Exhibit (d)(3)
HIGHMARK SMALL CAP VALUE FUND
SUB-ADVISORY AGREEMENT
This AGREEMENT is executed as of September 28, 2001 and made effective as of
October 1, 2001, by and between HIGHMARK CAPITAL MANAGEMENT, INC. (the
"Adviser") and LSV ASSET MANAGMEENT, a Delaware general partnership, which is an
investment adviser registered under the laws of the United States as an
investment adviser under the Investment Advisers Act of 1940 ("Sub-Adviser").
WHEREAS, the Adviser is the investment adviser for the HighMark Funds (the
"Trust"), an open-end diversified management investment company registered under
the Investment Company Act of 1940, as amended ("40 Act");
WHEREAS, Adviser's affiliate, Union Bank of California, N.A., serves as
Custodian for the HighMark Funds and provides certain other services for the
Funds;
WHEREAS, SEI Investments Fund Resources is Administrator and SEI Investments
Distribution Co. is Distributor of the HighMark Funds (collectively, the
"SEI Companies"). Further, SEI Funds, Inc. owns less than a majority
interest in Sub-Adviser; and
WHEREAS, Adviser desires to retain Sub-Adviser as its agent to furnish
investment sub-advisory services for certain assets of the Trust's Small Cap
Value Fund (the "Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth:
1.1 "33 Act" shall mean the Securities Act of 1933, the rules and
regulations issued thereunder, as they may be amended from time to
time.
1.2 "40 Act" shall mean the Investment Company Act of 1940, the rules and
regulations issued thereunder, as they may be amended from time to
time.
1.3 "Administrator" and "Distributor" shall mean SEI Investments Fund
Resources and SEI Investments Distribution Co., respectively.
1.4 "Adviser" shall mean HighMark Capital Management, Inc.
1.5 "Adviser's Act" shall mean the Investment Adviser's Act of
1940 and the rules and regulations promulgated thereunder, as
they may be amended from time to time.
1.6 "Bank" shall mean Union Bank of California, N.A., a national banking
association organized under the
laws of the United States.
1.7 "Sub-Adviser" shall mean LSV Asset Management, a Delaware
general partnership, and registered as an investment adviser
under the Investment Advisers Act of 1940.
2. APPOINTMENT. Adviser hereby appoints Sub-Adviser to provide certain
sub-advisory services to the Fund for the period and on the terms set forth in
this Agreement. Sub-Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
3. DELIVERY OF DOCUMENTS.
3.1 Adviser has furnished or will furnish Sub-Adviser with copies
properly certified or authenticated of each of the following:
(a) Copies of the Declarations of Trust establishing the HighMark
Funds and the By-Laws of the Trust;
(b) Resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement.
(c) The Trust's most recent prospectus and Statement of Additional
Information for the Small Cap Value Fund (such prospectus and Statement of
Additional Information, as presently in effect, and all amendments and
supplements thereto are herein collectively called the "Prospectus");
(d) Adviser's Form ADV Part II; and
(e) Such other materials and documents as Sub-Adviser shall reasonably
request.
Adviser will furnish Sub-Adviser with copies of all amendments of or supplements
to the foregoing promptly following adoption of such amendments or supplements.
3.2 Sub-Adviser has furnished or will furnish Adviser with copies
properly certified or authenticated of each of the following:
(a) Form ADV Part II;
(b) Such other materials and documents as Adviser shall reasonably request.
Sub-Adviser will furnish Adviser with copies of all amendments of or supplements
to the foregoing promptly following adoption of such amendments or supplements.
4. MANAGEMENT
4.1 Subject always to the supervision of the Trust's Board of Trustees
and of Adviser, Sub-Adviser will furnish an investment program in
respect of, and make investment decisions for, the certain assets of
the Fund entrusted to it hereunder. Sub-Adviser may place all orders
for the purchase and sale of securities, on behalf of the Fund.
