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EXHIBIT 5(b)
ESC STRATEGIC FUNDS, INC.
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT, effective commencing on ________________, 199_, among
Equitable Securities Corporation (the "Adviser"), ESC Strategic Funds, Inc.
(the "Company") and Equitable Asset Management, Inc. ("Portfolio Manager").
WHEREAS, the Company is a Maryland corporation of the series type
organized under Articles of Incorporation dated November 24, 1993, (the
"Articles") and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, management series-type investment
company;
WHEREAS, the Adviser has been appointed by the Company, pursuant to an
investment advisory agreement dated __________, 1996 ("Investment Advisory
Agreement"), to act as investment adviser to the Company with respect to each
of its present and future series ("Funds");
WHEREAS, the Adviser wishes to retain the Portfolio Manager to render
portfolio management services to the Company with respect to ESC Strategic
Growth Fund (the "Fund") and the Portfolio Manager is willing to furnish such
services to the Fund;
WHEREAS, the Portfolio Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Adviser and the Portfolio Manager as
follows:
1. Appointment. Pursuant to authority granted in the Investment
Advisory Agreement and with the approval of the Directors, the Adviser hereby
appoints the Portfolio Manager to act as portfolio manager for the Fund for the
periods and on the terms set forth in this Agreement. The Portfolio Manager
accepts such appointment and agrees to furnish the services herein set forth,
for the compensation herein provided.
2. Portfolio Management Duties. Subject to the overall
supervision of the Directors of the Company and the Adviser, the Portfolio
Manager is hereby granted full responsibility and discretion, with respect to
such portion of the Fund's assets as shall be allocated to it by the Adviser
for management pursuant to this Agreement from time to time (the "Assets"), for
(a) the management of the Assets in accordance with the Fund's investment
objectives, policies and limitations as stated in its prospectus
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and Statement of Additional Information included as part of the Company's
registration statement filed with the Securities and Exchange Commission
("SEC"), as they may be amended from time to time, ("Registration Statement")
copies of which shall be provided to the Portfolio Manager by the Adviser; and
(b) the placement of orders to purchase and sell securities for the Fund. At
the request of the Directors or the Adviser, the Portfolio Manager shall report
to the Board of Directors of the Company regularly at such times and in such
detail as the Board may from time to time determine to be appropriate, in order
to permit the Board to determine the adherence of the Portfolio Manager to the
investment policies of the Fund.
The Portfolio Manager further agrees that, in performing its duties
hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, and with any
applicable procedures adopted by the Directors;
(b) use reasonable efforts to manage the Assets, and to coordinate
its activities with the Adviser and any other portfolio manager of the Fund, so
that the Fund will qualify, and continue to qualify, as a regulated investment
company under Subchapter M of the Code and regulations issued thereunder;
(c) place orders for the investment of the Assets directly with
the issuer, or with any broker or dealer, in accordance with applicable
policies expressed in the prospectus and/or Statement of Additional Information
with respect to the Fund and in accordance with applicable legal requirements;
(d) furnish to the Company, the Adviser and any other portfolio
manager whatever statistical information the Company, the Adviser or such other
portfolio manager may reasonably request with respect to the Assets or
contemplated investments; and keep the Adviser and the Directors and, as
appropriate, other portfolio managers informed of developments materially
affecting the Fund's portfolio;
(e) make available to the Company's administrator (the
"Administrator"), the Company or the Adviser, promptly upon their request, such
copies of its investment records and ledgers with respect to the Fund as may be
required to assist the Administrator, the Company and the Adviser in their
compliance with applicable laws and regulations. The Portfolio Manager will
furnish the Directors with such periodic and special reports regarding the Fund
as the Directors may reasonably request;
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(f) immediately notify the Company and the Adviser in the event
that the Portfolio Manager or any of its affiliates: (1) becomes aware that it
is subject to a statutory disqualification that prevents the Portfolio Manager
from serving as a portfolio manager pursuant to this Agreement; or (2) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority. The Portfolio Manager further
agrees to review information in the Company's Registration Statement describing
the Portfolio Manager and to notify the Company and the Adviser if the
information becomes incorrect;
(g) in making investment decisions with respect to the Assets, use
no inside information that may be in its possession or in the possession of any
of its affiliates, nor will the Portfolio Manager seek to obtain any such
information.
3. Banking and Custody Accounts. The Portfolio Manager shall not
be required to provide or arrange for banking accounts for the Fund or to hold
money or assets on the Fund's behalf. The Portfolio Manager shall not be
required to act as the registered holder of any investment or to provide or
procure any custody or settlement services in connection with its services
hereunder. The Fund has entered into one or more agreements with providers of
banking and custody services (Custodians) whom the Fund will authorize to act
upon instructions from properly authorized representatives of the Portfolio
Manager, in connection with its services hereunder, directing the Custodian(s)
to pay, deliver or receive cash and securities in settlement of transactions
authorized by the Portfolio Manager on the Fund's behalf. The Fund's
agreement(s) with such Custodian(s) will require the Custodian(s) to settle all
transactions directed by the Portfolio Manager on the Fund's behalf.
4. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 4, the Portfolio Manager shall pay the
compensation and expenses of all its directors, officers and employees who
serve as directors, officers and executive employees of the Company (including
the Company's share of payroll taxes), and the Portfolio Manager shall make
available, without expense to the Fund, the services of its directors, officers
and employees who may be duly elected officers or directors of the Company,
subject to their individual consent to serve and to any limitations imposed by
law.
The Portfolio Manager shall not be required to pay any expenses of the
Company or the Fund other than those specifically allocated to the Portfolio
Manager in this section 4. In particular, but without limiting the generality
of the foregoing,
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the Portfolio Manager shall not be responsible, except to the extent of the
reasonable compensation of such of the Company's employees as are officers or
employees of the Portfolio Manager whose services may be involved, for the
following expenses of the Company or the Fund: organization and certain
offering expenses of the Company and the Fund (including out-of-pocket
expenses, but not including the Portfolio Manager's overhead and employee
costs); fees payable to or expenses of other portfolio managers or consultants;
legal expenses; auditing and accounting expenses; interest expenses; telephone,
telex, facsimile, postage and other communications expenses; taxes and
governmental fees; fees, dues and expenses incurred by or with respect to the
Company or the Fund in connection with membership in investment company trade
organizations; costs of insurance; fees and expenses of the Company's
Administrator or of any custodian, subcustodian, transfer agent, registrar, or
dividend disbursing agent of the Company or the Fund; payments for portfolio
pricing or valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing and printing share certificates;
other expenses in connection with the issuance, offering, distribution,
redemption or sale of securities issued by the Fund; expenses relating to
investor and public relations; expenses of registering and qualifying shares of
the Fund for sale; freight, insurance and other charges in connection with the
shipment of the Fund's portfolio securities; brokerage commissions or other
costs of acquiring or disposing of any portfolio securities or other assets of
the Fund, or of entering into other transactions or engaging in any investment
practices with respect to the Fund; expenses of printing and distributing
prospectuses, Statements of Additional Information, reports, notices and
dividends to stockholders; costs of preparing, printing and filing documents
with regulatory agencies; costs of stationery and other office supplies; any
litigation or other extraordinary expenses; costs of stockholders' and other
meetings; the compensation and all expenses (specifically including travel
expenses relating to the business of the Company or the Fund) of officers,
directors and employees of the Company who are not interested persons of the
Portfolio Manager; and travel expenses (or an appropriate portion thereof) of
officers or directors of the Company who are officers, directors or employees
of the Portfolio Manager to the extent that such expenses relate to attendance
at meetings of the Board of Directors of the Company, or any committees thereof
or advisory group thereto or other business of the Company or the Funds.
5. Compensation. As compensation for the services provided and
expenses assumed by the Portfolio Manager under this Agreement, the Adviser,
out of its fees from the Fund pursuant to the Investment Advisory Agreement,
will pay the Portfolio Manager at the end of each calendar month an investment
management fee
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computed daily at an annual rate equal to 0.65% of the first $50 million of the
average daily net value of the Assets, 0.60% on the next $50 million of such
value, 0.55% on the next $100 million of such value, and 0.50% on such value in
excess of $200 million. The "average daily net value of the Assets" shall mean
the average of the values placed on the net Assets as of 4:15 p.m. (Eastern
time) on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the Fund
lawfully determines the value of its net assets as of some other time on each
business day, as of such other time. The value of the net Assets, and of the
net assets of the Fund, shall always be determined pursuant to the applicable
provisions of the Articles and the Registration Statement. If, pursuant to
such provisions, the determination of net asset value for a Fund is suspended
for any particular business day, then for the purposes of this section 5, the
value of the net Assets as last determined shall be deemed to be the value of
the net Assets as of the close of the New York Stock Exchange, or as of such
other time as the value of the net assets of the Fund's portfolio may lawfully
be determined, on that day. If the determination of the net asset value of the
shares of the Fund has been so suspended for a period including any month end
when the Portfolio Manager's compensation is payable pursuant to this section,
then the Portfolio Manager's compensation payable at the end of such month
shall be computed on the basis of the value of the net Assets as last
determined (whether during or prior to such month). If the Fund determines the
value of the net assets of its portfolio more than once on any day, then the
last such determination thereof with respect to the net Assets on that day
shall be deemed to be the sole determination thereof on that day with respect
to the net Assets for the purposes of this section 5.
6. Books and Records. The Portfolio Manager agrees to maintain
such books and records with respect to its services to the Fund as are required
by Section 31 under the 1940 Act, and rules adopted thereunder, and by other
applicable legal provisions, and to preserve such records for the periods and
in the manner required by that Section, and those rules and legal provisions.
