XXXX XXXXXXX INVESTMENT TRUST III
Xxxx Xxxxxxx Greater China Opportunities Fund
Sub-Investment Management Contract
Dated June 1, 2005
XXXX XXXXXXX ADVISERS, LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
XXXX XXXXXXX INVESTMENT TRUST III
Xxxx Xxxxxxx Greater China Opportunities Fund
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
MFC Global Investment Management (U.S.A.) Limited
000 Xxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Sub-Investment Management Contract
Ladies and Gentlemen:
Xxxx Xxxxxxx Investment Trust III (the "Trust") has been organized as a
business trust under the laws of The Commonwealth of Massachusetts to engage in
the business of an investment company. The Trust's shares of beneficial interest
may be classified into series, each series representing the entire undivided
interest in a separate portfolio of assets. Series may be established or
terminated from time to time by action of the Board of Trustees of the Trust.
The Board of Trustees has established several series of the Trust, including
Xxxx Xxxxxxx Greater China Opportunities Fund (the "Fund").
The Trustees have selected Xxxx Xxxxxxx Advisers, LLC (the "Adviser") to
provide overall investment advice and management for the Fund, and to provide
certain other services, under the terms and conditions provided in the
Investment Management Contract, dated as of the date hereof, between the Trust,
the Fund and the Adviser (the "Investment Management Contract").
The Adviser and the Trustees have selected MFC Global Investment Management
(U. S. A.) Limited (the "Sub-Adviser") to provide the Adviser and the Fund with
the investment management and advisory services set forth below, and the
Sub-Adviser is willing to provide such advice and services, subject to the
review of the Trustees and overall supervision of the Adviser, under the terms
and conditions set forth in this agreement (the "Agreement"). The Sub-Adviser
hereby represents and warrants that it is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
Accordingly, the Trust, on behalf of the Fund, and the Adviser agree with the
Sub-Adviser as follows:
1. Investment Services.
(a) The Sub-Adviser will provide to the Fund continuing and suitable
investment advice with respect to investments, consistent with the
investment policies, objectives and restrictions of the Fund as set
forth in the Fund's Prospectus and Statement of Additional
Information. In the performance of the Sub-Adviser's duties hereunder,
subject always to (i) the Trust's and the Fund's organizational
documents as amended from time to time and (ii) the limitations set
forth in the Registration Statement of the Trust, on behalf of the
Fund, as in effect from time to time under the Securities Act of 1933,
1
as amended (the "1933 Act"), and the Investment Company Act of 1940,
as amended (the "1940 Act"), the Sub-Adviser will have full
discretionary authority over the investments of the Fund. In
performing the Sub-Adviser's obligations hereunder, the Sub-Adviser
shall comply with the provisions of the Declaration of Trust and
By-laws (as provided to the Sub- Adviser by the Adviser from time to
time), the 1940 Act, Advisers Act, the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the Commodity
Exchange Act and the rules and regulations promulgated under such
statutes and the investment objective, policies and restrictions of
the Fund, as each of the same shall be from time to time in effect as
set forth in the Fund's then current Prospectus and Statement of
Additional Information (as provided to the Sub- Adviser by the Adviser
from time to time). The Sub-Adviser shall cause the Fund to comply
with the requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), for qualification as a regulated
investment company. The Sub-Adviser shall also comply with such
policies, guidelines, procedures and instructions as the Adviser or
the Trustees may from time to time establish and deliver to the
Sub-Adviser. No supervisory activity undertaken by the Adviser shall
limit the Sub-Adviser's responsibility for the foregoing. No reference
in this agreement to the Sub-Adviser's discretionary authority over
the Fund's investments shall in any way limit the right of the
Adviser, in its sole discretion, to establish and revise policies in
connection with the management of the Fund's assets or otherwise
exercise its right to control the overall management of the Fund's
assets.
