Exhibit No. EX-99.d.5
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of July, 2005 by and between Mercer Global
Investments, Inc., a Delaware corporation (the "Advisor"), and Pzena Investment
Management LLC, a Delaware limited liability company (the "Sub-Advisor").
WHEREAS, the Advisor and the Sub-Advisor are registered investment advisers
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
engage in the business of providing investment management services; and
WHEREAS, the Advisor has been retained to act as investment adviser
pursuant to an Investment Management Agreement, dated July 1, 2005 (the
"Advisory Agreement"), with MGI Funds (the "Trust"), a Delaware statutory trust
registered with the U.S. Securities and Exchange Commission (the "SEC") as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), which consists of several separate series of
shares, each having its own investment objectives and policies, and which is
authorized to create additional series in the future; and
WHEREAS, the Advisory Agreement permits the Advisor, subject to the
supervision and direction of the Trust's Board of Trustees, to delegate certain
of its duties under the Advisory Agreement to other investment advisers, subject
to the requirements of the 1940 Act; and
WHEREAS, the Advisor desires to retain the Sub-Advisor to assist the
Advisor in the provision of a continuous investment program for that portion of
one or more of the Trust's series' (each a "Fund") assets which the Advisor will
assign to the Sub-Advisor (the "Sub-Advisor Assets"), and the Sub-Advisor is
willing to render such services, subject to the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of mutual covenants recited below, the
parties agree and promise as follows:
1. Appointment as Sub-Advisor. The Advisor hereby appoints the Sub-Advisor
to act as investment adviser for and to manage the Sub-Advisor Assets, subject
to the supervision of the Advisor and the Board of Trustees of the Trust, and
subject to the terms of this Agreement; and the Sub-Advisor hereby accepts such
appointment. In such capacity, the Sub-Advisor shall be responsible for the
investment management of the Sub-Advisor Assets. The Sub-Advisor agrees to
exercise the same degree of skill, care and diligence in performing its services
under this Agreement as the Sub-Advisor exercises in performing similar services
with respect to other fiduciary accounts for which the Sub-Advisor has
investment responsibilities, and that a prudent manager would exercise under the
circumstances.
2. Duties of the Sub-Advisor.
(a) Investments. The Sub-Advisor is hereby authorized and directed,
and hereby agrees, subject to the stated investment objectives, policies
and restrictions of each Fund as set forth in such Fund's prospectus and
statement of additional information as currently in effect and as amended
from time to time (collectively referred to as the "Prospectus") and
subject to the directions of the Advisor and the Trust's Board of Trustees,
to purchase, hold and sell investments for the Sub-Advisor Assets and to
monitor such investments on an ongoing basis. In providing these services,
the Sub-Advisor will conduct an ongoing program of investment, evaluation
and, if appropriate, sale and reinvestment of the Sub-Advisor Assets. The
Advisor agrees to provide the Sub-Advisor information concerning (i) a
Fund; (ii) its assets available or to become available for investment; and
(iii) the conditions of a Fund's or the Trust's affairs as relevant to the
Sub-Advisor.
(b) Compliance with Applicable Laws, Governing Documents and Trust
Compliance Procedures. In the performance of its duties and obligations
under this Agreement, the Sub-Advisor shall, with respect to Sub-Advisor
Assets, (i) act in conformity with: (A) the Trust's Agreement and
Declaration of Trust (the "Declaration of Trust") and By-Laws; (B) the
prospectus and statement of additional information (together, the
"Prospectus"); (C) the policies and procedures for compliance by the Trust
with the Federal Securities Laws (as that term is defined in Rule 38a-1
under the 0000 Xxx) provided to the Sub-Advisor (together, the "Trust
Compliance Procedures"); and (D) the instructions and directions received
in writing from the Advisor or the Trustees of the Trust; and (ii) conform
to and comply with the requirements of the 1940 Act, the Advisers Act, and
all other federal laws applicable to registered investment companies' and
Sub-Advisors' duties under this Agreement provided, however, that with
respect to a Fund's diversification requirements necessary for the
Sub-Advisor Assets to comply with subchapter M of the Internal Revenue Code
as if it were a regulated investment company thereunder, the Advisor
understands that Sub-Advisor is not equipped to monitor compliance with
these requirements and the Advisor will be responsible for monitoring,
testing and notifying Sub-Advisor of its compliance or non-compliance with
subchapter M. Sub-Advisor agrees to provide Advisor or an appointed party
with the necessary information, as Advisor shall request, such that
compliance or non-compliance with subchapter M can be assessed. The Advisor
will provide the Sub-Advisor with any materials or information that the
Sub-Advisor may reasonably request to enable it to perform its duties and
obligations under this Agreement.
