SUB-ADVISORY AGREEMENT
AGREEMENT
made as of the 30th day of June, 2008 by and between Mercer Global Investments,
Inc., a Delaware corporation (the “Advisor”), and Pacific Investment Management
Company LLC, a Delaware limited liability company (the “Sub-Advisor”).
WHEREAS,
the Advisor has been retained to act as investment adviser pursuant to an
Investment Advisory Agreement, dated July 1, 2005 (the “Advisory Agreement”),
with MGI Funds (the “Trust”), a Delaware statutory trust registered with the
U.S. Securities and Exchange Commission (the “SEC”) as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
“1940 Act”), which consists of several separate series of shares, each having
its own investment objectives and policies, and which is authorized to create
additional series in the future; and
In-Kind
Securities will be transferred into the Sub-Advisor Assets in accordance with
Exhibit A, and Exhibit A is hereby incorporated into this Agreement.
The
Advisor will provide the Sub-Advisor with reasonable advance notice, in writing,
of: (i) any change in a Fund’s investment objectives, policies and
restrictions as stated in the Prospectus; (ii) any change to the Trust’s
Declaration of Trust or By-Laws; or (iii) any material change in the Trust
Compliance Procedures; and the Sub-Advisor, in the performance of its duties
and
obligations under this Agreement, shall manage the Sub-Advisor Assets
consistently with such changes, provided the Sub-Advisor has received such
prior
notice of the effectiveness of such changes from the Trust or the
Advisor. In addition to such notice, the Advisor shall provide to the
Sub-Advisor a copy of a modified Prospectus and copies of the revised Trust
Compliance Procedures, as applicable, reflecting such changes. The
Sub-Advisor hereby agrees to provide to the Advisor in a timely manner, in
writing, such information relating to the Sub-Advisor and its relationship
to,
and actions for, a Fund as may be required to be contained in the Prospectus
or
in the Trust’s registration statement on Form N-1A, or otherwise as reasonably
requested by the Advisor.
In
order
to assist the Trust and the Trust’s Chief Compliance Officer (the “Trust CCO”)
to satisfy the requirements contained in Rule 38a-1 under the 1940 Act, the
Sub-Advisor shall provide to the Trust CCO: (i) direct access to the
Sub-Advisor’s chief compliance officer (the “Sub-Advisor CCO”), as reasonably
requested by the Trust CCO; (ii) quarterly reports confirming that the
Sub-Advisor has complied with the Trust Compliance Procedures in managing the
Sub-Advisor Assets; and (iii) quarterly certifications that there were no
Material Compliance Matters (as that term is defined by Rule 38a-1(e)(2)) that
arose under the Trust Compliance Procedures that related to the Sub-Advisor’s
management of the Sub-Advisor Assets.
In
connection with its management of the Sub-Advisor Assets and consistent with
its
fiduciary obligation to the Sub-Advisor Assets and other clients, the
Sub-Advisor, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities or futures
contracts to be sold or purchased in order to obtain the most favorable price
or
lower brokerage commissions and efficient execution. In such event,
allocation of the securities or futures contracts so purchased or sold, as
well
as the expenses incurred in the transaction, will be made by the Sub-Advisor
in
the manner the Sub-Advisor considers to be, over time, the most equitable and
consistent with its fiduciary obligations to the Sub-Advisor’s Assets and to
such other clients.
The
Sub-Advisor acknowledges that the Advisor and the Trust may 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 shall not consult with any other sub-advisor
to the Fund with respect to transactions in securities for the Sub-Advisor
Assets or any other transactions of Fund assets.
The
Sub-Advisor is authorized to engage in transactions in which the Sub-Advisor,
or
an affiliate of the Sub-Advisor, acts as a broker for both the Fund and for
another party on the other side of the transaction (“agency cross
transactions”). The Sub-Advisor shall effect any such agency cross
transactions in compliance with Rule 206(3)-2 under the Advisers Act and any
other applicable provisions of the federal securities laws and shall provide
the
Advisor with periodic reports describing such agency cross
transactions. By execution of this Agreement, the Advisor authorizes
the Sub-Advisor or its affiliates to engage in agency cross transactions, as
described above. The Advisor may revoke its consent at any time by
written notice to the Sub-Advisor.
The
Sub-Advisor hereby represents that it has implemented policies and procedures
that will prevent the disclosure by it, its employees or its agents of the
Trust’s portfolio holdings to any person or entity other than the Advisor, the
Trust’s custodian, or other persons expressly designated by the Advisor.
