AQUILA ROCKY MOUNTAIN EQUITY FUND
SUB-ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of the June 2, 1994, by and
between AQUILA ROCKY MOUNTAIN EQUITY FUND (the "Fund"), a
Massachusetts business Trust, 000 Xxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000 and AQUILA MANAGEMENT
CORPORATION (the "Sub-Adviser"), a New York corporation,
000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 10017
W I T N E S S E T H:
WHEREAS, the Fund and the Sub-Adviser wish to enter
into a Sub-Advisory and Administration Agreement as herein
set forth (referred to hereafter as "this Agreement");
NOW THEREFORE, in consideration of the mutual promises
and agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. In General.
The Sub-Adviser shall perform (at its own expense) the
functions set forth more fully herein for the Fund and for
the investment adviser for the Fund (the "Adviser").
2. Duties and Obligations of the Sub-Adviser to the Fund.
(a) Administration. Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, the Sub-
Adviser shall provide all administrative services to the
Fund other than those relating to its investment portfolio
handled by the Investment Adviser of the Fund (the
"Adviser") under the Investment Advisory Agreement of the
Fund (the "Advisory Agreement"); as part of such duties,
the Sub-Adviser shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following
functions and for the maintenance of the headquarters
of the Fund;
(ii) oversee all relationships between the Fund and
its transfer agent, custodian, legal counsel,
auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the
supervision and coordination of the performance of
such agreements, and the overseeing of all
administrative matters which are necessary or
desirable for the effective operation of the Fund and
for the sale, servicing or redemption of the Fund's
shares;
(iii) either keep the accounting records of the Fund,
including the computation of net asset value per share
and the dividends (provided that daily pricing of the
Fund's portfolio shall be the responsibility of the
Adviser under the Advisory Agreement) or, at its
expense and responsibility, delegate such duties in
whole or in part to a company satisfactory to the
Fund;
(iv) maintain the Fund's books and records, and
prepare (or assist counsel and auditors in the
preparation of) all required proxy statements, reports
to the Fund's shareholders and Trustees, reports to
and other filings with the Securities and Exchange
Commission and any other governmental agencies, and
tax returns, and oversee the insurance relationships
of the Fund;
(v) prepare, on behalf of the Fund and at the Fund's
expense, such applications and reports as may be
necessary to register or maintain the registration of
the Fund and/or its shares under the securities or
"Blue-Sky" laws of all such jurisdictions as may be
required from time to time;
(vi) respond to any inquiries or other communications
of shareholders of the Fund and broker-dealers, or
if any such inquiry or communication is more properly
to be responded to by the Fund's shareholder servicing
and transfer agent or distributor, oversee such
shareholder servicing and transfer agent's or
distributor's response thereto.
(b) Sub-Advisory Services. Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, the Sub-
Adviser shall review with the Adviser the investment
activities of the Fund and in conjunction with the Adviser
shall make such periodic reports to the Board of Trustees
of the Fund as may be appropriate, and in addition, the
Sub-Adviser shall provide such advisory services to the
Fund, in addition to those services provided by the
Adviser, as the Sub-Adviser deems appropriate; as part of
any such services, the Sub-Adviser shall at its discretion:
(i) provide the Adviser and the Fund with overall
market analysis;
(ii) provide the Adviser and the Fund with material
relevant to the investment of the assets of the Fund
in securities of issuers in various states;
(iii) provide the Adviser and the Fund such other
investment advice as it considers necessary or
appropriate;
(iv) consult with the Adviser in connection with the
Adviser's duties under the Advisory Agreement; and
(v) otherwise assist the Adviser, and itself directly
act (in coordination with the Adviser and as may be
agreed among them with respect to a portion of, or all
of, the Fund's portfolio), to
(A) supervise continuously the investment program
of the Fund and the composition of its portfolio;
(B) determine what securities shall be purchased
or sold by the Fund; and
(C) arrange for the purchase and the sale of
securities held in the portfolio of the Fund.
