SUB-INVESTMENT ADVISORY AGREEMENT
(International Equity Fund)
AGREEMENT made as of January 9, 1998 between XXXXXXX CAPITAL
ADVISORS, INC. (herein called the "Adviser"), and XXXXXXX INVESTMENT PARTNERS,
L.P., a California limited partnership (herein called the "Sub-Adviser").
WHEREAS, EMERALD FUNDS, a Massachusetts business trust (herein
called the "Trust"), is registered as an open-end, management investment company
under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, pursuant to an Investment Advisory Agreement by and
between the Trust and the Adviser (herein called the "Investment Advisory
Agreement"), the Adviser has agreed to furnish investment advisory services to
the Trust with respect to its International Equity Fund investment portfolio
(the "Fund"); and
WHEREAS, the Investment Advisory Agreement authorizes the
Adviser to sub-contract investment advisory services with respect to the
International Equity Fund to the Sub-Adviser pursuant to a sub-advisory
agreement agreeable to the Trust and approved in accordance with the provisions
of the 1940 Act; and
WHEREAS, this Agreement has been so approved, and the
Sub-Adviser is willing to furnish sub-advisory services to the Fund upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
The Adviser hereby appoints the Sub-Adviser to act as
sub-investment adviser to the Trust's International Equity Fund for the period
and on the terms set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Services of Sub-Adviser.
Subject to the oversight and supervision of the Adviser and
the Trust's Board of Trustees, the Sub-Adviser will provide a continuous
investment program for the Fund, including investment research and management
with respect to all securities and investments, except for such cash balances of
the Fund as are managed by the Adviser. Pursuant to the foregoing, the
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The Sub-Adviser
will provide the services rendered by it under this Agreement in accordance with
the investment criteria and policies established from time to time for the Fund
by the Adviser, the Fund's investment objective, policies and restrictions as
stated in the Trust's Prospectus and Statement of Additional Information for the
Fund, and resolutions of the Trust's Board of Trustees.
The Sub-Adviser further agrees that it will:
(a) Provide information to the Fund's accountant for the purpose of
updating the Fund's cash availability throughout the day as required;
(b) Maintain historical tax lots for each portfolio security held
by the Fund;
(c) Transmit trades to the Trust's custodian for proper settlement;
(d) Maintain all books and records with respect to the Fund
that are required to be maintained under Rule 31a-1(f) under the 1940 Act;
(e) Supply the Adviser, the Trust and the Trust's Board of
Trustees with reports, statistical data and economic information as requested;
and
(f) Prepare a quarterly broker security transaction summary
and, if requested in advance, monthly security transaction listing for the Fund.
3. Other Covenants.
The Sub-Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of
the Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(c) will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer. In executing portfolio transactions and selecting brokers or dealers,
the Sub-Adviser will use its best efforts to seek on behalf of the Fund the best
overall terms available. In assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. In evaluating the best overall terms available, and
in selecting the broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Fund or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser exercises investment discretion. The Sub-Adviser is
authorized, subject to the prior approval of the Adviser and the Trust's Board
of Trustees, to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction for the
Fund which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Sub-Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer -- viewed in terms of that particular transaction or in terms
of the overall responsibilities of the Sub-Adviser to the Fund. In addition, the
Sub-Adviser is authorized to take into account the sale of shares of the Trust
in allocating purchase and sale orders for portfolio securities to brokers or
dealers (including brokers and dealers that are affiliated with the Adviser,
Sub-Adviser or the Trust's principal underwriter), provided that the Sub-Adviser
believes that the quality of the transaction and the commission are comparable
to what they would be with other qualified firms. In no instance, however, will
portfolio securities be purchased from or sold to the Adviser, Sub-Adviser, the
Trust's principal underwriter or any affiliated person of either the Trust, the
Adviser, Sub-Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission; and
(d) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust 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 Trust, which
approval shall not be unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt proceeding for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
(e) will maintain a policy and practice of conducting its
sub-investment advisory services hereunder independently of its, and any of its
affiliates', commercial banking operations. When the Sub-Adviser makes
investment recommendations for the Fund, its investment advisory personnel will
not inquire or take into consideration whether the issuers of securities
proposed for purchase or sale for the Fund's account are customers of its, or
any of its affiliates', commercial department. In dealing with commercial
customers, the commercial department of the Sub-Adviser, or any of its
affiliates, will not inquire or take into consideration whether securities of
those customers are held by the Fund.
