Exhibit (d)(10)
VALUE OPPORTUNITIES FUND
SUB-ADVISORY AGREEMENT
Sub-Advisory Agreement (the "Agreement") executed as of September 2, 2005
between XXXX XXXXXXX INVESTMENT MANAGEMENT SERVICES, LLC, a Delaware limited
liability company (the "Adviser"), and GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC, a
Massachusetts limited liability company (the "Subadviser").
WHEREAS, the Adviser serves as investment adviser of the Value
Opportunities Fund (the "Fund"), a series of Xxxx Xxxxxxx Funds III (the
"Trust"), a Massachusetts business trust which has filed a registration
statement under the Investment Company Act of 1940, as amended (the "1940 Act")
and the Securities Act of 1933 (the "1933 Act"); and
WHEREAS, the Trust consists of several series, one of which is the
Fund; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), and desires to avail itself of the
services, advice and assistance of the Subadviser to assist the Adviser in
providing investment advisory services to the Fund; and
WHEREAS, the Subadviser is registered under the Advisers Act, and is
engaged in the business of rendering investment advisory services to investment
companies and other institutional clients and desires to provide such services
to the Adviser;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed as follows:
1. SERVICES TO BE RENDERED BY THE SUB-ADVISER.
(a) Subject always to the control of the trustees of the Trust (the
"Trustees"), the Subadviser, at its expense, will furnish continuously an
investment program for the Fund and will make investment decisions on
behalf of the Fund and place all orders for the purchase and sale of
portfolio securities and all other investments. The Subadviser will
allocate all facilities and personnel necessary for the conduct of its
duties under this Agreement. In the performance of its duties, the
Subadviser will comply with (1) the provisions of the Trust's Agreement
and Declaration of Trust and By-laws, and the investment objectives,
policies and restrictions of the Fund as set forth in its current
Prospectus and Statement of Additional Information (copies of which will
be supplied to the Subadviser upon filing with the SEC), and any
amendments to such Agreement and Declaration of Trust, By-laws, investment
objectives, policies and restrictions which the Trustees or the Adviser,
as the case may be, may from time to time determine, as promptly as
practicable after such amendments have been communicated to the Subadviser
in writing, and (2) other policies which the Trustees may from time to
time determine, as promptly as practicable after such policies have been
communicated to the Subadviser in writing. The Subadviser and the Adviser
shall each make its officers and employees and any information reasonably
requested available to the other from time to time at reasonable times to
review investment policies of the Fund, to facilitate the Adviser's
monitoring of the Subadviser, and to consult with each other regarding the
investment affairs of the Fund.
(b) The Subadviser shall bear its own expenses in providing services
pursuant to this Agreement, including salaries of its personnel. The
Subadviser shall not be obligated to pay any expenses of the Adviser, the
Trust or the Fund, including without limitation (i) interest and taxes;
(ii) brokerage commissions and other costs in connection with the purchase
and sale of securities and other investment instruments of the Fund; and
(iii) custodian fees and expenses. The Subadviser shall not be obligated
to pay any expenses of or for the Fund not expressly assumed by the
Subadviser pursuant to this Section 1. Any reimbursement of management or
other fees required by an expense limitation or waiver provision, and any
liability arising out of a violation by the Adviser of Section 36(b) of
the 1940 Act, shall be the sole responsibility of the Adviser, provided
that nothing herein shall relieve the Subadviser from its own liability
under Section 36(b) of the 1940 Act with respect to its duties under this
Agreement.
(c) In the selection of brokers or dealers and the placing of orders
for the purchase and sale of portfolio investments for the Fund, the
Subadviser 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 Subadviser,
bearing in mind the Fund's 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 execution capability, 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 Trustees of the Trust may
determine and communicate to the Subadviser in writing, the Subadviser
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 Subadviser 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 Subadviser 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 Subadviser's
overall responsibilities with respect to the Fund and to other clients of
the Subadviser and its affiliates as to which the Subadviser or its
affiliates exercise investment discretion.
(d) The Subadviser may execute Fund documentation, agreements,
contracts and other documents requested by brokers, dealers,
counterparties and other persons in connection with its providing
investment advisory services to the Fund.
