Exhibit d-2
SUB-ADVISORY AGREEMENT
between
Xxxx Xxxxx Management, Inc.
and
JF International Management Inc.
[insert date] 2003
TABLE OF CONTENTS
APPOINTMENT....................................................................2
DELIVERY OF DOCUMENTS..........................................................2
INVESTMENT ADVISORY SERVICES...................................................3
MANAGEMENT OF THE FUND......................................................3
COVENANTS...................................................................4
BOOKS AND RECORDS...........................................................5
REPORTS, EVALUATIONS, AND OTHER SERVICES....................................5
PURCHASE AND SALE OF SECURITIES.............................................5
BROKERS OR DEALERS..........................................................6
AGGREGATION OF SECURITIES TRANSACTIONS......................................6
REPRESENTATIONS AND WARRANTIES.................................................7
COMPENSATION...................................................................8
LIMITATION OF TRUSTEES' LIABILITY..............................................8
LIMITATION OF SUB-ADVISER'S LIABILITY..........................................8
USE OF NAMES AND OTHER INFORMATION.............................................9
NON-EXCLUSIVE SERVICES........................................................10
EFFECTIVE DATE, AMENDMENT, AND TERMINATION....................................10
CERTAIN DEFINITIONS...........................................................10
EXPENSES......................................................................10
INDEPENDENT CONTRACTOR........................................................11
INDEMNIFICATION...............................................................11
GOVERNING LAW.................................................................11
SEVERABILITY..................................................................11
INSTRUCTIONS..................................................................12
NOTICES.......................................................................12
FORCE MAJEURE.................................................................13
CHANGES WITHIN THE SUB-ADVISER................................................13
RISK DISCLOSURE...............................................................13
AGREEMENT, made as of the [insert day] day of September, 2003 (the Commencement
Date"), by and between Xxxx Xxxxx Management, Inc., a New York corporation (the
"Adviser"), and JF International Management Inc., a limited company organized
under the laws of the British Virgin Islands ("the Sub-Adviser").
WHEREAS, the Adviser is an investment adviser registered under the Investment
Advisers Act of 1940, as amended, (the "Advisers Act") and has been retained by
the China-U.S. Growth Fund (the "Fund" or the "Trust"), a Massachusetts business
trust registered as an open-end management investment company under the United
States Investment Company Act of 1940, as amended, pursuant to an Investment
Management Agreement dated September 8, 2003 (the "Management Agreement"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish it with
investment sub-advisory services in connection with the management of the Fund
and the Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the terms, conditions, and mutual covenants
herein contained, the parties agree as follows:
1. APPOINTMENT. In accordance with the Management Agreement, the Adviser
hereby appoints the Sub-Adviser to act as a sub-adviser to the Fund with
respect to that portion of the assets of the Fund that the Adviser shall
allocate to the Sub-Adviser for such purpose (the "Sub-Adviser Assets")
subject to the control and direction of the Adviser and the Trust's Board
of Trustees (the "Board"), for the period and on the terms set forth in
this Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein
provided.
2. DELIVERY OF DOCUMENTS.
a) The Adviser has delivered to the Sub-Adviser copies of each of the
following documents and will promptly deliver to it all future
amendments and supplements thereto, if any:
i) the Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of The Commonwealth of Massachusetts on
February 14, 2003;
ii) the Trust's By-Laws;
iii) resolutions of the Board authorizing the execution and
delivery of the Management Agreement and this Agreement;
iv) the Fund's Registration Statement on Form N-1A under the
United States
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Securities Act of 1933, as amended ("1933 Act") and under the
United States Investment Company Act of 1940, as amended, (the
"1940 Act") as filed with the United States Securities and
Exchange Commission (the "SEC");
v) the Fund's Notification of Registration under the 1940 Act of
Form N-8A as filed with the SEC;
vi) the currently effective Prospectus and Statement of Additional
Information of the Fund (collectively the "Prospectus"); and
vii) the Management Agreement.
b) The Sub-Adviser has delivered to the Adviser copies of each of the
following documents and will promptly delivery to it all future
amendments and supplements thereto, if any:
i) the Sub-Adviser's Uniform Application for Investment Adviser
Registration ("Form ADV");
ii) any written supervisory and operating policies and procedures
of the Sub-Adviser that the Adviser or the Board may
reasonably request;
iii) the Sub-Adviser's Code of Ethics which complies with Rule
17j-1 under the 1940 Act and related policies and procedures;
iv) certificates of liability insurance evidencing the
Sub-Adviser's Errors and Omissions and Directors and Officers
Liability and Fidelity Bond Coverage attached hereto as
Appendix D; and
v) any other documents that the Adviser or the Board may
reasonably request.
