Exhibit (d)(2)
SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of May, 2001, between Zurich Xxxxxxx
Investments, Inc., a Delaware corporation (hereinafter called the "Manager"),
and Zurich Xxxxxxx Investments Japan, Inc. (hereinafter called the
"Subadvisor").
WITNESSETH:
WHEREAS, The Japan Fund, Inc. (the "Fund") is a Maryland corporation
registered as an investment company under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Manager desires to utilize the services of the Subadvisor
as investment counsel with respect to certain portfolio assets of the Fund; and
WHEREAS, the Subadvisor is willing to perform such services on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, it is agreed as follows:
1. The Subadvisor's Services. The Subadvisor will serve the Manager as
investment counsel with respect to the investment portfolio of The Japan Fund,
Inc., which is under the management of the Manager pursuant to an Investment
Management Agreement between the Manager and the Fund dated September 7, 1998.
The Subadvisor is hereby authorized and directed and hereby agrees,
subject to the stated investment policies and restrictions of the Fund as set
forth in the current Prospectus and Statement of Additional Information of the
Fund, including amendments (the "Registration Statement"), and in accordance
with the Articles of Incorporation and By-laws of the Fund, as both may be
amended from time to time, governing the offering of its shares and subject to
such resolutions, policies and procedures as from time to time may be adopted by
the Board of Directors of the Fund and furnished to the Subadvisor, to develop,
recommend and implement such investment program and strategy for the Fund as may
from time to time be most appropriate to the achievement of the investment
objectives of the Fund as stated in the Registration Statement, to provide
research and analysis relative to the investment program and investments of the
Fund, to determine what securities should be purchased and sold and to monitor
on a continuing basis the performance of the portfolio securities of the Fund.
In addition, if requested by the Manager, the Subadvisor will place orders for
the purchase and sale of portfolio securities and, subject to the provisions of
the following paragraph, will take reasonable steps to assure that portfolio
transactions are effected at the best price and execution available. The
Subadvisor will advise the Fund' custodian and the Manager on a prompt basis of
each purchase and sale of a portfolio security specifying the name of the
issuer, the description and amount or number of shares of the security
purchased, the market price, commission and gross or net price, trade date,
settlement date and identity of the effecting broker or dealer. From time to
time as the Directors of the Fund or the Manager may reasonably request, the
Subadvisor will furnish to the Manager,
the Fund's officers and to each of its Directors reports on portfolio
transactions and reports on assets held in the Fund, all in such detail as the
Fund or the Manager may reasonably request. The Subadvisor will also inform the
Manager and the Fund's officers and Directors on a current basis of changes in
investment strategy or tactics or any other developments materially affecting
the Fund. The Subadvisor will make its officers and employees available to meet
with the Manager and the Fund's officers and Directors at least quarterly on due
notice and at such other times as may be mutually agreeable, to review the
investments and investment performance of the Fund in the light of the Fund's
investment objectives and policies and market conditions.
In using its best efforts to obtain for the Fund the most favorable
price and execution available, the Subadvisor, bearing in mind the Fund' best
interests at all times, 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 Directors of the Fund may determine, the
Subadvisor 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 an unaffiliated broker or dealer that provides brokerage
and research services to the Subadvisor 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
Subadvisor 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 Subadvisor's overall responsibilities with respect to the
clients of the Subadvisor for whom the Subadvisor exercises investment
discretion.
It shall be the duty of the Subadvisor to furnish to the Directors of
the Fund such information as may reasonably be requested in order for such
Directors to evaluate this Agreement or any proposed amendments thereto for the
purposes of casting a vote pursuant to Section 9 hereof.
In the performance of its duties hereunder, the Subadvisor is and shall
be an independent contractor and except as otherwise expressly provided herein
or otherwise authorized in writing, shall have no authority to act for or
represent the Fund or the Manager in any way or otherwise be deemed to be an
agent of the Fund or the Manager.
