INVESTMENT SUB-ADVISORY AGREEMENT
(NUVEEN MORTGAGE OPPORTUNITY TERM FUND 2 (JMT))
THIS AGREEMENT is made as of the 1st day of January, 2011, between Nuveen
Fund Advisors, Inc., a Delaware corporation (the "Adviser"), and Nuveen Asset
Management, LLC, a Delaware limited liability company (the "Sub-Adviser").
WHEREAS, the Adviser acts as the investment adviser for the Nuveen Mortgage
Opportunity Term Fund 2 (the "Fund"), pursuant to an investment advisory
agreement between the Adviser and the Fund (the "Advisory Agreement");
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish investment
advisory services for the Fund, upon the terms and conditions hereafter set
forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, the parties agree as follows:
1. Appointment of Sub-Adviser. The Adviser desires to engage and hereby
appoints the Sub-Adviser to provide certain sub-investment advisory services to
the Fund for the period and on the terms set forth in this Agreement. The
Sub-Adviser accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Duties of Sub-Adviser.
The Sub-Adviser is hereby employed and authorized to conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the assets in the Fund. In connection therewith, the Sub-Adviser will (a) make
investment decisions for the Fund; (b) place purchase and sale orders for
portfolio transactions in the Fund; (c) employ professional portfolio managers
and securities analysts to provide research services relating to the Fund;
(d) employ qualified personnel to assist in the supervision of the Fund's
investment program and to monitor the level of risk incurred by the Fund in
connection with its investment program; (e) provide input requested by the
Adviser with respect to the possible forms and levels of leverage employed by
the Fund, and help monitor the Fund's compliance with leverage limits imposed
under the 1940 Act; (f) provide assistance in connection with determining
dividend and distribution levels for the Fund and preparing and reviewing
dividend and distribution notices to shareholders; and (g) discuss with the
Adviser, and take into account, tax issues arising in connection with
management of the Fund's portfolio. Subject to the supervision of the Fund's
Board of Directors (the "Board") and the Adviser, the Sub-Adviser will manage
the assets in the Fund in accordance with (a) the Fund's investment
objective(s), policies and restrictions, to the extent the Sub-Adviser has been
notified of such objectives, policies and restrictions, (b) the Charter
Documents (as such term is defined below) of the Fund, to the extent that they
have been provided to the Sub-Adviser, and (c) applicable laws and regulations.
The Adviser has furnished to the Sub-Adviser the Fund's compliance
procedures pursuant to Rules 10f-3, 17a-7, and 17e-1 under the 1940 Act
(collectively, the "Compliance Procedures"), the Articles of Incorporation or
Declaration of Trust and Bylaws of the Fund, each as amended to date (the
"Charter Documents"), and the Fund's investment objective(s), policies
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and restrictions. The Adviser agrees, on an ongoing basis, to provide to the
Sub-Adviser, as promptly as practicable, copies of all amendments and
supplements to the Compliance Procedures, all amendments to the Charter
Documents and all revisions to the Fund's investment objective(s), policies and
restrictions.
3. Brokerage. In selecting brokers or dealers to execute transactions on
behalf of the Fund, the Sub-Adviser will seek the best overall terms available.
In assessing the best overall terms available for any transaction, the
Sub-Adviser will consider factors it deems relevant, including, without
limitation, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Sub-Adviser is authorized to consider brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended). The Sub-Adviser will not execute any portfolio transactions
with a broker or dealer which is an "affiliated person" (as defined in the 0000
Xxx) of the Sub-Adviser or the Adviser, except pursuant to the any 17e-1
Policies and Procedures for affiliated brokerage transactions that have been
approved by Board for such Fund. The Adviser will provide the Sub-Adviser with
a list of brokers and dealers that are "affiliated persons" of the Adviser.
4. Proxy Voting. The Sub-Adviser shall vote all proxies with respect to
securities held in the Fund in accordance with the Sub-Adviser's proxy voting
guidelines and procedures in effect from time to time. In the event material
changes are made to such proxy voting guidelines, the Sub-Adviser agrees to
provide the Adviser with a copy of the revised proxy voting guidelines. The
Adviser agrees to instruct the Fund's custodian to forward all proxy materials
and related shareholder communications to the Sub-Adviser promptly upon
receipt. The Sub-Adviser agrees to promptly inform the Adviser and any Fund of
any conflict of interest of which the Sub-Adviser is aware that the Sub-Adviser
has in voting proxies with respect to securities held in such Fund. The
Sub-Adviser shall not be liable with regard to voting of proxies or other
corporate actions if the proxy materials and related communications are not
received in a timely manner.
5. Information Provided to the Adviser.
(a) The Sub-Adviser will keep the Adviser informed of developments
materially affecting any Fund and will, on its own initiative, furnish the
Adviser from time to time with whatever information the Sub-Adviser believes is
appropriate for this purpose.