(c) Advisory Services. Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, in the event
of the termination of the Advisory Agreement, the Sub-
Adviser shall act as managerial investment adviser to the
Fund with respect to the investment of the Fund's assets,
and supervise and arrange the purchase of securities for
and the sale of securities held in the portfolio of the
Fund, and the fee payable to the Sub-Adviser shall be
increased to the amount provided in sub-section 4(b)
hereof, provided, however, that (i) within two weeks of
notice of termination of the Advisory Agreement being
delivered by the Fund or by the Adviser, or termination of
the Advisory Agreement for any other reason, or within such
longer period as shall have been specified by the Board of
Trustees, the Sub-Adviser shall have provided the Board of
Trustees information of the kind required in connection
with annual renewal of agreements under Section 15(c) of
the Act, and (ii) within thirty days of the termination of
the Advisory Agreement, the assumption of such duties by
the Sub-Adviser shall have been approved by a vote of the
Trust's Board of Trustees, including a vote of a majority
of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such
party, with votes cast in person at a meeting called for
the purpose of voting on such approval. In the event that
the Sub-Adviser assumes such duties, it shall
(i) supervise continuously the investment program
of the Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased
or sold by the Fund;
(iii) arrange for the purchase and the sale of
securities held in the portfolio of the Fund; and
(iv) at its expense provide for pricing of the
Fund's portfolio daily using a pricing service or
other source of pricing information satisfactory
to the Fund and, unless otherwise directed by the
Board of Trustees, provide for pricing of the
Fund's portfolio at least quarterly using another
such source satisfactory to the Fund.
(d) Compliance with Requirements. Any investment
program furnished, and any activities performed, by the
Sub-Adviser under this section shall at all times conform
to, and be in accordance with, any requirements imposed by:
(1) the Investment Company Act of l940 (the "Act") and any
rules or regulations in force thereunder; (2) any other
applicable laws, rules and regulations; (3) the Declaration
of Trust and By-Laws of the Fund as amended from time to
time; (4) any policies and determinations of the Board of
Trustees of the Fund; and (5) the fundamental policies of
the Fund, as reflected in its registration statement under
the Act or as amended by the shareholders of the Fund.
(e) Best Efforts; Responsibility. The Sub-Adviser
shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder, but the Sub-Adviser
shall not be liable for any loss sustained by reason of the
adoption of any investment policy or the purchase, sale or
retention of any security, whether or not such purchase,
sale or retention shall have been based upon (i) its own
investigation and research or (ii) investigation and
research made by any other individual, firm or corporation,
if such purchase, sale or retention shall have been made
and such other individual, firm or corporation shall have
been selected in good faith by the Adviser or the Sub-
Adviser.
(f) Order Allocation. In connection with any duties
for which it may become responsible to arrange for the
purchase and sale of the Fund's portfolio securities, the
Sub-Adviser shall select such broker-dealers ("dealers") as
shall, in the Sub-Adviser's judgment, implement the policy
of the Fund to achieve "best execution," i.e., the most
favorable price and efficient execution, and accordingly
will seek to execute each transaction at a price and
commission, if any, which provide the most favorable total
cost or proceeds reasonably attainable in the
circumstances. The Fund understands that purchases from
underwriters include a commission or concession paid by the
issuer to the underwriter and that principal transactions
placed through dealers include a spread between the bid and
asked prices. In allocating transactions to dealers, the
Sub-Adviser is authorized to consider, in determining
whether a particular dealer will provide best execution,
the dealer's reliability, integrity, financial condition
and risk in positioning the securities involved, as well as
the difficulty of the transaction in question, and thus
need not pay the lowest spread or commission available if
the Sub-Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the
brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the
Sub-Adviser's overall responsibilities. If, on the
foregoing basis, the transaction in question could be
allocated to two or more dealers, the Sub-Adviser is
authorized, in making such allocation, to consider (i)
whether a dealer has provided research services, as further
discussed below; and (ii) whether a dealer has sold shares
of the Fund. Such research may be in written form or
through direct contact with individuals and may include
quotations on portfolio securities and information on
particular issuers and industries, as well as on market,
economic, or institutional activities. The Fund recognizes
that no dollar value can be placed on such research
services or on execution services and that such research
services may or may not be useful to the Fund and may be
used for the benefit of the Sub-Adviser or its other
clients.
(g) Other Services. The Sub-Adviser assumes no
responsibility under this Agreement other than to render
the services called for hereunder.
