1
THE XXXXXX & RYGEL INVESTMENT GROUP
SUB-ADVISORY AGREEMENT BY AND BETWEEN
XXXXXX & RYGEL AND XXXXXXX-XXXXXX, LLC
This Sub-advisory Agreement is made as of October 1, 1998, by and
between Xxxxxx & Rygel, a California corporation (the "Adviser"), and
Xxxxxxx-Xxxxxx, LLC, a limited liability company organized under the laws of
Delaware (the "Sub-adviser").
WHEREAS, the Adviser has by separate contract agreed to serve as the
investment adviser to the Xxxxxx & Rygel European Growth & Income Fund, Xxxxxx &
Rygel International Equity Fund and Xxxxxx & Rygel Global Balanced Fund (each a
"Fund," and collectively the "Funds"), each of which is an investment portfolio
of The Xxxxxx & Rygel Investment Group (the "Trust"), a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended ("1940
Act"), as an open-end management investment company consisting of one or more
investment series of shares, each having its own assets and investment policies;
WHEREAS, the Adviser's contract with the Trust allows it to delegate
certain investment advisory services for the Trust with respect to each of the
Funds to other parties; and
WHEREAS, the Adviser desires to retain the Sub-adviser to perform
certain investment advisory services for the Trust with respect to each of the
Funds, and the Sub-adviser is willing to perform such services;
WHEREAS, pursuant to Section 15 of the 1940 Act and Rule 15a-4 pursuant
to the 1940 Act, the appointment of the Sub-adviser and the effectiveness of
this Agreement are subject to the approval of a majority of the outstanding
shares of each Fund at a special shareholders meeting (the "Shareholder Vote");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. SERVICES TO BE RENDERED BY THE SUB-ADVISER TO THE TRUST.
(a) Investment Program. Subject to the control and supervision
of the Board of Trustees of the Trust (the "Board") and the Adviser,
the Sub-adviser will, at its expense, continuously furnish to each of
the Funds an investment program for such portion, if any, of Fund
assets that is allocated to it by the Adviser from time to time. With
respect to such assets, the Sub-adviser will make investment decisions
and will place all orders for the purchase and sale of portfolio
securities. In the performance of its duties, the Sub-adviser will act
in the best interests of each such Fund and will comply with (i)
applicable laws and regulations, including, but not limited to, the
1940 Act, (ii) the terms of this Agreement, (iii) the investment
objective, policies, and restrictions of each such Fund as stated in
the then-current Registration Statement of the Trust, and (iv) such
other guidelines as the Trustees or Adviser may establish. The Adviser
shall be responsible for providing the Sub-adviser with current copies
of the materials specified in Subsections (a)(iii) and (iv) of this
Section 1. At such times as may be reasonably requested by the Board or
the Adviser, the Sub-adviser will provide them with economic and
investment analysis and reports, and make available to the Board any
economical, statistical, or investment services, normally available to
similar investment company clients of the Sub-adviser.
2
(b) Availability of Personnel. The Sub-adviser, at its
expense, will make available to the Trustees and the Adviser at
reasonable times its portfolio managers and other appropriate personnel
in order to review investment policies of each such Fund and to consult
with the Trustees and the Adviser regarding the investment affairs of
each such Fund, including economic, statistical, and investment matters
relevant to the Sub-adviser's duties hereunder, and will provide
periodic reports to the Trustees and the Adviser relating to the
portfolio strategies it employs.
(c) Salaries and Facilities. The Sub-adviser, at its expense,
will pay for all salaries of personnel and facilities required for it
to execute its duties under this Agreement.
(d) Compliance Reports. The Sub-adviser, at its expense, will
provide the Adviser with reasonable compliance reports relating to its
duties under this Agreement as may be agreed to upon by such parties
from time to time.
(e) Valuation. The Sub-adviser, at its expense, will provide
the Trust's custodian with market price information relating to the
assets of each of the Funds at such times as the parties hereto may
agree upon from time to time.
