Sub-Investment Management Contract
Dated December 3, 2004
XXXX XXXXXXX ADVISERS, LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
XXXX XXXXXXX EQUITY TRUST
Xxxx Xxxxxxx Small Cap Fund
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
INDEPENDENCE INVESTMENT LLC
00 Xxxxx Xxxxxx
Xxxxxx Xxxxxxxxxxxxx 00000
Sub-Investment Management Contract
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Ladies and Gentlemen:
Xxxx Xxxxxxx Equity Trust (the "Trust") has been organized as
a business trust under the laws of The Commonwealth of Massachusetts to engage
in the business of an investment company. The Trust's shares of beneficial
interest may be classified into series, each series representing the entire
undivided interest in a separate portfolio of assets. Series may be established
or terminated from time to time by action of the Board of Trustees of the Trust.
The Board of Trustees has established several series of the Trust, including
Xxxx Xxxxxxx Small Cap Fund (the "Fund").
The Trustees have selected Xxxx Xxxxxxx Advisers, LLC (the
"Adviser") to provide overall investment advice and management for the Fund, and
to provide certain other services, under the terms and conditions provided in
the Investment Management Contract, dated
as of the date hereof, between the
Trust, the Fund and the Adviser (the "Investment Management Contract").
The Adviser and the Trustees have selected Independence
Investment LLC (the "Sub-Adviser") to provide the Adviser and the Fund with the
investment management and advisory services set forth below, and the Sub-Adviser
is willing to provide such advice and services, subject to the review of the
Trustees and overall supervision of the Adviser, under the terms and conditions
set forth in this agreement (the "Agreement"). The Sub-Adviser hereby represents
and warrants that it is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"). Accordingly, the Trust,
on behalf of the Fund, and the Adviser agree with the Sub-Adviser as follows:
1. Investment Services.
--------------------
(a) The Sub-Adviser will provide to the Fund continuing and suitable
investment advice with respect to investments, consistent with the
investment policies, objectives and restrictions of the Fund as set
forth in the Fund's Prospectus and Statement of Additional
Information. In the performance of the Sub-Adviser's duties hereunder,
subject always to (i) the Trust's and the Fund's organizational
documents as amended from time to time and (ii) the limitations set
forth in the Registration Statement of the Trust, on behalf of the
Fund, as in effect from time to time under the Securities Act of 1933,
as amended (the "1933 Act"), and the Investment Company Act of 1940,
as amended (the "1940 Act"), the Sub-Adviser will have investment
discretion with respect to the Fund. In performing the Sub-Adviser's
obligations hereunder, the Sub-Adviser shall comply with the
provisions of the Declaration of Trust and By-laws, the 1940 Act,
Advisers Act, the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Commodity Exchange Act and the rules and
regulations promulgated under such statutes and the investment
objective, policies and restrictions of the Fund, as each of the same
shall be from time to time in effect as set forth in the Fund's then
current Prospectus and Statement of Additional Information. The
Sub-Adviser shall cause the Fund to comply with the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company. The
Sub-Adviser shall also comply with such policies, guidelines,
procedures and instructions as the Adviser or the Trustees may from
time to time establish and deliver to the Sub-Adviser. No supervisory
activity undertaken by the Adviser shall limit the Sub-Adviser's
responsibility for the foregoing. No reference in this agreement to
the Sub-Adviser's discretionary authority over the
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Fund's investments shall in any way limit the right of the Adviser, in
its sole discretion, to establish and revise policies in connection
with the management of the Fund's assets or otherwise exercise its
right to control the overall management of the Fund's assets.
