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 and the Sub-Advisor are registered investment advisers under the
Investment Advisers Act of 1940, as amended (the “Advisers Act”), and engage in
the business of providing investment management services; and
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
WHEREAS,
the Advisory Agreement permits the Advisor, subject to the supervision and
direction of the Trust’s Board of Trustees, to delegate certain of its duties
under the Advisory Agreement to other investment advisers, subject to the
requirements of the 1940 Act; and
WHEREAS,
the Advisor desires to retain the Sub-Advisor to assist the Advisor in the
provision of a continuous investment program for that portion of one or more
of
the Trust’s series’ (each a “Fund”) assets which the Advisor will assign to the
Sub-Advisor (the “Sub-Advisor Assets”), and the Sub-Advisor is willing to render
such services, subject to the terms and conditions set forth in this
Agreement.
NOW,
THEREFORE, in consideration of mutual covenants recited below, the parties
agree
and promise as follows:
1.
Appointment as Sub-Advisor. The Advisor hereby appoints the Sub-Advisor to
act
as investment adviser for and to manage the Sub-Advisor Assets, subject to
the
supervision of the Advisor and the Board of Trustees of the Trust, and subject
to the terms of this Agreement; and the Sub-Advisor hereby accepts such
appointment. In such capacity, the Sub-Advisor shall be responsible for the
investment management of the Sub-Advisor Assets. The Sub-Advisor agrees to
exercise the same degree of skill, care and diligence in performing its services
under this Agreement as the Sub-Advisor exercises in performing similar services
with respect to other fiduciary accounts for which the Sub-Advisor has
investment responsibilities, and that a prudent manager would exercise under
the
circumstances.
2.
Duties of the Sub-Advisor.
(a)
Investments. The Sub-Advisor is hereby authorized and directed, and hereby
agrees, subject to the stated investment objectives, policies and restrictions
of each Fund as set forth in such Fund’s prospectus and statement of additional
information as currently in effect and as amended from time to time
(collectively referred to as the “Prospectus”) and subject to the directions of
the Advisor and the Trust’s Board of Trustees, to purchase, hold and sell
investments for the Sub-Advisor Assets and to monitor such investments on an
ongoing basis. In providing these services, the Sub-Advisor will
conduct an ongoing program of investment, evaluation and, if appropriate, sale
and reinvestment of the Sub-Advisor Assets. The Advisor agrees to
provide the Sub-Advisor information concerning (i) a Fund; (ii) its assets
available or to become available for investment; and (iii) the conditions of
a
Fund’s or the Trust’s affairs as relevant to the
Sub-Advisor. Notwithstanding any other provision to the contrary, the
Sub-Advisor shall have no obligation to perform the following services or to
have employees of the Sub-Advisor perform the following roles, as
applicable: (a) preparing and filing material for distribution to
shareholders of the Fund, including statistical information about the Fund
and
material regarding the Fund’s performance or
investments; (b) providing employees of the Sub-Advisor to
serve as officers of the Trust; or (c) providing employees of the
Sub-Advisor to serve as the Trust’s Chief Compliance Officer and associated
staff.
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.
(b)
Compliance with Applicable Laws, Governing Documents and Trust Compliance
Procedures. In the performance of its duties and obligations under this
Agreement, the Sub-Advisor shall, with respect to Sub-Advisor Assets, (i) act
in
conformity with: (A) the Trust’s Agreement and Declaration of Trust (the
“Declaration of Trust”) and By-Laws; (B) the Prospectus; (C) the policies and
procedures for compliance by the Trust with the Federal Securities Laws (as
that
term is defined in Rule 38a-1 under the 0000 Xxx) provided to the Sub-Advisor
(together, the “Trust Compliance Procedures”); and (D) the instructions and
directions received in writing from the Advisor or the Trustees of the Trust;
and (ii) conform to and comply with the requirements of the 1940 Act, the
Advisers Act, and all other federal laws applicable to Sub-Advisors’
duties under this Agreement. The Advisor will provide the Sub-Advisor
with any materials or information that the Sub-Advisor may reasonably request
to
enable it to perform its duties and obligations under 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.
