XXXX XXXXXXX ADVISERS, INC.
Boston, Massachusetts
July 1, 1996
DFS Advisors, LLC
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Sub-Advisory Agreement
Dear Madam/Sirs:
Xxxx Xxxxxxx Special Equities Fund (the "Fund"), has been organized
under the laws of the Commonwealth of Massachusetts to engage in the business of
an investment company. The Fund's shares of beneficial interest may be
classified into series and classes, each series representing the entire
undivided interest in a separate portfolio of assets. As of the date hereof, the
Fund has three classes of shares.
The Board of Trustees of the Fund (the "Trustees") and the Fund's
shareholders have approved the selection of Xxxx Xxxxxxx Advisers, Inc. (the
"Adviser") to provide overall investment advice and management for the Fund, and
to provide certain other services, under the terms and conditions provided in
the Investment Management Contract, dated January 1, 1994, between the Fund and
the Adviser (as may be further amended from time to time, the "Investment
Management Contract").
The Adviser and the Fund have selected DFS Advisors, LLC (the
"Sub-Adviser") to provide the Adviser and the Fund with the advice and services
set forth below, and the Sub-Adviser is willing to provide such advice and
services, subject to the review of the Fund and the overall supervision of the
Adviser, under the terms and conditions hereinafter set forth. The Sub-Adviser
hereby represents and warrants that it is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended. Accordingly, the Adviser
agrees with the Sub-Adviser as follows:
1. Delivery of Documents. The Adviser has furnished the Sub-Adviser with copies,
properly certified or otherwise authenticated, of each of the following:
(a) The Amended and Restated Declaration of Trust of the Fund
dated February 28, 1992 (the "Declaration").
(b) By-Laws of the Trust as in effect on the date hereof.
(c) Resolutions of the Board of Trustees approving the form of
this Agreement and resolutions adopted by the shareholders of
the Fund approving the form of this Agreement.
(d) Resolutions of the Board of Trustees selecting the Adviser as
investment adviser to the Fund and approving the form of the
Investment Management Contract and resolutions adopted by the
shareholders of the Fund approving the form of the Investment
Management Contract.
(e) The Investment Management Contract.
(f) Commitments, limitations and undertakings made by the Fund to
state "blue sky" authorities for the purpose of qualifying
shares of the Fund for sale in such states.
(g) The Fund's portfolio compliance checklists.
(h) The Fund's Prospectus and Statement of Additional Information.
(i) The Fund's Code of Ethics.
The Adviser will furnish the Sub-Adviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any.
2. Investment Services and Duties. The Sub-Adviser will use its best efforts to
provide to the Fund continuing and suitable investment advice with respect to
investments, consistent with its investment policies, objectives and
restrictions as set forth in the Fund's Prospectus and Statement of Additional
Information. In the performance of the Sub-Adviser's duties hereunder, subject
always to the provisions contained in the documents delivered to the Sub-Adviser
pursuant to Section 1 above, as each of the same may from time to time be
amended or supplemented, the Sub-Adviser will, at its own expense:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the Fund as set forth above,
with respect to the purchase, holding and disposition of
portfolio securities including the purchase and sale of
options;
(b) furnish the Adviser and the Fund with advice as to the manner
in which voting rights, subscriptions rights, rights to
consent to corporate action and any other rights pertaining to
the Fund's assets shall be exercised, the Fund having the
responsibility to exercise such voting and other rights on
behalf of the Fund;
(c) furnish the Adviser and the Fund with research, economic and
statistical data in connection with the Fund's investments and
investment policies;
(d) submit such reports relating to the valuation of the Fund's
securities as the Adviser may reasonably request;
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(e) consistent with the provisions of Section 7 of this Agreement,
place orders with the Adviser's trading room for the purchase,
sale or exchange of portfolio securities for the Fund's
account with brokers or dealers selected by the Adviser or the
Sub-Adviser;
(f) from time to time or at any time requested by the Adviser or
the Fund, make reports to the Adviser or the Fund, as
requested, of the Sub-Adviser's performance of the foregoing
services;
(g) subject to the supervision of the Adviser, maintain and
preserve the records required by the Investment Company Act of
1940, as amended, to be maintained by the Sub-Adviser (the
Sub-Adviser agrees that such records are the property of the
Fund and copies will be surrendered to the Fund promptly upon
request therefor) subject to the Sub-Adviser's right to have
reasonable access thereto;
(h) give instructions to the custodian (including any
subcustodian) of the Fund as to deliveries of securities to
and from such custodian and payments of cash for the account
of the Fund, and advise the Adviser on the same day such
instructions are given; and
(i) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration
statements and periodic reports to be filed with the
Securities and Exchange Commission, including registration
statements on Form N-1A, semi-annual reports on Form N-SAR,
periodic statements, shareholder communications and proxy
materials furnished to holders of shares of the Fund, filings
with state "blue sky" authorities and with United States and
foreign agencies responsible for tax matters, and other
reports and filings of like nature.
3. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Agreement, the expenses of office rent, telephone, telecommunications
and other facilities required by it to perform the services specified in Section
2, and any other expenses, including legal, audit and professional fees and
expenses, incurred by it in connection with the performance of its duties
hereunder.
4. Expenses of the Funds Not Paid by the Sub-Adviser. The Sub-Adviser will not
be required to pay any expenses which this Agreement does not expressly state
shall by payable by the Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of Section 3, the
Sub-Adviser will not be required to pay any Fund expenses or to reimburse the
Adviser for any such expenses that the Adviser is required to pay.
5. Compensation of the Sub-Adviser. For all services to be rendered, facilities
furnished and expenses paid or assumed by the Sub-Adviser as herein provided for
the Fund, the Adviser will pay the Sub-Adviser a fee at the annual rate of 0.25%
of the average daily net assets of the Fund. The Adviser shall pay the foregoing
fee to the Sub-Adviser within ten business days of receipt by the Adviser of the
advisory fee payable to it by the Fund from time to time pursuant to the
Investment Management Contract.
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The Sub-Adviser will receive a pro rata portion of such fee for any periods in
which the Sub-Adviser advises the Fund for less than a full payment period. The
Sub-Adviser understands and agrees that the Fund shall not have any liability
for the Sub-Adviser's compensation hereunder. Calculations of the Sub-Adviser's
fee will be based on average net asset values as provided by the Adviser.
6. Other Activities of the Sub-Adviser and Its Affiliates. The Adviser and
Sub-Adviser may enter into a separate agreement which limits the ability of the
Sub-Adviser to act as Sub-Adviser for certain other investment companies and
advisory clients. However, nothing in this Agreement shall prevent the
Sub-Adviser or any of its affiliates or associates from engaging in any other
business or from acting as investment adviser or investment manager for any
other person or entity, whether or not having investment policies or portfolios
similar to the Fund. Subject to the provisions of such separate agreement, it is
specifically understood that officers, directors and employees of the
Sub-Adviser and those of its affiliates may engage in providing portfolio
management services and advice to other investment advisory clients of the
Sub-Adviser or of its affiliates.
7. Avoidance of Inconsistent Position. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Sub-Adviser nor
any of its directors, officers or employees will act as principal or agent or
receive any commission. The Sub-Adviser shall, at the time the Sub-Adviser
places any order to purchase or sell portfolio securities on behalf of the Fund,
inform the Adviser of any financial interest the Sub-Adviser has in the issuer
of the portfolio securities being bought or sold. The Adviser shall be entitled
to reject any purchase or sale order placed by the Sub-Adviser, including orders
that are deemed to be inappropriate due to the financial interest of the
Sub-Adviser. Access persons (as defined in Rule 17j-1 under the Investment
Company Act of 1940, as amended) of the Sub-Adviser will provide personal
trading reports to a designated representative of the Adviser in accordance with
the Fund's Code of Ethics.