(f) Executing Portfolio Transactions. The Sub-adviser will
place orders pursuant to its investment determinations for each of the
Funds either directly with the issuer or through other brokers. In the
selection of brokers and the placement of orders for the purchase and
sale of portfolio investments for the Fund, the Sub-adviser shall use
its best efforts to obtain for each of the Funds the most favorable
price and execution available. In using its best efforts to obtain the
most favorable price and execution available, the Sub-adviser, bearing
in mind each such Fund's best interests as all times, shall consider
all factors it deems relevant, including by way of illustration, price,
the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into
account market prices and trends, the reputation, experience and
financial stability of the broker involved and the quality of service
rendered by the broker in other transactions. In no instance will
portfolio securities of each such Fund be purchased from or sold to the
Sub-adviser or any affiliated person of the Sub-adviser. The Trust
agrees that any entity or person associated with the Adviser or the
Sub-adviser which is a member of a national securities exchange is
authorized to effect any transaction on such exchange for the account
of the Trust which is permitted by Section 11(a) of the Securities
Exchange Act of 1934, as amended, and the Trust consents to the
retention of compensation for such transactions.
(g) Expenses. The Sub-adviser shall not be obligated to pay
any expenses of or for the Trust or for any of the Funds not expressly
assumed by the Sub-adviser pursuant to this Agreement.
2. BOOKS AND RECORDS. Pursuant to Rule 31a-3 under the 1940 Act, the
Sub-adviser agrees that: (a) all records it maintains for the Trust are the
property of the Trust; (b) it will surrender promptly to the Trust or the
Adviser any such records upon the Trust's or Adviser's request; (c) it will
maintain for the Trust the records that the Trust is required to maintain
pursuant to Rule 31a-1 insofar as such records relate to the investment affairs
of each of the Funds; and (d) it will preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records it maintains for the Trust.
3. OTHER AGREEMENTS. The Sub-adviser and persons controlled by or under
common control with the Sub-adviser have and may have advisory, management
service or other agreements with
2
3
other organizations and persons, and may have other interests and businesses.
Nothing in this Agreement is intended to preclude such other business
relationships.
4. COMPENSATION. Each of the Funds pays to the Adviser a monthly fee
(the "Advisory Fee") at the following annual rate: International Equity Fund -
0.60% of the first $1 billion of average daily net assets of the portfolio, and
0.40% thereafter; Global Balanced Fund - 0.50% of the first $1 billion of
average daily net assets of the portfolio, and 0.40% thereafter; and European
Growth & Income Fund - 0.50% of the first $2 billion of average daily net assets
of the portfolio, and 0.40% thereafter. The Adviser will pay to the Sub-adviser
as compensation for the Sub-adviser's services rendered pursuant to this
Agreement a sub-advisory fee for each Fund equal to:
(a) For the period from October 1, 1998 through the
Shareholder Vote:
(i) For each of the International Equity Fund
and the Global Balanced Fund: 0.40% of the first $1 billion of
the average daily net assets of the Fund's portfolio allocated
to the Sub-adviser, and 0.30% thereafter;
(ii) For the European Growth & Income Fund: 50%
of the Advisory Fee earned and received by the Adviser. Such
fees shall be paid by the Adviser (and not by the Trust) and
shall be correspondingly reduced on a pro rata basis by any
reduction in the fees paid to the Adviser as a result of any
voluntary, statutory or regulatory limitation on investment
company expenses. Such fees shall be payable monthly, at
one-twelfth of the above rate, within 15 business days after
the end of such month. If the Sub-adviser shall serve for less
than the whole of a month, the compensation as specified shall
be prorated.
(b) For the period following the Shareholder Vote: For each of
the Funds, 100% of the Advisory Fee earned and received by the Adviser
for the Fund in question. Such fees shall be paid by the Adviser (and
not by the Trust) and shall be correspondingly reduced on a pro rata
basis by any reduction in the fees paid to the Adviser as a result of
any voluntary, statutory or regulatory limitation on investment company
expenses. Such fees shall be paid within 15 business days of the end of
each month. If the Sub-adviser shall serve for less than the whole of a
month, the compensation as specified shall be prorated.
5. AMENDMENT OF AGREEMENT. This Agreement shall not be materially
amended unless the Adviser and Sub-adviser mutually agree to such amendment, and
such amendment is approved by the affirmative vote of a majority of the
outstanding shares of each of the Funds, if required by the 1940 Act, and by the
vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the members of the Board who are not interested
persons of the Trust, the Adviser or the Sub-adviser (the "Independent
Trustees"). The Sub-adviser agrees to notify the Adviser of any anticipated
change in control of the Sub-adviser within a reasonable time prior to such
change.
