EXHIBIT 99.5(i)
GE FUNDS
GE SMALL-CAP VALUE EQUITY FUND
SUB-ADVISORY AGREEMENT
This agreement ("Agreement") is made as of June 29, 1998, between GE
INVESTMENT MANAGEMENT INCORPORATED ("GEIM"), a Delaware corporation, GE FUNDS, a
Massachusetts business trust ("Company"), on behalf of the GE SMALL-CAP VALUE
EQUITY FUND ("Fund"), a series of the Company, solely with respect to Section
6(b) of this Agreement, and PALISADE CAPITAL MANAGEMENT, L.L.C., a New Jersey
limited liability company ("Sub-Adviser").
RECITALS
GEIM has entered into an Investment Advisory and Administration Agreement
dated June 2, 1998 ("Advisory Agreement") with the Company, an open-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), with respect to the Fund, a series of the
Company;
Pursuant to Section 1 of the Advisory Agreement, GEIM is authorized to
delegate its investment advisory responsibilities to other investment advisers,
subject to the requirements of the 1940 Act;
GEIM wishes to retain the Sub-Adviser to furnish certain investment
advisory services to GEIM and the Fund, and the Sub-Adviser is willing to
furnish those services; and
GEIM intends that this Agreement will become effective when approved in
accordance with Section 15 of the 1940 Act;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. APPOINTMENT. GEIM hereby appoints the Sub-Adviser as an investment
sub-adviser with respect to the Fund's assets for the period and on the
terms set forth in this Agreement. The Sub-Adviser accepts that appointment
and agrees to render the services herein set forth, for the compensation
herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the oversight and supervision of GEIM and the
Board of Trustees of the Company ("Board"), the Sub-Adviser will
provide a continuous investment program for the Fund's assets,
including investment research and management. The Sub-Adviser will
determine from time to time what investments will be purchased,
retained or sold by the Fund. The Sub-Adviser will be responsible for
placing purchase and sell orders for Fund investments. The Sub-Adviser
will consult with GEIM from time to time regarding matters pertaining
to the Fund, including market strategy and portfolio characteristics.
The Sub-Adviser will provide services under this Agreement in
accordance with the Fund's investment objective, policies and
restrictions
as stated in the Company's current Registration Statement on Form N-1A
and any amendments or supplements thereto ("Registration Statement")
and the Company's Declaration of Trust and By-Laws, if any,
("Constituent Documents"). In this connection and in connection with
the further duties set forth in paragraphs 2(b) - (k) below, the
Sub-Adviser shall provide GEIM and the Board with such periodic
reports and documentation as GEIM or the Board shall reasonably
request regarding the Sub-Adviser's management of the Fund's assets,
compliance with applicable laws and rules and the Registration
Statement and all requirements hereunder.
(b) The Sub-Adviser shall carry out its responsibilities under
this Agreement in compliance with: (1) the Fund's investment
objective, policies and restrictions as set forth in the Registration
Statement, (2) the Constituent Documents, (3) all investment
guidelines, policies, procedures or directives of the Company or GEIM
provided to the Sub-Adviser, (4) the 1940 Act and the rules
promulgated thereunder, and (5) other applicable federal and state
laws and related regulations. In particular, in carrying out its
duties as Sub-Adviser, Sub-Adviser shall, to the extent within its
control, make every effort to ensure that the Fund continuously
qualifies as a regulated investment company under sub-chapter M of the
Internal Revenue Code of 1986, as amended ("Code") and the regulations
promulgated thereunder. GEIM shall promptly notify the Sub-Adviser of
changes to (1), (2) or (3) above and shall consult with Sub-Adviser
before making any changes relating solely to the Fund's investment
objective, policies and restrictions as set forth in the Registration
Statement.
(c) The Sub-Adviser shall take all actions which it considers
necessary to implement the investment objectives and policies of the
Fund, and in particular, to place all orders for the purchase or sale
of securities or other investments for the Fund with brokers or
dealers selected by it, and to that end, the Sub-Adviser is authorized
as the agent of the Company to give instructions to the Company's
custodian(s) as to deliveries of securities or other investments and
payments of cash for the account of the Fund. In connection with the
selection of brokers or dealers and the placing of purchase and sale
orders with respect to investments of the Fund, the Sub-Adviser is
directed at all times to seek to obtain best execution and price
within the policy guidelines determined by the Board.