(b) The Sub-Adviser will confer with the Adviser as the Adviser may
reasonably request regarding the investment and management of the Fund. The
Sub-Adviser will not be required to advise the Adviser or act for the Adviser
or any Fund in any legal proceedings, including bankruptcies or class actions,
involving securities in any Fund or the issuers of the securities.
(c) The Sub-Adviser agrees to comply with all reporting requirements that
the Board or the Adviser reasonably adopt and communicate to the Sub-Adviser in
writing, including
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reporting requirements related to performance of the Fund, brokerage practices,
and proxy voting.
(d) The Sub-Adviser will monitor the pricing of portfolio securities, and
events relating to the issuers of those securities and the markets in which the
securities trade in the ordinary course of managing the portfolio securities of
the Fund, and will notify the Adviser promptly of any issuer-specific or market
events or other situations that occur that may materially impact the pricing of
one or more securities in the Fund. In addition, upon the request of Adviser,
the Sub-Adviser will assist the Adviser in evaluating the impact that such an
event may have on the net asset value of the Fund and in determining a
recommended fair value of the affected security or securities. Sub-Adviser
shall not be liable for any valuation determined or adopted by the Fund, unless
such determination is made based upon information provided by the Sub-Adviser
that is materially incorrect or incomplete as a result of the Sub-Adviser's
gross negligence.
(e) The Sub-Adviser has provided the Adviser with a true and complete copy
of its compliance policies and procedures that are reasonably designed to
prevent violations of the "federal securities laws" (as such term is defined in
Rule 38a-1 under the 0000 Xxx) and Rule 206(4)-7 under the Investment Advisers
Act of 1940, as amended (the "Advisers Act") (the "Sub-Adviser Compliance
Policies"). The Sub-Adviser's chief compliance officer (the "Sub-Adviser CCO")
shall provide to the Fund's chief compliance officer (the "Fund CCO") or his or
her delegate, promptly (and in no event more than 10 business days) after the
occurrence of the triggering event, the following:
(i) a report of any material changes to the Sub-Adviser Compliance Policies;
(ii) a report of any "material compliance matters," as defined by Rule 38a-1
under the 1940 Act, that have occurred in connection with the Sub-Adviser
Compliance Policies;
(iii) a copy of a summary of the Sub-Adviser CCO's report with respect to
the annual review of the Sub-Adviser Compliance Policies pursuant to Rule
206(4)-7 under the Advisers Act; and
(iv) an annual (or more frequently as the Fund CCO may request)
certification regarding the Sub-Adviser's compliance with Rule 206(4)-7
under the Advisers Act and Section 38a-1 under the 1940 Act as well as the
foregoing sub-paragraphs (i)-(iii).
(f) The Sub-Adviser will timely notify the Adviser of any material
violations by the Sub-Adviser of the Fund's investment policies or restrictions
or any applicable law or regulation.
6. Standard of Care. The Sub-Adviser shall exercise its best judgment in
rendering the services described in paragraphs 2, 3 and 4 above. 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 the Sub-Adviser of its
obligations and duties under this Agreement (each such act or omission shall be
referred to as "Disqualifying Conduct"). Neither the Sub-Adviser nor its
members, partners, officers, employees and agents shall be liable to the
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Adviser, the Fund or its shareholders or any other person (a) for the acts,
omissions, errors of judgment or mistakes of law of any other fiduciary or
other person with respect to the Fund or (b) for any failure or delay in
performance of the Sub-Adviser's obligations under this Agreement arising out
of or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of civil or military authority,
national emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
The Sub-Adviser does not guarantee the future performance of the Fund or any
specific level of performance, the success of any investment decision or
strategy that the Sub-Adviser may use, or the success of the Sub-Adviser's
overall management of the Fund. The Adviser understands that investment
decisions made for the Fund by the Sub-Adviser are subject to various market,
currency, economic, political and business risks, and that those investment
decisions will not always be profitable.
7. Compensation. In consideration of the services rendered pursuant to this
Agreement, the Adviser will pay the Sub-Adviser on the fifth business day of
each month a fee equal to 4.3478% of the fees (net of applicable breakpoints,
waivers and reimbursements) paid by the Fund to the Adviser under the Advisory
Agreement for the Fund. The fee for the period from the date of this Agreement
to the end of the calendar month shall be prorated according to the proportion
that such period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.