3. INVESTMENT ADVISORY SERVICES.
a) MANAGEMENT OF THE FUND. The Sub-Adviser hereby undertakes to act as
investment sub-adviser to the Fund. The Sub-Adviser shall provide
investment management services to the Fund for the Sub-Adviser
Assets, subject to the reasonable direction the Adviser or the Board
may give from time to time, in accordance with this Agreement, the
Operational Guidelines described on Appendix A to this Agreement,
and Appendix B to this Agreement. The Adviser shall maintain
ultimate oversight regarding investment management of the Fund. In
furtherance of the foregoing, the Sub-Adviser shall:
i) obtain and evaluate pertinent economic, statistical and
financial data, and
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other significant events and developments which affect: the
economies of Asia and China generally; the Fund's investment
program; and Asian issuers and China issuers of securities
included in the Fund's portfolio as well as the industries in
which they engage or which may relate to securities or other
investments which the Sub-Adviser may deem desirable for
inclusion in the portfolio of the Sub-Adviser Assets;
ii) determine which Asian issuers, China issuers and other
securities shall be included in the Fund's portfolio, subject
to the oversight and supervision of the Adviser;
iii) furnish an investment program for the Fund with respect to
Asian issuers and China issuers;
iv) in its discretion, make determinations with respect to the
investment of the Sub-Adviser Assets and, with respect to such
assets, the purchase and sale of portfolio securities of Asian
issuers and China issuers; and
v) take, on behalf of the Fund, all actions the Sub-Adviser may
deem necessary in order to carry into effect such investment
program and which are consistent with the Sub-Adviser's
functions as provided above.
b) COVENANTS. The Sub-Adviser shall carry out its investment
sub-advisory responsibilities in a manner consistent with (i)
Appendix A to this Agreement; (ii) the 1940 Act, the United State
Investment Advisers Act of 1940 (the "Advisers Act"), the 1933 Act,
Subchapter M of the Internal Revenue Code of 1986, as amended, the
regulations under each of the foregoing and any laws or regulations
other than the foregoing applicable to the Sub-Adviser; and (iii)
the investment objective, policies, and restrictions as set out in
Appendix B to this Agreement which the Adviser shall ensure is
consistent with all of the current objectives, policies and
restrictions provided in the Prospectus; the Trust's By-Laws; the
Trust's Agreement and Declaration of Trust; any laws or regulations
applicable to the Trust other than those specified above, including
the applicable laws of any jurisdiction that specifically govern the
operations of business trusts; and such other investment policies,
procedures and/or limitations as adopted by the Trust or the Adviser
with respect to the Fund. Appendix A and Appendix B may be amended
from time to time with both parties agreeing in writing and by
transmitting the amended Appendix, provided that the agreement of
neither party is to be unreasonably withheld and provided further
that any such amendment shall be consistent with the Prospectus. If
the Sub-Adviser considers that any investment
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objective, policies and restrictions received may not, from a
compliance or systems viewpoint, be capable of being fully observed,
it shall promptly notify the Adviser of the same with a view to
arrive at a mutually acceptable method of resolution. The
Sub-Adviser shall use all reasonable endeavors to comply with such
investment objective, policies and restrictions to the fullest
practicable extent, subject to Section 19 of this Agreement. While
the Sub-Adviser will take reasonable care to manage the assets in
accordance with the investment objective, and to reflect the terms
as specified in Appendix B, the Adviser understands that there is no
certainty that this will be achieved. The existence of any benchmark
shall not preclude the Sub-Adviser from investing in countries not
forming components of the benchmark where this is considered to be
in the interests of the Sub-Adviser Assets. The Sub-Adviser is
permitted to take up any offer of rights or free subscription or
other warrants issued in respect of investments held in the
Sub-Adviser Assets or to acquire securities as a result of a
take-over, merger or other offer. To the extent that the foregoing
should result in investment limits being exceeded, the Sub-Adviser
shall either immediately sell the securities or take other action
necessary to avoid the situation from continuing. The Sub-Adviser
will make its officers and employees available to the Adviser from
time to time and at reasonable times to review the Fund's investment
policies and for consultation regarding the Fund's investment
affairs.
c) BOOKS AND RECORDS. The Sub-Adviser shall keep the books and records
with respect to the Fund's securities transactions required to be
maintained by or on behalf of the Fund with respect to sub-advisory
services rendered hereunder in accordance with Section 31(a) of the
1940 Act and will furnish such periodic and special reports as the
Adviser or the Board may reasonably request. The Sub-Adviser agrees
to provide reasonable access to all records that it maintains for
the Fund upon the Fund's reasonable request. The Sub-Adviser further
agrees to preserve such records of the Fund for the periods
prescribed by Rule 31a-2 of the 1940 Act and any other applicable
laws, rules, and regulations. The Sub-Adviser agrees that such
records are the property of the Fund and further agrees to surrender
promptly to the Fund any such records upon the Fund's request
provided that the Sub-Adviser may retain a copy of such records.
d) REPORTS, EVALUATIONS, AND OTHER SERVICES. The Sub-Adviser shall
render reports, evaluations, information or analyses to the Adviser
and the Board with respect to the Fund in such form and manner as
described on Appendix A to this Agreement or as the Adviser, or the
Board may otherwise agree with the Sub-Adviser from time to time.
