SUBADVISORY AGREEMENT
AGREEMENT amended and restated this 17th day of October, 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"). 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 Trust (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, copies of which the Adviser will
provide promptly 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
v. provide assistance to the Trust's Custodian regarding the fair value
of securities held by the Portfolios for which market quotations are
not readily available.
b. The Subadviser, at its expense, will furnish 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).
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 such policies or practices as may be established by the
Trustees and described in the Trust's registration statement as amended.
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
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.
f. The Subadviser shall vote all proxies received in connection with
securities held by the Portfolios. The Adviser agrees and acknowledges
that the Subadviser shall not be obligated to take any action with respect
to any class action proceedings or other legal action concerning
securities held by the Portfolios, except to forward to the Adviser in a
timely fashion any notice of such an action that the Subadviser may
receive.
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 Portfolios under this Agreement as may
reasonably be requested by the chief compliance officer of the Adviser or
of the Trust, as the case may be.
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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. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its directors, members, officers or
employees shall be liable to the Adviser or the Trust for any error of judgment
or mistake of law or for any loss suffered by the Adviser or Trust in connection
with the matters to which this Agreement relates except for losses resulting
from willful misfeasance, bad faith or gross negligence in the performance of,
or from the reckless disregard of, the duties of the Subadviser.
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, members or otherwise; that employees, agents and members 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 operating agreement of
the Subadviser, respectively, or by specific provision of applicable law.
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 request or require pursuant to applicable laws and regulations.
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio upon
its execution (the "Effective Date"). The Agreement will continue in effect with
respect to each Portfolio for a period of five years from the Effective Date,
subject to automatic earlier termination unless any continuance following the
second anniversary of the Effective Date is specifically approved at least
annually either by the Trustees of the Trust or by a majority of the outstanding
voting securities of such Portfolio, 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. The Agreement may continue in effect with
respect to each Portfolio following the fifth anniversary of the Effective Date
only so long as such continuance is approved in accordance with applicable law.
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
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the outstanding voting securities of (a) any other Portfolio affected by the
Agreement or (b) all the portfolios of the Trust.
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 actual control or management of the Subadviser, or any
change in the person(s) primarily responsible for the day-to-day
management of a Portfolio.
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, members,
affiliates or employees may purchase or sell for their own accounts or other
clients.
10. CONSULTATION WITH SUBADVISERS TO OTHER TRUST PORTFOLIOS
In order to allow the Trust and the parties hereto to take advantage of
the safe harbor under 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:
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1. other subadvisers to a Portfolio
2. other subadvisers to a Trust portfolio
3. other subadvisers to a portfolio under common control with the
Portfolio
11. 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.
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.
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16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust dated September 28, 1988, 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 Trust" 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 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. 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 as
provided by the Adviser to the Subadviser, and to establish and maintain
policies and procedures reasonably designed prohibit its employees from trading
on any such confidential information.
[Signature page follows]
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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: Xxxx Xxxxxxx Life Insurance Company
(U.S.A.), Managing Member
By:
------------------------------------------
Xxxx X. XxxXxxx III
Chairman
GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC
By:
------------------------------------------
Name:
Title:
Accepted and agreed to as of the date first mentioned above:
XXXX XXXXXXX TRUST,
On behalf of the Portfolios
By:
-------------------------------------
Name:
Title:
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APPENDIX A
The Subadviser shall serve as investment subadviser for the following
Portfolios of the Trust. The Adviser will pay the Subadviser, as full
compensation for all services provided under this Agreement, the fee computed
separately for each such Portfolio as indicated below.