(k)
Information Concerning Sub-Advisor Assets and the Sub-Advisor. From time to
time
as the Advisor, and any consultants designated by the Advisor in writing, or
the
Trust may request, the Sub-Advisor will furnish the requesting party reports
on
portfolio transactions and reports on Sub-Advisor Assets held in the portfolio,
all in such detail as the Advisor, its consultant(s) so designated in writing
or
the Trust may reasonably request. The Sub-Advisor will provide the Advisor
with
information (including information that is required to be disclosed in the
Prospectus) with respect to the portfolio managers responsible for Sub-Advisor
Assets, any changes in the portfolio managers responsible for Sub-Advisor
Assets, any material changes in the ownership or management of the Sub-Advisor,
or of material changes in the control of the Sub-Advisor. The Sub-Advisor will
promptly notify the Advisor of any pending investigation, material litigation,
administrative proceeding or any other significant regulatory inquiry that
could
reasonably be expected to have a material adverse effect on the Sub-Advisor’s
provision of services pursuant to this Agreement. Upon reasonable
request, the Sub-Advisor will make available certain account
management officers and employees to meet with the Trust’s Board of Trustees to
review the Sub-Advisor Assets.
The
Sub-Advisor also will provide such reasonable information or perform such
reasonable additional acts as are customarily performed by a Sub-Advisor and
may
be required for a Fund or the Advisor to comply with their respective
obligations under applicable federal securities laws, including, without
limitation, the 1940 Act, the Advisers Act, the 1934 Act, the Securities Act
of
1933, as amended (the “Securities Act”), and any rule or regulation
thereunder.
If
this
Agreement is terminated prior to the end of any calendar quarter, the fee shall
be prorated for the portion of any quarter in which this Agreement is in effect
according to the proportion which the number of calendar days, during which
this
Agreement is in effect, bears to the number of calendar days in the quarter,
and
shall be payable within ten (10) days after the date of termination.
(a)
The Sub-Advisor is registered as an investment adviser under the Advisers
Act;
(b)
The Sub-Advisor is a limited liability company, duly organized and validly
existing under the laws of Delaware, with the power to own and possess its
assets and carry on its business as it is now being conducted;
(c)
The execution, delivery and performance by the Sub-Advisor of this Agreement
are
within the Sub-Advisor’s powers and have been duly authorized by all necessary
action on the part of its members and no action by or in respect of, or filing
with, any governmental body, agency or official is required on the part of
the
Sub-Advisor for the execution, delivery and performance by the Sub-Advisor
of
this Agreement, and the execution, delivery and performance by the Sub-Advisor
of this Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation; (ii) the Sub-Advisor’s
governing instruments; or (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon the Sub-Advisor; and
(d)
The Form ADV of the Sub-Advisor previously provided to the Advisor (a copy
of
which is attached as Exhibit C to this Agreement) is a true and complete copy
of
the form and the information contained therein is accurate and complete in
all
material respects and does not omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they are made, not misleading. The Sub-Advisor will promptly provide the Advisor
and the Trust with a complete copy of all subsequent amendments to its Form
ADV.
(a)
The Advisor is registered as an investment adviser under the Advisers
Act;
(b)
The Advisor is a corporation duly organized and validly existing under the
laws
of the State of Delaware, with the power to own and possess its assets and
carry
on its business as it is now being conducted;
(c)
The execution, delivery and performance by the Advisor of this Agreement are
within the Advisor’s powers and have been duly authorized by all necessary
action on the part of its Board of Directors, and no action by or in respect
of,
or filing with, any governmental body, agency or official is required on the
part of the Advisor for the execution, delivery and performance by the Advisor
of this Agreement, and the execution, delivery and performance by the Advisor
of
this Agreement do not contravene or constitute a default under (i) any provision
of applicable law, rule or regulation; (ii) the Advisor’s governing instruments;
or (iii) any agreement, judgment, injunction, order, decree or other instrument
binding upon the Advisor;
(d)
The Advisor acknowledges that it received a copy of the Sub-Advisor’s Form ADV
(a copy of which is attached as Exhibit C) at least 48 hours prior to the
execution of this Agreement;
(e)
The Advisor and the Trust have duly entered into the Advisory Agreement pursuant
to which the Trust authorized the Advisor to enter into this Agreement;
(f)
The Advisor and the Trust have policies and procedures designed to detect and
deter disruptive trading practices, including “market timing,” and the Advisor
and the Trust each agree that they will continue to enforce and abide by such
policies and procedures, as amended from time to time, and comply with all
existing and future laws relating to such matters or to the purchase and sale
of
interests in the Funds generally;
(g)
Each Fund is a “qualified institutional buyer” (“QIB”) as defined in Rule 144A
under the Securities Act of 1933, as amended, and the Advisor will promptly
notify the Sub-Advisor if a Fund ceases to be a QIB;
(h)
Each Fund is a “qualified eligible person” (“QEP”) as defined in Commodity
Futures Trading Commission Rule 4.7 (“CFTC Rule 4.7”), and the Advisor will
promptly notify the Sub-Advisor if a Fund ceases to be a QEP, and hereby
consents for each Fund to be treated as an “exempt account” under CFTC Rule 4.7;
and
(i)
The Sub-Advisor Assets are free from all liens and charges, and the Advisor
undertakes that no liens or charges will arise from the acts or omissions of
the
Advisor which may prevent the Sub-Advisor from giving a first priority lien
or
charge on the assets solely in connection with the Sub-Advisor’s authority to
direct the deposit of margin or collateral to the extent necessary to meet
the
obligations of a Fund with respect to any investments made for the Fund.