8. Expenses. The Sub-Adviser will bear all of its expenses in connection
with the performance of its services under this Agreement. All other expenses
to be incurred in the operation of the Fund will be borne by the Fund, except
to the extent specifically assumed by the Adviser or Sub-Adviser. The expenses
to be borne by the Fund include, by way of example, but not by way of
limitation, (a) brokerage and commission expenses; (b) Federal, state, local
and foreign taxes, including issue and transfer taxes incurred by or levied on
the Fund; (c) interest charges on borrowings; (d) the Fund's organizational and
offering expenses; (e) fees and expenses of registering the Fund's shares under
the appropriate Federal securities laws and qualifying the Fund's shares under
applicable state securities laws; (f) fees and expenses of listing and
maintaining the listing of the Fund's shares on the principal securities
exchanges where listed, or, if the Fund's shares are not so listed, fees and
expenses of listing and maintaining the quotation of the Fund's shares on the
principal securities market where traded; (g) expenses of printing and
distributing reports to shareholders; (h) expenses of shareholders' meetings
and proxy solicitation; (i) charges and expenses of the Fund's administrator,
custodian and registrar, transfer agent and dividend disbursing agent;
(j) compensation of the Fund's officers, directors and employees that are not
affiliated persons or interested persons (as defined in Section 2(a)(19) of the
1940 Act and the rules, regulations and releases relating thereto) of the
Adviser or Sub-Adviser; (k) legal and auditing expenses; (l) cost of
certificates representing shares of the Fund; (m) costs of stationery and
supplies; (n) insurance expenses; and (o) association membership dues.
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9. Services to Other Companies or Accounts. The Adviser understands that the
Sub-Adviser now acts, will continue to act and may act in the future as
investment adviser to fiduciary and other managed accounts and as investment
adviser to other investment companies, and the Adviser has no objection to the
Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available
funds for investment, investments suitable and appropriate for each will be
allocated in accordance with a methodology believed to be equitable to each
entity. The Sub-Adviser agrees to similarly allocate opportunities to sell
securities. The Adviser recognizes that, in some cases, this procedure may
limit the size of the position that may be acquired or sold for the Fund. In
addition, the Adviser understands that the persons employed by the Sub-Adviser
to assist in the performance of the Sub-Adviser's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Adviser or any affiliate of
the Sub-Adviser to engage in and devote time and attention to other business or
to render services of whatever kind or nature.
10. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
specifically maintains for the Fund are the property of the Fund and further
agrees to surrender promptly to the Fund copies of any of such records upon the
Fund's or the Adviser's request. The Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records relating to
its activities hereunder required to be maintained by Rule 31a-1 under the 1940
Act and to preserve the records relating to its activities hereunder required
by Rule 204-2 under the Advisers Act for the period specified in said Rule.
11. Term of Agreement. Unless sooner terminated, this Agreement shall
continue in effect until August 1, 2012. Thereafter, this Agreement shall
continue automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Board of the Fund in the
manner required by the 1940 Act. This Agreement is terminable, without penalty,
on 60 days' written notice (the date of termination may be less than 60 days
after the written notice of termination so long as the duration of the notice
period is agreed upon by the Adviser and Sub-Adviser) by the Adviser, by the
Fund's Board, by vote of a majority of the Fund's outstanding voting
securities, or by the Sub-Adviser, and will immediately terminate upon
termination of the Advisory Agreement with respect to the Fund. This Agreement
also will terminate automatically in the event of its assignment (as defined in
the 1940 Act).
12. Trade Settlement at Termination. Termination will be without prejudice
to the completion of any transaction already initiated. On, or after, the
effective date of termination, the Sub-Adviser shall be entitled, without prior
notice to the Adviser or the Fund, to direct the Fund's custodian to retain
and/or realize any assets of the Fund as may be required to settle transactions
already initiated. Following the date of effective termination, any new
transactions will only be executed by mutual agreement between the Adviser and
the Sub-Adviser.
13. Indemnification. (a) The Adviser agrees to indemnify and hold harmless
the Sub-Adviser and its members, partners, officers, employees, agents,
successors and assigns (each a "Sub-Adviser Indemnified Person") from and
against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses) to which any Sub-Adviser
Indemnified Person may become subject as a result of the Adviser's material
breach of
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this Agreement or as a result of the Adviser's willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties hereunder
or violation of applicable law; provided, however, that no Sub-Adviser
Indemnified Person shall be indemnified for any claim, loss, liability or
damage that may be sustained as a result of the Sub-Adviser's Disqualifying
Conduct.
(b) The Sub-Adviser agrees to indemnify and hold harmless the Adviser and
the Fund and their respective shareholders, members, partners, directors,
officers, employees, agents, successors and assigns (each an "Adviser
Indemnified Person") from and against any and all claims, losses, liabilities
or damages (including reasonable attorney's fees and other related expenses) to
which any Adviser Indemnified Person may become subject as a result of the
Sub-Adviser's material breach of this Agreement or as a result of the
Sub-Adviser's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties hereunder or violation of applicable
law; provided, however, that no Adviser Indemnified Person shall be indemnified
for any claim, loss, liability or damage that may be sustained as a result of
the Adviser's Disqualifying Conduct.
