EXHIBIT (D)(2)
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SUB-ADVISORY AGREEMENT
WITH
NAVELLIER MANAGEMENT, INC.
QUESTAR CAPITAL CORPORATION SUBADVISORY AGREEMENT
Agreement made this 1st day of February, 2001, by and between Questar
Capital Corporation (hereinafter the "Adviser"), investment advisor for the
Avalon Capital Appreciation Fund (herein after the "Fund"), a series of The
Avalon Fund of Maryland, Inc., and Navellier Management, Inc., (hereinafter the
"Subadviser").
WHEREAS, the Adviser has been retained by the Fund, an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act") to provide investment advisory services to the
Fund pursuant to an Investment Advisory Agreement of even date herewith (
the"Investment Advisory Agreement"); and
WHEREAS, the directors of the Fund (the Directors), including a majority of
the Directors who are not "interested parties," as defined in the 1940 Act, and
the Fund's shareholders have approved the appointment of the Subadviser, to
perform certain investment advisory services for the Fund pursuant to this
Subadvisory Agreement, and the Subadviser is willing to perform such services
for the Fund;
WHEREAS, the Subadviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Adviser and the Subadviser as follows:
1. APPOINTMENT. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set
forth in this Subadvisory Agreement. The Subadviser accepts such
appointment and agrees to furnish the services herein set forth, for
the compensation herein provided.
2. DUTIES OF A SUBADVISER. The Adviser hereby authorizes Subadviser to
manage the investment and reinvestment of cash and investments
comprising those assets of the Fund with power on behalf of and in the
name of the Fund at Subadviser's discretion; subject at all time to
the supervision of the Adviser and the Directors of the Fund:
a) to direct the purchase, subscription, or other acquisition of
investments and to the direct sale, redemption, and exchange of
investments, subject to the duty to render to the Directors of
the Fund, the Adviser and the Custodian written reports of the
composition of the portfolio of the Fund as often as the
Directors shall reasonably require.
b) to make all decisions relating to the manner, method, and timing
of investment transactions, to select brokers, dealers, and other
intermedi-
aries by or through whom such transactions will be effected, to
engage such consultants, analysts and experts in connection
therewith as may be considered necessary or appropriate;
c) to direct banks, brokers, or custodians, to disburse funds or
assets solely in order to execute investment transactions for the
Fund, provided that the Subadviser shall have no authority to
direct the transfer of the Fund's funds or assets to itself or
other persons and shall have no authority over the disbursement
(as opposed to investment decisions) of funds or assets nor any
custody of any of the Fund's funds or assets; and
d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder;
provided that any specific or general directions which the Directors of the Fund
may give in writing to the Subadviser with regard to any of the foregoing powers
shall, unless the contrary is expressly stated herein, override the general
authority given by this provision to the extent that the Directors may, at any
time and from time to time, direct, either generally or to a limited extent and
either alone or in concert with the Adviser or the Subadviser (provided that
such directions would not cause the Subadviser to violate and fiduciary duties
or any laws with regard to the Subadviser's duties and responsibilities), all or
any of the same as they shall think fit, and in particular, the Adviser shall
have the right to direct that the Subadviser place trades through brokers and
other agents of the Adviser's choice, subject to brokers or agents executing
such trades on a "best execution basis," i.e. at the best price and/or with
research or other services which render that broker's services most appropriate
for the Subadviser's needs, and further that the Subadviser is satisfied that
the dealing and execution quality of such brokers are satisfactory to the
Subadviser, and provided further that nothing herein shall be construed as
giving the Subadviser power to manage the aforesaid cash and investments in such
a manner as would cause the Fund to be considered a "dealer" in stocks,
securities, or commodities for U.S. federal income tax purposes.
The Adviser shall monitor and review the performance of the Subadviser
under this Agreement, including but not limited to the Subadviser's performance
of the duties delineated in subparagraphs (a)-(d) of this provision.
