XXXX XXXXXXX FUNDS II
SUBADVISORY AGREEMENT
AGREEMENT made this 30th day of April, 2007, between Xxxx Xxxxxxx
Investment Management Services, LLC, a Delaware limited liability company (the
"Adviser"), and Franklin Advisers, Inc., a California corporation (the
"Subadviser"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of Xxxx Xxxxxxx Funds II (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the Portfolios specified in Appendix A to this Agreement as it shall
be amended by the Adviser and the Subadviser from time to time (the
"Portfolios"). The Subadviser will be an independent contractor and will have no
authority to act for or represent the Trust or Adviser in any way except as
expressly authorized in this Agreement or another writing by the Trust and
Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
a. Subject always to the direction and control of the Trustees of the Trust,
the Subadviser will manage the investments and determine the composition of
the assets of the Portfolios in accordance with the Portfolios'
registration statement, as amended, that Adviser provides to the
Subadviser. In fulfilling its obligations to manage the investments and
reinvestments of the assets of the Portfolios, the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial and
other information affecting the economy generally and individual
companies or industries the securities of which are included in the
Portfolios or are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related
investment policies for each such Portfolio as described in the
Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing
of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
b. The Subadviser, at its expense, will furnish (i) all necessary investment
and management facilities, including salaries of personnel required for it
to execute its duties faithfully, and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolios (excluding
determination of net asset value and shareholder accounting services).
Subadviser will not pay the costs of investments (including brokerage fees)
of a Portfolio and will not pay expenses related to the operation of a
Portfolio, including but not limited to, investment advisory fees,
administration fees, pricing service fees, taxes, interest, brokerage fees
and commissions, proxy voting expenses and extraordinary Portfolio
expenses.
c. The Subadviser will select brokers and dealers to effect all transactions
subject to the following conditions: The Subadviser will place all
necessary orders with brokers, dealers, or issuers, and will negotiate
brokerage commissions if applicable. The Subadviser is directed at all
times to seek to execute brokerage transactions for the Portfolios in
accordance with applicable laws and regulations. The Subadviser may pay a
broker-dealer which provides research and brokerage services a higher
spread or commission for a particular transaction than otherwise might have
been charged by another
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broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of
either the particular transaction or the Subadviser's overall
responsibilities with respect to accounts managed by the Subadviser. The
Subadviser may use for the benefit of the Subadviser's other clients, or
make available to companies affiliated with the Subadviser or to its
directors for the benefit of its clients, any such brokerage and research
services that the Subadviser obtains from brokers or dealers.
d. On occasions when the Subadviser deems the purchase or sale of a security
to be in the best interest of the Portfolio as well as other clients of the
Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be purchased or sold to attempt to obtain a more favorable
price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Portfolio and to its other clients.
e. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios as are required of an investment adviser of a registered
investment company pursuant to the Investment Company Act of 1940 (the
"Investment Company Act") and Investment Advisers Act of 1940 (the
"Investment Advisers Act") and the rules thereunder. Such accounts, books
and records shall be the property of the Subadviser, which shall provide
copies of them to the Adviser upon reasonable request.
f. Subadviser will make decisions on proxy voting unless such decisions are
expressly reserved by Adviser. Subadviser's obligation to vote proxies
shall be contingent upon receipt of proxies from a Portfolio custodian in a
timely manner. Subadviser shall not be expected or required to take any
action other than the rendering of investment-related advice with respect
to lawsuits involving securities presently or formerly held in a Portfolio,
or the issuers thereof. Adviser will file all proofs of claim on behalf of
Portfolios in class-action suits and SEC settlements which have a proof of
claim process for investors. The Subadviser shall review its proxy voting
activities on a periodic basis with the Trustees.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Portfolio the
compensation specified in Appendix A to this Agreement.
4. INDEMNIFICATION
Adviser and the Subadviser each agree to indemnify the other party (and
each such party's affiliates, employees, directors and officers) against any
claim, damages, loss or liability (including reasonable attorneys' fees) arising
out of any third party claims brought against an indemnified party that are
found to constitute willful misfeasance, bad faith or gross negligence on the
part of the indemnifying party.
5. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers, partners
or otherwise; that employees, agents and partners of the Subadviser are or may
be interested in the Trust as trustees, officers, shareholders or otherwise;
that the Subadviser may be interested in the Trust; and that the existence of
any such dual interest shall not affect the validity hereof or of any
transactions hereunder except as otherwise provided in the Agreement and
Declaration of Trust of the Trust and the partnerhsip agreement of the
Subadviser, respectively, or by specific provision of applicable law.
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6. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may require pursuant to applicable laws and regulations.
