SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 11th day of August, 2003, by and between
XXXXXX XXXXXXX INVESTMENT ADVISORS INC., a Delaware corporation (hereinafter
referred to as "Xxxxxx Xxxxxxx Investment Advisors"), and XXXXXX XXXXXXX
INVESTMENT MANAGEMENT LIMITED, a company incorporated under the laws of England
(hereinafter referred to the "Local Manager").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Xxxxxx Xxxxxxx International Value Equity Fund (the "Fund") is
a Massachusetts business trust engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, Xxxxxx Xxxxxxx Investment Advisors and the Local Manager are
engaged principally in rendering investment advisory services and are registered
as investment advisers under the Investment Advisors Act of 1940, as amended;
and
WHEREAS, the Local Manager is regulated by the Financial Services
Authority in the United Kingdom; and
WHEREAS, Xxxxxx Xxxxxxx Investment Advisors has entered into an
investment advisory agreement (the "Advisory Agreement") with the Fund dated
February 14, 2001, pursuant to which Xxxxxx Xxxxxxx Investment Advisors provides
management and investment and advisory services to the Fund; and
WHEREAS, the Local Manager is willing to provide investment management
services to Xxxxxx Xxxxxxx Investment Advisors in connection with the Fund's
operations on the terms and conditions hereinafter set forth and including the
terms and conditions contained in Annex 1 and Annex 2 to this Agreement;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Local Manager and Xxxxxx Xxxxxxx Investment Advisors
hereby agree as follows:
ARTICLE I
Duties of the Local Manager
Xxxxxx Xxxxxxx Investment Advisors hereby employs the Local Manager to
act as discretionary investment manager to Xxxxxx Xxxxxxx Investment Advisors
and to furnish the investment management services described below, subject to
the broad supervision of Xxxxxx Xxxxxxx Investment Advisors and the Fund, for
the period and on the terms and conditions set forth in this Agreement. The
Local Manager hereby accepts such employment and agrees during such period, at
its own expense, to render, or arrange for the rendering of, such services and
to assume the obligations herein set forth for the compensation provided for
herein. Xxxxxx Xxxxxxx Investment Advisors and its affiliates shall for all
purposes herein be deemed an Intermediate Customer as defined under the rules
and guidance promulgated by the Financial Services Authority (hereinafter
referred to as the "FSA Rules"). The Local Manager and its affiliates 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
represent the Fund in any way or otherwise be deemed an agent of the Fund.
The Local Manager shall have full discretion, power and authority on
the Fund's behalf to buy, sell, retain, exchange or otherwise deal in
investments and other assets, make deposits, subscribe to issues and offers for
sale and accept placings of any investments, enter into foreign currency
transactions on a spot or forward basis, effect transactions on any markets,
take all day to day decisions and otherwise act as the Local Manager judges
appropriate in relation to the investment and reinvestment of the portfolio of
assets of the Fund. This includes performing all acts and executing all
documents which the Local Manager reasonably considers incidental thereto,
including (without limitation) power to execute and deliver all applications,
requests, or claims for refund, reduction, repayment or credit of, or exemption
or relief from, any withholding tax or similar taxes in any jurisdiction in
which such applications, requests or claims may be made. Subject to guidelines
adopted by the Fund, the Local Manager shall also make recommendations or take
action as to the manner in which voting rights, rights to consent to corporate
action and any other rights pertaining to the portfolio of assets of the Fund
shall be exercised. All of the foregoing is subject always to the restrictions
of the Declaration of Trust and By-Laws of the Fund, as they may be amended
and/or restated from time to time and as provided to the Local Manager by Xxxxxx
Xxxxxxx Investment Advisors, the provisions of the Investment Company Act and
the statements relating to the Fund's investment objective(s), investment
policies and investment restrictions as the same are set forth in the currently
effective prospectus and statement of additional information relating to the
shares of the Fund under the Securities Act of 1933, as amended (the
"Prospectus" and "Statement of Additional Information", respectively), as well
as to the supervision of Xxxxxx Xxxxxxx Investment Advisors and the Board of
Trustees of the Fund.
The Local Manager will not hold money on behalf of Xxxxxx Xxxxxxx
Investment Advisors or the Fund, nor will the Local Manager be the registered
holder of the registered investment of Xxxxxx Xxxxxxx Investment Advisors or the
Fund or be the custodian of documents or other evidence of title.
The Local Manager may, where reasonable, employ agents (including
affiliates) to perform any administrative, dealing or ancillary services
required to enable the Local Manager to perform its services under this
Sub-Advisory Agreement.