The Subadviser further agrees that in performing its duties hereunder, it
will
a) (i) comply with the 1940 Act and all rules and regulations
thereunder, the Adviser's Act, the Internal Revenue Code (the
"Code") and all other applicable federal and state laws and
regulations, the Prospectus and Statement of Additional
Information for the Fund, and with any applicable procedures
adopted by the Directors in writing and made available to
Subadviser, (ii) manage the Fund in accordance with the
investment requirements for regulated investment companies under
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Subchapter M of the Code and regulations issued thereunder, (iii)
direct the placement of orders pursuant to its investment
determinations for the Fund directly with the issuers, or with
any broker or dealer, in accordance with applicable policies
expressed in the Fund's Prospectus and/or Statement of Additional
Information and in accordance with applicable legal requirements.
b) furnish the Fund whatever non-proprietary reports it may
reasonably request with respect to the Assets and shall, on the
Subadviser's own initiative, furnish to the Fund from time to
time whatever information the Subadviser believes appropriate for
this purpose;
c) make available to the Fund's administrator, Declaration Service
Company (the "Administrator"), the Adviser, and the Fund,
promptly upon their request such copies of its investment records
and ledgers with respect to the Assets as may be required to
assist the Adviser, the Administrator, and the Fund in their
compliance with applicable laws and regulations. The Subadviser
will furnish the Directors with such periodic and special reports
regarding the Fund as they may reasonably request;
d) immediately notify the Adviser and the Fund in the event that the
Sub adviser or any of its affiliates: (i) becomes aware that it
is subject to a statutory disqualification that prevents the
Subadviser from serving as an investment adviser pursuant to this
Subadvisory Agreement; or (ii) becomes aware that it is the
subject of an administrative proceeding or enforcement action by
the Securities and Exchange Commission ("SEC") or other
regulatory authority. The Subadviser further agrees to notify the
Fund and the Adviser immediately of any material fact known to
the Subadviser respecting or relating to the Subadviser that is
not contained in the Fund's Registration Statement, or any
amendment or supplement thereto, but that is required to be
disclosed therein, and of any statement contained therein that
becomes untrue in any material respect. The Fund, Adviser,
Administrator and their affiliates shall likewise immedi ately
notify the Subadviser if any of them become aware of any
regulatory action of the type described in this subparagraph
2(d).
3. ALLOCATION OF CHARGES AND EXPENSES. The Subadviser shall pay all
expenses associated with the management of its business operations in
performing its responsibilities hereunder, including the cost of its
own overhead, research, and employee compensation, and other internal
operating costs; provided, however, that the Subadviser shall be
entitled to reimbursement on a monthly basis by the Adviser of all
reasonable out-of-pocket expenses properly incurred by it in
connection with serving as a subadviser to the Fund, including,
without
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limitation, all travel, advertisement, solicitation, and marketing
costs related to the Fund. For the avoidance of doubt, the Fund shall
bear its own overhead and other internal operating costs (whether
incurred directly or by the Adviser or the Subadviser) including,
without limitation:
a) the costs incurred by the Fund in the preparation and printing of
the Prospectus or any offering literature (including any form of
advertise ment or other solicitation materials calculated to lead
to investors subscribing for shares);
b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
c) the reasonable fees and expenses of accountants, auditors,
lawyers and other professional advisers to the Fund;
d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
e) fiscal and governmental charges and duties relating to the
purchase, sale, issue or redemption of shares and increases in
authorized share capital of the Fund;
f) the fees of any stock exchange or over-the-counter market on
which the shares may from time to time be listed, quoted or dealt
in and the expenses of obtaining any such listing, quotation or
permission to deal;
g) the fees and expenses (if any) payable to Directors;
h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any
of the assets of the Fund or otherwise in connection with its
business;
i) the expenses of publishing details and prices of shares in
newspapers and other publications;
j) all expenses incurred in the convening of meetings of
shareholders or in the preparation of agreements or other
documents relating to the Fund or in relation to the safe custody
of the documents of title of any investments;
k) all Directors' communication costs; and
l) all premiums and costs for Fund insurance and blanket fidelity
bonds.