(h) Liability for Error. The Sub-Adviser shall not be
liable for any error in judgment or for any loss suffered
by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
(i) Other Customers. Nothing in this Agreement shall
prevent the Sub-Adviser or any officer thereof from acting
as investment adviser, sub-adviser, administrator or
manager for any other person, firm, or corporation, and
shall not in any way limit or restrict the Sub-Adviser or
any of its officers, stockholders or employees from buying,
selling or trading any securities for its own or their own
accounts or for the accounts of others for whom it or they
may be acting, provided, however, that the Sub-Adviser
expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the
performance of its obligations to the Adviser or the Fund
under this Agreement. The Fund shall indemnify the Sub-
Adviser to the full extent permitted by the Fund's
Declaration of Trust.
3. Allocation of Expenses.
The Sub-Adviser shall, at its own expense, provide
office space, facilities, equipment, and personnel for the
performance of its functions hereunder and shall pay all
compensation of Trustees, officers, and employees of the
Fund who are affiliated persons of the Sub-Adviser.
In the event of the termination of the Advisory
Agreement, the Sub-Adviser shall assume the payment of
expenses paid by the investment adviser under the Advisory
Agreement, and in connection therewith, the Fund agrees as
follows: the Fund shall bear the costs of preparing and
setting in type its prospectuses, statements of additional
information and reports to its shareholders, and the costs
of printing or otherwise producing and distributing those
copies of such prospectuses, statements of additional
information and reports as are sent to its shareholders.
All costs and expenses not expressly assumed by the Sub-
Adviser under this sub-section or otherwise by the Sub-
Adviser, administrator or principal underwriter or by any
other investment adviser shall be paid by the Fund,
including, but not limited to (i) interest and taxes; (ii)
brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of its Trustees other than those
affiliated with the Sub-Adviser or such adviser,
administrator or principal underwriter; (v) legal and audit
expenses; (vi) custodian and transfer agent, or shareholder
servicing agent, fees and expenses; (vii) expenses incident
to the issuance of its shares (including issuance on the
payment of, or reinvestment of, dividends); (viii) fees and
expenses incident to the registration under Federal or
State securities laws of the Fund or its shares; (ix)
expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Fund; (x)
all other expenses incidental to holding meetings of the
Fund's shareholders; and (xi) such non-recurring expenses
as may arise, including litigation affecting the Fund and
the legal obligations for which the Fund may have to
indemnify its officers and Trustees.
4. Compensation of the Sub-Adviser.
(a) Initial Compensation. The Fund shall pay the Sub-
Adviser, and the Sub-Adviser shall accept as full
compensation for all services rendered hereunder, a fee
payable monthly and computed on the net asset value of the
Fund at the end of each business day at the annual rate of
0.80 of 1% of such net asset value on net assets of the
Fund up to $15,000,000, 0.65 of 1% on net assets of the
Fund above $15,000,000 to $50,000,000 and 0.50 of 1% of the
Fund's net assets above $50,000,000.
(b) Additional Compensation as Approved Adviser. In
the event that the Sub-Adviser has assumed the duties of
managerial investment adviser to the Fund with rspect to
investment of the Fund's assets pursuant to sub-section
2(c) hereof following approval by the Fund's Board of
Trustees as there set forth, the Fund shall pay the Sub-
Adviser, and the Sub-Adviser shall accept as full
compensation for all services rendered hereunder, a fee
payable monthly and computed on the net asset value of the
Fund at the end of each business day at the annual rate of
1.50% of such net asset value on net assets of the Fund up
to $15,000,000, 1.20% on net assets of the Fund above
$15,000,000 to $50,000,000 and 0.90 of 1% of the Fund's net
assets above $50,000,000.
(c) Additional Compensation as Interim Adviser. In
the event of termination of the Advisory Agreement, if the
Sub-Adviser does not elect to assume the duties of
managerial investment adviser pursuant to sub-section 2(c)
hereof, or if its election as managerial investment adviser
is not approved by the Board of Trustees, the Sub-Adviser
shall act as acting investment adviser until a new
investment adviser has been appointed. In such event, in
addition to fees provided under sub-section 4(a) hereof for
the Sub-Adviser, the Fund shall pay the Sub-Adviser an
amount which, together with the amount paid under sub-
section 4(a), does not exceed the lesser of (i) the amount
specified in sub-section 4(b) above, or (ii) its costs for
its services as administrator and as acting managerial
investment adviser.