(b) The Sub-Adviser will, at its own expense:
(i) furnish the Adviser and the Fund with advice and recommendations,
consistent with the investment policies, objectives and restrictions
of the Fund as set forth in the Fund's Prospectus and Statement of
Additional Information, with respect to the purchase, holding and
disposition of portfolio securities;
(ii) furnish the Adviser and the Fund with advice as to the manner in which
voting rights, subscription rights, rights to consent to corporate
action and any other rights pertaining to the Fund's assets shall be
exercised, as requested, the Fund having the responsibility to
exercise such voting and other rights;
(iii)consistent with provisions of Section 6 of the Agreement, place
orders for the purchase, sale or exchange of portfolio securities with
brokers or dealers selected by the Adviser or the Sub-Adviser,
provided that in connection with the placing of such orders and the
selection of such brokers or dealers the Sub-Adviser shall seek to
obtain execution and pricing within the policy guidelines determined
by the Trustees and set forth in the Prospectus and Statement of
Additional Information of the Fund as in effect and furnished to the
Sub-Adviser from time to time;
(iv) furnish the Adviser and the Fund with research, economic and
statistical data in connection with the Fund's investments and
investment policiesa;
(v) submit such reports relating to the valuation of the Fund's securities
as the Trustees or the Fund's Valuation Committee may reasonably
request and to monitor daily the value of all securities held by the
Fund and in particular the value of any security that is priced at
fair value in accordance with the Fund's valuation procedures and
immediately report to the Adviser any change in such fair value;
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(iii)from time to time or at any time as reasonably requested by the
Adviser or the Trustees, make reports to the Adviser or the Trust of
the Sub-Adviser's performance of the foregoing services and the
compliance by the Fund with applicable statutory and regulatory
requirements relating to the management of the Fund's assets and the
Fund's investment objectives, policies and restrictions and upon
request, which may be without notice, to make the Sub-Adviser's
records and premises available for compliance audits by the Adviser or
the Fund's accountants or counsel;
(iv) subject to the supervision of the Adviser, maintain all books and
records with respect to the Fund's securities transactions required by
the 1940 Act, and preserve such records for the periods prescribed
therefor by the 1940 Act (the Sub-Adviser agrees that such records are
the property of the Trust and copies will be surrendered to the Trust
promptly upon request therefor);
(v) cooperate with and provide reasonable assistance to the Adviser, the
Fund, the Fund's custodian and foreign sub-custodians, the Fund's
pricing agents and all other agents and representatives of the Fund
and the Adviser, furnish such information with respect to the Fund as
they may reasonably request from time to time in the performance of
their obligations, provide prompt responses to reasonable requests
made by such persons and establish appropriate interfaces with each so
as to promote the efficient exchange of information and compliance
with applicable laws and regulations; and
(c) cooperate generally with the Fund and the Adviser to provide
information reasonably requested by the Adviser which is necessary for
the preparation of registration statements and periodic reports to be
filed with the Securities and Exchange Commission, including Form
N-1A, periodic statements, shareholder communications and proxy
materials furnished to holders of shares of the Fund, filings with
state "blue sky" authorities and with United States agencies
responsible for tax matters, and other reports and filings of like
nature.
2. Expenses Paid by the Sub-Adviser.
---------------------------------
The Sub-Adviser will pay the cost of maintaining the staff and personnel
necessary for it to perform its obligations under this Agreement, the expenses
of office rent, telephone, telecommunications and other facilities it is
obligated to provide in order to perform the services specified in Section 1,
and any other expenses incurred by it in connection with the performance of its
duties hereunder.
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3. Expenses of the Fund Not Paid by the Sub-Adviser.
-------------------------------------------------
The Sub-Adviser will not be required to pay any expenses of the Fund which
this Agreement does not expressly make payable by the Sub-Adviser. In
particular, and without limiting the generality of the foregoing but subject to
the provisions of Section 2, the Sub-Adviser will not be required to pay under
this Agreement:
(a) the compensation and expenses of Trustees and of independent advisers,
independent contractors, consultants, managers and other agents employed by the
Trust or the Fund other than through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust or the
Fund;
(c) the fees and disbursements of custodians and depositories of the Trust
or the Fund's assets, transfer agents, disbursing agents, plan agents and
registrars;
(d) taxes and governmental fees assessed against the Trust or the Fund's
assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends, distributions, reports,
notices and proxy materials to shareholders of the Trust or the Fund, except
that the Sub-Adviser shall bear the costs of providing the information referred
to in Section 1(c) to the Adviser;
(f) brokers' commissions and underwriting fees; and
(g) the expense of periodic calculations of the net asset value of the
shares of the Fund.