The Advisor will provide the Sub-Advisor with reasonable advance
notice, in writing, of: (i) any change in a Fund's investment objectives,
policies and restrictions as stated in the Prospectus; (ii) any change to
the Trust's Declaration of Trust or By-Laws; or (iii) any material change
in the Trust Compliance Procedures; and the Sub-Advisor, in the performance
of its duties and obligations under this Agreement, shall manage the
Sub-Advisor Assets consistently with such changes, provided the Sub-Advisor
has received such prior notice of the effectiveness of such changes from
the Trust or the Advisor. In addition to such notice, the Advisor shall
provide to the Sub-Advisor a copy of a modified Prospectus and copies of
the revised Trust Compliance Procedures, as applicable, reflecting such
changes. The Sub-Advisor hereby agrees to provide to the Advisor in a
timely manner, in writing, such information relating to the Sub-Advisor and
its relationship to, and actions for, a Fund as may be required to be
contained in the Prospectus or in the Trust's registration statement on
Form N-1A, or otherwise as reasonably requested by the Advisor.
In order to assist the Trust and the Trust's Chief Compliance Officer
(the "Trust CCO") to satisfy the requirements contained in Rule 38a-1 under
the 1940 Act, the Sub-Advisor shall provide to the Trust CCO: (i) direct
access to the Sub-Advisor's chief compliance officer (the "Sub-Advisor
CCO"), as reasonably requested by the Trust CCO; (ii) quarterly reports
confirming that the Sub-Advisor has complied with the Trust Compliance
Procedures in managing the Sub-Advisor Assets; and (iii) quarterly
certifications that there were no Material Compliance Matters (as that term
is defined by Rule 38a-1(e)(2)) that arose under the Trust Compliance
Procedures that related to the Sub-Advisor's management of the Sub-Advisor
Assets.
(c) Sub-Advisor Compliance Policies and Procedures. The Sub-Advisor
shall promptly provide the Trust CCO with copies of: (i) the Sub-Advisor's
policies and procedures for compliance by the Sub-Advisor with the Federal
Securities Laws (together, the "Sub-Advisor Compliance Procedures"), and
(ii) any material changes to the Sub-Advisor Compliance Procedures. The
Sub-Advisor shall cooperate fully with the Trust CCO so as to facilitate
the Trust CCO's performance of the Trust CCO's responsibilities under Rule
38a-1 to review, evaluate and report to the Trust's Board of Trustees on
the operation of the Sub-Advisor Compliance Procedures, and shall promptly
report to the Trust CCO any Material Compliance Matter arising under the
Sub-Advisor Compliance Procedures involving the Sub-Advisor Assets. The
Sub-Advisor shall provide to the Trust CCO: (i) quarterly reports
confirming the Sub-Advisor's compliance with the Sub-Advisor Compliance
Procedures in managing the Sub-Advisor Assets, and (ii) certifications that
there were no Material Compliance Matters involving the Sub-Advisor that
arose under the Sub-Advisor Compliance Procedures that affected the
Sub-Advisor Assets. At least annually, the Sub-Advisor shall provide a
certification to the Trust CCO to the effect that the Sub-Advisor has in
place and has implemented policies and procedures that are reasonably
designed to ensure compliance by the Sub-Advisor with the Federal
Securities Laws.
(d) Voting of Proxies. Unless otherwise instructed in writing by the
Advisor or the Trust, the Sub-Advisor shall have the power, discretion and
responsibility to vote, either in person or by proxy, all securities in
which the Sub-Advisor Assets may be invested from time to time, and shall
not be required to seek instructions from the Advisor, the Trust or a Fund.
The Sub-Advisor shall also provide its Proxy Voting Policy (the "Proxy
Policy"), and, if requested by the Advisor, a summary of such Proxy Policy
suitable for including in the Prospectus, and will provide the Advisor with
any material amendment to the Proxy Policy within a reasonable time after
such amendment has taken effect. If both the Sub-Advisor and another person
managing assets of a Fund have invested in the same security, the
Sub-Advisor and such other entity will each have the power to vote its pro
rata share of the security. The Advisor acknowledges that there may be
times when refraining to vote a proxy may be appropriate under such Proxy
Policy. In addition, the Advisor acknowledges and agrees that Sub-Advisor
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 Sub-Advisor Assets or
to advise or take any action on behalf of the Sub-Advisor Assets with
respect to any such actions or litigation. Sub-Advisor will forward any
proof of claim forms, settlement notices and other important information
received by it about such actions to Advisor or to a third party designated
in writing thereby.
