INVESTMENT SUB-SUB-ADVISORY AGREEMENT
This AGREEMENT is made and entered into this 1st day of January, 2010, by
and among INVESCO ADVISERS, INC., a Delaware corporation and registered
investment adviser (the "Sub-Adviser"), and INVESCO ASSET MANAGEMENT LTD., a
company incorporated in England and Wales, authorized by the Financial Services
Authority and a registered investment adviser (the "Sub-Sub-Adviser"), each, a
"party."
RECITALS
WHEREAS, the JNL/AIM Global Real Estate Fund (the "Fund") is a series
portfolio of the JNL Series Trust (the "Trust"), a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company; and
WHEREAS, the Xxxxxxx National Asset Management, LLC (the "Adviser") and
Sub-Adviser are parties to a certain Investment Sub-Advisory Agreement, dated
January 1, 2010, pursuant to which the Sub-Adviser acts as the investment
manager with respect to certain series portfolios of the Trust, including the
Fund; and
WHEREAS, the Sub-Adviser desires to retain the Sub-Sub-Adviser to provide
certain investment management services with respect to the Fund upon the terms
and conditions set forth below; and
WHEREAS, the parties acknowledge that the services provided by the
Sub-Sub-Advisor shall be understood to include the service of "portfolio
management" under the Markets in Financial Instruments Directive (2004/39/EC),
the MiFID Implementing Regulations (Regulations no. 1287/2006) and the MiFID
Implementing Directive (2006/73/EC) (collectively, "MiFID")); and
WHEREAS, the parties acknowledge that the Sub-Sub-Advisor and the investment
advisory services which are the subject of this Agreement are subject to
regulation under MiFID; and
WHEREAS, the Board of Trustees of the Trust, including a majority of the
Trustees who are not interested persons of the Trust, as determined in
accordance with the 1940 Act (the "disinterested Trustees"), have approved the
retention of the Sub-Adviser to provide the investment management services
contemplated herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Appointment.
(a) The Sub-Adviser hereby appoints the Sub-Sub-Adviser to act as a
discretionary investment manager with respect to the Fund for the period and
pursuant to the terms and conditions set forth herein. The Sub-Sub-Adviser
accepts such appointment and agrees to provide the services contemplated herein,
pursuant to the terms and conditions set forth and for the compensation
described herein.
(b) The Sub-Advisor acknowledges the risk warnings set out in Schedule 1,
which may be updated by the Sub-Sub-Advisor at any time by written notice to
Sub-Advisor.
(c) The Sub-Advisor acknowledges that it is the sole client of the
Sub-Sub-Advisor under this Agreement and is properly classified by
Sub-Sub-Advisor as a "professional client" (as defined in MiFID) for the
purposes of such rules. The Sub-Advisor may request that it be opted down to
the status of "retail client" (as defined in MiFID), in which case it would
benefit, if the request were granted, from the higher level of protection that
is afforded to this category of client. It is not the Sub-Sub-Advisor's current
policy to agree to such reclassifications.
2. Duties of Sub-Sub-Adviser.
(a) Subject to the supervision of the Sub-Adviser, the Sub-Sub-Adviser shall
develop and implement an investment program for the Fund that is consistent with
the investment objectives, policies and restrictions set forth in the Fund's
prospectus and Statement of Additional Information, as they may be amended from
time to time; provided, however, that the Sub-Sub-Adviser shall not be
responsible for compliance with any amendments to such prospectus or Statement
of Additional Information until such time as the Sub-Sub-Adviser shall have been
given actual notice of such amendment(s) and a reasonable opportunity to
implement changes in the Fund's investment program.
(b) The Sub-Sub-Adviser shall exercise discretion with respect to the
selection of investments for the Fund's portfolio, the disposition of such
investments, the selection of brokers to be used in connection with the trading
and settlement of transactions for the Fund. In connection with the placement
of orders with brokers and dealers which involve transactions for the Fund, the
Sub-Sub-Adviser must take all reasonable steps to obtain, when executing orders,
the best possible result (the "Best Execution Obligation") in accordance with
MiFID and consistent with its obligations under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), and applicable rules and guidance issued
by the Securities and Exchange Commission (the "SEC") and its staff thereunder.
