Exhibit 4(c)
INVESTMENT SUB-ADVISORY AGREEMENT
ALPHA SELECT FUNDS
AGREEMENT made this __ day of ________, 2000, by and between Concentrated
Capital Management, LP (the "Adviser") and Fund Asset Management, L.P. doing
business as Mercury Advisors ("Mercury Advisors") (the "Sub-Adviser").
WHEREAS, Alpha Select Funds, a Delaware business trust (the "Trust") is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated _________ __, 2000 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to each series of the Trust set
forth on Schedule A (each a "Fund" and, together, the "Funds"); and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with its management of the Funds, and the Sub-Adviser is willing to
render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. Duties of the Sub-Adviser. Subject to supervision by the Adviser and the
Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Fund entrusted to it by the Adviser
hereunder (the "Assets"), including the purchase, retention and
disposition of the Assets, in accordance with each Fund's investment
objectives, policies and restrictions as stated in the Fund's prospectus
and statement of additional information, as currently in effect and as
amended or supplemented from time to time (referred to collectively as the
"Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, subject to the direction of the Adviser,
determine from time to time what Assets will be purchased, retained
or sold by the Fund, and what portion of the Assets will be invested
or held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Trust's
Declaration of Trust (as defined herein) and the Prospectus and with
the instructions and directions of the Adviser and of the Board of
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, and
all other applicable federal and state laws and regulations, as each
is amended from time to time.
(c) The Sub-Adviser shall determine the Assets to be purchased or sold
by the Fund as provided in subparagraph (a) and will place orders
with or through such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in each Fund's Prospectus
or as the Board of Trustees or the Adviser may direct from time to
time, in conformity with federal securities laws. In executing Fund
transactions and selecting brokers or dealers, the Sub-Adviser will
use its best efforts to seek on behalf of each Fund the best overall
terms available. In assessing the best overall terms available for
any transaction, the Sub-Adviser shall consider all factors that it
deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis.
In evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the Sub-Adviser
may also consider the brokerage and research services provided (as
those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934). Consistent with any guidelines established by the
Board of Trustees of the Trust, the Sub-Adviser is authorized to
negotiate and pay to a broker or dealer who provides such brokerage
and research services a commission for executing a transaction for a
Fund which is in excess of the amount of commission another broker
or dealer would have charged for effecting that transaction if, but
only if, the Sub-Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer viewed in
terms of that particular transaction or in terms of the overall
responsibilities of the Sub-Adviser to the Fund. In addition, the
Sub-Adviser is authorized to allocate purchase and sale orders for
securities to brokers or dealers (including brokers and dealers that
are affiliated with the Adviser, Sub-Adviser or the Trust'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. In no instance, however, will a Fund's
Assets be purchased from or sold to the Adviser, Sub-Adviser, the
Trust's principal underwriter, or any affiliated person of either
the Trust, Adviser, the Sub-Adviser or the principal underwriter,
acting as principal in the transaction, except to the extent
permitted by the Securities and Exchange Commission ("SEC") and the
1940 Act.
(d) The Sub-Adviser shall maintain all books and records with respect to
transactions involving the Assets required by subparagraphs (b)(5),
(6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under
the 1940 Act. The Sub-Adviser shall provide to the Adviser or the
Board of Trustees such periodic and special reports, balance sheets
or financial information, and such other information with regard to
its affairs as the Adviser or Board of Trustees may reasonably
request.
The Sub-Adviser shall keep the books and records relating to the
Assets required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all information
relating to the Sub-Adviser's services under this Agreement needed
by the Adviser to keep the other books and records of a Fund
required by Rule 31a-1 under the 1940 Act. The Sub-Adviser shall
also furnish to the Adviser any other information relating to the
Assets that is required to be filed by the Adviser or the Trust with
the SEC or sent to shareholders under the 1940 Act (including the
rules adopted thereunder) or any exemptive or other relief that the
Adviser or the Trust obtains from the SEC. The Sub-Adviser agrees
that all records that it maintains on behalf of a Fund are property
of the Fund and the Sub-Adviser will surrender promptly to the Fund
any of such records upon the Fund's request; provided, however, that
the Sub-Adviser may retain a copy of such records. In addition, for
the duration of this Agreement, the Sub-Adviser shall preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any such
records as are required to be maintained by it pursuant to this
Agreement, and shall transfer said records to any successor
sub-adviser upon the termination of this Agreement (or, if there is
no successor sub-adviser, to the Adviser).