(e) Agent. Subject to any other written instructions of the Advisor or
the Trust, the Sub-Advisor is hereby appointed the Advisor's and the
Trust's agent and attorney-in-fact for the limited purposes of executing
account documentation, agreements, contracts and other documents as the
Sub-Advisor shall be requested by brokers, dealers, counterparties and
other persons in connection with its management of the Sub-Advisor Assets,
provided that, the Sub-Advisor's actions in executing such documents shall
comply with federal regulations, all other federal laws applicable to
registered investment companies and the Sub-Advisor's duties and
obligations under this Agreement and the Trust's governing documents.
(f) Brokerage. The Sub-Advisor will place orders pursuant to the
Sub-Advisor's investment determinations for a Fund either directly with an
issuer or with any broker or dealer selected by the Sub-Advisor, pursuant
to this paragraph. In executing portfolio transactions and selecting
brokers or dealers, the Sub-Advisor will use its best efforts to seek, on
behalf of a Fund, the best overall execution available. In assessing the
best overall terms available for any transaction, the Sub-Advisor shall
consider all factors that it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of
the commission, if any, both for the specific transaction and on a
continuing basis. In evaluating the best overall terms available, and in
selecting the broker or dealer to execute a particular transaction, the
Sub-Advisor may also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934,
as amended (the "1934 Act")) provided to a Fund and/or other accounts over
which the Sub-Advisor may exercise investment discretion. The Sub-Advisor
is authorized to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction for
any of the Funds that is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if, but
only if, the Sub-Advisor determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of that particular
transaction or in terms of the overall responsibilities of the Sub-Advisor
to a Fund. Such authorization is subject to termination at any time by the
Board of Trustees of the Trust for any reason. In addition, the Sub-Advisor
is authorized to allocate purchase and sale orders for portfolio securities
to brokers or dealers that are affiliated with the Advisor, the
Sub-Advisor, the Trust's principal underwriter, or other sub-advisors (if
applicable) if the Sub-Advisor believes that the quality of the transaction
and the commission are comparable to what they would be with other
qualified firms, and provided that the transactions are consistent with the
Trust's Rule 17e-1 and Rule 10f-3 procedures. The Advisor will identify all
brokers and dealers affiliated with the Trust, the Advisor, and the Trust's
principal underwriter (and the other Sub-Advisors of the Fund, to the
extent such information is necessary for the Sub-Advisor to comply with
applicable federal securities laws), other than those whose sole business
is the distribution of mutual fund shares, who effect securities
transactions for customers. The Advisor shall promptly furnish a written
notice to the Sub-Advisor if the information so provided is no longer
accurate.
In connection with its management of the Sub-Advisor Assets and
consistent with its fiduciary obligation to the Sub-Advisor Assets and
other clients, the Sub-Advisor, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities or futures contracts to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or futures contracts
so purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Sub-Advisor in the manner the Sub-Advisor considers to
be, over time, the most equitable and consistent with its fiduciary
obligations to the Sub-Advisor's Assets and to such other clients.
(g) Securities Transactions. In no instance will any Fund's portfolio
securities be purchased from or sold to the Advisor, the Sub-Advisor, the
Trust's principal underwriter, or any affiliated person of the Trust, the
Advisor, the Sub-Advisor or the Trust's principal underwriter, acting as
principal in the transaction, except to the extent permitted by the SEC and
the 1940 Act, including Rule 17a-7 thereunder.
The Sub-Advisor acknowledges that the Advisor and the Trust may rely
on Rule 17a-7, Rule 17a-10, Rule 10f-3, Rule 12d3-1 and Rule 17e-1 under
the 1940 Act, and the Sub-Advisor hereby agrees that it shall not consult
with any other sub-advisor to the Trust with respect to transactions in
securities for the Sub-Advisor Assets or any other transactions of Trust
assets.
