JOHN HANCOCK FUNDS III SUBADVISORY AGREEMENT
XXXX XXXXXXX FUNDS III
AGREEMENT made this 23rd day of November 2009, between Xxxx Xxxxxxx Investment Management Services, LLC, a Delaware limited liability company (the “Adviser”), and Fiduciary Management Associates, LLC, a Delaware limited liability company (the “Subadviser”). In consideration of the mutual covenants contained herein, the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject to the supervision of the Trustees of Xxxx Xxxxxxx Funds III (the “Trust”) and the terms of this Agreement, to manage the investment and reinvestment of the assets of the portfolio specified in Appendix A to this Agreement as it shall be amended by the Adviser and the Subadviser from time to time (the “Portfolio”). The Subadviser will be an independent contractor and will have no authority to act for or represent the Trust or Adviser in any way except as expressly authorized in this Agreement or another writing by the Trust and Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER
a. Subject always to the supervision and control of the Trustees of the Trust, the Subadviser will manage the investments and determine the composition of the assets of the Portfolio on a discretionary basis in accordance with the Portfolio’s registration statement, as amended. In fulfilling its obligations to manage the investments and reinvestments of the assets of the Portfolio, the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial and other information affecting the economy generally and individual companies or industries the securities of which are included in the Portfolio or are under consideration for inclusion in the Portfolio;
ii. formulate and implement a continuous investment program for the Portfolio consistent with the Subadviser’s investment strategy and the specific investment objectives and related investment policies for the Portfolio as described in the Portfolio’s registration statement, as amended;
iii. take whatever steps are necessary to implement these investment programs by the purchase and sale of securities including the placing of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the implementation of these investment programs; and
v. assist in providing determinations, in accordance with procedures and methods established by the Trustees of the Trust, of the fair value of securities held by the Portfolio for which market quotations are not readily available for purposes of enabling the Trust’s Custodian to calculate net asset value.
b. The Subadviser, at its expense, will furnish (i) all necessary investment and management facilities, including salaries of personnel required for it to execute its duties faithfully, and (ii) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the investment affairs of the Portfolio (excluding determination of net asset value and shareholder accounting services).
c. The Subadviser will select brokers and dealers to effect all transactions subject to the following conditions: the Subadviser will place all orders with brokers, dealers, or issuers, and will negotiate brokerage commissions if applicable. The Subadviser is directed at all times to seek to execute brokerage transactions for the Portfolio in accordance with such policies or practices as may be established by the Trustees and described in the Trust’s registration statement as amended. The Subadviser may pay a broker-dealer which provides research and brokerage services a higher spread or commission for a particular transaction than otherwise might have been charged by another broker-dealer, if the Subadviser determines that the higher spread or commission is reasonable in relation to the value of the brokerage and research services that such broker-dealer provides, viewed in terms of either the particular transaction or the Subadviser’s overall responsibilities with respect to accounts managed by the Subadviser. The Subadviser may use for the benefit of the Subadviser’s other clients, or make available to companies affiliated with the Subadviser or to its employees for the benefit of its clients, any such brokerage and research services that the Subadviser obtains from brokers or dealers.
d. On occasions when the Subadviser deems the purchase or sale of a security to be in the best interest of the Portfolio as well as other clients of the Subadviser, the Subadviser to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities to be purchased or sold to attempt to obtain a more favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Portfolio and to its other clients.
e. The Subadviser will maintain all accounts, books and records with respect to the Portfolio as are required of an investment adviser of a registered investment company pursuant to the Investment Company Act of 1940, as amended (the “Investment Company Act”), and Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”), and the rules thereunder.
f. The Subadviser shall have the authority to vote all proxies and respond to all corporate actions received in connection with securities held by the Portfolio. Subadviser shall exercise such voting rights and monitor such corporate actions in accordance with Subadviser’s written proxy voting policies and procedures, as the same may be amended from time to time. Adviser acknowledges on behalf of the Portfolio that there may be times when refraining to vote a proxy may be appropriate under such policies. In addition, Adviser acknowledges and agrees that Subadviser shall not have any responsibility to initiate, consider or participate in any bankruptcy, class action or other litigation against or involving any issue of securities held in or formerly held in the Account or to advise or take any action on behalf of the Portfolio or the Trust with respect to any such actions or litigation. Subadviser will forward any important information received by it about such actions to Adviser.