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of (i) its execution and (ii) the date of the meeting of the Board of
Trustees of the Trust, at which meeting this Agreement is approved as described
below. The Agreement will continue in effect for a period more than two years
from the date of its execution only so long as such continuance is specifically
approved at least annually either by the Trustees of the Trust or by a majority
of the outstanding voting securities of each of the Portfolios, provided that in
either event such continuance shall also be approved by the vote of a majority
of the Trustees of the Trust who are not interested persons (as defined in the
Investment Company Act) of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. Any required
shareholder approval of the Agreement or of any continuance of the Agreement
shall be effective with respect to any Portfolio if a majority of the
outstanding voting securities of the series (as defined in Rule 18f-2(h) under
the Investment Company Act) of shares of that Portfolio votes to approve the
Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved by a majority of the outstanding voting
securities of (a) any other Portfolio affected by the Agreement or (b) all the
portfolios of the Trust.
If any required shareholder approval of this Agreement or any continuance
of the Agreement is not obtained, the Subadviser will continue to act as
investment subadviser with respect to such Portfolio pending the required
approval of the Agreement or its continuance or of a new contract with the
Subadviser or a different adviser or subadviser or other definitive action;
provided, that the compensation received by the Subadviser in respect of such
Portfolio during such period is in compliance with Rule 15a-4 under the
Investment Company Act.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote of a majority of the outstanding voting securities of such Portfolio,
on sixty days' written notice to the Adviser and the Subadviser, or by the
Adviser or Subadviser on sixty days' written notice to the Trust and the other
party. This Agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment Company
Act) or in the event the Advisory Agreement between the Adviser and the Trust
terminates for any reason.
8. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which the
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives 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; and
c. any change in control of the Subadviser or the portfolio manager of any
Portfolio, provided however, that this shall not apply to a change of
control of Subadviser which results in control of Subadviser by one of its
affiliates that is under common control with the Subadviser.
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9. SERVICES TO OTHER CLIENTS
The Adviser understands, and has advised the Trust's Board of Trustees,
that the Subadviser now acts, or may in the future act, as an investment adviser
to fiduciary and other managed accounts and as investment adviser or subadviser
to other investment companies. Further, the Adviser understands, and has advised
the Trust's Board of Trustees that the Subadviser and its affiliates may give
advice and take action for its accounts, including investment companies, which
differs from advice given on the timing or nature of action taken for the
Portfolio. The Subadviser is not obligated to initiate transactions for a
Portfolio in any security which the Subadviser, its partners, affiliates or
employees may purchase or sell for their own accounts or other clients.
10. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the Trustees of the Trust and
by the vote of a majority of the Trustees of the Trust who are not interested
persons of any party to this Agreement cast in person at a meeting called for
the purpose of voting on such approval. Any required shareholder approval shall
be effective with respect to any Portfolio if a majority of the outstanding
voting securities of that Portfolio vote to approve the amendment,
notwithstanding that the amendment may not have been approved by a majority of
the outstanding voting securities of (a) any other Portfolio affected by the
amendment or (b) all the portfolios of the Trust.
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14 SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust dated August 12, 2005, 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 "Xxxx Xxxxxxx Funds II" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or 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 portfolio thereof, but
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only the assets belonging to the Trust, or to the particular Portfolio with
respect to which such obligation or claim arose, shall be liable.
17. CONSULTATION WITH SUBADVISERS TO OTHER TRUST PORTFOLIOS
As required by Rule 17a-10 under the Investment Company Act of 1940, the
Subadviser is prohibited from consulting with the entities listed below
concerning transactions for a Portfolio in securities or other assets:
1. other subadvisers to a Portfolio,
2. other subadvisers to a Trust portfolio, and
3. other subadvisers to a portfolio under common control with the Portfolio;
provided, however, that: (i) such consultations are permitted between the
current and successor sub-advisers of a Portfolio in order to effect an orderly
transition of sub-advisory duties so long as such consultations are not
concerning transactions prohibited by Section 17(a) of the 1940 Act; (ii)
Subadviser may consult with any of its affiliated persons concerning
transactions in securities or other assets; and (iii) Subadviser may consult
with any of the other subadvisers to the Trust concerning compliance with
paragraphs a and b of Rule 12d3-1 of the 1940 Act.
18. CONFIDENTIALITY OF TRUST PORTFOLIO HOLDINGS
The Subadviser agrees to treat Trust portfolio holdings as confidential
information in accordance with the Trust's "Policy Regarding Disclosure of
Portfolio Holdings", as such policy may be amended from time to time, and to
prohibit its employees from trading on any such confidential information.