(c) The Sub-Sub-Advisor has provided information on its arrangements to
comply with the Best Execution Obligation in Schedule 2. The Sub-Sub-Advisor
agrees that the Sub-Advisor may provide this information to its own underlying
clients, or an alternative document as agreed by the parties from time to time.
The Sub-Sub-Advisor may provide an update of the information disclosed about its
best execution arrangements at any time by written notice to Sub-Advisor.
(d) The Sub-Sub-Advisor shall provide the Sub-Advisor with such additional
information on its best execution arrangements and any law or regulation in its
jurisdiction on best execution as the Sub-Advisor may reasonably request from
time to time.
(e) The Sub-Advisor acknowledges that any specific instructions given by the
Sub-Advisor to the Sub-Sub-Advisor in relation to the execution of orders under
this Agreement may prevent the Sub-Sub-Advisor from taking the steps it has
designed and implemented in its best execution policy to obtain the best
possible result for the execution of those orders in respect of the elements
covered by those instructions.
(f) The Sub-Advisor gives its consent to the Sub-Sub-Advisor's best execution
arrangements as summarised in Schedule 2. It also gives its prior express
consent to the Sub-Sub-Advisor executing orders outside a regulated market or a
multilateral trading facility, as those terms are defined in MiFID.
(g) It is the Sub-Sub-Advisor's practice, when feasible, to aggregate into a
single transaction its requests for execution of purchases or sales of a
particular security for the accounts of several clients or mutual funds, in
order to seek a lower commission or more advantageous net price. The benefit, if
any, obtained as a result of such aggregation, is generally allocated pro rata
among the accounts of the clients who participated in the aggregated
transaction. The Sub-Advisor acknowledges that this process may work on some
occasions to the Sub-Advisor's disadvantage. It also acknowledges that, in the
case of a client who has restricted the Sub-Sub-Advisor to a particular broker
or dealer with respect to a portion of transactions for that client's account,
such client may be unable to participate in aggregated orders. Where such
client's account does not participate in an aggregated order, that client will
not receive the benefit, if any, of a lower commission resulting from the
aggregation. In addition, the Sub-Advisor has been advised by the
Sub-Sub-Advisor that the timing of orders for the purchase or sale of securities
through the broker may be affected (e.g., may be delayed) when the
Sub-Sub-Advisor is attempting to execute trades through another broker during
the same time period for the same securities on behalf of other clients.
(h) Consistent with the obligations set forth above, the Sub-Sub-Adviser
may, in its discretion, place orders which involve transactions for the Fund
with brokers and dealers who sell shares of the Fund and/or provide the Fund,
Adviser, Sub-Adviser, or Sub-Sub-Adviser with research, analysis, advice or
similar services. The Sub-Sub-Adviser may pay brokers and dealers in return for
research and analytic services a higher commission or spread than may be charged
by other brokers or dealers, subject to the Sub-Sub-Adviser determining in good
faith that such commission or spread is reasonable either in terms of (i) the
particular transaction or (ii) the overall responsibility of the Sub-Sub-Adviser
to the Fund and its other clients to ensure that the total commissions or
spreads paid by each client are reasonable in relation to the benefits to such
client over the long term.
(i) In no instance will securities held by or being acquired for the Fund be
purchased from or sold to the Sub-Sub-Adviser, or any affiliated person of the
Sub-Sub-Adviser or the Fund, except in accordance with the 1940 Act, the
Advisers Act, and applicable rules, guidance and exemptive orders issued by the
SEC and its staff thereunder.
(j) Whenever the Sub-Sub-Adviser simultaneously places orders to purchase or
sell the same security on behalf of the Fund and one or more other accounts
managed by the Sub-Sub-Adviser, such orders will be allocated as to price and
amount among all such accounts in a manner believed by the Sub-Sub-Adviser to be
equitable to each account.
(k) The Sub-Sub-Adviser shall act on instructions received from the
Sub-Adviser, to the extent that such instructions are not inconsistent with the
Sub-Sub-Adviser's fiduciary duties, applicable law, or any obligations to the
Fund hereunder.