The Sub-Advisor is authorized to engage in transactions in which the
Sub-Advisor, or an affiliate of the Sub-Advisor, acts as a broker for both
the Fund and for another party on the other side of the transaction
("agency cross transactions"). The Sub-Advisor shall effect any such agency
cross transactions in compliance with Rule 206(3)-2 under the Advisers Act
and any other applicable provisions of the federal securities laws and
shall provide the Advisor with periodic reports describing such agency
cross transactions. By execution of this Agreement, the Advisor authorizes
the Sub-Advisor or its affiliates to engage in agency cross transactions,
as described above. The Advisor may revoke its consent at any time by
written notice to the Sub-Advisor.
The Sub-Advisor hereby represents that it has implemented policies and
procedures that will prevent the disclosure by it, its employees or its
agents of the Trust's portfolio holdings to any person or entity other than
the Advisor, the Trust's custodian, or other persons expressly designated
by the Advisor.
(h) Code of Ethics. The Sub-Advisor hereby represents that it has
adopted policies and procedures and a code of ethics that meet the
requirements of Rule 17j-1 under the 1940 Act and Rule 204A-1 under the
Advisers Act. Copies of such policies and procedures and code of ethics and
any changes or supplements thereto shall be delivered to the Advisor and
the Trust, and any material violation of such policies, and procedures and
code of ethics by personnel of the Sub-Advisor, the sanctions imposed in
response thereto, and any issues arising under such policies, and
procedures and code of ethics shall be reported to the Advisor and the
Trust at the times and in the format reasonably requested by the Advisor
and the Board of Trustees.
(i) Books and Records. The Sub-Advisor shall maintain separate
detailed records of all matters pertaining to the Sub-Advisor Assets,
including, without limitation, brokerage and other records of all
securities transactions. Any records required to be maintained and
preserved pursuant to the provisions of Rule 31a-1 and Rule 31a-2
promulgated under the 1940 Act that are prepared or maintained by the
Sub-Advisor on behalf of the Trust are the property of the Trust and will
be surrendered promptly to the Trust upon request. The Sub-Advisor further
agrees to preserve for the periods prescribed in Rule 31a-2 under the 1940
Act the records required to be maintained under Rule 31a-1 under the 1940
Act.
(j) Information Concerning Sub-Advisor Assets and the Sub-Advisor.
From time to time as the Advisor, and any consultants designated by the
Advisor, or the Trust may request, the Sub-Advisor will furnish the
requesting party reports on portfolio transactions and reports on
Sub-Advisor Assets held in the portfolio, all in such detail as the
Advisor, its consultant(s) or the Trust may reasonably request. The
Sub-Advisor will provide the Advisor with information (including
information that is required to be disclosed in the Prospectus) with
respect to the portfolio managers responsible for Sub-Advisor Assets, any
changes in the portfolio managers responsible for Sub-Advisor Assets, any
changes in the ownership or management of the Sub-Advisor, or of material
changes in the control of the Sub-Advisor. The Sub-Advisor will promptly
notify the Advisor of any pending investigation, material litigation,
administrative proceeding or any other significant regulatory inquiry. Upon
reasonable request, the Sub-Advisor will make available its officers and
employees to meet with the Trust's Board of Trustees to review the
Sub-Advisor Assets.
(k) Valuation of Sub-Advisor Assets. The Sub-Advisor agrees to monitor
the Sub-Advisor Assets and to notify the Advisor or its designee on any day
that the Sub-Advisor determines that a trading halt or other extraordinary
market event as specified in Sub-Advisor's "Securities Pricing and
Valuation Policy" in effect from time to time has occurred with respect to
one or more securities held in the Sub-Advisor Assets. As requested by the
Advisor or the Trust's Valuation Committee, the Sub-Advisor hereby agrees
to provide additional assistance to the Valuation Committee of the Trust,
the Advisor and the Trust's pricing agents in valuing Sub-Advisor Assets
held in the portfolio. Such assistance may include fair value pricing of
portfolio securities, as requested by the Advisor. The Sub-Advisor agrees
that it will act, at all times, in accordance with the Trust's Valuation
Procedures, and will provide such certifications or sub-certifications
relating to its compliance with the Trust's Valuation Procedures as
reasonably may be requested, from time to time, by the Advisor or the
Trust.
The Sub-Advisor also will provide such information or perform such
additional acts as are customarily performed by a Sub-Advisor and may be
required for a Fund or the Advisor to comply with their respective
obligations under applicable federal securities laws, including, without
limitation, the 1940 Act, the Advisers Act, the 1934 Act, the Securities
Act of 1933, as amended (the "Securities Act"), and any rule or regulation
thereunder.