In furnishing the services under this Agreement, the Subadvisor will
comply with the requirements of the 1940 Act applicable to it, and the
regulations promulgated thereunder, and all other applicable laws and
regulations. The Subadvisor will immediately notify the Manager and the Fund in
the event that the Subadvisor: (i) becomes subject to a statutory
disqualification that prevents the Subadvisor from serving as an investment
adviser pursuant to this Agreement; or (ii) is or expects to become the subject
of an administrative proceeding or enforcement action by the Securities and
Exchange Commission or other regulatory authority. The Subadvisor will
immediately forward, upon receipt, to the Manager any correspondence from the
Securities and Exchange Commission or other regulatory authority that relates to
the Fund.
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2. Delivery of Documents to Subadvisor. The Manager will furnish to the
Subadvisor copies of each of the following documents:
(a) The Articles of Incorporation of the Fund as in effect on the
date hereof;
(b) The By-laws of the Fund in effect on the date hereof;
(c) The resolutions of the Directors approving the engagement of
the Subadvisor as Subadvisor to the Fund and approving the
form of this agreement;
(d) The resolutions of the Directors selecting the Manager as
investment manager to the Fund and approving the form of the
Investment Management Agreement with the Fund;
(e) The Investment Management Agreement with the Fund;
(f) The Code of Ethics of the Fund and of the Manager as currently
in effect;
(g) Current copies of the Fund' Prospectus and Statement of
Additional Information; and
(h) Resolutions, policies and procedures adopted by the Directors
of the Fund in respect of the management or operation of the
Fund.
The Manager will furnish the Subadvisor from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any. Such amendments or supplements as to Items
(a) though (g) above will be provided within 30 days of the time such materials
became available to the Manager and until so provided the Subadvisor may
continue to rely on those documents previously provided.
During the term of this Agreement, the Manager also will furnish to the
Subadvisor prior to use thereof copies of all Fund documents, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of the Fund or the public that refer in any way to
the Subadvisor, and will not use such material if the Subadvisor reasonably
objects in writing within five business days (or such other time period as may
be mutually agreed) after receipt thereof. However, the Manager and the
Subadvisor may agree amongst themselves that certain of the above-mentioned
documents do not need to be furnished to the Subadvisor prior to the document's
use.
In the event of termination of this Agreement, the Manager will
continue to furnish to the Subadvisor copies of any of the above-mentioned
materials that refer in any way to the Subadvisor. The Manager shall furnish or
otherwise make available to the Subadvisor such other information relating to
the business affairs of the Fund as the Subadvisor at any time, or from time to
time, reasonably requests in order to discharge its obligations hereunder.
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3. Delivery of Documents to the Manager. The Subadvisor has furnished
the Manager with copies of each of the following documents:
(a) The Subadvisor's most recent balance sheet;
(b) Separate lists of persons who the Subadvisor wishes to have
authorized to give written and/or oral instructions to
Custodians and the fund accounting agent of Fund assets for
the Fund;
(c) The Code of Ethics of the Subadvisor as currently in effect;
and
(d) Any compliance manuals, trading, commission and other reports,
insurance policies, and such other management or operational
documents as the Manager may reasonably request in writing (on
behalf of itself or the Directors of the Fund) in assessing
the Subadvisor.
The Subadvisor will maintain a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide the Fund with
a copy of the code of ethics, including any amendments thereto, and evidence of
its adoption. Within 45 days of the end of each year while this Agreement is in
effect (or more frequently if required by Rule 17j-1 or as the Fund may
reasonably request), an officer of the Subadvisor shall certify in writing to
the Fund that the Subadvisor has complied with the requirements of Rule 17j-1
during the previous year and that there has been no violation of its code of
ethics or, if such a violation has occurred, that appropriate action was taken
in response to such violation. Subadvisor shall also certify to the Fund with
respect to such other matters as may be required by Rule 17j-1. Upon the written
request of the Fund, the Subadvisor shall permit Fund to examine the reports to
be made by the Subadvisor under Rule 17j-1(d) and the records the Subadvisor
maintains pursuant to Rule 17j-1(f).
The Subadvisor will furnish the Manager from time to time with copies,
properly certified or otherwise authenticated, of all material amendments of or
supplements to the foregoing, if any. Additionally, the Subadvisor will provide
to the Manager such other documents relating to its services under this
Agreement as the Manager may reasonably request on a periodic basis. Such
amendments or supplements as to items (a) through (c) above will be provided
within 30 days of the time such materials became available to the Subadvisor.
