AMENDED AND RESTATED
INVESTMENT SUB-SUB-ADVISORY AGREEMENT
--------------------------------------------------------------------------------
This AGREEMENT is effective as of the 1st day of January, 2010, and
Amended and Restated effective as of the 1st day of December, 2012, by and among
INVESCO ADVISERS, INC., a Delaware corporation and registered investment adviser
(the "Sub-Adviser"), and INVESCO ASSET MANAGEMENT LTD., a company incorporated
in England and Wales, authorized by the Financial Services Authority and a
registered investment adviser (the "Sub-Sub-Adviser"), each, a "party."
RECITALS
--------
WHEREAS, the JNL/Invesco Global Real Estate Fund (the "Fund") is a series
portfolio of the JNL Series Trust (the "Trust"), a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company;
WHEREAS, the Xxxxxxx National Asset Management, LLC (the "Adviser") and
Sub-Adviser are parties to a certain Investment Sub-Advisory Agreement,
effective as of January 1, 2010, and Amended and Restated effective as of the
1st day of December, 2012, pursuant to which the Sub-Adviser acts as the
investment manager with respect to certain series portfolios of the Trust,
including the Fund;
WHEREAS, the Sub-Adviser desires to retain the Sub-Sub-Adviser to provide
certain investment management services with respect to the Fund upon the terms
and conditions set forth below;
WHEREAS, the parties acknowledge that the services provided by the
Sub-Sub-Advisor shall be understood to include the service of "portfolio
management" under the Markets in Financial Instruments Directive (2004/39/EC),
the MiFID Implementing Regulations (Regulations no. 1287/2006) and the MiFID
Implementing Directive (2006/73/EC) (collectively, "MiFID"));
WHEREAS, the parties acknowledge that the Sub-Sub-Advisor and the
investment advisory services which are the subject of this Agreement are subject
to regulation under MiFID; and
WHEREAS, the Board of Trustees of the Trust, including a majority of the
Trustees who are not interested persons of the Trust, as determined in
accordance with the 1940 Act (the "disinterested Trustees"), have approved the
retention of the Sub-Adviser to provide the investment management services
contemplated herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. APPOINTMENT.
------------
(a) The Sub-Adviser hereby appoints the Sub-Sub-Adviser to act as a
discretionary investment manager with respect to the Fund for the
period and pursuant to the
terms and conditions set forth herein. The Sub-Sub-Adviser accepts
such appointment and agrees to provide the services contemplated
herein, pursuant to the terms and conditions set forth and for the
compensation described herein.
(b) The Sub-Advisor acknowledges the risk warnings set out in Schedule
1, which may be updated by the Sub-Sub-Advisor at any time by
written notice to Sub-Advisor.
(c) The Sub-Advisor acknowledges that it is the sole client of the
Sub-Sub-Advisor under this Agreement and is properly classified by
Sub-Sub-Advisor as a "professional client" (as defined in MiFID) for
the purposes of such rules. The Sub-Advisor may request that it be
opted down to the status of "retail client" (as defined in MiFID),
in which case it would benefit, if the request were granted, from
the higher level of protection that is afforded to this category of
client. It is not the Sub-Sub-Advisor's current policy to agree to
such reclassifications.
2. DUTIES OF SUB-SUB-ADVISER.
--------------------------
(a) Subject to the supervision of the Sub-Adviser, the Sub-Sub-Adviser
shall develop and implement an investment program for the Fund that
is consistent with the investment objectives, policies and
restrictions set forth in the Fund's prospectus and Statement of
Additional Information, as they may be amended from time to time;
PROVIDED, HOWEVER, that the Sub-Sub-Adviser shall not be responsible
for compliance with any amendments to such prospectus or Statement
of Additional Information until such time as the Sub-Sub-Adviser
shall have been given actual notice of such amendment(s) and a
reasonable opportunity to implement changes in the Fund's investment
program.
(b) The Sub-Sub-Adviser shall exercise discretion with respect to the
selection of investments for the Fund's portfolio, the disposition
of such investments, the selection of brokers to be used in
connection with the trading and settlement of transactions for the
Fund. In connection with the placement of orders with brokers and
dealers which involve transactions for the Fund, the Sub-Sub-Adviser
must take all reasonable steps to obtain, when executing orders, the
best possible result (the "Best Execution Obligation") in accordance
with MiFID and consistent with its obligations under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and
applicable rules and guidance issued by the Securities and Exchange
Commission (the "SEC") and its staff thereunder.