In addition to seeking the best price and execution, to the
extent covered by Section 28(e) of the Securities Exchange Act of
1934, as amended ("1934 Act"), the Sub-Adviser is also authorized to
take into consideration research and statistical information and wire
and other quotation services provided by brokers and dealers to the
Sub-Adviser. The Sub-Adviser is also authorized to effect individual
securities transactions at commission rates in excess of the minimum
commission rates available, if it determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund. The
policies with respect to brokerage allocation, determined from time to
time by the Board, are disclosed in the Registration Statement. The
Sub-Adviser will periodically evaluate the statistical data, research
and other investment services provided to it by brokers and dealers.
Such services may be used by the Sub-Adviser in connection with the
performance of its obligations under this Agreement or in connection
with other advisory or investment operations, including using such
information in managing its own accounts. The Sub-Adviser is also
authorized to use soft-dollar services as requested by the Board
2
from time to time. Whenever the Sub-Adviser simultaneously places
orders to purchase or sell the same security on behalf of the Fund and
one or more other accounts advised by the Sub-Adviser, the orders will
be allocated as to price and amount among all such accounts in a
manner believed to be equitable by the Sub-Adviser to each account.
(d) Subject to: (1) the requirement that the Sub-Adviser seek to
obtain best execution and price within the policy guidelines
determined by the Board and set forth in the Registration Statement,
(2) the provisions of the 1940 Act and the Investment Advisers Act of
1940, as amended ("Advisers Act"), (3) the provisions of the 1934 Act,
and (4) other applicable provisions of law, the Sub-Adviser or an
affiliated person of the Sub-Adviser or of GEIM may act as broker for
the Fund in connection with the purchase or sale of securities or
other investments for the Fund. Such brokerage services are not within
the scope of the duties of the Sub-Adviser under this Agreement.
Subject to the requirements of applicable law and any procedures
adopted by the Board, the Sub-Adviser or its affiliated persons may
receive brokerage commissions, fees or other remuneration from the
Fund or the Company for such services in addition to the Sub-Adviser's
fees for services under this Agreement.
(e) The Sub-Adviser will maintain all books and records required
to be maintained by the Company pursuant to the 1940 Act and the rules
and regulations promulgated thereunder with respect to transactions on
behalf of the Fund, and will furnish the Board and GEIM with such
periodic and special reports as the Board or GEIM reasonably may
request. The Sub-Adviser shall permit the books and records maintained
with respect to the Fund to be inspected and audited by the Company,
GEIM or their respective agents at all reasonable times during normal
business hours upon reasonable notice. In compliance with the
requirements of Rule 3la-3 under the 1940 Act, the Sub-Adviser hereby
agrees that all records which it maintains for the Fund are the
property of the Company, agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any records which it maintains for
the Company and which are required to be maintained by Rule 31a-1
under the 1940 Act, and further agrees to surrender promptly to the
Company any records which it maintains for the Company upon request by
the Company.
(f) At such times as shall reasonably be requested, the
Sub-Adviser will provide to the Board and GEIM economic and investment
analyses and reports, information required in the Registration
Statement and information necessary for GEIM and the Board to review
the Fund or discuss the management of it. The Sub-Adviser will provide
quarterly reports setting forth the Fund's performance and the
Sub-Adviser's private account composite performance and will complete
on a quarterly basis the checklist provided to it by GEIM regarding
the Fund's investments and transactions. The Sub-Adviser shall make
available to the Board and GEIM any economic, statistical and
investment services normally available to institutional or other
customers of the Sub-Adviser. The Sub-Adviser will make available its
officers and employees to meet with the Board on reasonable notice to
review the Fund's investments.
(g) In accordance with procedures adopted by the Board, as
amended from time to time, the Sub-Adviser is responsible for
assisting the Board in determining the fair valuation of any illiquid
portfolio securities and will assist the Company's accounting services
agent or GEIM to obtain independent sources of market value for all
other portfolio securities.
3
(h) At such times as shall be reasonably requested by GEIM, the
Sub-Adviser shall review and certify in writing that the information
stated in the Company's Registration Statement relating to the
Sub-Adviser, its management of the Fund, including investment
objectives, strategies and related risks, and its performance history
is true, correct and complete to the best of its knowledge.
