SUB-ADVISORY AGREEMENT
AGREEMENT
made as of the 27th day of June, 2006 by and between Mercer Global Investments,
Inc., a Delaware corporation (the “Advisor”), and AQR Capital Management, LLC a
Delaware limited liability company (the “Sub-Advisor”).
WHEREAS,
the Advisor has been retained to act as investment adviser pursuant to an
Investment Advisory Agreement, dated July 1, 2005 (the “Advisory Agreement”),
with MGI Funds (the “Trust”), a Delaware statutory trust registered with the
U.S. Securities and Exchange Commission (the “SEC”) as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
“1940 Act”), which consists of several separate series of shares, each having
its own investment objectives and policies, and which is authorized to create
additional series in the future; and
The
Advisor will provide the Sub-Advisor with reasonable advance notice, in writing,
of: (i) any change in a Fund’s investment objectives, policies and restrictions
as stated in the Prospectus; (ii) any change to the Trust’s Declaration of Trust
or By-Laws; or (iii) any material change in the Trust Compliance Procedures;
and
the Sub-Advisor, in the performance of its duties and obligations under this
Agreement, shall manage the Sub-Advisor Assets consistently with such changes,
provided the Sub-Advisor has received and acknowledged such prior notice of
the
effectiveness of such changes from the Trust or the Advisor and has had
reasonable opportunity to implement such changes. In addition to such notice,
the Advisor shall provide to the Sub-Advisor a copy of a modified Prospectus
and
copies of the revised Trust Compliance Procedures, as applicable, reflecting
such changes. The Sub-Advisor hereby agrees to provide to the Advisor in a
timely manner, in writing, such information relating to the Sub-Advisor and
its
relationship to, and actions for, a Fund as may be required to be contained
in
the Prospectus or in the Trust’s registration statement on Form N-1A, or
otherwise as reasonably requested by the Advisor.
In
order
to assist the Trust and the Trust’s Chief Compliance Officer (the “Trust CCO”)
to satisfy the requirements contained in Rule 38a-1 under the 1940 Act, the
Sub-Advisor shall provide to the Trust CCO: (i) direct access to the
Sub-Advisor’s chief compliance officer (the “Sub-Advisor CCO”), as reasonably
requested by the Trust CCO; (ii) quarterly reports confirming that the
Sub-Advisor has complied with the Trust Compliance Procedures in managing the
Sub-Advisor Assets; and (iii) quarterly certifications that there were no
Material Compliance Matters (as that term is defined by Rule 38a-1(e)(2)) that
arose under the Trust Compliance Procedures that related to the Sub-Advisor’s
management of the Sub-Advisor Assets.
In
connection with its management of the Sub-Advisor Assets and consistent with
its
fiduciary obligation to the Sub-Advisor Assets and other clients, the
Sub-Advisor, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most favorable price
or
lower brokerage commissions and efficient execution. In such event, allocation
of the securities or futures contracts so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Sub-Advisor in the
manner the Sub-Advisor considers to be, over time, the most equitable and
consistent with its fiduciary obligations to the Sub-Advisor’s Assets and to
such other clients.
The
Sub-Advisor acknowledges that the Advisor and the Trust may rely on Rule 17a-7,
Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act, and
the
Sub-Advisor hereby agrees that it shall not consult with any other sub-advisor
to the Trust with respect to transactions in securities for the Sub-Advisor
Assets or any other transactions of Trust assets.
The
Sub-Advisor is authorized to engage in transactions in which the Sub-Advisor,
or
an affiliate of the Sub-Advisor, acts as a broker for both the Fund and for
another party on the other side of the transaction (“agency cross
transactions”). The Sub-Advisor shall effect any such agency cross transactions
in compliance with Rule 206(3)-2 under the Advisers Act and any other applicable
provisions of the federal securities laws and shall provide the Advisor with
periodic reports describing such agency cross transactions. By execution of
this
Agreement, the Advisor authorizes the Sub-Advisor or its affiliates to engage
in
agency cross transactions, as described above. The Advisor may revoke its
consent at any time by written notice to the Sub-Advisor.
The
Sub-Advisor hereby represents that it has implemented policies and procedures
that will prevent the disclosure by it, its employees or its agents of the
Trust’s portfolio holdings to any person not employed by the Sub-Advisor or
entity other than the Advisor, the Trust’s custodian, or other persons expressly
designated by the Advisor.
