Ex- 99(d)(7)
FINAL
INVESTMENT SUB-ADVISORY AGREEMENT
FIRST AMERICAN INVESTMENT FUNDS, INC.
INTERNATIONAL SELECT FUND
THIS AGREEMENT is made as of the 27th day of November, 2006, between FAF
Advisors, Inc., a Delaware corporation (the "Advisor") and Xxxxxxxxxx Global
Investors, Inc., a Delaware corporation (the "Sub-Advisor").
WHEREAS, the Advisor acts as the investment advisor for International
Select Fund (the "Fund"), a series of First American Investment Funds, Inc.
("FAIF"), pursuant to an investment advisory agreement between the Advisor and
FAIF (the "Advisory Agreement").
WHEREAS, the Advisor is responsible for the day-to-day management of the
Fund and for the coordination of the investment of the Fund's assets in
portfolio securities.
WHEREAS, specific portfolio purchases and sales for all or a portion of the
Fund's assets may be made by one or more sub-advisors selected and appointed by
the Advisor, subject to the pre-approval of the Board of Directors of FAIF (the
"Board").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, the parties agree as follows:
1. Appointment of Sub-Advisor. The Advisor desires to engage and hereby
appoints the Sub-Advisor to act as investment sub-advisor for that portion of
the assets of the Fund that the Advisor determines to allocate to the
Sub-Advisor from time to time (referred to herein as the "Sub-Advisory
Portfolio"). The Sub-Advisor accepts the appointment and agrees to furnish the
services described herein for the compensation set forth below.
2. Duties of Sub-Advisor.
The Sub-Advisor is hereby employed and authorized to conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the assets in the Sub-Advisory Portfolio. In connection therewith, the
Sub-Advisor will (a) make investment decisions for the Sub-Advisory Portfolio;
(b) place purchase and sale orders for portfolio transactions in the
Sub-Advisory Portfolio; and (c) employ professional portfolio managers and
securities analysts to provide research services relating to the Sub-Advisory
Portfolio. Subject to the supervision of the Board and the Advisor, the
Sub-Advisor will manage the assets in the Sub-Advisory Portfolio in accordance
with (a) the Fund's investment objective(s), policies and restrictions stated in
the Prospectus, the SAI and the Charter Documents (as such terms are defined
below), (b) the Guidelines (as such term is defined below), and (c) applicable
laws and regulations. In managing the Sub-Advisory Portfolio, the Sub-Advisor
will not consider any other securities, cash or other investment the Fund owns.
The duties of the Sub-Advisor with respect to the Sub-Advisory Portfolio shall
be confined to those set forth herein.
The Advisor has furnished to the Sub-Advisor the Fund's compliance
procedures pursuant to Rules 10f-3, 17a-7, and 17e-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") (collectively, the "Compliance
Procedures"), the Articles of Incorporation and Bylaws of FAIF, each as amended
to date (the "Charter Documents"), the currently effective prospectus (the
"Prospectus") and statement of additional information (the "SAI") of the Fund,
the resolution of the Board approving the form of this Agreement, the resolution
of the Board selecting the Advisor as investment advisor to the Fund and
approving the form of the Advisory Agreement, the resolution adopted by the
initial shareholder of the Fund approving the form of Advisory Agreement, and
the Advisory Agreement. The Advisor agrees, on an ongoing basis, to provide to
the Sub-Advisor, as promptly as practicable, copies of all
1
amendments and supplements to the Compliance Procedures, the Prospectus and the
SAI and amendments to the Charter Documents. The Advisor has furnished to the
Sub-Advisor all written guidelines (the "Guidelines") setting forth additional
operating policies and procedures, including any limitations on the types of
securities and other investment products in which the Fund is permitted to
invest or on investment activities in which the Fund is permitted to engage. The
Advisor retains the right, on prior written notice to the Sub-Advisor, to modify
the Guidelines at any time and in any manner. The Sub-Advisor shall either
comply with the amended Guidelines in accordance with a reasonable timeline
agreed upon by the Advisor and Sub-Advisor or terminate this Agreement in
accordance with Section 11 below.
3. Brokerage. In selecting brokers or dealers to execute transactions on
behalf of the Fund, the Sub-Advisor will seek the best overall terms available.