(d) Fee Limitation. The above fee shall be reduced,
but not below zero, by an amount equal to its pro-rata
portion (based upon the aggregate fees of the Adviser and
the Sub-Adviser) of the amount, if any, by which the total
expenses of the Fund in any fiscal year, exclusive of
taxes, interest, and brokerage fees, shall exceed the most
restrictive expense limitation imposed upon the Fund in the
states in which shares are then eligible for sale. The
payment of the above fee at the end of any month will be
reduced or postponed so that at no time will there be any
accrued but unpaid liability under this expense limitation,
subject to readjustment during the year.
5. Duration and Termination
(a) Duration. This Agreement shall become effective
on the effective date of the Registration Statement
containing the initial registration of shares of the Fund
and shall, unless terminated as hereinafter provided,
continue in effect until the June 30 next preceding the
second anniversary of the effective date of this Agreement,
and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (1)
by a vote of the Fund's Board of Trustees, including a vote
of a majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Act)
of any such party, with votes cast in person at a meeting
called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of
the outstanding voting securities of the Fund and by such a
vote of the Trustees. If the Fund's shareholders fail to
approve this Agreement, the Sub-Adviser may continue to
serve and act in that capacity pending further action by
the Fund's Board of Trustees or the Fund's shareholders,
provided that the compensation received by the Sub-Adviser
during such period is equal to no more than its actual
costs incurred in furnishing such services to the Fund or
the amount it would have received under this Agreement,
whichever is less.
(b) Termination. This Agreement may be terminated by
the Sub-Adviser at any time without penalty upon giving the
Fund sixty days' written notice (which notice may be waived
by the Fund) and may be terminated by the Fund at any time
without penalty upon giving the Sub-Adviser sixty days'
written notice (which notice may be waived by the Sub-
Adviser), provided that such termination by the Fund shall
be directed or approved by a vote of a majority of its
Trustees in office at the time or by a vote of the holders
of a majority (as defined in the Act) of the voting
securities of the Fund outstanding and entitled to vote.
This Agreement shall automatically terminate in the event
of its assignment (as defined in the Act). However, the
Sub-Adviser agrees that it will not exercise its
termination rights for at least five years from the
effective date of this Agreement, except for regulatory
reasons.
6. Disclaimer of Shareholder Liability
The Sub-Adviser understands that the obligations of
this Agreement are not binding upon any shareholder of the
Fund personally, but bind only the Fund's property; the
Sub-Adviser represents that it has notice of the provisions
of the Fund's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Fund.
7. Use of Aquila Name
The Fund may use the name "Aquila" or any name derived
from or similar to the name "Aquila Management Corporation"
or "Aquila Distributors, Inc." only for so long as this
Agreement or any extension, renewal or amendment thereof
remains in effect. At such time as this Agreement shall no
longer be in effect, the Fund shall (to the extent it
lawfully can) cease to use such a name or any other name
indicating that the Fund is administered, distributed or
otherwise connected with the Sub-Adviser or with Aquila
Distributors, Inc. (collectively, (the "Aquila
Organization"). The Fund acknowledges that it has adopted
the name "Aquila Rocky Mountain Equity Fund" through
permission of the Aquila Organization and agrees that the
Aquila Organization reserves to itself and any successor to
any of its business the right to grant the non-exclusive
right to use the names Aquila or any similar name to any
other corporation or entity, including but not limited to
any investment company of which the Aquila Organization or
any subsidiary or affiliate thereof or any successor to the
business of any thereof shall be the adviser, sub-adviser,
administrator or distributor.
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be executed by their duly authorized
officers and their seals to be hereunto affixed, all as of
the day and year first above written.
ATTEST: AQUILA ROCKY MOUNTAIN EQUITY FUND
/s/Xxxxxxx X. XxxXxxxxxx /s/Xxxx X. Xxxxxxxx
________________________ By:__________________________
Asst. Secy. President
ATTEST: AQUILA MANAGEMENT CORPORATION
/s/Xxxxx X. Xxxxxxxx /s/Xxxx X. Xxxxxxx
_______________________ By:__________________________
V.P. & Secy. C.F.O.
