Exhibit 4(b)(x)(3)
THE MASTERS' SELECT VALUE FUND
MASTERS' SELECT INVESTMENT TRUST
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT is made as of the ___ day of ____2000 by
and between XXXXXX/XXXXXXX FUND ADVISORS, LLC (hereinafter called the "Advisor")
and XXXXXX ASSOCIATES, L.P.(hereinafter called "Sub-Advisor").
WITNESSETH:
WHEREAS, the Advisor has been retained as the investment adviser to
The Masters' Select Value Fund (the "Fund"), a series of Masters' Select Funds
Trust (the "Trust"), an open-end management investment company, registered as
such under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, the Advisor has been authorized by the Trust to retain one or
more investment advisers (each an "investment manager") to serve as portfolio
managers for a specified portion of the Fund's assets (the "Allocated Portion");
and
WHEREAS, Sub-Advisor is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
is engaged in the business of supplying investment advisory services as an
independent contractor; and
WHEREAS, the Fund and the Advisor desire to retain Sub-Advisor as an
investment manager to render portfolio advice and services to the Fund pursuant
to the terms and provisions of this Agreement, and Sub-Advisor desires to
furnish said advice and services; and
WHEREAS, the Trust and the Fund are third party beneficiaries of such
arrangements;
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties to this Agreement, which shall
include the Trust on behalf of the Fund for purposes of the indemnification
provisions of section 11 hereof, intending to be legally bound hereby, mutually
agree as follows:
1. APPOINTMENT OF SUB-ADVISOR.
(a) The Advisor hereby employs Sub-Advisor, and Sub-Advisor hereby
accepts such employment, to render investment advice and related services with
respect to the Allocated Portion of the assets of the Fund for the period and on
the terms set forth in this Agreement, subject to the supervision and direction
of the Advisor and the Trust's Board of Trustees.
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(b) Sub-Advisor's employment shall be solely with respect to an
Allocated Portion of the Fund's assets, such Allocated Portion to be specified
by the Advisor and subject to periodic increases or decreases at the Advisor's
sole discretion.
2. DUTIES OF SUB-ADVISOR.
(a) GENERAL DUTIES. Sub-Advisor shall act as one of several investment
managers to the Fund and shall invest Sub-Advisor's Allocated Portion of the
assets of the Fund in accordance with the investment objectives, policies and
restrictions of the Fund as set forth in the Fund's and the Trust's governing
documents, including, without limitation, the Trust's Agreement and Declaration
of Trust and By-Laws; the Fund's prospectus, statement of additional information
and undertakings; and such other limitations, policies and procedures as the
Advisor or the Trustees of the Trust may impose from time to time in writing to
Sub-Advisor. In providing such services, Sub-Advisor shall at all times adhere
to the provisions and restrictions contained in the federal securities laws,
applicable state securities laws, the Internal Revenue Code, and other
applicable law. Advisor shall provide to Sub-Advisor such information with
respect to the Fund such that Sub-Advisor will be able to maintain compliance
with applicable regulations, laws, policies, and restrictions with respect to
Sub-Advisor's Allocated Portion.
Without limiting the generality of the foregoing, Sub-Advisor shall:
(i) furnish the Fund with advice and recommendations with respect to the
investment of the Sub-Advisor's Allocated Portion of the Fund's assets, (ii)
effect the purchase and sale of portfolio securities for Sub-Advisor's Allocated
Portion; (iii) determine that portion of Manager's Allocated Portion that will
remain uninvested, if any; (iv) manage and oversee the investments of the
Sub-Advisor's Allocated Portion, subject to the ultimate supervision and
direction of the Trust's Board of Trustees; (v) vote proxies, file required
ownership reports, and take other actions with respect to the securities in
Sub-Advisor's Allocated Portion; (vi) maintain the books and records required to
be maintained with respect to the securities in Sub-Advisor's Allocated Portion;
(vii) furnish reports, statements and other data on securities, economic
conditions and other matters related to the investment of the Fund's assets
which the Advisor, the Trustees, or the officers of the Trust may reasonably
request; and (viii) render to the Trust's Board of Trustees such periodic and
special reports with respect to Sub-Advisor's Allocated Portion as the Board may
reasonably request.