g. All portfolio transactions for the Portfolio will be consummated by payment to or delivery by the Trust’s Custodian, or such depositories or agents as may be designated by the Custodian in writing, as custodian for the Portfolio, of all cash and/or securities due to or from the Portfolio, and the Subadviser shall not have possession or custody thereof or any responsibility or liability with respect to such custody. The Subadviser shall advise and confirm in writing to the Custodian all investment orders for the Portfolio placed by it with brokers and dealers. The Portfolio shall issue to the Custodian such instructions as may be appropriate in connection with the settlement of any transaction initiated by the Subadviser. The Portfolio shall be responsible for all custodial arrangements and the payment of all custodial charges and fees, and, upon giving proper instructions to the Custodian, the Subadviser shall have no responsibility or liability with respect to custodial arrangements or the acts, omissions or other conduct of the Custodian.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to the Portfolio the compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its directors, officers or employees shall be liable to the Adviser or the Trust for any error of judgment or mistake of law or for any loss suffered by the Adviser or Trust in connection with the matters to which this Agreement relates except for losses resulting from willful misfeasance, bad faith or gross negligence in the performance of, or from the reckless disregard of, the duties of the Subadviser or any of its directors.
5. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations.
6. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated with the Subadviser to better enable it to fulfill its obligations under this Agreement for the provision of certain personnel and facilities to the Subadviser.
7. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the Trust are or may be interested in the Subadviser as trustees, officers or otherwise; that directors, officers and agents of the Subadviser are or may be interested in the Trust as trustees, officers, shareholders or otherwise; that the Subadviser may be interested in the Trust; and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder except as otherwise provided in the Agreement and Declaration of Trust of the Trust and the Certificate of Formation or Limited Liability Company Agreement of the Subadviser, respectively, or by specific provision of applicable law.
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to the Portfolio on the later of (i) its execution, (ii) the effective date of the registration statement of the Portfolio and (iii) with respect to the Portfolio, the date of the meeting of the shareholders of the Portfolio, at which meeting this Agreement is approved by the vote of a majority of the outstanding voting securities (as defined in the Investment Company Act) of the Portfolio. The Agreement will continue in effect for a period more than two years from the date of its execution only so long as such continuance is specifically approved at least annually either by the Trustees of the Trust or by a majority of the outstanding voting securities of the Portfolio, provided that in either event such continuance shall also be approved by the vote of a majority of the Trustees of the Trust who are not interested persons (as defined in the Investment Company Act) of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval of the Agreement or of any continuance of the Agreement shall be effective with respect to the Portfolio if a majority of the outstanding voting securities of the series (as defined in Rule 18f-2(h) under the Investment Company Act) of shares of the Portfolio votes to approve the Agreement or its continuance, notwithstanding that the Agreement or its continuance may not have been approved by a majority of the outstanding voting securities of all the portfolios of the Trust.
If the shareholders of the Portfolio fail to approve the Agreement or any continuance of the Agreement is not obtained, the Subadviser will continue to act as investment subadviser with respect to the Portfolio pending the required approval of the Agreement or its continuance or of any contract with the Subadviser or a different adviser or subadviser or other definitive action; provided, that the compensation received by the Subadviser in respect of such Portfolio during such period is in compliance with Rule 15a-4 under the Investment Company Act.
This Agreement may be terminated at any time, without the payment of any penalty, by the Trustees of the Trust, by the vote of a majority of the outstanding voting securities of the Trust, or with respect to the Portfolio by the vote of a majority of the outstanding voting securities of the Portfolio, on sixty days’ written notice to the Adviser and the Subadviser, or by the Adviser or Subadviser on sixty days’ written notice to the Trust and the other party. This agreement will automatically terminate, without the payment of any penalty, in the event of its assignment (as defined in the Investment Company Act) or in the event the Advisory Agreement between the Adviser and the Trust terminates for any reason. Termination of this Agreement shall not affect any liability or obligations of the Portfolio for outstanding trades/securities transactions initiated prior to Subadviser’s receipt of written notice of such termination.
9. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under the Investment Advisers Act or under the laws of any jurisdiction in which the Subadviser is required to be registered as an investment adviser in order to perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives notice of any material action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Trust; and
c. any change in actual control or management of the Subadviser or the portfolio manager of the Portfolio.
10. PROVISION OF CERTAIN INFORMATION BY ADVISER
The Adviser will promptly notify the Subadviser in writing of the occurrence of any of the following events:
a. the termination of the Investment Advisory Agreement between Adviser and the Trust;
b. any supplement, amendment, modification or other change to the registration statement of the Trust as effective from time to time and such other documents governing the investment of the Portfolio and such other information as is necessary for the portfolio manager to carry out its obligations under this Agreement;
c. additions or withdrawals of cash to the Portfolio;
d. the Adviser is served or otherwise receives notice of any material action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Fund pertinent to the subadvisory responsibilities, to the extent not otherwise prohibited by applicable law or order; and
e. any change in actual control or management of the Adviser that would result in the “assignment” of the advisory contract, as defined under the Investment Company Act.
