Exhibit d(vii)
SUB-INVESTMENT MANAGEMENT AGREEMENT
FOR THE
HALLMARK TOTAL RETURN BOND FUND
THIS AGREEMENT ("Agreement") made this 1st day of October, 2004, by,
between and among Hallmark Investment Series Trust , a Delaware business trust
(the "Trust"), on behalf of Hallmark First Total Return Bond Fund (the "Fund"),
and RESERVE MANAGEMENT COMPANY, INC., a New Jersey corporation having its
principal place of business in New York (the "Investment Manager") and Trainer,
Xxxxxxx & Investment Company, Inc. ( the "Sub-Investment Manager"), a New York
Corporation having its principal place of business in New York;
W I T N E S S E T H:
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act");
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest, no par value in separate series or classes of series with
each such separate series representing an interest in a separate portfolio of
investment securities and other assets;
WHEREAS, the Trust has employed the Investment Manager to act as
investment manager of the Fund as set forth in the Investment Management
Agreement between the Trust and the Investment Manager dated October 1, 2004
(the "Investment Management Agreement");
WHEREAS, the Sub-Investment Manager is engaged in the business of
rendering investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"); and
WHEREAS, the Trust and the Investment Manager desire to retain the
Sub-Investment Manager to render investment management services to the Fund in
the manner and on the terms hereinafter set forth;
The parties agree as follows:
1. Duties of the Sub-Investment Manager. The Sub-Investment Manager hereby
agrees, subject to the supervision of the Investment Manager and the Trust, (1)
to act as the sub-investment adviser to, and sub-investment manager of, the
Fund, (2) to manage the investment and reinvestment of the assets of the Fund
for the period and on the terms and conditions set forth in this Agreement, and
(3) during the term hereof, at its own expense, to render the services and to
assume the obligations herein set forth for the compensation provided for
herein.
2. Sub-Investment Management Services. In performing the duties stated in
Paragraph 1 above, the Sub-Investment Manager will regularly provide the
Investment Manager and the Trust with such investment research, advice and
management as the Investment Manager and the Trust may from time to time
consider reasonably necessary for the proper management of the Fund. The
Sub-Investment Manager will furnish continuously an investment program and will
conduct a continuous program of evaluation of assets in the Fund. In this
connection the Sub-Investment Manager will provide the Board of Trustees and
officers of the Trust with such statistical information with respect to
investments of the Fund and such periodic and special reports and information as
the Investment Manager or the Trustees may reasonably request. In addition the
Sub-Investment Manager will determine which securities or other investments
shall be purchased, sold or exchanged and what portion of the assets of the Fund
shall be held in securities or other assets in which it may invest. In so
acting, the Sub-Investment Manager shall always be subject to, and shall follow
at all times (i) any restrictions of the Declaration of Trust and By-Laws of the
Trust, as amended from time to time, (ii) the applicable provisions of the
Investment Company Act, and any rules and regulations adopted thereunder, (iii)
statements relating to the Fund's investment objectives, policies and
restrictions as the same are set forth in the prospectus of the Fund and
statement of additional information then currently
effective, and (iv) any other provision of state and federal law applicable to
it in connection with its duties hereunder. Should the Board of Trustees of the
Trust or the Investment Manager at any time, however, make any definite
determination as to investment policy of the Fund and notify the Sub-Investment
Manager thereof, the Sub-Investment Manager shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified
that such determination has been revoked. The Sub-Investment Manager shall take,
on behalf of the Trust, all actions which it deems necessary to implement the
investment policies of the Fund, determined as provided above, and in particular
shall place orders for the purchase or sale of securities or other investments
for the Fund with brokers or dealers selected by the Sub-Investment Manager.
The Sub-Investment Manager will comply with any and all reasonable
procedures established by the Investment Manager and shall establish and comply
with such other internal procedures as are necessary, with a view toward
assuring compliance by the Trust, the Fund, the Investment Manager and the
Sub-Investment Manager with the Advisers Act, the Investment Company Act and any
other applicable laws, rules and regulations.