(l) The Sub-Sub-Adviser shall maintain all records and other information
relative to the Fund as confidential and proprietary information of the Fund,
and will not use such records of information for any purpose other than in
connection with the performance of its responsibilities hereunder; provided,
however, that the Sub-Sub-Adviser may disclose records or information relative
to the Fund when directed by order of a court or regulatory authority.
3. Expenses of the Fund. The Sub-Adviser shall be responsible for the
reasonable costs and expenses associated with the provision of the services
contemplated herein; provided, however, that the Fund shall be responsible for
the cost associated with the purchase or sale of any security or investment
contract or other instrument for the Fund's portfolio and the fees, expenses and
costs associated with all other aspects of the Fund's operations.
4. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Sub-Adviser will pay the Sub-Sub-Adviser a fee
in accordance with the current Invesco Transfer Pricing Policy. Such fee shall
be computed weekly and paid monthly to Sub-Adviser on or before the last
business day of the next succeeding calendar month. If this Agreement becomes
effective or terminates before the end of any month, the fee for the period from
the effective date to the end of the month or from the beginning of such month
to the date of termination, as the case may be, shall be prorated according to
the proportion which such period bears to the full month in which such
effectiveness or termination occurs.
5. Services Not Exclusive. The services to be provided by the
Sub-Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Sub-Adviser shall be free to provide similar services to other clients so
long as the provision of such services to such other clients does not impair the
Sub-Sub-Adviser's ability to provide the services contemplated hereunder.
Nothing contained herein shall be construed to limit or restrict the right of
any director, officer or employee of Sub-Sub-Adviser (who may also be a
director, officer or employee of the Sub-Adviser) 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 other business, whether of a similar nature or a dissimilar
nature.
6. Compliance with Applicable Law. The Sub-Sub-Adviser shall comply with
all applicable laws, rules and regulations in the discharge or its obligations
hereunder, specifically including, but not limited to Rule 17j-1, under the 1940
Act.
7. Term and Approval. This Agreement shall become effective upon approval
by Board of Trustees of the Trust, including a majority of the disinterested
Trustees, and shall thereafter continue in force and effect for two (2) years
and may be continued from year to year thereafter, provided that such
continuation is specifically approved at least annually by Board of Trustees of
the Trust, including a majority of the disinterested Trustees.
8. Termination. This Agreement shall automatically terminate in the event of
its assignment, as defined in Section 2(a)(4) of the 1940 Act. The Agreement
may be also terminated:
(a) at any time, without the payment of any penalty, by the vote of the
Fund's Board of Trustees or by vote of a majority of the Fund's outstanding
voting securities;
(b) by either party upon the occurrence of a material breach of the terms of
the Agreement by the other party that remains uncured for a period of thirty
(30) days after notice of such breach has been given by the terminating party;
or
(c) the Sub-Sub-Adviser may terminate the agreement upon ninety (90) days
notice if the Fund materially changes its investment objectives, policies or
restrictions and the cost of performance hereunder by the Sub-Sub-Adviser is
increased.
9. Liability of the Sub-Sub-Adviser. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or duties
hereunder on the part of the Sub-Sub-Adviser or any of its officers, directors
or employees, the Sub-Sub-Adviser shall not be subject to liability to the
Sub-Adviser, Adviser or Fund for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security or investment
contract or other instrument for the Fund's portfolio.
10. Notices. Any notices under this Agreement shall be given in writing,
addressed and delivered or mailed, postage paid, to such address as may be
designated for the receipt of such notice, with copies to the Adviser and the
Fund. The respective addresses for the delivery of such notices are as follows:
IF TO SUB-ADVISER:
--------------------
Invesco Advisers, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, Managing Director
Copy to: Xxxx X. Xxxx, General Counsel
IF TO THE SUB-SUB-ADVISER:
-----------------------------
Invesco Asset Management Ltd.
