Execution Copy
THE XXXX XXXXXXX FINANCIAL TRENDS FUND INC.
SUB-ADVISORY AGREEMENT
AGREEMENT made this 31st day of December 2005, among Xxxx Xxxxxxx Advisers,
LLC, a Delaware limited liability company (the "Adviser"), Sovereign Asset
Management LLC, a Delaware limited liability company (the "Sub-adviser"), and
The Xxxx Xxxxxxx Financial Trends Fund Inc., a Maryland corporation (the
"Company"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. APPOINTMENT OF SUB-ADVISER
The Sub-adviser undertakes to act as investment sub-adviser to the Company,
and, subject to the supervision of the Directors of the Company and the terms of
this Agreement, to manage the investment and reinvestment of the assets of the
Company. The Sub-adviser will be an independent contractor and will have no
authority to act for or represent the Company or the Adviser in any way except
as expressly authorized in this Agreement or another writing by the Company or
the Adviser. The Sub-adviser and the Adviser are currently affiliates under the
common control of Manulife Financial Corporation.
2. SERVICES TO BE RENDERED BY THE SUB-ADVISER TO THE COMPANY
a. Subject always to the direction and control of the Directors of the
Company, the Sub-adviser shall have investment discretion over the assets
of the Company and will manage the investments and determine the
composition of these assets in accordance with the Company's registration
statement, as amended. In fulfilling its obligations to manage the
investments and reinvestments of the assets of the Company, the Sub-adviser
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
Company's portfolio or are under consideration for inclusion in the
Company's portfolio;
ii. formulate and implement a continuous investment program for the
Company that is consistent with the investment objectives and related
investment policies for the Company as described in the Company's
registration statement, as amended, copies of which shall be furnished
to the Sub-adviser promptly upon amendment;
iii. take whatever steps are necessary to implement the investment program
by the purchase and sale of securities, including the placing of
orders for such purchases and sales;
iv. regularly report to the Directors of the Company and to the Adviser
with respect to the implementation of the investment program; and
v. provide assistance to the Company's custodian regarding the fair value
of securities held by the Company for which market quotations are not
readily available.
b. The Sub-adviser, at its expense, will furnish all necessary investment and
management facilities, including salaries of personnel required for it to
execute its duties faithfully.
c. The Sub-adviser will select brokers and dealers to effect all transactions
subject to the following conditions: The Sub-adviser will place all
necessary orders with brokers, dealers, or issuers and will negotiate
brokerage commissions, if applicable. The Sub-adviser is directed at all
times to seek to execute brokerage transactions for the Company in
accordance with such policies or practices as may be established by the
Directors and described in the Company's registration statement, as
amended. The Sub-adviser 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 Sub-adviser 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 Sub-adviser's overall responsibilities with respect to
accounts managed by the Sub-adviser. The Sub-adviser may use for the
benefit of the Sub-adviser's other clients, or make available to companies
affiliated with the Sub-adviser or to its directors for the benefit of
their clients, any such brokerage and research services that the
Sub-adviser obtains from brokers or dealers.
d. On occasions when the Sub-adviser deems the purchase or sale of a security
to be in the best interest of the Company as well as other clients of the
Sub-adviser, the Sub-adviser, 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 Sub-adviser in
the manner the Sub-adviser considers to be the most equitable and
consistent with its fiduciary obligations to the Company and to its other
clients.
e. The Sub-adviser will maintain all accounts, books and records with respect
to the Company as are required of an investment sub-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 Sub-adviser shall vote proxies relating to the Company's investment
securities in accordance with the Company's proxy voting policies and
procedures, which provide that the Sub-adviser shall vote all proxies
relating to securities held by the Company and, subject to the Company's
policies and procedures, shall use proxy voting policies and procedures
adopted by the Sub-adviser in conformance with Rule 206(4)-6 under the
Investment Advisers Act. The Sub-adviser shall review its proxy voting
activities on a periodic basis with the Directors and with the Adviser.
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3. COMPENSATION OF SUB-ADVISER
The Adviser will pay the Sub-adviser with respect to the Company the
compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUB-ADVISER
Neither the Sub-adviser nor any of its directors, officers or employees
shall be liable to the Adviser or the Company for any error of judgment or
mistake of law or for any loss suffered by the Adviser or the Company 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 Sub-adviser
or any of its directors.
5. CONFLICTS OF INTEREST
It is understood that directors, officers, agents, members and shareholders
of the Company are or may be interested in the Sub-adviser as directors,
officers, partners, shareholders, members or otherwise; that employees, agents,
shareholders, members and partners of the Sub-adviser are or may be interested
in the Company as directors, officers, shareholders, members or otherwise; that
the Sub-adviser may be interested in the Company; 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 by-laws of the Company and the
limited liability company agreement of the Sub-adviser, respectively, or by
specific provision of applicable law.
6. REGULATION
The Sub-adviser 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.
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on the later of (i) its execution,
(ii) the date of the meeting of the Board of Directors of the Company, at which
meeting this Agreement is approved as described below and (iii) immediately
following the close of business on December 31, 2005. The Agreement will
continue in effect for a period more than two years from its effective date only
so long as such continuance is specifically approved at least annually either by
the Directors of the Company or by a majority of the outstanding voting
securities of the Company, provided that in either event such continuance shall
also be approved by the vote of a majority of the Directors of the Company 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. Any required shareholder approval of the Agreement or
of any continuance of the Agreement shall be effective if a majority of the
outstanding voting securities of the Company votes to approve the Agreement or
its continuance.
