INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement (this “Agreement”) dated as of February 26, 2015 is among Little Harbor Advisors, LLC (the “Investment Manager”), Hadron Capital LLP (the “Portfolio Adviser”), and Little Harbor MultiStrategy Composite Fund, a Delaware statutory trust (the “Fund”) that is registered as a management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). In consideration of the promises and mutual covenants contained herein, the Investment Manager, the Portfolio Adviser and, with respect to Section 3(c), 5, 6 and 10 only, the Fund agree as follows:
(a) In accordance with and subject to the Investment Management Agreement dated as of June 11, 2014 (the “Management Agreement”) between the Fund and the Investment Manager, the Investment Manager hereby appoints and authorizes the Portfolio Adviser to act as sub-adviser with respect to a portion of the Fund held in a sub-account on the records of the Fund’s custodian (the “Sub-Account”). The Portfolio Adviser hereby accepts such appointment subject to the terms of this Agreement.
(b) The Portfolio Adviser shall regularly provide the Investment Manager and the Fund with respect to Fund assets in the Sub-Account (the “Portfolio Assets”) with investment research, advice, management and supervision, and the Portfolio Adviser shall furnish to the Investment Manager and the Fund a continuous investment program for the Portfolio Assets consistent with (i) the Fund’s investment objectives, policies and restrictions, as stated in the Fund’s registration statement on Form N-2 filed with the Securities and Exchange Commission’s Electronic Data-Gathering, Analysis, and Retrieval (XXXXX) system (the “Registration Statement”), and (ii) the Portfolio Adviser’s investment strategy as described in the Registration Statement. Subject to the supervision of the Fund’s Trustees and the Investment Manager, as well as the investment guidelines as described in the Registration Statement (collectively, the “Investment Guidelines”), the Investment Manager grants the Portfolio Adviser full discretion as to all investment decisions regarding the Portfolio Assets, including the authority to (i) buy, sell, transfer and hold for investment, or otherwise deal in, cash and Financial Instruments (as such term is defined in Appendix A) in the Sub-Account, and (ii) exercise in the Portfolio Adviser’s discretion all rights, powers, privileges and other incidents of ownership with respect to Financial Instruments in the Sub-Account; provided, however, that the Investment Manager may determine and then direct the Portfolio Adviser to invest the Portfolio Assets in any collective investment fund that the Portfolio Adviser, or one of its affiliates, manages or serves as general partner or manager, notwithstanding the delegation of full discretionary authority to the Portfolio Adviser in this Section 1.
(a) The Portfolio Adviser may not (i) transfer any Portfolio Asset into an account or sub-account at any custodian, other than the Sub-Account, without the Fund’s written authorization, or (ii) without the express written consent of the Investment Manager, employ in managing the Portfolio Assets any investment strategy materially different from the Portfolio Adviser’s investment strategy as described in the Registration Statement;
1 of 12
(b) The Portfolio Adviser shall not be responsible for any expenses of the Fund relating to trading the Portfolio Assets, including brokerage commissions, custodial fees, service fees, legal fees and expenses attempting to protect or enhance the value of the Financial Instruments in the Sub-Account, and any amounts due on Portfolio Asset-related loans and debit balances or, if Portfolio Assets are invested in any collective investment fund, unless otherwise agreed by the Portfolio Adviser, the Fund’s share of the collective investment fund’s expenses and profit allocations. Subject to the immediate preceding sentence, the Portfolio Adviser, at its expense, shall (i) establish, monitor and oversee the risk profile and compliance with the Investment Guidelines of the Portfolio Assets, taken as a whole, and (ii) supply the Investment Manager and, if specifically requested, the Trustees and officers of the Fund, with all information and reports reasonably required by them relating to the services provided by the Portfolio Adviser hereunder;
(c) Notwithstanding anything in this Agreement to the contrary, the Portfolio Adviser shall not have any authority to take or have possession of any Fund asset or to direct delivery of any Fund asset or payment of any funds held in the Sub-Account to itself, or to direct any disposition of any Fund asset or funds, except (i) to the Fund, (ii) for counter-value, or (iii) as provided in Section 2(b) of this Agreement;
(d) The Investment Manager appoints the Portfolio Adviser as agent and attorney-in-fact to the Investment Manager, which is the agent and attorney-in-fact to the Fund, in each case with full power and authority to (i) buy, sell and otherwise deal in Financial Instruments and contracts relating to the same for the Sub-Account, (ii) unless specifically directed in writing by the Investment Manager or the Fund, exercise all voting rights and take all corporate actions with respect to every Financial Instrument in the Sub-Account, and (iii) do and perform every act necessary and proper to be done in the exercise of the powers granted to it pursuant to this Agreement as fully as the Investment Manager, as agent and attorney-in-fact of the Fund, might or could do if personally present;