The
Advisor shall indemnify the Sub-Advisor, its affiliates and its controlling
persons (the “Advisor Indemnified Persons”) for any liability and expenses,
including reasonable attorneys’ fees, howsoever arising from, or in connection
with, the Advisor’s breach of this Agreement or its representations and
warranties herein or as a result of the Advisor’s willful misfeasance, bad
faith, negligence, reckless disregard of its duties hereunder or violation
of
applicable law; provided, however, that the Advisor Indemnified Persons shall
not be indemnified for any liability or expenses which may be sustained as
a
result of the Sub-Advisor’s willful misfeasance, bad faith, negligence, or
reckless disregard of its duties hereunder.
This
Agreement shall not be assigned and shall terminate automatically in the event
of its assignment, except as provided otherwise by any rule, exemptive order
issued by the SEC, or No Action Letter provided or pursuant to the 1940 Act,
or
upon the termination of the Advisory Agreement. In the event that
there is a proposed change in control of the Sub-Advisor that would act to
terminate this Agreement, if a vote of shareholders to approve continuation
of
this Agreement is at that time deemed by counsel to the Trust to be required
by
the 1940 Act or any rule or regulation thereunder, the Sub-Advisor agrees to
assume all reasonable costs associated with soliciting shareholders of the
appropriate Fund(s) of the Trust to approve continuation of this
Agreement. Such expenses include the costs of preparation and mailing
of a proxy statement, and of soliciting proxies. In the event that
such proposed change in control of the Sub-Advisor shall occur following
either: (i) receipt by the Advisor and the Trust of an exemptive
order issued by the SEC with respect to the appointment of sub-advisors absent
shareholder approval, or (ii) the adoption of proposed Rule 15a-5 under the
1940
Act, the Sub-Advisor agrees to assume all reasonable costs and expenses
(including the costs of mailing) associated with the preparation of a statement,
required by the exemptive order or Rule 15a-5, containing all information that
would be included in a proxy statement (an “Information
Statement”). In addition, if the Sub-Advisor shall resign, the
Sub-Advisor agrees to assume all reasonable costs and expenses (including the
costs of mailing) associated with the preparation of an Information Statement;
provided that Sub-Advisor shall not be responsible for the amount of such costs
in excess of $25,000. Notwithstanding the foregoing, if in its sole
reasonable judgment, the Sub-Advisor determines that continuing to serve in
its
role as Sub-Advisor under this Agreement will expose it to unwanted
reputational, regulatory, financial or other risks, then the Sub-Advisor will
not assume the costs or expenses (including the costs of mailing) associated
in
any way with the preparation or distribution of an Information Statement.
The
Sub-Advisor may delegate portfolio management and administrative duties to
its
affiliates and may share such information as necessary to accomplish these
purposes. Additionally, the Sub-Advisor will have the ability to
delegate back office services to State Street Investment Manager Solutions,
LLC. In all cases, the Sub-Advisor shall remain liable as if such
services were provided directly. No additional fees shall be imposed
for such services except as otherwise agreed.
This
Agreement shall extend to and bind the heirs, executors, administrators and
successors of the parties hereto.
(a)
If to the Advisor:
Xxxxxx
Global Investments, Inc.
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
XX 00000
Attention: Chief
Counsel
(b)
If to the Sub-Advisor:
Pacific
Investment Management Company
LLC
000
Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx
Xxxxx, XX 00000
Fax: 000-000-0000
Attention: General
Counsel
Cc: Xxxx
Xxxxxxx, Account
Manager
E-mail: xxxx.xxxxxxx@xxxxx.xxx
16.