19. COMPLIANCE
Upon execution of this Agreement, the Subadviser shall provide the Adviser
with the Subadviser's written policies and procedures ("Compliance Policies") as
required by Rule 206(4)-7 under the Investment Advisers Act that relate to the
services provided by the Subadviser to the Trust. Throughout the term of this
Agreement, the Subadviser shall make reasonable efforts to submit to the
Adviser: (i) any material changes to the Compliance Policies, (ii) notification
of regulatory examinations of the Subadviser and general descriptions of the
results of such examinations and of any periodic testing of the Compliance
Policies, and (ii) notification of any material compliance matter that relates
to the services provided by the Subadviser to the Trust including but not
limited to any material violation of the Compliance Policies or of the
Subadviser's code of ethics and/or related code that relate to the services
provided by the Subadviser to the Trust. Throughout the term of this Agreement,
the Subadviser shall provide the Adviser with any certifications, information
and access to personnel and resources (including those resources that will
permit testing of the Compliance Policies by the Adviser) that the Adviser may
reasonably request to enable the Trust to comply with Rule 38a-1 under the
Investment Company Act.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
Xxxx Xxxxxxx Investment Management
Services, LLC
by: /s/ Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxx
Executive Vice President
Franklin Advisers, Inc.
by: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxx
EVP/CIO, Equities- Franklin
Advisers, Inc.
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APPENDIX A
The Subadviser shall serve as investment subadviser for each Portfolio of
the Trust listed below. The Adviser will pay the Subadviser, as full
compensation for all services provided under this Agreement with respect to each
Portfolio, the fee computed separately for such Portfolio at an annual rate as
follows (the "Subadviser Fee"):
BETWEEN BETWEEN
$50 MILLION $200 MILLION
FIRST AND AND EXCESS OVER
$50 MILLION $200 MILLION $500 MILLION $500 MILLION
OF AGGREGATE OF AGGREGATE OF AGGREGATE OF AGGREGATE
PORTFOLIO NET ASSETS* NET ASSETS* NET ASSETS* NET ASSETS*
--------- ------------ ------------ ------------ ------------
Income Fund
* The term Aggregate Net Assets includes the net assets of a Portfolio of the
Trust. It also includes with respect to each Portfolio the net assets of
one or more other portfolios as indicated below, but in each case only for
the period during which the Subadviser for the Portfolio also serves as the
subadviser for the other portfolio(s). For purposes of determining
Aggregate Net Assets and calculating the Subadviser Fee, the net assets of
the Portfolio and each other portfolio of the Trust are determined as of
the close of business on the previous business day of the Trust, and the
net assets of each portfolio of each other fund are determined as of the
close of business on the previous business day of that fund.
Trust Portfolio(s) Other Portfolio(s)
------------------ ------------------
Income Fund -- Income Trust, a series of Xxxx Xxxxxxx Trust,
International Value Trust, a series of Xxxx Xxxxxxx
Trust
International Value Fund, a series of Xxxx Xxxxxxx
Funds II,
International Small Cap Trust, a series of Xxxx
Xxxxxxx Trust,
International Small Cap Fund, a series of Xxxx Xxxxxxx
Fund,
Global Trust, a series of Xxxx Xxxxxxx Trust,
Global Fund, a series of Xxxx Xxxxxxx Funds II,
Mutual Shares Trust, a series of Xxxx Xxxxxxx Trust,
Mutual Shares Fund, a series of Xxxx Xxxxxxx Funds II
The Subadviser Fee for a Portfolio shall be based on the applicable annual
fee rate for the Portfolio which for each day shall be equal to (i) the sum of
the amounts determined by applying the annual percentage rates in the table to
the applicable portions of Aggregate Net Assets divided by (ii) Aggregate Net
Assets (the "Applicable Annual Fee Rate"). The Subadviser Fee for each Portfolio
shall be accrued for each calendar day, and the sum of the daily fee accruals
shall be paid monthly to the Subadviser within 30 calendar days of the end of
each month. The daily fee accruals will be computed by multiplying the
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fraction of one over the number of calendar days in the year by the Applicable
Annual Fee Rate, and multiplying this product by the net assets of the
Portfolio. The Adviser shall provide Subadviser with such information as
Subadviser may reasonably request supporting the calculation of the fees paid to
it hereunder. Fees shall be paid either by wire transfer or check, as directed
by Subadviser.
If, with respect to any Portfolio, this Agreement becomes effective or
terminates, or if the manner of determining the Applicable Annual Fee Rate
changes, before the end of any month, the fee (if any) for the period from the
effective date to the end of such month or from the beginning of such month to
the date of termination or from the beginning of such month to the date such
change, as the case may be, shall be prorated according to the proportion which
such period bears to the full month in which such effectiveness or termination
or change occurs.
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If, with respect to any Portfolio, this Agreement becomes effective or
terminates, or if the manner of determining the Applicable Annual Fee Rate
changes, before the end of any month, the fee (if any) for the period from the
effective date to the end of such month or from the beginning of such month to
the date of termination or from the beginning of such month to the date such
change, as the case may be, shall be prorated according to the proportion which
such period bears to the full month in which such effectiveness or termination
or change occurs.