(c) The Sub-Sub-Advisor has provided information on its arrangements to
comply with the Best Execution Obligation in Schedule 2. The
Sub-Sub-Advisor agrees that the Sub-Advisor may provide this
information to its own underlying clients, or an alternative
document as agreed by the parties from time to time. The
Sub-Sub-Advisor may provide an update of the information disclosed
about its best execution arrangements at any time by written notice
to Sub-Advisor.
(d) The Sub-Sub-Advisor shall provide the Sub-Advisor with such
additional information on its best execution arrangements and any
law or regulation in its jurisdiction on best execution as the
Sub-Advisor may reasonably request from time to time.
--------------------------------------------------------------------------------
PAGE 2 OF 7
(e) The Sub-Advisor acknowledges that any specific instructions given by
the Sub-Advisor to the Sub-Sub-Advisor in relation to the execution
of orders under this Agreement may prevent the Sub-Sub-Advisor from
taking the steps it has designed and implemented in its best
execution policy to obtain the best possible result for the
execution of those orders in respect of the elements covered by
those instructions.
(f) The Sub-Advisor gives its consent to the Sub-Sub-Advisor's best
execution arrangements as summarised in Schedule 2. It also gives
its prior express consent to the Sub-Sub-Advisor executing orders
outside a regulated market or a multilateral trading facility, as
those terms are defined in MiFID.
(g) It is the Sub-Sub-Advisor's practice, when feasible, to aggregate
into a single transaction its requests for execution of purchases or
sales of a particular security for the accounts of several clients
or mutual funds, in order to seek a lower commission or more
advantageous net price. The benefit, if any, obtained as a result of
such aggregation, is generally allocated pro rata among the accounts
of the clients who participated in the aggregated transaction. The
Sub-Advisor acknowledges that this process may work on some
occasions to the Sub-Advisor's disadvantage. It also acknowledges
that, in the case of a client who has restricted the Sub-Sub-Advisor
to a particular broker or dealer with respect to a portion of
transactions for that client's account, such client may be unable to
participate in aggregated orders. Where such client's account does
not participate in an aggregated order, that client will not receive
the benefit, if any, of a lower commission resulting from the
aggregation. In addition, the Sub-Advisor has been advised by the
Sub-Sub-Advisor that the timing of orders for the purchase or sale
of securities through the broker may be affected (e.g., may be
delayed) when the Sub-Sub-Advisor is attempting to execute trades
through another broker during the same time period for the same
securities on behalf of other clients.
(h) Consistent with the obligations set forth above, the Sub-Sub-Adviser
may, in its discretion, place orders which involve transactions for
the Fund with brokers and dealers who sell shares of the Fund and/or
provide the Fund, Adviser, Sub-Adviser, or Sub-Sub-Adviser with
research, analysis, advice or similar services. The Sub-Sub-Adviser
may pay brokers and dealers in return for research and analytic
services a higher commission or spread than may be charged by other
brokers or dealers, subject to the Sub-Sub-Adviser determining in
good faith that such commission or spread is reasonable either in
terms of (i) the particular transaction or (ii) the overall
responsibility of the Sub-Sub-Adviser to the Fund and its other
clients to ensure that the total commissions or spreads paid by each
client are reasonable in relation to the benefits to such client
over the long term.
(i) In no instance will securities held by or being acquired for the
Fund be purchased from or sold to the Sub-Sub-Adviser, or any
affiliated person of the Sub-Sub-Adviser or the Fund, except in
accordance with the 1940 Act, the Advisers Act, and applicable
rules, guidance and exemptive orders issued by the SEC and its staff
thereunder.
(j) Whenever the Sub-Sub-Adviser simultaneously places orders to
purchase or sell the same security on behalf of the Fund and one or
more other accounts managed by the
--------------------------------------------------------------------------------
PAGE 3 OF 7
Sub-Sub-Adviser, such orders will be allocated as to price and
amount among all such accounts in a manner believed by the
Sub-Sub-Adviser to be equitable to each account.
(k) The Sub-Sub-Adviser shall act on instructions received from the
Sub-Adviser, to the extent that such instructions are not
inconsistent with the Sub-Sub-Adviser's fiduciary duties, applicable
law, or any obligations to the Fund hereunder.