Governing Law. This Agreement shall be governed by the internal laws of the
State of New York without regard to conflict of law principles; provided,
however that nothing herein shall be construed as being inconsistent with the
1940 Act. Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
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PURSUANT
TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION
WITH
ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS ACCOUNT DOCUMENT IS NOT REQUIRED
TO
BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING
COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM
OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE.
CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR
APPROVED THIS TRADING PROGRAM OR THIS ACCOUNT DOCUMENT.
ADVISOR
XXXXXX
GLOBAL INVESTMENTS, INC.
By: /s/
Xxxx Xxxxxxxxxxxx
Xxxx
Xxxxxxxxxxxx
President
SUB-ADVISOR
PACIFIC
INVESTMENT MANAGEMENT COMPANY LLC
By: /s/
Xxxxx X. Xxxxxx
Xxxxx
X. Xxxxxx
Managing
Director
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#866512v.7
EXHIBIT
A
The
Advisor desires to include within the Sub-Advisor Assets certain “in-kind”
securities (the “In-Kind Securities”). A certified list of the
In-Kind Securities to be transferred to the Sub-Advisor Assets will be provided
to the Sub-Advisor by a Fund’s custodian bank.
The
Advisor acknowledges and agrees that some or all of the In-Kind Securities
may
have value for the Sub-Advisor Assets and it may be in the Advisor’s best
interest to retain them, but in order to comply with the investment objectives
or strategies of a Fund, some or all of such assets may be liquidated at such
times and in such manner as is deemed appropriate by the Sub-Advisor and the
proceeds be invested in compliance with the investment objectives of the
Fund.
The
Advisor acknowledges and agrees that the Sub-Advisor will use its commercially
reasonable efforts to obtain the best execution. The Sub-Advisor will
not be liable to the Advisor, the Trust or to a Fund for the prices obtained
in
connection with any sale of the In-Kind Securities and the Advisor acknowledges
that such prices may in fact be much lower than the prices at which such In-Kind
Securities are presently carried in a Fund’s account. The Sub-Advisor
shall maintain a log of all transactions placed through all securities brokerage
firms including the name of the firm, a description of each transaction, the
date of each transaction and the amount or commissions paid.
The
Sub-Advisor shall invest the proceeds from the sale of the assets, together
with
any assets remaining unsold, in accordance with the investment objectives of
the
relevant Fund as mutually established by the Sub-Advisor and the
Advisor. In the event any assets contributed in-kind into the
Sub-Advisor Assets are not compliant with the investment objectives for the
Fund, the Advisor acknowledges and agrees that the Sub-Advisor can continue
to
hold such assets in the Sub-Advisor Assets without regard to the Fund’s
investment objectives.
Doc.
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EXHIBIT
B
BETWEEN
XXXXXX GLOBAL INVESTMENTS, INC.
AND
PACIFIC
INVESTMENT MANAGEMENT COMPANY LLC
June
30,
2008
MGI
CORE
OPPORTUNISTIC FIXED INCOME FUND
FEE
SCHEDULE
ASSETS
COMPENSATION
If
less
than $3 billion in
assets
0.25%
If
over
$3 billion in
assets
0.25% on the first $1 billion
0.225%
thereafter
Computation
As
soon
as practicable after the end of each calendar quarter, the Sub-Advisor shall
send to the Advisor a calculation (the “Calculation”) in reasonable detail of
the fee for the calendar quarter then ended as of the close of business on
the
last day of such calendar quarter. The Advisor may approve or
disapprove the Calculation within ten (10) business days of its
receipt. In the event that the Calculation has been accurately
prepared in accordance with the terms of this Agreement, the Advisor shall
pay
the fee to the Sub-Advisor. In the event of a dispute between the
parties regarding the accuracy of the Calculation, it is hereby agreed that
all
discussions in resolution of such dispute will be conducted promptly and in
good
faith.
The
foregoing fee shall be accrued for each calendar day and the sum of the daily
fee accruals shall be paid quarterly in arrears by the Advisor to the
Sub-Advisor as described herein. The daily fee accruals will be
computed by multiplying the fraction of one over the number of calendar days
in
the year by the applicable annual rate set forth in the schedule above and
multiplying this product by the net assets of the Sub-Advisors Assets, as
determined in accordance with the Prospectus as of the close of business on
the
previous business day on which the Trust was open for business. If
this Agreement is terminated prior to the end of any calendar quarter, the
fee
shall be prorated for the portion of any quarter in which this Agreement is
in
effect according to the proportion which the number of calendar days, during
which this Agreement is in effect, bears to the number of calendar days in
the
quarter.
Doc.
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EXHIBIT
C
SUB-ADVISOR
FORM
ADV
(Please
attach)
Doc.
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