The Sub-Adviser shall give the Adviser and the Board written notice
of any changes in the Sub-Adviser's personnel who are responsible
for the day-to-day management of the Sub-Adviser Assets as soon as
reasonably practicable, but no later than five (5) business days,
after such information becomes known or available to the
Sub-Adviser.
e) PURCHASE AND SALE OF SECURITIES. The Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for the
Sub-Adviser Assets with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated with
the Adviser or the Sub-Adviser to the extent permitted by the 1940
Act, the Trust's policies and procedures, and as the Adviser shall
notify the Sub-
5
Adviser from time to time. The Sub-Adviser understands that Xxxx
Xxxxx & Company Incorporated may be used as principal broker or
dealer for securities transactions, to the extent permitted by law,
but that no formula has been adopted for allocation of the
Sub-Adviser Assets' investment transaction business. The Sub-Adviser
shall obtain the best overall terms available for the Fund. In
assessing the best overall terms available for any transaction, the
Sub-Adviser may consider various factors, including but not limited
to, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the
broker or dealer, research services provided to the Sub-Adviser, and
the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In no event shall the
Sub-Adviser be under any duty to obtain the lowest commission or the
best net price for the Fund on any particular transaction. In
connection with the placement of orders, the Sub-Adviser will create
and maintain all necessary brokerage records of the Fund in
accordance with all applicable laws, rules, and regulations,
including but not limited to Section 31(a) of the 1940 Act and
Section 3(c) of this Agreement.
In connection with the purchase and sale of securities for the
Sub-Adviser Assets, the Sub-Adviser shall carry out its
responsibilities in accordance with the Operational Guidelines
described on Appendix A to this Agreement.
f) BROKERS OR DEALERS. The Sub-Adviser may, to the extent permitted by
law, including but not limited to Section 28(e) of the Securities
Exchange Act of 1934 (the "Exchange Act"), pay a broker or dealer
who provides research services to the Sub-Adviser a commission for
executing a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting
such transaction if the Sub-Adviser determines in good faith that
the excess commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer
viewed in terms of the particular transaction or the Sub-Adviser's
overall responsibilities with respect to the discretionary accounts
that it manages. The Sub-Adviser shall render a written report to
the Board, at least quarterly, regarding overall commissions paid by
the Fund and their reasonableness in relation to their benefits to
the Fund in accordance with Section 3(d) of this Agreement.
g) AGGREGATION OF SECURITIES TRANSACTIONS. In executing portfolio
transactions for the Fund, the Sub-Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased with
those of its other clients if, in the Sub-Adviser's reasonable
judgment, such aggregation (i) will be likely to result in an
overall economic benefit to the Sub-Adviser's clients as a whole,
taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses, and trading
requirements and (ii) is not inconsistent with the policies set
forth in the Trust's Prospectus and previously notified to the
Sub-Adviser. In such event, the Sub-Adviser will allocate the
securities so purchased or sold, and
6
the expenses incurred in the transaction, in an equitable manner and
consistent with its fiduciary obligations to the Fund.
4. REPRESENTATIONS AND WARRANTIES.
a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:
i) The Sub-Adviser is a limited company duly organized and in
good standing under the laws of the British Virgin Islands and
is fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder;
ii) The Sub-Adviser is registered as an investment adviser with
the SEC under the Advisers Act and is licensed by the Hong
Kong Securities and Futures Commission. The Sub-Adviser shall
maintain all necessary registrations or licenses in effect at
all times during the term of this Agreement;
iii) The Sub-Adviser at all times shall use its best judgment and
efforts in carrying out the Sub-Adviser's obligations
hereunder; and
iv) The Sub-Adviser shall maintain the following insurance
protection with respect to its obligations under this
Agreement: (i) Directors and Officers and Errors and Omissions
Insurance of such types and in such amounts as the Sub-Adviser
may reasonably deem necessary to protect the Adviser and its
agents against loss from errors or omission in performance of
the Sub-Adviser's duties and obligations described in or
contemplated by this Agreement; and (ii) Fidelity Bond
Coverage of Sub-Adviser personnel which may be required under
applicable law in connection with the Sub-Adviser's services
as Sub-Adviser under this Agreement. The Sub-Adviser has
provided the Adviser with certificates of liability insurance
evidencing the foregoing, attached hereto as Appendix D, and
shall notify the Adviser of any material changes thereto.
b) The Adviser hereby represents and warrants to the Sub-Adviser as
follows:
i) The Adviser is a corporation duly organized and in good
standing under the laws of the State of New York and is fully
authorized to enter into this Agreement and carry out its
duties and obligations hereunder;
ii) The Trust is and at all times will be the legal owner of the
Sub-Adviser Assets and the investments and cash comprising the
Sub-Adviser Assets are and at all times will be held by the
Trust free from all liens, charges and encumbrances
whatsoever;
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iii) The Adviser is registered as an investment adviser with the
SEC under the Advisers Act, and is registered or licensed as
an investment adviser under the laws of all applicable
jurisdictions. The Adviser shall maintain such registrations
or licenses in effect at all times during the term of this
Agreement;
iv) The Trust has been duly organized as a business trust under
the laws of The Commonwealth of Massachusetts; and
v) The Trust is registered as an investment company with the SEC
under the 1940 Act, and shares of the Fund are registered for
offer and sale to the public under the 1933 Act and all
applicable state securities laws where currently sold. Such
registrations will be kept in effect during the term of this
Agreement.