(e) Nothing herein shall be considered as constituting the
Subadviser as an agent for the Adviser or the Fund or the Trust or as
anything other than an independent contractor with respect to the Adviser
or the Fund or the Trust.
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(f) The Subadviser makes no representation or warranty, express or
implied, that any level of performance or investment results will be
achieved by the Fund or that the Fund will perform comparably with any
standard, including other funds managed by the Subadviser.
(g) The Subadviser will provide such access to the Subadviser's
chief compliance officer and such compliance-related information
concerning the Subadviser's services to the Fund under this Agreement as
may reasonably be requested by the chief compliance officer of the Adviser
or of the Fund, as the case may be.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers
and employees of the Trust may be a shareholder, member, director, officer
or employee of, or be otherwise interested in, the Subadviser, and in any
person controlled by or under common control with the Subadviser, and that
the Subadviser and any person controlled by or under common control with
the Subadviser may have an interest in the Trust. It is also understood
that this is a non-exclusive contract for services, and that the
Subadviser and persons controlled by or under common control with the
Subadviser have and may have advisory, management service or other
contracts with other organizations and persons, and may have other
interests and businesses. The Subadviser may, by way of example and not by
way of limitation, undertake to act as investment adviser or subadviser
for any investment company, including without limitation other U.S.
registered investment companies with identical investment policies to the
Fund. Nothing in this paragraph is intended to negate or otherwise limit
any existing or future agreements between the Adviser and the Subadviser
beyond this Agreement that may have the effect of limiting (i) the
organizations and persons to which the Subadviser may provide investment
advisory services or (ii) the nature of the investment advisory services
the Subadviser may provide to other organizations and persons.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Adviser will pay to the Subadviser the compensation specified in
Appendix A in return for the Subadviser's services rendered hereunder.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS CONTRACT.
This Agreement shall automatically terminate, without the payment of
any penalty by the Fund, in the event of its assignment or in the event
that the Investment Management Contract between the Adviser and the Trust
shall have terminated for any reason; and this Agreement shall not be
amended unless such amendment is approved as follows: (i) at a meeting by
the affirmative vote of a majority of the outstanding shares of the Fund,
unless either (A) a determination is made that shareholder approval is not
required based on SEC guidance or reliance on SEC staff interpretations or
(B) pursuant to exemptive relief no such approval is required; and (ii) by
the vote, cast in person at a meeting called for the purpose of voting on
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such approval, of a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Adviser or of the Subadviser;
and (iii) by both parties hereto.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
(a) This Agreement shall not become effective until such time as it
is fully executed by all parties hereto (the "Effective Date"). Subject to
any early termination provisions below, this Agreement shall continue in
full force and effect as to the Fund for a period of five years from the
Effective Date.
(b) Notwithstanding the foregoing, if (i) the Trustees of the Trust
or the shareholders by the affirmative vote of a majority of the
outstanding shares of the Fund, and (ii) a majority of the Trustees of the
Trust who are not interested persons of the Trust or of the Adviser or of
the Subadviser, by vote cast in person at a meeting called for the purpose
of voting on such approval, do not specifically approve at least annually
the continuance of this Agreement, then this Agreement shall automatically
terminate at the close of business on the second anniversary of the
Effective Date, or upon the expiration of one year from the effective date
of the last such continuance, whichever is later. This Agreement may
continue in effect following the fifth anniversary of the Effective Date
only so long as such continuance is approved in accordance with applicable
law.
(c) Notwithstanding the foregoing, if the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval
and such shareholders fail to approve such continuance of this Agreement
as provided herein, the Subadviser may continue to serve hereunder in a
manner consistent with the 1940 Act and the rules and regulations
thereunder.
(d) The Trust may at any time terminate this Agreement upon 60 days
prior written notice delivered or mailed by registered mail, postage
prepaid, to the Adviser and the Subadviser. Action by the Trust to effect
such termination may be taken either (i) by vote of a majority of its
Trustees, or (ii) by the affirmative vote of a majority of the outstanding
shares of the Fund.
(e) Either the Adviser or the Subadviser may at any time terminate
this Agreement by not less than 60 days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party and the
Fund.