(l) Custody Arrangements. The Sub-Advisor, on each business day, shall
provide the Advisor, its consultant(s) and the Trust's custodian such
information as the Advisor and the Trust's custodian may reasonably request
relating to all transactions concerning the Sub-Advisor Assets.
(m) Historical Performance Information. To the extent agreed upon by
the parties, the Sub-Advisor will provide the Trust with total return
information on similarly managed investment companies or for other accounts
to be used by the Trustees for internal review purposes.
(n) Regulatory Examinations. The Sub-Advisor will cooperate promptly
and fully with the Advisor and/or the Trust in responding to any regulatory
or compliance examinations or inspections (including information requests)
relating to the Sub-Advisor Assets, brought by any governmental or
regulatory authorities having appropriate jurisdiction (including, but not
limited to, the SEC).
3. Independent Contractor. In the performance of its duties hereunder, the
Sub-Advisor is and shall be an independent contractor and, unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent a Fund, the Trust or the Advisor in any way or
otherwise be deemed an agent of a Fund, the Trust or the Advisor.
4. Services to Other Clients. Nothing herein contained shall limit the
freedom of the Sub-Advisor or any affiliated person of the Sub-Advisor to render
investment advisory, supervisory and other services to other investment
companies, to act as investment adviser or investment counselor to other
persons, firms or corporations, or to engage in other business activities. It is
understood that the Sub-Advisor may give advice and take action for its other
clients that may differ from advice given, or the timing or nature of action
taken, for a Fund. The Sub-Advisor is not obligated to initiate transactions for
a Fund in any security that the Sub-Advisor, its principals, affiliates or
employees may purchase or sell for its or their own accounts or other clients.
5. Expenses. During the term of this Agreement, the Sub-Advisor will pay
all expenses incurred by it in connection with its activities under this
Agreement, other than the costs of securities, commodities and other investments
(including, but not limited to, brokerage commissions, interest or debit
balances, taxes and other transaction charges, if any) purchased or otherwise
acquired, or sold or otherwise disposed of, for a Fund. The Sub-Advisor, at its
sole expense, shall employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties under this
Agreement. The Trust or the Advisor, as the case may be, shall reimburse the
Sub-Advisor for any expenses as may be reasonably incurred by the Sub-Advisor,
at the request of and on behalf of a Fund or the Advisor. The Sub-Advisor shall
keep and supply to the Trust and the Advisor reasonable records of all such
expenses.
6. Compensation. For the services provided and the expenses assumed with
respect to a Fund pursuant to this Agreement, the Sub-Advisor will be entitled
to the fee listed for the Fund(s) on Exhibit A. Such fees will be computed daily
and payable in arrears no later than the seventh (7th) business day following
the end of each month, on behalf of the Fund(s), calculated at an annual rate
based on the Sub-Advisor Assets' average daily net assets.
If this Agreement is terminated prior to the end of any calendar month, the
fee shall be prorated for the portion of any month in which this Agreement is in
effect according to the proportion which the number of calendar days, during
which this Agreement is in effect, bears to the number of calendar days in the
month, and shall be payable within ten (10) days after the date of termination.
7. Representations and Warranties of the Sub-Advisor. The Sub-Advisor
represents and warrants to the Advisor and the Trust as follows:
(a) The Sub-Advisor is registered with the Securities and Exchange
Commission as an investment adviser under the Advisers Act;
(b) The Sub-Advisor is a limited liability company, duly organized and
validly existing under the laws of Delaware, with the power to own and
possess its assets and carry on its business as it is now being conducted;
(c) The execution, delivery and performance by the Sub-Advisor of this
Agreement are within the Sub-Advisor's powers and have been duly authorized
by all necessary action on the part of its officers and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Sub-Advisor for the execution, delivery and
performance by the Sub-Advisor of this Agreement, and the execution,
delivery and performance by the Sub-Advisor of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or regulation; (ii) the Sub-Advisor's governing instruments; or
(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Sub-Advisor; and
(d) The Form ADV of the Sub-Advisor previously provided to the Advisor
(a copy of which is attached as Exhibit B to this Agreement) is a true and
complete copy of the form as currently filed with the SEC and the
information contained therein is accurate and complete in all material
respects and does not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they
are made, not misleading. The Sub-Advisor will promptly provide the Advisor
and the Trust with a complete copy of all subsequent amendments to its Form
ADV.