(i) The Sub-Adviser will promptly notify GEIM of any change of
control of the Sub-Adviser, including any change of its general
partners or 25% shareholders or members, as applicable, and any
changes in the key personnel of the Sub-Adviser, including without
limitation portfolio management personnel responsible for the Fund's
assets, in each case prior to or promptly after such change.
Notwithstanding the foregoing, the Sub-Adviser will promptly notify
GEIM of any existing agreement, or upon entering into any agreement,
that may result in a change of control of the Sub-Adviser, including
without limitation the retention of an agent to assist in the sale of
all, or a significant portion, of the business of the Sub-Adviser.
(j) The Sub-Adviser will calculate its private account composite
performance in compliance with the Performance Presentation Standards
of the Association for Investment Management Research and such
performance will be reviewed at least annually by an independent
accounting firm.
(k) Within fifteen days of the end of the last calendar quarter
of each year that this Agreement is in effect, the president or a vice
president of the Sub-Adviser shall certify to GEIM that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during
the previous year and that there has been no violation of the
Sub-Adviser's code of ethics or, if such a violation has occurred,
that appropriate action was taken in response to such violation. Upon
the written request of GEIM, the Sub-Adviser shall permit GEIM, its
employees or its agents to examine the reports required to be made to
the Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to
the Sub-Adviser's code of ethics.
3. EXPENSES. During the term of this Agreement, the Sub-Adviser will bear
all expenses incurred by it in connection with its investment sub-advisory
services under this Agreement.
4. COMPENSATION.
For the services rendered, the facilities furnished and the expenses
assumed by the Sub-Adviser, the Adviser shall pay the Sub-Adviser no later than
the twentieth (20th) business day following the end of each calendar month a fee
based on the average daily net assets of the Fund at the following annual rates:
.450% of the first $25,000,000; .400% of the next $50,000,000; and
.375% of the next $100,000,000 and .350% of amounts in excess of
$175,000,000.
The Sub-Adviser's fee shall be paid by GEIM out of GEIM's advisory fee to
the extent such fee is received by GEIM pursuant to the Advisory Agreement. To
the extent that
4
GEIM determines to waive, or to reimburse the Fund for, all or a portion of its
advisory fee, the Sub-Adviser agrees to a reduction of its fee pro-rata.
The Sub-Adviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of the Fund shall be determined in the manner and on the dates set forth
in the current prospectus of the Company, and, on dates on which the net assets
are not so determined, the net asset value computation to be used shall be as
determined on the next day on which the net assets shall have been determined.
In the event of termination of this Agreement, all compensation due through the
date of termination will be calculated on a pro-rated basis through the date of
termination and paid within thirty (30) business days of the date of
termination.
During any period when the determination of net asset value is suspended,
the net asset value of the Fund as of the last business day prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding business day until it is again determined.
5. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable to the
Company or GEIM for any loss resulting from the Sub-Adviser's acts or omissions
as Sub-Adviser to the Fund, except to the extent any such losses result from bad
faith, willful misfeasance, reckless disregard or gross negligence on the part
of the Sub-Adviser or any of its directors, officers or employees in the
performance of the Sub-Adviser's duties and obligations under this Agreement.
6. INDEMNIFICATION.
(a) GEIM agrees to indemnify and hold the Sub-Adviser, its officers and
directors, and any person who controls the Sub-Adviser within the meaning of
Section 15 of the Securities Act of 1933, as amended ("1933 Act") harmless from
any and all direct or indirect liabilities, losses or damages (including
reasonable attorneys' fees) suffered by Sub-Adviser resulting from (i) GEIM's
breach of its duties under the Advisory Agreement or (ii) bad faith, willful
misfeasance, reckless disregard or gross negligence on the part of GEIM or any
of its directors, officers or employees in the performance of GEIM's duties and
obligations under this Agreement, except to the extent such loss results from
the Sub-Adviser's own willful misfeasance, bad faith, reckless disregard or
gross negligence in the performance of Sub-Adviser's duties and obligations
under this Agreement.