ARTICLE II
Allocation of Charges and Expenses
The Local Manager assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement and shall at
its own expense provide the office space, equipment and facilities which it is
obligated to provide under Article I hereof.
ARTICLE III
Compensation of the Local Manager
For the services rendered, the facilities furnished and expenses
assumed by the Local Manager, Xxxxxx Xxxxxxx Investment Advisors shall pay to
the Local Manager a fee in an amount to be determined from time to time by
Xxxxxx Xxxxxxx Investment Advisors and the Local Manager but in no event in
excess of the amount that Xxxxxx Xxxxxxx Investment Advisors actually received
for providing services to the Fund pursuant to the Advisory Agreement.
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ARTICLE IV
Limitation of Liability of the Local Manager
No warranty is given by the Local Manager as to the performance or
profitability of the Fund or any part of them.
If a percentage restriction contained in the Fund's investment
objective(s) or investment restrictions (as the same are set forth in the Fund's
currently effective Prospectus and Statement of Additional Information) is
adhered to at the time of investment, a later change in percentage resulting
from a change in values or assets will not constitute a violation of such
restriction.
The Local Manager will not be responsible to Xxxxxx Xxxxxxx Investment
Advisors or the Fund for the solvency, actions or omissions of any counterparty,
broker, dealer, market-maker, bank, custodian or sub-custodian, with whom it
transacts business on Xxxxxx Xxxxxxx Investment Advisors' behalf, other than
affiliates of the Local Manager.
Nothing in this Agreement will exclude or restrict any liability which
the Local Manager has under the Financial Services and Markets Xxx 0000, FSA
Rules or the Regulatory System in relation to Xxxxxx Xxxxxxx Investment Advisors
and which may not be excluded or restricted thereunder.
The Local Manager shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the performance of investment management services rendered with
respect to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties hereunder. The exception in the previous sentence
shall apply to each limitation of the Local Manager's liability contained in
this Article IV. As used in this Article IV, the Local Manager shall include any
affiliates of the Local Manager performing services for the Local Manager
contemplated hereby and directors, officers and employees of the Local Manager
and such affiliates.
ARTICLE V
Activities of the Local Manager
The services of the Local Manager to the Fund are not to be deemed to
be exclusive, the Local Manager and any person controlled by or under common
control with the Local Manager (for purposes of this Article V referred to as
"affiliates") being free to render services to others. It is understood that
Trustees, officers, employees and shareholders of the Fund are or may become
interested in the Local Manager and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Local Manager and its affiliates are or may become
similarly interested in the Fund, and that the Local Manager and directors,
officers, employees, partners and shareholders of its affiliates may become
interested in the Fund as shareholders or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until the date of termination of the Advisory
Agreement (but not later than two years after the date hereof) and thereafter,
but only so long as such continuance is specifically approved at least annually
by (i) the Trustees of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund and (ii) a
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majority of those Trustees who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by Xxxxxx Xxxxxxx Investment Advisors, by the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, or by the Local Manager, on sixty days' written notice to the other party.
This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Advisory Agreement. Any termination shall
be without prejudice to the completion of transactions already initiated.
ARTICLE VII
Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Trustees of the Fund or by the vote of a
majority of outstanding voting securities of the Fund and (ii) a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person" used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
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XXXXXX XXXXXXX INVESTMENT ADVISORS INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
XXXXXX XXXXXXX INVESTMENT
MANAGEMENT LIMITED
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Managing Director
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SUB-ADVISORY AGREEMENT
ANNEX 1
1. DEALING AND COUNTERPARTIES
1.1 The Local Manager will act in good faith and with due diligence in its
choice and use of counterparties. Unless directed by Xxxxxx Xxxxxxx
Investment Advisors or the Fund to use a specific counterparty, the
Local Manager undertakes to secure Best Execution (as defined in the
FSA Rules) of all the Fund's transactions. In securing Best Execution,
the Local Manager will take reasonable care to obtain the best
available price in accordance with FSA Rules. Subject thereto, the
Local Manager may deal on such markets or exchanges and with such
counterparties (including any affiliate) as it thinks fit. All
transactions will be effected in accordance with the rules and
regulations of the relevant market or exchange, and the Local Manager
may take all such steps as may be required or permitted by such rules
and regulations and/or by appropriate market practice.
1.2 If any counterparty should fail to deliver any necessary documents or
to complete any transaction, the Local Manager will take all reasonable
steps on behalf of Xxxxxx Xxxxxxx Investment Advisors or the Fund to
rectify such failure or obtain compensation. Xxxxxx Xxxxxxx Investment
Advisors shall procure that the Fund pay all reasonable costs and
expenses properly incurred by the Local Manager.