3. Purchase and Sale of Assets. Nothing in this Agreement shall preclude
the combining of orders for the sale or purchase of securities or other
investments with other accounts managed by the Sub-Investment Manager, provided
that the Sub-Investment Manager does not favor any account over any other
account and provided that any purchase or sale orders executed contemporaneously
shall be allocated in a manner the Sub-Investment Manager deems equitable among
the accounts involved and at a price which is approximately averaged. Neither
the Sub-Investment Manager, nor any of its principals, trustees, officers or
employees, nor any person, firm or corporation controlling, controlled by or
under common control with it shall act as a principal or receive any commission
as agent in connection with the purchase or sale of assets of the Fund.
In placing orders for the purchase or sale of investments for the Fund,
the Sub-Investment Manager shall use its best efforts to obtain for the Fund the
most favorable price and execution available, considering all of the
circumstances, and shall maintain records adequate to demonstrate compliance
with this requirement.
The Sub-Investment Manager may, to the extent authorized by Section 28(e)
of the Securities Exchange Act of 1934, as amended, and any successor provision
thereof, cause the Fund to pay a broker or dealer that provides research and
other brokerage services to the Sub-Investment Manager an amount of commission
for effecting a Fund investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. To the extent authorized by said section, the Sub-Investment
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action.
4. Compensation of the Sub-Investment Manager. For the services rendered
by the Sub-Investment Manager under this Agreement, the Investment Manager shall
pay to the Sub-Investment Manager at the end of each calendar quarter a fee of
not less than 0.35% (35 basis points) on the net assets of the current
shareholders of the Fund, not less than 0.30% (30 basis points) on the net
assets of any new Class R shareholders of the Fund and not less than 0.20% (20
basis points) on the net assets of the Class I shares of the Fund, on an annual
basis. Expenses are allocated to a fund on an identified cost basis or prorated
by assets or number of accounts where facilities, services or personnel are
utilized by more than one fund. The Fund will be audited annually and its books
are open to inspection by the Investment Manager and Sub-Investment Manager on
any reasonable frequency with or without notice. The Investment Manager shall
provide to the Sub-Investment Manager, on a quarterly basis, an unaudited
Statement of Operations of the revenues received from and expenses incurred on
behalf of the Fund.
The payment of the advisory fees and the allocation of charges and
expenses between the Trust and the Investment Manager are set forth in the
Investment Management Agreement. Nothing in this Agreement shall change or
affect that arrangement. The payment of advisory fees and the apportionment of
any expenses
related to the services of the Sub-Investment Manager shall be the sole concern
of the Investment Manager and the Sub-Investment Manager and shall not be the
responsibility of the Trust.
5. Books and Records. The Sub-Investment Manager agrees that all books and
records which it maintains for the Trust are the Trust's property, and, in the
event of termination of this Agreement for any reason, the Sub-Investment
Manager agrees to return to the Trust, free from any claim or retention of
rights by the Sub-Investment Manager, all records relating to the Fund. The
Sub-Investment Manager also agrees upon request of the Investment Manager or the
Fund, promptly to surrender the books and records to the requester or make the
books and records available for inspection by representatives of regulatory
authorities and the Investment Manager or the Fund. In connection with its
duties hereunder the Sub-Investment Manager further agrees to maintain, prepare
and preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Sub-Investment Manager will use records or information obtained under
this Agreement only for the purposes contemplated hereby, and will not disclose
such records or information in any manner other than as expressly authorized by
the Trust, or if disclosure is expressly required by applicable Federal or state
regulatory authorities or by this Agreement.
