisor shall from time to time
determine to be necessary or appropriate to perform its obligations
under this Agreement. The Sub-Advisor shall cooperate fully with the
Trust's independent auditors and with the Advisor in connection with
any annual audit, the preparation of filings with the Commission,
and in connection with any examination of the Trust or the Advisor
by the Commission.
(e) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Sub-Advisor may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased with
those of other Funds or accounts advised by the Sub-Advisor. The
Sub-Advisor will aggregate trades if, in the Sub-Advisor's
reasonable judgment, such aggregation (i) will result in an overall
economic benefit to the Fund, taking into consideration the
advantageous selling or purchase price, brokerage commission and
other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the Trust's registration
statement and the Fund's Prospectus and Statement of Additional
Information.
In the event that the Sub-Advisor aggregates any securities
transactions as provided for above, the Sub-Advisor will allocate
the securities so purchased or sold, and the expenses incurred in
the transaction, in an equitable manner, consistent with its
fiduciary obligations to each Fund and such other accounts of the
Sub-Advisor.
(f) Meetings: The Sub-Advisor will meet with the Advisor on a periodic
basis, as reasonably requested by the Advisor, to review the
responsibilities of each party and discuss any operational issues.
4. Use of Sub-Advisory Performance Information.
(a) With respect to each Fund for which the Sub-Advisor provides
investment advisory service pursuant to this Agreement, the
Sub-Advisor shall permit the Advisor and the Trust to include in the
Trust's Prospectus and/or Statement of Additional Information
performance figures relating to any private accounts and/or
registered investment companies that have substantially similar
investment objectives and policies to a Fund, provided that the
inclusion of any such prior performance satisfies all applicable SEC
rules, regulations, and interpretive positions.
(b) Nothing herein shall prohibit the Sub-Advisor or any of its
principals from using the name of a Fund, the Trust or the Advisor
in a biographical description of the Sub-Advisor or its principals
or prohibit the use of the performance of a Fund or the Trust (to
the extent permissible under the U.S. federal and state securities
laws and regulations) in sales literature, advertising material or
other communications of the Sub-Advisor that describes the composite
performance record of the Sub-Advisor or its principals.
5. Representations and Warranties.
(a) The Sub-Advisor hereby represents and warrants to the Advisor as
follows:
(i) The Sub-Advisor is a limited liability company duly
organized and in good standing under the laws of the State
of Delaware and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii)The Sub-Advisor is registered as an investment adviser with
the Commission under the Advisers Act, and is registered or
licensed as an investment adviser under the laws of all
applicable jurisdictions. The Sub-Advisor shall maintain
such registrations or licenses in effect at all times during
the term of this Agreement.
(iii) The Sub-Advisor is not the subject of any administrative
proceeding by any state, federal or other regulatory body.
(iv)The Sub-Advisor at all times shall provide service to the
Funds hereunder using its reasonable best judgment and
efforts to carry out its obligations to the Funds hereunder.
(b) The Advisor hereby represents and warrants to the Sub-Advisor as
follows:
(i) The Advisor is a corporation duly organized and in good
standing under the laws of the State of Delaware and is
fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder.
(ii)The Advisor is registered as an investment adviser with the
Commission under the Advisers Act, and is registered or
licensed as an investment adviser under the laws of all
applicable jurisdictions. The Advisor shall maintain such
registrations or licenses in effect at all times during the
term of this Agreement.
(iii) The Advisor is not the subject of any administrative
proceeding by any state, federal or any other regulatory
body.
(iv)The Advisor at all times shall provide service to the Funds
using its reasonable best judgement and efforts to carry out
its obligations to the Funds.
(v) To the extent that the Funds incur losses as a result of the
Advisor's failure to adequately fulfill its duties to the
Funds, the Advisor agrees that it shall be solely
responsible to make the Funds whole.
6. Compensation. As compensation for the services which the Sub-Advisor is
to provide pursuant to Paragraph 3, the Advisor shall pay to the
Sub-Advisor the greater of (i) an annual fee, computed and accrued
daily and paid in arrears on the first business day of every month, at
the rate set forth opposite each Fund's name on Schedule A, which shall
be a percentage of the average daily net assets of the Fund (computed
in a manner consistent with the Fund's most recent Prospectus and
Statement of Additional Information) determined as of the close of
business on each business day throughout the month, or (ii) $3,500 per
month. The fee for any partial month under this Agreement shall be
calculated on a proportionate basis.
7. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and shareholders of the
Trust are, may be, or may become, interested in the Sub-Advisor as
directors, officers or otherwise, and that directors, officers and
shareholders of the Sub-Advisor are, may be, or may become, similarly
interested in the Trust.
