EXHIBIT d(2)(h)
SUB-ADVISORY AGREEMENT
Agreement made as of December 27, 2001 (the "Agreement") between New
York Life Investment Management LLC, a Delaware limited liability company (the
"Manager"), and McMorgan & Company LLC, a Delaware limited liability company
(the "Subadvisor").
WHEREAS, the Manager has entered into a Management Agreement, dated
December 27, 2001 (the "Management Agreement") with The MainStay Funds (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of the
U.S. Large Cap Equity Fund (the "Fund");
WHEREAS, under the Management Agreement, the Manager has agreed to
provide certain investment advisory and related administrative services to the
Fund,
WHEREAS, the Management Agreement permits the Manager to delegate
certain of its investment advisory duties under the Management Agreement to a
subadvisor; and
WHEREAS, the Manager desires to retain the Subadvisor to furnish
certain investment advisory services with respect to the Fund and the Subadvisor
is willing to furnish such services;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Manager hereby appoints the Subadvisor as an
investment subadviser with respect to the Fund for the period and on the terms
set forth in this Agreement. The Subadvisor accepts that appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. Duties as Subadvisor. Subject to the supervision of the Board
of Trustees of the Trust and the Manager, the Subadvisor shall manage the
investment operations of the Fund and the composition of the portfolio of the
Fund, including the purchase, retention and disposition of securities therein,
in accordance with the investment objectives, policies and restrictions of the
Fund, as specified in the currently effective Prospectus (as hereinafter
defined) and subject to the following understandings:
(a) The Subadvisor shall provide supervision of the
Fund's investments and determine from time to time what investments or
securities will be purchased, retained, sold or lent by the Fund, and what
portion of the Fund's assets will be invested or held uninvested as cash.
(b) The Subadvisor shall use its best judgment in the
performance of its duties under this Agreement.
(c) The Subadvisor, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the Declaration
of Trust, By-Laws and Prospectus (each as hereinafter defined) of the Trust and
with the instructions and directions of the Board of
Trustees and the Manager and will conform to and comply with the requirements of
the 1940 Act and all other applicable federal and state laws and regulations.
(d) The Subadvisor shall determine the securities to be
purchased or sold by the Fund and will place orders pursuant to its
determination with or through such persons, brokers or dealers (including NYLIFE
Securities Inc.) in conformity with the policy with respect to brokerage as set
forth in the Trust's Registration Statement and Prospectus (each as hereinafter
defined) or as the Board of Trustees may direct from time to time. It is
recognized that, in providing the Fund with investment supervision or the
placing of orders for portfolio transactions, the Subadvisor will give primary
consideration to securing the most favorable price and efficient execution.
Consistent with this policy, the Subadvisor may consider the financial
responsibility, research and investment information and other services provided
by brokers or dealers who may effect or be a party to any such transaction or
other transactions to which other clients of the Subadvisor may be a party. It
is understood that neither the Fund, the Trust, the Manager nor the Subadvisor
has adopted a formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund that the
Subadvisor have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the most favorable
price and efficient execution. Therefore, the Subadvisor is authorized to place
orders for the purchase and sale of securities for the Fund with such certain
brokers, subject to review by the Trust's Board of Trustees from time to time
with respect to the extent and continuation of this practice. It is understood
that the services provided by such brokers may be useful to the Subadvisor in
connection with its services to other clients.
On occasions when the Subadvisor deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Subadvisor, to the extent permitted by applicable laws and regulations, may, but
shall be under no obligation to, aggregate the securities to be so 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
so purchased or sold, as well as expenses incurred in the transaction, will be
made by the Subadvisor in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other clients.
(e) The Subadvisor shall maintain all books and records
with respect to the Fund's securities transactions required by sub-paragraphs
(b)(5), (6), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act and
any other books and records required to be maintained by it under the 1940 Act
and the Rules thereunder and shall render to the Manager and to the Trust's
Trustees such periodic and special reports as the Manager or the Trustees may
reasonably request.
(f) The Subadvisor shall provide the Fund's Custodian on
each business day with information relating to the execution of all portfolio
transactions pursuant to standing instructions.
3. Subadvisor Personnel. The Subadvisor shall authorize and
permit any of its directors, officers and employees who may be elected or
appointed as Trustees or officers of the
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Trust to serve in the capacities in which they are elected or appointed.
Services to be furnished by the Subadvisor under this Agreement may be furnished
through the medium of any of such directors, officers, or employees.
4. Books and Records. The-Subadvisor shall keep the Fund's books
and records required to be maintained by it, pursuant to paragraph 2 hereof. The
Subadvisor agrees that all records which it maintains for the Fund are the
property of the Fund, and it will surrender promptly to the Fund any of such
records upon the Fund's request. The Subadvisor further agrees to preserve for
the periods prescribed by Rule 31a-2 as promulgated by the Securities and
Exchange Commission (the "Commission") under the 1940 Act any such records as
are required to be maintained by the Subadvisor pursuant to paragraph 2 hereof.