(e) The Sub-Advisor currently maintains a $15 million errors and
omissions insurance policy and a $5 million crime shield/fidelity bond, and
shall continue during the term of this agreement to maintain such errors
and omissions insurance and fidelity bond, with companies acceptable to the
Advisor, at no less than the current levels and proof of such insurance
coverage shall be provided as set forth in paragraph (g) below.
(f) Any coverage available to the Advisor shall apply on an excess
basis. Sub-Advisor agrees that Sub-Advisor, Sub-Advisor's insurer(s) and
anyone claiming by, through or on Sub-Advisor's behalf shall have no claim,
right of action or right of subrogation against the Advisor based on any
loss or liability insured against under the foregoing insurance (including
the fidelity bond).
(g) The Sub-Advisor agrees to furnish to the Advisor certificates of
insurance in form and substance reasonably acceptable to the Advisor
evidencing the specified coverages (including the fidelity bond) and will
not materially change (other than to increase the level of coverage) or
terminate any of such coverages without at least 30 days' prior written
notice to the Advisor. The Sub-Advisor further agrees to notify the Advisor
as soon as possible, and in any event within five business days, when the
Sub-Advisor receives notice of any material change or termination of the
specified coverages.
8. Representations and Warranties of the Advisor. The Advisor represents
and warrants to the Sub-Advisor and the Trust as follows:
(a) The Advisor is registered as an investment adviser with the
Securities and Exchange Commission under the Advisers Act;
(b) The Advisor is a corporation duly organized and validly existing
under the laws of the State of Delaware, with the power to own and possess
its assets and carry on its business as it is now being conducted;
(c) The execution, delivery and performance by the Advisor of this
Agreement are within the Advisor's powers and have been duly authorized by
all necessary action on the part of its Board of Directors, and no action
by or in respect of, or filing with, any governmental body, agency or
official is required on the part of the Advisor for the execution, delivery
and performance by the Advisor of this Agreement, and the execution,
delivery and performance by the Advisor of this Agreement do not contravene
or constitute a default under (i) any provision of applicable law, rule or
regulation; (ii) the Advisor's governing instruments; or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Advisor;
(d) The Advisor acknowledges that it received a copy of the
Sub-Advisor's Form ADV (a copy of which is attached as Exhibit B) prior to
the execution of this Agreement;
(e) The Advisor and the Trust have duly entered into the Advisory
Agreement pursuant to which the Trust authorized the Advisor to enter into
this Agreement; and
(f) The Advisor and the Trust have policies and procedures designed to
detect and deter disruptive trading practices, including "market timing,"
and the Advisor and the Trust each agree that they will continue to enforce
and abide by such policies and procedures, as amended from time to time,
and comply with all existing and future laws relating to such matters or to
the purchase and sale of interests in the Funds generally.
9. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Sub-Advisor and the Advisor
pursuant to Sections 7 and 8 of this Agreement, respectively, shall survive for
the duration of this Agreement and the parties hereto shall promptly notify each
other in writing upon becoming aware that any of the foregoing representations
and warranties are no longer true.
10. Liability and Indemnification.
(a) Liability. The duties of the Sub-Advisor shall be confined to
those expressly set forth herein, with respect to the Sub-Advisor Assets.
The Sub-Advisor shall not be liable for any loss arising out of any
portfolio investment or disposition hereunder, except a loss resulting from
willful misfeasance, bad faith or negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions of
applicable state law that cannot be waived or modified hereby. Under no
circumstances shall the Sub-Advisor be liable for any loss arising out of
any act or omission taken by another sub-advisor, or any other third party,
in respect of any portion of the Trust's assets not managed by the
Sub-Advisor pursuant to this Agreement.
(b) Indemnification. The Sub-Advisor shall indemnify the Advisor, the
Trust and each Fund, and their respective affiliates and controlling
persons (the "Sub-Advisor Indemnified Persons") for any liability and
expenses, including reasonable attorneys' fees, which the Advisor, the
Trust or a Fund and their respective affiliates and controlling persons may
sustain as a result of the Sub-Advisor's willful misfeasance, bad faith,
negligence, or reckless disregard of its duties hereunder; provided,
however, that the Sub-Advisor Indemnified Persons shall not be indemnified
for any liability or expenses which may be sustained as a result of the
Advisor's willful misfeasance, bad faith, negligence, or reckless disregard
of its duties hereunder and nothing in this Agreement shall constitute a
waiver or limitation of any rights that Advisor may have under applicable
Federal or State securities law. Sub-Advisor shall not be responsible for
any loss incurred by reason of any act or omission of Advisor, a custodian
or any broker or dealer, unless such act or omission was directly caused by
the negligence, bad faith or willful misconduct of Sub-Advisor.