(f) Termination of this Agreement pursuant to this Section 5 shall
be without the payment of any penalty by the Fund. Neither the Adviser nor
the Trust shall use or refer in any way to the name of the Subadviser
following the termination of this Agreement without the Subadviser's
consent, except as may be required by law.
6. CERTAIN INFORMATION.
The Subadviser shall promptly notify the Adviser in writing of the
occurrence of any of the following events: (a) the Subadviser shall fail
to be registered as an investment adviser under the Advisers Act and under
the laws of any jurisdiction in which the Subadviser is required to be
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registered as an investment adviser in order to perform its obligations
under this Agreement, (b) the Subadviser shall be disqualified from
serving as investment adviser to the Fund pursuant to Section 9 of the
1940 Act, or otherwise, (c) the Subadviser shall have been served or
otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board
or body, involving the affairs of the Trust, (d) there is a change in
control of the Subadviser or any parent of the Subadviser within the
meaning of the 1940 Act, (e) there is a material adverse change in the
business or financial position of the Subadviser that would materially
affect the services provided by the Subadviser hereunder, or (f) any
person(s) primarily responsible for the day-to-day management of the
Fund's portfolio, if any, shall have changed.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares of the Fund" means the affirmative
vote, at a duly called and held meeting of shareholders, (a) of the
holders of 67% or more of the shares of the Fund, as the case may be,
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, as the
case may be, 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, as the case may be, entitled to vote at such meeting, whichever
is less.
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their
respective meanings defined in the 1940 Act and the rules and regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under the 1940 Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules and regulations thereunder; and
the term "brokerage and research services" shall have the meaning given in
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
8. NONLIABILITY OF SUBADVISER.
Notwithstanding any other provision of this Agreement, in the
absence of willful misconduct, bad faith or gross negligence on the part
of the Subadviser, or reckless disregard of its obligations and duties
hereunder, the Subadviser, including its officers, directors, employees
and members, shall not be subject to any liability to the Adviser, to the
Trust, to the Fund, or to any shareholder, officer, director or Trustee
thereof, for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security.
9. EXERCISE OF VOTING RIGHTS.
Except as instructed otherwise by the Trustees of the Trust or the
Adviser, the Subadviser shall at its discretion exercise or procure the
exercise of any voting right attaching to investments of the Fund. The
Adviser agrees and acknowledges that the Subadviser shall not be obligated
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to take any action with respect to any class action proceedings or other
legal action concerning securities held in the Fund's portfolio, except to
forward to the Adviser in a timely fashion any notice of such an action
that the Subadviser may receive.
10. REPORTS.
During the term of this Agreement, the Adviser agrees to use its
best efforts (a) to furnish to the Subadviser, at a reasonable time prior
to the use thereof, all prospectuses (as described in Section 10(a) of the
Securities Act of 1933, as amended (the "1933 Act")), proxy statements,
reports to shareholders, sales literature or other material relating to
the Trust which describe the Subadviser or its ownership, business or
investment processes in any way that is materially different from the
"Agreed Disclosure" (which for this purpose means either (i) the
prospectus (including any prospectus supplement) or (ii) the most recent
amendment to the Trust's registration statement under the 1933 Act
depending on whether, on the relevant date, the prospectus or the
amendment was more recently filed with the SEC) and (b) not to use any
such material (to the extent it relates to the Subadviser) if the
Subadviser objects in writing that the description of the Subadviser or
its ownership, business or investment process is materially misleading or
inaccurate.
11. CONSULTATION WITH SUBADVISERS.
In order to allow the Trust and the parties hereto to take advantage
of the safe harbor under Rule 17a-10 under the 1940 Act, the Subadviser is
prohibited from consulting with the entities listed below concerning
transactions for the Fund in securities or other assets:
1. other subadvisers to the Fund
2. other subadvisers to a series of the Trust
3. other subadvisers to a fund under common control with the Fund
12. MISCELLANEOUS.
(a) Any information and advice furnished by either party to this
Agreement to the other shall be treated as confidential and shall not be
disclosed to third parties without the consent of the other party hereto
except as required by applicable law, rule or regulation.