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx XX0X0XX
Attention: Xxxxxxxx Xxxxx, General Counsel
Copy to: Sub-Adviser
COPIES TO THE ADVISER AND FUND MAY BE DELIVERED TO:
------------------------------------------------------------
JNL Series Trust
Xxxxxxx National Asset Management, LLC
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, President
11. Dispute Resolution. All claims, disputes and other matters in question
between the parties to this Agreement, arising out of or relating to this
Agreement or the breach or alleged breach thereof, shall be decided by
arbitration in accordance with the rules of the American Arbitration Association
then in effect unless the parties mutually agree otherwise. Notice of the
demand for arbitration shall be filed in writing with the other party to the
Agreement and with the American Arbitration Association. The demand shall be
made within a reasonable time after the claim, dispute or other matter in
question has arisen. In no event shall the demand for arbitration be made after
the date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statute of
limitations. The award rendered by the arbitrators shall be final, and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction thereof. The prevailing party in any arbitration under this
Agreement shall be awarded its reasonable attorney's fees and costs associated
with the arbitration. The location for arbitration of any and all claims,
controversies or disputes arising out of or relating to this Agreement or any
breach or alleged breach thereof shall be in Houston, Texas.
12. Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Delaware (without regard to conflict or choice of law
provisions), the 1940 Act, the Advisers Act, and applicable rules, guidance and
exemptive orders issued by the SEC and its staff thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 1st day of January 2010.
INVESCO ADVISERS, INC.
By: /s/ P. Xxxxxxxx Xxxxx
Name: P. Xxxxxxxx Xxxxx
Title: Vice President
INVESCO ASSET MANGEMENT LTD.
By: /s/ NMC Xxxxx
Name: NMC Xxxxx
Title: Director
JNL SERIES TRUST
By: /s/ Xxxx X. Xxxxx
Name: Xxxx X. Xxxxx
Title: President
SCHEDULE 1 - RISK WARNINGS
SCHEDULE 1
Risk Warnings
APPENDIX E
----------
1. GENERAL
This general risk warning applies to all forms of investment: the value of
investments and the income derived from such investments can fall as well as
rise.
2. FUTURES AND OPTIONS
This brief statement does not disclose all of the risks and other
significant aspects of trading in futures and options. In light of the risks,
the Customer should undertake such transactions only if the Customer understands
the nature of the contracts (and contractual relationships) into which the
Customer is entering and the extent to the Customer's exposure to risk. Trading
in futures and options is not suitable for many members of the public. The
Customer should carefully consider whether trading is appropriate for the
Customer in light of the Customer's experience, objectives, financial resources
and other relevant circumstances.
FUTURES
EFFECT OF 'LEVERAGING' OR 'GEARING'
a) Transactions in futures carry a high degree of risk. The amount of
initial margin is small relative to the value of the futures contract so that
transactions are 'leveraged' or 'geared'. A relatively small market movement
will have a proportionately larger impact on the funds the Customer has
deposited or will have to deposit: this may work against the Customer as well
as for the Customer. The Customer may sustain a total loss of initial margin
funds and any additional funds deposited with the firm to maintain the
Customer's position. If the market moves against the Customer's position or
margin levels are increased, the Customer may be called upon to pay substantial
additional funds on short notice to maintain the Customer's position. If the
Customer fails to comply with a request for additional funds within the time
prescribed, the Customer's position may be liquidated at a loss and the Customer
will be liable for any resulting deficit.
RISK-REDUCING ORDERS OR STRATEGIES
b) The placing of certain orders (e.g. 'stop-loss' orders, where permitted
under local law, or 'stop-limit' orders) which are intended to limit losses to
certain amounts may not be effective because market conditions may make it
impossible to execute such orders. Strategies using combinations of position,
such as 'spread' and 'straddle' positions may be as risky as taking simple
'long' or 'short' positions.
OPTIONS
VARIABLE DEGREE OF RISK
c) Transactions in options carry a high degree of risk. Purchasers and
sellers of options should familiarise themselves with the type of option (i.e.
put or call) which they contemplate trading and the associated risks. The
Customer should calculate the extent to which the value of the options must
increase for the Customer's position to become profitable, taking into account
the premium and all transaction costs.