(j) Information
Concerning Sub-Advisor Assets and the Sub-Advisor. From time to time as the
Advisor, and any consultants designated by the Advisor, or the Trust may
request, the Sub-Advisor will furnish the requesting party reports on portfolio
transactions and reports on Sub-Advisor Assets held in the portfolio, all in
such detail as the Advisor, its consultant(s) or the Trust may reasonably
request. The Sub-Advisor will provide the Advisor with information (including
information that is required to be disclosed in the Prospectus) with respect
to
the portfolio managers responsible for Sub-Advisor Assets, any material changes
in the portfolio managers responsible for Sub-Advisor Assets, any material
changes in the ownership or management of the Sub-Advisor, or of material
changes in the control of the Sub-Advisor. The Sub-Advisor will promptly notify
the Advisor of any pending investigation, material litigation, administrative
proceeding or any other significant regulatory inquiry, other than routine
examinations. Upon reasonable request, the Sub-Advisor will make available
its
officers and employees to meet with the Trust’s Board of Trustees to review the
Sub-Advisor Assets.
The
Sub-Advisor also will provide such information or perform such additional acts
as are customarily performed by a Sub-Advisor and may be required for a Fund
or
the Advisor to comply with their respective obligations under applicable federal
securities laws, including, without limitation, the 1940 Act, the Advisers
Act,
the 1934 Act, the Securities Act of 1933, as amended (the “Securities Act”), and
any rule or regulation thereunder.
If
this
Agreement is terminated prior to the end of any calendar month, the fee shall
be
prorated for the portion of any month in which this Agreement is in effect
according to the proportion which the number of calendar days, during which
this
Agreement is in effect, bears to the number of calendar days in the month,
and
shall be payable within ten (10) days after the date of
termination.
(a) The
Sub-Advisor is registered as an investment adviser under the Advisers
Act;
(b) The
Sub-Advisor is a limited liability company, duly organized and validly existing
under the laws of the State of Delaware, with the power to own and possess
its
assets and carry on its business as it is now being conducted;
(c) The
execution, delivery and performance by the Sub-Advisor of this Agreement are
within the Sub-Advisor’s powers and have been duly authorized by all necessary
action on the part of its officers and managing members and no action by or
in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Sub-Advisor for the execution, delivery and
performance by the Sub-Advisor of this Agreement, and the execution, delivery
and performance by the Sub-Advisor of this Agreement do not contravene or
constitute a default under (i) any provision of applicable law, rule or
regulation; (ii) the Sub-Advisor’s governing instruments; or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding
upon
the Sub-Advisor; and
(d) The
Form
ADV of the Sub-Advisor previously provided to the Advisor (a copy of which
is
attached as Exhibit B to this Agreement) is a true and complete copy of the
form
as currently filed with the SEC and the information contained therein is
accurate and complete in all material respects and does not omit to state any
material fact necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading. The Sub-Advisor will
promptly provide the Advisor and the Trust with a complete copy of its Form
ADV
in accordance with the requirements set forth in Rule 204-3 of the Advisers
Act.
(a) The
Advisor is registered as an investment adviser under the Advisers
Act;
(b) The
Advisor is a corporation duly organized and validly existing under the laws
of
the State of Delaware, with the power to own and possess its assets and carry
on
its business as it is now being conducted;
(c) The
execution, delivery and performance by the Advisor of this Agreement are within
the Advisor’s powers and have been duly authorized by all necessary action on
the part of its officers and managing members, and no action by or in respect
of, or filing with, any governmental body, agency or official is required on
the
part of the Advisor for the execution, delivery and performance by the Advisor
of this Agreement, and the execution, delivery and performance by the Advisor
of
this Agreement do not contravene or constitute a default under (i) any provision
of applicable law, rule or regulation; (ii) the Advisor’s governing instruments;
or (iii) any agreement, judgment, injunction, order, decree or other instrument
binding upon the Advisor;
(d) The
Advisor acknowledges that it received a copy of the Sub-Advisor’s Form ADV (a
copy of which is attached as Exhibit B) prior to the execution of this
Agreement;
(e) The
Advisor and the Trust have duly entered into the Advisory Agreement pursuant
to
which the Trust authorized the Advisor to enter into this Agreement;
and
(f) The
Advisor and the Trust have policies and procedures designed to detect and deter
disruptive trading practices, including “market timing,” and the Advisor and the
Trust each agree that they will continue to enforce and abide by such policies
and procedures, as amended from time to time, and comply with all existing
and
future laws relating to such matters or to the purchase and sale of interests
in
the Funds generally.