(l) The Sub-Sub-Adviser shall maintain all records and other information
relative to the Fund as confidential and proprietary information of
the Fund, and will not use such records of information for any
purpose other than in connection with the performance of its
responsibilities hereunder; provided, however, that the
Sub-Sub-Adviser may disclose records or information relative to the
Fund when directed by order of a court or regulatory authority.
3. EXPENSES OF THE FUND. The Sub-Adviser shall be responsible for the
reasonable costs and expenses associated with the provision of the
services contemplated herein; PROVIDED, HOWEVER, that the Fund shall be
responsible for the cost associated with the purchase or sale of any
security or investment contract or other instrument for the Fund's
portfolio and the fees, expenses and costs associated with all other
aspects of the Fund's operations.
4. COMPENSATION. For the services provided and the expenses assumed pursuant
to this Agreement, the Sub-Adviser will pay the Sub-Sub-Adviser a fee in
accordance with the current Invesco Transfer Pricing Policy. Such fee
shall be computed weekly and paid monthly to Sub-Adviser on or before the
last business day of the next succeeding calendar month. If this Agreement
becomes effective or terminates before the end of any month, the fee for
the period from the effective date to the end of the month or from the
beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to
the full month in which such effectiveness or termination occurs.
5. SERVICES NOT EXCLUSIVE. The services to be provided by the Sub-Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Sub-Adviser shall be
free to provide similar services to other clients so long as the provision
of such services to such other clients does not impair the
Sub-Sub-Adviser's ability to provide the services contemplated hereunder.
Nothing contained herein shall be construed to limit or restrict the right
of any director, officer or employee of Sub-Sub-Adviser (who may also be a
director, officer or employee of the Sub-Adviser) to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar
nature or a dissimilar nature.
6. COMPLIANCE WITH APPLICABLE LAW. The Sub-Sub-Adviser shall comply with all
applicable laws, rules and regulations in the discharge or its obligations
hereunder, specifically including, but not limited to Rule 17j-1, under
the 1940 Act and the regulations adopted by the U.S. Securities and
Exchange Commission; and the requirements of the Commodities Exchange Act
and the regulations adopted by the U.S. Commodity Futures Trading
Commission and National Futures Association. Further, the Sub-Sub-Adviser
will conduct its activities under this Agreement in accordance with
applicable regulations of any governmental authority pertaining to its
investment advisory activities.
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PAGE 4 OF 7
7. TERM AND APPROVAL. This Agreement shall become effective upon approval by
Board of Trustees of the Trust, including a majority of the disinterested
Trustees, and shall thereafter continue in force and effect for two (2)
years and may be continued from year to year thereafter, provided that
such continuation is specifically approved at least annually by Board of
Trustees of the Trust, including a majority of the disinterested Trustees.
8. TERMINATION. This Agreement shall automatically terminate in the event of
its assignment, as defined in Section 2(a)(4) of the 1940 Act. The
Agreement may be also terminated:
(a) at any time, without the payment of any penalty, by the vote of the
Fund's Board of Trustees or by vote of a majority of the Fund's
outstanding voting securities;
(b) by either party upon the occurrence of a material breach of the
terms of the Agreement by the other party that remains uncured for a
period of thirty (30) days after notice of such breach has been
given by the terminating party; or
(c) the Sub-Sub-Adviser may terminate the agreement upon ninety (90)
days notice if the Fund materially changes its investment
objectives, policies or restrictions and the cost of performance
hereunder by the Sub-Sub-Adviser is increased.
9. LIABILITY OF THE SUB-SUB-ADVISER. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or
duties hereunder on the part of the Sub-Sub-Adviser or any of its
officers, directors or employees, the Sub-Sub-Adviser shall not be subject
to liability to the Sub-Adviser, Adviser or Fund for any act or omission
in the course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale of any
security or investment contract or other instrument for the Fund's
portfolio.
10. NOTICES. Any notices under this Agreement shall be given in writing,
addressed and delivered or mailed, postage paid, to such address as may be
designated for the receipt of such notice, with copies to the Adviser and
the Fund. The respective addresses for the delivery of such notices are as
follows:
IF TO SUB-ADVISER:
------------------
Invesco Advisers, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, Managing Director
Copy to: Xxxx X. Xxxx, General Counsel
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PAGE 5 OF 7
IF TO THE SUB-SUB-ADVISER:
--------------------------
Invesco Asset Management Ltd.