6. DURATION AND TERMINATION OF THE AGREEMENT. This Agreement shall
become effective with respect to each Fund upon its execution; provided,
however, that this Agreement shall not become effective unless it first has been
approved by a vote of the Independent Trustees, cast in person at a meeting
called for the purpose of voting on such approval. This Agreement shall remain
in full force and effect with respect to each Fund continuously thereafter as
follows:
(a) By vote of a majority of the (i) Independent Trustees, or
(ii) outstanding voting shares of a Fund, the Trust may at any time
terminate this Agreement with respect to such Fund
3
4
without the payment
of penalty, by providing not more than 60 days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser
and the Sub-adviser.
(b) This Agreement will terminate automatically with respect
to a Fund without payment of any penalty, unless, within two years
after its initial effectiveness and at least annually thereafter, the
continuance of the Agreement is specifically approved by (i) the Board
of Trustees or the shareholders of such Fund by the affirmative vote of
a majority of the outstanding shares of such Fund, and (ii) a majority
of the Independent Trustees, by vote cast in person at a meeting called
for the purpose of voting on such approval. If the continuance of this
Agreement is submitted to the shareholders of a Fund for their approval
and such shareholders fail to approve such continuance as provided
herein, the Sub-adviser may continue to serve hereunder in a manner
consistent with the 1940 Act and the rules and regulations thereunder.
(c) The Adviser may at any time terminate this Agreement with
respect to a Fund without the payment of any penalty by not less than
60 days' written notice delivered or mailed by registered mail, postage
prepaid, to the Sub-adviser and the Trust, and the Sub-adviser may at
any time without the payment of any penalty, terminate this Agreement
with respect to a Fund by not less than 90 days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser
and the Trust.
(d) This Agreement shall terminate automatically and
immediately with respect to a Fund without the payment of any penalty,
in the event of its assignment or if the Investment Management
Agreement between the Adviser and the Trust with respect to such Fund
shall terminate for any reason.
(e) This Agreement shall terminate automatically and
immediately with respect to a Fund unless approved by an affirmative
vote of a majority of the outstanding Shares of such Fund within 120
days after the date first set forth above.
Upon termination of this Agreement, the duties of the Adviser delegated to the
Sub-adviser under this Agreement automatically shall revert to the Adviser.
7. NOTIFICATION OF THE ADVISER. The Sub-adviser promptly shall notify
the Adviser in writing of the occurrence of any of the following events:
(a) the Sub-adviser shall fail to be registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended, and 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 shall have been served or otherwise have
notice of any action, suit, or proceeding, inquiry, or investigation at
law or in equity, before or by any court, public board or body,
involving the affairs of the Trust or any Fund; or
(c) any other occurrence that might affect the ability of the
Sub-adviser to provide the services provided for under this Agreement.
8. DEFINITIONS. For the purposes of this Agreement, the terms "vote of
a majority of the outstanding shares," "affiliated person," "control,"
"interested person," and "assignment" shall have their respective meanings as
defined in the 1940 Act and the rules and regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under said
4
5
Act; and references to annual approvals by the Board of Trustees shall be
construed in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
9. LIABILITY OF THE SUB-ADVISER. In the absence of its willful
misfeasance, bad faith, negligence, or disregard of its obligations and duties
hereunder, the Sub-adviser shall not be subject to any liability to the Adviser,
the Trust or their directors, Trustees, officers, or shareholders, for any act
or omission in the course of, or connected with, rendering services hereunder.
However, the Sub-adviser shall indemnify and hold harmless such parties from any
and all claims, losses, expenses, obligations and liabilities (including
reasonable attorneys fees) which arise or result from Sub-adviser's willful
misfeasance, bad faith, negligence, or disregard of its obligations and duties
hereunder.
10. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent that
the applicable laws of the State of California conflict with the applicable
provisions of the 1940 Act, the latter shall control.
11. 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. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
12. MISCELLANEOUS. The captions in this agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
agreement is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, Xxxxxx & Rygel, and Xxxxxxx-Xxxxxx, LLC have each
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative, all as of the day and year first above written.
Attest: XXXXXX & RYGEL
By:______________________ By:________________________
Secretary Chairman
Attest: XXXXXXX-XXXXXX, LLC
By:______________________ By:________________________
Assistant Secretary President
5