The
Advisor shall indemnify the Sub-Advisor, its affiliates and its controlling
persons (the “Advisor Indemnified Persons”) for any liability and expenses,
including reasonable attorneys’ fees, howsoever arising from, or in connection
with, the Advisor’s breach of this Agreement or its representations and
warranties herein or as a result of the Advisor’s willful misfeasance, bad
faith, negligence, reckless disregard of its duties hereunder or violation
of
applicable law; provided, however, that the Advisor Indemnified Persons shall
not be indemnified for any liability or expenses which may be sustained as
a
result of the Sub-Advisor’s willful misfeasance, bad faith, negligence, or
reckless disregard of its duties hereunder.
This
Agreement shall not be assigned and shall terminate automatically in the event
of its assignment, except as provided otherwise by any rule, exemptive order
issued by the SEC, or No Action Letter provided or pursuant to the 1940 Act,
or
upon the termination of the Advisory Agreement. In the event that there is
a
proposed change in control of the Sub-Advisor that would act to terminate this
Agreement, if a vote of shareholders to approve continuation of this Agreement
is at that time deemed by counsel to the Trust to be required by the 1940 Act
or
any rule or regulation thereunder, the Sub-Advisor agrees to assume all
reasonable costs associated with soliciting shareholders of the appropriate
Fund(s) of the Trust to approve continuation of this Agreement. Such expenses
include the costs of preparation and mailing of a proxy statement, and of
soliciting proxies. In the event that such proposed change in control of the
Sub-Advisor shall occur following either: (i) receipt by the Advisor and the
Trust of an exemptive order issued by the SEC with respect to the appointment
of
sub-advisors absent shareholder approval, or (ii) the adoption of proposed
Rule
15a-5 under the 1940 Act, the Sub-Advisor agrees to assume all reasonable costs
and expenses (including the costs of mailing) associated with the preparation
of
a statement, required by the exemptive order or Rule 15a-5, containing all
information that would be included in a proxy statement (an “Information
Statement”). In addition, if the Sub-Advisor shall resign, the Sub-Advisor
agrees to assume all reasonable costs and expenses (including the costs of
mailing) associated with the preparation of an Information Statement; provided,
however, that if the Sub-Advisor Assets are less than $100,000,000 at the time
of such resignation, the Sub-Advisor shall not be responsible for such costs
and
expenses to the extent that the costs and expenses exceed $25,000.
This
Agreement shall extend to and bind the heirs, executors, administrators and
successors of the parties hereto.
(a) If
to the
Advisor:
Xxxxxx
Global Investments, Inc.
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Chief Counsel
(b) If
to the
Sub-Advisor:
AQR
Capital Management, LLC
Two
Xxxxxxxxx Xxxxx
Xxxxxxxxx,
XX 00000
Attention:
Client Administration
Fax
No.
000-000-0000
16. Governing
Law. This Agreement shall be governed by the internal laws of the State of
Delaware without regard to conflict of law principles; provided, however that
nothing herein shall be construed as being inconsistent with the 1940 Act.
Where
the effect of a requirement of the 1940 Act reflected in any provision of this
Agreement is altered by a rule, regulation or order of the SEC, whether of
special or general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
XXXXXX
GLOBAL INVESTMENTS, INC.
By:
/s/
Xxxx Xxxxxxxxxxxx
Xxxx
Xxxxxxxxxxxx
Chief
Investment Officer
SUB-ADVISOR
AQR
CAPITAL MANAGEMENT, LLC
By:
/s/
Xxxxxxx X. Xxxxxx
Xxxxxxx
X. Xxxxxx
General
Counsel
EXHIBIT
A
BETWEEN
XXXXXX GLOBAL INVESTMENTS, INC.
AND
AQR
CAPITAL MANAGEMENT, LLC
June
27,
2006
MGI
Small/Mid Cap Value Equity Fund
FEE
SCHEDULE
The
fees
for investment management services provided by the Sub-Advisor are based upon
the value of the Sub-Advisor Assets under management and calculated as
follows:
ASSETS COMPENSATION
On
first
$100 Million 0.65%
Assets
over $100 Million 0.60%
Notwithstanding
the foregoing, should the Sub-Advisor Assets, calculated as of the day occurring
twenty-four (24) months from the date of this Agreement, not exceed $100
million, the fees for investment management services provided by the Sub-Advisor
with respect to the Sub-Advisor Assets shall be calculated as follows for the
duration of this Agreement:
ASSETS COMPENSATION
On
first
$50 Million 0.70%
Assets
over $50 Million 0.60%
EXHIBIT
B
SUB-ADVISOR
FORM
ADV
(Please
attach)