EXHIBIT 99.(d)(2)
EMERGING GROWTH FUND, INC.
SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT is made as of the 1st day of May,
2001 by and among EMERGING GROWTH FUND, INC., a Maryland corporation (the
"Fund"), INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), and XXXXX ADVISORY INCORPORATED, a Maryland corporation (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 Department of
Assessments and Taxation of the State of Maryland on July 2, 1987 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 September 8, 1987;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-21119) and
under the 1940 Act as filed with the SEC on April 8, 1988 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 the
"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.
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3. Duties of Sub-Advisor. In carrying out its obligations under Section 1
hereof, the Sub-Advisor shall, subject to overall supervision by the Advisor:
(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;
(e) provide the Board of Directors of the Fund on a regular basis with
financial reports with respect to the Fund's portfolio investments and
analyses of the Fund's operations and the operations of comparable
investment companies; and
(f) 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 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
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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 Sub-Advisor may direct Deutsche Banc Alex. Xxxxx Inc.
("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 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 among
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 one or more officers 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; the charges and expenses of any registrar, any custodian or any
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
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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 the independent 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, 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 0.55% of the Fund's average daily net assets provided that, if
necessary, the Sub-Advisor's annual compensation will be reduced in an amount
proportional to the Advisor's waiver so that the Fund's total expenses for that
year do not exceed 1.50% of the Flag Investors Class A Shares' average daily net
assets. Except as hereinafter set forth, compensation under this Agreement shall
be calculated and accrued daily and the amounts of the daily accruals shall be
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 calculation 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 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-
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Advisor. This Agreement may be terminated at any time, without the payment of
any penalty, by the Advisor or the Sub-Advisor on sixty (60) days' written
notice to the Fund and the other party. Upon the termination of the Investment
Advisory Agreement, this Agreement shall automatically terminate on sixty (60)
days written notice. 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
officers or Directors 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
Directors of the Sub-Advisor to the extent permitted by law; and that the
officers and Directors 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, trustees or directors of any other firm,
trust 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 for this purpose shall be 00-00 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx
00000, and the address of the Advisor and the Fund 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: EMERGING GROWTH FUND, INC.
/s/ Xxxxxxx Xxxxxxxx By: /s/ Xxx X. Xxxxxx
-------------------- -----------------
Name: Xxx X. Xxxxxx
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(print name)
Title: Secretary
----------
(print title)
Attest: INVESTMENT COMPANY CAPITAL CORP.
/s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
-------------------- ----------------------
Name: Xxxxxx X. Xxxxxxxx
------------------
(print name)
Title: Executive Vice President
-------------------------
(print title)
Attest: XXXXX ADVISORY INCORPORATED
/s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxx
-------------------- ----------------------
Name: Xxxxxx X. Xxxxxx
-----------------
(print name)
Title: Vice Chairman
-------------
(print title)
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