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4. COMPENSATION. As compensation for the services provided by the
Subadviser under this agreement, the Adviser will pay the Subadviser,
at the end of each calendar month, an advisory fee computed daily at
an annual rate equal to the applicable percentage of the Fund's
average daily net assets set forth in the attached Fee Schedule. The
"average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time)
on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if
the fund lawfully determines the value of its net assets as of some
other time on each business day, as of such other time. The value of
net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Fund's Declaration of Fund and the
Registration Statement. If, pursuant to such provisions, the
determination of net asset value is suspended for any particular
business day, then for the purposes of this Section 4, the value of
the net assets of the Fund as last determined shall be deemed to be
the value of its net assets as of the close of regular trading on the
New York Stock Exchange, or as of such other time as the value of the
net assets of the Fund's portfolio may lawfully be determined, on that
day. If the determination of the net asset value of the shares of the
Fund has been so suspended for a period including any month end when
the Subadviser's compensation payable at the end of such month shall
be computed on the basis of the value of the net assets of the Fund as
last determined (whether during or prior to such month). If the Fund
determines the value of its portfolio more than once on any day, then
the last such determina tion thereof on that day shall be deemed to be
the sole determination thereof on that day for the purposes of this
section 4.
5. BOOKS AND RECORDS. The Subadviser agrees to maintain such books and
records with respect to its services to the Fund and the Fund as are
required by Section 31 under the 1940 Act, and rules adopted
thereunder, and by other applicable legal provisions, and to preserve
such records for the periods and in the manner required by applicable
laws or regulations. The Subadviser also agrees that records it
maintains and preserves pursuant to rules 3la-2 under the 1940 Act
(excluding trade secrets or intellectual property rights) in
connection with its services hereunder are the property of the Fund
and will be surrendered promptly to the Fund upon its request and the
Subadviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports
in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being
conducted in accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Subadviser shall
exercise its best judgment in rendering the services provided by it
under this Subadvisory Agreement. The Subadviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered
by the Fund or the holders of the Fund's
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shares or by the Adviser in connection with the matters to which this
Sub advisory Agreement relates, provided that nothing in this
Subadvisory Agreement shall be deemed to protect or purport to protect
the subadviser against a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a
loss resulting from willful malfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations or duties under this Agreement.
7. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Subadviser are not exclusive, and that nothing in this Subadvisory
Agreement shall prevent the Subadviser, its affiliates or their
officers, directors and employees from providing similar services to
other investment companies (whether or not their investment objectives
and policies are similar to those of the Fund) or from engaging in
other in other investment advisory activities. When the Subadviser
recommends the purchase or sale of a security for other investment
companies and other clients, and at the same time the Subadviser
recommends the purchase or sale of the same security for the Fund, it
is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to
the Fund the same investments it recommends to its other clients. In
connection with purchases or sales or portfolio securities for the
account of the Fund, neither the Subadviser nor any of its directors,
officers or employees shall act as a principal or agent or receive any
commission. If the Subadviser provides any advice to its clients
concerning the shares of the Fund, the Subadviser shall act solely as
investment counsel for such clients and not in any way on behalf of
the Fund.
8. DURATION AND TERMINATION. This Subadvisory Agreement shall continue in
effect for a period of two years unless sooner terminated as provided
herein. Notwith standing the foregoing, this Subadvisory Agreement may
be terminated: (a) at any time without penalty by the Fund or Adviser
upon the vote of a majority of the Directors or by vote of the
majority of the Fund's outstanding voting securities, upon sixty (60)
days' written notice to the Subadviser, or (b) by the Subadviser
without cause at any time without penalty, upon sixty (60) days'
written notice to the Fund and the Adviser. This Subadvisory Agreement
will also terminate automatically in the event of its assignment (as
defined in the ▇▇▇▇ ▇▇▇) or the assignment or termination of the
Investment Advisory Agreement.
9. AMENDMENTS. No provision of this Subadvisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by both parties, and no material amendment of this
Subadvisory Agreement shall be effective until approved by an
affirmative vote of (i) a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the Directors of the
Fund, including a majority of the Directors who are not
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interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval,
if such approval is required by applicable law.