5. COMPENSATION. As compensation for the services provided pursuant to this
Agreement the Adviser shall pay the Sub-Adviser and the Sub-Adviser agrees
to accept as full compensation therefor a sub-advisory fee, paid quarterly
in arrears on the day immediately following each calendar quarter, which
is the higher of (i) USD62,500 per calendar quarter; or (ii) the amount
produced by multiplying the annual rate of 0.50 percent by the average
daily net assets of the Sub-Adviser Assets, during the relevant calendar
quarter, which shall be computed and accrued daily provided that for the
first four quarters following the date of the initial transfer of the
Sub-Adviser Assets, the fee shall be calculated by reference to the amount
produced by multiplying the annual rate of 0.50 percent by the average
daily net assets of the Sub-Adviser Assets only. Such sub-advisory fee
shall begin to accrue on the date that the Adviser transfers Sub-Adviser
Assets to the Sub-Adviser. In the case of the calculation of the
sub-advisory fee in respect of periods less than 90 days, the sub-advisory
fee shall be calculated on a prorated basis. For the purposes of
calculating the Sub-Adviser's fee, the daily value of the net assets of
the portion of the Fund's assets managed by the Sub-Adviser shall be
computed by the method used to determine net assets for purposes of sales
and redemptions of Fund shares. The Sub-Adviser shall have the right to
waive or reduce any portion of the sub-advisory fee which it is entitled
to under this Agreement. Any such waiver shall be in writing.
6. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser acknowledges that it has
received notice of and accepts the limitations upon the Trust's liability
set forth in its Declaration of Trust.
7. LIMITATION OF SUB-ADVISER'S LIABILITY. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Adviser or a breach
of fiduciary duty with respect to receipt of compensation, neither the
Sub-Adviser nor any of its directors, officers, shareholders, agents or
employees shall be liable or responsible to the Adviser, the Trust, the
Fund or to any shareholder of the Fund for any error of judgment or
mistake of law or for any act or
8
omission in the course of or connected with rendering services hereunder
or for any loss suffered by the Adviser, the Trust, the Fund or any
shareholder of the Fund in connection with the performance of this
Agreement. No warranty is given by the Sub-Adviser as to the performance
or profitability of any investments, cash or other property forming part
of or constituting the Fund. The Sub-Adviser shall not take or omit to
take any action which to the actual knowledge of the individual taking or
omitting to take such action would prejudice the tax position of the Fund.
Subject thereto, the Adviser shall be responsible for the management of
the Fund's affairs for tax purposes. Any stated limitations on liability
shall not relieve the Sub-Adviser from any responsibility or liability the
Sub-Advisor may have under United States state or federal statutes.
8. USE OF NAMES AND OTHER INFORMATION. The Sub-Adviser shall not use the name
of the Adviser or the Trust in any material relating to the Sub-Adviser in
any manner not approved in advance by the Adviser or the Trust; provided
however, that the Adviser and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the
appointment of the Sub-Adviser hereunder or which are required by the SEC
or a state or other securities authority; and provided further, that in no
event shall such approval be unreasonably withheld. Neither the Adviser
nor the Trust shall use the name of the Sub-Adviser in any material
relating to the Adviser or the Trust in any manner not approved in advance
by the Sub-Adviser; provided, however, that the Sub-Adviser will approve
all uses of its name which merely refer in accurate terms to this
appointment hereunder or which are required by the SEC or a state or other
securities authority; and provided further, that in no event shall such
approval be unreasonably withheld.
The Sub-Adviser also agrees to permit the use by the Trust or its
distributor of the past performance and investment history of the
Sub-Adviser as the same is applicable to the Fund, and to permit the use
of biographical and historical data of the Sub-Adviser and its individual
manager(s) as reasonably requested and agreed to by the Sub-Adviser,
provided further, that in no event shall such agreement be unreasonably
withheld.
Notwithstanding the above, these provisions shall not preclude the
Sub-Adviser from complying with any statutory, regulatory or governmental
requirement to provide information concerning the Fund to which the
Sub-Adviser may be subject from time to time or to disclose such
information to counterparties or other agents in order for the Sub-Adviser
to carry out its duties hereunder provided that the Sub-Adviser shall
endeavor to obtain assurance that confidential treatment will be accorded
the information so provided or disclose such information to affiliates for
the purpose of general business oversight. However, the Sub-Adviser shall
with respect to disclosure made in compliance with any statutory,
regulatory or governmental requirement to provide information concerning
the Fund: (i) provide the Adviser with prompt written notice of any of the
above facts to the extent not prohibited by law so that the Adviser may
attempt to obtain a protective order or other appropriate remedy; and (ii)
provide only that portion of information that the Sub-Adviser's legal
counsel advises is legally required.
9
9. NON-EXCLUSIVE SERVICES. The Adviser understands that the Sub-Adviser's
services hereunder are not to be deemed exclusive and the Sub-Adviser may
provide similar investment advisory or management services to its other
clients. The Adviser further understands that the Sub-Adviser may give
advice and take action with respect to its other clients or for its own
account that may differ from the timing or nature of action taken by the
Sub-Adviser with respect to the Fund. The Sub-Adviser understands that the
Adviser may retain one or more additional Sub-Advisers with respect to any
portion of the Fund's assets.
10. EFFECTIVE DATE, AMENDMENT, AND TERMINATION.
a) This Agreement shall become effective as of the date of execution
hereof. The initial term of this Agreement shall be for two (2)
years. Thereafter, this Agreement shall continue in effect for
successive twelve (12) month periods, provided such continuance is
specifically approved at least annually (i) by a vote of the
majority of the Trustees who are not parties to this Agreement or
interested persons of the Fund, the Adviser or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval and (ii) by a vote of the Board or a majority of the
outstanding voting securities of the Fund.
b) This Agreement may be amended at any time by mutual consent of the
parties, subject to consent of the Trust, which consent must, except
as otherwise permitted by or under the 1940 Act, be approved (i) by
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of the Fund, the Adviser or the
Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such amendment and (ii) by vote of a majority of the
outstanding voting securities of the Fund.
c) This Agreement may be terminated by either party as further set
forth in this Paragraph (c) at any time without payment of any
penalty. Upon termination, all sub-advisory fees (as defined in
Section 5 of this Agreement) shall cease to accrue and become due
and payable. This Agreement may be terminated by the Adviser upon
the vote of the Board or a majority of the outstanding voting
securities of the Fund on sixty (60) days' written notice to the
Sub-Adviser. This Agreement may be terminated by the Sub-Adviser
upon sixty (60) days' written notice to the Adviser and the Fund.
This Agreement shall terminate automatically in the event of its
assignment or termination of the Management Agreement.
11. CERTAIN DEFINITIONS. The terms "majority of the outstanding voting
securities," "assignment," and "interested persons," shall have the
meanings set forth in the 1940 Act.
12. EXPENSES. The Sub-Adviser will bear its expenses of providing services to
the Fund pursuant to this Agreement other than the cost of securities
(including brokerage commissions, if any) purchased for the Fund.
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13. INDEPENDENT CONTRACTOR. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise
provided for herein or authorized by the Board from time to time, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
14. INDEMNIFICATION. The Sub-Adviser agrees to fully indemnify the Adviser on
demand from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever directly resulting from the
willful misfeasance, bad faith or gross negligence on the part of the
Sub-Adviser, its directors, officers, or employees, which may be imposed
on, incurred by or asserted against the Adviser and related to the
services provided under this Agreement. The Adviser agrees to fully
indemnify the Sub-Adviser on demand from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
other than those directly resulting from the willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser, its directors,
officers, or employees, which may be imposed on, incurred by or asserted
against the Sub-Adviser related to the services provided under this
Agreement. The provisions of this Section 14 shall survive termination of
this Agreement.
15. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of New York.
16. SEVERABILITY. If any provision of this Agreement shall become or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
17. INSTRUCTIONS. The Sub-Adviser is authorized to rely on, may act on and
treat as fully authorized by the Adviser, any instruction or communication
which purports to have been given in writing (and which is accepted by the
Sub-Adviser in good faith as having been given) by or on behalf of the
persons notified by the Adviser from time to time to the Sub-Adviser as
being authorized to instruct it in respect of the Fund and, by whatever
means transmitted, unless the Sub-Adviser shall have received written
notice to the contrary, whether or not the authority of such person shall
have been terminated. Except as provided under this Section 17 of this
Agreement, the Sub-Adviser shall be under no duty whatsoever to verify the
identity of persons giving facsimile or other instructions and the Adviser
indemnifies the Sub-Adviser against all liabilities, actions, proceedings,
claims, losses and expenses arising out of or in connection with, whether
directly or indirectly, the acceptance of facsimile or other instructions
by the Sub-Adviser and upon which the Sub-Adviser is authorized to rely
unless such acceptance results from or constitutes gross negligence or
willful misconduct by the Sub-Adviser. The Sub-Adviser and its associates
will employ commercially reasonable procedures to endeavor to confirm that
the Adviser's instructions are genuine, which may include but is not
limited to, the use of voice recording procedures, in connection with all
communications.
11
18. NOTICES. All notices under this Agreement shall be given in writing and
shall be duly given if mailed or delivered to the Adviser at 00 Xxxxxxxxxx
Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx, 00000 to the attention of Xxxxxxxxx X.
Xxxx, Executive Vice President and to the Sub-Adviser at 00/X, Xxxxxx
Xxxxx, 0 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx to the attention of Lauren
Pan, Vice President. Notices shall be effective upon delivery.
19. FORCE MAJEURE. Each party shall maintain and update from time to time
business continuation and disaster recovery facilities and procedures with
respect to its investment advisory business that it determines in good
faith from time to time to meet reasonable commercial standards. Neither
party to this Agreement shall be liable for any failure, interruption or
delay to meet its obligations under this Agreement due to acts, events or
circumstances not reasonably within its control, including, but not
limited to, industrial disputes, acts or regulations of any governmental
or supranational bodies or authorities and breakdown, failure or
malfunction of any telecommunications or computer service or systems,
except to the extent that any breakdown, failure or malfunction of any
equipment or system is primarily attributable to the party's gross
negligence or willful misconduct in maintaining such equipment or system.
The parties shall take reasonable steps to minimize any loss or damage but
neither party shall be otherwise liable or have any other responsibility
of any kind for any loss or damage thereby incurred or suffered by the
other party or the Fund.
20. CHANGES WITHIN THE SUB-ADVISER. The Sub-Adviser will inform the Adviser in
writing within a reasonable time of any material changes to the
information provided to the Adviser under this Agreement.
21. RISK DISCLOSURE. The Adviser confirms that it has notice of the risk
disclosure statement as set out in Appendix C.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the date written
above.
XXXX XXXXX MANAGEMENT, INC. JF INTERNATIONAL
MANAGEMENT INC.
