XXXX XXXXXXX FUNDS III
SUBADVISORY AGREEMENT
AGREEMENT made this 29th day of December, 2006, between Xxxx Xxxxxxx
Investment Management Services, LLC, a Delaware limited liability company (the
"Adviser"), and MFC Global Investment Management (U.S.A.) Limited, a Canadian
corporation (the "Subadviser"). In consideration of the mutual covenants
contained herein, the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of Xxxx Xxxxxxx Funds III (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the Portfolios specified in Appendix A to this Agreement as it shall
be amended by the Adviser and the Subadviser from time to time (the
"Portfolios"). The Subadviser will be an independent contractor and will have no
authority to act for or represent the Trust or Adviser in any way except as
expressly authorized in this Agreement or another writing by the Trust and
Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
a. Subject always to the direction and control of the Trustees of the Trust,
the Subadviser will manage the investments and determine the composition of
the assets of the Portfolios in accordance with the Portfolios'
registration statement, as amended. In fulfilling its obligations to manage
the investments and reinvestments of the assets of the Portfolios, the
Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial and other
information affecting the economy generally and individual companies or
industries the securities of which are included in the Portfolios or are
under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide determinations, in accordance with procedures and methods
established by the Trustees of the Trust, of the fair value of securities
held by the Portfolios for which market quotations are not readily
available for purposes of enabling the Trust's Custodian to calculate net
asset value.
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b. The Subadviser, at its expense, will furnish (i) all necessary investment
and management facilities, including salaries of personnel required for it
to execute its duties faithfully, and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolios (excluding
determination of net asset value and shareholder accounting services).
c. The Subadviser will select brokers and dealers to effect all transactions
subject to the following conditions: The Subadviser will place all orders
with brokers, dealers, or issuers, and will negotiate brokerage commissions
if applicable. The Subadviser is directed at all times to seek to execute
brokerage transactions for the Portfolios in accordance with such policies
or practices as may be established by the Trustees and described in the
Trust's registration statement as amended. The Subadviser may pay a
broker-dealer which provides research and brokerage services a higher
spread or commission for a particular transaction than otherwise might have
been charged by another broker-dealer, if the Subadviser determines that
the higher spread or commission is reasonable in relation to the value of
the brokerage and research services that such broker-dealer provides,
viewed in terms of either the particular transaction or the Subadviser's
overall responsibilities with respect to accounts managed by the
Subadviser. The Subadviser may use for the benefit of the Subadviser's
other clients, or make available to companies affiliated with the
Subadviser or to its directors for the benefit of its clients, any such
brokerage and research services that the Subadviser obtains from brokers or
dealers.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios as are required of an investment adviser of a registered
investment company pursuant to the Investment Company Act of 1940 (the
"Investment Company Act") and Investment Advisers Act of 1940 (the
"Investment Advisers Act") and the rules thereunder.
e. The Subadviser shall vote proxies relating to the Portfolio's investment
securities in accordance with the Trust's proxy voting policies and
procedures, which provide that the Subadviser shall vote all proxies
relating to securities held by the Portfolio and, subject to the Trust's
policies and procedures, shall use proxy voting policies and procedures
adopted by the Subadviser in conformance with Rule 206(4)-6 under the
Investment Advisers Act. The Subadviser shall review its proxy voting
activities on a periodic basis with the Trustees.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Portfolio the
compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its officers or employees shall be liable
to the Adviser or Trust for any loss suffered by the Adviser or Trust resulting
from any error of judgment made in the good faith exercise of the Subadviser's
investment discretion in connection with selecting Portfolio investments except
for losses resulting from willful misfeasance, bad faith or gross negligence of,
or from reckless disregard of, the duties of the Subadviser or any of its
officers or employees; and neither the Subadviser nor any of its officers or
employees shall be liable to the Adviser or Trust for any loss suffered by the
Adviser or Trust resulting from any other matters to which this Agreement
relates (i.e., those other matters specified in Sections 2 and 8 of this
Agreement), except for losses resulting from willful misfeasance, bad faith, or
gross negligence in the performance of, or from disregard of, the duties of the
Subadviser or any of its employees.
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5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers or
otherwise; that directors, officers and agents of the Subadviser are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; that
the Subadviser may be interested in the Trust; and that the existence of any
such dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided in the Agreement and Declaration of Trust
of the Trust and the Certificate of Incorporation of the Subadviser,
respectively, or by specific provision of applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of (i) its execution, (ii) the effective date of the registration
statement of the Portfolio and (iii) with respect to each Portfolio except the
Money Market Portfolio, the date of the meeting of the shareholders of the
Portfolio, at which meeting this Agreement is approved by the vote of a majority
of the outstanding voting securities (as defined in the Investment Company Act)
of the Portfolio. The Agreement will continue in effect for a period more than
two years from the date of its execution only so long as such continuance is
specifically approved at least annually either by the Trustees of the Trust or
by a majority of the outstanding voting securities of each of the Portfolios,
provided that in either event such continuance shall also be approved by the
vote of a majority of the Trustees of the Trust who are not interested persons
(as defined in the Investment Company Act) of any party to this Agreement cast
in person at a meeting called for the purpose of voting on such approval. The
required shareholder approval of the Agreement or of any continuance of the
Agreement shall be effective with respect to any Portfolio if a majority of the
outstanding voting securities of the series (as defined in Rule 18f-2(h) under
the Investment Company Act) of shares of that Portfolio votes to approve the
Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved by a majority of the outstanding voting
securities of (a) any other Portfolio affected by the Agreement or (b) all the
portfolios of the Trust.