The Advisor shall indemnify the Sub-Advisor, its affiliates and its
controlling persons (the "Advisor Indemnified Persons") for any liability
and expenses, including reasonable attorneys' fees, howsoever arising from,
or in connection with, the Advisor's breach of this Agreement or its
representations and warranties herein or as a result of the Advisor's
willful misfeasance, bad faith, negligence, reckless disregard of its
duties hereunder or violation of applicable law; provided, however, that
the Advisor Indemnified Persons shall not be indemnified for any liability
or expenses which may be sustained as a result of the Sub-Advisor's willful
misfeasance, bad faith, negligence, or reckless disregard of its duties
hereunder.
Advisor agrees to indemnify and defend Sub-Advisor, and its
representative officers, directors, employees and any person who controls
Sub-Advisor for any loss or expense (including reasonable attorneys' fees)
arising out of or in connection with any claim, demand, action, suit or
proceeding relating to any actual or alleged material misstatement or
omission in the Fund's Prospectus, any proxy statement, or any
communication to current or prospective investors in a Fund, other than a
misstatement or omission made in reliance on written information furnished
by Sub-Advisor as set forth above.
11. Duration and Termination.
(a) Duration. This Agreement, unless sooner terminated as provided
herein, shall for the Fund(s) listed on Exhibit A attached hereto remain in
effect from the date of execution (the "Effective Date"), until two years
from the Effective Date, and thereafter, for periods of one year, so long
as such continuance thereafter is specifically approved at least annually
(i) by the vote of a majority of those Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by the
Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of each Fund (except as such vote may be unnecessary
pursuant to relief granted by an exemptive order from the SEC). The
foregoing requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
(b) Termination. This Agreement may be terminated as to any Fund at
any time, without the payment of any penalty by: (i) the vote of a majority
of the Trustees of the Trust, the vote of a majority of the outstanding
voting securities of the Fund, or the Advisor, or (ii) the Sub-Advisor on
not less than 90 days written notice to the Advisor and the Trust. This
Agreement may also be terminated as to any Fund at any time by any party
hereto immediately upon written notice to the other parties in the event of
a material breach of any provision to this Agreement by any of the parties.
This Agreement shall not be assigned and shall terminate automatically
in the event of its assignment, except as provided otherwise by any rule,
exemptive order issued by the SEC, or No Action Letter provided or pursuant
to the 1940 Act, or upon the termination of the Advisory Agreement. In the
event that there is a proposed change in control of the Sub-Advisor that
would act to terminate this Agreement, if a vote of shareholders to approve
continuation of this Agreement is at that time deemed by counsel to the
Trust to be required by the 1940 Act or any rule or regulation thereunder,
the Sub-Advisor agrees to assume all reasonable costs associated with
soliciting shareholders of the appropriate Fund(s) of the Trust to approve
continuation of this Agreement. Such expenses include the costs of
preparation and mailing of a proxy statement, and of soliciting proxies. In
the event that such proposed change in control of the Sub-Advisor shall
occur following either: (i) receipt by the Advisor and the Trust of an
exemptive order issued by the SEC with respect to the appointment of
sub-advisors absent shareholder approval, or (ii) the adoption of proposed
Rule 15a-5 under the 1940 Act, the Sub-Advisor agrees to assume all
reasonable costs and expenses (including the costs of mailing) associated
with the preparation of a statement, required by the exemptive order or
Rule 15a-5, containing all information that would be included in a proxy
statement (an "Information Statement"). In addition, if the Sub-Advisor
shall resign, the Sub-Advisor agrees to assume all reasonable costs and
expenses (including the costs of mailing) associated with the preparation
of an Information Statement.
This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
12. Amendment. This Agreement may be amended by mutual consent of the
parties, provided that the terms of any material amendment shall be approved by:
(a) the Trust's Board of Trustees, and (b) the vote of a majority of those
Trustees of the Trust who are not interested persons of any party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law, and unless otherwise
permitted pursuant to exemptive relief granted by the SEC or No Action position
granted by the SEC or its staff, by a vote of the majority of a Fund's
outstanding securities.
