SUB-ADVISORY AGREEMENT
Gateway Investment Advisers, L.P.
000 XxxxxxXxxxxx Xxxxx
Xxxxxxx, Xxxx 00000
Ladies and Gentlemen:
Xxxxx Family of Real Estate Funds (the "Trust"), an Ohio business
trust, is a diversified open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "Act"), and is subject to
the rules and regulations promulgated thereunder. The Trust currently offers one
series of shares to investors, the Xxxxx S&P REIT Index Fund (the "Fund"). Each
share of the Fund represents an undivided interest in the assets, subject to the
liabilities, of the Fund.
Xxxxx Asset Management, Inc. (the "Adviser") acts as the investment
adviser for the Fund pursuant to the terms of an Advisory Agreement. The Adviser
shall have overall supervisory responsibility for the general management and
investment of the Fund's assets and portfolio securities. However, specific
portfolio purchases and sales for the investment portfolio of the Fund are to be
made by advisory organizations recommended by the Adviser and approved by the
Board of Trustees of the Trust.
1. APPOINTMENT AS SUB-ADVISER. The Trust being duly authorized hereby
appoints and employs Gateway Investment Advisers, L.P. (the "Sub-Adviser") as
the discretionary portfolio manager of the Fund, on the terms and conditions set
forth herein.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Sub-Adviser
accepts the appointment as the discretionary portfolio manager and agrees to use
its best professional judgment to make timely investment decisions for the Fund
in accordance with the provisions of this agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for investment by
the Fund, to purchase and sell securities of the Fund, and upon making any
purchase or sale decision, to place orders for the execution of such portfolio
transactions in accordance with paragraphs 5 and 6 hereof. In providing
portfolio management services to the Fund, the Sub-Adviser shall be subject to
such investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code of 1986, applicable state securities laws,
the supervision and control of the Board of Trustees of the Trust, such specific
instructions as the Board of Trustees may adopt and communicate to the
Sub-Adviser the investment objectives, policies and restrictions of the Fund
furnished pursuant to paragraph 4 and the provisions of Schedule A hereto. The
Sub- Adviser is not authorized by the Trust to take any action, including the
purchase or sale of securities for the Fund, in contravention of any
restriction, limitation, objective, policy or instruction described in the
previous sentence. The Sub- Adviser shall maintain on behalf of the Fund the
records listed in Schedule A hereto (as amended from time to time). At the
Trust's reasonable request, the Sub-Adviser will consult with the
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Adviser with respect to any decision made by it with respect to the investments
of the Fund.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust will
provide the Sub-Adviser with the statement of investment objectives, policies
and restrictions applicable to the Fund as contained in the Fund's registration
statements under the Act and the Securities Act of 1933, and any instructions
adopted by the Board of Trustees supplemental thereto. The Trust will provide
the Sub-Adviser with such further information concerning the investment
objectives, policies and restrictions applicable thereto as the Sub-Adviser may
from time to time reasonably request. The Trust retains the right, on written
notice to the Sub-Adviser from the Trust or the Adviser, to modify any such
objectives, policies or restrictions in any manner at any time.
5. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have the authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Sub-Adviser and to select the markets on or in which the
transactions will be executed.
A. In doing so, the Sub-Adviser will give primary
consideration to securing the best execution, taking into account such factors
as price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer.
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Consistent with this policy, the Sub-Adviser may select brokers or dealers who
also provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the other accounts over
which it exercises investment discretion. It is understood that neither the
Trust, the Adviser nor the Sub-Adviser has adopted a formula for allocation of
the Fund's investment transaction business. It is also understood that it is
desirable for the Fund that the Sub-Adviser have access to supplemental
investment and market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher commission to
the Fund than may result when allocating brokerage to other brokers on the basis
of seeking the lowest commission. Therefore, the Sub-Adviser is authorized to
place orders for the purchase and sale of securities for the Fund with such
certain brokers, subject to review by the Trust's Board of Trustees from time to
time with respect to the extent and continuation of this practice, provided that
the Sub-Adviser determines in good faith that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker or dealer. The determination may be viewed in
terms of either a particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to the other accounts over which
it exercises investment discretion. It is understood that although the
information may be useful to the Trust and the Sub-Adviser, it is not possible
to place a dollar
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value on such information. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
execution, the Sub-Adviser may give consideration to sales of shares of the Fund
as a factor in its selection of brokers and dealers to execute portfolio
transactions of the Fund.