(c)
Sub-Advisor Compliance Policies and Procedures. The Sub-Advisor shall promptly
provide the Trust CCO with copies of: (i) the Sub-Advisor’s policies and
procedures for compliance by the Sub-Advisor with the Federal Securities Laws
(together, the “Sub-Advisor Compliance Procedures”), and (ii) any material
changes to the Sub-Advisor Compliance Procedures. The Sub-Advisor
shall cooperate fully with the Trust CCO so as to facilitate the Trust CCO’s
performance of the Trust CCO’s responsibilities under Rule 38a-1 to review,
evaluate and report to the Trust’s Board of Trustees on the operation of the
Sub-Advisor Compliance Procedures, and shall promptly report to the Trust CCO
any Material Compliance Matter arising under the Sub-Advisor Compliance
Procedures involving the Sub-Advisor Assets. The Sub-Advisor shall
provide to the Trust CCO: (i) quarterly reports confirming the
Sub-Advisor’s compliance with the Sub-Advisor Compliance Procedures in managing
the Sub-Advisor Assets, and (ii) certifications that there were no Material
Compliance Matters involving the Sub-Advisor that arose under the Sub-Advisor
Compliance Procedures that affected the Sub-Advisor Assets. At least
annually, the Sub-Advisor shall provide a certification to the Trust CCO to
the
effect that the Sub-Advisor has in place and has implemented policies and
procedures that are reasonably designed to ensure compliance by the Sub-Advisor
with the Federal Securities Laws.
(d)
Voting of Proxies. Unless otherwise instructed by the Advisor or the Trust,
the
Sub-Advisor shall have the power, discretion and responsibility to vote, either
in person or by proxy, all securities in which the Sub-Advisor Assets may be
invested from time to time, and shall not be required to seek instructions
from
the Advisor, the Trust or a Fund. The Sub-Advisor shall also provide its Proxy
Voting Policy (the “Proxy Policy”), and, if requested by the Advisor, a summary
of such Proxy Policy suitable for including in the Prospectus, and will provide
the Advisor with any material amendment to the Proxy Policy within a reasonable
time after such amendment has taken effect. If both the Sub-Advisor
and another person managing assets of a Fund have invested in the same security,
the Sub-Advisor and such other entity will each have the power to vote its
pro
rata share of the security. Further, the Sub-Advisor shall have the
power, discretion and responsibility to exercise rights, options, warrants,
conversion privileges, and redemption privileges, and to tender securities
pursuant to a tender offer with respect to the Sub-Advisor Assets under
management by the Sub-Advisor.
(e)
Agent. Subject to any other written instructions of the Advisor or the Trust,
the Sub-Advisor is hereby appointed the Advisor’s and the Trust’s agent and
attorney-in-fact for the limited purposes of (i) executing account
documentation, agreements, contracts and other documents (e.g. any derivatives
documentation such as exchange traded and over-the-counter, as applicable)
as
the Sub-Advisor shall be requested by brokers, dealers, counterparties and
other
persons in connection with its management of the Sub-Advisor Assets; and (ii)
acknowledge the receipt of brokers’ risk disclosure statements, electronic
trading disclosure statements and similar disclosures provided that, the
Sub-Advisor’s actions in executing such documents shall comply with federal
regulations, all other federal laws applicable to the Sub-Advisor’s duties and
obligations under this Agreement and the Trust’s governing documents.
(f)
Brokerage. The Sub-Advisor will place orders pursuant to the Sub-Advisor’s
investment determinations for a Fund either directly with an issuer or with
any
broker or dealer selected by the Sub-Advisor, pursuant to this
paragraph. In executing portfolio transactions and selecting brokers
or dealers, the Sub-Advisor will use its best efforts to seek, on behalf of
a
Fund, the best overall execution available. In assessing the best
overall terms available for any transaction, the Sub-Advisor shall consider
all
factors that it deems relevant, which may include 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, both for the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting the broker or
dealer to execute a particular transaction, the Sub-Advisor may also consider
the brokerage and research services (as those terms are defined in Section
28(e)
of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) provided to
a Fund and/or other accounts over which the Sub-Advisor may exercise investment
discretion. The Sub-Advisor is authorized to pay to a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for any of the Funds that is in excess of
the
amount of commission another broker or dealer would have charged for effecting
that transaction if, but only if, the Sub-Advisor determines in good faith
that
such commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of that
particular transaction or in terms of the overall responsibilities of the
Sub-Advisor to a Fund. Such authorization is subject to termination
at any time by the Board of Trustees of the Trust for any reason. In
addition, the Sub-Advisor is authorized to allocate purchase and sale orders
for
portfolio securities to brokers or dealers that are affiliated with the Advisor,
the Sub-Advisor, the Trust’s principal underwriter, or other sub-advisors (if
applicable) if the Sub-Advisor believes that the quality of the transaction
and
the commission are comparable to what they would be with other qualified firms,
and provided that the transactions are consistent with the Trust’s Rule 17e-1
and Rule 10f-3 procedures. The Advisor will identify all brokers and
dealers affiliated with the Trust, the Advisor, and the Trust’s principal
underwriter (and the other Sub-Advisors of the Fund, to the extent such
information is necessary for the Sub-Advisor to comply with applicable federal
securities laws) who effect securities transactions for
customers. The Advisor shall promptly furnish a written notice to the
Sub-Advisor if the information so provided is no longer accurate.