4. Compensation of the Sub-Adviser.
--------------------------------
(a) Subject to Section 4(b), for all services to be rendered, facilities
furnished and expenses paid or assumed by the Sub-Adviser as herein provided for
the Fund, the Adviser will pay the Sub-Adviser quarterly, in arrears, within 5
business days after the end of each quarter, a fee equal on an annual basis to
0.41% of the Fund's average daily net assets. The "average daily net assets" of
the Fund shall be determined on the basis set forth in the Fund's Prospectus or
otherwise consistent with the 1940 Act and the regulations promulgated
thereunder. The Sub-Adviser will receive a pro rata portion of such fee for any
periods in which the Sub-Adviser advises the Fund less than a full quarter. The
Fund shall not be liable to the Sub-Adviser for the Sub-Adviser's compensation
hereunder. Calculations of the Sub-Adviser's fee will be based on average net
asset values as provided by the Adviser.
(b) For the period from the Effective Date until the first anniversary of the
Effective Date, the Sub-Adviser agrees to waive its fee unless the net revenue
received by
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the Adviser from its Advisory Fee exceeds the Advisors cumulative costs
(including the marketing expenses not recovered under a Rule 12b-1 Plan) and to
limit its Sub-Advisory Fee to the amount of such net revenue if such net revenue
is less than the Sub-Advisory Fee. After the first anniversary of the Effective
Date, the Sub-Adviser shall be entitled to its full Sub-Advisory Fee regardless
of the net revenue of the Adviser.
5. Other Activities of the Sub-Adviser and Its Affiliates.
-------------------------------------------------------
Nothing herein contained shall prevent the Sub-Adviser or any associate of
the Sub-Adviser from engaging in any other business or from acting as investment
adviser or investment manager for any other person or entity. It is understood
that officers, directors and employees of the Sub-Adviser or its affiliates may
continue to engage in providing portfolio management services and advice to
other investment companies, whether or not registered, to other investment
advisory clients of the Sub-Adviser or its affiliates and to said affiliates
themselves.
6. Avoidance of Inconsistent Position.
-----------------------------------
In connection with purchases or sales of portfolio securities for the
account of the Fund, neither the Sub-Adviser nor any of its investment
management subsidiaries nor any of such investment management subsidiaries'
directors, officers or employees will act as principal or agent or receive any
commission, except as may be permitted by the 1940 Act and rules and regulations
promulgated thereunder. The Sub-Adviser shall not knowingly recommend that the
Fund purchase, sell or retain securities of any issuer in which the Sub-Adviser
has a financial interest which would cause it to be a principal transaction
without obtaining prior approval of the Adviser prior to the execution of any
such transaction.
Nothing herein contained shall limit or restrict the Sub-Adviser or any of its
officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts or for the account of
clients other than the Fund. The Trust and Fund acknowledge the Sub-Adviser and
its officers, affiliates, and employees, and its other clients may at any time
have, acquire, increase, decrease or dispose of positions in investments which
are at the same time being acquired or disposed of hereunder. The Sub-Adviser
shall have no obligation to acquire with respect to the Fund, a position in any
investment which the Sub-Adviser, its officers, affiliates or employees may
acquire for its or their own accounts or for the account of another client, if
in the sole discretion of the Sub-Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund. Nothing herein
contained shall prevent the Sub-Adviser from purchasing or recommending the
purchase of a particular security for one or more funds or clients while other
funds or clients may be selling the same security.
7. No Partnership or Joint Venture.
--------------------------------
The Trust, the Fund, the Adviser and the Sub-Adviser are not partners of or
joint venturers with each other and nothing herein shall be construed so as to
make them such partners or joint venturers or impose any liability as such on
any of them. The Sub-Adviser is an independent contractor and is not an agent of
either the Adviser or the Fund.