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, 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 sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as 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.
For each fiscal quarter of the Fund, the Sub-Adviser shall prepare and
render reports to the Adviser and the Trust's Board of Trustees of the total
brokerage business placed and the manner in which the allocation has been
accomplished. Such reports shall set forth at a minimum the information required
to be maintained by Rule 31a-1(b)(9) under the Act.
B. The Sub-Adviser agrees that it will not execute
any portfolio transactions for the Fund's account with a broker
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or dealer which is an "affiliated person" (as defined in the Act) of the Trust,
the Adviser, the Sub-Adviser or any portfolio manager of the Trust without the
prior written approval of the Adviser. The Adviser agrees that it will provide
the Sub-Adviser with a list of brokers and dealers which are "affiliated
persons" of the Trust, the Adviser or the Sub-Adviser.
6. TRANSACTION PROCEDURES. All transactions will be consummated by
payment to or delivery by the Fund's custodian (the "Custodian"), or such
depositories or agents as may be designated by the Custodian in writing, as
custodian for the Fund, of all cash and/or securities due to or from the Fund,
and the Sub-Adviser shall not have possession or custody thereof. The
Sub-Adviser shall advise the Custodian and confirm in writing to the Trust and
to the Adviser all investment orders for the Fund placed by it with brokers and
dealers. The Sub-Adviser shall issue to the Custodian such instructions as may
be appropriate in connection with the settlement of any transaction initiated by
the Sub-Adviser. It shall be the responsibility of the Sub-Adviser to take
appropriate action if the Custodian fails to confirm in writing proper execution
of the instructions.
7. PROXIES. The Trust will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be invested
from time to time. At the Trust's request, the Sub-Adviser shall provide the
Trust with its recommendations as to the voting of such proxies.
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8. REPORTS TO THE SUB-ADVISER. The Trust will provide the Sub-Adviser
with such periodic reports concerning the status of the Fund as the Sub-Adviser
may reasonably request.
9. FEES FOR SERVICES. For the services provided to the Fund, the
Adviser (not the Fund) shall pay the Sub-Adviser a monthly fee equal to the
annual rate of .15% of the value of the Fund's average daily net assets up to
$100,000,000, .10% of such assets from $100,000,000 to $200,000,000 and .07% of
such assets in excess of $200,000,000; provided, however, that the minimum fee
is $3,000 per month. Pursuant to the provisions of the Advisory Agreement
between the Trust and the Adviser, the Adviser is solely responsible for the
payment of fees to the Sub-Adviser, and the Sub-Adviser agrees to seek payment
of the Sub-Adviser's fees solely from the Adviser. The Sub-Adviser agrees to pay
the compensation of any persons rendering any services to the Fund who are
officers, directors or employees of the Sub-Adviser.
10. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Trust
acknowledges that the Sub-Adviser or one or more of its affiliates may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that the Sub-
Adviser, its affiliates or any of its or their directors, officers, agents or
employees may buy, sell or trade in any securities for its or their respective
accounts ("Affiliated Accounts"). Subject to the provisions of paragraph 2
hereof, the Trust agrees that the Sub-Adviser or its affiliates may give
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advice or exercise investment responsibility and take such other action with
respect to other Affiliated Accounts which may differ from the timing or nature
of action taken with respect to the Fund, provided that the Sub-Adviser acts in
good faith, and provided further, that it is the Sub-Adviser's policy to
allocate, within its reasonable discretion, investment opportunities to the Fund
over a period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objectives and policies of the Fund
and any specific investment restrictions applicable thereto. The Trust
acknowledges that one or more of the Affiliated Accounts may at any time hold,
acquire, increase, decrease, dispose of or otherwise deal with positions in
investments in which the Fund may have an interest from time to time, whether in
transactions which involve the Fund or otherwise. The Sub-Adviser shall have no
obligation to acquire for the Fund a position in any investment which any
Affiliated Account may acquire, and the Trust shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund or otherwise.
