FLAG INVESTORS EQUITY PARTNERS FUND, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 1st day of September, 2000 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, non-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 4, 1988 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 1940 Act 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-1 under
the Securities Act of 1933, as amended (the "1933 Act") (File No.
2-87336) 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.
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 and
execution available. 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 DB Alex. Xxxxx LLC
("DB Alex. Xxxxx") to execute portfolio transactions for the Fund on an
agency basis. The commissions paid to DB 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 by the Sub-Advisor. DB 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 DB Alex. Xxxxx in any
transaction in which the Sub-Advisor or DB Alex. Xxxxx acts as a principal
with respect to any part of the Fund's order. If DB 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 provision of the By-Laws; and
(e) any other applicable provisions of state and federal
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.
(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'
commissions 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: 0.65% of the first $50 million
of the Fund's average daily net assets, 0.50% of the next $150 million of the
Fund's average daily net assets, 0.40% 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.
SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, THE DUTIES OF THE
SUB-ADVISOR, THE PORTION OF FUND ASSETS THAT SUCH SUB-ADVISOR SHALL MANAGE
AND THE FEES TO BE PAID SUCH SUB-ADVISOR BY THE ADVISOR UNDER AND PURSUANT
TO THIS AGREEMENT MAY BE ADJUSTED FROM TIME TO TIME BY THE ADVISOR WITH AND
UPON THE APPROVAL OF SUCH SUB-ADVISOR AND THE MEMBERS OF THE FUNDS BOARD OF
DIRECTORS WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) OF
ANY PARTY TO THIS AGREEMENT.
9. DELEGATION OF 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 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-Advisor 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.
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 OF 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.
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.
[SEAL] FLAG INVESTORS EQUITY PARTNERS
FUND, INC.
Attest: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxx X. Xxxxxx
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Name: Xxxxxxx Xxxxxxxx Name: Xxx X. Xxxxxx
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Title: Secretary
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[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxxx Xxxxxxxx Name: Xxxxxx X. Xxxxxxxx
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Title: Executive Vice President
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[SEAL] ALEX. XXXXX INVESTMENT MANAGEMENT
Attest: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxxxx Xxxxxxxx Name: Xxxxx X. Xxxxxxx
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Title: Vice President and Principal
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