Exhibit (d)(3)(xxii)
NEW ENGLAND STAR SMALL CAP FUND
SUB-ADVISORY AGREEMENT
RS INVESTMENT MANAGEMENT, L.P.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
February 26, 1999 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and RS Investment Management, L.P., a
California limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
December 31,1996 (the "Advisory Agreement") with New England Funds Trust I (the
"Trust"), pursuant to which the Manager provides portfolio management and
administrative services to New England Star Small Cap Fund (the "Fund"), a
series of the Trust (the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of a segment
of the assets of the Series (the "Portfolio"). The Sub-Adviser shall
manage the Series in conformity with (1) the investment objective,
policies and restrictions of the Series set forth in the Trust's
prospectus and statement of additional information relating to the
Series, (2) any additional policies or guidelines established by the
Manager or by the Trust's trustees that have been furnished in writing
to the Sub-Adviser and (3) the provisions of the Internal Revenue Code
(the "Code") applicable to "regulated investment companies" (as defined
in Section 851 of the Code), all as from time to time in effect
(collectively, the "Policies"), and with all applicable provisions of
law, including without limitation all applicable provisions of the
Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations thereunder. The Fund is the owner of all cash, securities
and other assets in the Portfolio, and, except as may otherwise be
provided be the 1940 or other federal laws, there are no restrictions
on the pledge, hypothecation, transfer or sale of such cash,
securities, or assets. Subject to the foregoing, the Sub-Adviser is
authorized, in its sole and exclusive discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
(b) The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Fund's custodian
to provide) timely information to the Sub-Adviser regarding such
matters as the composition of assets of the Series, cash requirements
and cash available for investment in the Series, and all other
information as may be reasonably necessary for the Sub-Adviser to
perform its responsibilities hereunder.
(b) The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the Trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and xxxx "RS Investment Management,
L.P." and that all use of any designation consisting in whole or part of "RS
Investment Management, L.P." (a "RS Xxxx") under this Agreement shall inure to
the benefit of the Sub-Adviser. The Manager on its own behalf and on behalf of
the Series agrees not to use any RS Xxxx in any advertisement or sales
literature or other materials promoting the Series, except with the prior
written consent of the Sub-Adviser. Without the prior written consent of the
Sub-Adviser, the Manager shall not, and the Manager shall use its best efforts
to cause the Series not to, make representations regarding the Sub-Adviser in
any disclosure document, advertisement or sales literature or other materials
relating to the Series. Upon termination of this Agreement for any reason, the
Manager shall cease, and the Manager shall use its best efforts to cause the
Series to cease, all use of any Xxxxxxxxx Xxxxxxxx Xxxx(s) as soon as reasonably
practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, (c) custodian, independent
auditors, legal counsel fees and expenses, (d) settlement charges, and (e)
expenses of preparing, printing and distributing all prospectuses, proxy
material, reports and notices to shareholders of the Fund, and other incidental
costs of the Portfolio. Any reimbursement of advisory fees required by any
expense limitation provision of any law shall be the sole responsibility of the
Manager. The Manager and the Sub-Adviser shall not be considered as partners or
participants in a joint venture. The Sub-Adviser will pay its own expenses
incurred in furnishing the services to be provided by it pursuant to this
Agreement. Neither the Sub-Adviser nor any affiliated person thereof shall be
entitled to any compensation from the Manager or the Trust with respect to
service by any affiliated person of the Sub-Adviser as an officer or trustee of
the Trust (other than the compensation to the Sub-Adviser payable by the Manager
pursuant to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. Except as may otherwise be
provided by the 1940 or other federal laws, such transactions may be made at
slightly different prices, due to the volume of the securities purchased or
sold. In such event, the average price of all securities purchased or sold in
such transactions may be determined, and the Portfolio may be charged or
credited, as the case may be, the average transaction price. The Sub-Adviser
shall use its best efforts to obtain execution of transactions for the Series at
prices which are advantageous to the Series and at commission rates that are
reasonable in relation to the benefits received. However, the Sub-Adviser may
select brokers or dealers on the basis that they provide brokerage, research or
other services or products to the Series and/or other accounts serviced by the
Sub-Adviser. To the extent consistent with applicable law, the Sub-Adviser may
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer spread another
broker or dealer would have charged for effecting that transaction if the
Sub-Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research products
and/or services provided by such broker or dealer. This determination, with
respect to brokerage and research services or products, may be viewed in terms
of either that particular transaction or the overall responsibilities which the
Sub-Adviser and its affiliates have with respect to the Series or to accounts
over which they exercise investment discretion. Not all such services or
products need be used by the Sub-Adviser in managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.55% of the first $50 million of the average daily net assets of the
Portfolio and 0.50% of such assets in excess of $50 million. Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement. The daily fee accruals will be computed on the basis of the
valuations of the total net assets of the Portfolio as of the close of business
each day. For purposes of determining the daily fee accruals, the assets of the
Portfolio shall be valued by the Manager in good faith to reflect the fair
market value thereof. The net market value of securities held short by the
Portfolio shall be treated a liability of the Account, and, together with the
amount of any margin or other loans owned by the Account, shall be subtracted in
determining net market value. If this Agreement begins on a date other than the
first day of a quarter or terminates on a date other than the last day of a
quarter, the sub-advisory fee payable with respect to either such quarter shall
be prorated.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. This will create conflicts of interest with
the Portfolio over the Sub-Adviser's time devoted to managing the Portfolio and
the allocation of investment opportunities among accounts (including the
Portfolio) managed by the Sub-Adviser. The Sub-Adviser will attempt to resolve
all such conflicts in a manner that is generally fair to all of its clients.