Sub-Adviser is also authorized, subject to periodic approvals of
authorized persons by the Board of Trustees, to instruct Custodian to
settle trades executed on behalf of the Fund. In the performance of its
duties, Sub-Adviser will satisfy its fiduciary duties to the Fund, will
monitor the Fund investments, and will comply with the investment
objectives, policies and restrictions of the Fund stated in the Fund
Prospectus and compliance policies and procedures furnished to the
Sub-Adviser by Adviser from time to time.
4.2 Sub-Adviser and Adviser will each make its officers and employees
available to the other from time to time at reasonable times to review
investment policies of the Fund and to consult with each other
regarding the investment affairs of the Fund. Sub-Adviser shall also
make itself reasonably available to the Trust's Board of Trustees at
such times as the Board of Trustees shall request.
4.3 Sub-Adviser represents and warrants that it is and shall remain in
compliance with all applicable United States Securities and Exchange
Commission ("SEC") Rules and Regulations pertaining to its investment
advisory activities and agrees that it:
(a) will use at least the same skill and care in providing such
services as it uses in providing services to discretionary investment
advisory fiduciary accounts in the United States for which is has investment
responsibilities;
(b) will maintain registration with the SEC as an investment adviser
under the Advisers Act and will conform with all applicable laws, rules and
regulations pertaining to its investment advisory activities;
(c) will place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or dealer. In providing
the Fund with investment supervision, the Sub-Adviser will give primary
consideration to securing the most favorable price and efficient execution.
Within the framework of this policy, the Sub-Adviser may consider the financial
responsibility, research and investment
information and other services provided by brokers or dealers who may effect or
be a party to any such transaction or other transactions to which the
Sub-Adviser's other clients may be a party. It is understood that it is
desirable for the Fund the Trust that the Sub-Adviser or Advisor have access to
supplemental investment and market research and security and economic analysis
provided by brokers who may execute brokerage transactions at a higher cost to
the Fund than may result when allocating brokerage to other brokers on the basis
of seeking the most favorable price and efficient execution. Therefore, the
Sub-Adviser is authorized to place orders for the purchase and sale of
securities for the Sub-Adviser's assets with such brokers, subject to the
general supervision of, and guidelines from time to time established by, the
Adviser and reviewed by the Trust's Board of Trustees with respect to the extent
and continuation of this practice.
On occasions when the Sub-Adviser deems the purchase or sale
of a security to be in the best interest of the Fund as well as other clients of
the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commission and 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 the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund and
to such other clients. In no instance will portfolio securities be purchased
from or sold to Adviser, Sub-Adviser, the SEI Companies, or any affiliated
person of any of the Trust, Adviser, the Sub-Adviser, the Administrator, the
Distributor, or any entity Adviser has identified to the Sub-Adviser in writing,
except as may be permitted under the '40 Act.
(d) will report regularly to Adviser and will make appropriate
persons available for the purpose of reviewing at reasonable times the
management of the certain assets of the Fund with representatives of Adviser and
the Board of Trustees, including, without limitation, review of the general
investment strategy of the Fund, the overall performance of the Fund in relation
to standard industry indices which have been agreed upon between Adviser and
Sub-Adviser and general conditions affecting the marketplace, and will provide
various other reports from time to time as reasonably requested by Adviser;
(e) will maintain books and records with respect to the Fund's
securities transactions required by subparagraphs (b)(5), (6), (7), (9), (10)
and (11) and paragraph (f) of Rule 31a-1 under the '40 Act and will furnish
Adviser and the Trust's Board of Trustees such periodic and special reports as
the Adviser or Board of Trustees may request;
(f) will act upon instructions from Adviser that are not
inconsistent with the fiduciary duties undertaken hereunder; and
(g) will treat confidentially and as proprietary information
of the Trust all such records and other information relative to certain assets
of the Fund maintained by the Sub-Adviser, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Board of Trustees, which approval shall not be unreasonably withheld and may
not be withheld where Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
Sub-Adviser shall have the right to execute and deliver, or cause its nominee to
execute and deliver, all proxies and notices of meetings and other notices
affecting or relating to the securities of the Fund under its management.