In assessing the best overall terms available for any transaction, the
Sub-Advisor will consider factors it deems relevant, including, without
limitation, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Sub-Advisor is authorized to consider brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended). The Sub-Advisor will not execute any portfolio transactions
with a broker or dealer which is an "affiliated person" (as defined in the 0000
Xxx) of the Sub-Advisor or the Advisor, except pursuant to the Board's approved
17e-1 Policies and Procedures for affiliated brokerage transactions. The Advisor
will provide the Sub-Advisor with a list of brokers and dealers that are
"affiliated persons" of the Advisor.
4. Proxy Voting. The Sub-Advisor shall vote all proxies with respect to
securities held in the Sub-Advisory Portfolio in accordance with the
Sub-Advisor's proxy voting guidelines and procedures in effect from time to
time. In the event material changes are made to such proxy voting guidelines,
the Sub-Advisor agrees to provide the Advisor with a copy of the revised proxy
voting guidelines. The Advisor agrees to instruct the Fund's custodian to
forward all proxy materials and related shareholder communications to the
Sub-Advisor promptly upon receipt. The Sub-Advisor agrees to promptly inform the
Advisor and the Fund of any conflict of interest of which the Sub-Advisor is
aware that the Sub-Advisor has in voting proxies with respect to securities held
in the Sub-Advisory Portfolio. The Sub-Advisor shall not be liable with regard
to voting of proxies or other corporate actions if the proxy materials and
related communications are not received in a timely manner.
5. Information Provided to the Advisor.
(a) The Sub-Advisor will keep the Advisor informed of developments
materially affecting the Fund and will, on its own initiative, furnish the
Advisor from time to time with whatever information the Sub-Advisor believes is
appropriate for this purpose.
(b) The Sub-Advisor will confer with the Advisor as the Advisor may
reasonably request regarding the investment and management of the Sub-Advisory
Portfolio. The Sub-Advisor will not advise the Advisor or act for the Advisor or
the Fund in any legal proceedings, including bankruptcies or class actions,
involving securities in the Sub-Advisory Portfolio or the issuers of the
securities.
(c) The Sub-Advisor agrees to comply with all reporting requirements that
the Board or the Advisor reasonably adopt and communicate to the Sub-Advisor in
writing, including reporting requirements related to performance of the
Sub-Advisory Portfolio, brokerage practices, and proxy voting.
2
(d) The Sub-Advisor agrees to furnish the information requested of the
Sub-Advisor, as set forth in the Fund's Valuation Policies and Procedures, as
currently existing or hereafter modified, including, without limitation,
advising the Advisor as soon as practicable of any "significant event" (as
defined in the Valuation Policies and Procedures) relating to, or affecting the
value of, any security or other asset held in the Sub-Advisory Portfolio. A copy
of the current Valuation Policies and Procedures is attached as Exhibit A. The
Advisor agrees to notify the Sub-Advisor of any modification to the Valuation
Policies and Procedures applicable to the Sub-Advisor in a timely manner.
(e) The Sub-Advisor has provided the Advisor with a true and complete copy
of its compliance policies and procedures that are reasonably designed to
prevent violations of the "federal securities laws" (as such term is defined in
Rule 38a-1 under the 0000 Xxx) and Rule 206(4)-7 under the Investment Advisers
Act of 1940, as amended (the "Advisers Act") (the "Sub-Advisor Compliance
Policies"). The Sub-Advisor's chief compliance officer (the "Sub-Advisor CCO")
shall provide to FAIF's Chief Compliance Officer (the "FAIF CCO") or his or her
delegate, promptly (and in no event more than 10 business days) after the
occurrence of the triggering event, the following:
(i) a report of any material changes to the Sub-Advisor Compliance
Policies;
(ii) a report of any "material compliance matters," as defined by Rule
38a-1 under the 1940 Act, that have occurred in connection with the
Sub-Advisor Compliance Policies;
(iii) a copy of a summary of the Sub-Advisor CCO's report with respect to
the annual review of the Sub-Advisor Compliance Policies pursuant to Rule
206(4)-7 under the Advisers Act; and
(iv) an annual (or more frequently as the FAIF CCO may request)
certification regarding the Sub-Advisor's compliance with Rule 206(4)-7
under the Advisers Act and Section 38a-1 under the 1940 Act as well as the
foregoing sub-paragraphs (i) - (iii).
(f) The Sub-Advisor will timely notify the Advisor of any material
violations by the Sub-Advisor of the Fund's investment policies or restrictions,
the Guidelines, or any applicable law or regulation.