(e) The Sub-Adviser shall provide each Fund's custodian on each business
day with information relating to all transactions concerning the
Fund's Assets and shall provide the Adviser with such information
upon request of the Adviser.
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(f) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser
shall be free to render similar services to others, as long as such
services do not impair the services rendered to the Adviser or the
Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to
fulfill its commitment under this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the
Assets. The Adviser shall instruct the custodian and other parties
providing services to the Fund to promptly forward proxies to the
Sub-Adviser.
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
2. Duties of the Adviser. The Adviser shall continue to have responsibility
for all services to be provided to each Fund pursuant to the Advisory
Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection
with its management of the Assets, nothing herein shall be construed to
relieve the Sub-Adviser of responsibility for compliance with the Trust's
Declaration of Trust (as defined herein), the Prospectus, the instructions
and directions of the Board of Trustees of the Trust, the requirements of
the 1940 Act, the Internal Revenue Code of 1986, and all other applicable
federal and state laws and regulations, as each is amended from time to
time.
3. Delivery of Documents. The Adviser has furnished the Sub-Adviser with
copies of each of the following documents:
(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the State of Delaware (such Agreement and
Declaration of Trust, as in effect on the date of this Agreement and
as amended from time to time, herein called the "Declaration of
Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");
(c) Prospectus(es) of each Fund, including any relevant Statements of
Additional Information of each such Fund.
4. Compensation to the Sub-Adviser. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefore, a sub-advisory fee at the rate specified in the Schedule A
which is attached hereto and made part of this Agreement. The fee will be
calculated based on the average monthly market value of the Assets under
the Sub-Adviser's management and will be paid to the Sub-Adviser
quarterly. Except as may otherwise be prohibited by law or regulation
(including any then current SEC staff interpretation), the Sub-Adviser
may, in its discretion and from time to time, waive a portion of its fee.
The Sub-Adviser may also be eligible to share in additional compensation
as described in Schedule B, which is attached hereto and made part of this
Agreement.
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5. Indemnification. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related expenses)
howsoever arising from or in connection with the performance of the
Sub-Adviser's obligations under this Agreement; provided, however, that
the Sub-Adviser's obligation under this Section 5 shall be reduced to the
extent that the claim against, or the loss, liability or damage
experienced by the Adviser, is caused by or is otherwise directly related
to the Adviser's own willful misfeasance, bad faith or negligence, or to
the reckless disregard of its duties under this Agreement.
The Adviser shall indemnify and hold harmless the Sub-Adviser from and
against any and all claims, losses, liabilities or damages (including
reasonable attorney's fees and other related expenses) howsoever arising
from or in connection with the performance of the Adviser's obligations
under this Agreement; provided, however, that the Adviser's obligation
under this Section 5 shall be reduced to the extent that the claim
against, or the loss, liability or damage experienced by the Sub-Adviser,
is caused by or is otherwise directly related to the Sub-Adviser's own
willful misfeasance, bad faith or negligence, or to the reckless disregard
of its duties under this Agreement.
6. Duration and Termination. This Agreement shall become effective as to each
and every Fund upon its approval by the Trust's Board of Trustees and by
the vote of a majority of the outstanding voting securities of each Fund.
This Agreement shall continue in effect as to each and every Fund for a
period of more than two years from the date hereof only so long as such
continuance is specifically approved at least annually in conformance with
the 1940 Act; provided, however, that this Agreement may be terminated
with respect to a Fund (a) by the Fund at any time, without the payment of
any penalty, by the vote of a majority of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of the Fund, (b)
by the Adviser at any time, without the payment of any penalty, on 60
days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser at any
time, without the payment of any penalty, on 60 days' written notice to
the Adviser. This Agreement shall terminate automatically and immediately
in the event of its assignment, or as to any Fund in the event of a
termination of the advisory Agreement relating to that Fund. As used in
this Section 6, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject to
such exceptions as may be granted by the SEC under the 1940 Act.
7. Governing Law. This Agreement shall be governed by the internal laws of
the Commonwealth of Pennsylvania, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as
being inconsistent with the 1940 Act.
8. 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
shall inure to the benefit of the parties hereto and their respective
successors.