(b) The Sub-Adviser will, at its own expense:
(i) furnish the Adviser and the Fund with advice and recommendations,
consistent with the investment policies, objectives and
restrictions of the Fund as set forth in the Fund's Prospectus
and Statement of Additional Information, with respect to the
purchase, holding and disposition of portfolio securities;
(ii) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to
corporate action and any other rights pertaining to the Fund's
assets shall be exercised, as requested, the Fund having the
responsibility to exercise such voting and other rights;
(iii)consistent with provisions of Section 6 of the Agreement, place
orders for the purchase, sale or exchange of portfolio securities
with brokers or dealers selected by the Adviser or the
Sub-Adviser, provided that in connection with the placing of such
orders and the selection of such brokers or dealers the
Sub-Adviser shall seek to obtain execution and pricing within the
policy guidelines determined by the Trustees and set forth in the
Prospectus and Statement of Additional Information of the Fund as
in effect and furnished to the Sub-Adviser from time to time;
(iv) furnish the Adviser and the Fund with research, economic and
statistical data in connection with the Fund's investments and
investment policies;
2
(v) submit such reports relating to the valuation of the Fund's
securities as the Trustees or the Fund's Valuation Committee may
reasonably request and to monitor daily the value of all
securities held by the Fund and in particular the value of any
security that is priced at fair value in accordance with the
Fund's valuation procedures and immediately report to the Adviser
any change in such fair value;
(vi) from time to time or at any time as reasonably requested by the
Adviser or the Trustees, make reports to the Adviser or the Trust
of the Sub-Adviser's performance of the foregoing services and
the compliance by the Fund with applicable statutory and
regulatory requirements relating to the management of the Fund's
assets and the Fund's investment objectives, policies and
restrictions and upon request, which may be without notice, to
make the Sub-Adviser's records and premises available for
compliance audits by the Adviser or the Fund's accountants or
counsel;
(vii) subject to the supervision of the Adviser, maintain all books and
records with respect to the Fund's securities transactions
required by the 1940 Act, and preserve such records for the
periods prescribed therefor by the 1940 Act (the Sub-Adviser
agrees that such records are the property of the Trust and copies
will be surrendered to the Trust promptly upon request therefore,
subject to the Sub-Adviser's rights to keep copies);
(viii)cooperate with and provide reasonable assistance to the Adviser,
the Fund, the Fund's custodian and foreign sub-custodians, the
Fund's pricing agents and all other agents and representatives of
the Fund and the Adviser, furnish such information with respect
to the Fund as they may reasonably request from time to time in
the performance of their obligations, provide prompt responses to
reasonable requests made by such persons and establish
appropriate interfaces with each so as to promote the efficient
exchange of information and compliance with applicable laws and
regulations; and
(ix) cooperate generally with the Fund and the Adviser to provide
information reasonably requested by the Adviser which is
necessary for the preparation of registration statements and
periodic reports to be filed with the Securities and Exchange
Commission, including Form N-1A, periodic statements, shareholder
communications and proxy materials furnished to holders of shares
of the Fund, filings with state "blue sky" authorities and with
United States agencies responsible for tax matters, and other
reports and filings of like nature.
2. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Agreement, the expenses of office rent, telephone, telecommunications
and other facilities it is obligated to provide in order to perform the services
specified in Section 1, and any other expenses incurred by it in connection with
the performance of its duties hereunder.
3
3. Expenses of the Fund Not Paid by the Sub-Adviser. The Sub-Adviser will
not be required to pay any expenses of the Fund which this Agreement does not
expressly make payable by the Sub-Adviser. In particular, and without limiting
the generality of the foregoing but subject to the provisions of Section 2, the
Sub-Adviser will not be required to pay under this Agreement:
(a) the compensation and expenses of Trustees and of independent advisers,
independent contractors, consultants, managers and other agents
employed by the Trust or the Fund other than through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust or the
Fund;
(c) the fees and disbursements of custodians and depositories of the Trust
or the Fund's assets, transfer agents, disbursing agents, plan agents
and registrars;
(d) taxes and governmental fees assessed against the Trust or the Fund's
assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends, distributions, reports,
notices and proxy materials to shareholders of the Trust or the Fund,
except that the Sub-Adviser shall bear the costs of providing the
information referred to in Section 1(ix) to the Adviser;
(f) brokers' commissions and underwriting fees; and
(g) the expense of periodic calculations of the net asset value of the
shares of the Fund.
4. Compensation of the Sub-Adviser. (a) Subject to Section 4(b), for all
services to be rendered, facilities furnished and expenses paid or assumed by
the Sub-Adviser as herein provided for the Fund, the Adviser will pay the
Sub-Adviser quarterly, in arrears, within 5 business days after the end of each
quarter, a fee equal on an annual basis to 0.30% of the Fund's average daily net
assets. The "average daily net assets" of the Fund shall be determined on the
basis set forth in the Fund's Prospectus or otherwise consistent with the 1940
Act and the regulations promulgated thereunder. The Sub-Adviser will receive a
pro rata portion of such fee for any periods in which the Sub-Adviser advises
the Fund less than a full quarter. The Fund shall not be liable to the
Sub-Adviser for the Sub-Adviser's compensation hereunder. Calculations of the
Sub-Adviser's fee will be based on average net asset values as provided by the
Adviser.
(b) For the period from the effective date of the Agreement forward,
the Sub-Adviser agrees to waive its fee until the net revenue
received by the Adviser from its Advisery Fee exceeds the
Advisors cumulative costs (including the marketing expenses not
recovered under a Rule 12b-1 Plan) and to limit its Sub-Advisory
Fee to the amount of such net revenue if such net revenue is less
than the Sub-Advisory Fee.
