THE MASTERS' SELECT EQUITY FUND
MASTERS' SELECT INVESTMENT TRUST
INVESTMENT SUB-ADVISORY AGREEMENT
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THIS INVESTMENT SUB-ADVISORY AGREEMENT is made as of the ___
day of ___________, 199__, by and between XXXXXX/XXXXXXX FUND ADVISORS, LLC
(hereinafter called the "Advisor"); SOUTHEASTERN ASSET MANAGEMENT, INC.
(hereinafter called the "Sub-Advisor"); Masters' Select Investment Trust
(hereinafter called the "Trust"), on behalf of The Masters' Select Equity Fund
(hereinafter called the "Fund"), a separate series of the Trust, solely for
purposes of the indemnification provisions of Section 13 hereof; and
Xxxxxx/Xxxxxxx & Company, LLC, solely for purposes of the indemnification
provisions of Section 13 hereof.
WHEREAS, the Advisor is registered as an Investment Adviser
under the Investment Adviser's Act of 1940, as amended (the "Investment
Adviser's Act"); and
WHEREAS, the Advisor is the sole sponsor and organizer of and
has been retained as the investment advisor to the Fund, a series of the Trust,
an open-end management investment company registered as such under the
Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, Sub-Advisor is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and is engaged in the
business of supplying investment advisory services as an independent contractor;
and
WHEREAS, the Fund and the Advisor desire to retain Sub-Advisor
as an investment advisor to render portfolio advice and services to the Fund
pursuant to the terms and provisions of this Agreement, and Sub-Advisor desires
to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties to this Agreement, which
shall include the Trust on behalf of the Fund and Xxxxxx Xxxxxxx & Company, LLC
solely for purposes of the indemnification provisions of Section 13 hereof,
intending to be legally bound hereby, mutually agree as follows:
1. Description of Duties of Advisor.
Advisor is the sponsor of the Fund and has the overall
responsibility for its organization, administration, operation, and compliance
with all applicable federal and state laws and regulations, all rules or
requirements of self-regulatory organizations, as well as all policies
established by the Trust's Board of Trustees. Such duties include but are not
limited to the overall responsibility for the investment
management of the Fund's portfolio of securities, the functions of fund
accounting, preparation and filing of tax returns, transfer agent and
shareholder servicing, daily pricing of the Fund's portfolio, registrations with
the Securities and Exchange Commission and the various states, preparation,
filing, and distribution of all investment company financial reports, compliance
with any contractual expense limitation requirements and mutual fund fidelity
bonding requirements, and the performance of or supervision of all other mutual
fund administrative and operational functions. Advisor may retain other parties
or entities to perform some or all of such functions as the Advisor deems
appropriate, and Advisor has the responsibility for screening, selection, and
supervision of all outside or non-affiliated service providers to the Fund.
Except as specifically delegated to Sub-Advisor under the provisions of this
Agreement, Sub-Advisor shall have no responsibility for any administrative or
operational functions, or for the compliance with any applicable laws,
regulations, rules or internal policies.
2. Appointment and General Duties of Sub-Advisor.
(a) Appointment. Advisor hereby employs Sub- Advisor,
and Sub-Advisor hereby accepts such employment, to render investment advice and
related services with respect to a specified portion of the assets of the Fund
(the "Allocated Portion") for the period and on the terms set forth in this
Agreement, subject to the supervision and direction of the Advisor and the
Trust's Board of Trustees.
(b) General Duties. Sub-Advisor shall act as one of
the several sub-investment advisers on behalf of the Fund and shall make
recommendations to the Advisor with respect to investment transactions for the
Sub-Advisor's Allocated Portion of the assets of the Fund in accordance with the
investment objectives, policies, and restrictions of the Fund as set forth in
the Fund's prospectus and statement of additional information, and with any
other limitations or requirements established by the Trust's Board of Trustees
from time to time as communicated in writing to the Sub-Advisor.
3. Responsibilities of Advisor and Sub-Advisor With Respect to
Portfolio Investments.