11. SERVICES TO OTHER CLIENTS
The Adviser understands, and has advised the Trust’s Board of Trustees, that the Subadviser now acts, or may in the future act, as an investment adviser to fiduciary and other managed accounts and as investment adviser or subadviser to other investment companies. Further, the Adviser understands, and has advised the Trust’s Board of Trustees that the Subadviser and its affiliates may give advice and take action for its accounts, including investment companies, which differs from advice given on the timing or nature of action taken for the Portfolio. The Subadviser is not obligated to initiate transactions for the Portfolio in any security which the Subadviser, its partners, affiliates or employees may purchase or sell for their own accounts or other clients.
12. CONSULTATION WITH SUBADVISERS TO OTHER TRUST PORTFOLIOS
As required by Rule 17a-10 under the Investment Company Act, the Subadviser is prohibited from consulting with the entities listed below concerning transactions for the Portfolio in securities or other assets:
1. other subadvisers to the Portfolio; and
2. other subadvisers to a portfolio under common control with the Portfolio.
13. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of a majority of the outstanding voting securities of the Portfolio affected by the amendment and by the vote of a majority of the Trustees of the Trust who are not interested persons of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval shall be effective with respect to the Portfolio if a majority of the outstanding voting securities of the Portfolio vote to approve the amendment, notwithstanding that the amendment may not have been approved by a majority of the outstanding voting securities of all the portfolios of the Trust.
14. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the parties.
15. HEADINGS
The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof.
16. NOTICES
All notices required to be given pursuant to this Agreement shall be delivered or mailed to the last known business address of the Trust or applicable party in person or by registered mail or a private mail or delivery service providing the sender with notice of receipt. Notice shall be deemed given on the date delivered or mailed in accordance with this paragraph.
17. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained herein.
18. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts, or any of the applicable provisions of the Investment Company Act. To the extent that the laws of The Commonwealth of Massachusetts, or any of the provisions in this Agreement, conflict with applicable provisions of the Investment Company Act, the latter shall control.
19. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust, a copy of which, together with all amendments thereto (the “Declaration”), is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that the name “Xxxx Xxxxxxx Funds III” refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, shareholder, officer, employee or agent of the Trust shall be held to any personal liability, nor shall resort be had to their private property, for the satisfaction of any obligation or claim, in connection with the affairs of the Trust or any portfolio thereof, but only the assets belonging to the Trust, or to the Portfolio with respect to which such obligation or claim arose, shall be liable.
20. CONFIDENTIALITY OF TRUST PORTFOLIO HOLDINGS
The Subadviser agrees to treat Trust portfolio holdings as confidential information in accordance with the Trust’s “Policies and Procedures Regarding Disclosure of Portfolio Holdings,” as such policy may be amended from time to time, and to prohibit its employees from trading on any such confidential information.
21. COMPLIANCE
Upon execution of this Agreement, the Subadviser shall provide the Adviser with the Subadviser’s written policies and procedures (“Compliance Policies”) as required by Rule 206(4)-7 under the Investment Advisers Act. Throughout the term of this Agreement, the Subadviser shall promptly submit to the Adviser: (i) any material changes to the Compliance Policies, (ii) notification of the commencement of a regulatory examination of the Subadviser and documentation describing the results of any such examination and of any periodic testing of the Compliance Policies, and (iii) notification of any material compliance matter that relates to the services provided by the Subadviser to the Trust including but not limited to any material violation of the Compliance Policies or of the Subadviser’s code of ethics and/or related code. Throughout the term of this Agreement, the Subadviser shall provide the Adviser with any certifications, information and access to personnel and resources (including those resources that will permit testing of the Compliance Policies by the Adviser) that the Adviser may reasonably request to enable the Trust to comply with Rule 38a-1 under the Investment Company Act.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first mentioned above.
XXXX XXXXXXX INVESTMENT MANAGEMENT
SERVICES, LLC
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
FIDUCIARY MANAGEMENT ASSOCIATES, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Managing Director
APPENDIX A
The Subadviser shall serve as investment subadviser for the Xxxx Xxxxxxx Small Company Fund (the “Portfolio”). The Adviser will pay the Subadviser, as full compensation for all services provided under this Agreement with respect to the Portfolio, a fee at an annual rate as follows (the “Subadviser Fee”):
|
Portfolio |
First $500 million of Net Assets |
Next $500 million of Net Assets |
Over $1 billion of Net Assets |
|
Xxxx Xxxxxxx Small Company Fund |
|
|
|
The Subadviser Fee for the Portfolio shall be accrued for each calendar day and the sum of the daily fee accruals shall be paid monthly to the Subadviser. 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 described in the preceding paragraph, and multiplying this product by the net assets of the Portfolio. For purposes of determining net assets of the Portfolio and calculating the Subadviser Fee, the net assets of the Portfolio are determined as of the close of business on the previous business day of the Trust.