(b) The Fund agrees to indemnify and hold the Sub-Adviser, its officers and
directors, and any person who controls the Sub-Adviser within the meaning the
1933 Act harmless from any and all direct or indirect liabilities, losses or
damages (including reasonable attorneys' fees) suffered by Sub-Adviser resulting
from any misrepresentation of a material fact in the Registration Statement or
the omission of a fact necessary to make information contained in the
Registration Statement not misleading, except to the extent that such loss
results from information in the Registration Statement that was provided by
Sub-Adviser.
(c) The Sub-Adviser agrees to indemnify and hold GEIM, its officers and
directors, and any person who controls GEIM within the meaning of Section 15 of
the 1933 Act,
5
and the Company harmless from any and all direct or indirect liabilities, losses
or damages (including reasonable attorneys' fees) suffered by GEIM, its officers
and directors, and any person who controls GEIM within the meaning of Section 15
of the 1933 Act, and the Company resulting from (i) Sub-Adviser's breach of its
duties hereunder or (ii) bad faith, willful misfeasance, reckless disregard or
gross negligence on the part of the Sub-Adviser or any of its directors,
officers or employees in the performance of the Sub-Adviser's duties and
obligations under this Agreement, except to the extent such loss results from
the Company's or GEIM's own willful misfeasance, bad faith, reckless disregard
or gross negligence in the performance of their respective duties and
obligations under the Advisory Agreement or this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER. The Sub-Adviser
represents, warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will seek to continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by the Advisory Agreement;
(iv) has the authority to enter into and perform the services contemplated by
this Agreement and the execution, delivery and performance by the Sub-Adviser of
this Agreement does not contravene or constitute a default under any agreement
binding upon the Sub-Adviser; (v) will promptly notify GEIM of the occurrence of
any event that would disqualify it from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise; (vi)
has filed a notice of exemption pursuant to Rule 4.14 under the Commodity
Exchange Act with the Commodity Futures Trading Commission and the National
Futures Association, or is not required to file such exemption; and (vii) is
duly organized and validly existing under the laws of the state in which it was
organized with the power to own and possess its assets and carry on its business
as it is now being conducted.
(b) The Sub-Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide GEIM and the
Board with a copy of that code of ethics, together with evidence of its
adoption.
(c) The Sub-Adviser certifies that the information stated in Post-Effective
Amendment No. 26 to the Company's Registration Statement relating to the
Sub-Adviser, its management of the Fund and its performance history is true,
correct and complete to the best of its knowledge.
8. REPRESENTATIONS AND WARRANTIES OF GEIM. GEIM represents, warrants and
agrees that GEIM (i) is registered as an investment adviser under the Advisers
Act and will continue to be so registered for so long as this Agreement remains
in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by the Advisory Agreement; (iii) has met,
and will seek to continue to meet for so long as this Agreement remains in
effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services
6
contemplated by the Advisory Agreement; (iv) has the authority to enter into and
perform the services contemplated by the Advisory Agreement and the execution,
delivery and performance by GEIM of the Advisory Agreement does not contravene
or constitute a default under any agreement binding upon GEIM; (v) will promptly
notify the Sub-Adviser of the occurrence of any event that would disqualify GEIM
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise; (vi) has filed a notice of exemption
pursuant to Rule 4.14 under the Commodity Exchange Act with the Commodity
Futures Trading Commission and the National Futures Association, or is not
required to file such exemption; (vii) is duly organized and validly existing
under the Laws of the State of Delaware with the power to own and possess its
assets and carry on its business as it is now being conducted; and (viii) it has
furnished the Sub-Adviser with true and complete copies of the Constituent
Documents and the Registration Statement and will provide to the Sub-Adviser
copies of any amendments or supplements to any of these materials as soon as
practicable after such materials become available.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Sub-Adviser and GEIM pursuant to
Sections 7 and 8, respectively, shall survive for the duration of this Agreement
and the parties hereto shall promptly notify each other in writing upon becoming
aware that any of the foregoing representations and warranties are no longer
true.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective upon the date first above written
and will continue for an initial two-year term and will continue thereafter so
long as the continuance is specifically approved at least annually (a) by the
Board or (b) by a vote of a majority of the Fund's outstanding voting
securities, as defined in the 1940 Act, provided that in either event the
continuance is also approved by a majority of the Board 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 the approval.