5. Services Not Exclusive. The services furnished by the
Subadvisor hereunder are not to be deemed exclusive and the Subadvisor shall be
free to furnish similar or different services to others so long as its services
under this Agreement are not impaired thereby.
6. Documents. The Manager has delivered to the Subadvisor copies
of each of the following documents and will deliver to it all future amendments
and supplements, if any:
(a) Declaration of Trust of the Trust, filed with the
Secretary of The Commonwealth of Massachusetts (such Declaration of Trust, as in
effect on the date hereof and as amended from time to time, is herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on
the date hereof and as amended from time to time, are herein called the
"By-Laws");
(c) Certified Resolutions of the Board of Trustees of the
Trust authorizing the appointment of the Subadvisor and approving the form of
this Agreement;
(d) Written Instrument to Establish and Designate
Separate Series of Shares;
(e) Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-1A (the "Registration Statement"),
as filed with the Commission relating to the Fund and the Fund's Shares and all
amendments thereto;
(f) Notification of Registration of the Trust under the
1940 Act on Form N-8A as filed with the Commission and all amendments thereto;
and
(g) Each Prospectus and Statement of Additional
Information of the Trust (such Prospectus and Statement of Additional
Information, as currently in effect and as amended or supplemented from time to
time, being herein called collectively the "Prospectus").
7. Expenses. During the term of this Agreement, the Subadvisor
will bear all expenses incurred by it in connection with its services under this
Agreement. The Subadvisor shall not be responsible for any expenses incurred by
the Trust, the Fund or the Manager.
8. Compensation. For the services provided and the expenses
assumed by the Subadvisor pursuant to this Agreement, the Manager, not the Trust
or the Fund, will pay to the
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Subadvisor a fee, computed daily and payable monthly, at an annual rate, as set
forth opposite the Fund's name on Schedule A, of the average daily net assets of
the Fund.
9. Standard of Care. Subject to the applicable law, the
Subadvisor shall not be liable for any error of judgment or for any loss
suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
10. Duration and Termination. This Agreement shall continue in
effect for a period of more than two years from the date hereof only so long as
such continuance is specifically approved at least annually with respect to the
Fund in conformity with the requirements of the 1940 Act and the Rules
thereunder. Notwithstanding the foregoing, this Agreement may be terminated: (a)
with respect to the Fund at any time without penalty upon the vote of a majority
of the Trust's Trustees or by vote of the majority of the Fund's outstanding
voting securities, upon sixty (60) days' written notice to the Subadvisor, (b)
by the Manager at any time without penalty upon sixty (60) days' written notice
to the Subadvisor or immediately upon material breach by the Subadvisor or
immediately if, in the reasonable judgment of the Manager, the Subadvisor
becomes unable to discharge its duties and obligations under this Agreement, or
(c) by the Subadvisor at any time without penalty, upon sixty (60) days' written
notice to the Fund. This Agreement will also terminate automatically in the
event of its assignment (as defined in the 0000 Xxx) or the assignment or
termination of the Management Agreement.
11. Other Business. Nothing in this Agreement shall limit or
restrict the right of any of the Subadvisor's directors, officers, or employees
who may also be a Trustee, officer, or employee of the Trust to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or dissimilar
nature, nor limit or restrict the Subadvisor's right to engage in any other
business or to render services of any kind to any other corporation, trust,
firm, individual or association.
12. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. No material amendment of this Agreement shall be
effective until approved (i) by a vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, and (ii) by a vote of a majority of the Fund's outstanding voting
securities (unless in the case of (ii), the Trust receives a Commission order or
no-action letter permitting it to modify the Agreement without such vote).
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. Notice. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at NYLIM Center, 000
Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000; or (2) to the Subadvisor at Xxx
Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000.
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15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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. As used in this Agreement, the terms "majority of the
outstanding voting securities," "affiliated person," "interested person,"
"assignment," "broker," "investment adviser," "net assets," "sale," "sell" and
"security" shall have the same meaning as such terms have in the 1940 Act. Where
the effect of a requirement of the federal securities laws reflected in any
provision of this Agreement is made less restrictive by a rule, regulation or
order of the Commission, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order. This Agreement may be signed in counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
NEW YORK LIFE INVESTMENT
MANAGEMENT LLC
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Operating Officer
MCMORGAN & COMPANY LLC
By: /s/ Xxxxx X. X'Xxxxx
-------------------------------------
Xxxxx X. X'Xxxxx
President
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SCHEDULE A
FUND ANNUAL RATE*
U.S. Large Cap Equity Fund 0.325%
* of the Fund's average daily net assets
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