(a) Sub-Advisor shall furnish the Advisor with
recommendations with respect to the purchase or sale of investments for the
Sub-Advisor's Allocated Portion of the Fund's assets, in accordance with the
requirements of Section 2(b), above. Advisor shall have responsibility for
determining that the recommended transaction does not conflict with transactions
being proposed or implemented by other sub-advisors and that, if implemented,
the recommended transaction would satisfy all applicable diversification
requirements under the Investment Company Act, the Internal Revenue Code of
1986, as amended, or otherwise. After the Advisor grants approval for the
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transaction, Sub-Advisor shall effect the approved transaction for the
Sub-Advisor's Portfolio Allocation through its traders and shall provide Advisor
with confirmations of the execution of the transaction. Sub-Advisor shall
maintain records with respect to all transactions for its Allocated Portion, and
shall furnish such other reports, statements, and other data on the securities
recommended and acquired for its Allocated Portion as the Advisor or the Fund's
Board of Trustees may reasonably request.
(b) Advisor shall have the responsibility for
maintaining consolidated books and records with respect to the Fund's overall
portfolio of securities in the manner required by the Investment Company Act and
the Investment Adviser's Act, for voting all proxies for the securities held in
the Fund's portfolio of securities, and for filing all required ownership
reports for such securities, including the filing with the Securities and
Exchange Commission of Schedules 13F, 13G, and 13D, under its name or in the
name of the Fund as may be appropriate.
(c) Brokerage. With respect to Sub-Advisor's
Allocated Portion, Sub-Advisor shall be responsible for broker-dealer selection
and for negotiation of brokerage commission rates, provided that Sub-Advisor
shall not direct orders to an affiliated person of the Sub-Advisor without
general prior authorization to use such affiliated broker or dealer by the
Trust's Board of Trustees. Sub-Advisor's primary consideration in effecting a
securities transaction will be execution at the most favorable price. In
selecting a broker-dealer to execute each particular transaction, Sub-Advisor
may take the following into consideration: the best net price available; the
reliability, integrity, and financial condition of the broker-dealer; the size
of and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. The price to the Fund in any transaction may be less favorable
than that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.
Subject to such policies as the Advisor and the Board of
Trustees of the Trust may determine, Sub-Advisor shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Fund to pay a broker or
dealer that provides (directly or indirectly) brokerage or research services to
the Advisor an amount of commission for effecting a portfolio transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, if Sub-Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or Sub-Advisor's or Advisor's
overall responsibilities with respect to the Fund. Sub-Advisor is further
authorized to allocate the
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orders placed by it on behalf of the Fund to such brokers or dealers who also
provide research or statistical material, or other services, to the Trust, the
Advisor, or any affiliate of either. Such allocation shall be in such amounts
and proportions as Sub-Advisor shall determine, and Sub-Advisor shall report on
such allocations regularly to the Advisor and the Trust, indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
Sub-Advisor is also authorized to consider sales of shares of the Fund as a
factor in the selection of brokers or dealers to execute portfolio transactions,
subject to the requirements of best execution, i.e., that such brokers or
dealers are able to execute the order promptly and at the best obtainable
securities price.
On occasions when Sub-Advisor deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of
Sub-Advisor, Sub-Advisor, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
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
Sub-Advisor in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients.
4. Representations of Sub-Advisor.
(a) Sub-Advisor shall use its best judgment and
efforts in rendering the advice and services to the Fund as contemplated by this
Agreement.
(b) Sub-Advisor shall maintain all licenses and
registrations necessary to perform its duties hereunder in good order.
(c) Sub-Advisor shall conduct its responsibilities
under this Agreement at all times in conformance with the Investment Advisers
Act, the Investment Company Act, and any other applicable state and/or
self-regulatory organization regulations.
5. Independent Contractor Status. Advisor and Sub-Advisor
shall for all purposes herein be deemed to be independent contractors and,
unless expressly authorized to do so, shall have no authority to act for or
represent the Trust, the Fund, or each other in any way, or in any way be deemed
an agent for the Trust, the Fund, or each other. It is expressly understood and
agreed that Sub-Advisor is engaged in rendering investment advisory services to
a large number of other clients and that the services to be rendered pursuant to
the terms of this Agreement are not to be deemed exclusive. In the event that
Sub-Advisor determines that its ability to render the services hereunder would
be impaired by the performance of similar services for other
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clients, Sub-Advisor agrees to so notify Advisor and to terminate its services
hereunder when so requested by Advisor.