The Subadvisor will promptly notify the Manager of any proposed
transaction or other event that could reasonably be expected to result in an
"assignment" of this Agreement within the meaning of the 1940 Act. In addition,
the Subadvisor will promptly complete and return to the Manager any compliance
questionnaires or other inquiries submitted to the Subadvisor in writing.
4. Other Agreements, etc. It is understood that any of the
shareholders, Directors, officers and employees of the Fund may be a
shareholder, director, officer or employee of, or be otherwise interested in,
the Subadvisor, any interested person of the Subadvisor, any organization in
which the Subadvisor may have an interest or any organization which may have an
interest in
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the Subadvisor, and that any such interested person or any such organization may
have an interest in the Fund. It is also understood that the Subadvisor, the
Manager and the Fund may have advisory, management, service or other contracts
with other individuals or entities, and may have other interests and businesses.
When a security proposed to be purchased or sold for the Fund is also to be
purchased or sold for other accounts managed by the Subadvisor at the same time,
the Subadvisor shall make such purchases or sales on a pro-rata, rotating or
other equitable basis so as to avoid any one account's being preferred over any
other account.
The Subadvisor may give advice and take action with respect to other
funds or clients, or for its own account which may differ from the advice or the
timing or nature of action taken with respect to the Fund.
Nothing in this Agreement shall be implied to prevent the (i) Manager
from engaging other Subadvisors to provide investment advice and other services
in relation to portfolios of the Fund for which the Subadvisor does not provide
such services, or to prevent the Manager from providing such services itself in
relation to such portfolios; or (ii) the Subadvisor from providing investment
advice and other services to other funds or clients.
5. Fees, Expenses and Other Charges.
(a) For its services hereunder, the Subadvisor shall be paid a
management fee by the Manager according to the fee schedule
attached hereto as Schedule A.
(b) The Subadvisor, at its expense, will furnish all necessary
investment facilities, including salaries of personnel
required for it to execute its duties under this Agreement.
6. Confidential Treatment. It is understood that any information or
recommendation supplied by the Subadvisor in connection with the performance of
its obligations hereunder is to be regarded as confidential and for use only by
the Manager, the Fund or such persons as the Manager may designate in connection
with the Fund. It is also understood that any information supplied to the
Subadvisor in connection with the performance of its obligations hereunder,
particularly, but not limited to, any list of securities which, on a temporary
basis, may not be bought or sold for the Fund, is to be regarded as confidential
and for use only by the Subadvisor in connection with its obligation to provide
investment advice and other services to the Fund.
The Subadvisor will maintain and enforce adequate security procedures
with respect to all materials, records, documents and data relating to any of
its responsibilities pursuant to this Agreement including all means for the
effecting of securities transactions.
7. Representations and Covenants of the Parties. The Subadvisor hereby
acknowledges that it is registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Adviser's Act") and neither it nor any "affiliated
person" of it, as defined in the 1940 Act, is subject to any disqualification
that would make the Subadvisor unable to serve as an investment adviser to a
registered investment company under Section 9 of the 1940 Act. The Subadvisor
covenants that it will carry out appropriate compliance procedures necessary to
the operation of
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the Fund as the Subadvisor and the Manager may agree. The Subadvisor also
covenants that it will manage the Fund in conformity with all applicable rules
and regulations of the Securities and Exchange Commission in all material
respects and so that the Fund will qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code.
8. Reports by the Subadvisor and Records of the Fund. The Subadvisor
shall furnish the Manager monthly, quarterly and annual reports concerning
transactions and performance of the Fund, including information required to be
disclosed in the Fund's Registration Statement, in such form as may be mutually
agreed, to review the Fund and discuss the management of it. The Subadvisor
shall permit the financial statements, books and records with respect to the
Fund to be inspected and audited by the Fund, the Manager or their agents at all
reasonable times during normal business hours. The Subadvisor shall immediately
notify and forward to both the Manager and legal counsel for the Fund any legal
process served upon it on behalf of the Manager or the Fund. The Subadvisor
shall promptly notify the Manager of any changes in any information concerning
the Subadvisor of which the Subadvisor becomes aware that would be required to
be disclosed in the Fund's registration statement.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Subadvisor agrees that all records it maintains for the Fund are the
property of the Fund and further agrees to surrender promptly to the Fund or the
Manager any such records upon the Fund's or the Manager's request. The
Subadvisor further agrees to maintain for the Fund the records the Fund is
required to maintain under Rule 31a-1(b) insofar as such records relate to the
investment affairs of the Fund. The Subadvisor further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records it maintains
for the Fund.