13. Confidentiality. Any information or recommendations supplied by either
the Advisor or the Sub-Advisor, that are not otherwise in the public domain or
previously known to the other party in connection with the performance of its
obligations and duties hereunder, including portfolio holdings of the Trust,
financial information or other information relating to a party to this
Agreement, are to be regarded as confidential ("Confidential Information") and
held in the strictest confidence. Except as may be required by applicable law or
rule or as requested by regulatory authorities having jurisdiction over a party
to this Agreement, Confidential Information may be used only by the party to
which said information has been communicated and such other persons as that
party believes are necessary to carry out the purposes of this Agreement, the
custodian, and such persons as the Advisor may designate in connection with the
Sub-Advisor Assets. Nothing in this Agreement shall be construed to prevent the
Sub-Advisor from giving other entities investment advice about, or trading on
their behalf, in the securities of a Fund or the Advisor.
14. Use of Sub-Advisor's Name. During the term of this Agreement, the
Advisor shall have permission to use the Sub-Advisor's name in the marketing of
the Fund, and agrees to furnish the Sub-Advisor at its principal office all
sales literature and similar documents, all prospectuses, proxy statements and
reports to shareholders prepared for distribution to shareholders of the Fund or
the public, which refer to the Sub-Advisor in any way. All such materials shall
be subject to the review and consent (such consent to not be unreasonably
withheld) of the Sub-Advisor at least two days prior to use. If Advisor does not
receive a response from the Sub-Advisor with respect to such materials within
two days, such materials shall be deemed accepted by the Sub-Advisor.
15. Notice. Any notice, advice or report to be given pursuant to this
Agreement shall be deemed sufficient if delivered or mailed by registered,
certified or overnight mail, postage prepaid addressed by the party giving
notice to the other party at the last address furnished by the other party:
(a) If to the Advisor:
Xxxxxx Global Investments, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Chief Counsel
(b) If to the Sub-Advisor:
Pzena Investment Management LLC
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
16. Governing Law. This Agreement shall be governed by the internal laws of
the State of New York without regard to conflict of law principles; provided,
however that nothing herein shall be construed as being inconsistent with the
1940 Act. Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
17. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to this Agreement's subject matter. This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but such counterparts shall, together, constitute only one
instrument.
18. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
19. Certain Definitions. For the purposes of this Agreement and except as
otherwise provided herein, "interested person," "affiliated person,"
"affiliates," "controlling persons" and "assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions as
may be granted by the SEC, and the term "Fund" or "Funds" shall refer to those
Fund(s) for which the Sub-Advisor provides investment management services and as
are listed on Exhibit A to this Agreement.
20. Captions. The captions herein are included for convenience of reference
only and shall be ignored in the
construction or interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
ADVISOR
XXXXXX GLOBAL INVESTMENTS, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxxxxxxx
Chief Counsel
SUB-ADVISOR
PZENA INVESTMENT MANAGEMENT LLC
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Managing Principal, Marketing & Client Services
EXHIBIT A
SUB-ADVISORY AGREEMENT
BETWEEN
XXXXXX GLOBAL INVESTMENTS, INC.
AND
PZENA INVESTMENT MANAGEMENT, LLC
July 1, 2005
MGI US LARGE CAP VALUE EQUITY FUND
FEE SCHEDULE
(a) For the first twenty-four (24) months of the Agreement, Sub-Advisor shall
be paid a management fee calculated as follows:
Annual Fee Net Value of Sub-Fund Assets
0.45% on the first $300 million
0.35% on all assets over $300 million
(b) At the end of twenty-four (24) months, the Net Value of Sub-Fund Assets
under Sub-Advisor's management shall be reviewed and if the value of such
assets does not equal or exceed $300 million, the management fee shall be
revised, to conform to Sub-Advisor's standard fee. If at the end of
twenty-four (24) months, the Net Value of Sub-Fund Assets under
Sub-Advisor's management equals or exceeds $300 million, the management fee
shall continue as set forth in (a) above.
PIM's standard large cap fee schedule is as follows:
For Accounts Over $10 Million:
---------------------------------------------------------------------
---------------------------------------------------------------------
0.70 bps on 1st $25 m
---------------------------------------------------------------------
0.50 bps on next $75 m
---------------------------------------------------------------------
0.40 bps on next $200 m
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0.35 bps on balance
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For Accounts Below $10 Million:
---------------------------------------------------------------------
---------------------------------------------------------------------
1% per annum of up to $10 Million of assets
---------------------------------------------------------------------
Minimum Fee: $35,000
---------------------------------------------------------------------
Maximum Fee: $70,000
EXHIBIT B
PZENA INVESTMENT MANAGEMENT, LLC
FORM ADV
(Please attach)