6. Sub-Advisor's Personnel. Sub-Advisor shall, at its own
expense, maintain such staff and employ or retain such personnel and consult
with such other persons as it shall from time to time determine to be necessary
to the performance of its obligations under this Agreement.
7. Expenses.
(a) Sub-Advisor shall be responsible for (i)
providing the personnel, office space and equipment reasonably necessary to
fulfill its obligations under this Agreement, and (ii) the costs of any special
meetings of the Fund's shareholders or the Trust's Board of Trustees convened
for the primary benefit of Sub-Advisor.
(b) Advisor may voluntarily or as the result of an
expense limitation agreement absorb certain Fund expenses or waive some or all
of the Advisor's own fee, but such actions shall not reduce the sub-investment
advisory fee otherwise due and payable by Advisor to Sub-Advisor.
8. Sub-Advisory Fee.
(a) The Advisor shall pay to Sub-Advisor, and
Sub-Advisor agrees to accept, as full compensation for all investment advisory
services furnished or provided to the Fund pursuant to this Agreement, an annual
sub-advisory fee based on Sub-Advisor's Allocated Portion, as such Allocated
Portion may be adjusted from time to time. Such fee shall be equal to [ ]% of
the average daily net assets of the Fund attributable to the Sub-Advisor's
Allocated Portion, computed on the value of such net assets as of the close of
business each day.
(b) The sub-advisory fee shall be paid by the Advisor
to Sub-Advisor monthly in arrears on the tenth business day of each month.
(c) The initial fee under this Agreement shall be
payable on the tenth business day of the first month following the effective
date of this Agreement and shall be prorated as set forth below. If this
Agreement is terminated prior to the end of any month, the fee to Sub-Advisor
shall be prorated for the portion of any month in which this Agreement is in
effect which is not a complete month according to the proportion which the
number of calendar days in the month during which the Agreement is in effect
bears to the number of calendar days in the month, and shall be payable within
ten (10) days after the date of termination.
9. No Shorting; No Borrowing. Sub-Advisor agrees that neither
it nor any of its officers or employees shall take any short position in the
shares of the Fund. This prohibition
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shall not prevent the purchase of such shares by any of the officers or
employees of Sub-Advisor or any trust, pension, profit-sharing or other benefit
plan for such persons or affiliates thereof, at a price not less than the net
asset value thereof at the time of purchase, as allowed pursuant to rules
promulgated under the Investment Company Act. Sub-Advisor agrees that neither it
nor any of its officers or employees shall borrow from the Fund or pledge or use
the Fund's assets in connection with any borrowing not directly for the Fund's
benefit.
10. Conflicts with Trust's Governing Documents and Applicable
Laws. Nothing herein contained shall be deemed to require the Trust or the Fund
to take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and the Fund. In this connection,
Sub-Advisor acknowledges that the Advisor and the Trust's Board of Trustees
retain ultimate plenary authority over the Fund, including the Allocated
Portion, and may take any and all actions necessary and reasonable to protect
the interests of shareholders.
11. Reports and Access. Sub-Advisor agrees to supply such
information to the Advisor and to permit such compliance inspections by the
Advisor or the Fund with respect to the Allocated Portion as shall be reasonably
necessary to permit the administrator to satisfy its obligations and respond to
the reasonable requests of the Trustees.
12. Standard of Care.
(a) Sub-Advisor shall exercise reasonable care and
prudence in fulfilling its obligations under this Agreement.
(b) Subject to submission by Advisor to Sub-Advisor
for approval prior to publication or other usage, Sub-Advisor shall have
responsibility for the accuracy and completeness (and liability for the lack
thereof) of the statements in the Fund's offering materials (including the
prospectus, the statement of additional information, advertising and sales
materials) that pertain to Sub-Advisor and the investment of Sub-Advisor's
Allocated Portion of the Fund. Sub-Advisor shall have no responsibility or
liability with respect to other disclosures.
13. Insurance and Indemnification.
(a) For the protection and benefit of the Trust and
the Sub-Advisor, Advisor shall maintain in full force and effect an errors and
omissions liability insurance policy providing errors and omissions liability
insurance coverage for all mutual fund operations for which Advisor and
Sub-Advisor have responsibility, as set forth in Sections 1, 2, and 3 herein.