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx XX0X0XX
Attention: Xxxxxxxx Xxxxx, General Counsel
Copy to: Sub-Adviser
COPIES TO THE ADVISER AND FUND MAY BE DELIVERED TO:
---------------------------------------------------
JNL Series Trust
Xxxxxxx National Asset Management, LLC
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, President
11. DISPUTE RESOLUTION. All claims, disputes and other matters in question
between the parties to this Agreement, arising out of or relating to this
Agreement or the breach or alleged breach thereof, shall be decided by
arbitration in accordance with the rules of the American Arbitration
Association then in effect unless the parties mutually agree otherwise.
Notice of the demand for arbitration shall be filed in writing with the
other party to the Agreement and with the American Arbitration
Association. The demand shall be made within a reasonable time after the
claim, dispute or other matter in question has arisen. In no event shall
the demand for arbitration be made after the date when institution of
legal or equitable proceedings based on such claim, dispute or other
matter in question would be barred by the applicable statute of
limitations. The award rendered by the arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any
court having jurisdiction thereof. The prevailing party in any arbitration
under this Agreement shall be awarded its reasonable attorney's fees and
costs associated with the arbitration. The location for arbitration of any
and all claims, controversies or disputes arising out of or relating to
this Agreement or any breach or alleged breach thereof shall be in
Houston, Texas.
12. APPLICABLE LAW. This Agreement shall be construed in accordance with the
laws of the State of Delaware (without regard to conflict or choice of law
provisions), the 1940 Act, the Advisers Act, and applicable rules,
guidance and exemptive orders issued by the SEC and its staff thereunder.
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PAGE 6 OF 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 21st day of February 2013, effective December 1, 2012.
INVESCO ADVISERS, INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
-----------------------------------
Title: SVP, CCO
----------------------------------
INVESCO ASSET MANAGEMENT LTD.
By: /s/ X. XxXxxxxxxx
-------------------------------------
Name: X. XxXxxxxxxx
-----------------------------------
Title: Director
----------------------------------
JNL SERIES TRUST
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
-----------------------------------
Title: President and CEO
----------------------------------
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PAGE 7 OF 7
SCHEDULE 1
Risk Warnings
APPENDIX E
----------
1. GENERAL
This general risk warning applies to all forms of investment: the value of
investments and the income derived from such investments can fall as well
as rise.
2. FUTURES AND OPTIONS
This brief statement does not disclose all of the risks and other
significant aspects of trading in futures and options. In light of the
risks, the Customer should undertake such transactions only if the
Customer understands the nature of the contracts (and contractual
relationships) into which the Customer is entering and the extent to the
Customer's exposure to risk. Trading in futures and options is not
suitable for many members of the public. The Customer should carefully
consider whether trading is appropriate for the Customer in light of the
Customer's experience, objectives, financial resources and other relevant
circumstances.
FUTURES
EFFECT OF 'LEVERAGING' OR 'GEARING'
a) Transactions in futures carry a high degree of risk. The amount of initial
margin is small relative to the value of the futures contract so that
transactions are 'leveraged' or 'geared'. A relatively small market
movement will have a proportionately larger impact on the funds the
Customer has deposited or will have to deposit: this may work against the
Customer as well as for the Customer. The Customer may sustain a total
loss of initial margin funds and any additional funds deposited with the
firm to maintain the Customer's position. If the market moves against the
Customer's position or margin levels are increased, the Customer may be
called upon to pay substantial additional funds on short notice to
maintain the Customer's position. If the Customer fails to comply with a
request for additional funds within the time prescribed, the Customer's
position may be liquidated at a loss and the Customer will be liable for
any resulting deficit.
RISK-REDUCING ORDERS OR STRATEGIES
b) The placing of certain orders (e.g. 'stop-loss' orders, where permitted
under local law, or 'stop-limit' orders) which are intended to limit
losses to certain amounts may not be effective because market conditions
may make it impossible to execute such orders. Strategies using
combinations of position, such as 'spread' and 'straddle' positions may be
as risky as taking simple 'long' or 'short' positions.