The purchaser of options may offset or exercise the options or allow the
options to expire. The exercise of an option results either in a cash settlement
or in the purchaser acquiring or delivering the underlying interest. If the
option is on a future, the purchaser will acquire a futures position with
associated liabilities for margin (see the section on Futures above). If the
purchased options expire worthless, the Customer will suffer a total loss of the
Customer's investment which will consist of the option premium plus transactions
costs. If the Customer is contemplating purchasing deep-out-of-the-money
options, the Customer should be aware that the chance of such options becoming
profitable ordinarily is remote.
Selling ('writing' or 'granting') and option generally entails considerably
greater risk than purchasing options. Although the premium received by the
seller is fixed, the seller may sustain a loss well in excess of that amount.
The seller will be liable for additional margin to maintain the position if the
market moves unfavourably. The seller will also be exposed to the risk of the
purchaser exercising the option and the seller will be obligated to either
settle the option in cash or to acquire or deliver the underlying interest. If
the option is on a future, the seller will acquire a position in a future with
associated liabilities for margin (see the section on Futures above). If the
option is 'covered' by the seller holding a corresponding position in the
underlying interest or a future or another option, the risk may be reduced. If
the option is not covered, the risk of loss can be unlimited.
Certain exchanges in some jurisdictions permit deferred payment of the
option premium, exposing the purchaser to liability for margin payments not
exceeding the amount of the premium. The purchaser is still subject to the risk
of losing the premium and transaction costs. When the option is exercised or
expires, the purchaser is responsible for any unpaid premium outstanding at that
time.
ADDITIONAL RISKS COMMON TO FUTURES AND OPTIONS
TERMS AND CONDITIONS OF CONTRACTS
d) The Customer should ask the firm with which the Customer deals about the
terms and conditions of the specific futures or options which the Customer is
trading and associated obligations (e.g. the circumstances under which the
Customer may become obligated to make or take delivery of the underlying
interest of a futures contract and, in respect of options, expiration dates and
restrictions on the time for exercise). Under certain circumstances the
specifications of outstanding contracts (including the exercise price of an
option) may be modified by the exchange or clearing house to reflect changes in
the underlying interest.
SUSPENSION OR RESTRICTION OF TRADING AND PRICING RELATIONSHIPS
e) Market conditions (e.g. illiquidity) and/or the operation of the rules of
certain markets (e.g. the suspension of trading in any contract or contract
month because of price limits or 'circuit breakers') may increase the risk of
loss by making it difficult or impossible to effect transactions or
liquidate/offset positions. If the Customer has sold options, this may increase
the risk of loss.
Further, normal pricing relationships between the underlying interest and
the future, and the underlying interest and the option may not exist. This can
occur when, for example, the futures contract underlying the option is subject
to price limits while the option is not. The absence of an underlying reference
price may make it difficult to judge 'fair' value.
DEPOSITED CASH AND PROPERTY
f) The Customer should familiarise its self with the protections accorded
money or other property the Customer deposits for domestic and foreign
transactions, particularly in the event of a firms insolvency or bankruptcy. The
extent to which the Customer may recover the Customer's money or property may be
governed by specific legislation or local rules. In some jurisdictions, property
which had been specifically identifiable as the Customer's own will be pro-rated
in the same manner as cash for purposes of distribution in the event of a
shortfall.
COMMISSION AND OTHER CHARGES
g) Before the Customer begins to trade, the Customer should obtain a clear
explanation of all commission, fees and other charges for which the Customer
will be liable. These charges will affect the Customer's net profit (if any) or
increase the Customer's loss.
TRANSACTIONS IN OTHER JURISDICTIONS
h) Transactions on markets in other jurisdictions, including markets
formally linked to a domestic market, may expose the Customer to additional
risk. Such markets may be subject to regulation which may offer different or
diminished investor protection. Before the Customer trades the Customer should
enquire about any rules relevant to the Customer's particular transactions. The
Customer's local regulatory authority will be unable to compel the enforcement
of the rules of regulatory authorities or markets in other jurisdictions where
the Customer's transactions have been effected. The Customer should ask the firm
with which the Customer deals for details about the types of redress available
in both the Customer's home jurisdiction and other relevant jurisdictions before
the Customer start to trade.
