EX-99.B(5)(b)
FORM OF SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the ______ day of
______________, 1997 by and among FLAG INVESTORS EQUITY PARTNERS FUND, INC., a
Maryland corporation (the "Fund"), INVESTMENT COMPANY CAPITAL CORP., a
Maryland corporation (the "Advisor"), and ALEX. XXXXX INVESTMENT MANAGEMENT, a
Maryland limited partnership (the "Sub-Advisor").
WHEREAS, the Advisor is the investment advisor to the Fund,
which is an open-end, diversified management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Advisor wish to retain the
Sub-Advisor for purposes of rendering advisory services to the Fund and the
Advisor in connection with the Advisor's responsibilities to the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Sub-Advisor. The Fund hereby appoints the
Sub- Advisor to act as the Fund's Sub-Advisor under the supervision of the
Fund's Board of Directors and the Advisor, and the Sub-Advisor hereby accepts
such appointment, all subject to the terms and conditions contained herein.
2. Delivery of Documents. The Fund has furnished the
Sub-Advisor with copies properly certified or authenticated of each of the
following:
(a) The Fund's Articles of Incorporation, filed
with the State of Maryland on November 29, 1994 and all amendments
thereto (such Articles of Incorporation, as presently in effect and
as they shall from time to time be amended, are herein called the
"Articles of Incorporation");
(b) The Fund's By-laws and all amendments thereto
(such By-laws, as presently in effect and as they shall from time to
time be amended, are herein called the "By-laws");
(c) Resolutions of the Fund's Board of Directors
and shareholders authorizing the appointment of the Sub-Advisor and
approving this Agreement;
(d) The Fund's Notification of Registration Filed
Pursuant to Section 8(a) of the Investment Company Act of 1940 on
Form N-8A under the 1940 Act as filed with the Securities and
Exchange Commission (the "SEC") on November 30, 1994;
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File
No. 33-86832) and under the 1940 Act as filed with the SEC on
November 30, 1994 relating to the shares of the Fund, and all
amendments thereto; and
(f) The Fund's most recent prospectus (such
prospectus, as presently in effect, and all amendments and
supplements thereto are herein called "Prospectus").
The Fund will furnish the Sub-Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements
to the foregoing, if any, and all documents, notices and reports filed with
the SEC.
3. Duties of Sub-Advisor. In carrying out its obligations
under Section 1 hereof, the Sub-Advisor shall:
(a) provide the Fund with such executive,
administrative and clerical services as are deemed advisable by the
Fund's Board of Directors;
(b) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to
the Fund's Board of Directors;
(c) formulate and implement continuing programs for
the purchases and sales of the securities of such issuers and
regularly report thereon to the Fund's Board of Directors;
(d) take, on behalf of the Fund, all actions which
appear to the Fund necessary to carry into effect such purchase and
sale programs as aforesaid, including the placing of orders for the
purchase and sale of securities of the Fund; and
(e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial
data, domestic, foreign or otherwise, whether affecting the economy
generally or the Fund, and whether concerning the individual issuers
whose securities are included in the Fund's portfolio or the
activities in which they engage, or with respect to securities which
the Advisor considers desirable for inclusion in the Fund's
portfolio.
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4. Broker-Dealer Relationships. In circumstances when the
Sub-Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of its brokerage commission
rates, the Sub-Advisor's primary consideration in effecting a security
transaction will be execution of orders at the most favorable price on an
overall basis. In performing this function the Sub-Advisor shall comply with
applicable policies established by the Board of Directors and shall provide
the Board of Directors with such reports as the Board of Directors may require
in order to monitor the Fund's portfolio transaction activities. In selecting
a broker-dealer to execute each particular transaction, the Sub-Advisor will
take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size
of and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on
a continuing basis. Accordingly, the price to the Fund in any transaction may
be less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the portfolio execution
services offered. Subject to such policies as the Board of Directors may
determine, the Sub-Advisor shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Fund to pay a broker-dealer that provides brokerage
and research services to the Sub-Advisor an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the
Sub-Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Sub-Advisor's overall responsibilities with respect to the
Fund. The Sub-Advisor is further authorized to allocate the orders placed by it
on behalf of the Fund to such broker-dealers who also provide research or
statistical material or other services to the Fund or the Sub-Advisor. Such
allocation shall be in such amounts and proportions as the Sub-Advisor shall
determine and the Sub-Advisor will report on said allocation regularly to the
Board of Directors of the Fund, indicating the brokers to whom such allocations
have been made and the basis therefor.
Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking the most
favorable price and execution available and such other policies as the
Directors may determine, the Sub-Advisor may consider services in connection
with the sale of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
Subject to the policies established by the Board of
Directors in compliance with applicable law, the Advisor may direct Alex.
Xxxxx & Sons Incorporated ("Alex. Xxxxx") to execute portfolio transactions
for the Fund on an agency basis. The commissions paid to Alex. Xxxxx must be,
as required by Rule 17e-1 under the 1940 Act, "reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar
securities during a comparable period of time." If the purchase or sale of
securities consistent with the investment policies of the Fund or one or more
other accounts of the Sub-Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a
manner deemed equitable
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by the Sub-Advisor. Alex. Xxxxx and the Sub-Advisor may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution.
The Fund will not deal with the Sub-Advisor or Alex. Xxxxx
in any transaction in which the Sub-Advisor or Alex. Xxxxx acts as a principal
with respect to any part of the Fund's order. If Alex. Xxxxx is participating
in an underwriting or selling group, the Fund may not buy portfolio securities
from the group except in accordance with policies established by the Board of
Directors in compliance with rules of the SEC.