(b) BROKERAGE. With respect to Sub-Advisor's Allocated Portion,
Sub-Advisor shall be responsible for broker-dealer selection and for negotiation
of brokerage commission rates. Sub-Advisor may direct orders to an affiliated
person of the Sub-Advisor or to any other broker-dealer who has been identified
by the Advisor to the Sub-Advisor as an affiliate of any other investment
manager without prior authorization to use such affiliated broker or dealer by
the Trust's Board of Trustees, provided that Sub-Advisor does so in a manner
consistent with Sections 17(a) and 17(e) of the Investment Company Act, Rule
17e-1 thereunder and the Rule 17e-1 procedures adopted by the Trust (a copy of
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which shall by provided by the Advisor). Sub-Advisor's primary consideration in
effecting a securities transaction will be execution at the most favorable
price. In selecting a broker-dealer to execute each particular transaction,
Sub-Advisor may take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. The price to the Fund in any transaction may
be less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the portfolio execution
services offered.
Subject to such policies as the Advisor and the Board of Trustees of
the Trust may determine, Sub-Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides (directly or indirectly) brokerage or research services to Sub-Advisor
an amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if Sub-Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or Sub-Advisor's or Advisor's overall responsibilities
with respect to the Fund. Sub-Advisor is further authorized to allocate the
orders placed by it on behalf of the Fund to such brokers or dealers who also
provide research or statistical material, or other services, to the Trust, the
Advisor, any affiliate of either, or the Sub-Advisor. Such allocation shall be
in such amounts and proportions as Sub-Advisor shall determine, and Sub-Advisor
shall report on such allocations regularly to the Advisor and the Trust,
indicating the broker-dealers to whom such allocations have been made and the
basis therefor. Sub-Advisor is also authorized to consider sales of shares of
the Fund as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best execution, I.E., that such
brokers or dealers are able to execute the order promptly and at the best
obtainable securities price.
On occasions when Sub-Advisor deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients of Sub-Advisor,
Sub-Advisor, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and the most efficient execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by Sub-Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
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3. REPRESENTATIONS OF SUB-ADVISOR.
(a) Sub-Advisor shall use its best judgment and efforts in rendering
the advice and services to the Fund as contemplated by this Agreement.
(b) Sub-Advisor shall maintain all licenses and registrations
necessary to perform its duties hereunder in good order.
(c) Sub-Advisor shall conduct its operations at all times in
conformance with the Investment Advisers Act, the Investment Company Act and any
other applicable state and/or self-regulatory organization regulations.
(d) Sub-Advisor shall be covered by errors and omissions insurance.
The company self-retention or deductible shall not exceed reasonable and
customary standards, and Sub-Advisor agrees to notify Advisor in the event the
aggregate coverage of such insurance in any annual period is reduced below
$10,000,000.
4. INDEPENDENT CONTRACTOR. Sub-Advisor shall, for all purposes herein, be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized to do so, have no authority to act for or represent the
Trust, the Fund, or the Advisor in any way, or in any way be deemed an agent for
the Trust, the Fund, or the Advisor. It is expressly understood and agreed that
the services to be rendered by Sub-Advisor to the Fund under the provisions of
this Agreement are not to be deemed exclusive, and Sub-Advisor shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
5. SUB-ADVISOR'S PERSONNEL. Sub-Advisor shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of Sub-Advisor shall be
deemed to include persons employed or retained by Sub-Advisor to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice, and assistance as
Sub-Advisor, the Advisor or the Trust's Board of Trustees may desire and
reasonably request.
6. EXPENSES.
(a) Sub-Advisor shall be responsible for (i) providing the personnel,
office space, and equipment reasonably necessary to fulfill its obligations
under this Agreement.
(b) In the event this Agreement is terminated by an assignment in the
nature of a change of control as contemplated by Section 14(b) hereof, and the
parties agree to enter into a new agreement, Sub-Advisor shall be responsible
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for (i) the costs of any special notifications to the Fund's shareholders and
any special meetings of the Trust's Board of Trustees convened for the primary
benefit of Sub-Advisor, or (ii) its fair share of the costs of any special
meetings required for the benefit of Sub-Advisor as well as for other purposes.
(c) Sub-Advisor may voluntarily absorb certain Fund expenses or waive
some or all of Sub-Advisor's own fee.
(d) To the extent Sub-Advisor incurs any costs by assuming expenses
which are an obligation of the Advisor or the Fund, the Advisor or the Fund
shall promptly reimburse the Sub-Advisor for such costs and expenses. To the
extent Sub-Advisor performs services for which the Fund or the Advisor is
obligated to pay, Sub-Advisor shall be entitled to prompt reimbursement in such
amount as shall be negotiated between Sub-Advisor and the Advisor but shall,
under no circumstances, exceed Sub-Advisor's actual costs for providing such
services.
