SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 16th day of September, 2002, by and between
Xxxxxxxx and Associates, a California corporation located at 0000 X Xxxxxx, 00xx
Xxxxx, Xxxxxxxxxx, XX 00000 (the "Advisor"), and SSgA Funds Management, Inc., a
Massachusetts corporation located at Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 (the "Sub-Advisor").
WHEREAS, the Advisor and the Sub-Advisor are each engaged in the business
of rendering investment advice; and
WHEREAS, the Xxxxxxxx Social Fund (the "Client") has retained the Advisor
to render investment management services to the Client pursuant to an Investment
Advisory Agreement dated as of September 16, 2002 (the "Investment Advisory
Agreement"), pursuant to which the Advisor may contract with the Sub-Advisor as
a sub-manager as provided for herein;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed among the parties
hereto as follows:
1. APPOINTMENT OF SUB-ADVISOR.
(a) Subject Portfolio. The Sub-Advisor is hereby appointed and the
Sub-Advisor hereby accepts the appointment, on the terms herein set
forth and for the compensation herein provided, to act as investment
adviser and manager to the Client's assets designated by the Advisor
(the "Subject Portfolio").
(b) Additional Subject Portfolios. In the event that the Advisor desires
to retain the Sub-Advisor to render investment advisory services
hereunder for any additional assets, it shall so notify the
Sub-Advisor in writing. If it is willing to render such services, the
Sub-Advisor shall notify the Advisor in writing, whereupon such assets
shall become a Subject Portfolio hereunder.
(c) Independent Contractor. The Sub-Advisor shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or be
deemed an agent of the Client.
(d) The Sub-Advisor' Representations. The Sub-Advisor represents, warrants
and agrees that it has all requisite power and authority to enter into
and perform its obligations under this Agreement, and has taken all
necessary corporate action to authorize its execution, delivery and
performance of this Agreement. The Sub-Advisor represents, warrants
and agrees that it is registered as an adviser under the Investment
Advisers Act of 1940.
(e) The Advisor's Representations. The Advisor represents, warrants and
agrees that it has all requisite power and authority to enter into and
perform its obligations under this Agreement, and has taken all
necessary corporate action to authorize its execution, delivery and
performance of this Agreement. The Advisor further represents,
warrants and agrees that it has the authority under the Investment
Advisory Agreement to appoint the Sub-Advisor. The Advisor further
represents and warrants that it has received a copy of Part II of the
Sub-Advisor's Form ADV. The Advisor further represents and warrants
that the Client is either (i) excluded from the definition of the term
"pool" under Section 4.5 of the General Regulations under the
Commodity Exchange Act ("Rule 4.5"), or (ii) a qualifying entity under
Rule 4.5(b) for which a notice of eligibility has been filed.
(f) Plenary authority of the Board of Trustees. The Sub-Advisor and
Advisor both acknowledge that the Client is a mutual fund that
operates as a series of an open-end series investment company under
the authority of the Board of Trustees.
2. PROVISION OF INVESTMENT ADVISORY SERVICES.
The Sub-Advisor will provide for the Subject Portfolio a continuing and
suitable investment program consistent with the investment policies, objectives
and restrictions of the Subject Portfolio, as established by the Client and the
Advisor and provided to the Sub-Advisor in writing. The current policies,
objectives and restrictions are attached hereto as Exhibit A. From time to time,
the Advisor may provide the Sub-Advisor with written copies of additional or
amended investment policies, guidelines and restrictions, which shall become
effective at such time as agreed upon by both parties. The Sub-Advisor, as
sub-manager, will manage the investment and reinvestment of the assets in the
Subject Portfolio, and perform the functions set forth below, subject to the
overall supervision, direction, control and review of the Advisor, consistent
with the applicable investment policies, guidelines and restrictions, or any
directions or instructions delivered to the Sub-Advisor in writing by the
Advisor from time to time, and further subject to the plenary authority of the
Client's Board of Trustees. Consistent with Exhibit A, or unless otherwise
directed in writing by the Advisor, the Sub-Advisor shall have full
discretionary authority to manage the investment of the assets in the Subject
Portfolio, including the authority to purchase, sell, cover open positions, and
generally to deal in securities, financial and commodity futures contracts,
options, short-term investment vehicles and other property comprising or
relating to the Subject Portfolio.