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.
(g)
Securities Transactions. In no instance will any Fund’s portfolio securities be
purchased from or sold by the Sub-Advisor to the Advisor, the Sub-Advisor,
the
Trust’s principal underwriter, or any affiliated person the Trust, the Advisor,
the Sub-Advisor or the Trust’s principal underwriter, acting as principal in the
transaction, except to the extent permitted by the SEC and the 1940 Act,
including Rule 17a-7 thereunder.
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.
(h)
Code of Ethics. The Sub-Advisor hereby represents that it has adopted policies
and procedures and a code of ethics that comply in all material respects with
the requirements of Rule 17j-1 under the 1940 Act and Rule 204A-1 under the
Advisers Act. Copies of such policies and procedures and code of ethics and
any
changes or supplements thereto shall be delivered to the Advisor and the Trust,
and any material violation of such policies, and procedures and code of ethics
by personnel of the Sub-Advisor, the sanctions imposed in response thereto,
and
any material issues arising under such policies, and procedures and code of
ethics shall be reported to the Advisor and the Trust at the times and in the
format reasonably requested by the Advisor and the Board of Trustees.
(j)
Books and Records. The Sub-Advisor shall maintain separate detailed records
of
all matters pertaining to the Sub-Advisor Assets, including, without limitation,
brokerage and other records of all securities transactions. Any records required
to be maintained and preserved pursuant to the provisions of Rule 31a-1 and
Rule
31a-2 promulgated under the 1940 Act that are prepared or maintained by the
Sub-Advisor on behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust upon request. The Sub-Advisor shall be
entitled to retain originals or copies of records pursuant to the requirements
of applicable laws or regulations. The Sub-Advisor further agrees to preserve
for the periods prescribed in Rule 31a-2 under the 1940 Act the records required
to be maintained under Rule 31a-1 under the 1940 Act.
(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.
(l)
Valuation of Sub-Advisor Assets. The Sub-Advisor agrees to monitor the
Sub-Advisor Assets and to use commercially reasonable efforts to notify the
Advisor or its designee on any day that the Sub-Advisor determines that a
significant event has occurred with respect to one or more securities held
in
the Sub-Advisor Assets which would materially affect the value of such
securities. As requested by the Advisor or the Trust’s Valuation Committee, the
Sub-Advisor hereby agrees to provide additional reasonable assistance to the
Valuation Committee of the Trust, the Advisor and the Trust’s pricing agents so
that the Trust can value Sub-Advisor Assets held in the
portfolio. Such assistance may include assistance with the Trust’s
fair value pricing of portfolio securities, as requested by the
Advisor. The Advisor acknowledges and agrees that the Sub-Advisor is
not a pricing vendor for the Fund and does not have responsibility for
determining the market value of any asset in the Fund. The
Sub-Advisor agrees that it will act, at all times, in accordance with the
Sub-Advisor's Pricing Policy and will provide such certifications or
sub-certifications relating to valuation and liquidity in such forms as may
be
agreed upon from time to time by the Advisor and the Sub-Advisor.
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.
(m)
Custody Arrangements. The Sub-Advisor, on each business day, shall provide
the
Advisor, its consultant(s) so designated in writing and the Trust’s custodian
such information as the Advisor and the Trust’s custodian may reasonably request
relating to all transactions concerning the Sub-Advisor Assets.
(n)
Historical Performance Information. To the extent agreed upon by the parties,
the Sub-Advisor will provide the Trust with historical performance information
on similarly managed investment companies or for other accounts to be included
in the Prospectus or for any other uses permitted by applicable law.