OPTIONS
VARIABLE DEGREE OF RISK
c) Transactions in options carry a high degree of risk. Purchasers and
sellers of options should familiarise themselves with the type of option
(i.e. put or call) which they contemplate trading and the associated
risks. The Customer should calculate the extent to which the value of the
options must increase for the Customer's position to become profitable,
taking into account the premium and all transaction costs.
The purchaser of options may offset or exercise the options or allow the
options to expire. The exercise of an option results either in a cash
settlement or in the purchaser acquiring or delivering the underlying
interest. If the option is on a future, the purchaser will acquire a
futures position with associated liabilities for margin (see the section
on Futures above). If the purchased options expire worthless, the Customer
will suffer a total loss of the Customer's investment which will consist
of the option premium plus transactions costs. If the Customer is
contemplating
SCHEDULE 1 - RISK WARNINGS
purchasing deep-out-of-the-money options, the Customer should be aware
that the chance of such options becoming profitable ordinarily is remote.
Selling ('writing' or 'granting') and option generally entails
considerably greater risk than purchasing options. Although the premium
received by the seller is fixed, the seller may sustain a loss well in
excess of that amount. The seller will be liable for additional margin to
maintain the position if the market moves unfavourably. The seller will
also be exposed to the risk of the purchaser exercising the option and the
seller will be obligated to either settle the option in cash or to acquire
or deliver the underlying interest. If the option is on a future, the
seller will acquire a position in a future with associated liabilities for
margin (see the section on Futures above). If the option is 'covered' by
the seller holding a corresponding position in the underlying interest or
a future or another option, the risk may be reduced. If the option is not
covered, the risk of loss can be unlimited.
Certain exchanges in some jurisdictions permit deferred payment of the
option premium, exposing the purchaser to liability for margin payments
not exceeding the amount of the premium. The purchaser is still subject to
the risk of losing the premium and transaction costs. When the option is
exercised or expires, the purchaser is responsible for any unpaid premium
outstanding at that time.
ADDITIONAL RISKS COMMON TO FUTURES AND OPTIONS
TERMS AND CONDITIONS OF CONTRACTS
d) The Customer should ask the firm with which the Customer deals about the
terms and conditions of the specific futures or options which the Customer
is trading and associated obligations (e.g. the circumstances under which
the Customer may become obligated to make or take delivery of the
underlying interest of a futures contract and, in respect of options,
expiration dates and restrictions on the time for exercise). Under certain
circumstances the specifications of outstanding contracts (including the
exercise price of an option) may be modified by the exchange or clearing
house to reflect changes in the underlying interest.
SUSPENSION OR RESTRICTION OF TRADING AND PRICING RELATIONSHIPS
e) Market conditions (e.g. illiquidity) and/or the operation of the rules of
certain markets (e.g. the suspension of trading in any contract or
contract month because of price limits or 'circuit breakers') may increase
the risk of loss by making it difficult or impossible to effect
transactions or liquidate/offset positions. If the Customer has sold
options, this may increase the risk of loss.
Further, normal pricing relationships between the underlying interest and
the future, and the underlying interest and the option may not exist. This
can occur when, for example, the futures contract underlying the option is
subject to price limits while the option is not. The absence of an
underlying reference price may make it difficult to judge 'fair' value.
DEPOSITED CASH AND PROPERTY
f) The Customer should familiarise its self with the protections accorded
money or other property the Customer deposits for domestic and foreign
transactions, particularly in the event of a firms insolvency or
bankruptcy. The extent to which the Customer may recover the Customer's
money or property may be governed by specific legislation or local rules.
In some jurisdictions, property which had been specifically identifiable
as the Customer's own will be pro-rated in the same manner as cash for
purposes of distribution in the event of a shortfall.
COMMISSION AND OTHER CHARGES
g) Before the Customer begins to trade, the Customer should obtain a clear
explanation of all commission, fees and other charges for which the
Customer will be liable. These charges will affect the Customer's net
profit (if any) or increase the Customer's loss.
SCHEDULE 1 - RISK WARNINGS
TRANSACTIONS IN OTHER JURISDICTIONS
h) Transactions on markets in other jurisdictions, including markets formally
linked to a domestic market, may expose the Customer to additional risk.
Such markets may be subject to regulation which may offer different or
diminished investor protection. Before the Customer trades the Customer
should enquire about any rules relevant to the Customer's particular
transactions. The Customer's local regulatory authority will be unable to
compel the enforcement of the rules of regulatory authorities or markets
in other jurisdictions where the Customer's transactions have been
effected. The Customer should ask the firm with which the Customer deals
for details about the types of redress available in both the Customer's
home jurisdiction and other relevant jurisdictions before the Customer
start to trade.