8. Non-Exclusive Services; Limitation of Sub-Advisor's Liability. The
services of the Sub-Advisor provided to each of the Funds are not to be
deemed exclusive and the Sub-Advisor may render similar services to
others and engage in other activities. In the absence of willful
misfeasance, bad faith, negligence or reckless disregard of obligations
or duties hereunder on the part of the Sub-Advisor, or a breach of
fiduciary duty with respect to receipt of compensation, neither the
Sub-Advisor nor any of its directors, officers, shareholders, agents,
or employees shall be liable or responsible to the Advisor, the Trust,
the Funds or to any shareholder of the Funds for any error of judgment
or mistake of law or for any act or omission in the course of, or
connected with, rendering services hereunder or for any loss suffered
by the Advisor, the Trust, a Fund or any shareholder of a Fund in
connection with the performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall become
effective on _______ , 2000.
(a) This Agreement shall continue in force for an initial term of two
years from its effective date with respect to a Fund. Thereafter,
this Agreement may be renewed as to each Fund for successive annual
periods, provided that the Agreement is approved by the Trust's
Board, including a majority of Independent Trustees.
(b) Notwithstanding the foregoing provisions of this Paragraph 9, either
party hereto may terminate this Agreement at any time on sixty (60)
days' prior written notice to the other, without payment of any
penalty. Such a termination by the Advisor may be effected severally
as to any particular Fund. In addition, this Agreement may be
terminated by the Board of Trustees or, with respect to any Fund, by
a majority vote of the Fund's shareholders, without penalty, upon 60
days' prior written notice. This Agreement shall terminate
automatically in the event of its assignment.
10. Limitation of Liability of Trustees and Shareholders. The Sub-Advisor
acknowledges the following limitation of liability: The terms "The FBR
Family of Funds" and "Trustees" refer, respectively, to the Trust and
the Trustees, as trustees but not individually or personally, acting
from time to time under the Trust Instrument, to which reference is
hereby made, such reference being inclusive of any and all amendments
thereto so filed or hereafter filed. The obligations of "The FBR Family
of 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 assets of the Trust, and all persons dealing with the Trust or a
Fund must look solely to the assets of the Trust or Fund for the
enforcement of any claims against the Trust or Fund.
11. Certain Definitions. The terms "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers
Act shall be construed as references to such laws as now in effect or
as hereafter amended, and shall be understood as inclusive of any
applicable rules, interpretations and/or orders adopted or issued
thereunder by the Commission.
12. Independent Contractor. The Sub-Advisor shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the
Trust or the Advisor from time to time, have no authority to act for or
represent a Fund in any way or otherwise be deemed an agent of a Fund
or of the Advisor.
13. Structure of Agreement. This Agreement is between the Advisor and the
Sub-Advisor and is separate and independent from any agreements between
the Advisor and the Trust. The Sub-Advisor shall have no recourse
against the Trust or any Fund of the Trust. The responsibilities and
benefits set forth in this Agreement shall refer to each Fund severally
and not jointly. No Fund shall have any responsibility for any
obligation of the Advisor arising out of this Agreement. Without
otherwise limiting the generality of the foregoing:
(a) any breach of any term of this Agreement regarding the Advisor with
respect to any one Fund shall not create a right or obligation with
respect to any other Fund;
(b) under no circumstances shall the Sub-Advisor have the right to set
off claims relating to the services to a particular Fund by applying
property of that particular Fund or any other Fund or account
managed by the Sub-Advisor; and
(c) the business and contractual relationships created by this
Agreement, consideration for entering into this Agreement, and the
consequences of such relationship and consideration relate solely to
the Advisor and Sub-Advisor.
This Agreement is intended to govern only the relationships between the
Advisor, on the one hand, and the Sub-Advisor, on the other hand, and
(except as specifically provided above in this Paragraph 13) is not
intended to and shall not govern (i) the relationship between the Trust
and any Fund, (ii) the relationships among the respective Funds, or
(iii) the relationship between the Advisor and the Trust or any of the
Funds.
14. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or the Advisers Act.
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 and, to this extent,
the provisions of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Advisor hereunder by
the Sub-Advisor shall be in writing and shall be duly given if mailed
or delivered to the Advisor at Potomac Tower, 0000 Xxxxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: _________________ or at
such other address or to such individual as shall be so specified by
the Advisor, or if sent via facsimile, to the recipient's current
facsimile number as contained in the sender's records. Notices of any
kind to be given to the Sub-Advisor shall hereunder by the Advisor be
in writing and shall be duly given if mailed or delivered to the
Sub-Advisor at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxx, Xx. or at such other address or to such
individual as shall be so specified by the Sub-Advisor, or if sent via
facsimile, to the recipient's current facsimile number as contained in
the sender's records. Notices shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
FBR FUND ADVISERS, INC. XXXX CAPITAL MANAGEMENT, LLC
By:____________________________ By:____________________________
Name: Name:
Title: Title:
Schedule A
Name of Fund Fee*
------------ ----
FBR Small Cap Value Fund 0.40%
-----------
* As a percentage of average daily net assets.