14. Delegation to Third Parties. Except where prohibited by applicable law
or regulation, the Sub-Adviser may delegate or may employ a third party to
perform any accounting, administrative, reporting and ancillary services
required to enable the Sub-Adviser to perform its functions under this
Agreement. Notwithstanding any other provision of the Agreement, the
Sub-Adviser may provide information about the Adviser and any Fund to any such
third party for the purposes of this paragraph, provided that the third party
is subject to a confidentiality agreement that specifically prevents the misuse
of any such information, including portfolio holdings. The Sub-Adviser will act
in good faith and with due diligence in the selection, use and monitoring of
third parties and shall be solely responsible for any loss, mistake, gross
negligence or misconduct caused by such third party.
15. Disclosure. (a) Neither the Adviser, on its own behalf or on behalf of
the Fund, or the Sub-Adviser shall disclose information of a confidential
nature acquired in consequence of this Agreement, except for information that
they may be entitled or bound to disclose by law, regulation or that is
disclosed to their advisors where reasonably necessary for the performance of
their professional services or, in the case of the Sub-Adviser, as permitted in
accordance with Section 14 of this Agreement.
(b) Notwithstanding the provisions of Subsection 15(a), to the extent that
any market counterparty with whom the Sub-Adviser deals requires information
relating to the Fund (including, but not limited to, the identity of the
Adviser or the Fund and market value of the Fund), the Sub-Adviser shall be
permitted to disclose such information to the extent necessary to effect
transactions on behalf of the Fund in accordance with the terms of this
Agreement.
(c) Notwithstanding the provisions of Subsections 15(a) and 15(b), the
Sub-Adviser acknowledges that the Adviser and the Fund intend to rely on Rule
17a-7, Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act.
16. Instructions to Custodian. The Sub-Adviser shall have authority to issue
to the Fund's custodian such instructions as it may consider appropriate in
connection with the
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settlement of any transaction relating to the Fund that it has initiated. The
Adviser shall ensure that the Fund's custodian is obliged to comply with any
instructions of the Sub-Adviser given in accordance with this Agreement. The
Sub-Adviser will not be responsible for supervising the Fund's custodian.
17. Representations and Warranties. (a) The Adviser represents and warrants
to the Sub-Adviser that the Adviser:
(i) has full power and authority to appoint the Sub-Adviser to manage the
Fund in accordance with the terms of this Agreement; and
(ii) this Agreement is valid and has been duly authorized by appropriate
action of the Adviser, the Board of the Fund and its shareholders, does not
violate any obligation by which the Adviser is bound, and when so executed
and delivered, will be binding upon the Adviser in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and general principles of equity.
(b) The Sub-Adviser represents and warrants to the Adviser that the
Sub-Adviser:
(i) is registered as an "investment adviser" under the Advisers Act and will
continue to be so registered for so long as this Agreement remains in effect;
(ii) is not currently the subject of, and has not been the subject of during
the last three (3) years, any enforcement action by a regulator, except as
previously disclosed to the Adviser; and
(iii) maintains insurance coverage in an appropriate amount and shall upon
request provide to the Adviser any information it may reasonably require
concerning the amount of or scope of such insurance.
18. Miscellaneous.
(a) Notices. All notices provided for by this Agreement shall be in writing
and shall be deemed given when received, against appropriate receipt, by the
General Counsel of the Adviser or Sub-Adviser, as the case may be, or such
other person as a party shall designate by notice to the other parties.
(b) Amendment. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Sub-Adviser, which amendment must
be approved by the Board of the Fund in the manner required by the 1940 Act.
(c) Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto and supersedes any prior agreement among the parties
relating to the subject matter hereof.
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(d) Severability. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby.
(e) Headings. The paragraph headings of this Agreement are for convenience
of reference and do not constitute a part hereof.
(f) Governing Law. This Agreement shall be governed in accordance with the
internal laws of the State of Illinois, without giving effect to principles of
conflict of laws.
(g) Use of Sub-Adviser's Name. The Adviser shall furnish to the Sub-Adviser
all prospectuses, proxy statements, reports to shareholders, sales literature
or other material prepared for distribution which refers to the Sub-Adviser by
name prior to the use thereof. The Adviser shall not use or cause any Fund to
use any such materials if the Sub-Adviser reasonably objects to such use. This
paragraph shall survive the termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives as of the date
first written above.
Nuveen Fund Advisors, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxx
-----------------------------
Title: Managing Director
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Nuveen Asset Management, LLC
By: /s/ Xxxxx X. XxXxxxxx
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Name: Xxxxx X. XxXxxxxx
-----------------------------
Title: Managing Director
-----------------------------
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