CURRENCY RISKS
i) The profit or loss in transactions in foreign currency-denominated
contracts (whether they are traded in the Customer's own or another
jurisdiction) will be affected by fluctuations in currency rates where
there is a need to convert from the currency denomination of the contract
to another currency.
TRADING FACILITIES
j) Most open-outcry and electronic trading facilities are supported by
computer-based component systems for the order-routing, execution,
matching, registration or clearing of trades. As with all facilities and
systems, they are vulnerable to temporary disruption or failure. The
Customer's ability to recover certain losses may be subject to limits on
liability imposed by the system provider, the market, the clearing house
and/or member firms. Such limits may vary: the Customer should ask the
firm with which the Customer deal for details in this respect.
ELECTRONIC TRADING
k) Trading on an electronic trading system may differ not only from trading
in an open-outcry market but also from trading on other electronic trading
systems. If the Customer undertakes transactions on an electronic trading
system, the Customer will be exposed to risks associated with the system
including the failure of hardware and software. The result of any system
failure may be that the Customer's order is either not executed according
to the Customer's instructions or is not executed at all.
OFF-EXCHANGE TRANSACTIONS
l) In some jurisdictions, and only then in restricted circumstances, firms
are permitted to effect off-exchange transactions. The firm with which the
Customer deals may be acting as the Customer's counterparty to the
transaction. It may be difficult or impossible to liquidate an existing
position, to assess the value, to determine a fair price or to assess the
exposure to risk. For these reasons, these transactions may involve
increased risks. Off-exchange transactions may be less regulated or
subject to a separate regulatory regime. Before the Customer undertakes
such transactions, the Customer should familiarise its self with
applicable rules and attendant risks.
3. EXCHANGE RATES
If a liability in one currency is to be matched by an asset in a different
currency, or if the services to be provided under the agreement may relate
to our investment denominated in a currency other than the currency in
which the Customer's Investments are valued, the movement of exchange
rates may have a separate effect, unfavourable as well as favourable, on
the gain or loss otherwise experienced on investments.
SCHEDULE 1 - RISK WARNINGS
SCHEDULE 2
Summary of Trade Execution Policy
APPENDIX C
----------
INVESCO ASSET MANAGEMENT LIMITED ("IAML") - TRADE EXECUTION POLICY - 1 NOVEMBER
--------------------------------------------------------------------------------
2007
----
1. INTRODUCTION, OBJECTIVE AND SCOPE
------------------------------------
This document contains information on IAML's trade execution policy (the
"Policy"), which sets out the various high level principles that IAML and its
divisions will follow when placing, arranging or executing orders for the
various discretionary arrangements in place for its clients ("Client Orders").
This is subject in all respects to the terms of any investment management
agreement in place. For its Client Orders, IAML will take all reasonable steps
in accordance with the Policy to obtain the best possible result for its
clients. In regulatory terms, this may involve execution outside of a Regulated
Market or Multilateral Trading Facility (within the meaning of the FSA Rules).
The Policy also covers mandates where investment management activities have been
delegated by IAML to other investment management professionals within the
INVESCO Ltd Group (including, but not limited to, the United States of America,
Hong Kong, Japan, Australia and Continental Europe). References in this document
to IAML therefore include those other professionals where applicable.
The Policy, with reference to applicable FSA Rules, covers the following asset
classes:-
o Equities;
o Fixed income;
o Cash products;
o Structured products; and
o Over-the-counter (OTC) products (including variations of the above),
where applicable.
Although the factors set out in the Policy are expected to produce the best
possible result for IAML's clients on a consistent basis, there is no guarantee
that circumstances will enable this to be achieved in every single transaction.
Also, wherever there is a specific instruction from a client in respect to an
order, IAML must carry out the order in accordance with that specific
instruction. HOWEVER, THIS MAY PREVENT IAML FROM TAKING STEPS THAT IT HAS
DESIGNED AND IMPLEMENTED TO OBTAIN THE BEST POSSIBLE RESULT IN EXECUTING CLIENT
ORDERS.