(e) The Investment Manager acknowledges that, notwithstanding anything in this Agreement to the contrary: (i) the Portfolio Adviser is not making, and has not made, any express or implied guarantee that it will achieve any investment objective, including the investment objective described in the Registration Statement and (ii) the Investment Manager understands the risks of the Portfolio Adviser’s investment strategy with respect to the Portfolio Assets, including the risk that the Portfolio Assets could suffer substantial diminution or total loss in value, and the Fund has the financial resources to accept that risk;
(f) Except as may otherwise be agreed to by the parties, the value of each Financial Instrument or currency in the Sub-Account will be equal to its then-current market value or determined as otherwise provided in accordance with procedures adopted from time to time by the Trustees of the Fund, and the value of the Portfolio Assets will be the “current net asset value” of the Portfolio Assets, taken as a whole;
2 of 12
(g) The Investment Manager shall promptly notify the Portfolio Adviser in writing if at any time: (i) there has been a change in the Fund’s circumstances, financial or otherwise, that may cause the Fund to breach any agreement to which it is a party, violate any applicable law or regulation, or materially affect or alter the Fund’s investment objective with respect to the Portfolio Assets; (ii) the Investment Manager considers any investment advice provided or investment selected by the Portfolio Adviser that relates to the Portfolio Assets to violate the Investment Guidelines; and (iii) the Investment Manager considers the Portfolio Adviser’s proxy voting policies to violate any law, rule, regulation or proxy voting guidelines applicable to the Fund, the Portfolio Assets or the Sub-Account;
(h) The Investment Manager shall promptly furnish, or use its best efforts to cause the Fund to furnish, to the Portfolio Adviser all data and other information the Portfolio Adviser may reasonably request in the performance of its duties and obligations hereunder; provided, that the Portfolio Adviser acknowledges that the Investment Manager shall not be responsible for the completeness and accuracy of data and information prepared and/or furnished by a person other than the Investment Manager or prepared and furnished by the Investment Manager, in whole or in part, in reliance on data and other information prepared by another person;
(i) The Investment Manager acknowledges that before or at the time that the Investment Manager executed this Agreement, it received a copy of the Portfolio Adviser’s Form ADV, Part 2A and Part 2B;
(j) The Portfolio Adviser may rely on the services of other persons, including brokers, dealers, foreign currency dealers, and futures commission merchants, but not including investment sub-advisers, and the Portfolio Adviser is responsible only for the reasonable selection of such other persons. The Portfolio Adviser may, on the Fund’s behalf, pay a commission to any broker or dealer that also provides “brokerage” and “research services” (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to the Investment Manager, the Fund and/or the other accounts over which the Portfolio Adviser or its affiliates exercise investment discretion, in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Portfolio Adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer;
(k) Unless expressly directed in writing by the Investment Manager, the Portfolio Adviser may not invest any portion of the Portfolio Assets in any collective investment fund that the Portfolio Adviser, or one of its affiliates, manages or serves as general partner or manager;
(l) To the extent required by Rule 17(a)-10 under the 1940 Act and other applicable law, the Portfolio Adviser may not, without the express written consent of the Investment Manager, which consent may be withheld or withdrawn at any time for any reason or no reason, consult with any other investment sub-adviser to the Fund, or any affiliated person of such sub-adviser (as such term is defined in Section 2(a)(3) of the 1940 Act), about securities transactions of the Fund or any portion thereof;
3 of 12
(m) The Portfolio Adviser may manage the assets of other persons, including other collective investment funds, with different objectives, and thus, the Portfolio Adviser may acquire or dispose of an instrument for such other persons while doing the opposite for the Fund, or allocate investment opportunities to such other persons while not allocating such opportunities to the Fund; and
(n) The Investment Manager hereby authorizes any entity or person associated with the Portfolio Adviser that is a member of a national securities exchange to effect any transaction on the exchange for any Sub-Account that is permitted by Section 11(a) of the Exchange Act and Rule 11a2-2(T) thereunder, and the Investment Manager on behalf of the Fund hereby consents to the retention of compensation for such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv). Notwithstanding the foregoing, the Portfolio Adviser will not deal with itself, or with any of the Trustees of the Fund or any principal underwriter of the Fund, as principals or agents in making purchases or sales of securities or other property for the Fund, and the Portfolio Adviser will not purchase, on behalf of the Fund, any securities from an underwriting or selling group in which the Portfolio Adviser or its affiliates is participating, or arrange for purchases and sales of securities between the Fund and another account advised by the Portfolio Adviser or its affiliates, except in each case as permitted by the 1940 Act and in accordance with such policies and procedures as may be adopted by the Fund from time to time, and the Portfolio Adviser will comply with all other provisions of the Fund’s Declaration of Trust and By-Laws and the Registration Statement relative to the Portfolio Adviser and its directors, members and officers.
