SUB-ADVISORY AGREEMENT
AGREEMENT, made this 31st day of March, 1997, by and between XXXXXXXXXX
INVESTMENT MANAGEMENT LLC, an Illinois limited liability company registered
under the Investment Advisers Act of 1940 ("Advisers Act") as an investment
adviser ("Adviser"), and AFFINITY INVESTMENT ADVISERS, INC., a California
corporation registered under the Advisers Act as an investment adviser ("Sub-
Adviser").
WHEREAS, THE XXXXXXXXXX FUNDS, a Delaware business trust (the "Trust"), is
an open-end, management investment company registered under the Investment
Company Act of 1940 (the "1940 Act");
WHEREAS, the Trust has retained the Adviser to render to it investment
advisory services for the portion of its assets represented by the shares of
beneficial interest issued in the series designated XXXXXXXXXX BALANCED FUND
(the "Fund") pursuant to an Investment Advisory Agreement dated March 31, 1997
(the "Investment Advisory Agreement");
WHEREAS, the Adviser desires at this time to retain Sub-Adviser to render
investment advisory services for that portion of the assets of the Fund
designated by the Adviser for investment in equity securities and Sub-Adviser is
willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
it is hereby agreed by and between the parties as follows:
1. SUB-ADVISORY SERVICES. The Adviser hereby employs the Sub-Adviser to
render investment advisory services for that portion of the assets of the Fund
designated by the Adviser for investment in equity securities, subject to the
terms of this Agreement and to the supervision and control of the Adviser and
the Trust's Board of Trustees ("Trustees"). Sub-Adviser agrees to perform the
following services with respect to the Fund:
(a) to obtain and evaluate such information relating to economies,
industries, businesses, securities and commodities markets, and
individual securities, commodities and indices as it may deem
necessary or useful in discharging its responsibilities hereunder;
(b) to provide investment advice with respect to the investment and
reinvestment of the Fund assets designated by the Adviser for
investment in equity securities consistent with and subject to (i)
Trust's agreement and declaration of trust and by-laws; (ii) the
Fund's investment objectives, policies, and restrictions as set forth
in written documents furnished by the Trust or Adviser to Sub-Adviser;
(iii) all securities, commodities, and tax laws and regulations
applicable to the Fund and Trust; and (iv) any other written limits or
directions furnished by the Trust or Adviser to Sub-Adviser;
(c) unless otherwise directed by the Trustees, in consultation with and
subject to the approval of the Adviser, to determine from time to time
securities, commodities, interests or other investments to be
purchased, sold, retained or lent by the Fund, and to implement those
decisions, including the selection of entities with or through which
such purchases, sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will qualify
as a regulated investment company under subchapter M of the Internal
Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting rights,
rights to consent to Trust or Fund action, and any other rights
pertaining to Trust or the Fund shall be exercised;
(f) to make available to Adviser and Trust promptly upon request all of
the Fund's records and ledgers and any reports or information
reasonably requested by the Adviser or Trust; and
(g) to the extent required by law, to furnish to regulatory authorities
any information or reports relating to the services provided pursuant
to this Agreement.
Except as otherwise instructed from time to time by the Trustees or
Adviser, with respect to execution of transactions on behalf of the Fund, Sub-
Adviser shall place, or arrange for the placement of, all orders for purchases,
sales, or loans with issuers, brokers, dealers or other counterparties or agents
selected by Sub-Adviser. In connection with the selection of all such parties
for the placement of all such orders, Sub-Adviser shall attempt to obtain most
favorable execution and price, but may nevertheless in its sole discretion as a
secondary factor, purchase and sell portfolio securities from and to brokers and
dealers who provide Sub-Adviser with statistical, research and other
information, analysis, advice, and similar services. In recognition of such
services or brokerage services provided by a broker or dealer, Sub-Adviser is
hereby authorized to pay such broker or dealer a commission or spread in excess
of that which might be charged by another broker or dealer for the same
transaction if the Sub-Adviser determines in good faith that the commission or
spread is reasonable in relation to the value of the services so provided.