The Sub-Advisor will be specifically named as an insured party on
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such policy. The company self-retention or deductible shall not exceed 20% of
the policy limits and the policy limits shall be as follows:
Total Fund Assets E & O Policy Limits
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Up to $500 million $1,000,000
$500 million - $1 billion $2,000,000
$1 billion - $1.5 billion $3,000,000
$1.5 billion - $2 billion $4,000,000
Above $2 billion - $5,000,000
(b) With respect to the policy required by this
Agreement, the Advisor shall provide the other parties with an initial insurance
certificate and a certified copy of the insurance policy, and annually
thereafter with insurance certificates and certified copies of the policy, if
requested.
(c) Indemnification. Each party to this Agreement,
including the Trust and Xxxxxx/Xxxxxxx & Company, LLC (each such party an
"Indemnifying Party"), shall indemnify each other Party and the shareholders,
directors, officers, and employees of each other party (any such person an
"Indemnified Party") against any loss, liability, claim, damage, or expense
(including the reasonable cost of investigating and defending any alleged loss,
liability, claim, damage, or expense and reasonable counsel fees incurred in
connection therewith) sustained by the Indemnified Party and arising out of any
errors or omissions of the Indemnifying Party in its performance or
non-performance of any of its duties or responsibilities under this Agreement;
provided however, that nothing contained herein shall be deemed to protect the
Indemnified Party against any liability to which such Indemnified Party would
otherwise be subject by reason of the Indemnified Party's willful misfeasance,
bad faith, negligence, or reckless disregard of its obligations or duties under
this Agreement.
(d) No provision of this Agreement shall be construed
to protect any Trustee or officer of the Trust, or officer of the Advisor or
Sub-Advisor, from liability in violation of Sections 17(h) and (i) of the
Investment Company Act. Advisor and Sub-Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Investment Advisers Act
and has been provided the Board of Trustees of the Trust.
14. Term.
(a) This Agreement shall become effective at the time
the Fund commences operations pursuant to an effective amendment to the Trust's
Registration Statement under the Securities Act of 1933 and shall remain in
effect for a period of two (2) years, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for additional
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periods not exceeding one (l) year so long as such continuation is approved for
the Fund at least annually by (i) the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of the Fund and (ii) the
vote of a majority of the Trustees of the Trust who are not parties to this
Agreement nor interested persons thereof, cast in person at a meeting called for
the purpose of voting on such approval, and (iii) the Advisor. The terms
"majority of the outstanding voting securities" and "interested persons" shall
have the meanings as set forth in the Investment Company Act.
(b) The Fund and its distributor may use the Sub-
Advisor's trade name or any name derived from the Sub-Advisor's trade name only
for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect. Within sixty (60) days from such time as this Agreement shall
no longer be in effect, the Fund shall cease to use such a name or any other
name connected with Sub-Advisor.
15. Termination; No Assignment.
(a) This Agreement may be terminated by the Advisor,
the Sub-Advisor, or the Trust on behalf of the Fund at any time without payment
of any penalty, by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of a Fund, upon sixty (60) days' written
notice to the Advisor, and by the Advisor upon sixty (60) days' written notice
to the Fund. In the event of a termination, Sub-Advisor shall cooperate in the
orderly transfer of the Fund's affairs and, at the request of the Board of
Trustees, transfer any and all books and records of the Fund maintained by
Sub-Advisor on behalf of the Fund.
(b) This Agreement shall terminate automatically in
the event of any transfer or assignment thereof, as defined in the Investment
Company Act.
16. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
17. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without giving
effect to the conflict of laws principles thereof; provided that nothing herein
shall be construed to preempt, or to be inconsistent with, any federal law,
regulation or rule, including the Investment Company Act and the Investment
Advisors Act of 1940 and any rules and regulations promulgated thereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers, all on the day
and year first above written.
XXXXXX/XXXXXXX FUND SOUTHEASTERN ASSET MANAGEMENT,
ADVISORS, LLC INC.
By:______________________________ By:_________________________________
______________________________ _________________________________
______________________________ _________________________________
With respect to the indemnification provisions of Section 13 hereof:
MASTERS' SELECT INVESTMENT TRUST
on behalf of XXXXXX/XXXXXXX & COMPANY,
THE MASTERS' SELECT EQUITY FUND LLC
By:______________________________ By:_________________________________
______________________________ _________________________________
______________________________ _________________________________
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