EXHIBIT 5(b)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the ____ day of ___________, 1997, by and between
XXXXXXX XXXXX ASSET MANAGEMENT, L.P., a Delaware limited partnership
(hereinafter referred to as "MLAM"), and XXXXXXX XXXXX ASSET MANAGEMENT U.K.
LIMITED, a corporation organized under the laws of England and Wales
(hereinafter referred to as "MLAM U.K.").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, XXXXXXX XXXXX CONVERTIBLE FUND, INC. (the "Fund") is a Maryland
corporation engaged in business as a non-diversified, open-end investment
company registered under the Investment Company Act of 1940, as amended
(hereinafter referred to as the "Investment Company Act"); and
WHEREAS, MLAM and MLAM U.K. are engaged principally in rendering
investment advisory services and are registered as investment advisers under
the Investment Advisers Act of 1940, as amended;
WHEREAS, MLAM U.K. is regulated by the Investment Management Regulatory
Organization, a self-regulating organization recognized under the Financial
Services Act of 1986 of the United Kingdom (hereinafter referred to as
"IMRO"), and the conduct of its investment business is regulated by IMRO; and
WHEREAS, MLAM has entered into an investment advisory agreement (the
"Investment Advisory Agreement") dated ________________, 1997, pursuant to
which MLAM provides management and investment and advisory services to the
Fund; and
WHEREAS, MLAM U.K. is willing to provide investment advisory services to
MLAM in connection with the Fund's operations on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, MLAM U.K. and MLAM hereby agree as follows:
ARTICLE I
---------
Duties of MLAM U.K.
-------------------
MLAM hereby employs MLAM U.K. to act as investment adviser to MLAM and
to furnish, or arrange for affiliates to furnish, the investment advisory
services described below, subject to the broad supervision of MLAM and the
Fund, for the period and on the terms and conditions set forth in this
Agreement. MLAM U.K. hereby accepts such employment and agrees during such
period, at its own expense, to render, or arrange for the rendering of, such
services and to assume the obligations herein set forth for the compensation
provided for herein. MLAM and its affiliates shall for all purposes herein
be deemed a Non Private Customer as defined under the rules promulgated by
IMRO (hereinafter referred to as the "IMRO Rules"). MLAM U.K. and its
affiliates shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
MLAM U.K. shall have the right to make unsolicited calls on MLAM and
shall provide MLAM with such investment research, advice and supervision as
the latter may from time to time consider necessary for the proper
supervision of the assets of the Fund; shall make recommendations from time
to time as to which securities shall be purchased, sold or exchanged and what
portion of the assets of the Fund shall be held in the various securities in
which the Fund invests, options, futures, options on futures or cash; all of
the foregoing subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as they may be amended and/or restated
from time to time, the provisions of the Investment Company Act and the
statements relating to the Fund's investment objective, investment policies
and investment restrictions as the same are set forth in the currently
effective prospectus and statement of additional information relating to the
shares of the Fund under the Securities Act of 1933, as amended (the
"Prospectus" and "Statement of Additional Information", respectively). MLAM
U.K. shall make recommendations and effect transactions with respect to
foreign currency matters, including foreign exchange contracts, foreign
currency options, foreign currency futures and related options on foreign
currency futures and forward foreign currency transactions. MLAM U.K. shall
also make recommendations or take action as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining
to the portfolio securities of the Fund shall be exercised.
MLAM U.K. will not hold money on behalf of MLAM or the Fund, nor will
MLAM U.K. be the registered holder of the registered investments of FAM or
the Fund or be the custodian of documents or other evidence of title.
ARTICLE II
----------
Allocation of Charges and Expenses
----------------------------------
MLAM U.K. assumes and shall pay for maintaining the staff and personnel
necessary to perform its obligations under this Agreement and shall at its
own expense provide the office space, equipment and facilities which it is
obligated to provide under Article I hereof and shall pay all compensation of
officers of the Fund and all Directors of the Fund who are affiliated persons
of MLAM U.K.
ARTICLE III
-----------
Compensation of MLAM U.K.
-------------------------
For the services rendered, the facilities furnished and expenses assumed
by MLAM U.K., MLAM shall pay to MLAM U.K. a fee in an amount to be determined
from time to time by MLAM and MLAM U.K. but in no event in excess of the
amount that MLAM actually receives for providing services to the Fund
pursuant to the Investment Advisory Agreement.
ARTICLE IV
----------
Limitation of Liability of MLAM U.K.
------------------------------------
MLAM U.K. shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission
in the performance of sub-advisory services rendered with respect to the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. As used in this Article IV, MLAM U.K.
shall include any affiliates of MLAM U.K. performing services for MLAM
contemplated hereby and directors, officers and employees of MLAM U.K. and
such affiliates.
ARTICLE V
---------
Activities of MLAM U.K.
-----------------------
The services of MLAM U.K. to the Fund are not to be deemed to be
exclusive, MLAM U.K. and any person controlled by or under common control
with MLAM U.K. (for purposes of this Article V referred to as "affiliates")
being free to render services to others. It is understood that Directors,
officers, employees and shareholders of the Fund are or may become interested
in MLAM U.K. and its affiliates, as directors, officers, employees and
shareholders or otherwise and that directors, officers, employees and
shareholders of MLAM U.K. and its affiliates are or may become similarly
interested in the Fund, and that MLAM U.K. and directors, officers,
employees, partners and shareholders of its affiliates may become interested
in the Fund as shareholders or otherwise.
ARTICLE VI
----------
MLAM U.K. Statements Pursuant to IMRO Rules
-------------------------------------------
Any complaints concerning MLAM U.K. should be in writing addressed to
the attention of the Managing Director of MLAM U.K. MLAM has the right to
obtain from MLAM U.K. a copy of the IMRO complaints procedure and to approach
IMRO and the Investment Ombudsman directly.
MLAM U.K. may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding Investments Not
Readily Realisable (as that term is used in the IMRO Rules) or investments
denominated in a currency other than British pound sterling. There can be no
certainty that market makers will be prepared to deal in unlisted or thinly
traded securities and an accurate valuation may be hard to obtain. The value
of investments recommended by MLAM U.K. may be subject to exchange rate
fluctuations which may have favorable or unfavorable effects on investments.
MLAM U.K. may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding options, futures or
contracts for differences. Markets can be highly volatile and such
investments carry a high degree of risk of loss exceeding the original
investment and any margin on deposit.
ARTICLE VII
-----------
Duration and Termination of this Agreement
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until _________, 1999, and thereafter, but only so
long as such continuance is specifically approved at least annually by (i)
the Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund and (ii) a majority of those Directors who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by MLAM or by vote of a majority of the outstanding voting
securities of the Fund, or by MLAM U.K., on sixty days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment or in the event of the termination of the Investment Advisory
Agreement. Any termination shall be without prejudice to the completion of
transactions already initiated.
ARTICLE VIII
------------
Amendments of this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (1) the Directors of the Fund or by the vote of a
majority of outstanding voting securities of the Fund and (2) a majority of
those Directors who are not parties to this Agreement or interested persons
of any such party cast in person at a meeting called for the purpose of
voting on such approval.
ARTICLE IX
----------
Definitions of Certain Terms
----------------------------
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission
under said Act.
ARTICLE X
---------
Governing Law
-------------
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company
Act. To the extent that the applicable laws of the State of New York, or any
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By
----------------------------------------
Title:
XXXXXXX XXXXX ASSET MANAGEMENT U.K. LIMITED
By
----------------------------------------
Title:
