Exhibit (d-2)
SUB-ADVISORY AGREEMENT
BETWEEN
XXXX XXXXX MANAGEMENT, INC.
AND
XXXXXX XXXXXX INC.
NOVEMBER 2006
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TABLE OF CONTENTS
1. APPOINTMENT AND INITIAL FUND VALUE....................................1
2. DELIVERY OF DOCUMENTS.................................................2
3. REGULATORY STATUS.....................................................3
4. INVESTMENT ADVISORY SERVICES..........................................3
a) MANAGEMENT OF THE FUND.......................................3
b) COVENANTS....................................................6
c) BOOKS AND RECORDS............................................6
d) REPORTS, EVALUATIONS, AND OTHER SERVICES.....................7
e) PURCHASE AND SALE OF SECURITIES..............................7
f) BROKERS OR DEALERS...........................................7
g) AGGREGATION OF SECURITIES TRANSACTIONS.......................7
h) DELEGATION...................................................8
5. REPRESENTATIONS AND WARRANTIES........................................8
6. COMPENSATION.........................................................10
7. LIMITATION OF SUB-ADVISER'S LIABILITY AND THE TRUST'S LIABILITY......11
8. USE OF NAMES AND OTHER INFORMATION...................................11
9. NON-EXCLUSIVE SERVICES...............................................12
10. EFFECTIVE DATE, AMENDMENT, AND TERMINATION...........................12
11. CERTAIN DEFINITIONS..................................................13
12. INDEPENDENT CONTRACTOR...............................................13
13. [INDEMNIFICATION.....................................................13
14. RISK WARNINGS........................................................14
15. CONFLICTS OF INTEREST................................................14
16. COMPLAINTS...........................................................14
17. CONFIDENTIALITY......................................................14
18. GOVERNING LAW........................................................15
19. SEVERABILITY.........................................................15
20. INSTRUCTIONS.........................................................15
21. NOTICES..............................................................16
22. TAXATION ............................................................16
23. AMENDMENT ...........................................................16
24. GENERAL .............................................................16
25. FORCE MAJEURE .......................................................17
26. CHANGES WITHIN THE SUB-ADVISER ......................................17
27. RISK DISCLOSURE .....................................................17
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AGREEMENT, made as of the (the "Commencement Date"), by and between Xxxx Xxxxx
Management, Inc., Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 a New York corporation
(the "Adviser"), and Xxxxxx Xxxxxx Inc., a corporation organized under the laws
of the State of New York ("the Sub-Adviser"), and having its principal office at
Saltire Court, 00 Xxxxxx Xxxxxxx, Xxxxxxxxx, XX0 0XX, Xxxxxxxx.
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
Investment Company Act of 1940, as amended (the "1940 Act"), 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; and
NOW, THEREFORE, in consideration of the terms, conditions, and mutual covenants
herein contained, the parties agree as follows:
DEFINITIONS
Associate: a company within the same group as the Sub-Adviser
The Act: the Financial Services and Markets Xxx 0000 as amended from time
to time
The FSA: the Financial Services Authority or its successor
FSA Rules: the rules from time to time of the FSA
In-House Funds: Unit Trusts, Investment Trusts, SICAVs (societe d'investissement
a capital variable) and/or open ended investment companies or collective
investment schemes (whether on shore or off shore) operated, managed and/or
advised by the Sub-Adviser or an Associate.
Intermediate Customer:.....an individual, company, partnership, trust,
government, local or public authority or institution which is deemed to have a
certain level of investment experience by the FSA rules.
1. APPOINTMENT AND INITIAL FUND VALUE
a) 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 from time
to time to the Sub-Adviser for such purpose (the "Sub-Adviser
Assets"), subject to the oversight and supervision 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.
b) This Agreement shall commence as of the date of execution
hereof.
c) The initial value of the Sub-Adviser Assets are to be provided
to the Sub-Adviser (as agreed with Sub-Adviser).
2. DELIVERY OF DOCUMENTS
a) The Adviser has delivered, or will promptly deliver, 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 (the
"Declaration of Trust"), as filed with the Secretary
of State of The Commonwealth of Massachusetts on
February 14, 2003;
ii) The Certificate of Amendment to the Declaration of
Trust, as filed with the Secretary of State of The
Commonwealth of Massachusetts on September 5, 2003;
iii) The Certificate of Designation, as filed with the
Secretary of State of The Commonwealth of
Massachusetts on February 4, 2005;
iv) the Trust's Amended and Restated By-Laws, dated as of
December 7, 2004;
v) resolutions of the Board authorizing the execution
and delivery of this Agreement;
vi) the Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933
Act") and under the 1940 Act as filed with the
Securities and Exchange Commission (the "SEC");
vii) the currently effective Prospectus and Statement of
Additional Information of the Fund (collectively the
"Prospectus"); and
viii) to provide the Sub-Adviser with such evidence of
identity as may be requested to allow the Sub-Adviser
to fulfill all its duties and obligations under
applicable anti-money laundering legislation, rules,
regulations or guidance. The Sub-Adviser shall not be
entitled to remit any sums to the Adviser or receive
any sums from the Adviser or commence management of
the Sub-Adviser Assets, until the verification
procedure is complete.
b) The Sub-Adviser has delivered, or will promptly deliver, 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 Parts I and II ("Form ADV");
ii) any written supervisory and operating policies and
procedures, or summaries thereof 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 Rule 204A-1 under
the Advisers Act, and related policies and
procedures;
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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;
v) the Sub-Adviser's compliance program adopted pursuant
to Rule 206(4)-7 under the Advisers Act, and related
policies and procedures; and
vi) any other documents that the Adviser or the Board may
reasonably request and which is within the power and
capability of the Sub Adviser to provide.
3. REGULATORY STATUS
The services to be provided by the Sub-Adviser are provided on the
basis that the Adviser is deemed to be an Intermediate Customer, as
defined by the Financial Services Authority, but nothing in this
Agreement shall exclude the liability of the Sub- Adviser to the
Adviser under the Act or the FSA Rules.
The Sub-Adviser is authorized and regulated by the FSA and Securities
and Exchange Commission ("SEC") in the conduct of its investment
business. The Sub-Adviser is duly registered as an "Investment Adviser"
with the FSA and also the SEC (under the Investment Advisers Act of
1940). The Sub-Adviser will notify the Adviser immediately if it ceases
to be authorized and regulated by the FSA or if it ceases to be
registered with the SEC. The Sub-Adviser will at all times comply with
the FSA and SEC Rules insofar as they relate to the management of the
Fund.
The Adviser confirms that it has received from the Sub-Adviser a copy
of the Sub-Adviser's Form ADV at least 48 hours in advance of the date
of signing of this Agreement.
4. INVESTMENT ADVISORY SERVICES
a) MANAGEMENT OF THE FUND
i) The Sub-Adviser hereby undertakes to act as an
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
oversight and supervision of the Sub-Adviser Assets
by the Adviser and/ or the Board, in accordance with
this Agreement, the Operational Guidelines described
on Appendix A to this Agreement and the Fund's
investment objectives, policies and restrictions as
set forth in Appendix B to this Agreement, as may be
revised from time to time, which revisions shall be
mutually agreed in writing, with due time for the
Sub-Adviser to comply. For the duration of this
Agreement the Sub-Adviser shall, subject to the
investment objectives and restrictions from time to
time agreed with the Adviser manage the Fund, acting
in good faith and with reasonable skill and care, and
shall have full power, authority and right to
exercise the functions, duties, powers and discretion
exercisable by the Adviser in managing the Fund,
either itself or wholly or in part through its
authorized agents or delegates, (and for the
avoidance of doubt, the Sub-Adviser shall always
perform the investment advisory services which shall
never be delegated by the Sub-Adviser), including
full discretion, without prior reference to the
Adviser, to buy, sell, retain, exchange or otherwise
deal in investments and other assets or securities,
make deposits, (subscribe to issues and offers for
sale and accept placings,
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underwritings and sub-underwritings of any
investments), advise on or execute transactions
(including those in or related to unregulated
collective investment schemes), exercise rights in
investments, negotiate and execute counterparty and
account opening documentation, take all routine
day-to-day decisions and to manage the Sub-Adviser
Assets in such manner as the Sub-Adviser may
determine upon, but always subject to the applicable
obligations of the Sub-Adviser under the FSA Rules
and regulations and the applicable SEC rules
regarding suitability and best execution. The
Sub-Adviser shall not be responsible or liable for
the selection of the investment objectives or
restrictions.
ii) The Adviser shall retain oversight and supervision
over the Sub-Adviser Assets and in the event that the
Sub-Adviser is found to be in beach of it's
obligations hereunder and not performing the
investment management activities according to the
terms hereunder, then the Adviser will have the right
to step in and direct the Sub-Adviser accordingly, to
ensure the terms of this Agreement are adhered to.
In furtherance of the foregoing, the Sub-Adviser shall:
i) obtain and evaluate pertinent economic, statistical
and financial data, and other significant events and
developments which affect: the economies of Asia and
China; the Fund's investment program; and Asian and
Chinese 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 securities of Asian, Chinese and
other issuers shall be included in assets under the
supervision of the Sub-Adviser;
iii) 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 and Chinese issuers;
iv) 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 including voting any proxies issued by
companies selected by the Sub-Adviser, and shall
provide an annual record, in a format acceptable to
the Adviser acting reasonably, of the voting of such
proxies to the Adviser for inclusion in the Fund's
Form N-PX. The Sub-Adviser may exercise or refrain
from exercising any voting and other rights or
privileges attaching to the investments of the Fund
at its discretion, subject to the Adviser's specific
instructions (if any); and the Sub-Adviser being
reasonably satisfied that the exercise or refraining
from exercise is in the best interests of the Fund.
The Adviser acknowledges and agrees that the
Sub-Adviser may use the services of a proxy voting
company, provided that any such proxy voting company
shall vote in accordance with the Sub-Adviser's
voting policy, a copy of which has been provided to
the Adviser prior to commencement of this Agreement;
v) The Adviser hereby acknowledges that where the Fund
includes collective investment schemes, investment
companies and other vehicles for collective
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investment (including without limitation trusts and
limited partnerships), the Sub-Adviser's reporting
system does not report the underlying holdings of
said entities;
vi) Where the investment objectives and restrictions have
been breached, the Sub-Adviser will endeavor, with
the minimum of delay, to restore them to the then
current agreed allocation levels, unless this would
not be in the best interests of the Fund, in which
case the Sub-Adviser shall take such appropriate
action (in the best interests of the Fund) and in
consultation with the Adviser;
vii) In making investment decisions, the Sub-Adviser shall
exercise its discretion upon the information from
time to time available to it. Such information shall
not include any information which the Sub-Adviser or
any of its employees are under a fiduciary, statutory
or other legal duty not to disclose and the
Sub-Adviser shall not take such information into
account in exercising its discretion;
viii) In the selection of brokers or dealers and the
placing of orders for the purchase and sale of
portfolio investments for the Fund, the Sub-Adviser
shall use its best efforts to obtain for the Fund the
most favorable price and execution available, except
to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research
services as described below. In using its best
efforts to obtain for the Fund the most favorable
price and execution available, the Sub-Adviser, shall
consider all factors it deems relevant, including, by
way of illustration, price, the size of the
transaction, the nature of the market for the
security, the amount of the commission, the timing of
the transaction taking into account market prices and
trends, the reputation, experience and financial
stability of the broker or dealer involved and the
quality of service rendered by the broker or dealer
in other transactions. Subject to such policies as
the Adviser may determine and communicate to the
Sub-Adviser in writing, the Sub-Adviser shall not be
deemed to have acted unlawfully or to have breached
any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay
a broker or dealer that provides brokerage and
research services to the Sub-Adviser or its
affiliates an amount of commission for effecting a
portfolio investment transaction in excess of the
amount of commission another broker or dealer would
have charged for effecting that transaction, if the
Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value
of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to
other clients of the Sub-Adviser and its Associates
as to which the Sub-Adviser or its affiliates
exercise investment discretion; and
ix) The Sub-Adviser may not make any arrangements to:
a) lend to a third party any investments or
documents of the title or certificates
evidencing title to investments comprising
the Fund or any part of it;
b) borrow on the Adviser's behalf against the
security of such investments or other
property; or
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c) deposit such investments with a third party
by way of collateral.
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 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, each as applicable to the investment management
of the Fund; and (iii) the investment objectives, policies and
restrictions as set out in Appendix B to this Agreement; and
such other investment policies, procedures and/or limitations
as adopted by the Board, the Trust or the Adviser with respect
to the Fund. Appendix A and Appendix B may be amended from
time to time which amendments shall be mutually agreed in
writing and by transmitting the amended Appendix, with due
time for the Sub-Adviser to comply, provided that the
agreement of neither party is to be unreasonably withheld and
provided further that any such amendment shall be consistent
with the version of the Prospectus in effect at such time. If
the Sub-Adviser considers that any investment objective,
policy or restriction received may not, from a compliance and
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, policy or restriction 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 Fund's investment
objectives, 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 or
issuers not forming components of the benchmark where this is
considered to be in the interests of the Fund. 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 portfolio of Sub-Adviser Assets or to
acquire securities as a result of a take-over, merger or other
offer, provided that such action is taken for the benefit of
the Fund. 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
Rule 204-2 under the Advisers Act, Section 31(a) of the 1940
Act and will furnish such periodic and special reports as the
Adviser or the Board may reasonably request, and which is
within the power and capability of the Sub-Adviser to provide.
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 applying to the Sub-Adviser. 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.
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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, upon request of the Adviser, 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-Adviser from time to time. The Sub-Adviser
shall seek to 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 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 applying to the
Sub-Adviser, including but not limited to Section 31(a) of the
1940 Act and in accordance with Section 4(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"), and the FSA Rules 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 in accordance
with Section 4 (a) (x) 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, subject to the FSA rules and SEC rules, but
shall not be obligated to, aggregate the securities to be sold
or purchased with those of its other clients if,
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in the Sub-Adviser's reasonable judgment, such aggregation
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 albeit
the Adviser acknowledges that aggregation may occasionally be
to the Adviser's disadvantage. 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 the expenses incurred in the transaction, in an equitable
manner and consistent with its fiduciary obligations to the
Fund
h) DELEGATION
The Sub-Adviser may, where reasonable, employ agents and
delegates (including Associates) to perform any
administrative/ or ancillary services (but not investment
advisory services) required to enable the Sub-Adviser to
perform its services under this Agreement. The Sub-Adviser
will act in good faith and with reasonable skill and care in
the selection, use and monitoring of agents. The Sub-Adviser's
liability to the Adviser for all matters so delegated shall
not be affected thereby.
5. REPRESENTATIONS AND WARRANTIES
a) The Sub-Adviser hereby represents and warrants to the Adviser
as follows:
i) The Sub-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 Sub-Adviser is registered as an investment
adviser with the SEC under the Advisers Act. The
Sub-Adviser shall have in place and 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, including but
not limited to Rule 17g-1 under the 1940 Act, 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;
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ii) 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;
iii) The Trust has been duly organized as a business trust
under the laws of The Commonwealth of Massachusetts;
iv) 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;
v) no part of the Fund has been granted by way of
security or is otherwise subject to any claim by a
third party;
vi) any information provided to the Sub-Adviser in
relation to status, including in particular residence
and domicile for taxation purposes, is complete and
correct and the Adviser agrees to provide any further
information properly required by the Sub-Adviser or
any competent authority. The Adviser shall notify the
Sub-Adviser immediately if there is any material
change in any such information provided;
vii) That the Adviser has adopted a compliance program as
required pursuant to Rule 206(4) -7 under the
Advisers Act and pursuant to Rule 38a-1, ("Compliance
Program"), as respects the Fund, and agrees to
provide a summary of any such processes and
procedures to the Sub-Adviser upon reasonable
request;
viii) The Adviser will procure that the Trust will provide
all necessary authorizations to the Sub-Adviser to
enable the Sub-Adviser to carry out its duties under
this Agreement.
(c) The Adviser undertakes:
i) not to deal, except through the Sub-Adviser, with any
of the assets comprising the Sub-Adviser Assets or to
authorize anyone else so to deal;
ii) if so directed by authorized personnel of the
Sub-Adviser the Adviser shall promptly arrange for
the execution or production of any documents
necessary to carry out transactions effected in
accordance with this Agreement. Where a delay or
failure to deliver such documents is envisaged the
Adviser shall notify the Sub-Adviser;
iii) To promptly notify the Sub-Adviser as soon as it
becomes aware of any material regulatory or legal
investigation involving the business and affairs
generally of the Adviser, or another company within
the same group as the Adviser, and to provide the
Sub-Adviser with information thereto (as may be
reasonably requested). For the avoidance of doubt,
standard and non material regulatory investigations
and notices shall not required to be notified to the
Sub-Adviser. The Adviser shall also promptly notify
the Sub-Adviser of any material defaults
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under the Adviser's own Compliance Program and shall
provide the Sub-Adviser with any information thereto
as may be reasonably requested; and
iv) The Adviser and the Sub-Adviser shall conform with
all applicable rules, laws and regulations. In the
event the Adviser wishes to change the investment
objectives, restrictions and guidelines such that
would involve new laws, regulations applying to the
investment management of the Fund, (subsequent to the
date of signing of this Agreement) then the Adviser
shall be under a duty to provide the Sub-Adviser with
full details of any such new laws and regulations.
Any such new laws and regulations shall qualify as an
amendment to this Agreement and governed by the terms
of clause of 23.
6. COMPENSATION
a) 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 therefore a
sub-advisory fee, paid quarterly in arrears on the day
immediately following each calendar quarter, at the annual
rate of .80% on the first $100 million of the Fund's average
daily Sub-Adviser Assets and 0.60% on Sub-Adviser Assets
thereafter. Such sub-advisory fee shall begin to accrue on the
date that the Adviser authorizes the transfer of
responsibility for the 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 Sub-Adviser Assets 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.
b) There shall be a minimum Sub-Adviser Assets value of $25
million. In the event the value of the Sub-Advisers Assets at
any time falls below $25 million, the sub advisory fees due
and payable (at such times) shall be calculated as if the
value of the Sub-Adviser Assets were $25 million.
c) In order to rule out any duplication of fees in relation to
In-House Funds, the Sub-Adviser shall inform the Adviser of
the net asset value invested in any such In-House Funds which
shall be deducted from the net asset value in order to
calculate the fees due and payable by the Adviser.
d) Other than as stated in this Agreement the Sub-Adviser will
not receive any other remuneration in connection with
transactions effected by the Sub-Adviser on the Adviser's
behalf.
e) In the event of any dispute arising as to the amount of the
Sub-Adviser's remuneration hereunder, the same shall be
referred to a mutually agreed and appointed expert for
settlement and his decision shall be regarded as the decision
of an expert and shall be binding and final on the parties
hereto.
f) The Sub-Adviser shall not be responsible for all those costs
and expenses necessarily incurred by the Sub-Adviser in order
to manage the Fund, including custodian charges, brokerage
fees, commissions, stamp and other duties, taxes, governmental
charges, transfer fees, registration fees and other direct or
incidental charges or expenses payable or incurred in respect
of
-10-
acquiring, holding or realizing investments, making deposits
and any foreign exchange transactions carried out in
connection therewith on behalf of the Fund.
g) The Adviser shall be responsible for calculating the
sub-advisory fee and shall remit calculations (appropriately
detailed) to the Sub-Adviser, within a reasonable period of
time following the Quarter End, giving the Sub-Adviser
reasonable period of time to review the calculations before
due and payable.
7. LIMITATION OF SUB-ADVISER'S LIABILITY AND THE TRUST'S LIABILITY
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 Fund or any shareholder of the Fund for any error of
judgment or mistake of law or for any act or omission in the course of
or connected with rendering services hereunder or for any loss suffered
by the Adviser, 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 be liable on account of anything done or
suffered to be done by the Sub-Adviser in good faith in accordance with
any request or advice of the Adviser.
Without prejudice to the other provisions of this Clause 7, the
Sub-Adviser shall not be liable to the Adviser for any loss, or failure
to take profit or advantage in relation to any investment, which may
result from any compliance procedures properly operated by the
Sub-Adviser.
The Sub-Adviser shall not be liable to the Adviser for any loss arising
as a result of failure to ensure that email is virus checked prior to
sending.
The Sub-Adviser shall not be liable for any default by any third party
with or through whom the Sub-Adviser may deal pursuant to this
Agreement or by a third party (including the Custodian) responsible for
the holding, safe custody, transmission or delivery of money,
investments, documents of title, certificate or other records
evidencing title to investment or other comprised in the Account Fund,
provided that such third parties are not Associates of the Sub-Adviser
and save to the extent that such default arises by reason of (a) a
breach by the Sub-Adviser of its duties or obligations pursuant to this
Agreement or (b) the willful misfeasance, bad faith, gross negligence
or reckless disregard of the Sub-Adviser.
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, however this does not
impact in any way the Adviser's liability to the Sub-Adviser under the
terms of this Agreement
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
-11-
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 (solely for the purposes of the Fund and only during the
continuation of this Agreement) of the past performance and investment
history of the Fund, and to permit the use of biographical and
historical data of the Sub-Adviser and its individual manager(s)
relating solely to the Fund 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. 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 annual 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.
-12-
b) This Agreement may be amended in writing 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 at any time without payment
of penalty by the Adviser upon the vote of the Board or by
vote of the holders of a majority of the outstanding voting
securities (as defined in the 0000 Xxx) of the Fund, in each
case on ten (10) days prior written notice to the Sub-Adviser,
or, by the Sub-Adviser upon not less than sixty days written
notice to the Fund. This Agreement shall terminate
automatically in the event of its assignment or termination of
the Management Agreement.
d) Either party may terminate this Agreement by immediate written
notice if so required by any competent regulatory authority.
e) Upon termination the Sub-Adviser shall be entitled to:
i) the accrued amount of fees and charges referred to
under Clause 6 to the date of termination;
ii) any additional expenses necessarily incurred in
terminating the Agreement;
iii) any losses necessarily realized in selling or
concluding outstanding obligations; and
iv) Termination will not affect any accrued rights,
indemnities, existing commitments or contractual
provisions intended to survive termination.
(f) The Sub-Adviser shall have the right to immediately terminate
this Agreement upon receiving notification with respect to
regulatory and or legal investigations as provided for under
clause 5 (c) (iii).
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. 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.
13. INDEMNIFICATION
The Sub-Adviser agrees to indemnify the Adviser on demand from and
against any and all direct liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever directly resulting from the willful
misfeasance,
-13-
bad faith, gross negligence or reckless disregard 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
indemnify the Sub-Adviser on demand from and against any and all direct
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, gross negligence or reckless disregard 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 13 shall survive termination of this Agreement.
14. RISK WARNINGS
The Adviser accepts and acknowledges the risk disclosures set out in
Appendix C.
15. CONFLICTS OF INTEREST
The Adviser acknowledges and agrees to the Conflicts of Interest
provisions set out in Appendix E.
16. COMPLAINTS
Any complaint relating to the Sub-Adviser should, in the first
instance, be notified in writing to the Compliance Officer of the
Sub-Adviser who will make due investigations and report his findings,
in writing, to the Adviser. Once a complaint has been responded to in
writing, if no indication has been received from the Adviser that they
are not satisfied with the response, then after 2 months from the date
of response the Sub-Adviser may treat the complaint as settled and
resolved. The Adviser acknowledges that it is not entitled to pursue
its complaint with the Financial Ombudsman Service.
17. CONFIDENTIALITY
a) Neither the Sub-Adviser nor any Associate is obliged to
disclose to the Adviser or take into consideration information
either:
(i) the disclosure of which, by them to the Adviser,
would or might be a breach of duty or confidence to
any other person; or
(ii) which comes to the notice of an employee, officer or
agent of the Sub-Adviser or of an Associate, but does
not come to the actual notice of the individual
managing the Fund.
(b) Any confidential information or any recommendation supplied by
the Sub-Adviser, which is not otherwise in the public domain
or previously known to the Adviser in connection with the
performance of the Sub-Adviser's obligations hereunder, is to
be regarded as confidential and is for use only by the Adviser
or such persons as the Adviser may designate in advance with
the consent of the Sub-Adviser in connection with the Fund,
and will not be disclosed by the Adviser or such designated
persons, either before or after the termination of this
Agreement, to any party not authorized by the Sub-Adviser to
receive the same, save as may be required by law. The Adviser
will not do or suffer to be done any act which would or might
prejudice or bring into disrepute the business reputation of
the Sub-Adviser. For the purposes of the
-14-
clause, Confidential Information shall include any information
disclosed by any means to the Adviser by the Sub-Adviser or
its relevant Associates or delegates as the case may, be or
its representatives or advisors before or after the date of
this Agreement but shall exclude part of such information
which:
(i) is in or comes into the public domain in any way
otherwise than by breach of this Agreement by the
receiving party; or
(ii) the receiving party can show was in its possession or
known to it prior to receipt from the disclosing
party and was not previously acquired by the
receiving party from the disclosing party under an
obligation of confidence; or
(iii) the receiving party can show to have been developed
by or for the receiving party at any time
independently of any information disclosed to it by
the disclosing party; or
(iv) the receiving party obtains or has available from a
source other than the disclosing party without breach
by the receiving party or such source of any
obligation of confidentiality or non-use towards the
disclosing party.
18. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the
State of New York.
19. SEVERABILITY
If any provision of this Agreement shall become or be made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
20. INSTRUCTIONS
a) 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 20 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. The Adviser shall forward
to the Sub-Adviser a list of specimen signatures of authorized
persons and shall notify the Sub-Adviser of any changes to the
list immediately.
-15-
b) The Sub-Adviser will acknowledge instructions from the Adviser
by acting upon them but the Sub-Adviser may refuse to comply
with any instructions received from the Adviser if, in the
Sub-Adviser's opinion or that of its legal advisors,
compliance with such instructions would contravene any
applicable regulations, including but not limited to the FSA
rules. In such circumstances the Sub-Adviser will promptly
notify the Adviser and the appropriate regulatory agency, in
writing.
c) Where the Adviser has agreed that e-mail communications,
information, advice and valuations may be provided to the
Adviser via the Internet, the Adviser acknowledges that the
Internet is not a secure medium for communication of sensitive
information. Communication is therefore at the Adviser's own
risk. The Sub-Adviser will not be liable for any breach of
confidentiality which may arise from the communication being
accessed by an unauthorized third party. Where the Sub-Adviser
has agreed that certain communications required from the
Adviser may be provided to the Sub-Adviser via the Internet,
the Sub-Adviser acknowledges that the Internet is not a secure
medium for communication of sensitive information.
Communication is therefore at the Sub- Adviser's own risk. The
Adviser will not be liable for any breach of confidentiality
which may arise from the communication being accessed by an
unauthorized third party.
21. NOTICES
Any notices hereunder shall be in writing and shall be served by hand
at or by being sent by telex, facsimile or post to the offices noted
below of the party on which it is to be served. Any such notice shall
be deemed to have been served at the time of delivery (if delivered by
hand) within two hours of the time of receipt of confirmed answerback
(if served by telex or facsimile) or at the expiration of two business
days after posting (if served by post). Evidence that the notice was
properly addressed, stamped and posted shall be conclusive evidence of
posting.
Offices:
Adviser: 000 Xxxxx Xxxxxx Xxx Xxxx Xxx Xxxx, 00000, to the attention of
Xxx Xxxxxx, Executive Vice President and Chief Legal Officer.
Sub-Adviser: 1350 Avenue of the Americas, Xxxxx 0000, Xxx Xxxx, Xxx
Xxxx 00000 to the attention of Xxxxx Xxxxxxxx.
22. TAXATION
The Adviser and any professional tax adviser of the Adviser shall be
solely responsible for the management of the Adviser's and the Fund's
affairs for tax purposes. The Adviser will be responsible for paying
any taxes incurred in relation to investments and assets comprised in,
or transactions effected for, the Fund, but the Sub-Adviser shall have
authority to deduct any sum which may be required by any revenue
authority in respect of tax wherever arising. The Sub-Adviser shall
cooperate in providing the Adviser with such information as required by
the Adviser in relation to the Fund's tax obligations in so far as the
Sub-Adviser is competent and able to provide.
23. AMENDMENT
This Agreement may only be amended by both parties agreeing in writing.
-16-
24. GENERAL
No failure on the part of either party to exercise, and no delay on its
part in exercising any right or remedy under this Agreement, will
operate as a waiver thereof nor will any single or partial exercise of
any right or remedy preclude any other or further exercise thereof or
the exercise of any other right or remedy. The rights and remedies
provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law. The illegality, invalidity or
enforceability of any provision of this Agreement under the law of any
jurisdiction shall not affect its legality, validity or enforceability
under the law of any other jurisdiction nor the legality, validity or
enforceability of any other provision.
25. 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.
26. 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 and which would
directly and materially impact the Adviser and or the Fund, as provided
to the Adviser under this Agreement.
27. RISK DISCLOSURE
The Adviser confirms that it has notice of the risk disclosure
statement as set out in Appendix C.
-17-
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. XXXXXX XXXXXX INC.
By: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxx Xxxxxxxx
-------------------- ------------------
Name: Xxxxxxx Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title: Executive Vice President Title: Senior Vice President
-18-
APPENDIX A
OPERATIONAL GUIDELINES
INVESTMENT MANAGEMENT
The assets of the Fund shall be managed with discretion within the limits of
Section 4 of this Agreement.
CALCULATING THE NET ASSET VALUE (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 the foreign markets where the
securities are principally traded ("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 Xxxxxxx
Telephone Number: 000-000-0000
E-mail: xxxxxxxx@xxxxx.xxx
PRICING AND TRADING CONTACTS SUB-ADVISER
Facsimile Number: 212-258-1919
Contact Person: - Xxxx Xxxxxxxx
Telephone Number: 0000 000 0000
Email:xxxxxxxxx@xxxxxxxxxxxx.xxx
INVESTMENT PERFORMANCE MONITORING PROCEDURES
The Trustees and/or their designees will review the Sub-Adviser's process and
performance as sub-adviser, 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 Fund's stated investment
objectives and complying with the Fund's 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-Adviser's investment
philosophy, process or personnel. The Adviser and the Sub-Adviser shall meet by
conference call Quarterly and ad hoc where reasonably required 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-adviser and other related
matters, in light of the Fund's stated investment objectives, appropriate market
indices, and benchmarks.
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 (normal business hours as per
geographical location) 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 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 as soon as practicable 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 record keeping 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.
APPENDIX B
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
THE CHINA - U.S. GROWTH FUND
The Fund seeks to achieve its objective by investing in equity securities, such
as common or preferred stocks, or securities convertible into or exchangeable
for equity securities, including warrants and rights.
The Sub-Adviser Assets will be invested primarily in equity securities, such as
common or preferred stocks, of companies, which the Sub-Adviser believes will
benefit from China's economic development and growth. The Sub-Adviser Assets
will normally be invested primarily in the U.S. and Chinese securities markets.
There is no guarantee that the Fund will achieve its objective.
Under normal circumstances, the Fund will invest at least 80% of the value of
its net assets plus borrowings, if any, in the equity securities of companies
that are economically tied to China or the United States. It may invest the
remainder of its assets in equity securities, or investments of other types as
noted in the Fund's prospectus and statement of additional information, that are
not issued by companies economically tied to either country.
For the avoidance of doubt, the term 'China' includes Greater China, the
People's Republic of China, Hong Kong and Taiwan.
In adhering to the Investment Restrictions section Clause 7 in the Statement of
Additional Information, the Sub-Adviser will monitor against the MSCI tier 3
industry level.
The Sub-Adviser will comply with the Fund's investment objectives, policies and
restrictions as set forth in the Fund's prospectus and statement of additional
information, which may be revised from time to time. As set forth in the
Agreement, the Adviser will promptly deliver revised copies of the Fund's
prospectus or statement of additional information, as applicable, to the
Sub-Adviser.
This Appendix B may be amended from time to time as provided under Section 4(a)
of the Agreement. The Adviser and Sub-Adviser may agree to further modify the
Sub-Adviser's required compliance with the Fund's investment objectives,
policies and restrictions. These modifications may be agreed upon in writing by
the Adviser and Sub-Adviser on a case-by-case basis.
APPENDIX C
RISK DISCLOSURE STATEMENT
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.
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 familiarized
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.
The Adviser accepts and acknowledges that:
a) past performance is not necessarily a guide to the future;
b) the value of investments, as well as any income derived from
them, can fall as well as rise;
c) the movements in exchange rates may have a separate effect,
unfavorable as well as favorable, on the gain or loss
otherwise experienced on the investment;
d) smaller and developing markets can be more volatile than
developed stockmarkets and can carry more risk therefore a
long-term approach to investing in these markets is advised;
e) investment in futures or contracts for difference carries a
high risk of loss, the markets in these investments being
highly volatile. A relatively small adverse market movement
may result not only in the losses of the original investment
but also unquantifiable further loss exceeding any margin
deposited;
f) funds which invest in one country carry a higher degree of
risk than those with portfolios diversified across a number of
markets;
g) warrants often involve a high level of gearing so that a
relatively small movement in the price of the security to
which the warrant relates may result in a disproportionately
large movement, unfavorable as well as favorable, in the price
of the warrant.
The Adviser further accepts and acknowledges that in relation to investments
held through the media of investment trusts or collective investment schemes
that:
a) smaller and developing markets can be more volatile than
developed stockmarkets and can carry more risk therefore a
long-term approach to investing in these markets is advised;
b) the movements in exchange rates may have a separate effect,
unfavorable as well as favorable, on the gain or loss
otherwise experienced on the investment.
The Adviser accepts and acknowledges that services which are to be provided by
the Sub-Adviser may include advice on investments relating to, or executing
transactions in units (as defined in the FSA Rules) in Unregulated Collective
Investment Schemes (as defined in the FSA Rules).
Investment in the securities of smaller and unquoted companies can involve
greater risk than is customarily associated with investment in larger, more
established companies. In particular, smaller companies often have limited
product lines, markets or financial resources and may be dependent for their
management on a smaller number of key individuals. In addition, the market for
stock in smaller companies is often less liquid than that for stock in larger
companies, bringing with it potential difficulties
in acquiring, valuing and disposing of such stock. Proper information for
determining their value or the risks to which they are exposed may not be
available.
In some international markets and particularly in developing and emerging
markets the marketability of quoted shares may be limited due to foreign
investment restrictions, wide dealing spreads, exchange controls, foreign
ownership restrictions, the restricted opening of stock exchanges and a narrow
range of investors. Trading volume is lower than on more developed stock
markets, and equities are less liquid. Volatility of prices can also be greater
than in more developed stock markets. The infrastructure for clearing,
settlement and registration on the primary and secondary markets of many
emerging markets may be undeveloped. Under certain circumstances the Fund may
experience delays in settling transactions in the markets in which it invests.
Many developing and emerging markets, and the companies quoted on their stock
exchanges, are exposed to the risks of political, social and religious
instability, expropriation of assets or nationalization, rapid rates of
inflation, high interest rates, currency depreciation and fluctuations and
changes in taxation that may affect the Fund's income and the value of its
investments.
Companies in developing and emerging markets are not always subject to
disclosure, accounting, auditing and financial standards which are equivalent to
those applicable in more developed countries. Such information as is available
is also often less reliable. There may be less rigorous government supervision
and regulation.
APPENDIX D
CERTIFICATES OF INSURANCE FOR SUB-ADVISER
APPENDIX E
CONFLICTS OF INTEREST
REFERRED TO IN CLAUSE 15
The services of the Sub-Adviser to the Adviser hereunder are not deemed
exclusive and the Sub-Adviser and its Associates shall be free to render similar
services to others and to retain for their benefit all fees or other monies
payable to the Sub-Adviser thereby, and nothing in this Agreement shall in any
way be deemed to restrict the right of the Sub-Adviser, or any of its
Associates, to perform investment advisory or other services for any other
person or entity, and the performance of such services for others shall not be
deemed to violate or give rise to any duty or obligation to the Adviser.
The Sub-Adviser will be entitled to act for more than one client collectively,
including the Adviser, in any one transaction or series of transactions without
prior reference to the Adviser. The Sub-Adviser shall have no obligation to
acquire, or dispose of, a position for the Fund in any investment which the
Sub-Adviser or its Associates may acquire, or dispose of, for its or their own
account or for the account of their clients, if, in the sole discretion of the
Sub-Adviser, it is not feasible, desirable or prudent to acquire, or dispose of,
a position in such investment for the Fund.
The Sub-Adviser and any Associate may effect transactions in which the
Sub-Adviser or Associate has, directly or indirectly, a material interest or a
relationship of any description with another party, which may involve a
potential conflict with the Sub-Adviser's duty to the Adviser. Neither the
Sub-Adviser nor any Associate shall be liable to account to the Adviser for any
profit, commission or remuneration made or received from or by reason of such
transactions or any connected transactions nor will the Sub-Adviser's fees,
unless otherwise expressly provided, be abated.
Except as provided above, nothing in this Agreement shall limit or restrict the
Sub-Adviser or its Associates from buying, selling or trading in any securities
for its or their own account or accounts. Such dealings will be in accordance
with the Sub-Adviser's code of ethics.
The Sub-Adviser will ensure that transactions where there is a potential
conflict of interest are effected on terms which are not materially less
favourable to the Adviser than if the potential conflict had not existed.
The Sub-Adviser will normally act as agent of the Adviser, who will therefore be
bound by the Sub-Adviser's actions pursuant to this Agreement. Nevertheless,
none of the services to be provided by the Sub-Adviser pursuant to this
Agreement, nor any other matter, shall give rise to any fiduciary or equitable
duties which would prevent or hinder the Sub-Adviser or any Associate in
transactions with or for the Adviser, acting as principal or agent, dealing with
other Associates or other customers and generally effecting transactions as
provided above.
The Sub-Adviser may, without prior reference to the Adviser, effect transactions
in which the Sub-Adviser or an Associate has, directly or indirectly, a material
interest or a relationship with another party, which may involve a potential
conflict with the Sub-Adviser's duty to the Adviser. In particular, but without
limitation, such potential conflicting interests or duties may arise because:
a) the Sub-Adviser or an Associate undertakes investment business
for other clients; or
b) the transaction is in units or shares of In-House Funds;
c) the transaction or recommendation to buy or sell the relevant
investment may relate to an investment in which the
Sub-Adviser or an Associate may have a long or short position;
d) the transaction relates to an investment in an issuer in which
a director or employee of the Sub-Adviser or an Associate is
interested on their own account. or
e) the transaction involves the Fund buying investments from or
selling investments to another client of the Sub-Adviser or of
an Associate.
Unless otherwise stated, the Sub-Adviser shall not be liable to account to the
Adviser for any profit, commission or remuneration made or received from or by
reason of such transactions or any connected transactions and the Sub-Adviser's
fees and charges shall not be abated thereby.