(o)
Regulatory Examinations. The Sub-Advisor will cooperate promptly and fully
with
the Advisor and/or the Trust in responding to any regulatory or compliance
examinations or inspections (including information requests) relating to the
Trust, the Fund or the Advisor brought by any governmental or regulatory
authorities having appropriate jurisdiction (including, but not limited to,
the
SEC).
3.
Independent Contractor. In the performance of its duties hereunder, the
Sub-Advisor is and shall be an independent contractor and, unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent a Fund, the Trust or the Advisor in any way
or
otherwise be deemed an agent of a Fund, the Trust or the Advisor.
4.
Services to Other Clients. Nothing herein contained shall limit the freedom
of
the Sub-Advisor or any affiliated person of the Sub-Advisor to render investment
advisory, supervisory and other services to other investment companies, to
act
as investment adviser or investment counselor to other persons, firms or
corporations, or to engage in other business activities. It is understood that
the Sub-Advisor may give advice and take action for its other clients that
may
differ from advice given, or the timing or nature of action taken, for a Fund.
The Sub-Advisor is not obligated to initiate transactions for a Fund in any
security that the Sub-Advisor, its principals, affiliates or employees may
purchase or sell for its or their own accounts or other clients.
5.
Expenses. During the term of this Agreement, the Sub-Advisor will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the costs of securities, commodities and other investments (including
brokerage commissions and other transaction charges, if any) purchased or
otherwise acquired, or sold or otherwise disposed of, for a Fund. The
Sub-Advisor, at its sole expense, shall employ or associate itself with such
persons as it believes to be particularly fitted to assist it in the execution
of its duties under this Agreement. The Trust or the Advisor, as the case may
be, shall reimburse the Sub-Advisor for any expenses as may be reasonably
incurred by the Sub-Advisor, at the request of and on behalf of a Fund or the
Advisor. The Sub-Advisor shall keep and supply to the Trust and the Advisor
reasonable records of all such expenses.
6.
Compensation. For the services provided and the expenses assumed with respect
to
a Fund pursuant to this Agreement, the Sub-Advisor will be entitled to the
fee
listed for the Fund(s) on Exhibit B. Such fees will be computed and accrued
daily and payable in arrears no later than the seventh (7th) business day
following the end of each quarter, from the Trust on behalf of the Fund(s),
calculated at an annual rate based on the daily net assets of the Sub-Advisor
Assets.
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.
7.
Representations and Warranties of the Sub-Advisor. The Sub-Advisor represents
and warrants to the Advisor and the Trust as follows:
(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.
8.
Representations and Warranties of the Advisor. The Advisor represents and
warrants to the Sub-Advisor and the Trust as follows:
(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.
9.
Survival of Representations and Warranties; Duty to Update Information. All
representations and warranties made by the Sub-Advisor and the Advisor pursuant
to Sections 7 and 8 of this Agreement, respectively, shall survive for the
duration of this Agreement and the parties hereto shall promptly notify each
other in writing upon becoming aware that any of the foregoing representations
and warranties are no longer true in any material respect.
10.
Liability and Indemnification.
(a)
Liability. The duties of the Sub-Advisor shall be confined to those expressly
set forth herein, with respect to the Sub-Advisor Assets. The Sub-Advisor shall
not be liable for any loss arising out of any portfolio investment or
disposition hereunder, except a loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder, except as may
otherwise be provided under provisions of applicable state law that cannot
be
waived or modified hereby. Under no circumstances shall the Sub-Advisor be
liable for any loss arising out of any act or omission taken by another
sub-advisor, or any other third party, in respect of any portion of the Trust’s
assets not managed by the Sub-Advisor pursuant to this
Agreement. Under no circumstances shall either party
hereto be liable to the other for special, punitive or consequential damages,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages.
(b)
Indemnification. The Sub-Advisor shall indemnify the Advisor, the Trust and
each
Fund, and their respective affiliates and controlling persons (the “Sub-Advisor
Indemnified Persons”) for any liability and expenses, including reasonable
attorneys’ fees, which the Advisor, the Trust or a Fund and their respective
affiliates and controlling persons may sustain as a result of the Sub-Advisor’s
willful misfeasance, bad faith, negligence, or reckless disregard of its duties
hereunder; provided, however, that the Sub-Advisor Indemnified Persons shall
not
be indemnified for any liability or expenses which may be sustained as a result
of the Advisor’s or the Trust’s willful misfeasance, bad faith, negligence, or
reckless disregard of its duties hereunder.