9. 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:
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To the Adviser at: Concentrated Capital Management, LP
0000 Xxxxx Xxxxxx
Xxxx View Tower, Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000-0000
To the Sub-Adviser at: Mercury Advisors
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
10. 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.
A copy of the Declaration of Trust is on file with the Secretary of State
of the State of Delaware, and notice is hereby given that the obligations of
this instrument are not binding upon any of the Trustees, officers or
shareholders of any Fund or the Trust.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
Concentrated Capital Fund Asset Management, L.P. is
Management, LP doing business as Mercury Advisors
By: By:
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Name: Name:
-------------------- -------------------
Title: Title:
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Schedule A
to the
Sub-Advisory Agreement
between
Concentrated Capital Management, LP
and
Mercury Advisors
Pursuant to Article 4, the Adviser shall pay the Sub-Adviser compensation at an
annual rate as follows:
Target Select Equity Fund
For the Global Small Cap mandate: 1.00%
For the Value mandate: .75%
The Sub-Adviser agrees to waive these fees until the assets in the Fund exceed
$50 million.
Schedule B
to the
Sub-Advisory Agreement
between
Concentrated Capital Management
and
Mercury Advisors
Pursuant to Article 4, the Adviser shall pay the Sub-Adviser, if eligible, a
portion of any performance based fee received by the Advisor from the Fund. The
Adviser only earns a performance based fee when the Fund outperforms the
applicable index by more than 3%. The performance based fee, when earned,
accrues daily based on a trailing 12 month period of performance. The Adviser
will place all performance based fees in a performance pool (the "Pool") to be
divided among eligible sub-advisers at the end of each calendar quarter.
This Schedule B shall become effective and enforceable only upon the Adviser's
demonstration, by delivery of a written opinion of reputable counsel acceptable
to the Sub-Adviser or by such other manner deemed acceptable to the Sub-Adviser,
that the payment of fees to the Sub-Adviser as described in this Schedule B is
in accordance with all applicable legal requirements, including those of the
Investment Company Act of 1940, as amended, and the Investment Advisers Act of
1940, as amended. Upon the failure of the Adviser's counsel to provide such
evidence, the Adviser agrees to negotiate with the Sub-Adviser in good faith a
new fee structure that provides to the Sub-Adviser additional compensation in an
amount at no less advantage than the Sub-Adviser would have received under the
arrangement described herein.
In order to be deemed eligible to share in the Pool, sub-advisers must have
outperformed their respective benchmarks by 3% annually, on a net of
sub-advisory fee basis, as of the calendar quarter end. For the purpose of
eligibility, Sub-Adviser shall have the following benchmarks:
Sub-Adviser Mandate Benchmark
------------------- ---------
Value Xxxxxxx 2500 Value Index
Global Small Cap MSCI World Small Cap Index
The Pool will then be split proportionately among eligible sub-advisers based on
the following calculation:
1. Each eligible sub-adviser's average daily balance of Fund assets
under management will be calculated. The sum of these will determine
the denominator of the fractional percentage to be used.
2. The numerator for the fractional percentage of each eligible
sub-adviser's share of the Pool will be the average daily balance of
Fund assets under management by that sub-adviser.
3. The amount paid to eligible sub-advisers will be the balance of the
Pool at the end of the calendar quarter multiplied by a fraction
whose numerator and denominator is described in (1) and (2),
respectively.
For the purpose of this agreement, each investment mandate that the Sub-Adviser
manages in the Fund will be deemed to be a separate and distinct sub-advisory
relationship.
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Since the Pool is based on 12 month returns, there will be no Pool available
until 12 months from the date the Fund commences operations.
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Performance Base Fee Example
Sub-Advisory Agreement
Between
Concentrated Capital Management
And
Mercury Advisors
Assume 4 sub-advisers managing average daily balances of $32, $30, $20 and $18.
Let's further assume that the first 3 sub-advisers, respectively, are eligible
to share in the Pool. The denominator of the fraction would equal $82
(32+30+20). The first sub-adviser would then earn 39.02% of the Pool (32/82).
The second sub-adviser would earn 36.59% of the Pool (30/82). The third
sub-adviser would earn 24.39% of the Pool (20/82). The fourth sub-adviser is not
eligible and therefore, receives nothing from the Pool.