The Portfolio Manager also agrees that records it maintains and preserves
pursuant to Rules 31a-1 and 31a-2 under the 1940 Act and otherwise in
connection with its services hereunder are the property of the Company and will
be surrendered promptly to the Company upon its request. And the Portfolio
Manager further agrees that it will furnish to regulatory authorities having
the requisite authority any information or reports in connection with its
services hereunder which may be requested in order to determine whether the
operations of the Company and the Fund are being conducted in accordance with
applicable laws and regulations.
7. Standard of Care and Limitation of Liability. The Portfolio
Manager shall exercise its best judgment in rendering
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the services provided by it under this Agreement. The Portfolio Manager shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Company or the Fund or the holders of the Fund's shares in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Portfolio Manager against any liability to the Company, the Fund or to holders
of the Fund's shares to which the Portfolio Manager would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Portfolio Manager's reckless
disregard of its obligations and duties under this Agreement. As used in this
Section 7, the term "Portfolio Manager" shall include any officers, directors,
employees or other affiliates of the Portfolio Manager performing services with
respect to the Company or the Fund.
8. Services Not Exclusive. It is understood that the services of
the Portfolio Manager are not exclusive, and that nothing in this Agreement
shall prevent the Portfolio Manager from providing similar services to other
investment companies or to other series of investment companies (whether or not
their investment objectives and policies are similar to those of the Fund or
another fund of the Company) or from engaging in other activities, provided
such other services and activities do not, during the term of this Agreement,
interfere in a material manner with the Portfolio Manager's ability to meet its
obligations to the Company, the Adviser and the Fund hereunder. When the
Portfolio Manager recommends the purchase or sale of a security for other
investment companies and other clients, and at the same time the Portfolio
Manager recommends the purchase or sale of the same security for the Fund, it
is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to the
Fund. In connection with purchases or sales of portfolio securities for the
account of the Fund, neither the Portfolio Manager nor any of its directors,
officers or employees shall act as a principal or agent or receive any
commission. If the Portfolio Manager provides any advice to its clients
concerning the shares of the Fund or other funds of the Company, the Portfolio
Manager shall act solely as investment counsel for such clients and not in any
way on behalf of the Company, the Fund or another fund of the Company.
9. Duration and Termination. This Agreement shall continue until
__________________, 199__, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically approved
at least annually by (i) the Directors or (ii) by vote of a "majority" (as
defined in the 0000 Xxx) of the Fund's outstanding voting securities (as
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defined in the 1940 Act), provided that in either event the continuance is also
approved by a majority of the Directors who are not parties to this Agreement
or "interested persons" (as defined in the 0000 Xxx) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. Notwithstanding the foregoing, this Agreement may be
terminated: (a) at any time without penalty (i) by the Adviser, (ii) by the
Company upon the vote of a majority of the Directors or (iii) by vote of the
majority of the Fund's outstanding voting securities, each upon sixty (60)
days' written notice to the Portfolio Manager; or (b) by the Portfolio Manager
at any time without penalty, upon sixty (60) days' written notice to the
Company or the Adviser. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).
10. Amendments. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Directors, including
a majority of Directors 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.
11. Proxies and Rights. Unless the Company or the Adviser
gives written instructions to the contrary, the Portfolio Manager shall (a)
vote all proxies solicited by or with respect to the issuers of securities in
which the Assets are invested, using its best good faith judgment to vote such
proxies in a manner which best serves the interests of the Fund's shareholders,
and (b) exercise all other rights attaching to or arising with respect to the
Assets, subject to the Fund's investment objectives, policies and limitations
as stated in its Registration Statement, directing the Custodian to make any
required payment or settlement in connection therewith.
12. Non-Competition. The Company acknowledges that the Portfolio
Manager as a firm, and not any particular employee or managing director of the
Portfolio Manager (a "Portfolio Manager Employee"), is being retained by the
Company as portfolio manager for the Fund. The Company agrees not to employ or
otherwise receive portfolio management services from any Portfolio Manager
Employee, directly or indirectly through the engagement of any person or entity
which employs or to which such services are provided by any Portfolio Manager
Employee, at any location within the States of Michigan, Ohio, Tennessee,
Kentucky or
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Indiana, for the 24 (twenty-four) consecutive months after the termination of
the Portfolio Manager Employee's employment. The Company acknowledges that
this provision is not contained in the investment advisory or portfolio
management agreements of all investment advisors or portfolio managers.
13. Miscellaneous.
a. This Agreement shall be governed by the laws of the State of
Tennessee, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
b. The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
c. 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 hereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
d. Nothing herein shall be construed as constituting the
Portfolio Manager as an agent of the Company or the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of ______________, 199__.
EQUITABLE SECURITIES CORPORATION
By
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President
EQUITABLE ASSET MANAGEMENT, INC.
By
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Title:
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