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.
11.
Duration and Termination.
(a)
Duration. This Agreement, unless sooner terminated as provided herein, shall
for
the Fund(s) listed on Exhibit B attached hereto remain in effect from the date
of execution (the “Effective Date”), until two years from the Effective Date,
and thereafter, for periods of one year, so long as such continuance thereafter
is specifically approved at least annually (i) by the vote of a majority of
those 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, and (ii) by the Trustees of the Trust, or by the vote of a majority
of
the outstanding voting securities of each Fund (except as such vote may be
unnecessary pursuant to relief granted by an exemptive order from the
SEC). The foregoing requirement that continuance of this Agreement be
“specifically approved at least annually” shall be construed in a manner
consistent with the 1940 Act and the rules and regulations thereunder.
(b)
Termination. This Agreement may be terminated as to any Fund at any time,
without the payment of any penalty by: (i) the vote of a majority of the
Trustees of the Trust or the vote of a majority of the outstanding voting
securities of the Fund, (ii) the Advisor on not less than 30 days written notice
to the Sub-Advisor, or (iii) the Sub-Advisor on not less than 60 days written
notice to the Advisor and the Trust. This Agreement may also be terminated
as to
any Fund at any time by any party hereto immediately upon written notice to
the
other parties in the event of a material breach of any provision to this
Agreement by any of the parties.
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.
12.
Amendment. This Agreement may be amended by mutual consent of the parties,
provided that the terms of any material amendment shall be approved by: (a)
the
Trust’s Board of Trustees, and (b) the vote of a majority of those 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, and
by a
vote of the majority of a Fund’s outstanding securities if such approval is
required by applicable law, and unless otherwise permitted pursuant to exemptive
relief granted by the SEC or No Action position granted by the SEC or its
staff.
13.
Confidentiality. Any information or recommendations supplied by either the
Advisor or the Sub-Advisor, that are not otherwise in the public domain or
previously known to the other party in connection with the performance of its
obligations and duties hereunder, including portfolio holdings of the Trust,
financial information or other information relating to a party to this
Agreement, are to be regarded as confidential (“Confidential Information”) and
held in the strictest confidence. Except as may be required by
applicable law or rule or as requested by regulatory authorities having
jurisdiction over a party to this Agreement, Confidential Information may be
used only by the party to which said information has been communicated and
such
other persons as that party believes are necessary to carry out the purposes
of
this Agreement, the custodian, and such persons as the Advisor may designate
in
connection with the Sub-Advisor Assets. Nothing in this Agreement
shall be construed to prevent the Sub-Advisor from giving other entities
investment advice about, or trading on their behalf, in the securities of a
Fund
or the Advisor.
14.
Use of Sub-Advisor’s Name. During the term of this Agreement, the
Advisor shall have permission to use the Sub-Advisor’s name in the marketing of
the Fund, and agrees to furnish the Sub-Advisor at its principal office all
marketing materials, prospectuses, statements of additional information, proxy
statements and reports to shareholders prepared for distribution to shareholders
of the Fund or the public, which refer to the Sub-Advisor in any way.
15.
Notice. Any notice, advice or report to be given pursuant to this Agreement
shall be deemed sufficient if delivered or mailed by registered, certified
or
overnight mail, postage prepaid addressed by the party giving notice to the
other party at the last address furnished by the other party:
(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.
17.
Entire Agreement. This Agreement embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to this Agreement’s subject matter. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but such counterparts shall, together, constitute
only
one instrument.
18.
Severability. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
19.
Certain Definitions. For the purposes of this Agreement and except as otherwise
provided herein, “interested person,” “affiliated person,” “affiliates,”
“controlling persons” and “assignment” shall have their respective meanings as
set forth in the 1940 Act, subject, however, to such exemptions as may be
granted by the SEC, and the term “Fund” or “Funds” shall refer to those Fund(s)
for which the Sub-Advisor provides investment management services and as are
listed on Exhibit B to this Agreement.
20.
Captions. The captions herein are included for convenience of reference only
and
shall be ignored in the construction or interpretation hereof.
Doc.
#866512v.7
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first written above.
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
Doc.
#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.
#866512v.7
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.
#866512v.7
EXHIBIT
C
SUB-ADVISOR
FORM
ADV
(Please
attach)
Doc.
#866512v.7