By: By:
---------------------------- ----------------------------
Name: Xxxxxxxxx X. Xxxx Name:
Title: Executive Vice President Title:
Date: Date:
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APPENDIX A
OPERATIONAL GUIDELINES
INVESTMENT MANAGEMENT
The assets of the Fund shall be managed with discretion within the limits of
Section 3 of this Agreement.
CALCULATING THE NAV
The Adviser is responsible for calculating the NAV of the Fund. The Adviser
shall be the primary source of Fund data with regard to the Fund for purposes of
calculating the NAV. The Adviser reserves the right to delegate the
responsibility of calculating the NAV to an affiliate of the Adviser.
In order for the Adviser to calculate the NAV of the Fund, the Adviser and the
Sub-Adviser shall comply with the Pricing Information guidelines described
below.
PRICING INFORMATION
By the close of business on a business day in Hong Kong ("Business Day"), the
Sub-Adviser shall transmit the following information ("Price Information") to
the Adviser, via facsimile, to the number listed below.
1. Name of Security
2. Closing Market Price of the previous Business Day
The Sub-Adviser shall transmit the Price Information even if said Price
Information is unchanged from the previous Business Day. If on any Business Day
the Sub-Adviser is unable to provide such Price Information by facsimile, the
Sub-Adviser shall contact the person listed below. In the event that the
Sub-Adviser fails to provide Price Information to the Adviser on a Business Day,
the Adviser shall use the Price Information from the prior Business Day in its
calculations.
PRICING AND TRADING CONTACTS ADVISER
Facsimile Number: 000-000-0000
Contact Person: Xxxx Xxxx
Telephone Number: 000-000-0000
E-mail: xxxxx@xxxxx.xxx
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PRICING AND TRADING CONTACTS SUB-ADVISER
Facsimile Number: 000-0000-0000
Contact Person: Xxxxx Ma
Telephone Number: 000-0000-0000
E-MAIL: XXXXX.XX@XXXX.XXX
INVESTMENT PERFORMANCE MONITORING PROCEDURES
The Trustees and/or their designees will review the Sub-Adviser's process and
performance as sub-advisor, no less than annually, to determine whether the
investments performed satisfactorily compared to appropriate market indices as
well as whether the Sub-Adviser is meeting the stated investment objectives and
complying with investment guidelines. Periodic reviews will include but will not
be limited to: historical risk and return results; fees and expense levels; and
material changes in the Sub-Advisor's investment philosophy, process or
personnel. The Adviser and the Sub-Adviser shall meet by conference call
regularly and periodically to review the Sub-Adviser's determinations with
respect to the Sub-Adviser Assets, including a review of performance of the
Sub-Adviser as sub-advisor and other related matters, in light of the stated
investment objectives, appropriate market indices, and benchmarks.
In instances where an investment's performance is consistently below
expectations or its characteristics are outside of acceptable guidelines, the
Trustees will undertake additional remedial steps with the Sub-Adviser. These
steps will include: conducting more frequent reviews to determine the cause of
the problem as well as agreeing on appropriate remedies and tracking progress of
those remedies. The Trustees also reserve the right, at their discretion, to
make additional suggestions to improve performance.
BOOKS AND RECORDS
During and for a reasonable time after the term of this Agreement, upon
reasonable notice, the Sub-Adviser shall permit the Adviser or its agents, at
all reasonable times during business hours to inspect, at the Adviser's expense,
the Sub-Adviser's records of securities transactions, holdings, and valuation,
including all listings and appraisals of securities with respect to such
transactions, holdings or valuations, and all other records and other data
created and maintained relating to this Agreement to the extent that such access
would not compromise any duty of confidentiality of the Sub-Adviser to its other
clients.
REPORTS, EVALUATIONS, AND OTHER SERVICES
Unless otherwise requested in writing, the Sub-Adviser shall cause to be
delivered to the Adviser, as soon as practicable after the end of each month,
each quarter, and each year, a written monthly, quarterly, and annual
performance statement showing: all investments at the close of business on the
last day of the month, quarter, and year; all additions to and withdrawals from
the Fund's assets during
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such period; the return on the Sub-Adviser Assets; such other information
required by any statutory, regulatory or governmental requirement and which is
reasonably practicable for the Sub-Adviser to provide; and such other
information as the Adviser and the Sub-Adviser shall agree from time to time.
In addition to the periodic performance reports, the Trustees expect that
unusual, notable or extraordinary events regarding the investments will be
communicated immediately by the Sub-Adviser. Examples of such events include
turnover within the Sub-Adviser's investment advisory team that have a material
impact on the management of the Sub-Adviser Assets, violation of investment
guidelines or restrictions other than a violation resulting from changes in
market movements or other changes beyond the Sub-Adviser's control, material
litigation against the Sub-Adviser, and material changes in ownership or
organization structure of the Sub-Adviser that have a material impact on the
management of the Sub-Adviser Assets.
PURCHASE AND SALE OF SECURITIES
In connection with the purchase and sale of securities for the Sub-Adviser
Assets, the Sub-Adviser will arrange for the transmission to State Street Bank
and Trust Company or its agents (collectively referred to as the "Custodian")
and the Adviser, on a daily basis, such confirmation, trade tickets, and other
documents and information, including but not limited to, Cusip, Sedol or other
numbers that identify securities to be purchased or sold on behalf of the Fund,
as may be reasonably necessary to enable the Custodian and the Adviser to
perform their administrative and recordkeeping responsibilities with respect to
the Fund. With respect to portfolio securities to be purchased or sold through
securities depositories, the Sub-Adviser will arrange for the automatic
transmission of the confirmation of such trades to the Custodian and the
Adviser.