(b) This Agreement shall be governed and construed in accordance
with the laws of The Commonwealth of Massachusetts.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
(d) The Agreement and Declaration of Trust of the Trust, a copy of
which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of The Commonwealth of Massachusetts,
provides that the name of the Trust refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or
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personally; and no Trustee, shareholder, officer, employee or agent of the
Trust shall be held to any personal liability, nor shall resort be had to
their private property, for the satisfaction of any obligation or claim,
in connection with the affairs of the Trust or any series thereof
(including the Fund), but only the assets belonging to the Trust, or to
the Fund or other particular series of the Trust with respect to which
such obligation or claim arose, shall be liable.
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In Witness Whereof, XXXX XXXXXXX INVESTMENT MANAGEMENT SERVICES, LLC and
GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC have each caused this instrument to be
signed in duplicate on its behalf by its duly authorized representative, all as
of the day and year first above written.
XXXX XXXXXXX INVESTMENT MANAGEMENT SERVICES, LLC
By: /s/ Xxxxx X. Xxxxx
------------------
Title: Executive Vice President
GRANTHAM, MAYO, VAN OTTERLOO
& CO. LLC
By: /s/ Xxxxx X. Xxxxx
------------------
Title:
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Title:
Accepted and agreed to as of the day and year first above written:
XXXX XXXXXXX FUNDS III,
on behalf of its
Value Opportunities Fund
By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------
Title: President
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APPENDIX A
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The Subadviser shall serve as investment subadviser for the Fund. The
Adviser will pay the Subadviser, as full compensation for all services provided
under this Agreement, the fee computed as indicated below.
1. For purposes of calculating the fee to be paid to the Subadviser under
this Agreement:
"Fund Assets" shall mean the net assets of the Fund managed by the
Subadviser for which the fee is being calculated;
"Other Assets" shall mean the net assets of the portion of assets
managed by the Subadviser of the accounts listed in the table under Item 3
below;
"Combined Assets" shall mean the sum of Fund Assets and Other
Assets; and
"Daily Fund Net Assets" shall mean the net asset value of the Fund
Assets as of the end of each day.
"Daily Combined Net Assets" shall mean the net asset value of the
Combined Assets as of the end of each day.
2. The Subadviser's fee shall be calculated and accrued daily based upon
the Daily Fund Net Assets and the sum of the daily fee accruals shall be paid
monthly in arrears (within 10 days of receipt by the Adviser of an invoice from
the Subadviser). The fee accrued each calendar day shall be calculated by
applying the Applicable Rate, as determined in accordance with Item 4 below, to
the Daily Fund Net Assets, and dividing by 365 (366 in a leap year).
3. The following table shall be used to determine the Other Assets that
correspond to the Fund:
NAMES OF ACCOUNTS USED TO CALCULATE "OTHER ASSETS"
--------------------------------------------------
Value Opportunities Trust, a series of Xxxx Xxxxxxx Trust
4. The following fee schedule shall be used to determine the Applicable
Rate used in calculating the fee to be paid to the Subadviser under this
Agreement, in each case based on the Daily Combined Net Assets as indicated.
THIRD TRANCHE:
SECOND TRANCHE: DAILY
DAILY COMBINED COMBINED NET
FIRST TRANCHE: NET ASSETS IN ASSETS IN FOURTH TRANCHE:
DAILY COMBINED EXCESS OF EXCESS OF DAILY COMBINED
NET ASSETS $500,000,000 $1,000,000,000 NET ASSETS IN
UP TO AND UP TO AND UP TO EXCESS OF
NAME OF FUND $500,000,000 $1,000,000,000 $2,500,000,000 $2,500,000,000
------------ ------------ -------------- -------------- --------------
Value
Opportunities
Fund 0.35% 0.33% 0.32% 0.31%
The "Applicable Rate" is equal to the quotient of (a) the sum of the products of
the percentage and the dollar amount of the portion of Daily Combined Net Assets
in each respective tranche, divided by (b) the total amount of Daily Combined
Net Assets. For example, if Daily Combined Net Assets were $3,000,000,000, the
Applicable Rate would be (($500,000,000 * 0.35%) + ($500,000,000 * 0.33%) +
($1,500,000,000 * 0.32 %) + ($500,000,000 * 0.31%)) / $3,000,000,000 = ($1.75m +
$1.65m + $4.8m + $1.55m) / $3,000m = 0.325%.
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