1.3 The Local Manager may enter into soft commission arrangements from time
to time with brokers who provide the Local Manager with research, and
research related services. The Local Manager will secure Best Execution
on all such transactions disregarding any benefit to the portfolio of
assets of the Fund arising from such service. Annex 2 sets out the
Local Manager's policy on soft commission. The Local Manager will
provide Xxxxxx Xxxxxxx Investment Advisors with a general soft
commission statement on at least an annual basis showing the amount of
soft commission paid by the Local Manager as a percentage of the total
commission paid during the year, total commission paid from the Fund's
portfolio of assets during the year, and a description of the research
and research related services received during the year.
1.4 The Local Manager may aggregate the Fund's orders with orders of other
clients (whether or not connected with the Local Manager). Xxxxxx
Xxxxxxx Investment Advisors is aware and has made the Fund aware that
the aggregation of the Fund's orders with those of other clients may
result in the Fund obtaining on some occasions a more favourable price
and on others a less favourable price, than if such orders had not been
aggregated.
2. MATERIAL INTERESTS
2.1 The Local Manager and any affiliate may, subject to the limitations of
the U.S. Investment Company Act of 1940 (as amended), and to the
overriding principles of suitability and Best Execution and without
prior reference to Xxxxxx Xxxxxxx Investment Advisors or the Fund,
effect transactions in which the Local Manager or affiliate has,
directly or indirectly, a material interest or a relationship of any
description with another party, which may involve a potential conflict
with the Local Manager's duty to Xxxxxx Xxxxxxx Investment Advisors or
the Fund. Neither the
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Local Manager nor any affiliate shall be liable to account to Xxxxxx
Xxxxxxx Investment Advisors or the Fund for any profit, commission or
remuneration made or received from or by reason of such transactions or
any connected transactions nor will the Local Manager's fees, unless
otherwise provided, be abated. For example, such potential conflicting
interests or duties may arise because:
(a) any of the Local Manager's or affiliate's directors or employees
is a director of, holds or deals in securities of, or is
otherwise interested in any company whose securities are held or
dealt in on behalf of the Fund;
(b) the transaction is in the securities of a company for which an
affiliate has provided corporate finance advice, underwritten,
managed or arranged an issue or offer for sale;
(c) the Local Manager deals on behalf of the Fund with an affiliate;
(e) the Local Manager may effect transactions involving placings
and/or new issues with an Affiliate who may be acting as
principal or receiving agent's commission. Affiliates may retain
any agent's commission or discount or other benefit (including
directors' fees) that accrues to them; or
(f) the transaction is in units or shares of a collective investment
scheme (regulated or unregulated) of which the Local Manager or
any affiliate is the manager, operator, banker, adviser,
custodian or trustee.
2.2 Nothing in this Agreement shall oblige the Local Manager or any
affiliate to accept responsibilities more extensive than those set out
in this Agreement or shall give rise to any fiduciary or equitable
duties which would prevent or hinder any affiliate acting both as
market-maker and broker, principal or agent, dealing with other
affiliates and other clients and generally effecting transactions as
provided above nor from retaining any remuneration received in respect
thereof.
3. RECORDS AND REPORTS
3.1 The Local Manager will keep accurate and detailed records with respect
to all receipts, investments, sales, disbursements and other
transactions carried out by the Local Manager for Xxxxxx Xxxxxxx
Investment Advisors or with the Fund.
3.2 All records held pursuant to this clause by the Local Manager shall be
open to inspection by Xxxxxx Xxxxxxx Investment Advisors or the Fund
and the Local Manager will provide Xxxxxx Xxxxxxx Investment Advisors
and the Fund with such access as it itself has to records held by any
relevant third party, in each case at reasonable times during business
hours and upon the giving of reasonable notice by Xxxxxx Xxxxxxx
Investment Advisors or the Fund.
3.3 The Local Manager shall, not later than 10 working days following the
end of each calendar month, furnish to Xxxxxx Xxxxxxx Investment
Advisors a statement showing all transactions that have occurred in the
Fund and a monthly listing of all investments and cash balances held as
of the end of such month.
3.4 The monthly statement will show the cost or amount realised (in the
case of any relevant new purchase or sale) and, where available, the
current value (where applicable) of each investment held in the Fund
and any income arising on the Fund's account during the relevant
calendar
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month, and will also include a statement showing the measure of the
performance of the assets of the Fund. The basis of all valuations will
be as stated in the first monthly statement, unless otherwise agreed.
3.5 The Local Manager will not provide Xxxxxx Xxxxxxx Investment Advisors
with an individual trade confirmation of each portfolio transaction
unless Xxxxxx Xxxxxxx Investment Advisors has specifically requested
the Local Manager to do so.