If any required shareholder approval of this Agreement or any continuance
of the Agreement is not obtained, the Sub-adviser will continue to act as
investment sub-adviser to the Company pending the required approval of the
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Agreement or its continuance or of a new contract with the Sub-adviser or a
different adviser or sub-adviser or other definitive action; provided, that the
compensation received by the Sub-adviser in respect of the Company 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 Directors of the Company or by the vote of a majority of the
outstanding voting securities of the Company, on sixty days' written notice to
the Adviser and the Sub-adviser, or by the Adviser or Sub-adviser on sixty days'
written notice to the Company 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 Company terminates for any
reason.
8. PROVISION OF CERTAIN INFORMATION BY SUB-ADVISER
The Sub-adviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. the Sub-adviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which the
Sub-adviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
b. the Sub-adviser is served or otherwise receives notice of any 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 Company; and
c. any change in actual control or management of the Sub-adviser or the
portfolio manager of the Company.
9. SERVICES TO OTHER CLIENTS
The Adviser understands, and has advised the Company's Board of Directors,
that the Sub-adviser now acts, or may in the future act, as an investment
adviser to fiduciary and other managed accounts and as investment adviser or
sub-adviser to other investment companies. Further, the Adviser understands, and
has advised the Company's Board of Directors, that the Sub-adviser and its
affiliates may give advice and take action for other accounts, including
investment companies, which differs from advice given or the timing or nature of
action taken for the Company. The Sub-adviser is not obligated to initiate
transactions for the Company in any security that the Sub-adviser, its partners,
affiliates or employees may purchase or sell for their own accounts or other
clients.
10. CONSULTATION WITH SUB-ADVISERS TO OTHER FUNDS
As required by Rule 17a-10 under the Investment Company Act, the
Sub-adviser is prohibited from consulting with the entities listed below
concerning transactions for the Company in securities or other assets:
1. other sub-advisers to the Company
2. other sub-advisers to any other company or fund
3. other sub-advisers to the Company under common control with the Company
provided, however, the Sub-adviser may consult with any entity listed above that
is an affiliate of the Sub-adviser.
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10. ONGOING RESPONSIBILITIES OF THE ADVISER
The Adviser understands, and has advised the Company's Board of Directors,
that during the term of this Agreement the Adviser shall retain responsibility
for (i) providing the services set forth in Section 2 of this Agreement to the
Company in the event the Sub-adviser fails, for whatever reason, to provide such
services and (ii) ensuring that the services provided by the Sub-adviser to the
Company pursuant to this Agreement are rendered in a manner such that the nature
and quality of such services are substantially the same as the nature and
quality of the investment advisory services heretofore rendered to the Company
by the Adviser. Nothing in this Agreement is intended to limit or terminate the
Adviser's responsibilities under the Advisory Agreement, which obligations,
including the indemnification provisions thereof, shall remain in full force and
effect.
11. AMENDMENTS TO THE AGREEMENT
This Agreement (with the exception of Appendix A, which may be amended by
the Adviser and the Sub-adviser from time to time) may be amended by the parties
hereto only if such amendment is specifically approved by the vote of a majority
of the Directors of the Company and by the vote of a majority of the Directors
of the Company 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.
Any required shareholder approval shall be effective if a majority of the
outstanding voting securities of the Company votes to approve the amendment. No
amendment shall be effective unless it is in writing and signed by all parties
hereto.
12. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
13. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
14. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Company 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.
15. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, this Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
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16. 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.
17. CONFIDENTIALITY OF COMPANY HOLDINGS
The Sub-adviser agrees to treat the portfolio security positions of the
Company as confidential information in accordance with the Company's "Policy
Regarding Disclosure of Fund Holdings," as such policy may be amended from time
to time, and to prohibit its employees from trading on any such confidential
information. The policy and any such amendment shall not be binding upon the
Sub-adviser until a copy has been provided to the Sub-adviser.
18. COMPLIANCE
Upon execution of this Agreement, the Sub-adviser shall provide the Adviser
with the Sub-adviser'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 Sub-adviser shall promptly submit to the Adviser:
(i) any material changes to the Compliance Policies, (ii) notification of the
commencement of any regulatory examination of the Sub-adviser 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 Sub-adviser to the Company,
including but not limited to any material violation of the Compliance Policies
or of the Sub-adviser's code of ethics. Throughout the term of this Agreement,
the Sub-adviser 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 Company to comply with Rule 38a-1 under the
Investment Company Act.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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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 ADVISERS, LLC
By: /s/Xxxx X. Vryse
Name: Xxxx X. Xxxxxx
Title: Executive Vice President and Chief
Financial Officer
SOVEREIGN ASSET MANAGEMENT LLC
By: /s/Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
THE XXXX XXXXXXX FINANCIAL TRENDS FUND INC.
By: /s/Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: President
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APPENDIX A
The Adviser will pay the Sub-adviser, as full compensation for all services
provided under this Agreement with respect to the Company, a fee of 0.35% of the
Company's average daily net assets (the "Sub-adviser Fee"), computed at an
annual rate as follows:
The Sub-adviser Fee shall be accrued for each calendar day, and the sum of
the daily fee accruals shall be paid monthly to the Sub-adviser within 30
calendar days of the end of each month. The daily fee accruals will be computed
by multiplying the fraction of one over the number of calendar days in the year
by the Sub-adviser Fee, and multiplying this product by the net assets of the
Company. The Adviser shall provide the Sub-adviser with such information as the
Sub-adviser may reasonably request supporting the calculation of the fees paid
to it hereunder. Fees shall be paid either by wire transfer or check, as
directed by the Sub-adviser.
If this Agreement becomes effective or terminates, or if the manner of
determining the Sub-adviser Fee changes, before the end of any month, the fee
(if any) for the period from the effective date to the end of such month or from
the beginning of such month to the date of termination or from the beginning of
such month to the date of such change, as the case may be, shall be pro rated
according to the proportion which such period bears to the full month in which
such effectiveness or termination or change occurs.
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