In addition, the Sub-Advisor will, at its own expense:
(a) advise the Advisor in connection with investment policy decisions to
be made by it regarding the Subject Portfolio and, upon request,
furnish the Advisor with research, economic and statistical data in
connection with the Subject Portfolio's investments and investment
policies;
(b) submit such reports and information as the Advisor or the Client may
reasonably request to assist the Client's custodian (the "Custodian")
in its determination of the market value of securities held in the
Subject Portfolio;
(c) place orders for purchases and sales of portfolio investments for the
Subject Portfolio;
(d) give instructions to the Custodian concerning the delivery of
securities and transfer of cash for the Subject Portfolio;
(e) maintain and preserve the records relating to its activities hereunder
required by applicable law to be maintained and preserved by the
Advisor, to the extent not maintained by the Advisor or another agent
of Client;
(f) at the close of business [each day], provide the Advisor and the
Custodian with copies of trade tickets for each transaction effected
for the Subject Portfolio, and promptly forward to the Custodian
copies of all brokerage or dealer confirmations;
(g) as soon as practicable following the end of each calendar month,
provide the Advisor with written statements showing all transactions
effected for the Subject Portfolio during the month, a summary listing
all investments held in the Subject Portfolio as of the last day of
the month, and such other information as the Advisor may reasonably
request in connection with any accounting services that the Advisor
provides for the Subject Portfolio; and
(h) absent specific instructions to the contrary provided to it by the
Advisor, and subject to its receipt of all necessary voting materials,
vote all proxies with respect to investments of the Subject Portfolio
in accordance with the Sub-Advisor's proxy voting policy as most
recently provided to the Advisor.
The Advisor will provide timely information to the Sub-Advisor regarding
such matters as inflows to and outflows from the Subject Portfolio and the cash
requirements of, and cash available for investment in, the Subject Portfolio.
The Advisor will timely provide the Sub-Advisor with copies of monthly
accounting statements for the Subject Portfolio, and such other information as
may be reasonably necessary or appropriate in order for the Sub-Advisor to
perform its responsibilities hereunder.
The Sub-Advisor shall vote or not vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Subject Portfolio
may be invested in accordance with the Sub-Advisor's proxy voting guidelines, a
copy of which has been provided to the Advisor.
3. ALLOCATION EXPENSES.
Each party to this Agreement shall bear the costs and expenses of
performing its obligations hereunder. In this regard, the Advisor specifically
agrees that the Subject Portfolio shall assume the expense of:
(a) brokerage commissions for transactions in the portfolio investments of
the Client and similar fees and charges for the acquisition,
disposition, lending or borrowing of such portfolio investments;
(b) custodian fees and expenses;
(c) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Client to federal, state or other government
agencies; and
(d) interest payable on any Client borrowings.
Nothing in this Agreement shall alter the allocation of expenses and costs
agreed upon between the Client and the Advisor in the Investment Advisory
Agreement or any other agreement to which they are parties.
4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject Portfolio as
herein provided, the Advisor shall pay to the Sub-Advisor a fee (for the payment
of which the Client shall have no obligation or liability), based on the Current
Net Assets of the Subject Portfolio, as set forth in Schedule A attached hereto
and made a part hereof. Such fee shall be accrued daily and payable monthly, as
soon as practicable after the last day of each calendar month. In the case of
termination of this Agreement with respect to the Subject Portfolio during any
calendar month, the fee with respect to such Portfolio accrued to, but
excluding, the date of termination shall be paid promptly following such
termination. For purposes of computing the amount of advisory fee accrued for
any day, "Current Net Assets" shall mean the Subject Portfolio's net assets as
of the most recent preceding day for which the Subject Portfolio's net assets
were computed.
5. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Subject Portfolio, the Sub-Advisor is authorized to select the brokers or
dealers that will execute purchase and sale transactions for the Portfolio and
to use all reasonable efforts to obtain the best available price and most
favorable execution with respect to all such purchases and sales of portfolio
securities for said Portfolio. In connection therewith, an affiliate of Adviser,
such as State Street Global Markets, LLC, may be so employed and may receive a
commission. The Sub-Advisor shall maintain records adequate to demonstrate
compliance with the requirements of this section. The Sub-Advisor shall have the
right to follow a policy of selecting brokers who furnish brokerage and research
services to the Subject Portfolio or to the Sub-Advisor, and who charge a higher
commission rate to the Subject Portfolio than may result when allocating
brokerage solely on the basis of seeking the most favorable price and execution.