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If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement, the Subadviser will continue to act as investment
subadviser with respect to such Portfolio pending the required approval of the
Agreement or its continuance or of any contract with the Subadviser or a
different adviser or subadviser or other definitive action; provided, that the
compensation received by the Subadviser in respect of such Portfolio during such
period is in compliance with Rule 15a-4 under the Investment Company Act.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote of a majority of the outstanding voting securities of such Portfolio,
on sixty days' written notice to the Adviser and the Subadviser, or by the
Adviser or Subadviser on sixty days' written notice to the Trust and the other
party. This agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment Company
Act) or in the event the Advisory Agreement between the Adviser and the Trust
terminates for any reason.
9. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which the
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust; and
c. any change in actual control or management of the Subadviser or the
portfolio manager of any Portfolio.
10. CONSULTATION WITH SUBADVISERS TO OTHER TRUST PORTFOLIOS
As required by Rule 17a-10 under the Investment Company Act of 1940, the
Subadviser is prohibited from consulting with the entities listed below
concerning transactions for a Portfolio in securities or other assets:
1. other subadvisers to a Portfolio
2. other subadvisers to a Trust portfolio
3. other subadvisers to a portfolio under common control with the Portfolio
11. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Portfolios affected by the amendment and by the vote
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of a majority of the Trustees of the Trust who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval. The required shareholder approval shall be effective
with respect to any Portfolio if a majority of the outstanding voting securities
of that Portfolio vote to approve the amendment, notwithstanding that the
amendment may not have been approved by a majority of the outstanding voting
securities of (a) any other Portfolio affected by the amendment or (b) all the
portfolios of the Trust.
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 Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
15. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
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. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that the name " Xxxx
Xxxxxxx Funds II" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
portfolio thereof, but only the assets belonging to the Trust, or to the
particular Portfolio with respect to which such obligation or claim arose, shall
be liable.
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18. CONFIDENTIALITY OF TRUST PORTFOLIO HOLDINGS
The Subadviser agrees to treat Trust portfolio holdings as confidential
information in accordance with the Trust's "Policy Regarding Disclosure of
Portfolio Holdings," as such policy may be amended from time to time, and to
prohibit its employees from trading on any such confidential information.
19. COMPLIANCE
Upon execution of this Agreement, the Subadviser shall provide the Adviser
with the Subadviser's written policies and procedures ("Compliance Policies") as
required by Rule 206(4)-7 under the Investment Advisers Act. Throughout the term
of this Agreement, the Subadviser shall promptly submit to the Adviser: (i) any
material changes to the Compliance Policies, (ii) notification of the
commencement of a regulatory examination of the Subadviser and documentation
describing the results of any such examination and of any periodic testing of
the Compliance Policies, and (iii) notification of any material compliance
matter that relates to the services provided by the Subadviser to the Trust
including but not limited to any material violation of the Compliance Policies
or of the Subadviser's code of ethics and/or related code. Throughout the term
of this Agreement, the Subadviser shall provide the Adviser with any
certifications, information and access to personnel and resources (including
those resources that will permit testing of the Compliance Policies by the
Adviser) that the Adviser may reasonably request to enable the Trust to comply
with Rule 38a-1 under the Investment Company Act.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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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 INVESTMENT MANAGEMENT
SERVICES, LLC
By: \s\ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice President
MFC GLOBAL INVESTMENT MANAGEMENT
(U.S.A.) LIMITED
By: \s\ Xxxxxx Light
----------------
Name: Xxxxxx Light
Title: Chief Financial Officer
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APPENDIX A
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The Subadviser shall serve as investment subadviser for the International
Allocation Portfolio (the "Portfolio"). The Adviser will pay the Subadviser, as
full compensation for all services provided under this Agreement with respect to
the Portfolio, the fee at an annual rate as follows (the "Subadviser Fee"):
First Between Excess Over
$250 million $250 million $500 million
of and $500million of of
Portfolio Net Assets* Net Assets* Net Assets*
International Allocation Portfolio
The Subadviser Fee for the Portfolio shall be accrued for each calendar day
and the sum of the daily fee accruals shall be paid monthly to the Subadviser.
The daily fee accruals will be computed by multiplying the fraction of one over
the number of calendar days in the year by the applicable annual rate described
in the preceding paragraph, and multiplying this product by the net assets of
the Portfolio. For purposes of determining net assets of the Portfolio and
calculating the Subadviser Fee, the net assets of the Portfolio are determined
as of the close of business on the previous business day of the Trust.
If, with respect to the Portfolio, this Agreement becomes effective or
terminates, or if the manner of determining the Subadviser 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 prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination or change
occurs.
A-1