CURRENCY RISKS
i) The profit or loss in transactions in foreign currency-denominated
contracts (whether they are traded in the Customer's own or another
jurisdiction) will be affected by fluctuations in currency rates where there is
a need to convert from the currency denomination of the contract to another
currency.
TRADING FACILITIES
j) Most open-outcry and electronic trading facilities are supported by
computer-based component systems for the order-routing, execution, matching,
registration or clearing of trades. As with all facilities and systems, they are
vulnerable to temporary disruption or failure. The Customer's ability to recover
certain losses may be subject to limits on liability imposed by the system
provider, the market, the clearing house and/or member firms. Such limits may
vary: the Customer should ask the firm with which the Customer deal for details
in this respect.
ELECTRONIC TRADING
k) Trading on an electronic trading system may differ not only from trading
in an open-outcry market but also from trading on other electronic trading
systems. If the Customer undertakes transactions on an electronic trading
system, the Customer will be exposed to risks associated with the system
including the failure of hardware and software. The result of any system failure
may be that the Customer's order is either not executed according to the
Customer's instructions or is not executed at all.
OFF-EXCHANGE TRANSACTIONS
l) In some jurisdictions, and only then in restricted circumstances, firms
are permitted to effect off-exchange transactions. The firm with which the
Customer deals may be acting as the Customer's counterparty to the transaction.
It may be difficult or impossible to liquidate an existing position, to assess
the value, to determine a fair price or to assess the exposure to risk. For
these reasons, these transactions may involve increased risks. Off-exchange
transactions may be less regulated or subject to a separate regulatory regime.
Before the Customer undertakes such transactions, the Customer should
familiarise its self with applicable rules and attendant risks.
3. EXCHANGE RATES
If a liability in one currency is to be matched by an asset in a different
currency, or if the services to be provided under the agreement may relate to
our investment denominated in a currency other than the currency in which the
Customer's Investments are valued, the movement of exchange rates may have a
separate effect, unfavourable as well as favourable, on the gain or loss
otherwise experienced on investments.
SCHEDULE 2 - SUMMARY OF TRADE EXECUTION POLICY
SCHEDULE 2
Summary of Trade Execution Policy
APPENDIX C
-----------
INVESCO ASSET MANAGEMENT LIMITED ("IAML") - TRADE EXECUTION POLICY - 1 NOVEMBER
2007
1. INTRODUCTION, OBJECTIVE AND SCOPE
------------------------------------
This document contains information on IAML's trade execution policy (the
"Policy"), which sets out the various high level principles that IAML and its
divisions will follow when placing, arranging or executing orders for the
various discretionary arrangements in place for its clients ("Client Orders").
This is subject in all respects to the terms of any investment management
agreement in place. For its Client Orders, IAML will take all reasonable steps
in accordance with the Policy to obtain the best possible result for its
clients. In regulatory terms, this may involve execution outside of a Regulated
Market or Multilateral Trading Facility (within the meaning of the FSA Rules).
The Policy also covers mandates where investment management activities have been
delegated by IAML to other investment management professionals within the
INVESCO Ltd Group (including, but not limited to, the United States of America,
Hong Kong, Japan, Australia and Continental Europe). References in this
document to IAML therefore include those other professionals where applicable.
The Policy, with reference to applicable FSA Rules, covers the following asset
classes:-
- Equities;
- Fixed income;
- Cash products;
- Structured products; and
- Over-the-counter (OTC) products (including variations of the above), where
applicable.
Although the factors set out in the Policy are expected to produce the best
possible result for IAML's clients on a consistent basis, there is no guarantee
that circumstances will enable this to be achieved in every single transaction.
Also, wherever there is a specific instruction from a client in respect to an
order, IAML must carry out the order in accordance with that specific
instruction. HOWEVER, THIS MAY PREVENT IAML FROM TAKING STEPS THAT IT HAS
DESIGNED AND IMPLEMENTED TO OBTAIN THE BEST POSSIBLE RESULT IN EXECUTING CLIENT
ORDERS.