6. Standard of Care. The Sub-Advisor shall exercise its best judgment in
rendering the services described in paragraphs 2, 3 and 4 above. The Sub-Advisor
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or the Advisor in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Advisor's part in the performance of its duties
or from reckless disregard by the Sub-Advisor of its obligations and duties
under this Agreement (each such act or omission shall be referred to as
"Disqualifying Conduct"). Neither the Sub-Advisor nor its members, partners,
officers, employees and agents shall be liable to the Advisor, the Fund, its
shareholders or any other person (a) for the acts, omissions, errors of judgment
or mistakes of law of any other fiduciary or other person with respect to the
Fund or (b) for any failure or delay in performance of the Sub-Advisor's
obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control, including, without
limitation, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
The Sub-Advisor does not guarantee the future performance of the
Sub-Advisory Portfolio or any specific level of performance, the success of any
investment decision or strategy that the Sub-Advisor may use, or the success of
the Sub-Advisor's overall management of the Sub-Advisory Portfolio. The Advisor
understands that investment decisions made for the Fund by
3
the Sub-Advisor are subject to various market, currency, economic, political and
business risks, and that those investment decisions will not always be
profitable.
7. Compensation. In consideration of the services rendered pursuant to this
Agreement, the Advisor will pay the Sub-Advisor on the fifth business day of
each month a fee for the previous month according to the attached Schedule A.
The fee for the period from the date of this Agreement to the end of the
calendar month shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to the Sub-Advisor, the value of the net
assets of the Sub-Advisory Portfolio shall be computed at the times and in the
manner specified in the Prospectus and/or the SAI.
8. Expenses. The Sub-Advisor will bear all of its expenses in connection
with the performance of its services under this Agreement. All other expenses to
be incurred in the operation of the Fund will be borne by the Fund, except to
the extent specifically assumed by the Sub-Advisor. The expenses to be borne by
the Fund include, without limitation, the following: organizational costs,
taxes, interest, brokerage fees and commissions, directors' fees, Securities and
Exchange Commission fees and state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining existence, costs attributable to investor
services (including, without limitation, telephone and personnel expenses),
costs of preparing and printing prospectuses and SAIs for regulatory purposes
and for distribution to existing stockholders, costs of stockholders' reports
and meetings, and any extraordinary expenses.
9. Services to Other Companies or Accounts. The Advisor understands that
the Sub-Advisor now acts, will continue to act and may act in the future as
investment advisor to fiduciary and other managed accounts and as investment
advisor to other investment companies, and the Advisor has no objection to the
Sub-Advisor so acting, provided that whenever the Sub-Advisory Portfolio and one
or more other accounts or investment companies advised by the Sub-Advisor have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a methodology believed to be equitable to
each entity. The Sub-Advisor agrees to similarly allocate opportunities to sell
securities. The Advisor recognizes that, in some cases, this procedure may limit
the size of the position that may be acquired or sold for the Fund. In addition,
the Advisor understands that the persons employed by the Sub-Advisor to assist
in the performance of the Sub-Advisor's duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed to limit
or restrict the right of the Sub-Advisor or any affiliate of the Sub-Advisor to
engage in and devote time and attention to other business or to render services
of whatever kind or nature.
10. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Advisor hereby agrees that all records which it
specifically maintains for the Fund are the property of the Fund and further
agrees to surrender promptly to the Fund copies of any of such records upon the
Fund's or the Advisor's request. The Sub-Advisor further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records relating to
its activities hereunder required to be maintained by Rule 31a-1 under the 1940
Act and to preserve the records relating to its activities hereunder required by
Rule 204-2 under the Advisers Act for the period specified in said Rule.
11. Term of Agreement. This Agreement shall become effective as of the date
of its execution and shall continue in effect for a period of two years from the
date of execution. Thereafter, this Agreement shall continue automatically for
successive annual periods, provided such continuance is specifically approved at
least annually by the Board in the manner required by the 1940 Act. This
Agreement is terminable, without penalty, on 90 days' written notice (the
4
date of termination may be less than or more than 90 days after the written
notice of termination so long as the duration of the notice period is agreed
upon by the Advisor and Sub-Advisor) by the Advisor, by the Board, or by the
Sub-Advisor, and will immediately terminate upon termination of the Advisory
Agreement. This Agreement also will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
12. Trade Settlement at Termination. Termination will be without prejudice
to the completion of any transaction already initiated. On, or after, the
effective date of termination, the Sub-Advisor shall be entitled, without prior
notice to the Advisor or the Fund, to direct the Fund's custodian to retain
and/or realize any assets of the Fund as may be required to settle transactions
already initiated. Following the date of effective termination, any new
transactions will only be executed by mutual agreement between the Advisor and
the Sub-Advisor.