4. FORCE MAJEURE
The Local Manager shall not be responsible or liable to Xxxxxx Xxxxxxx
Investment Advisors or the Fund for any failure or delay in the
performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes;
fires; floods; wars; civil or military disturbances; sabotage;
epidemics; riots; interruptions, loss or malfunctions of utilities;
computer (hardware or software) or communications services; accidents;
labor disputes; acts of civil or military authority or governmental
actions; it being understood that the Local Manager shall use
reasonable efforts which are consistent with accepted practices in the
investment management industry to resume performance as soon as
practicable under the circumstances.
5. COMPLAINTS
The Local Manager maintains procedures in accordance with FSA Rules for
the effective consideration and handling of client complaints.
Complaints will be considered promptly by the appropriate supervisory
manager who is not personally involved in the subject matter of the
complaint. Where appropriate, the complaint will be passed to the
Compliance Officer.
6. CONFIDENTIALITY AND DISCLOSURE
The Local Manager and Xxxxxx Xxxxxxx Investment Advisors undertake to
keep private and confidential all information acquired in connection
with this Agreement, and not to disclose such information to any person
except to the extent that:
(a) the other party gives prior consent; or
(b) the Local Manager is required to disclose the information by the
FSA, the Bank of England, the London Stock Exchange or any other
recognised investment exchange, the City Panel on Takeovers and
Mergers or any other regulatory authority having jurisdiction
over the Local Manager or the performance by it of its
obligations under this Agreement or by English Law; or
(c) disclosure to a counterparty to a transaction effected for the
Fund is required as a condition to such transaction; or
(d) disclosure is necessary to enable the Local Manager to perform
its obligations under this Agreement.
7. DATA PROTECTION
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7.1 The Local Manager will, in connection with the Sub-Advisory Agreement,
comply (where applicable) with the UK Data Protection Xxx 0000 and
other applicable data protection laws and regulations (together, the
"Data Protection Laws").
7.2 Xxxxxx Xxxxxxx Investment Advisors will comply (where applicable) with
the Data Protection Laws and (where applicable) take all reasonable
steps to ensure that it has obtained all necessary consents for the
Local Manager to process any personal data for the purposes of the
Agreement.
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SUB-ADVISORY AGREEMENT
ANNEX 2
XXXXXX XXXXXXX INVESTMENT MANAGEMENT LIMITED
SOFT COMMISSION POLICY
Soft commission arrangements are defined as arrangements whereby the
Investment Manager executes portfolio transactions through a particular broker
in return for the payment or provision of research related services. Such
arrangements are also known as soft dollar arrangements. Because Xxxxxx Xxxxxxx
Investment Management Limited ("MS Investment Management Limited") is a US
registered investment advisor, you receive from us an annual SEC Form ADV which
provides information concerning our soft commission policy. As stated in our ADV
Form, it is MS Investment Management Limited's policy, consistent with the
obligation to seek the most favourable price and execution, to effect
transactions from time to time with brokers which pay for research services
provided by third parties in accordance with Section 28(e) of the Securities
Exchange Act of 1934, as amended.
Under the rules of the Financial Services Authority "FSA" (a UK regulatory body
which also governs our business), we will be providing you each year with a
summary of our soft commission arrangements showing the amount of soft
commissions we generated for the year reflected as a percentage of our total
commission business together with a summary of the research and research related
services received by us.
We would like to take this opportunity to discuss our rationale for entering
into such arrangements. The type of research related services we typically
receive from our soft commission brokers includes market intelligence data,
stock pricing and rating information and specialty computer software and
hardware, all of which provide our fund managers with valuable assistance in the
decision making process. Although each and every service received may not be
used for the benefit of all of our clients, we believe that those services
received are, on aggregate, of significant assistance in fulfilling our
investment responsibilities to all our clients. The receipt of these services
does not cause our clients to incur additional execution or commission costs.
Under the FSA rules, soft commission brokers have an obligation to achieve best
execution on each transaction and a soft commission broker will charge a
comparable commission rate to a "traditional" or non-soft commission broker. As
commission rates are generally subject to negotiation, we carefully monitor and
negotiate commission rates to ensure they are competitive within the relevant
market. Given that similar dealing costs will be incurred whether we use a soft
commission broker or a traditional broker, we believe it is in our clients'
interests for us to use soft commission brokers because our investment
management capabilities are enhanced at no additional cost to our clients.
Xxxxxx Xxxxxxx Investment Management Limited has entered into Soft Commission
Agreements with the following brokers:
Instinet Investment Services Limited
Xxxxxx & Company Limited
Xxxxxx Brothers
Merrill Xxxxx International
January, 2003
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