XXXX XXXXXXX FUNDS II
SUBADVISORY AGREEMENT
AGREEMENT made this 17th day of October, 2005, between Xxxx Xxxxxxx
Investment Management Services, LLC (formerly, Manufacturers Securities
Services, LLC), a Delaware limited liability company (the "Adviser"), and
Xxxxxxx Capital Management, LLC, a Delaware limited liability company (the
"Subadviser"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of Xxxx Xxxxxxx Funds II (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of, the Portfolio(s) specified in Appendix A to this Agreement as it
shall be amended by the Adviser and the Subadviser from time to time (the
"Portfolios"). The Subadviser will be an independent contractor and will have no
authority to act for or represent the Trust or Adviser in any way except as
expressly authorized in this Agreement or another writing by the Trust and
Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
a. Subject always to the direction and control of the Trustees of the Trust,
the Subadviser will manage the investments and determine the composition of
the assets of the Portfolio(s) in accordance with the Portfolio(s)'
registration statement, as amended. In fulfilling its obligations to manage
the investments and reinvestments of the assets of the Portfolio(s), the
Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial and
other information affecting the economy generally and individual
companies or industries the securities of which are included in the
Portfolio(s) or are under consideration for inclusion in the
Portfolio(s);
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related
investment policies for each such Portfolio as described in the
Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing
of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide assistance to the Adviser and the Trust's Custodian regarding
the fair value of securities held by the Portfolio(s) for which market
quotations are not readily available.
b. The Subadviser, at its expense, will furnish all necessary investment and
management facilities, including personnel and equipment and salaries of
personnel required for it to execute its sub-advisory duties faithfully.
c. The Subadviser will select brokers and dealers to effect all transactions
subject to the following conditions: The Subadviser will place all
necessary orders with brokers, dealers, or issuers, and will negotiate
brokerage commissions if applicable. The Subadviser is directed at all
times to seek to execute brokerage transactions for the Portfolios in
accordance with such policies or practices as may be established by the
Trustees and communicated to the Subadviser and described in the Trust's
registration statement as amended. The Subadviser may pay a broker-dealer
which provides research and brokerage services a higher spread or
commission for a particular transaction than otherwise might have been
charged by another broker-dealer, if the Subadviser determines that the
higher spread or commission is reasonable in relation to the value of the
brokerage and research services that such broker-dealer provides, viewed in
terms of either the particular transaction or the Subadviser's overall
responsibilities with respect to accounts managed by the Subadviser. The
Subadviser may use for the benefit of the Subadviser's other clients, or
make available to companies affiliated with the Subadviser or to its
directors for the benefit of its clients, any such brokerage and research
services that the Subadviser obtains from brokers or dealers.
d. On occasions when the Subadviser deems the purchase or sale of a security
to be in the best interest of a Portfolio as well as other clients of the
Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be purchased or sold to attempt to obtain a more favorable
price or lower brokerage commissions or more efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Portfolio and to its other clients.
e. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios as are required of an investment sub-adviser of a
registered investment company pursuant to the Investment Company Act of
1940 (the "Investment Company Act") and Investment Advisers Act of 1940
(the "Investment Advisers Act") and the rules thereunder.
f. The Subadviser shall vote proxies relating to each Portfolio's investment
securities in accordance with the Trust's proxy voting policies and
procedures, which provide that the Subadviser shall vote all proxies
relating to securities held by the Portfolio and, subject to the Trust's
policies and procedures, shall use proxy voting policies and procedures
adopted by the Subadviser in conformance with Rule 206(4)-6 under the
Investment Advisers Act. The Subadviser shall review its proxy voting
activities as requested on a periodic basis with the Trustees.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Portfolio the
compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its directors, officers or employees
shall be liable to the Adviser or the Trust for any error of judgment or mistake
of law or for any loss suffered by the Adviser or Trust in connection with the
matters to which this Agreement relates except for losses resulting from willful
2
misfeasance, bad faith or gross negligence in the performance of, or from the
reckless disregard of, the duties of the Subadviser or any of its directors.
Subadviser does not warrant that it will achieve any particular rate of return
or that its performance will match any benchmark index or other standard or
objective.
5. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may reasonably request or require pursuant to applicable laws and
regulations.
6. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of (i) its execution and (ii) the date of the meeting of the Board of
Trustees of the Trust, at which meeting this Agreement is approved as described
below. The Agreement will continue in effect for a period more than two years
from the date of its execution only so long as such continuance is specifically
approved at least annually either by the Trustees of the Trust or by a majority
of the outstanding voting securities of each of the Portfolios, provided that in
either event such continuance shall also be approved by the vote of a majority
of the Trustees of the Trust who are not interested persons (as defined in the
Investment Company Act) of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. Any required
shareholder approval of the Agreement or of any continuance of the Agreement
shall be effective with respect to any Portfolio if a majority of the
outstanding voting securities of the series (as defined in Rule 18f-2(h) under
the Investment Company Act) of shares of that Portfolio votes to approve the
Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved by a majority of the outstanding voting
securities of (a) any other Portfolio affected by the Agreement or (b) all the
portfolios of the Trust.
If any required shareholder approval of this Agreement or any continuance
of the Agreement is not obtained, the Subadviser will continue to act as
investment subadviser with respect to such Portfolio pending the required
approval of the Agreement or its continuance or of a new contract with the
Subadviser or a different adviser or subadviser or other definitive action;
provided that the compensation received by the Subadviser in respect of such
Portfolio during such period is in compliance with Rule 15a-4 under the
Investment Company Act, and provided that the Subadviser may exercise its right
to terminate this Agreement at any time as described below.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote of a majority of the outstanding voting securities of such Portfolio,
on sixty days' written notice to the Adviser and the Subadviser, or by the
Adviser or Subadviser on sixty days' written notice to the Trust and the other
party. This Agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment Company
Act) or in the event the Advisory Agreement between the Adviser and the Trust
terminates for any reason.
3
7. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which the
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust; provided
that Subadviser will address receipt of claim eligibility notices in
connection with shareholder class action litigation consistent with
Subadviser's class action procedures; and
c. any change in actual control or management of the Subadviser or the
portfolio manager of any Portfolio.
8. SERVICES TO OTHER CLIENTS
The Adviser understands, and has advised the Trust's Board of Trustees,
that the Subadviser now acts, or may in the future act, as an investment adviser
to fiduciary and other managed accounts and as investment adviser or subadviser
to other investment companies. Further, the Adviser understands, and has advised
the Trust's Board of Trustees that the Subadviser and its affiliates may give
advice and take action for its accounts, including investment companies, which
differs from advice given on the timing or nature of action taken for a
Portfolio. The Subadviser is not obligated to initiate transactions for a
Portfolio in any security which the Subadviser, its partners, affiliates or
employees may purchase or sell for their own accounts or other clients.
9. CONSULTATION WITH SUBADVISERS TO OTHER TRUST PORTFOLIOS
As required by Rule 17a-10 under the Investment Company Act, the Subadviser
is prohibited from consulting with the entities listed below concerning
transactions for a Portfolio in securities or other assets:
1. other subadvisers to a Portfolio
2. other subadvisers to a Trust portfolio
3. other subadvisers to a portfolio under common control with the Portfolio
10. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
agreed to by both parties, is in writing, and is specifically approved by the
vote of a majority of the Trustees of the Trust and by the vote of a majority of
the Trustees of the Trust who are not interested persons of any party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. Any required shareholder approval shall be effective with respect to
any Portfolio if a majority of the outstanding voting securities of that
Portfolio vote to approve the amendment, notwithstanding that the amendment may
4
not have been approved by a majority of the outstanding voting securities of (a)
any other Portfolio affected by the amendment or (b) all the portfolios of the
Trust.
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that the name " Xxxx
Xxxxxxx Funds II" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
portfolio thereof, but only the assets belonging to the Trust, or to the
particular Portfolio with respect to which such obligation or claim arose, shall
be liable.
17. CONFIDENTIALITY OF TRUST PORTFOLIO HOLDINGS
The Subadviser agrees to treat the Portfolios' holdings as confidential
information in accordance with the Trust's "Policy Regarding Disclosure of
Portfolio Holdings" to be communicated to the Subadviser, as such policy may be
amended from time to time, and to seek to prohibit its employees from trading on
any such confidential information. The Subadviser will similarly treat the
5
Portfolios' holdings as confidential information in accordance with its own
policies and procedures, as provided to the Adviser. Subadviser will be
permitted to make any disclosures of such holdings information as is necessary
in the ordinary course of business for it to perform services under this
Subadvisory Agreement (such as disclosure to broker-dealers or custodians)
provided the Subadviser has reasonable assurances that such party will treat
such portfolio holdings as confidential information.