4.4 Sub-Advisor will diligently perform services as defined under
this Agreement. However, Sub-Advisor makes no representations
or guarantees whatsoever that the objective(s) of the Fund
will be achieved or that the Fund will outperform its
benchmark as set forth in Schedule B.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the '40 Act, Sub-Adviser hereby agrees that certain records which it maintains
for the Fund are the property of the Fund also and further agrees to surrender
promptly to the Trust a duplicate of any of such records, upon the Trust's
request. Sub-Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the '40 Act the records required to be maintained by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule
31a-1 under the '40 Act for the Fund. Sub-Adviser may delegate its
responsibilities under this Section to affiliates that perform custody and/or
fund accounting services for the Fund, which delegation shall not, however,
relieve the Sub-Adviser of its responsibilities under this paragraph 5.
6. EXPENSES. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Trust, unless otherwise stated in this Agreement.
7. COMPENSATION. For the services provided and the expenses assumed pursuant to
this Agreement, Adviser shall pay the Sub-Advisor a sub-advisory fee computed on
the average daily net assets of the Fund subject to this Agreement, calculated
as of the last business day of each calendar month, and payable within 30 days
of the end of each month, in accordance with Schedule A hereto. From time to
time, Sub-Adviser may, in its sole discretion, agree to waive or reduce some or
all of the compensation to which it is entitled under this Agreement.
8. SERVICES TO OTHERS. Adviser understands, and has advised the Trust's Board of
Trustees, that Sub-Adviser now acts and may in the future act, as an investment
adviser to fiduciary and other managed accounts, and as investment adviser,
sub-
investment adviser, and/or administrator to other investment companies.
Adviser has no objection to Sub-Adviser's acting in such capacities, as long as
such services do not impair the services rendered to Adviser or the Fund.
Adviser recognizes, and has advised the Trust's Board of Trustees that, in some
cases, this procedure may adversely affect the size of the position that the
Fund may obtain in a particular security. In addition, Adviser understands, and
has advised the Trust's Board of Trustees, that the persons employed by
Sub-Adviser to assist in Sub-Adviser's duties under this Agreement will not
devote their full time to such service and nothing contained in this Agreement
will be deemed to limit or restrict the right of Sub-Advisor or any of its
affiliates to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
9. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any error or
judgment or for any loss suffered by the Fund or Adviser in connection with
performance of its obligations under this Agreement or for having executed
Advisor's instructions, except a loss resulting from a breach of Sub-Adviser's
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the '40 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its obligations or in failing to perform its obligations under
this Agreement, except as may otherwise be provided under provisions of
applicable state or federal law which cannot be waived or modified hereby.
10. INDEMNIFICATION. Adviser and Sub-Adviser each agree to indemnify the other
against any third party claim, loss or liability (including reasonable
attorneys' fees) arising out of any action taken or not taken in the performance
of its respective obligations under this Agreement except for action or inaction
which constitutes willful misfeasance, bad faith or gross negligence.
11. DURATION AND TERMINATION. This Agreement will become effective as of the
date hereof, provided that it has been approved by a vote of a majority of the
outstanding voting securities of the Fund in accordance with the requirements
under the '40 Act, and, unless sooner terminated as provided therein, will
continue in effect for two (2) years.
Thereafter, if not terminated, this Agreement will continue in effect for the
Fund for successive periods of 12 months, each ending on the day preceding the
annual anniversary of the Agreement's effective date, provided that such
continuation is specifically approved at least annually (a) by the vote of a
majority of those members of the Trust's Board of Trustees who are not
interested persons of the Trust, Sub-Adviser, or Adviser, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Trust's Board of Trustees or by the vote of majority of all
votes attributable to the outstanding Shares of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated as to the Fund
at any time, without the payment of any penalty, on sixty (60) day's written
notice by the Adviser to Sub-Adviser. This Agreement may be terminated at any
time, without
payment of any penalty, on 120 day's written notice by the
Sub-Adviser to Adviser. This Agreement will immediately terminate in the event
of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" have the
same meaning of such terms in the '40 Act.)