5. Other Activities of the Sub-Adviser and Its Affiliates. Nothing herein
contained shall prevent the Sub-Adviser or any associate of the Sub-Adviser from
engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity. It is understood that
officers, directors and employees of the Sub-Adviser or its affiliates may
4
continue to engage in providing portfolio management services and advice to
other investment companies, whether or not registered, to other investment
advisory clients of the Sub-Adviser or its affiliates and to said affiliates
themselves.
6. Avoidance of Inconsistent Position. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the
Sub-Adviser nor any of its investment management subsidiaries nor any of such
investment management subsidiaries' directors, officers or employees will act as
principal or agent or receive any commission, except as may be permitted by the
1940 Act and rules and regulations promulgated thereunder. The Sub-Adviser shall
not knowingly recommend that the Fund purchase, sell or retain securities of any
issuer in which the Sub-Adviser has a financial interest which would cause it to
be a principal transaction without obtaining prior approval of the Adviser prior
to the execution of any such transaction.
Nothing herein contained shall limit or restrict the Sub-Adviser or any of
its officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts or for the account of
clients other than the Fund. The Trust and Fund acknowledge the Sub-Adviser and
its officers, affiliates, and employees, and its other clients may at any time
have, acquire, increase, decrease or dispose of positions in investments which
are at the same time being acquired or disposed of hereunder. The Sub-Adviser
shall have no obligation to acquire with respect to the Fund, a position in any
investment which the Sub-Adviser, its officers, affiliates or employees may
acquire for its or their own accounts or for the account of another client, if
in the sole discretion of the Sub-Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund. Nothing herein
contained shall prevent the Sub-Adviser from purchasing or recommending the
purchase of a particular security for one or more funds or clients while other
funds or clients may be selling the same security.
7. No Partnership or Joint Venture. The Trust, the Fund, the Adviser and
the Sub-Adviser are not partners of or joint venturers with each other and
nothing herein shall be construed so as to make them such partners or joint
venturers or impose any liability as such on any of them. The Sub-Adviser is an
independent contractor and is not an agent of either the Adviser or the Fund.
8. Limitation of Liability of Sub-Adviser. The Sub-Adviser shall not be
liable for any losses, claims, damages, liabilities or litigation (including
legal and other expenses) incurred or suffered by the Adviser, the Trust, the
Fund or any of their affiliates as a result of any error of judgment or mistake
of law by the Sub-Adviser with respect to the Fund, except that nothing in this
Agreement shall operate or purport to operate in any way to exculpate, waive or
limit the liability of the Sub-Adviser for, and the Sub-Adviser shall indemnify
and hold harmless the Adviser, the Trust, and the Fund (collectively, the
"Adviser Indemnitees") against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses) to which any of
the Adviser Indemnities may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, or under any other statute, at common law or otherwise arising out
of or based on (a) the Sub-Adviser's causing the Fund to be in violation of any
applicable federal or state law, rule or regulation or any investment policy or
restriction set forth in the Fund's Prospectus or Statement of Additional
Information or any written policies, procedures, guidelines or instructions
provided in writing to the Sub-Adviser by the Trustees or the Adviser, (b) the
Sub-Adviser's causing the Fund to fail to satisfy the requirements of Subchapter
M of the Code for qualification as a regulated investment company, or (c) the
Sub-Adviser's willful misfeasance, bad faith or gross negligence generally in
5
the performance of its duties hereunder or its reckless disregard of its
obligations and duties under this Agreement.
9. Duration and Termination of this Agreement. This Agreement shall remain
in force until June 1, 2007 and from year to year thereafter, provided its
continuance is approved prior to June 1, 2007 and annually thereafter as
required by the Investment Company Act. This Agreement may, on 10 days' written
notice, be terminated at any time without the payment of any penalty by the
Trust or the Fund by vote of a majority of the outstanding voting securities of
the Fund, by the Trustees or the Adviser and may be terminated upon 60 days
written notice by the Sub-Adviser. Termination of this Agreement with respect to
the Fund shall not be deemed to terminate or otherwise invalidate any provisions
of any contract between the Sub-Adviser and any other series of the Trust. This
Agreement shall automatically terminate in the event of its assignment or upon
termination of the Investment Management Contract. In interpreting the
provisions of this Section 9, the definitions contained in Section 2(a) of the
1940 Act (particularly the definitions of "assignment," "interested person" or
"voting security"), shall be applied.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved in the manner required by the 1940 Act or the rules and interpretive
positions of the Securities and Exchange Commission under the 1940 Act.