2. BEST POSSIBLE RESULT
-----------------------
IAML's policy for placing, arranging and or executing orders on behalf of its
clients sets out the principles for:-
o Selecting suitable venues for execution;
o Selecting suitable entities as a means of accessing those venues
(IAML may access venues directly or may use an approved
counterparty/intermediary to do so) or otherwise executing orders;
o Evaluating the Execution Factors to be taken into account when
choosing the Venue/Entity;
in each case, with reference to the particular client characteristics where
applicable.
SCHEDULE 2 - SUMMARY OF TRADE EXECUTION POLICY
3. APPROVED COUNTERPARTIES
--------------------------
IAML uses a number of approved counterparties who are selected for their ability
to allow it to take all reasonable steps to achieve the best possible result for
its clients.
A list of the approved counterparties is maintained on IAML's investment
management systems and is available upon request from:-
Director of European Compliance,
INVESCO Asset Management Limited,
00 Xxxxxxxx Xxxxxx,
Xxxxxx
XX0X 0XX
In selecting counterparties for its approved list, IAML will ensure these
counterparties owe IAML a duty of best execution and have in place execution
arrangements which satisfy its requirements to take all reasonable steps to
obtain, on a consistent basis, the best possible result for its client orders as
outlined in the Policy. The results they achieve will also be monitored on an
ongoing basis. Any new approved counterparty is subjected to a due diligence
process, focusing in particular on quality of execution and credit risk where
the relevant counterparty will trade on an OTC basis with IAML.
4. HOW APPROVED COUNTERPARTIES AND EXECUTION VENUES ARE CHOSEN
--------------------------------------------------------------
Entities or execution venues that IAML chooses to transmit orders to or execute
orders (as applicable), will be selected on the basis of the quality of
execution provided by that venue or entity. As such, IAML has assessed a number
of venues and entities to ensure they can provide the best possible result,
which will be measured for consistency on transactions over a significant
period.
Alternative entities or venues may be considered where in the view of IAML the
best possible result can be obtained and where the relevant execution factors
are taken into account.
Selection of a venue or entity that provides the best possible result over a
significant period will be made on the overall basis of general prices
available; nature of the orders; depth of liquidity of venues; volatility of the
markets; speed of execution; cost of execution; creditworthiness of venues; and
quality and cost of clearing and settlement. Different execution techniques will
be employed by certain entities, including trading on a regulated exchange or
multilateral trading facility, crossing orders with another client of that
entity, or executing orders outside a regulated market or multilateral trading
facility. Execution venues could include:
o Regulated markets
o Multilateral trading facilities
o Crossing networks
o Use of systematic internalisers
o For funds, the operator or authorised corporate director (ACD) of
the fund (or its agent)
o For initial public offerings (IPOs), the issuing company
o Market makers, brokers, banks and other liquidity providers
o Non-EEA entities or venues that perform a similar function to those
listed above.
However, any client specific instruction may direct execution away from a more
suitable venue or entity. Factors will vary according to the different venues
selected; however, the best possible result will always be our foremost
consideration.
SCHEDULE 2 - SUMMARY OF TRADE EXECUTION POLICY
IAML's list of selected venues and entities will be reviewed at least annually,
but any significant changes to any previously assessed venue or entity, or
addition of a new venue or entity will be updated as soon as identified .
TRANSACTIONS OUTSIDE A REGULATED MARKET OR MULTILATERAL TRADING FACILITY -
--------------------------------------------------------------------------
In cases where client orders in relation to a particular instrument are executed
by IAML outside a Regulated Market or Multilateral Trading Facility after 1st
November 2007, and the orders could in theory have been dealt with on such a
market/facility, then IAML is required to obtain the relevant client's prior
express consent.
5. EXECUTION FACTORS -
----------------------
IAML will, based on its experience, market judgement, the nature of the orders
and the particular instruments, at all times undertake to obtain the best
possible result. The following factors will be taken into account by IAML when
seeking to obtain the best possible result for its clients:-
o Price;
o Costs;
o Speed of execution;
o Likelihood of execution;
o Speed of settlement; o Likelihood of settlement;
o Size of order;
o Nature of order; and
o Any other consideration relating to the execution of the order.
The relative importance of above factors will be influenced by the
characteristics of the client concerned - retail or professional; any
characteristics of the client order - any limitations or specific instructions;
characteristics of the financial instrument - quoted on-exchange, or bespoke
product; any characteristics of the venues or entities used.