10. INDEMNIFICATION.
a) The Adviser hereby agrees to indemnify the Subadviser from and
against all liabilities, losses, expenses, reasonable attorneys'
fees and costs (other than attorney's fees and costs in relation
to the preparation of this Agreement; each party bearing
responsibility for its own such costs and fees) or damages (other
than liabilities, losses, expenses, attorneys' fees and costs or
damages arising from the Subadviser failing to meet the standard
of care required hereunder in the performance by the Sub adviser
of, or its failure to perform, the services required hereunder),
arising from the Adviser's (its affiliates and their respective
agents and employees) failure to perform its duties or assume its
obligations hereunder, or from its wrongful actions or omissions,
including but not limited to any claims for non-payment of
advisory fees; claims asserted or threatened by any shareholder
of the Fund, governmental or regulatory agency, or any other
person; claims arising from any wrongful act by the Fund or any
of their trustees, officers, employees, or represen tatives, or
by the Adviser, its officers, employees or representatives, or
from any actions by any representative of the Fund; any action or
claim against the Subadviser based on any alleged untrue
statement or misstatement of material fact in any registration
statement, prospectus, shareholder report or other information or
materials covering shares filed or made public by the Fund or any
amendment thereof or supplement thereto, or the failure or
alleged failure to state therein a material fact required to be
stated in order that the statements therein are not misleading,
provided that such claim is not based upon information provided
to the Adviser by the Subadviser or approved by the Subadviser in
the manner provided in paragraph 12b) of this Agreement, or which
facts or information the Subadviser failed to provide or
disclose. With respect to any claim for which the Subadviser
shall be entitled to indemnity hereunder, the Adviser shall
assume the reasonable expenses and costs (including any
reasonable attorneys' fees and costs) of the Subadviser of
investigating and/or defending any claim asserted or threatened
by any party, subject always to the Adviser first receiving a
written undertaking from the Subadviser to repay any amounts paid
on its behalf in the event and to the extent of any subsequent
determination that the Subadviser was not entitled to
indemnification hereunder in respect of such claim.
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b) The Subadviser hereby agrees to indemnify the Adviser, its
affiliates, and the Fund from and against all liabilities,
losses, expenses, reasonable attorneys' fees and costs (other
than attorneys' fees and costs in relation to the preparation of
this Subadvisory Agreement; each party bearing responsibility for
its own such costs and fees) or damages (other than liabilities,
losses, expenses, attorneys' fees and costs or damages arising
from the Adviser's failure to perform its responsibilities
hereunder or claims arising from its acts or failure to act in
performing this Sub advisory Agreement) arising from Subadviser's
(its affiliates, and their respective agents and employees)
failure to perform its duties and assume its obligations
hereunder, or from any wrongful act of Subadviser or its failure
to act in performing this Subadvisory Agreement including any
action or claim against the Adviser based on any alleged untrue
statement or misstatement of a material fact made or provided by
and with the consent of Subadviser contained in any registration
statement, prospectus, shareholder report or other information or
materials relating to the Fund and shares issued by the Fund or
the failure or alleged failure to state a material fact therein
required to be stated in order that the statement therein is not
misleading, which fact should have been made or provided by the
Subadviser to the Adviser. With respect to any claim for which
the Adviser is entitled to indemnity hereunder, the Subadviser
shall assume the reasonable expenses and costs (including any
reasonable attorneys' fees and costs) of the Adviser of
investigating and/or defending any claim asserted or threatened
by any party, subject always to the Subadviser first receiving a
written undertaking from the Adviser to repay any amounts paid on
its behalf in the event and to the extent of any subsequent
determination that the Adviser was not entitled to
indemnification hereunder in respect of such claim.
c) In the event that the Subadviser or Adviser is or becomes a party
to any action or proceedings in respect of which indemnification
may be sought hereunder, the party seeking indemnification shall
promptly notify the other party thereof. After becoming notified
of the same, the party from whom indemnification is sought shall
be entitled to partici ▇▇▇▇ in any such action or proceeding and
shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking
indemnification. After properly assuming the defense thereof, the
party from whom indemnification is sought shall not be liable
hereunder to the other party for any legal or other expenses sub
sequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment,
settlement, or otherwise pursuant to this provision. The party
from whom indemnifica tion is sought shall not be liable
hereunder for any settlement of any
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action or claim effected without its written consent which
consent shall not be unreasonably withheld.
11. INDEPENDENT CONTRACTOR. Subadviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as
otherwise expressly provided herein, shall have no authority to act
for, bind or represent the Fund in any way or otherwise be deemed to
be an agent of the Fund. Likewise, the Fund, the Adviser, and their
respective affiliates, agents and employees shall not be deemed agents
of the Subadviser and shall have not authority to bind Subadviser.