13. Indemnification. (a) The Advisor agrees to indemnify and hold harmless
the Sub-Advisor and its members, partners, officers, employees, agents,
successors and assigns (each a "Sub-Advisor Indemnified Person") from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses) to which any Sub-Advisor Indemnified
Person may become subject as a result of the Advisor's material breach of this
Agreement or as a result of the Advisor's willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder or
violation of applicable law; provided, however, that no Sub-Advisor Indemnified
Person shall be indemnified for any claim, loss, liability or damage that may be
sustained as a result of the Sub-Advisor's Disqualifying Conduct.
(b) The Sub-Advisor agrees to indemnify and hold harmless the Advisor and
the Fund and their respective shareholders, members, partners, directors,
officers, employees, agents, successors and assigns (each an "Advisor
Indemnified Person") from and against any and all claims, losses, liabilities or
damages (including reasonable attorney's fees and other related expenses) to
which any Advisor Indemnified Person may become subject as a result of the
Sub-Advisor's material breach of this Agreement or as a result of the
Sub-Advisor's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties hereunder or violation of applicable
law; provided, however, that no Advisor Indemnified Person shall be indemnified
for any claim, loss, liability or damage that may be sustained as a result of
the Advisor's Disqualifying Conduct.
14. Delegation to Third Parties. Except where prohibited by applicable law
or regulation, the Sub-Advisor may delegate or may employ a third party to
perform any accounting, administrative, reporting and ancillary services
required to enable the Sub-Advisor to perform its functions under this
Agreement. Notwithstanding any other provision of the Agreement, the Sub-Advisor
may provide information about the Advisor and the Fund to any such third party
for the purposes of this paragraph, provided that the third party is subject to
a confidentiality agreement that specifically prevents the misuse of any such
information, including portfolio holdings. The Sub-Advisor will act in good
faith and with due diligence in the selection, use and monitoring of third
parties and shall be solely responsible for any loss, mistake, gross negligence
or misconduct caused by such third party.
15. Disclosure. (a) Neither the Advisor, on its own behalf or on behalf of
the Fund, or the Sub-Advisor shall disclose information of a confidential nature
acquired in consequence of this Agreement, except for information that they may
be entitled or bound to disclose by law, regulation or that is disclosed to
their advisors where reasonably necessary for the performance of their
professional services or, in the case of the Sub-Advisor, as permitted in
accordance with Section 14 of this Agreement.
(b) Notwithstanding the provisions of Subsection 15(a), to the extent that
any market counterparty with whom the Sub-Advisor deals requires information
relating to the Fund (including, but not limited to, the identity of the Advisor
or the Fund and market value of the
5
Fund), the Sub-Advisor shall be permitted to disclose such information to the
extent necessary to effect transactions on behalf of the Fund in accordance with
the terms of this Agreement.
(c) Notwithstanding the provisions of Subsections 15(a) and 15(b), the
Sub-Advisor acknowledges that the Advisor and the Fund intend to rely on Rule
17a-7, Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under the 1940 Act,
and the Sub-Advisor hereby agrees that it (i) shall not consult with any other
Sub-Advisor to the Fund with respect to transactions in securities for the
Sub-Advisory Portfolio or any other transactions of Fund assets and (ii) will
provide advice and otherwise perform services hereunder exclusively with respect
to the Sub-Advisory Portfolio of the Fund.
16. Instruction to Custodian. The Sub-Advisor shall not have control of the
investments or cash, including the investment of such cash, in the Fund but
shall have authority to issue to the Fund's custodian such instructions as it
may consider appropriate in connection with the settlement of any transaction
relating to the Sub-Advisory Portfolio that it has initiated. In addition, the
Fund's custodian shall be responsible for executing all foreign exchange
transactions made or required to be made in conjunction with settling the
purchase and sale of securities in the Sub-Advisory Portfolio. The Advisor shall
ensure that the Fund's custodian is obliged to comply with any instructions of
the Sub-Advisor given in accordance with this Agreement. The Sub-Advisor will
not be responsible for supervising the Fund's custodian.