IAML will generally give the highest priority to total consideration. Total
consideration represents the price of the financial instrument, plus any costs
related to execution. Costs include all directly related to the execution of
that order. However, IAML may at its discretion and in accordance with the
Policy, prioritise other factors outside of price and costs that are considered
more important for any given order and should be taken into account. A list of
specific examples of such situations (which is not exhaustive) is set out in
Appendix A.
6. BEST EXECUTION MONITORING
----------------------------
Assessment of the venues and entities used to provide the best possible result
for transactions will be made on an ongoing, consistent basis. Internal
monitoring, and where applicable transaction cost analysis tools, will be used
for assessment, as well as information obtained from the various venues and
entities used by IAML.
Where such monitoring and review is deemed to find that a venue or entity is not
consistently providing the best possible result, IAML will first try and resolve
the issue with the relevant venue and/or entity. Where resolution appears to be
impossible, IAML will give due consideration to cease using that venue or
entity.
SCHEDULE 2 - SUMMARY OF TRADE EXECUTION POLICY
7. MATTERS BEYOND OUR CONTROL
------------------------------
Due to systems failures or other reasons which are unavoidable or beyond IAML's
reasonable control, IAML may from time to time handle orders in a manner that
differs from the normal processes under the Policy. In the event of such an
occurrence, IAML will still endeavour to place, arrange and/or execute orders on
the best possible terms available in the relevant circumstances. In such
circumstances, total consideration may not be the most important factor.
8. GENERAL
----------
The Policy is subject to change. The execution arrangements will be reviewed as
circumstances dictate, and at least annually, unless IAML becomes aware that
there is a material change in relevant external circumstances. A change to the
execution arrangements may result in a change to the Policy. However, IAML will
only notify clients of such a change when this is material and directly relevant
to them,
The Policy supersedes any previous Policy issued by IAML.
If you have any queries in relation to the Policy then please contact the
Director of European Compliance in writing at:
INVESCO Asset Management Limited
00 Xxxxxxxx Xxxxxx
Xxxxxx, XX0X 0XX
APPENDIX A TO TRADE EXECUTION POLICY
o SPECIFIC EXECUTION FACTORS - In a falling or volatile market, IAML may
consider speed or certainty of execution to be the most important
execution factors. On the other hand, liquidity may be more important
where a particularly large order must be dealt with.
o CONFIDENTIALITY - The desire to keep an order confidential may on
occasions limit IAML's ability to take the steps it would normally take to
ensure it obtains the best possible price; e.g., by speaking to a number
of different possible approved counterparties with or through whom the
order may be executed. This may be the case in particular with large
orders or OTC derivatives. On other occasions, an approved counterparty
may provide IAML with confidential research about a possible trade or
investment idea, on the basis that if this resulted in an order, IAML
would place this with or through the counterparty. IAML would tend to
agree to this, subject to any further requirements in the Policy and to it
being comfortable that the total consideration relating to the order is
commercially acceptable.
o UNITS OR SHARES IN FUNDS - The only method available for buying or selling
most of these in practice is to transmit them to the operator of the fund
(or its agent) for execution. This includes orders that relate to Invesco
funds. In general, these types of operators will therefore be the only
"execution venue" we use, regardless of other possible execution factors.
Sometimes a fund may be available via a trading platform provided by a
third party which in theory could be an alternative execution venue.
However, we do not use such platforms, as we do not believe that we would
obtain a better price by doing so.
o INVESTMENT TRUSTS SHARES - When it is necessary to buy or sell these, we
generally send the order to the official stockbroker appointed by the
relevant trust. This includes where we deal with orders relating to
Invesco investment trusts. We do this because such shares can often be
relatively illiquid, such that the trust's official stockbrokers are
generally best placed to provide us on a consistent basis with a
competitive market price and the required level of liquidity. We will,
however, ensure that any such stockbroker owes us a duty of best execution
when executing our orders and we will also regularly monitor the prices
they achieve to ensure they meet their obligations.
SCHEDULE 2 - SUMMARY OF TRADE EXECUTION POLICY
o INITIAL PUBLIC OFFERINGS (IPOS) - In practice, participating in an IPO
will mean that IAML places an order directly with the company issuing the
relevant shares.
SCHEDULE 2 - SUMMARY OF TRADE EXECUTION POLICY
