Exhibit d (2)(M)(ii)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of December, 2003, by and between XXXXXX
XXXXXXX INVESTMENT MANAGEMENT INC., a Delaware corporation (hereinafter referred
to as "MSIM"), and XXXXXX XXXXXXX INVESTMENT MANAGEMENT LIMITED, a company
incorporated under the laws of England (hereinafter referred to the "Local
Manager").
WITNESSETH:
WHEREAS, MSIM has heretofore sponsored and acts as Investment Adviser or
Portfolio Manager to certain U.S. third-party sub-advised accounts invested in
ING Xxx Xxxxxx Global Franchise Portfolio (the "Portfolio"); and
WHEREAS, MSIM 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, MSIM has entered into an investment advisory agreement (the
"Advisory Agreement") with the Portfolio dated May 1, 2002, pursuant to which
MSIM provides management and investment and advisory services to the Portfolio;
and
WHEREAS, the Local Manager is willing to provide investment management
services to MSIM in connection with the Portfolio'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 MSIM hereby agree as follows:
ARTICLE I
DUTIES OF THE LOCAL MANAGER
MSIM hereby employs the Local Manager to act as discretionary investment
manager to MSIM and to furnish the investment management services described
below, subject to the broad supervision of MSIM and the Portfolio, 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. MSIM
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 Portfolio in any way
or otherwise be deemed an agent of the Portfolio.
The Local Manager shall have full discretion, power and authority on the
Portfolio'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
Portfolio. 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 Portfolio,
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 Portfolio shall be
exercised. All of the foregoing is subject always to the restrictions of the
Articles of Incorporation and By-Laws of the Portfolio, as they may be amended
and/or restated from time to time and as provided to the Local Manager by MSIM,
the provisions of the Investment Company Act and the statements relating to each
Portfolio'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 Portfolio
under the Securities Act of 1933, as amended (the "Prospectus" and "Statement of
Additional Information", respectively), as well as to the supervision of MSIM
and the Board of Trustees of the Portfolio.
The Local Manager will not hold money on behalf of MSIM or the Portfolio,
nor will the Local Manager be the registered holder of the registered investment
of MSIM or the Portfolio 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, MSIM shall pay to the Local Manager a fee in an amount to be
determined from time to time by MSIM and the Local Manager but in no event in
excess of the amount that MSIM actually received for providing services to the
Portfolio pursuant to the Advisory Agreement.
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 Portfolio or any part of them.
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If a percentage restriction contained in the Portfolio's investment
objective(s) or investment restrictions (as the same are set forth in the
Portfolio'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 MSIM or the Portfolio for the
solvency, actions or omissions of any counterparty, broker, dealer,
market-maker, bank, custodian or sub-custodian, with whom it transacts business
on MSIM's 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 MSIM 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 Portfolio, 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 Portfolio 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 Portfolio 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 Portfolio, and that the Local Manager and
directors, officers, employees, partners and shareholders of its affiliates may
become interested in the Portfolio 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 Portfolio or by the vote of a majority of the
outstanding voting securities of the Portfolio 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.
This Agreement may be terminated at any time, without the payment of any
penalty, by MSIM, by the Board of Trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio, 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
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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 Portfolio or by the vote of a
majority of outstanding voting securities of the Portfolio 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.
XXXXXX XXXXXXX INVESTMENT
MANAGEMENT INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
XXXXXX XXXXXXX INVESTMENT
MANAGEMENT LIMITED
By: /s/ J. David Germany
-----------------------------
Name: J. DAVID GERMANY
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 MSIM or the
Portfolio to use a specific counterparty, the Local Manager undertakes
to secure Best Execution (as defined in the FSA Rules) of all the
Portfolio'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 MSIM or the Portfolio to rectify such failure or
obtain compensation. MSIM shall procure that the Portfolio 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 Portfolio arising from such service. Annex 2 sets out the
Local Manager's policy on soft commission. The Local Manager will
provide MSIM 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 Portfolio'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 Portfolio's orders with orders of
other clients (whether or not connected with the Local Manager). MSIM
is aware and has made the Portfolio aware that the aggregation of the
Portfolio's orders with those of other clients may result in the
Portfolio 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 MSIM or the Portfolio, 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 MSIM
or the Portfolio. Neither the Local Manager nor any affiliate shall be
liable to account to MSIM or the Portfolio for any profit, commission
or remuneration made or received from or by reason of such transactions
or any connected transactions nor will the Local
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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 Portfolio;
(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 Portfolio 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 director.
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 MSIM or with the
Portfolio.
3.2 All records held pursuant to this clause by the Local Manager shall be
open to inspection by MSIM or the Portfolio and the Local Manager will
provide MSIM and the Portfolio 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
MSIM or the Portfolio.
3.3 The Local Manager shall, not later than 10 working days following the
end of each calendar month, furnish to MSIM a statement showing all
transactions that have occurred in the Portfolio 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
Portfolio and any income arising on the Portfolio's account during the
relevant calendar month, and will also include a statement showing the
measure of the performance of the assets of the Portfolio. 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 MSIM with an individual trade
confirmation of each
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portfolio transaction unless MSIM has specifically requested the Local
Manager to do so.
4. FORCE MAJEURE
The Local Manager shall not be responsible or liable to MSIM or the
Portfolio 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 MSIM 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
Portfolio 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
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 MSIM 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 portfolio 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
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January, 2004
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