5. Control by Fund's Board of Directors. Any recommendations
concerning the Fund's investment program for the Fund proposed by the
Sub-Advisor to the Fund and the Advisor pursuant to this Agreement, as well as
any other activities undertaken by the Sub-Advisor on behalf of the Fund
pursuant hereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Sub-Advisor shall at all times
conform to:
(a) all applicable provisions of the 1940 Act and
any rules and regulations adopted thereunder, as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of
Incorporation;
(d) the provisions of the By-laws; and
(e) any other applicable provisions of Federal and
State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund, the Sub-Advisor and the Advisor as follows:
(a) The Sub-Advisor shall, subject to compliance
with applicable banking regulations, furnish, at its expense and
without cost to the Fund, the services of the President and certain
Vice Presidents of the Fund, to the extent that such officers may be
required by the Fund for the proper conduct of its affairs.
(b) The Sub-Advisor shall maintain, at its expense
and without cost to the Fund, a trading function in order to carry
out its obligations under Section 3 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
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(c) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation:
payments to the Advisor under the Investment Advisory Agreement
between the Fund and the Advisor; payments to the Fund's distributor
under the Fund's plan of distribution; the charges and expenses of
any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property,
and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commission chargeable to the Fund in connection
with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to Federal, State or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection
with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the
costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of
the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Directors' meetings and of preparing,
printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any
advisory board or committee; all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Directors of the Fund who are not
"interested persons" (as defined in the 0000 Xxx) of the Fund and of
independent certified public accountants, in connection with any
matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Directors)
of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all
other charges and costs of the Fund's operation unless otherwise
explicitly provided herein.
8. Compensation. For the services to be rendered hereunder
by the Sub-Advisor, the Advisor shall pay to the Sub-Advisor monthly
compensation equal to the sum of the amounts determined by applying the
following annual rates to the Fund's average daily net assets: .75% of the
first $50 million of the Fund's average daily net assets, .60% of the next
$150 million of the Fund's average daily net assets, and .50% of the Fund's
average daily net assets in excess of $200 million. Except as hereinafter set
forth, compensation under this Agreement shall be calculated and accrued daily
and the amounts of the daily accruals paid monthly. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the calculations of
the fees as set forth above. Payment of the Sub-Advisor's compensation for the
preceding month shall be made as promptly as possible.
9. Additional Responsibilities. The Sub-Advisor may, but
shall not be under any duty to, perform services on behalf of the Fund which
are not required by this
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Agreement upon the request of the Fund's Board of Directors. Such services
will be performed on behalf of the Fund and the Sub-Advisor's charges in
rendering such services will be billed monthly to the Fund, subject to
examination by the Fund's independent certified public accountants. Payment or
assumption by the Sub-Advisor of any Fund expense that the Sub-Advisor is not
required to pay or assume under this Agreement shall not relieve the
Sub-Advisor of any of its obligations to the Fund nor obligate the Sub-Advisor
to pay or assume any similar Fund expenses on any subsequent occasions.
10 Term. This Agreement shall become effective at 12:01 a.m.
on the date hereof and shall remain in force and effect, subject to Section 12
hereof, for two years from the date hereof.
11. Renewal. Following the expiration of its initial
two-year term, this Agreement shall continue in force and effect from year to
year, provided that such continuance is specifically approved at least
annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities of the
Fund (as defined in Section 2(a)(42) of the 0000 Xxx); and
(b) by the affirmative vote of a majority of the
Directors who are not parties to this Agreement or "interested
persons" of a party to this Agreement (other than as Directors of the
Fund) by votes cast in person at a meeting specifically called for
such purpose.
12. Termination. This Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Fund's Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund (as defined in Section 2(a)(42) of the 1940 Act), on sixty (60) days'
written notice to the Advisor and the Sub-Advisor. This Agreement may be
terminated at any time, without the payment of any penalty, by the Sub-Advisor
on sixty (60) days' written notice to the Fund and the Advisor. The notice
provided for herein may be waived by any person to whom such notice is
required. This Agreement shall automatically terminate in the event of its
assignment (as defined in Section 2(a)(4) of the 1940 Act).
13. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor and the Fund are not to be deemed to be exclusive, and the Sub-Advisor
shall be free to render investment advisory or other services to others
(including other investment companies) and to engage in other activities, so
long as its services under this Agreement are not impaired thereby. It is
understood and agreed that partners of the Sub-Advisor may serve as officers
or Directors of the Fund, and that officers or Directors of the Fund may serve
as officers or partners of the Sub-Advisor to the extent permitted by law;
and that the partners of the Sub-Advisory are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers or directors of any other firm or
corporation, including other investment companies.
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14. Liability of Sub-Advisor. In the performance of its
duties hereunder, the Sub-Advisor shall be obligated to exercise care and
diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under this
Agreement, but the Sub-Advisor shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith or gross negligence
on the part of the Sub-Advisor or its officers, directors or employees, or
reckless disregard by the Sub-Advisor of its duties under this Agreement.
15. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of the
Sub-Advisor, of the Advisor and of the Fund for this purpose shall be Xxx
Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
16. Questions and Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be
deemed to incorporate the effect of such rule, regulation or order. Otherwise
the provisions of this Agreement shall be interpreted in accordance with the
laws of Maryland.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers on the day
and year first above written.
Attest: FLAG INVESTORS EQUITY PARTNERS FUND, INC.
__________________ By:______________________________________
Name:
Title:
Attest: INVESTMENT COMPANY CAPITAL CORP.
__________________ By:_______________________________________
Name:
Title:
Attest: ALEX. XXXXX INVESTMENT MANAGEMENT
By BT Alex. Xxxxx Incorporated,
a General Partner
__________________ By:_______________________________________
Name:
Title:
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