2. BEST POSSIBLE RESULT
-----------------------
IAML's policy for placing, arranging and or executing orders on behalf of its
clients sets out the principles for:-
- Selecting suitable venues for execution;
- Selecting suitable entities as a means of accessing those venues (IAML may
access venues directly or may use an approved counterparty/intermediary
to do so) or otherwise executing orders;
- Evaluating the Execution Factors to be taken into account when choosing
the Venue/Entity;
in each case, with reference to the particular client characteristics where
applicable.
3. APPROVED COUNTERPARTIES
--------------------------
IAML uses a number of approved counterparties who are selected for their ability
to allow it to take all reasonable steps to achieve the best possible result for
its clients.
A list of the approved counterparties is maintained on IAML's investment
management systems and is available upon request from:-
Director of European Compliance,
INVESCO Asset Management Limited,
00 Xxxxxxxx Xxxxxx,
Xxxxxx
XX0X 0XX
In selecting counterparties for its approved list, IAML will ensure these
counterparties owe IAML a duty of best execution and have in place execution
arrangements which satisfy its requirements to take all reasonable steps to
obtain, on a consistent basis, the best possible result for its client orders as
outlined in the Policy. The results they achieve will also be monitored on an
ongoing basis. Any new approved counterparty is subjected to a due diligence
process, focusing in particular on quality of execution and credit risk where
the relevant counterparty will trade on an OTC basis with IAML.
4. HOW APPROVED COUNTERPARTIES AND EXECUTION VENUES ARE CHOSEN
----------------------------------------------------------------------
Entities or execution venues that IAML chooses to transmit orders to or execute
orders (as applicable), will be selected on the basis of the quality of
execution provided by that venue or entity. As such, IAML has assessed a number
of venues and entities to ensure they can provide the best possible result,
which will be measured for consistency on transactions over a significant
period.
Alternative entities or venues may be considered where in the view of IAML the
best possible result can be obtained and where the relevant execution factors
are taken into account.
Selection of a venue or entity that provides the best possible result over a
significant period will be made on the overall basis of general prices
available; nature of the orders; depth of liquidity of venues; volatility of the
markets; speed of execution; cost of execution; creditworthiness of venues; and
quality and cost of clearing and settlement. Different execution techniques will
be employed by certain entities, including trading on a regulated exchange or
multilateral trading facility, crossing orders with another client of that
entity, or executing orders outside a regulated market or multilateral trading
facility. Execution venues could include:
- Regulated markets
- Multilateral trading facilities
- Crossing networks
- Use of systematic internalisers
- For funds, the operator or authorised corporate director (ACD) of the fund
(or its agent)
- For initial public offerings (IPOs), the issuing company
- Market makers, brokers, banks and other liquidity providers
- Non-EEA entities or venues that perform a similar function to those listed
above.
However, any client specific instruction may direct execution away from a more
suitable venue or entity. Factors will vary according to the different venues
selected; however, the best possible result will always be our foremost
consideration.
IAML's list of selected venues and entities will be reviewed at least annually,
but any significant changes to any previously assessed venue or entity, or
addition of a new venue or entity will be updated as soon as identified .
TRANSACTIONS OUTSIDE A REGULATED MARKET OR MULTILATERAL TRADING FACILITY -
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In cases where client orders in relation to a particular instrument are executed
by IAML outside a Regulated Market or Multilateral Trading Facility after 1st
November 2007, and the orders could in theory have been dealt with on such a
market/facility, then IAML is required to obtain the relevant client's prior
express consent.
5. EXECUTION FACTORS -
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IAML will, based on its experience, market judgement, the nature of the orders
and the particular instruments, at all times undertake to obtain the best
possible result. The following factors will be taken into account by IAML when
seeking to obtain the best possible result for its clients:-
- Price;
- Costs;
- Speed of execution;
- Likelihood of execution;
- Speed of settlement;
- Likelihood of settlement;
- Size of order;
- Nature of order; and
- Any other consideration relating to the execution of the order.
The relative importance of above factors will be influenced by the
characteristics of the client concerned - retail or professional; any
characteristics of the client order - any limitations or specific instructions;
characteristics of the financial instrument - quoted on-exchange, or bespoke
product; any characteristics of the venues or entities used.