7. INVESTMENT SUB-ADVISORY FEE.
(a) The Advisor shall pay to Sub-Advisor, and Sub-Advisor agrees to
accept, as full compensation for all investment advisory services furnished or
provided to the Fund pursuant to this Agreement, an annual sub-advisory fee
based on Sub-Advisor's Allocated Portion, as such Allocated Portion may be
adjusted from time to time. Such fee shall be equal to 0.65% of the first
$50,000,000 of average daily net assets of the Fund attributable to
Sub-Advisor's Allocated Portion, 0.60% of the next $50 million of average daily
net assets of the Fund attributable to the Sub-Advisor's Allocated Portion, and
0.55% of any additional average daily net assets of the Fund attributable to the
Sub-Advisor's Allocated Poriton, all computed on the value of such net assets as
of the close of business each day.
(b) The sub-advisory fee shall be paid by the Advisor to Sub-Advisor
monthly in arrears on the tenth business day of each month.
(c) The initial fee under this Agreement shall be payable on the tenth
business day of the first month following the effective date of this Agreement
and shall be prorated as set forth below. If this Agreement is terminated prior
to the end of any month, the fee to Sub-Advisor shall be prorated for the
portion of any month in which this Agreement is in effect which is not a
complete month according to the proportion which the number of calendar days in
the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
(d) The fee payable to Sub-Advisor under this Agreement will be
reduced to the extent of any receivable owed by Sub-Advisor to the Advisor or
the Fund.
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(e) Sub-Advisor voluntarily may reduce any portion of the compensation
or reimbursement of expenses due to it pursuant to this Agreement and may agree
to make payments to limit the expenses which are the responsibility of the
Advisor of the Fund under this Agreement. Any such reduction or payment shall be
applicable only to such specific reduction or payment and shall not constitute
an agreement to reduce any future compensation or reimbursement due to
Sub-Advisor hereunder or to continue future payments. Any such reduction will be
agreed to prior to accrual of the related expense or fee and will be estimated
daily and reconciled and paid on a monthly basis.
(f) Sub-Advisor may agree not to require payment of any portion of the
compensation or reimbursement of expenses otherwise due to it pursuant to this
Agreement. Any such agreement shall be applicable only with respect to the
specific items covered thereby and shall not constitute an agreement not to
require payment of any future compensation or reimbursement due to Sub-Advisor
hereunder.
8. NO SHORTING; NO BORROWING. Sub-Advisor agrees that neither it nor any of
its officers or employees shall take any short position in the shares of the
Fund. This prohibition shall not prevent the purchase of such shares by any of
the officers or employees of Sub-Advisor or any trust, pension, profit-sharing
or other benefit plan for such persons or affiliates thereof, at a price not
less than the net asset value thereof at the time of purchase, as allowed
pursuant to rules promulgated under the Investment Company Act. Sub-Advisor
agrees that neither it nor any of its officers or employees shall borrow from
the Fund or pledge or use the Funds assets in connection with any borrowing not
directly for the Fund's benefit.
9. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS. Nothing
herein contained shall be deemed to require the Trust or the Fund to take any
action contrary to the Trust's Agreement and Declaration of Trust, By-Laws, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of the Trust of its responsibility for and control of the conduct of
the affairs of the Trust and the Fund. In this connection, Sub-Advisor
acknowledges that the Advisor and the Trust's Board of Trustees retain ultimate
plenary authority over the Fund, including the Allocated Portion, and may take
any and all actions necessary and reasonable to protect the interests of
shareholders.
10. REPORTS AND ACCESS. Sub-Advisor agrees to supply such information to
the Advisor and to permit such compliance inspections by the Advisor or the Fund
as shall be reasonably necessary to permit the administrator to satisfy its
obligations and respond to the reasonable requests of the Trustees.
11. STANDARD OF CARE, LIABILITY AND INDEMNIFICATION.
(a) Sub-Advisor shall exercise reasonable care and prudence in
fulfilling its obligations under this Agreement.
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(b) Sub-Advisor shall have responsibility for the accuracy and
completeness (and liability for the lack thereof) of the statements furnished by
Sub-Advisor for use by the Advisor in the Fund's offering materials (including
the prospectus, the statement of additional information, advertising and sales
materials) that pertain to Sub-Advisor and the investment of Sub-Advisor's
Allocated Portion of the Fund. Sub-Advisor shall have no responsibility or
liability with respect to other disclosures.