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8. Limitation of Liability of Sub-Adviser.
---------------------------------------
The Sub-Adviser shall not be liable for any losses, claims, damages,
liabilities or litigation (including legal and other expenses) incurred or
suffered by the Adviser, the Trust, the Fund or any of their affiliates as a
result of any error of judgment or mistake of law by the Sub-Adviser with
respect to the Fund, except that nothing in this Agreement shall operate or
purport to operate in any way to exculpate, waive or limit the liability of the
Sub-Adviser for, and the Sub-Adviser shall indemnify and hold harmless the
Adviser, the Trust, and the Fund (collectively, the "Adviser Indemnitees")
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) to which any of the Adviser
Indemnities may become subject under the 1933 Act, the 1940 Act, the Advisers
Act, or under any other statute, at common law or otherwise arising out of or
based on (a) with respect to the Fund, the Sub-Adviser's causing the Fund to be
in violation of any applicable federal or state law, rule or regulation or any
investment policy or restriction set forth in the Fund's Prospectus or Statement
of Additional Information or any written policies, procedures, guidelines or
instructions provided in writing to the Sub-Adviser by the Trustees or the
Adviser, (b) with respect to the Fund, the Sub-Adviser's causing the Fund to
fail to satisfy the requirements of Subchapter M of the Code for qualification
as a regulated investment company, or (c) the Sub-Adviser's willful misfeasance,
bad faith or gross negligence generally in the performance of its duties
hereunder or its reckless disregard of its obligations and duties under this
Agreement.
9. Duration and Termination of this Agreement.
----------------------------------------------
This Agreement shall remain in force until June 30, 2009 and from year to
year thereafter, provided its continuance is approved prior to June 30, 2006 and
annually thereafter as required by the Investment Company Act. This Agreement
may, on 10 days' written notice, be terminated at any time without the payment
of any penalty by the Trust or the Fund by vote of a majority of the outstanding
voting securities of the Fund, by the Trustees or the Adviser and may be
terminated upon 30 days written notice by the Sub-Adviser. Termination of this
Agreement with respect to the Fund shall not be deemed to terminate or otherwise
invalidate any provisions of any contract between the Sub-Adviser and any other
series of the Trust. This Agreement shall automatically terminate in the event
of its assignment or upon termination of the Investment Management Contract. In
interpreting the provisions of this Section 10, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "assignment,"
"interested person" or "voting security"), shall be applied.
10. Amendment of this Agreement.
----------------------------
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment, transfer, assignment, sale, hypothecation or pledge of
this Agreement shall be effective until approved in the manner required by the
1940 Act or the rules and interpretive positions of the Securities and Exchange
Commission under the 1940 Act.
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11. Provision of Certain Information by the Sub-Adviser.
--------------------------------------------------------
The Sub-Adviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
(a) the Sub-Adviser fails to be registered as an investment adviser under
the Advisers Act or under the laws of any jurisdiction in which the Sub-Adviser
is required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
(b) the Sub-Adviser is served or otherwise receives notice of any action,
suit, proceeding, or investigation, at law or in equity, before or by any court,
public board, or body, involving the affairs of the Fund (excluding class action
suits in which the Fund is a member of the plaintiff class by reason of the
Fund's ownership of shares in the defendant) or the compliance by the
Sub-Adviser with the federal or state securities laws;
(c) the ultimate controlling parent of the Sub-Adviser changes, there is
otherwise an actual change in control (whether through sale of all or
substantially all the assets of the Sub-Adviser or a material change in
management of the Sub-Adviser) or an "assignment" (as defined in the 0000 Xxx)
has or is proposed to occur;
(d) any occurrence of any event that would disqualify the Sub-Adviser from
serving as a Sub-Adviser with respect to the Fund; or
(e) any representation of the Sub-Adviser under this Agreement is no longer
true in all material respects.