9. Continuance and Termination. This Agreement shall remain in full
force and effect through October 31, 2001, and is renewable annually thereafter
by specific approval of the Board of Directors of the Fund or by the affirmative
vote of a majority of the outstanding voting securities of the Fund. Any such
renewal shall be approved by the vote of a majority of the Directors of the Fund
who are not interested persons under the 1940 Act, cast in person at a meeting
called for the purpose of voting on such renewal. This Agreement may be
terminated without penalty at any time by the Directors, by vote of a majority
of the outstanding voting securities of the Fund, or by the Manager or by the
Subadvisor upon 60 days written notice, and will automatically terminate in the
event of its assignment by either party to this Agreement, as defined in the
1940 Act, or upon termination of the Manager's Investment Management Agreement
with the Fund. In addition, the Manager or the Fund may terminate this Agreement
upon immediate notice if the Subadvisor becomes statutorily disqualified from
performing its duties under this Agreement or otherwise is legally prohibited
from operating as an investment adviser.
10. Voting Rights. The Manager shall be responsible for exercising any
voting rights of any securities of the Fund.
11. Indemnification. The Subadvisor agrees to indemnify and hold
harmless the Manager, any affiliated person within the meaning of Section
2(a)(3) of the 1940 Act ("affiliated person") of the Manager and each person, if
any, who, within the meaning of Section 15 of the
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Securities Act of 1933 (the "1933 Act"), controls ("controlling person") the
Manager, against any and all losses, claims damages, liabilities or litigation
(including reasonable legal and other expenses), to which the Manager or such
affiliated person or controlling person may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, under any other statute, at common law or
otherwise, arising out of Subadvisor's responsibilities as portfolio manager of
the Fund (1) to the extent of and as a result of the willful misconduct, bad
faith, or gross negligence by the Subadvisor, any of the Subadvisor's employees
or representatives or any affiliate of or any person acting on behalf of the
Subadvisor, or (2) as a result of any untrue statement or alleged untrue
statement of a material fact contained in a prospectus or statement of
additional information covering the Fund or the Fund or any amendment thereof or
any supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading, if such a statement or omission was made in reliance
upon written information furnished by the Subadvisor to the Manager, the Fund or
any affiliated person of the Manager or the Fund expressly for use in the Fund's
registration statement, or upon verbal information confirmed by the Subadvisor
in writing expressly for use in the Fund's registration statement or (3) to the
extent of, and as a result of, the failure of the Subadvisor to execute, or
cause to be executed, portfolio transactions according to the standards and
requirements of the 1940 Act; provided, however, that in no case is the
Subadvisor's indemnity in favor of the Manager or any affiliated person or
controlling person of the Manager, or any other provision of this Agreement,
deemed to protect such person against any liability to which any such person
would otherwise be subject by reason of willful misconduct, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
The Manager agrees to indemnify and hold harmless the Subadvisor, any
affiliated person within the meaning of Section 2(a)(3) of the 1940 Act
("affiliated person") of the Subadvisor and each person, if any, who, within the
meaning of Section 15 of the 1933 Act, controls ("controlling person") the
Subadvisor, against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Subadvisor or such affiliated person or controlling person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute, at
common law or otherwise, arising out of the Manager's responsibilities as
investment manager of the Fund (1) to the extent of and as a result of the
willful misconduct, bad faith, or gross negligence by the Manager, any of the
Manager's employees or representatives or any affiliate of or any person acting
on behalf of the Manager, or (2) as a result of any untrue statement or alleged
untrue statement of a material fact contained in a prospectus or statement of
additional information covering the Fund or the Fund or any amendment thereof or
any supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading, if such a statement or omission was made by the Fund
other than in reliance upon written information furnished by the Subadvisor, or
any affiliated person of the Subadvisor, expressly for use in the Fund's
registration statement or other than upon verbal information confirmed by the
Subadvisor in writing expressly for use in the Fund's registration statement;
provided, however, that in no case is the Manager's indemnity in favor of the
Subadvisor or any affiliated person or controlling person of the Subadvisor, or
any other provision of this Agreement, deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misconduct, bad faith or gross negligence in the
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performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
12. Certain Definitions. For the purposes of this Agreement, the "vote
of a majority of the outstanding voting securities of the Fund" means the
affirmative vote, at a duly called and held meeting of shareholders of the Fund,
(a) of the holders of 67% or more of the shares of the Fund present (in person
or by proxy) and entitled to vote at such meeting, if the holders of more than
50% of the outstanding shares of the Fund entitled to vote at such meeting are
present in person or by proxy, or (b) of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting, whichever is
less.