The Sub-Adviser will monitor on a daily basis the determination by the Custodian
and the Adviser of the valuation of portfolio securities and other investments
in the Sub-Adviser Assets provided that such information is provided to the
Sub-Adviser by the Custodian or the Adviser. The Sub-Adviser will assist the
Custodian and the Adviser in determining or confirming, consistent with the
procedures and policies stated in the Prospectus, the value of any portfolio
securities or other assets in the Sub-Adviser Assets for which the Custodian and
the Adviser seeks assistance from, or identifies for review by, the Sub-Adviser.
The Sub-Adviser shall assist the Board in determining fair value of such
securities or assets for which market quotations are not readily available.
00
XXXXXXXX X
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
THE CHINA - U.S. GROWTH FUND
This Appendix B may be amended from time to time as provided under Section 3(b)
of the Agreement. Limited exceptions to the following restrictions may be agreed
upon in writing by the Adviser and Sub-Adviser on a case-by-case basis.
1. INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
Ninety percent of the Sub-Adviser Assets (as defined in the Sub-Advisory
Agreement) must be invested in the securities of issuers that are
economically tied to China (including, for purposes of this policy, Macau
and Hong Kong, but excluding Taiwan). The remainder of the Sub-Adviser
Assets may be invested in investments that are not economically ties to
China. For purposes of this policy, an issuer is economically tied to
China if
The issuer is organized under the laws of, or its principal office is
in, China; or
The issuer's primary trading market is in China; or
China or a governmental division or municipality thereof guarantees
the securities of the issuer; or
The issuer is included in an index representative of China; or
Fifty percent or more of the issuer's assets are located in China; or
Fifty percent or more of the issuer's revenues or earnings are derived
from China.
2. REFERENCE BENCHMARK
MSCI Golden Dragon Index
3. REPORTING CURRENCY
The reporting currency is the United States dollar.
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4. PERMITTED INVESTMENT CLASSES
Please note that certain securities and instruments may be classified in
one or more categories.
If trading is conducted in markets outside the China region, the
availability of Fund custodial facilities must first be verified.
a) EQUITIES YES
This will include common and preferred shares, warrants, rights,
equity-linked notes, American Depositary Receipts, American
Depositary Shares and Global Depositary Receipts, provided, however,
that only ADRs, ADSs and GDRs of companies that are economically
tied to China (see 1 above) may be purchased.
b) BONDS NO
This will include, but not be limited to, bonds or convertible bonds
and preference shares of any kind which are listed or otherwise
quoted or traded on any market, and unquoted bonds, this may include
short-term instruments such as Treasury-bills.
c) COLLECTIVE INVESTMENT SCHEMES NO
This will include, but not be limited to, any unit trust, open-ended
investment company or other vehicle (wherever incorporated,
established or regulated) for investment by investors in assets on a
pooled basis, with investors having a proportionate share in the net
asset value of the assets, including those managed by the
Sub-Adviser and its associates.
d) COMMODITIES NO
This will include, but not be limited to, any non-ferrous or
precious metals and all other commodities of any nature and includes
any contract for the sale or purchase of any commodity for future
delivery. This will also include warrants or other instruments
directly linked to the underlying commodity.
e) CASH AND SHORT TERM MONEY MARKET INSTRUMENTS YES
This will include, but not be limited to, certificates of deposit,
term deposits, notes, commercial paper, short-term government debt
such as Treasury-bills, bills of exchange and other instruments with
a remaining period to maturity not exceeding five (5) days.
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5. INVESTMENT RESTRICTIONS
The percentage limitations contained in the following restrictions apply
at the time of the purchase of the securities and a later increase or
decrease in percentage resulting from a change in the values of the
securities or in the amount of the Sub-Adviser Assets will not constitute
a violation of the restriction. For purposes of investing the Sub-Adviser
Assets, the Fund is prohibited from:
a) Issuing senior securities.
b) Underwriting the securities of other issuers, except insofar as the
Fund may be deemed to be an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
c) Purchasing securities that would cause more than 25% of the value of
the Sub-Adviser Assets to be invested in the securities of issuers
conducting their principal business activities in the same industry
(based on the GICS classification); provided that there shall be no
limit on the purchase of U.S. government securities.
d) Purchasing or selling real estate or real estate limited
partnerships, except that the Fund may purchase or sell securities
secured by real estate, mortgages or interests therein and
securities that are issued by companies that invest or deal in real
estate.
e) Investing in oil, gas or other mineral exploration or development
programs, except that the Fund may invest in the securities of
companies that invest in or sponsor those programs.
f) Investing in firm commitment agreements and when issued purchases
for leveraging purposes. (This does not prohibit investing in IPOs,
which are generally permitted.)
g) Investing in commodities.
h) Investing more than 15% of the net Sub-Adviser Assets in securities
which are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. However,
securities with legal or contractual restrictions on resale may be
purchased if they are determined to be liquid and such purchases
would not be subject to the 15% limit stated above. The Fund's Board
of Trustees will in good faith determine the specific types of
securities deemed to be liquid and the value of such securities
held.
i) Making investments for the purpose of exercising control or
management.
j) With respect to any one issuer, investing more than 5% of the
Sub-Adviser Assets in the securities of that issuer or investing in
more than 10% of the issuer's outstanding voting securities.