6. Liability and Indemnification. In performing its duties hereunder, the
Sub-Investment Manager may rely on all documentation and information furnished
it by the Trust. Except as may otherwise be provided by the Investment Company
Act, neither the Sub-Investment Manager nor its officers, trustees, employees or
agents shall be subject to any liability for any act or omission in the course
of, connected with or arising out of any services to be rendered hereunder,
except by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Sub-Investment Manager's duties or by reason of reckless
disregard of the Sub-Investments Manager's obligations and duties under this
Agreement. The Sub-Investment Manager shall also comply with the Fund's Code of
Ethics, which has been provided to it.
Investment Manager and Trust agree to hold harmless and indemnify
Sub-Investment Manager from and against any loss, liability, damages or
expenses, including attorney fees, resulting from willful misfeasance, bad faith
or gross negligence by Investment Manager or Trust, or by any officer, trustee,
employee or agent of either. Further, Investment Manager and Trust agree to
indemnify Sub-Investment Manager for any loss, liability, damages or expenses,
including attorney fees, that may be incurred by Sub-Investment Manager as a
result of a breach, or allegations of a breach, of a fiduciary duty by
Investment Manager or Trust or as a result of a violation, or allegation of a
violation, by Investment Manager or Trust of the federal securities laws,
including but not limited to, the Advisers Act, the Investment Company Act, or
of any other federal or state law(s), rule(s) or regulation(s) applicable to
Investment Manager or Trust.
7. Reliance on Documents. The Trust or its agent will provide timely
information to the Sub-Investment Manager regarding such matters as purchases
and redemptions of shares in the Fund, the cash requirements, and cash available
for investment in the Fund, and all other information as may be reasonably
necessary or appropriate in order for the Sub-Investment Manager to perform its
responsibilities hereunder.
The Investment Manager has herewith furnished the Sub-Investment Manager
copies of the Fund's prospectus and statement of additional information, the
Declaration of Trust and By-Laws as currently in effect and agrees during the
continuance of this agreement to furnish the Sub-Investment Manager copies of
any amendments or supplements thereto before or at the time the amendments or
supplements become effective. The Sub-Investment Manager will be entitled to
rely on all such documents furnished to it by the Investment Manager of the
Fund.
8. Approval and Termination of this Agreement. This Agreement shall become
effective as of the date first above written. Thereafter, it shall continue in
effect from year to year, but only so long as such continuance is specifically
approved at least annually by (a) the Board of Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Fund, and (b) a
majority of those Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may be terminated without the
payment of any penalty by the Board of Trustees of the Trust, by vote of a
majority of the outstanding shares of the Fund, or by the Investment Manager on
sixty days' written notice to the Sub-Investment Manager, or by the
Sub-Investment Manager on sixty days' written notice to the Trust and the
Investment Manager. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
9. Definitions. The terms "assignment," "interested person," and "majority
of the outstanding voting securities," when used in this Agreement, shall have
the respective meanings specified under the Investment Company Act and the rules
thereunder.
10. Governing Law. The terms and provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
11. Shareholder Liability. The Investment Manager and Sub-Investment
Manager understand and agree that the obligations of the Trust under this
Agreement are not binding upon any shareholder of the Trust personally, but bind
only the Fund and the property of the Fund. The Manager and Sub-Investment
Manager represent that they have notice of the provisions of the Declaration of
Trust of the Trust disclaiming shareholder liability for acts or obligations of
the Trust.
12. Enforcement Limited to Fund. The Manager and Sub-Investment Manager
understand and agree that any debts, liabilities, obligations, and expenses
incurred, contracted for or otherwise existing on behalf of the Fund under this
Agreement shall be enforceable against the assets of the Fund only, and not
against the assets of the Trust, generally, or the assets of any other separate
series of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed on the day and year first above written.
HALLMARK INVESTMENT SERIES TRUST,
on behalf of Hallmark Total
Return Bond Fund
Attest:
________________________________ BY:_____________________________
Title:___________________________ Title:___________________________
________________________________
Attest:
________________________________ BY:_____________________________
Title:___________________________ Title:___________________________
RESERVE MANAGEMENT COMPANY, INC.
Attest:
________________________________ BY:_____________________________
Title:___________________________ Title:___________________________