The Sub-Advisor shall determine in good faith that such higher cost was
reasonable in relation to the value of the brokerage and research services
provided and shall make reasonable reports regarding such determination and
description of the products and services obtained if so requested by the Client.
The Advisor authorizes and empowers the Sub-Advisor to direct the Custodian
to open and maintain brokerage accounts for securities and other property,
including financial and commodity futures and commodities and options thereon
(all such accounts hereinafter called "brokerage accounts") for and in the name
of the Client and to execute for the Client as its agent and attorney-in-fact
standard customer agreements with such broker or brokers as the Sub-Advisor
shall select as provided above. The Sub-Advisor may, using such of the
securities and other property in the Subject Portfolio as the Sub-Advisor deems
necessary or desirable, direct the Custodian to deposit for the Client original
and maintenance brokerage and margin deposits and otherwise direct payments of
cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Sub-Advisor deems desirable or appropriate.
The Sub-Advisor shall cause all securities and other property purchased or
sold for the Subject Portfolio to be settled at the place of business of the
Custodian or as the Custodian shall direct. All securities and other property of
the Subject Portfolio shall remain in the direct or indirect custody of the
Custodian. The Sub-Advisor shall notify the Custodian as soon as practicable of
the necessary information to enable the Custodian to effect such purchases and
sales.
The Sub-Advisor further shall have the authority to instruct the Custodian
(i) to pay cash for securities and other property delivered to the Custodian for
the Subject Portfolio, (ii) to deliver securities and other property against
payment for the Subject Portfolio, and (iii) to transfer assets and funds to
such brokerage accounts as the Sub-Advisor may designate, all consistent with
the powers, authorities and limitations set forth herein. The Sub-Advisor shall
not have authority to cause the Custodian to deliver securities and other
property, or pay cash to the Sub-Advisor except as expressly provided herein.
6. LIABILITY; STANDARD OF CARE.
The Sub-Advisor, its affiliates, agents and employees, shall be indemnified
by the Advisor against all liabilities, losses or claims (including reasonable
expenses arising out of defending such liabilities, losses or claims):
(a) arising from Client's or the Advisor's directions to the Sub-Advisor
or Custodian, or brokers, dealers or others with respect to the
making, retention or sale of any investment or reinvestment hereunder;
or
(b) arising from the acts or omissions of the Advisor, the Custodian or
the Client, their respective affiliates, agents or employees;
except for any such liability or loss which is due to the gross negligence,
willful misconduct, or lack of good faith of the Sub-Advisor, its affiliates,
agents and employees. The Sub-Advisor shall also be without liability hereunder
for any action taken or omitted by it in good faith and without negligence.
The Sub-Advisor shall comply with all applicable laws and regulations in
the discharge of its duties under this Agreement; shall (as provided in Section
2 above) comply with the investment policies, guidelines and restrictions of the
Subject Portfolio; shall act at all times in the best interests of the Client;
and shall discharge its duties with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of a similar
enterprise.
However, the Sub-Advisor shall not be obligated to perform any service not
described in this Agreement, and shall not be deemed by virtue of this Agreement
to have made any representation or warranty that any level of investment
performance or level of investment results will be achieved.
7. EFFECTIVE DATE AND TERMINATION OF THIS AGREEMENT.
(a) Effective Date. This Agreement shall become effective with respect to
the Subject Portfolio from the date of execution or, if later, the
date the initial capital to the Subject Portfolio is first provided
(the "Effective Date."), and shall remain in effect for a maximum
initial term of two (2) years from the Effective Date, and thereafter,
for a maximum extension periods of one (1) year so long as (a) such
continuance is specifically approved at least annually by either (i)
the affirmative vote of a majority of the Board of Trustees of the
Client cast in person at a meeting called for the purpose of voting on
such approval, or (ii) the affirmative vote of a majority of the
Subject Portfolio's outstanding voting securities; and (b) the
affirmative vote of a majority of the Board of Trustees who are not
parties to the agreement or interested persons of any such party, cast
in person at a meeting called for that purpose. The foregoing
requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent
with the 1940 Act and the rules and regulations thereunder.
(b) Termination. This Agreement may be terminated by any party hereto on
at least sixty (60) days' prior written notice to the other party.
This Agreement will automatically and immediately terminate in the
event of its assignment (as defined in the 1940 Act).