12. USE OF NAME.
a) The Fund may, subject to sub-clause (b) below, use the name,
"Navellier Fund Management, Inc." or any component, abbreviation
or other name derived therefrom for promotional purposes only for
so long as this Agreement (or any extension, renewal or amendment
thereof) continues in force, unless the Subadviser shall
specifically consent in writing to such continued use thereafter.
Any permitted use by the Fund during the term hereof of the name
of the Subadviser, Navellier, or any derivative thereof, shall in
no way prevent the Subadviser or any of its shareholders or any
of their successors, from using or permitting the use of such
name (whether singly or in any combination with any other words)
for, by or in connecting with an entity or enterprise other than
the Fund. The name and right to the name Navellier Management,
Inc. or any derivation of the name of Navellier shall at all
times be owned and be the sole and exclusive property of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and his affiliated entities. Navellier Management,
Inc., by entering into this Agreement, is allowing the Fund to
use the name Navellier and/or derivatives thereof solely by or on
behalf of this Fund. At the conclusion of this Agreement or in
the event of any termination of this Agreement or if the
Subadviser's services are terminated for any reason, each of the
authorized parties and their respective employees,
representatives, affiliates, and associates agree that they shall
immediately cease using the name and/or any derivatives of said
name for any purpose what soever.
b) The Adviser and its affiliates shall not publish or distribute,
and shall cause the Fund not to publish or distribute to Fund
shareholders, prospective investors, sales agents or members of
the public any disclosure document, offering literature
(including any form of advertise ment or other solicitation
materials calculated to lead investors to subscribe for any
purchase shares of the Fund) or other document referring by name
to the Subadviser, unless the Subadviser shall have
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consented in writing to such references in the form and context
in which they appear; provided however, that where the Fund
timely seeks to obtain approval of disclosure contained in any
documents required to be filed by the Fund, and such approval is
not forthcoming on or before the date on which such documents are
required by law to be filed, the Subadviser shall be deemed have
consented to such disclosure.
13. MISCELLANEOUS.
a) This Subadvisory Agreement shall be governed by the laws of the
State of Michigan, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act, the
Advisers Act, or rules or orders of the SEC thereunder. In the
event of any litigation in which the Adviser and the Subadviser
are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States
District Court for the State of Michigan located in Detroit,
Michigan.
b) The captions of this Subadvisory Agreement are included for con
venience only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
c) This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed to constitute one and the
same instrument
14. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the
offices of the parties as set forth therein during normal business
hours, or delivered or sent by prepaid registered mail, express mail
or by facsimile to the parties at such offices or such other address
as may be notified by either party from time to time. Such notice,
instruction or other instrument shall be deemed to have been served,
in the case of a registered letter at the expiration of seventy-two
(72) hours after posting; in the case of express mail, within
twenty-four (24) hours after dispatch; and in the case of facsimile,
immediately on dispatch, and if delivered outside normal business
hours it shall be deemed to have been received at the next time after
delivery or transmission when normal business hours commence. Evidence
that the notice, instruction or other instrument was properly
addressed, stamped and put into the post shall be conclusive evidence
of posting.
15. ATTORNEYS' FEES. In the event of a material breach of this Agreement
by any party hereto, the prevailing party, as determined by the trier
of fact, shall be
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entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
16. NON-SOLICITATION. The Adviser, its affiliates and their respective
agents (including brokers engaged in marketing and selling shares of
the Fund), and each of their employees and affiliates agree not to
knowingly solicit to invest, or accept or retain as investors, in the
Fund any persons or entities who are clients of or investors in any
fund or investment vehicle managed by any entity owned by ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of this 1st day of February,
2001.
QUESTAR CAPITAL CORPORATION NAVELLIER MANAGEMENT, INC.
----------------------------------- -----------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Chairman and CEO President
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FEE SCHEDULE
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All assets, including common stock, preferred stock, securities convertible
into common stock, straight debt securities, and cash and cash equivalents, will
be computed at an annual rate of:
Accounts under $25,000,000
1/2% per year (.005)
Next $25,000,000
.45% per year (.0045)
Next $50,000,000
.4% per year (.004)
Over $100,000,000
.35% per year (.0035)
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