SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 21st day of September, 2006, by and between XXXXXX
XXXXXXX INVESTMENT MANAGEMENT INC., a Delaware corporation (hereinafter referred
to as "MSIM"), and XXXXXX XXXXXXX INVESTMENT MANAGEMENT COMPANY, a corporation
organized under the laws of Singapore (hereinafter referred to the "Local
Manager").
WITNESSETH:
WHEREAS, Xxxxxx Xxxxxxx China A Share Fund, Inc. (the "Fund") is a Maryland
corporation engaged in business as a closed-end management investment company
and is registered under the Investment Company Act of 1940, as amended
(hereinafter referred to as the "Investment Company Act"); and
WHEREAS, MSIM and the Local Manager are engaged principally in rendering
investment advisory services and are registered as investment advisers under the
Investment Advisors Act of 1940, as amended; and
WHEREAS, the Local Manager is the holder of a capital markets services
licence for fund management under the Securities and Futures Act (Cap. 289) of
Singapore or is exempt from licensing under the Securities and Futures Act (Cap.
289) of Singapore and is the holder of a financial adviser's license under the
Financial Advisers Act (Cap. 110) of Singapore or is exempt from licensing under
the Financial Advisers Act (Cap. 110) of Singapore; and
WHEREAS, MSIM has been granted QFII status by the CSRC, and has been
allocated a Quota of US$200 million by SAFE, as from time to time renewed and/or
updated, to invest in A-Shares and other permitted PRC securities; and
WHEREAS, MSIM has entered into an investment advisory agreement (the
"Advisory Agreement") with the Fund dated September 21, 2006, pursuant to which
MSIM provides management and investment and advisory services to the Fund; and
WHEREAS, the Local Manager is willing to provide investment advisory
services to MSIM in connection with the Advisory Agreement and the Fund's
investments in the PRC on the terms and conditions hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Local Manager and MSIM hereby agree as follows:
ARTICLE I
Interpretation
A-SHARES means shares denominated in Renminbi and issued by companies in
the PRC and listed on PRC stock exchanges or such other shares issued by
companies in the PRC listed on PRC stock exchanges and available for investment
by a QFII;
CSRC means the China Securities Regulatory Commission;
CSDCC means the China Securities Depositary and Clearing Corporation
Limited;
INVESTMENT REGULATIONS means the regulations governing the establishment
and operation of Quotas in the PRC, including, as at the date of the Agreement:
(a) Measures on the Administration of the Domestic Securities of Qualifying
Foreign Institutional (promulgated by the CSRC and the PBOC on 24 August 2006
and effective on 1 September 2006);
(b) Provisional Measures for the Administration of Domestic Securities
Investments of QFIIs (promulgated jointly by the CSRC and the PBOC and effective
1 December 2002);
(c) Notice on Issues Concerning Applications filed by Commercial Banks to
be Custodians for QFIIs in Domestic Securities Trading (issued by the PBOC and
effective on 17 December 2002);
(d) Tentative Provisions on the Administration of Foreign Exchange in
Domestic Securities Investments by QFIIs (issued by SAFE and effective on 1
December 2002);
(e) Implementing Rules for Registration and Settlement of Domestic
Securities Investments in China by QFIIs (issued by CSDCC and effective on 1
December 2002);
(f) Shanghai Stock Exchange Implementing Rules on Securities Transactions
by QFIIs (issued by the Shanghai Stock Exchange and effective on 1 December
2002);
(g) Shenzhen Stock Exchange Implementing Rules on Securities Transactions
by QFIIs (issued by the Shenzhen Stock Exchange and effective on 1 December
2002);
and any amendments which may be made from time to time to any of the above,
and to any measures or guidance issued under any of the above, and to all rules
and directives made under any such law and regulations in force and all other
applicable rules and regulations in force in PRC relevant to MSIM and/or the
Fund;
PBOC means The People's Bank of China;
PRC or CHINA means the People's Republic of China (excluding the Hong Kong
and Macau Special Administrative Regions and Taiwan);
QFII means a Qualified Foreign Institutional Investor;
QUOTA means the PRC foreign investor quota granted to the Adviser pursuant
to the Investment Regulations; and
SAFE means the PRC State Administration of Foreign Exchange, the government
agency responsible for matters relating to foreign exchange administration.
