Exhibit 5(B)
C-8
Sub-Advisory Agreement
by and between
Xxxxxxxxxx Asset Management, LLC
and
Martingale Asset Management, L.P.
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SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT made as of the 31st day of August, 1998, by
and between XXXXXXXXXX ASSET MANAGEMENT, LLC, a Delaware limited liability
company (hereinafter called the "Manager"), with respect to certain series of
The Xxxxxxxxxx Funds II, a Delaware business trust (hereinafter called the
"Trust") listed in Appendix A hereto, as may be amended from time to time
(hereinafter referred to individually as a "Fund" and collectively as the
"Funds"), and MARTINGALE ASSET MANAGEMENT, L.P., a limited partnership organized
and existing under the laws of the State of Delaware (hereinafter called the
"Sub-Adviser").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is engaged
in the business of supplying investment advice, investment management and
administrative services, as an independent contractor; and
WHEREAS, the Sub-Adviser is also registered as an investment adviser
under the Advisers Act and is engaged in the business of supplying investment
advice, investment management and administrative services, as an independent
contractor; and
WHEREAS, the Manager and the Trust desire to retain the Sub-Adviser to
render advice and services to the Funds pursuant to the terms and provisions of
this Agreement, and the Sub-Adviser is interested in furnishing said advice and
services;
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:
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1. Appointment of Sub-Adviser. The Manger hereby employs the
Sub-Adviser and the Sub-Adviser hereby accepts such employment, to render
investment advice and management services with respect to the assets of the
Funds for the period and on the terms set forth in this Agreement, subject to
the supervision and direction of the Manager.
2. Duties of Sub-Adviser.
(a) General Duties. The Sub-Adviser shall act as sub-adviser
with respect to the portion of assets of the Funds' portfolios assigned to the
Sub-Adviser from time to time by the Manager and shall supervise investments of
the Funds in accordance with the investment objectives, programs and
restrictions of the Funds as provided in the Trust's governing documents,
including, without limitation, the Trust's Agreement and Declaration of Trust
and By-Laws, or otherwise and such other limitations as the Manager may impose
from time to time in writing to the Sub-Adviser. Without limiting the generality
of the foregoing, the Sub-Adviser shall: (i) furnish the Funds with advice and
recommendations with respect to the investment of each Fund's assets and the
purchase and sale of portfolio securities for the Funds, including the taking of
such other steps as may be necessary to implement such advice and
recommendations; (ii) furnish the Funds with reports, statements and other data
on securities, economic conditions and other pertinent subjects which the
Manager may reasonably request; (iii) manage the investments of the Funds,
subject to each Fund's currently effective registration statement filed with the
Securities and Exchange Commission (the "SEC"), as amended, from time to time,
including, among other things, investment objectives and policies and investment
restrictions, and subject to the ultimate supervision and direction of the
Manager; and (iv) render to the Manager and the Trust's Board of Trustees such
periodic and special reports with respect to each Fund's investment activities
as the Board may reasonably request.
(b) Brokerage. The Sub-Adviser shall place orders for the
purchase and sale of securities either directly with the issuer or with a broker
or dealer selected by the Sub-Adviser. In placing each Fund's securities trades,
it is recognized that the Sub-Adviser will give primary consideration to
securing the most
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favorable price and efficient execution, so that each Fund's total cost or
proceeds in each transaction will be the most favorable under all the
circumstances. Within the framework of this policy, the Sub-Adviser may consider
the financial responsibility, research and investment information, and other
services provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Sub-Adviser may
be a party.
It is also understood that it is desirable for the Funds that the
Sub-Adviser have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the Funds than might result from the allocation of brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the purchase and sale of securities for the Funds may be
made with brokers who provide such research and analysis, subject to review by
the Manager and the Trust's Board of Trustees from time to time with respect to
the extent and continuation of this practice to determine whether each Fund
benefits, directly or indirectly, from such practice. It is understood by both
parties that the Sub-Adviser may select broker-dealers for the execution of the
Funds' portfolio transactions who provide research and analysis as the
Sub-Adviser may lawfully and appropriately use in its investment management and
advisory capacities, whether or not such research and analysis may also be
useful to the Sub-Adviser in connection with its services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of one or more of the Funds as well as of
other clients, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
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 it considers to be the most equitable and consistent
with its fiduciary obligations to the Funds and to such other clients.