(a) The Portfolio Adviser represents and warrants to the Investment Manager and, with respect to (v) below, the Fund that:
(i) It is registered as an “investment adviser” under the Investment Advisers Act of 1940, as amended (the “Advisers Act”);
(ii) It is registered, or is not required to be registered, as a “commodity trading adviser” under the Commodity Exchange Act, as amended (the “Commodity Exchange Act”), and is a member, or is not required to be a member, of the National Futures Association;
(iii) It has the authority, and has received all necessary consents, authorizations and other permissions necessary to enter into this Agreement and perform the services described in Section 1 of this Agreement as contemplated herein;
(iv) The information in its Form ADV on file with the Investment Adviser Registration Depository is true, correct and complete and not misleading; and
(v) The information in the Registration Statement describing the Portfolio Adviser, its investment strategies, principals and employees that has been reviewed and approved by the Portfolio Adviser is true, correct and complete and not misleading.
4 of 12
For so long as the Portfolio Adviser is performing such services as described in Section 1 of this Agreement, the Portfolio Adviser shall notify the Investment Manager promptly (or, with respect to Section 3(a)(iv), only at such time and in such manner as is required by the instructions to Form ADV) at any time any of such representations and warranties in this Section 3(a) is no longer true and correct or, with the passing of time, no longer would be true or correct, in any material respect.
(b) The Investment Manager represents and warrants to the Portfolio Adviser that:
(i) It is registered as an “investment adviser” under the Advisers Act, is registered or not required to be registered as a “commodity pool operator” under the Commodity Exchange Act, is registered or not required to be registered as a “commodity trading adviser” under the Commodity Exchange Act, and is a member or not required to be a member of the National Futures Association; and
(ii) It has the authority, and has received all necessary consents, authorizations and other permissions necessary to enter into this Agreement and perform its obligations described herein, including permission to engage the Portfolio Adviser as an investment sub-adviser with respect to the Fund.
For so long as the Portfolio Adviser is performing such services as described in Section 1 of this Agreement, the Investment Manager shall notify the Portfolio Adviser promptly if at any time any of such representations and warranties in this Section 3(b) is no longer true and correct or, with the passing of time, no longer would be true or correct, in any material respect.
(c) The Fund represents and warrants to the Portfolio Adviser that:
(i) The Fund is registered under the 1940 Act as a management investment company pursuant to the Registration Statement; each shareholder of the Fund who may be a “client” of the Portfolio Adviser for purposes of Section 205 of the Advisers Act and Rule 205-3 thereunder is a “qualified client,” as such term is defined Rule 205-3(d)(1) under the Advisers Act; and the Fund has elected to be, and is, taxed as a “regulated investment company” in accordance with subchapter M of the Internal Revenue Code of 1986, as amended;
(ii) The information in the Registration Statement (other than information concerning the Portfolio Adviser, its investment strategies, principals and employees that has been reviewed and approved by the Portfolio Adviser) is true, correct and complete and not misleading;
(iii) The Fund is the sole owner of the Portfolio Assets and the Sub-Account, and it holds them free and clear of any liens and other restrictions; and
5 of 12
(iv) No person other than the Investment Manager or, acting collectively, the Trustees of the Fund, has any authority to acquire or dispose of any asset in the Sub-Account.
For so long as the Portfolio Adviser is performing such services as described in Section 1 of this Agreement, the Fund shall notify the Portfolio Adviser promptly if at any time any of such representations and warranties in this Section 3(c) is no longer true and correct or, with the passing of time, no longer would be true or correct, in any material respect.
6 of 12
(a) This Agreement will become effective on the date the Fund commences investment operations and shall continue until it is terminated.
(b) Notwithstanding any other term of this Agreement, this Agreement shall terminate without notice to the Portfolio Adviser 2 years after the inception date, or at each anniversary date thereafter, unless renewal is approved by the Trustees or the shareholders of the Fund in accordance with the 1940 Act.