IAML will generally give the highest priority to total consideration. Total
consideration represents the price of the financial instrument, plus any costs
related to execution. Costs include all directly related to the execution of
that order. However, IAML may at its discretion and in accordance with the
Policy, prioritise other factors outside of price and costs that are considered
more important for any given order and should be taken into account. A list of
specific examples of such situations (which is not exhaustive) is set out in
Appendix A.
6. BEST EXECUTION MONITORING
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Assessment of the venues and entities used to provide the best possible result
for transactions will be made on an ongoing, consistent basis. Internal
monitoring, and where applicable transaction cost analysis tools, will be used
for assessment, as well as information obtained from the various venues and
entities used by IAML.
Where such monitoring and review is deemed to find that a venue or entity is not
consistently providing the best possible result, IAML will first try and resolve
the issue with the relevant venue and/or entity. Where resolution appears to be
impossible, IAML will give due consideration to cease using that venue or
entity.
7.MATTERS BEYOND OUR CONTROL
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Due to systems failures or other reasons which are unavoidable or beyond IAML's
reasonable control, IAML may from time to time handle orders in a manner that
differs from the normal processes under the Policy. In the event of such an
occurrence, IAML will still endeavour to place, arrange and/or execute orders on
the best possible terms available in the relevant circumstances. In such
circumstances, total consideration may not be the most important factor.
8. GENERAL
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The Policy is subject to change. The execution arrangements will be reviewed as
circumstances dictate, and at least annually, unless IAML becomes aware that
there is a material change in relevant external circumstances. A change to the
execution arrangements may result in a change to the Policy. However, IAML will
only notify clients of such a change when this is material and directly relevant
to them,
The Policy supersedes any previous Policy issued by IAML.
If you have any queries in relation to the Policy then please contact the
Director of European Compliance in writing at:
INVESCO Asset Management Limited
00 Xxxxxxxx Xxxxxx
Xxxxxx, XX0X 0XX
APPENDIX A TO TRADE EXECUTION POLICY
- SPECIFIC EXECUTION FACTORS - In a falling or volatile market, IAML may
consider speed or certainty of execution to be the most important execution
factors. On the other hand, liquidity may be more important where a
particularly large order must be dealt with.
- CONFIDENTIALITY - The desire to keep an order confidential may on
occasions limit IAML's ability to take the steps it would normally take to
ensure it obtains the best possible price; e.g., by speaking to a number of
different possible approved counterparties with or through whom the order may be
executed. This may be the case in particular with large orders or OTC
derivatives. On other occasions, an approved counterparty may provide IAML with
confidential research about a possible trade or investment idea, on the basis
that if this resulted in an order, IAML would place this with or through the
counterparty. IAML would tend to agree to this, subject to any further
requirements in the Policy and to it being comfortable that the total
consideration relating to the order is commercially acceptable.
- UNITS OR SHARES IN FUNDS - The only method available for buying or selling
most of these in practice is to transmit them to the operator of the fund (or
its agent) for execution. This includes orders that relate to Invesco funds.
In general, these types of operators will therefore be the only "execution
venue" we use, regardless of other possible execution factors. Sometimes a fund
may be available via a trading platform provided by a third party which in
theory could be an alternative execution venue. However, we do not use such
platforms, as we do not believe that we would obtain a better price by doing so.
- INVESTMENT TRUSTS SHARES - When it is necessary to buy or sell these, we
generally send the order to the official stockbroker appointed by the relevant
trust. This includes where we deal with orders relating to Invesco investment
trusts. We do this because such shares can often be relatively illiquid, such
that the trust's official stockbrokers are generally best placed to provide us
on a consistent basis with a competitive market price and the required level of
liquidity. We will, however, ensure that any such stockbroker owes us a duty of
best execution when executing our orders and we will also regularly monitor the
prices they achieve to ensure they meet their obligations.
- INITIAL PUBLIC OFFERINGS (IPOS) - In practice, participating in an IPO
will mean that IAML places an order directly with the company issuing the
relevant shares.