12. Representations and Acknowledgements of Sub-Adviser.
----------------------------------------------------
The Sub-Adviser hereby warrants and represents to the Adviser that (a) it
has obtained all applicable licenses, permits, registrations and approvals that
may be required in order to serve in its designated capacities with respect to
the Fund, including, but not limited to registration under the Advisers Act, and
shall continue to keep current such license, permits, registrations and
approvals for so long as this Agreement is in effect; (b) it is not prohibited
by the Advisers Act or other applicable laws and regulations from performing the
services contemplated by this Agreement; and (c) this Agreement has been duly
and validly authorized, executed and delivered on behalf of the Sub-Adviser and
is a valid and binding agreement of the Sub-Adviser enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and limitations on the availability of equitable
remedies. The Sub-Adviser represents that it has provided the Adviser with a
complete copy of its Form ADV as currently in effect and will promptly provide
the Adviser with copies of all amendments and supplements thereto. Such ADV, as
amended and supplemented from time to time, does not and shall not contain a
material misstatement of the information required to be stated therein.
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13. Governing Law.
--------------
This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Massachusetts.
14. Severability.
-------------
The provisions of this Agreement are independent of and separable from each
other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be
deemed invalid or unenforceable in whole or in part.
15. Miscellaneous.
--------------
(a) 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. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The name Xxxx Xxxxxxx Equity Trust is the designation of the
Trustees under the Amended and Restated Declaration of Trust dated June 8, 1999,
as amended from time to time. The Declaration of Trust has been filed with the
Secretary of The Commonwealth of Massachusetts. The obligations of the Trust and
the Fund are not personally binding upon, nor shall resort be had to the private
property of, any of the Trustees, shareholders, officers, employees or agents of
the Fund, but only the Fund's property shall be bound. The Trust or the Fund
shall not be liable for the obligations of any other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which is not otherwise in the
public domain, in connection with the performance of its duties hereunder is to
be regarded as confidential and for use only by the Fund and/or its agents, and
only in connection with the Fund and its investments. Any information supplied
by the Trust or the Advisor, which is not otherwise in the public domain, in
connection with the Fund or the Adviser is to be regarded as confidential and
for use only by the Sub-Adviser and/or its agents, and only in connection with
the Sub-Adviser's services under this Agreement. However, after notice to the
other party, either party may disclose such information to the extent required
or requested by an affiliate, or a court or governmental authority, including
without limitation the SEC. Any party in receipt of confidential information
shall use reasonable precautions (substantially identical to those used in
safeguarding of its own confidential information) that its directors/trustees,
officers, employees and advisors abide by these confidentiality provisions. Each
of the Trust, the Adviser and the Sub-Adviser acknowledge that the restrictions
contained in this Section 17(b) are necessary for the protection of the business
of the other parties hereto and are considered to be reasonable for such
purpose. Each of the Trust, the Adviser and Sub-Adviser agree that any breach of
this Section 17(b) is likely to cause the other parties hereto substantial and
irrevocable damage and therefore, in the event of such breach, in addition to
any other remedies it may have at law or in equity, the non-breach party shall
be entitled to specific performance and other injunctive relief. The provisions
of this Section 17(b) shall survive any termination of this Agreement.
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Yours very truly,
XXXX XXXXXXX EQUITY TRUST on behalf
of Xxxx Xxxxxxx Small Cap Fund
/s/Xxxxx X. Xxxxxxxxxxx
-----------------------------------
By: Xxxxx X. Xxxxxxxxxxx
Its: President and Chief Executive Officer
The foregoing contract is hereby agreed to as of the date hereof.
XXXX XXXXXXX ADVISERS, LLC
/s/Xxxxx X. Xxxxxx
-------------------------------------
By: Xxxxx X. Xxxxxx
Its: Senior Vice President and Secretary
INDEPENDENCE INVESTMENT LLC
/s/Xxxxxx X. Xxxxxx
-------------------------------------
By: Xxxxxx X. Xxxxxx
Its: Chief Operating Officer
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Advisory Agmt final.DOC