(c) This Agreement may be terminated by the Investment Manager at any time, without the payment of any penalty, on 60 days’ prior written notice to the Portfolio Adviser. This Agreement may be terminated by the Portfolio Adviser at any time, without the payment of any penalty, on 180 days’ prior written notice to the Investment Manager.
(d) This Agreement will terminate at such time as the Management Agreement terminates. The Investment Manager shall promptly notify the Portfolio Adviser of the earliest to occur of the following events: (i) this Agreement terminates pursuant to this Section 8(d), (ii) the Investment Manager has notified the Fund of its intent to terminate the Management Agreement, and (iii) the Fund has notified the Investment Manager of its intent to terminate the Management Agreement. Any notice provided to the Portfolio Adviser pursuant to this Section 8(d) shall include the date, or the intended date, of termination of the Management Agreement, as the case may be.
(e) Notwithstanding any termination of this Agreement, the Portfolio Adviser shall be entitled to any and all compensation due to the Portfolio Adviser as provided in this Agreement until such time as the Portfolio Adviser no longer is providing any services under Section 1 of this Agreement and no longer owes any fiduciary duty to the Fund, the Portfolio Assets or the Sub-Account.
7 of 12
(f) Notwithstanding any termination of this Agreement pursuant to this Section 8, the following sections of their Agreement shall survive: Sections 5, 6, 7, 8(e), 10, and 11.
14. Governing Law. This Agreement shall be construed and interpreted in accordance with the law of the Commonwealth of Massachusetts applicable to agreements entered into and performed entirely within the Commonwealth of Massachusetts.
8 of 12
[Intentionally Left Blank]
Signature Page to Follow
9 of 12
LITTLE HARBOR ADVISORS, LLC
By: | ||||
Xxxx Xxxxxxx
|
||||
Authorized Person
|
Address: | America’s Cup Building |
00 Xxxxx Xxxx | |
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000 | |
xxxxxxxx@xxxxxxxxxxxxxxxxxxxx.xxx |
HADRON CAPITAL LLP
By: | |||||
|
|||||
Name: | |||||
Title:
|
|
Address: |
Hadron Xxxxxxx XXX
|
0, Xxxxx Xxxxxxxx Xxxxxxxxx
|
|
Xxxxxx XX0X 0XX
|
For Section 3(c), Xxxxxxx 0, Xxxxxxx 0 and Section 10 only:
By: | |||||
|
|||||
Name: |
Xxxx Xxxxxxx
|
||||
Title:
|
President
|
Address: | c/o Little Harbor Advisors, LLC |
America’s Cup Building
|
|
00 Xxxxx Xxxx | |
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
|
|
xxxxxxxx@xxxxxxxxxxxxxxxxxxxx.xxx |
10 of 12
APPENDIX A
Certain Definitions
“Financial Instruments” means any asset of any kind whatsoever other than cash, and shall include: (a) all instruments held in or credited to the Sub-Account, (b) all financial assets and all security entitlements with respect to all financial assets from time to time credited to the securities accounts comprising the Sub-Account, and all financial assets, and all dividends, distributions, return of capital, interest, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such security entitlements or financial assets held in or credited to the Sub-Account, (c) all other investment property (including all (i) securities, whether certificated or uncertificated, (ii) security entitlements, (iii) securities accounts, (iv) swap agreements, options and futures, and (v) foreign currency), the certificates or instruments, if any, representing or evidencing such investment property, and all dividends, distributions, return of capital, interest, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property held in or credited to the Sub-Account, and (d) all proceeds of, collateral for, income, and supporting obligations relating to, any and all of the foregoing held in or credited to the Sub-Account.
11 of 12
APPENDIX B
Pursuant to Section 4 of this Agreement, the Investment Manager shall pay the Portfolio Adviser an amount equal to the “Portfolio Adviser’s Share” of 70 percent of each of the amount of the Management Fee and any Incentive Fee (as each are defined in the Registration Statement; provided, that the Management Fee will not be less than 2% and any the Incentive Fee will not be less than 20%) received by the Investment Manager from the Fund pursuant to the Management Agreement. For purposes of this Appendix B, “Portfolio Adviser’s Share” on any day means the percentage equal to the net asset value of the Portfolio Assets divided by the net asset value of the Fund, each determined as of the close of business on such day but prior to taking into account any subscriptions and redemptions on that date.
All amounts payable to the Portfolio Adviser pursuant to Section 4 of this Agreement will be paid by the Investment Manager within 10 days of receipt of any Management Fee and/or Incentive Fee received by the Investment Manager under the Management Agreement.
12 of 12