11. CERTIFICATE OF AUTHORITY. The Trust, the Adviser and the
Sub-Adviser shall furnish to each other from time to time certified copies of
the resolutions of their Board of Trustees or Board of Directors or executive
committees, as the case may be, evidencing the authority of officers and
employees who are authorized to act on behalf of the Trust, the Fund, the
Adviser and/or the Sub-Adviser.
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12. LIMITATION OF LIABILITY. The Sub-Adviser shall be held harmless
and indemnified for any action taken, omitted or suffered to be taken by it in
its reasonable judgment, in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement,
or in accordance with (or in the absence of) specific directions or instructions
from the Trust, provided however, that such acts or omissions shall not have
resulted from the Sub- Adviser's willful misfeasance, bad faith or gross
negligence. Nor shall the Sub-Adviser be liable for any action whatsoever taken,
omitted or suffered to be taken by the Adviser. Nothing in this paragraph 12
shall be construed in a manner inconsistent with Sections 17(h) and (i) of the
Act.
13. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the
Adviser and the Trust to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto shall
treat as confidential all information pertaining to the Fund and the actions of
the Sub-Adviser and the Trust in respect thereof.
14. ASSIGNMENT. No assignment of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in the event of
such assignment. The Sub-Adviser shall notify the Trust and the Adviser in
writing sufficiently in advance of any proposed change of control, as defined in
Section 2(a)(9) of the Act, as will enable the Trust and the Adviser to consider
whether an assignment will occur, and to take
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the steps necessary to enter into a new contract with the
Sub-Adviser.
15. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust
represents, warrants and agrees that:
A. The Sub-Adviser has been duly appointed by the
Board of Trustees of the Trust to provide investment services to
the Fund as contemplated hereby.
B. The Trust will deliver to the Sub-Adviser a true and
complete copy of its then current prospectus and statement of additional
information as effective from time to time and such other documents or
instruments governing the investments of the Fund and such other information as
is necessary for the Sub- Adviser to carry out its obligations under this
Agreement.
C. The Trust is currently in compliance and shall at
all times comply with the requirements imposed upon the Trust by
applicable laws and regulations.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SUB- ADVISER.
The Sub-Adviser represents, warrants and agrees that:
A. The Sub-Adviser is registered as an "investment
adviser" under the Investment Advisers Act of 1940.
B. The Sub-Adviser will maintain, keep current and preserve on
behalf of the Trust, in the manner and for the time periods required or
permitted by the Act, the records identified in Schedule A. The Sub-Adviser
agrees that such records (unless otherwise indicated on Schedule A) are the
property of the Trust, and will be surrendered to the Trust promptly upon
request.
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C. The Sub-Adviser will complete such reports concerning
purchases or sales of securities on behalf of the Fund as the Adviser or the
Trust may from time to time require to ensure compliance with the Act, the
Internal Revenue Code of 1986 and applicable state securities laws.
D. The Sub-Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and will provide the
Trust with a copy of the code of ethics and evidence of its adoption. Within
forty-five (45) days of the end of the last calendar quarter of each year while
this Agreement is in effect, the President or a Vice President of the
Sub-Adviser shall certify to the Trust that the Sub-Adviser has complied with
the requirements of Rule 17j-1 during the previous year and that there has been
no violation of the Sub-Adviser's code of ethics or, if such a violation has
occurred, that appropriate action was taken in response to such violation. Upon
the written request of the Trust, the Sub-Adviser shall submit to the Trust the
reports required to be made to the Sub-Adviser by Rule 17j-1(c)(1).