1. For purposes of calculating the fee to be paid to the Subadviser under
this Agreement:
"Portfolio Assets" shall mean the net assets of a given Portfolio
managed by the Subadviser for which the fee is being calculated;
"Other Assets" shall mean, with respect to a Portfolio, the net
assets of the portion of assets managed by the Subadviser of the
Accounts listed below as corresponding to such Portfolio;
"Combined Assets" shall mean the sum of Portfolio Assets and Other
Assets; and
"Daily Portfolio Net Assets" shall mean the net asset value of the
Portfolio 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 Portfolio 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 Portfolio 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 each Portfolio:
NAME OF PORTFOLIO NAMES OF ACCOUNTS USED TO CALCULATE "OTHER ASSETS"
-------------------------- ------------------------------------------------------------------
Growth Opportunities Trust Xxxx Xxxxxxx Growth Opportunities Fund, a series of Xxxx
Xxxxxxx Funds III;
Growth Opportunities Fund, a series of Xxxx Xxxxxxx Funds II
Intrinsic Value Trust Xxxx Xxxxxxx Intrinsic Value Fund, a series of Xxxx Xxxxxxx Funds
III;
Intrinsic Value Fund, a series of Xxxx Xxxxxxx Funds II
U.S. Multi Sector Trust Xxxx Xxxxxxx U.S. Multi Sector Fund, a series of Xxxx Xxxxxxx
Funds II;
A-1
NAME OF PORTFOLIO NAMES OF ACCOUNTS USED TO CALCULATE "OTHER ASSETS"
-------------------------- ----------------------------------------------------------------------
Growth Trust Growth Fund, a series of Xxxx Xxxxxxx Funds III
Growth Fund, a series of Xxxx Xxxxxxx Funds II
Managed Trust Growth & Income Trust, a series of Xxxx Xxxxxxx Trust;
U.S. Core Fund, a series of Xxxx Xxxxxxx Funds III
U.S. Core Fund, a series of Xxxx Xxxxxxx Funds II
that portion of the net assets of the Managed Fund, a series of Xxxx
Xxxxxxx Funds II, that is managed by the Subadviser
Growth & Income Trust U.S. Core Fund, a series of Xxxx Xxxxxxx Funds III;
U.S. Core Fund, a series of Xxxx Xxxxxxx Funds II;
that portion of the net assets of the Managed Trust, a series of Xxxx
Xxxxxxx Trust, that is managed by the Subadviser
that portion of the net assets of the Managed Fund, a series of Xxxx
Xxxxxxx Funds II, that is managed by the Subadviser
International Growth Trust International Growth Fund, a series of Xxxx Xxxxxxx Funds III;
International Growth Fund, a series of Xxxx Xxxxxxx Funds II
International Stock Trust International Core Fund, a series of Xxxx Xxxxxxx Funds II;
International Core Fund, a series of Xxxx Xxxxxxx Funds III
Value Opportunities Trust Value Opportunities Fund, a series of Xxxx Xxxxxxx Funds II;
Value Opportunities Fund, a series of Xxxx Xxxxxxx Funds III
A-2
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 with respect to each Portfolio, in each case (unless otherwise noted)
based on the Daily Combined Net Assets as indicated.
SECOND
TRANCHE: THIRD TRANCHE:
DAILY DAILY
FIRST TRANCHE: COMBINED NET COMBINED NET FOURTH TRANCHE:
DAILY ASSETS IN ASSETS IN DAILY
COMBINED NET EXCESS OF EXCESS OF COMBINED NET
ASSETS $500,000,000 $1,000,000,000 ASSETS IN
UP TO AND UP TO AND UP TO EXCESS OF
NAME OF PORTFOLIO $500,000,000 $1,000,000,000 $2,500,000,000 $2,500,000,000
-------------------------- ------------- -------------- --------------- --------------
Growth Opportunities Trust 0.350% 0.330% 0.320% 0.310%
Value Opportunities Trust 0.350% 0.330% 0.320% 0.310%
Intrinsic Value Trust 0.330% 0.310% 0.300% 0.290%
U.S. Multi Sector Trust 0.330% 0.310% 0.300% 0.290%
Growth Trust 0.350% 0.330% 0.320% 0.310%
Managed Trust* 0.330% 0.310% 0.300% 0.290%
Growth & Income Trust** 0.330% 0.310% 0.300% 0.290%
* Such portion of the assets of the Portfolio as shall be allocated to the
Subadviser by the Adviser from time to time.
** Calculations set forth above for Growth & Income Trust are effective only
upon approval of shareholders of an increase in the advisory fee at a meeting
currently scheduled for October 17, 2005 (or any adjournment thereof). Prior to
such approval, the Applicable Rate will be calculated solely on the basis of
Daily Portfolio Net Assets, without regard to Other Assets or Combined Assets,
as follows: 0.250% for the first $500 million of Daily Portfolio Net Assets;
0.200% for the Daily Portfolio Net Assets between $500 million and $1 billion;
and 0.150% for all Daily Portfolio Net Assets over $1 billion.
SECOND TRANCHE:
DAILY COMBINED
FIRST TRANCHE: NET ASSETS IN THIRD TRANCHE:
DAILY COMBINED EXCESS OF DAILY COMBINED
NET ASSETS $100,000,000 NET ASSETS IN
UP TO AND UP TO EXCESS OF
NAME OF PORTFOLIO $100,000,000 $1,000,000,000 $1,000,000,000
-------------------------- ------------- --------------- --------------
International Growth Trust 0.470% 0.445% 0.430%
International Stock Trust 0.470% 0.445% 0.430%
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Unless otherwise indicated above, the "Applicable Rate" is equal to (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, using the first Portfolio above,
Growth Opportunities Trust, if Daily Combined Net Assets were $3,000,000,000,
the Applicable Rate would be (($500,000,000 * 0.350%) + ($500,000,000 * 0.330%)
+ ($1,500,000,000 * 0.320%) + ($500,000,000 * 0.310%)) / $3,000,000,000 = ($175m
+ $165m + $480m + $155m) / $3,000m = 0.325%.
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