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3. Best Efforts and Judgment. The Sub-Adviser shall use its best
judgment and efforts in rendering the advice and services to the Funds as
contemplated by this Agreement.
4. Independent Contractor. The Sub-Adviser shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Trust or the Funds in any way, or in any way be deemed an agent
for the Trust or for the Funds. It is expressly understood and agreed that the
services to be rendered by the Sub-Adviser to the Funds under the provisions of
this Agreement are not to be deemed exclusive, and the Sub-Adviser shall be free
to render similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be impaired
thereby.
5. Sub-Adviser's Personnel. The Sub-Adviser shall, at its own expense,
maintain such staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Sub-Adviser shall be
deemed to include persons employed or retained by the Sub-Adviser to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Sub-Adviser or the Manager may desire and reasonably request.
6. Reports by Funds to Sub-Adviser. The Manager will from time to time
furnish to the Sub-Adviser, with respect to each Fund, detailed statements of
its investments and assets, and information as to its investment objective and
needs, and will make available to the Sub-Adviser such financial reports, proxy
statements, legal and other information relating to each Fund's investments as
may be in its possession or available to it, together with such other
information as the Sub-Adviser may reasonably request.
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7. Expenses During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it, its staff and their activities, in connection with
its portfolio management activities under this Agreement. The Sub-Adviser shall
not be responsible for any expense incurred by the Manager or the Trust, except
as provided in Section 11 below.
8. Investment Advisory and Management Fee. The Manager shall pay to the
Sub-Adviser, and the Sub-Adviser agrees to accept, as full compensation for all
investment management and advisory services furnished or provided to each Fund
pursuant to this Agreement, a management fee as set forth in the Fee Schedule
attached hereto as Appendix B.
9. Fund Share Activities of Sub-Adviser's Partners, Officers and
Employees. The Sub-Adviser agrees that neither it nor any of its partners,
officers or employees shall take any short position in the shares of the Funds.
This prohibition shall not prevent the purchase of such shares by any of the
officers and partners or bona fide employees of the Sub-Adviser or any trust,
pension, profit-sharing or other benefit plan for such persons or affiliates
thereof, at a price not less than the net asset value thereof at the time of
purchase, as allowed pursuant to rules promulgated under the 1940 Act.
10. Conflicts with Trust's Governing Documents and Applicable Laws.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and Funds.
11. Sub-Adviser's Liabilities.
(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Sub-Adviser, the Sub-Adviser shall not be subject to liability to
the Manager, the Trust or the Funds or to any shareholder of the Funds 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 by the Funds.
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(b) The Sub-Adviser shall indemnify and hold harmless the
Funds, their trustees, officers, employees and agents and the Manager, its
members, directors, officers and employees of each of them (any such person, an
"Indemnified Party") against any loss, liability, claim, damage or expense
(including the reasonable cost of investigating and defending any alleged loss,
liability, claim, damage or expenses and reasonable counsel fees incurred in
connection therewith) arising out of the Sub-Adviser's willful misfeasance, bad
faith or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties under this Agreement.
(c) The Manager shall indemnify and hold harmless the
Sub-Adviser, its general partner and the shareholders, directors, officers and
employees of each of them (any such person, an "Indemnified Party") against any
loss, liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
(d) No provision of this Agreement shall be construed to
protect any Trustee or officer of the Trust, or partner or officer of the
Sub-Adviser, from liability in violation of Sections 17(h) and (i) of the 1940
Act.