Sub-Adviser may, where it deems to be advisable, aggregate orders for its
other customers together with any securities of the same type to be sold or
purchased for the Fund in order to obtain best execution or lower brokerage
commissions. In such event, Sub-Adviser shall allocate the shares so purchased
or sold, as well as the expenses incurred in the transaction, in a manner it
considers to be equitable and fair and consistent with its fiduciary obligations
to the Fund, and Sub-Adviser's other customers.
Sub-Adviser shall for all purposes be deemed to be an independent
contractor and not an agent of Trust or Adviser and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent
Trust or Adviser in any way.
2. EXPENSES BORNE BY SUB-ADVISER. Sub-Adviser at its own expense shall
furnish all executive and other personnel, office space, and office facilities
required to render the investment advisory services set forth in this Agreement.
3. SUB-ADVISORY FEE. For the services rendered and facilities provided
hereunder, Adviser shall pay to Sub-Adviser a fee of 12% of the investment
advisory fees received by the Adviser (net of any fee waivers or expense
reimbursements). The fee shall be payable monthly on the first business day of
the next succeeding calendar month.
4. NON-EXCLUSIVITY. The services of Sub-Adviser hereunder are not to be
deemed exclusive and Sub-Adviser shall be free to render similar services to
others.
5. STANDARD OF CARE. Neither Sub-Adviser, nor any of its directors,
officers, stockholders, agents or employees shall be liable to Adviser or Trust
or its shareholders for any error of judgment, mistake of law, loss arising out
of any investment, or any other act or omission in the performance by Sub-
Adviser of its duties under this Agreement, except for loss or liability
resulting from willful misfeasance, bad faith or gross negligence on Sub-
Adviser's part or from reckless disregard by Sub-Adviser of its obligations and
duties under this Agreement.
6. EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective
on the date hereof. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Trustees of Trust, or by a vote of a
majority of the outstanding shares of the Fund, upon at least sixty (60) days'
written notice to Adviser and Sub-Adviser. This Agreement may be terminated by
Adviser at any time upon at least sixty (60) days' written notice to Sub-
Adviser. This Agreement may be terminated by Sub-Adviser at any time upon at
least sixty (60) days' written notice to Adviser and Trust. This Agreement
shall terminate automatically in the event of its "assignment" (as defined in
the 0000 Xxx) or in the event of the termination of the Investment Advisory
Agreement. Unless terminated as hereinbefore provided, this Agreement shall
continue in effect until March 31, 1999 and thereafter from year to year only so
long as such continuance is specifically approved at least annually (a) by a
majority of those Trustees who are not interested persons of Trust, of Adviser
or of Sub-Adviser, voting in person at a meeting called for the purpose of
voting on such approval, and (b) by either the Board of Trustees of Trust or by
a "vote of a majority of the outstanding shares" of the Fund. The terms
"interested persons" and "vote of a majority of the outstanding shares"
shall be construed in accordance with their respective definitions
in the 1940 Act and, with respect to the latter term, in accordance with Rule
18f-2 under the 1940 Act.
7. OWNERSHIP OF RECORDS; REPORTING. All records required to be
maintained and preserved by Trust pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are maintained and
preserved by Sub-Adviser on behalf of Trust and any other records the parties
mutually agree shall be maintained by Sub-Adviser on behalf of Trust are the
property of Trust and shall be surrendered by Sub-Adviser promptly on request by
Trust; PROVIDED that Sub-Adviser may at its own expense make and retain copies
of any such records.
Sub-Adviser shall prepare and furnish to Adviser and Trust as to the Fund
statistical data and other information in such form and at such intervals as
Adviser or Trust may reasonably request.
8. APPLICABLE LAW. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Illinois.
9. REFERENCES AND HEADINGS. In this Agreement and in any such amendment,
references to this Agreement and all expressions such as "herein," "hereof," and
"hereunder" shall be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Attest: XXXXXXXXXX INVESTMENT MANAGEMENT LLC
/s/ Xxxxxx X. Xxxxxxx, III By: /s/ H. Steel Bokhof,Jr.
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Xxxxxx X. Xxxxxxx, III H. Steel Bokhof, Jr.
Secretary President
Attest: AFFINITY INVESTMENT ADVISERS, INC.
/s/ By: /s/ Xxxxxxx X. Xxx
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Name Xxxxxxx X. Xxx
Title President