E. The Sub-Adviser will promptly after filing with
the Securities and Exchange Commission an amendment to its Form
ADV furnish a copy of such amendment to the Trust and to the
Adviser.
F. The Sub-Adviser will immediately notify the Trust and the
Adviser of the occurrence of any event which would disqualify the Sub-Adviser
from serving as an investment adviser
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of an investment company pursuant to Section 9(a) of the Act or otherwise.
17. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Sub-Adviser, the Adviser and the Trust, which
amendment, other than amendments to Schedule A, is subject to the approval of
the Board of Trustees and the shareholders of the Fund in the manner required by
the Act and the rules thereunder, subject to any applicable exemptive order of
the Securities and Exchange Commission modifying the provisions of the Act with
respect to approval of amendments to this Agreement.
18. EFFECTIVE DATE; TERM. This Agreement shall become effective on the
date of its execution and shall remain in full force and effect for two (2)
years from the date hereof, and from year to year thereafter but only so long as
such continuance is specifically approved at least annually by the vote of a
majority of the Trustees who are not interested persons of the Trust, the
Adviser or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval, and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities of the Fund. The aforesaid
requirement that this Agreement may be continued "annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
19. TERMINATION. This Agreement may be terminated by any party hereto,
without the payment of any penalty, immediately upon written notice to the other
in the event of a breach of any
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provision thereof by the party so notified, or otherwise upon sixty (60) days'
written notice to the other, but any such termination shall not affect the
status, obligations or liabilities of any party hereto to the other.
20. SHAREHOLDER LIABILITY. The Sub-Adviser is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed by the
Trust pursuant to this Agreement shall be limited in all cases to the Trust and
its assets. The Sub-Adviser agrees that it shall not seek satisfaction of any
such obligations from the shareholders or any individual shareholder of the
Fund, nor from the Trustees or any individual Trustee of the Trust.
21. USE OF NAME. The Trust, the Fund, the Adviser and any other party
thereto acknowledges and agrees (i) that the name "Gateway" or any derivation
thereof is and has always been the sole property of the Sub-Adviser and (ii) to
make no claim of title, right, license, privilege or any other right of property
or ownership of or to the name "Gateway"; provided, however, that the
Sub-Adviser grants the Trust a non-exclusive right to use the name "Gateway" in
connection with the Fund so long as the name "Gateway" is used in good faith and
used in a manner permitted under the Act and other applicable law. The Trust's
non-exclusive right to use the name "Gateway" shall automatically terminate upon
termination of this Agreement.
22. DEFINITIONS. As used in paragraphs 14 and 18 of this Agreement,
the terms "assignment," interested person" and "vote of a majority of the
outstanding voting securities" shall have
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the meanings set forth in the Act and the rules and regulations thereunder.
23. APPLICABLE LAW. To the extent that state law is not preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of Ohio.
XXXXX ASSET MANAGEMENT, INC. XXXXX FAMILY OF REAL ESTATE
FUNDS
By: __________________________ By: ___________________________
Title: President Title: President
Date: __________________, 1997 Date: __________________, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
GATEWAY INVESTMENT ADVISERS, L.P.
By: ___________________________
Title: ________________________
Date: __________________, 1997
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SCHEDULE A
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Sub-Adviser on behalf
of the Fund for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modification or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
X. The name of the person who placed the order on
behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter,
completed within ten (10) days after the end of the
quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or
dealers was effected, and the division of brokerage
commissions or other compensation on such purchase and
sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers
or dealers.
(ii) The supplying of services or benefits by
brokers or dealers to:
(a) The Trust;
(b) the Adviser;
(c) the Sub-Adviser;
(d) any other portfolio adviser of
the Trust; and
(e) any person affiliated with the
foregoing persons.
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(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as
such.
B. Shall show the nature of the services or benefits made
available.
X. Xxxxx describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rules
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Sub-Adviser's transactions with respect to the Fund.
*Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or portfolio adviser reviews.
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