8. SERVICES NOT EXCLUSIVE.
The services of the Sub-Advisor to the Client are not to be deemed
exclusive and it shall be free to render similar services to others so long as
its services hereunder are not impaired thereby. It is specifically understood
that directors, officers and employees of the Sub-Advisor and of its
subsidiaries and affiliates may continue to engage in providing portfolio
management services and advice to other investment advisory clients.
9. AGGREGATION OF ORDERS.
Nothing in this Agreement, shall preclude the combination of orders for the
sale or purchase of portfolio securities of the Subject Portfolio with those for
other accounts managed by the Sub-Advisor or its affiliates, if orders are
allocated in a manner deemed equitable by the Sub-Advisor among the accounts and
at a price approximately averaged.
10. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by all parties.
11. NOTICES.
Notices and other communications required or permitted under this Agreement
shall be in writing, shall be deemed to be effectively delivered when actually
received, and may be delivered by US mail (first class, postage prepaid), by
facsimile transmission, by hand or by commercial overnight delivery service,
addressed as follows:
ADVISOR: Xxxxxxxx and Associates
0000 X Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx, President
Phone: 000-000-0000
SUB-ADVISOR: SSgA Funds Management, Inc.
Xxx Xxxxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Compliance Officer
Fax #: (000) 000-0000
12. GOVERNING LAW.
This agreement shall be construed in accordance with the laws of the
commonwealth of Massachusetts.
13. ASSIGNMENT.
This Agreement may not be assigned by any party, either in whole or in
part, without the prior written consent of each other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day first set forth above.
ATTEST: Xxxxxxxx and Associates
By: __________________________
Name: Xxxxxx Xxxxxxxx
Title: President
ATTEST: SSgA Funds Management, Inc.
By: ___________________________
Name:
Title:
EXHIBIT A
INVESTMENT GUIDELINES
The Xxxxxxxx Social Fund will be a separately-managed strategy that employs the
SSgA U.S. All-Cap portfolio management process, subject to specific social
screens.
The Xxxxxxxx Social Fund seeks to meet or exceed the performance of the Xxxxxxx
3000 Index with similar risk characteristics. Targeted portfolio characteristics
and risk controls are as follows:
|X| Turnover: targeted at less than 50% annually.
|X| Portfolio holdings: 45 to 70 holdings.
|X| Cash position: targeted at 3% or less.
|X| Risk controls: FM seeks to maintain broad diversification within the
portfolio, remaining broadly neutral to the Xxxxxxx 3000 benchmark. Average
weighted market capitalization is targeted within 0.5 and 1.5 times the
average weighted market capitalization of the benchmark. Sector weights
will be in the range of 50 to 150% of the relative weight of the benchmark.
FM will review any holding if it exceeds 6 to 8% of the portfolio.
|X| Tracking error: targeted at 7 to 10%.
Social screens to be applied to the portfolio are listed below:
1. The portfolio will be socially screened to include a minimum of 50%
holdings in institutions having headquarters or facilities located in
federal Empowerment Zones and Enterprise Communities. Xxxxxxxx and
Associates will search all publicly-traded companies doing business in
these areas to provide an initial and ongoing list of eligible companies to
FM (as sub-advisor.) FM will then apply this screen to the eligible
universe.
The percentage of the portfolio that qualifies for EZ/EC will be monitored
regularly by Xxxxxxxx and Associates. Xxxxxxxx and Associates will instruct
FM to rebalance the portfolio (if the EZ/EC percentage is below target) on
a monthly basis.
2. The portfolio will be socially screened to eliminate tobacco and
alcohol-related businesses.
3. The portfolio will be screened for any additional affiliated equity issues.
For example, we would have to eliminate State Street Corporation (STT:
NYSE) from consideration for the Xxxxxxxx Social Fund.
SCHEDULE B
FEES
Investment management fees are as follows:
0.65% on the first $50,000,000
0.60% on the next $50,000,000
0.55% thereafter
Minimum annual fee: $125,000
Fee shall be accrued daily and payable monthly, as soon as practicable after the
last day of each calendar month. In the case of termination of this Agreement
with respect to the Subject Portfolio during any calendar month, the fee with
respect to such Portfolio accrued to, but excluding, the date of termination
shall be paid promptly following such termination. For purposes of computing the
amount of advisory fee accrued for any day, "Current Net Assets" shall mean the
Subject Portfolio's net assets as of the most recent preceding day for which the
Subject Portfolio's net assets were computed.