18. COMPLIANCE
Upon execution of this Agreement, the Subadviser shall provide the Adviser
with the Subadviser's written policies and procedures ("Compliance Policies") as
required by Rule 206(4)-7 under the Investment Advisers Act. Throughout the term
of this Agreement, the Subadviser shall promptly submit to the Adviser: (i) any
material changes to the Compliance Policies, (ii) notification of a regulatory
examination that materially impacts the Subadviser as it relates to the
Portfolio and documentation describing any material adverse findings resulting
from any regulatory examination of the Subadviser or formal review of the
Compliance Policies, and (iii) notification of any material compliance matter
that relates to the services provided by the Subadviser to the Trust including
but not limited to any material violation of the Compliance Policies or of the
Subadviser's code of ethics. Throughout the term of this Agreement, the
Subadviser shall provide the Adviser with any certifications, information and
access to personnel and resources (including those resources that will permit
reasonable testing of the Compliance Policies by the Adviser) that the Adviser
may reasonably request to enable the Trust to comply with Rule 38a-1 under the
Investment Company Act.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
XXXX XXXXXXX INVESTMENT MANAGEMENT
SERVICES, LLC
By: Xxxx Xxxxxxx Life Insurance Company (U.S.A.),
Managing Member
By: /s/Xxxx X. XxxXxxx III
Name: Xxxx X. XxxXxxx III
Title: Chairman
XXXXXXX CAPITAL MANAGEMENT, LLC
By: /s/Xxxxxxxxxxx X. Xxxxxxx
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: President
7
APPENDIX A
The Subadviser shall serve as investment subadviser for each Portfolio of
Xxxx Xxxxxxx Funds II (the "Trust") listed below. The Adviser will pay the
Subadviser, as full compensation for all services provided under this Agreement
with respect to each Portfolio, the fee computed separately for such Portfolio
at an annual rate as follows (the "Subadviser Fee"):
Between
$250 million
First and Excess Over
$250 million $500million $500 million
of Aggregate of Aggregate of Aggregate
Portfolio Net Assets* Net Assets* Net Assets*
International Opportunities Fund 0.550% 0.500% 0.450%
*The term Aggregate Net Assets for a given day includes the net assets of a
Portfolio of the Trust. It also includes with respect to each Portfolio the net
assets of one or more other portfolios of the Trust or other trusts as indicated
below, but in each case only for the period during which the Subadviser for the
Portfolio also serves as the subadviser for the other portfolio(s). For purposes
of determining Aggregate Net Assets and calculating the Subadviser Fee for a
given day, the net assets of the Portfolio and each other portfolio of the Trust
or other trusts are determined by the Custodian as of the close of business on
the previous business day of the Trust, and the net assets of each portfolio of
each other fund or trust are determined as of the close of business on the
previous business day of that fund or trust.
This Appendix A is deemed to amend the fee schedules for the other portfolios to
the extent that it is inconsistent with such schedules.
Trust Portfolio(s) Other Portfolio(s)
International Opportunities Fund -- International Opportunities Trust,
a series of Xxxx Xxxxxxx Trust
The Subadviser Fee for each Portfolio shall be accrued for each calendar
day by the Custodian and the sum of the daily fee accruals shall be paid monthly
to the Subadviser within 30 calendar days of the end of each month. The daily
Subadviser Fee accruals shall be based in part on the applicable annual fee rate
for the Portfolio/s ("Applicable Annual Fee Rate"), which may vary from day to
day depending on the amount of Aggregate Net Assets. The Applicable Annual Fee
Rate on a given day is a blended rate that is calculated by (i) multiplying each
rate in the table above by the relevant portion of the Aggregate Net Assets;
(ii) adding together the resulting amounts; and (iii) dividing the sum of those
amounts by the Aggregate Net Assets. The daily fee accruals will be computed by
the Custodian by multiplying the fraction of one over the number of calendar
days in the year by the Applicable Annual Fee Rate, and multiplying this product
by the net assets of the Portfolio as determined in accordance with the Trust's
prospectus and statement of additional information as of the close of business
on the previous business day on which the Trust was open for business. The
Adviser shall provide Subadviser with such information as Subadviser may
A-1
reasonably request supporting the calculation of the fees paid to it hereunder.
Fees shall be paid either by wire transfer or check, as directed by Subadviser.
If, with respect to any Portfolio, the applicable Agreement becomes
effective or terminates, or if the manner of determining the Applicable Annual
Fee Rate changes, before the end of any month, the fee (if any) for the period
from the effective date to the end of such month from the beginning of such
month to the date of termination or from the beginning of such month to the date
of such change, 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 or change occurs.
A-2