12. Non-Exclusivity. The Manager's employment of the Sub-Adviser is not
an exclusive arrangement, and the Manager may from time to time employ other
individuals or entities to furnish it with the services provided for herein. If
this Agreement is terminated with respect to any Fund, this Agreement shall
remain in full force and effect with respect to all other Funds listed on
Appendix A hereto, as the same may be amended.
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13. Term. This Agreement shall become effective on the date that is the
latest of (1) the execution of this Agreement, (2) the approval of this
Agreement by the Board of Trustees of the Trust and (3) any requisite approval
of this Agreement by the shareholders of each Fund. This Agreement shall remain
in effect for a period of two (2) years, unless sooner terminated as hereinafter
provided. This Agreement shall continue in effect thereafter for additional
periods not exceeding one (l) year so long as such continuation is approved for
each Fund at least annually by (i) the Manager, (ii) the Board of Trustees of
the Trust or by the vote of a majority of the outstanding voting securities of
each Fund; and (iii) the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement nor interested persons thereof, cast in person at
a meeting called for the purpose of voting on such approval.
14. Termination. This Agreement may be terminated by the Manager, the
Trust on behalf of any one or more of the Funds at any time without payment of
any penalty, by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of a Fund, upon sixty (60) days' written
notice to the Sub-Adviser, and by the Sub-Adviser upon sixty (60) days' written
notice to a Fund.
15. Termination by Assignment. This Agreement shall terminate
automatically in the event of any transfer or assignment thereof, as defined in
the 1940 Act.
16. Transfer, Assignment. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged without the affirmative
vote or written consent of the holders of a majority of the outstanding voting
securities of each Fund.
17. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
18. Definitions. The terms "majority of the outstanding voting
securities" and "interested persons" shall have the meanings as set forth in the
1940 Act.
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19. Notice of Declaration of Trust. The Sub-Adviser agrees that any
obligation of the Trust under this Agreement shall be limited to the Funds and
to their assets, and that the Sub-Adviser shall not seek satisfaction of any
such obligation from the shareholders of the Funds nor from any trustee,
officer, employee or agent of the Trust or the Funds.
20. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
21. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the 1940 Act and the Advisers Act and any rules and regulations
promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers, all on the day and
year first above written.
XXXXXXXXXX ASSET MANAGEMENT, LLC MARTINGALE ASSET MANAGEMENT, L.P.
By: ________________________________ By: _____________________________
Title: _______________________________ Title: ___________________________
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Appendix A
Fund Schedule
Fund Effective Date
x Xxxxxxxxxx SmallCap Systematic Value Fund August 31, 1998
x Xxxxxxxxxx MacroCap Systematic Value Fund August 31, 1998
x Xxxxxxxxxx U.S. Long-Short Fund September 30, 1998
x Xxxxxxxxxx U.S. Market Neutral Fund September 30, 1998
XXXXXXXXXX ASSET MANAGEMENT, LLC MARTINGALE ASSET MANAGEMENT, L.P.
By: ________________________________ By: _____________________________
Title: _______________________________ Title: ___________________________
00
Xxxxxxxx X
Fee Schedule
The Manager shall pay the Sub-Adviser forty-five percent (45%) of all investment
advisory fees received by the Manager from each Fund, net of fees or commissions
charged by finders, broker-dealers and other intermediaries with respect to the
Funds, which are paid by the Manager out of its own resources or investment
advisory fee (and not separately paid through fees or commissions specified in
the prospectus for the Funds) (the "Sub-Advisory Fee"). The Manager shall pay
the Sub-Advisory Fee from each calendar month within 30 days after the end of
that calendar month.
The Manager agrees to furnish the Sub-Adviser upon request all reasonable
documentation to support the calculation of the Sub-Advisory Fee, including the
fees and commissions that were applied to determine net amounts.
XXXXXXXXXX ASSET MANAGEMENT, LLC MARTINGALE ASSET MANAGEMENT, L.P.
By: ________________________________ By: _____________________________
Title: _______________________________ Title: ___________________________
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