8. No Partnership or Joint Venture. Nothing in this Agreement shall be construed
so as to make the Adviser and the Sub-Adviser partners or joint venturers or
impose any liability as such on any of them. In the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor and unless
otherwise expressly provided or authorized shall have no authority to act for or
represent the Fund in any way or otherwise be deemed to be an agent of the Fund
or of the Adviser.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund or the Adviser in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or gross
negligence on the Sub-Adviser's part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
10. Duration and Termination of this Agreement. Unless terminated as provided
below, this Agreement shall remain in force until June 30, 1998, and from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually by (a) a majority of the Trustees of the Fund who are
not interested persons of the Adviser, of the Sub-Adviser or of the Fund (other
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than as Board members), cast in person at a meeting called for the purpose of
voting on such approval, and (b) either (i) a majority of the Trustees of the
Fund or (ii) a majority of the outstanding voting securities of the Fund. This
Agreement may, on 60 days' written notice, be terminated at any time, without
the payment of any penalty by the Fund by vote of a majority of the outstanding
voting securities of the Fund, by the Adviser or by the Sub-Adviser. Termination
of this Agreement shall not be deemed to terminate or otherwise invalidate any
other agreement between the Adviser and the Sub-Adviser, except as otherwise
provided therein. This Agreement shall automatically terminate in the event of
its assignment or upon the termination of the Adviser's Investment Management
Contract. In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the Investment Company Act of 1940, as amended
(particularly the definitions of "assignment", "interested person," and "voting
security"), shall be applied.
11. Amendment of This Agreement. No provision of this Agreement may be changed
or waived orally, but only by an instrument in writing signed by the party
against which enforcement of the change or waiver is sought, and no amendment,
transfer, assignment, sale, hypothecation or pledge of this Agreement shall be
effective until approved by (a) the Board of Trustees of the Fund, including a
majority of the Trustees who are not interested persons of the Adviser, the
Sub-Adviser or the Fund, cast in person at a meeting called for the purpose of
voting on such approval, and (b) a majority of the outstanding voting securities
of the Fund, as defined in the Investment Company Act of 1940, as amended.
12. Miscellaneous.
(a) 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. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(b) Nothing herein contained shall limit or restrict the
Sub-Adviser or any of its officers, affiliates or employees
from buying, selling or trading in any securities for its or
their own account or accounts if done in full compliance with
the Sub-Adviser's Code of Ethics. The Fund acknowledges that
the Adviser or sub-advisers engaged by it and their respective
officers, affiliates and employees, and their other clients
may at any time, have, acquire, increase, decrease or dispose
of positions in investments which are at the same time being
acquired or disposed of by the Fund.
(c) Any of the shareholders, Trustees, officers and employees of
the Fund may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Sub-Adviser, any
interested person of the Sub-Adviser, any organization in
which the Sub-Adviser may have an interest or any organization
which may have an interest in the Sub-Adviser, and the
Sub-Adviser, any such interested person or any such
organization may have an interest in the Fund. Subject to the
provisions of any separate agreement between the Adviser and
the Sub-Adviser, the Sub-Adviser, the Adviser and the Fund may
have advisory, management, service or other contracts with
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other individuals or entities, and may have other interests
and businesses. When a security proposed to be purchased or
sold for the Fund is also to be purchased or sold for other
accounts managed by the Sub-Adviser at the same time, the
Sub-Adviser shall make such purchases or sales on a pro-rata,
rotating or other equitable basis so as to avoid any one
account's being preferred over any other account.
(d) The Sub-Adviser agrees that it will adopt a Code of Ethics in
a form reasonably satisfactory to the Adviser by no later than
June 1, 1996.
13. Governing Law. This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable provisions of the
Investment Company Act of 1940.
Yours very truly,
XXXX XXXXXXX ADVISERS, INC.
By: /s/ Xxxx X. Xxxxxxx
-------------------------
President
DFS ADVISORS, LLC
By: /s/ Xxxxxx St. Pierre
------------------------
Title: Manager