4. Services Not Exclusive.
The services furnished by the Sub-Adviser hereunder are deemed
not to be exclusive, and the Sub-Adviser shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby. To the extent that the purchase or sale of securities or other
investments of the same issuer may be deemed by the Sub-Adviser to be suitable
for two or more accounts managed by the Sub-Adviser, the available securities or
investments may be allocated in a manner believed by the Sub-Adviser to be
equitable to each account. It is recognized that in some cases this procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtainable for or disposed of by the Fund.
5. Books and Records.
In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Sub-Adviser hereby agrees that all records which it maintains for
the Fund are the property of the Trust and further agrees to surrender promptly
to the Trust any of such records upon the Trust's request. The Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by it under this Agreement.
6. Expenses.
During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions, custodial charges and other transaction costs,
if any) purchased or sold for the Fund.
7. Compensation.
For the services provided and the expenses assumed pursuant to
this Agreement, the Adviser will pay the Sub-Adviser, and the Sub-Adviser will
accept as full compensation therefor, a fee, computed daily and payable monthly,
at the annual rate of .50% of the average daily net assets of the Fund. Such fee
shall be a separate charge to the Fund and shall be the several (and not joint
or joint and several) obligation of the Fund. The fees payable by the Adviser
under this Section 7 for the period beginning on the date of this Agreement and
ending on the date the shareholders of the Fund approve this Agreement shall be
maintained in an interest-bearing escrow account until such time as the Fund's
shareholders approve the payment of such fees to the Sub-Adviser. If the Fund's
shareholders do not approve the payment to the Sub-Adviser of such fees for such
period, the balance of the escrow account shall be paid to the Fund. The
Sub-Adviser acknowledges that it shall not be entitled to any further
compensation from either the Adviser or the Trust in respect of the services
provided and expenses assumed by it under this Agreement.
8. Limitation of Liability.
The Sub-Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
performance of this Agreement, except that the Sub-Adviser shall be liable to
the Trust for any loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or any loss resulting from willful
misfeasance, bad faith or negligence on the part of the Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Duration and Termination.
This Agreement will become effective as of the date first
above written. Unless sooner terminated as provided herein this Agreement shall
continue in effect until May 9, 1998 and, if approved by the shareholders of the
Fund on or before such date, shall continue in effect for an additional period
ending on November 30, 1998. Thereafter, if not terminated, this Agreement shall
automatically continue in effect for successive annual periods ending on
November 30, provided such continuance 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 any party to this Agreement, cast in
person at a meeting called for the purpose of voting such approval, and (b) by
the Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to the Fund at any time, without the payment of any penalty, by
the Adviser or by the Trust (by vote of the Trust's Board of Trustees or by vote
of a majority of the outstanding voting securities of the Fund), on sixty days'
written notice to the Sub-Adviser, or by the Sub-Adviser, on sixty days' written
notice to the Trust, provided that in each such case, notice shall be given
simultaneously to the Adviser. In addition, notwithstanding anything herein to
the contrary, in the event of the termination of the Investment Advisory
Agreement with respect to the Fund for any reason (whether by the Trust, by the
Adviser or by operation of law) this Agreement shall terminate upon the
effective date of such termination of the Investment Advisory Agreement. This
Agreement will also 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" shall have the same meaning
as such terms have in the 1940 Act.)
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. To the extent required by the 1940 Act, no amendment of
this Agreement shall be effective until approved by vote of a majority of the
outstanding voting securities of the Fund.
11. 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 shall be held or made 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 shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by Delaware law.
12. Names.
The names "Emerald Funds" and "Trustees of Emerald Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated March 15, 1988, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of "Emerald Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
XXXXXXX CAPITAL ADVISORS, INC.
BY: /s/ Xxxx X. Xxxxx
TITLE: President
XXXXXXX INVESTMENT PARTNERS, L.P.
BY: /s/ Xxxx Xxxxx
TITLE: Managing Partner