17. Money Laundering. The Advisor, on its own behalf and on behalf of the
Fund, confirms that where it is acting as principal or where it is acting on
behalf of another person (notwithstanding that it enters into this Agreement and
any transactions as principal), it is in compliance with the anti-money
laundering regulations that apply to it. The Advisor shall provide any document
or information to the Sub-Advisor that the Sub-Advisor may request for complying
with its own anti-money laundering regulations.
18. Representations and Warranties. (a) The Advisor represents and warrants
to the Sub-Advisor that the Advisor:
(i) has full power and authority to appoint the Sub-Advisor to manage the
Fund in accordance with the terms of this Agreement; and
(ii) this Agreement is valid and has been duly authorized by appropriate
action of the Advisor, the Board and the Fund's shareholders, does not violate
any obligation by which the Advisor is bound, and when so executed and
delivered, will be binding upon the Advisor in accordance with its terms subject
to applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and general principles of equity.
(b) The Sub-Advisor represents and warrants to the Advisor that the
Sub-Advisor:
(i) is registered as an "investment adviser" under the Advisers Act;
(ii) is not currently the subject of, and has not been the subject of
during the last three (3) years, any enforcement action by a regulator; and
(iii) maintains insurance coverage in an appropriate amount and shall upon
request provide to the Advisor any information it may reasonably require
concerning the amount of or scope of such insurance.
19. Miscellaneous.
(a) Notices. All notices provided for by this Agreement shall be in writing
and shall be deemed given when received, against appropriate receipt, by the
President with a copy to the
6
General Counsel in the case of the Sub-Advisor and the Advisor's General Counsel
in the case of the Advisor, or such other person as a party shall designate by
notice to the other parties.
(b) Amendment. This Agreement may be amended at any time, but only by
written agreement between the Advisor and the Sub-Advisor, which amendment must
be approved by the Board in the manner required by the 1940 Act.
(c) Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto and supersedes any prior agreement among the parties relating
to the subject matter hereof.
(d) Severability. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby.
(e) Headings. The paragraph headings of this Agreement are for convenience
of reference and do not constitute a part hereof.
(f) Governing Law. This Agreement shall be governed in accordance with the
internal laws of the State of Delaware, without giving effect to principles of
conflict of laws.
(g) Use of Sub-Advisor's Name. The Fund and the Advisor agree to submit any
proposed sales literature that mentions the Sub-Advisor (other than identifying
the Sub-Advisor as Sub-Advisor to the Fund) to the Sub-Advisor for review prior
to use and the Sub-Advisor agrees to promptly review such materials by a
reasonable and appropriate deadline. The Advisor agrees to cause the Advisor and
the Fund's distributor to promptly review all such sales literature for
compliance with relevant requirements, to promptly advise the Sub-Advisor of any
deficiencies contained in such sales literature, and to promptly file complying
sales literature with the relevant regulatory authorities. Neither the Advisor,
nor the Fund nor any affiliate of the foregoing will use the registered
trademarks, service marks, logos, names or any other proprietary designations of
Sub-Advisor, its subsidiaries and/or affiliates (collectively, "Sub-Advisor
Marks") in any advertising or promotional materials without Sub-Advisor's prior
written approval, which will not be unreasonably withheld. Advisor and
Sub-Advisor will work together to develop mutually agreeable standards and
procedures for the review of materials bearing Sub-Advisor Marks to facilitate
the efficient creation and use of such advertising or promotional materials.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives as of the date
first written above.
FAF Advisors, Inc.
By: /s/ Xxxxxx X. Xxxxx, III
------------------------------------
Name: Xxxxxx X. Xxxxx, III
Title: Chief Financial Officer
Xxxxxxxxxx Global Investors, Inc.
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Name: Xxxxxx X. Xxxx
Title: President
7
SCHEDULE A
Pursuant to Section 7, the Advisor shall pay the Sub-Advisor compensation
for services rendered to the Fund, calculated daily and paid monthly, at the
annual rates set forth in the following table. Such rates are based on the
average daily net assets of the Sub-Advisory Portfolio.
SUB-ADVISORY PORTFOLIO ASSETS FEE PER ANNUM
----------------------------- -------------
First $100 million 0.45%
Next $325 million 0.40%
Next $112.5 million 0.35%
Over $537.5 million 0.30%
Exhibit A - Page 1