(c) Sub-Advisor shall be liable to the Fund for any loss (including
brokerage charges) incurred by the Fund as a result of any investment made by
Sub-Advisor in violation of Section 2 hereof. (d) Except as otherwise provided
in this Agreement, in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of Sub-Advisor, Sub-Advisor shall not be subject to liability to the
Advisor, the Trust, or the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(e) Each party to this Agreement (as an "Indemnifying Party"),
including the Trust on behalf of the Fund, shall indemnify and hold harmless the
other party and the shareholders, directors, officers, and employees of the
other party (any such person, an "Indemnified Party") against any loss,
liability, claim, damage, or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage, or
expense and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnifying Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
If indemnification is to be sought hereunder, then the Indemnified
Party shall promptly notify the Indemnifying Party of the assertion of any claim
or the commencement of any action or proceeding in respect thereof; provided,
however, that the failure so to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability that it may otherwise have to the
Indemnified Party provided such failure shall not affect in a material adverse
manner the position of the Indemnifying Party or the Indemnified Party with
respect to such claim. Following such notification, the Indemnifying Party may
elect in writing to assume the defense of such action or proceeding and, upon
such election, it shall not be liable for any legal costs incurred by the
Indemnified Party (other than reasonable costs of investigation previously
incurred) in connection therewith, unless (i) the Indemnifying Party has failed
to provide counsel reasonably satisfactory to the Indemnified Party in a timely
manner or (ii) counsel which has been provided by the Indemnifying Party
reasonably determines that its representation of the Indemnified Party would
present it with a conflict of interest.
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The provisions of this paragraph 11(e) shall not apply in any action
where the Indemnified Party is the party adverse, or one of the parties adverse,
to the other party.
(f) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or officer of the Advisor or Sub-Advisor, from
liability in violation of Sections 17(h) and (i) of the Investment Company Act.
12. NON-EXCLUSIVITY; TRADING FOR SUB-ADVISOR'S OWN ACCOUNT. The Advisor's
employment of Sub-Advisor is not an exclusive arrangement. The Advisor
anticipates that it will employ other individuals or entities to furnish it with
the services provided for herein. Likewise, Sub-Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
from buying, selling, or trading any securities for its or their own accounts or
the accounts of others for whom it or they may be acting, provided, however,
that Sub-Advisor expressly represents that it will undertake no activities which
will adversely affect the performance of its obligations to the Fund under this
Agreement; and provided further that Sub-Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Investment Advisers Act,
a copy of which has been provided to the Board of Trustees of the Trust.
13. TERM.
(a) This Agreement shall become effective at the time Advisor
allocates a portion of Fund's assets to Sub-Advisor as approved by a majority of
the Trustees of the Trust who are not parties to this Agreement nor interested
persons thereof, and shall remain in effect for a period of two (2) years,
unless sooner terminated as hereinafter provided. This Agreement shall continue
in effect thereafter for additional periods not exceeding one (1) year so long
as such continuation is approved for the Fund at least annually by (i) the Board
of Trustees of the Trust or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement nor interested persons thereof, cast
in person at a meeting called for the purpose of voting on such approval, and
(iii) the Advisor. The terms "majority of the outstanding voting securities" and
"interested persons" shall have the meanings as set forth in the Investment
Company Act.
(b) The Fund and its distributor may use the Sub-Advisor's trade name
or any name derived from the Sub-Advisor's trade name only in a manner
consistent with the nature of this Agreement for so long as this Agreement or
any extension, renewal, or amendment hereof remains in effect. Within sixty (60)
days from such time as this Agreement shall no longer be in effect, the Fund
shall cease to use such a name or any other name connected with Sub-Advisor.
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14. TERMINATION; NO ASSIGNMENT.
(a) This Agreement may be terminated by the Advisor, the Sub-Advisor,
or the Trust on behalf of the Fund at any time without payment of any penalty,
by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund, upon sixty (60) days' written notice
to the Sub-Advisor, and by the Sub-Advisor upon sixty (60) days' written notice
to the Fund. In the event of a termination, Sub-Advisor shall cooperate in the
orderly transfer of the Fund's affairs and, at the request of the Board of
Trustees, transfer any and all books and records of the Fund maintained by
Sub-Advisor on behalf of the Fund.
(b) This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company Act.
15. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise rendered
invalid, the remainder of this Agreement shall not be affected thereby.
16. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
17. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the Investment Company Act and the Investment Advisers Act and
any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
XXXXXX/XXXXXXX FUND XXXXXX ASSOCIATES, L.P.
ADVISORS, LLC
By: ________________________________ By: __________________________________
Xxxx X. Xxxxxxxx __________________________________
Chief Operating Officer __________________________________
As a Third Party Beneficiary,
MASTERS' SELECT FUNDS TRUST
on behalf of
THE MASTERS' SELECT VALUE FUND
By: ________________________________
Xxxx X. Xxxxxxxx
Treasurer
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