Nothing in this Agreement shall be deemed to obligate the Sub-Adviser to acquire
for the Portfolio any security that the Sub-Adviser or its affiliated persons
may acquire for its own accounts or for the account of any other client, if in
the absolute discretion of the Sub-Adviser and consistent with the Sub-Adviser's
fiduciary duties to the shareholders or the Manager of the Fund, it is not
practical or desirable to acquire such a position in such security for the
Portfolio. The Sub-Adviser shall for all purposes hereof be deemed to be an
independent contractor and shall, unless otherwise provided or authorized, have
no authority to act for or represent the Series or the Manager in any way or
otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Series or any regulatory body that is not
based upon the obligations of the Sub-Adviser under this Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
(d) this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Confidentiality. Except as required by law, the Manager agrees to
maintain in strict confidence all investment advice and information furnished to
the Manager or the Fund by the Sub-Adviser.
12. Amendment. This Agreement may be amended in writing at any time by
mutual consent of the Manager and the Sub-Adviser, provided that, if required by
law, such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
13. Notices. Any notice given hereunder shall be in writing and may be
served by being sent to telex, facsimile, or other electronic transmission or
sent by registered mail or by courier to the address set forth for the party for
which it is intended. A notice served by mail shall be deemed to have been
served seven days after mailing and in the case of telex, facsimile or other
electronic transmission twelve hours after dispatch thereof. Addressed for
notice may be changed by written notice to the other party.
If to Manager:
Xxxxx X. Xxxxx
Managing Director and President
New England Funds Management, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
With a copy to:
Xxxx X. Xxxxxxxxx
Managing Director, Senior Vice President,
General Counsel, Secretary & Clerk
New England Funds Management, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
If to Sub-Adviser:
G. Xxxxxxx Xxxxx
RS Investment Management, L.P.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
With a copy to:
Xxxxx X. Xxxxxx
RS Investment Management, L.P.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
14. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
15. Delivery of Information. The Manager acknowledges that it has
received the Sub-Adviser's brochure required to be delivered under the Advisers
Act (including the information in Part II of the Sub-Adviser's Form ADV). If the
Manager received such information less than forty-eight hours prior to signing
this Agreement, this Agreement may be terminated by the Adviser with penalty
within five business days from the effective date. On written request by the
Manager, the Sub-Adviser agrees to deliver annually without charge the
Sub-Adviser's brochure required by the Advisers Act.
16. Entire Agreement; Severability. This Agreement (and the letter
dated September 16, 1996 from Xxxxx X. Xxxxx to Xxxxxxxxx, Xxxxxxxx) is the
entire agreement of the parties and supersedes all prior or contemporaneous
written or oral negotiations, correspondence, agreements and understandings
regarding the subject matter hereof.
17. No Third-Party Beneficiaries. Neither party intends for this
Agreement to benefit any third-party not expressly named in this Agreement.
18. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By: /s/ Xxxx X. Xxxxxxxxx
----------------------
Name: Xxxx X. Xxxxxxxxx
Title: Managing Director, Senior Vice President,
General Counsel, Secretary & Clerk
RS INVESTMENT MANAGEMENT, L.P.
By: /s/ Xxxxxx X. Xxxxx
----------------------
Name: Xxxxxx X. Xxxxx
Title: President