12. 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.
13. SUB-ADVISER INFORMATION. During the terms of this Agreement, Adviser agrees
to furnish the Sub-Adviser at Sub-Adviser's principal office all prospectuses,
proxy statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of the Fund, the Trust or the public
that refer to the Sub-Adviser. The Adviser agrees to use its reasonable best
efforts to ensure that materials prepared by its employees or agents or its
affiliates that refer to the Sub-Adviser in any way are consistent with those
materials previously published. Sales literature may be furnished to the
Sub-Adviser by first-class or overnight mail, facsimile transmission equipment
or hand delivery.
Sub-Adviser agrees to give prompt written notice to Advisor at any time if the
ownership interest of SEI Funds, Inc. becomes a majority ownership interest.
14. SEVERABILITY. Should any part of this Agreement be held invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors.
15. NOTICES. Any notice, advice or report to be given pursuant to this
Agreement shall be delivered or mailed as set forth below.
TO ADVISER AT:
HighMark Capital Management, Inc.
000 Xxxxxxx Xxxxxx
Post Office Xxx 00000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxx, President
TO THE SUB-ADVISER AT:
LSV Asset Management
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxx
Partner & Chief Operating Officer
TO THE TRUST OR THE FUND AT:
HighMark Funds
c/o SEI Investments Fund Resources
and SEI Investments Distribution Co.
Xxx Xxxxxxx Xxxxxx Xxxx
Xxx, XX 00000
Attention: Legal Department
Parties agree that they shall not be bound by the terms of any changes in
policies, procedures, or contracts until notice has been received as set forth
in this Agreement.
16. CHANGE OF LAW. Where the effect of a requirements of the '40 Act reflected
in any provision of this Agreement is altered by a rule, regulation or order of
the SEC, whether of special or general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
17. MISCELLANEOUS.
The captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement is held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby. This Agreement will be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and will be governed by the laws of the Commonwealth of Massachusetts.
The name "HighMark Funds" and "Trustees of the HighMark Funds" refer,
respectively, to the Trust created by, and the Trustees as trustees (but not
individually or personally), acting from time to time under, the Declaration of
the Trust, to which reference is hereby made and copy of which is on file at the
office of the Secretary of State of the Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "HighMark Funds" entered in the name or on
behalf thereof by any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and persons dealing
with the Funds must look solely to the assets of the Trust belonging to such
Funds for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officer designated below as of the day and year first above
written.
HIGHMARK CAPITAL MANAGEMENT, INC. LSV ASSET MANAGEMENT
By: /s/ Xxxx Xxxxx By: /s/ Xxxxxxxx Xxxxxxxx
----------------------------- ---------------------------------
Name: Xxxx Xxxxx Name: Xxxxxxxx Xxxxxxxx
Title: President Title: Partner & Chief Operating
Officer
SCHEDULE A
HIGHMARK SMALL CAP VALUE FUND
Advisory Fee: 100 b.p.
Sub-Advisory Fee: 65 b.p. on the first $50 million*, and
55 b.p. on the next $50 million*, and
50 b.p. on the additional amounts over $100 million*
* Including cash and cash equivalents
The Sub-Advisory fee shall be payable out of the Advisory fee, calculated and
payable in accordance with the provisions of Section 7 of the Agreement.
SCHEDULE B
SUB-ADVISER PERFORMANCE STANDARDS
Outperform the Xxxxxxx 2000 Value Index and perform in the top 30% of the
Morningstar Small Value Category.
Sub-Advisor will diligently perform services as defined under this Agreement.
However, Sub-Advisor makes no representations or guarantees whatsoever that the
objective of the Fund will be achieved or that the Fund will outperform its
benchmark as set forth above.
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