ARTICLE II
Duties of the Local Manager
MSIM hereby employs the Local Manager to act as investment adviser to MSIM
and to furnish the investment advisory services described below, subject to the
broad supervision of MSIM and the Fund, for the period and on the terms and
conditions set forth in this Agreement. The Local Manager hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations herein
set forth for the compensation provided for herein. The Local Manager and its
affiliates shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
The Local Manager shall have the right to solicit information from MSIM and
shall provide MSIM with such investment research, advice and supervision as MSIM
may from time to time consider
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necessary for the proper supervision of the assets of the Fund; shall furnish
continuously an investment program for the Fund and shall make recommendations
from time to time as to which securities shall be purchased, sold or exchanged
and what portion of the assets of the Fund shall be held in the various
categories of permitted PRC securities, including but not limited to, A-Shares,
convertible bonds, listed warrants, closed-ended funds and open-ended funds in
which the Fund invests or cash. Investments in A-Shares and other permitted PRC
securities that are governed by the Quota will be subject to the Investment
Regulations and all investments will be subject to any restrictions of the
Articles of Incorporation and By-Laws of the Fund, as they may be amended and/or
restated from time to time, the provisions of the Investment Company Act and the
statements relating to the Fund's investment objective, investment restrictions
as the same are set forth in the currently effective prospectus relating to the
shares of the Fund under the Securities Act of 1933, as amended (the
"Prospectus"). The Local Manager shall make recommendations and effect
transactions with respect to securities in which the Fund is permitted to
invest. The Local Manager shall also make recommendations as to the manner in
which voting rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities of the Fund shall be exercised.
The Local Manager will not hold money on behalf of MSIM or the Fund, nor
will the Local Manager be the registered holder of the PRC securities invested
by MSIM on behalf of the Fund or be the custodian of documents or other evidence
of title.
ARTICLE III
Allocation of Charges and Expenses
The Local Manager assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement and shall at
its own expense provide the office space, equipment and facilities which it is
obligated to provide under Article II hereof and shall pay all compensation of
officers of the Fund and all Directors of the Fund who are affiliated persons of
the Local Manager.
ARTICLE IV
Compensation of the Local Manager
For the services rendered, the facilities furnished and expenses assumed by
the Local Manager, MSIM shall pay to the Local Manager a fee in an amount to be
determined from time to time by MSIM and the Local Manager, but in no event in
excess of the amount that MSIM actually received for providing services to the
Fund pursuant to the Advisory Agreement.
ARTICLE V
Limitation of Liability of the Local Manager
The Local Manager shall not be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
in the performance of sub-advisory services rendered with respect to the Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article V, the Local Manager shall include any
affiliates of MSIM performing services for MSIM contemplated hereby and
directors, officers and employees of the Local Manager and such affiliates.
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ARTICLE VI
Activities of the Local Manager
The services of the Local Manager to MSIM are not to be deemed to be
exclusive, the Local Manager and any person controlled by or under common
control with the Local Manager (for purposes of this Article VI referred to as
"affiliates") being free to render services to others. It is understood that
Directors, officers, employees and shareholders of the Fund are or may become
interested in the Local Manager and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Local Manager and its affiliates are or may become
similarly interested in the Fund, and that the Local Manager and directors,
officers, employees, partners and shareholders of its affiliates may become
interested in the Fund as shareholders or otherwise.
ARTICLE VII
Compliance with Applicable Laws and Regulations
The Local Manager shall obtain and at all times maintain and comply with
the terms of all relevant authorizations, licenses, consents, approvals and
registrations and comply with all relevant laws and regulations, necessary for
the purpose of performing any of its duties and obligations under this
Agreement. The Local Manager shall inform MSIM as soon as possible if at any
time the Local Manager becomes unable to comply with the terms of or maintain
any such authorizations, licenses, consents, approvals or registrations.
ARTICLE VIII
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until the date of termination of the Advisory
Agreement (but not later than two years after the date hereof) and thereafter,
but only so long as such continuance is specifically approved at least annually
by (i) the Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund and (ii) a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by MSIM or by vote of a majority of the outstanding voting securities
of the Fund, or by the Local Manager, on sixty days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Advisory Agreement. Any
termination shall be without prejudice to the completion of transactions already
initiated.
ARTICLE IX
Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Directors of the Fund or by the vote of a
majority of outstanding voting securities of the Fund and (ii) a majority of
those Directors who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
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ARTICLE X
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person" used in this Agreement
shall have the respective meanings specified in the Investment Company Act and
the rules and regulations thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under the Investment
Company Act.
ARTICLE XI
Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
XXXXXX XXXXXXX INVESTMENT MANAGEMENT
INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Principal
Executive Officer
XXXXXX XXXXXXX INVESTMENT MANAGEMENT
COMPANY
By: /s/ Xxxxxxx Xxxxxxxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxxxxxxx
Title: Managing Director
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