11. Provision of Certain Information by the Sub-Adviser. The Sub-Adviser
will promptly notify the Adviser in writing of the occurrence of any of the
following events:
(a) the Sub-Adviser fails to be registered as an investment adviser
under the Advisers Act or under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an
investment adviser in order to perform its obligations under this
Agreement;
(b) the Sub-Adviser is served or otherwise receives notice of any
action, suit, proceeding, or investigation, at law or in equity,
before or by any court, public board, or body, involving the
affairs of the Fund (excluding class action suits in which the
Fund is a member of the plaintiff class by reason of the Fund's
ownership of shares in the defendant) or the compliance by the
Sub-Adviser with the federal or state securities laws;
(c) the ultimate controlling parent of the Sub-Adviser changes, there
is otherwise an actual change in control (whether through sale of
all or substantially all the assets of the Sub-Adviser or a
material change in management of the Sub-Adviser) or an
"assignment" (as defined in the 1940 Act) has or is proposed to
occur;
(d) any occurrence of any event that would disqualify the Sub-Adviser
from serving as a Sub-Adviser with respect to the Fund; or
(e) any representation of the Sub-Adviser under this Agreement is no
longer true in all material respects.
6
12. Representations and Acknowledgements of Sub-Adviser. The Sub-Adviser
hereby warrants and represents to the Adviser that (a) it has obtained all
applicable licenses, permits, registrations and approvals that may be required
in order to serve in its designated capacities with respect to the Fund,
including, but not limited to registration under the Advisers Act, and shall
continue to keep current such license, permits, registrations and approvals for
so long as this Agreement is in effect; (b) it is not prohibited by the Advisers
Act or other applicable laws and regulations from performing the services
contemplated by this Agreement; and (c) this Agreement has been duly and validly
authorized, executed and delivered on behalf of the Sub-Adviser and is a valid
and binding agreement of the Sub-Adviser enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and limitations on the availability of equitable remedies. The
Sub-Adviser represents that it has provided the Adviser with a complete copy of
its Form ADV as currently in effect and will promptly provide the Adviser with
copies of all amendments and supplements thereto. Such ADV, as amended and
supplemented from time to time, does not and shall not contain a material
misstatement of the information required to be stated therein.
13. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts.
14. Severability. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
15. Miscellaneous. (a) The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name Xxxx Xxxxxxx Investment Trust III is the
designation of the Trustees under the Amended and Restated Declaration of Trust
dated March 8, 2005, as amended from time to time. The Declaration of Trust has
been filed with the Secretary of The Commonwealth of Massachusetts. The
obligations of the Trust and the Fund are not personally binding upon, nor shall
resort be had to the private property of, any of the Trustees, shareholders,
officers, employees or agents of the Fund, but only the Fund's property shall be
bound. The Trust or the Fund shall not be liable for the obligations of any
other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which is not otherwise in
the public domain, in connection with the performance of its duties hereunder is
to be regarded as confidential and for use only by the Fund and/or its agents,
and only in connection with the Fund and its investments. Any information
supplied by the Trust or the Advisor, which is not otherwise in the public
domain, in connection with the Fund or the Adviser is to be regarded as
confidential and for use only by the Sub-Adviser and/or its agents, and only in
connection with the Sub-Adviser's services under this Agreement. However, after
notice to the other party, either party may disclose such information to the
extent required or requested by an affiliate, or a court or governmental
authority, including without limitation the SEC. Any party in receipt of
confidential information shall use reasonable precautions (substantially
identical to those used in safeguarding of its own confidential information)
that its directors/trustees, officers, employees and advisors abide by these
confidentiality provisions. Each of the Trust, the Adviser and the Sub-Adviser
7
acknowledge that the restrictions contained in this Section 15(b) are necessary
for the protection of the business of the other parties hereto and are
considered to be reasonable for such purpose. Each of the Trust, the Adviser and
Sub-Adviser agree that any breach of this Section 15(b) is likely to cause the
other parties hereto substantial and irrevocable damage and therefore, in the
event of such breach, in addition to any other remedies it may have at law or in
equity, the non-breach party shall be entitled to specific performance and other
injunctive relief. The provisions of this Section 15(b) shall survive any
termination of this Agreement.
Yours very truly,
XXXX XXXXXXX INVESTMENT TRUST III
On behalf of
Xxxx Xxxxxxx Greater China Opportunities Fund
By: /s/Xxxxx X. Xxxxxxxxxxx
Xxxxx X. Xxxxxxxxxxx
President and Chief Executive Officer
The foregoing contract is hereby agreed
to as of the date hereof.
XXXX XXXXXXX ADVISERS, LLC
By /s/Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
Assistant Secretary
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED
By: /s/Xxxxxx X. Xxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxx
Title: General Counsel, Chief Compliance Officer and
Corporate Secretary
8