For the purposes of this Agreement, the terms "interested person" and
"assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
For the purposes of this Agreement, the terms "assets", "net assets",
"securities", "portfolio securities" or "investments" of the Fund shall mean,
respectively, such assets, net assets, securities, portfolio securities or
investments which are from time to time under the management of the Subadvisor
pursuant to this Agreement.
13. Notices. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered or sent by
pre-paid first class letter post to the following addresses or to such other
address as the relevant addressee shall hereafter notify for such purpose to the
others by notice in writing and shall be deemed to have been given at the time
of delivery.
If to the Manager: ZURICH XXXXXXX INVESTMENTS, INC.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxx
Attention: General Counsel
If to the Fund: THE JAPAN FUND, INC.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxx
Attention: Secretary
If to the Subadvisor: ZURICH XXXXXXX INVESTMENTS JAPAN, INC.
Kamiyachyo Mori Building, 00xx Xxxxx
0-0-00, Xxxxxxxxx
Xxxxxx-xx, Xxxxx, Xxxxx 105-0001
Attention: Chief Compliance Officer
14. Instructions. The Subadvisor is authorized to honor and act on any
notice, instruction or confirmation given by the Fund or Manager in writing
signed or sent by one of the persons
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whose names, addresses and specimen signatures will be provided by the Fund or
Manager from time to time.
15. Law. This Agreement is governed by and shall be construed in
accordance with the laws of the State of New York in a manner not in conflict
with the provisions of the 1940 Act.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have each caused this instrument
to be signed in duplicate on its behalf by the officer designated below
thereunto duly authorized.
ZURICH XXXXXXX INVESTMENTS, INC.
Attest: By:
--------------------------- --------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Managing Director
ZURICH XXXXXXX INVESTMENTS JAPAN. INC.
Attest: By:
--------------------------- -------------------------------------
Name: Xxxxxxxxx Xxxxxx
Title: Managing Director
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Schedule A to the Subadvisory Agreement for The Japan Fund, Inc. ("Fund")
dated as of May 1, 2001 between Zurich Xxxxxxx Investments, Inc. ("Manager")
and Zurich Xxxxxxx Investments Japan, Inc. ("Subadvisor")
FEE SCHEDULE
As compensation for its services described herein, the Manager will pay to the
Subadvisor, at the end of each calendar month, a sub-advisory fee computed at an
annual rate of 0.280% of the average daily net assets of the Fund.
The "average daily net assets" of the Fund shall be calculated at such time or
times as the Directors of may determine in accordance with the provisions of the
Investment Company Act of 1940. The value of the net assets of the Fund shall
always be determined pursuant to the applicable provisions of the Articles of
Incorporation of the Fund and the Registration Statement of the Fund. If the
determination of net asset value does not take place for any particular day, for
the purposes of this Schedule A, the net asset value shall be deemed to be the
net asset value determined as of the close of business on the last day on which
such calculation was made for the purpose of the foregoing computation. If the
Fund determines the value of the net assets of its portfolio more than once on
any day, then the last such determination thereof on that day shall be deemed to
be the sole determination thereof on that day for the purposes of this Schedule
A. Fees are charged monthly in arrears based on one-twelfth of the annual fee
rate. Fees will be prorated appropriately if Subadvisor does not perform
services pursuant to this Subadvisory Agreement for a full month.
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