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6. BORROWING
a) Permitted for settlement purposes as a temporary measure only, up to
five percent of the Sub-Adviser Assets. YES
b) Permitted for investment purposes. NO
7. CURRENCY HEDGING
This will include, but not be limited to, forwards and derivatives.
Hedging back to Reporting Currency. NO
Proxy currency hedging. NO
Cross currency hedging. NO
For settlement purposes. NO
8. DERIVATIVES
This will include, but not be limited to, futures, options and all other
instruments derived therefrom, whether listed on futures and options
markets, tailor-made or traded over-the-counter. (This does not include
equity-linked notes.)
c) For hedging assets. NO
d) For investment timing purposes. NO
e) For covered exposure. NO
f) For uncovered exposure. NO
g) For leveraged exposure. NO
9. SHORT-SELLING (AND ASSOCIATED BORROWING) OF SECURITIES
Permitted. NO
10. STOCKLENDING
Permitted. NO
11. UNDERWRITING AND SUB-UNDERWRITING
Permitted, provided that the Sub-Adviser purchases securities from an
underwriter. NO
12. SECURITIES UNDERWRITTEN OR ISSUED BY THE SUB-ADVISER OR ITS ASSOCIATES.
May at issuance participate in securities underwritten, sub-underwritten,
lead-managed by the Sub-Adviser or its associates, to the extent allowable
under Rule 10f-3 under the 1940 Act. YES
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13. VOTING AT SUB-ADVISER'S DISCRETION, SUBJECT TO THE FUND'S PROXY VOTING
POLICIES AND PROCEDURES NOTIFIED TO THE SUB-ADVISER YES
14. DIVIDENDS AND OTHER PORTFOLIO INCOME RE-INVESTED YES
15. CROSSING
Permitted. NO
A crossing is a transaction in which the Sub-Adviser acts for both buyer
and seller. If the Sub-Adviser is authorized to carry out off-market
crossings, no commission will be charged by the Sub-Adviser.
16. SOFT COMMISSION ARRANGEMENTS
Permitted. YES
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APPENDIX C
RISK DISCLOSURE STATEMENT
RISK OF SECURITIES TRADING
The prices of securities fluctuate, sometimes dramatically. The price of a
security may move up or down, and may become valueless. It is as likely that
losses will be incurred rather than profit made as a result of buying and
selling securities.
RISK OF TRADING FUTURES AND OPTIONS
The risk of loss in trading futures contracts or options is substantial. In some
circumstances, you may sustain losses in excess of your initial margin funds.
Placing contingent orders, such as "stop-loss" or "stop-limit" orders, will not
necessarily avoid loss. Market conditions may make it impossible to execute such
orders. You may be called upon at short notice to deposit additional margin
funds. If the required funds are not provided within the prescribed time, your
position may be liquidated. You will remain liable for any resulting deficit in
your account. You should therefore study and understand futures contracts and
options before you trade and carefully consider whether such trading is suitable
in the light of your own financial position and investment objectives. If you
trade options you should inform yourself of exercise and expiration procedures
and your rights and obligations upon exercise or expiry.
RISK OF TRADING GROWTH ENTERPRISE MARKET STOCKS
Growth Enterprise Market (GEM) stocks involve a high investment risk. In
particular, companies may list on GEM with neither a track record of
profitability nor any obligation to forecast future profitability. GEM stocks
may be very volatile and illiquid.
You should make the decision to invest only after due and careful consideration.
The greater risk profile and other characteristics of GEM mean that it is a
market more suited to professional and other sophisticated investors.
Current information on GEM stocks may only be found on the internet website
operated by The Stock Exchange of Hong Kong Limited. GEM Companies are usually
not required to issue paid announcements in gazetted newspapers.
You should seek independent professional advice if you are uncertain of or have
not understood any aspect of this risk disclosure statement or the nature and
risks involved in trading of GEM stocks.
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RISK OF MARGIN TRADING
The risk of loss in financing a transaction by deposit of collateral is
significant. You may sustain losses in excess of your cash and any other assets
deposited as collateral with the dealer or securities margin financier. Market
conditions may make it impossible to execute contingent orders, such as
"stop-loss" or "stop-limit" orders. You may be called upon at short notice to
make additional margin deposits or interest payments. If the required margin
deposits or interest payments are not made within the prescribed time, your
collateral may be liquidated without your consent. Moreover, you will remain
liable for any resulting deficit in your account and interest charged on your
account. You should therefore carefully consider whether such a financing
arrangement is suitable in light of your own financial position and investment
objectives.
RISK OF TRADING NASDAQ-AMEX SECURITIES AT THE STOCK EXCHANGE OF HONG KONG
LIMITED
The securities under the Nasdaq-Amex Pilot Program (PP) are aimed at
sophisticated investors. You should consult your dealer and become familiarised
with the PP before trading in the PP securities. You should be aware that the PP
securities are not regulated as a primary or secondary listing on the Main Board
or the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.
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APPENDIX D
CERTIFICATES OF INSURANCE FOR SUB-ADVISER
[INCLUDED IN ORIGINAL]
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