(b) This Agreement may be terminated at any time without the payment of any
penalty, by the Board, or by vote of a majority of the Fund's outstanding voting
securities, on 60 days' written notice to the Sub-Adviser. This Agreement may
also be terminated, without the payment of any penalty, by GEIM: (i) upon 60
days' written notice to the Sub-Adviser; (ii) upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
8 of this Agreement; or (iii) if the Sub-Adviser becomes unable to discharge its
duties and obligations under this Agreement, including circumstances such as
financial insolvency of the Sub-Adviser or other circumstances that could
adversely affect the Fund. The Sub-Adviser may terminate this Agreement at any
time, without the payment of a penalty, on 60 days' written notice to GEIM. This
Agreement will terminate automatically in the event of its assignment, including
without limitation, a change of control of the Sub-Adviser, or upon termination
of the Advisory Agreement.
11. CHANGE OF CONTROL OF THE SUB-ADVISER. The Sub-Adviser will be liable to
the Company and GEIM for all direct and indirect costs resulting from a change
of control of the
7
Sub-Adviser, including without limitation all costs associated with proxy
solicitations, Board meetings, revisions to prospectuses, statements of
additional information and marketing materials, and the hiring of another
sub-adviser to the Fund. The understandings and obligations set forth in this
Section 11 shall survive the termination of this Agreement and shall be binding
upon the Sub-Adviser's successor(s) and/or assign(s).
12. EXCLUSIVITY. During the term of this Agreement, the Sub-Adviser shall
not, without the written consent of GEIM and the Board, serve as investment
adviser or investment sub-adviser to another management investment company
registered under the 1940 Act (or series thereof) with substantially similar
investment objectives, policies and restrictions as those of the Fund ("Another
Small-Cap Fund"), other than a management investment company registered under
the 1940 Act (or series thereof) that is advised by GEIM, PROVIDED, HOWEVER,
that such consent is not required if the Fund has, upon GEIM's receipt of
written notification ("Notification Date") of Sub-Adviser's intent to act as
investment adviser or investment sub-adviser to Another Small-Cap Fund, (i) more
than $25 million of net assets, if the Notification Date is on or after one year
and six months from the date that the first one hundred Fund shares are issued,
(ii) more than $50 million of net assets, if the Notification Date is on or
after two years and six months from the date that the first one hundred Fund
shares are issued or (iii) more than $100 million of net assets, if the
Notification Date is on or after three years and six months from the date that
the first one hundred Fund shares are issued.
13. RIGHT OF FIRST REFUSAL. Subject to the provisions of Section 12 of this
Agreement, the Sub-Adviser shall not serve as investment adviser or investment
sub-adviser to any other management investment company registered under the 1940
Act (or series thereof) ("Other Fund") without having first offered in writing
to serve as investment sub-adviser to a fund advised by GEIM with similar
investment objectives, policies and restrictions for an investment sub-advisory
fee not to exceed the lesser of (a) the investment sub-advisory fee contemplated
for the Other Fund and (b) the median investment sub-advisory fee for the
applicable asset class described in Lipper Analytical Services ("Lipper"), or if
Lipper no longer provides such information, an independent mutual fund data
provider mutually agreed upon by GEIM and the Sub-Adviser ("Offer"). The Offer
shall be valid for thirty (30) days from the date of its receipt by GEIM. If
GEIM accepts the Offer, the Sub-Adviser shall not serve as investment adviser or
investment sub-adviser to the Other Fund, unless the Board does not approve the
sub-advisory agreement with GEIM or the amount of the sub-advisory fee
contemplated.
14. AMENDMENT OF THIS AGREEMENT. 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 material amendment to the terms of
this Agreement shall be effective until approved by a vote of a majority of the
Fund's outstanding voting securities (unless the Company receives an SEC order
or opinion of counsel, or the issue is the subject of a position of the SEC or
its staff, permitting it to modify the Agreement without such vote).
15. GOVERNING LAW. This Agreement shall be construed in accordance with the
1940 Act and the laws of the State of New York, without giving effect to the
conflicts of laws
8
principles thereof. To the extent that the applicable laws of the State of New
York conflict with the applicable provisions of the 1940 Act, the latter shall
control.
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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 thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," "broker," "investment adviser," "net assets," "sale," "sell" and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule, regulation
or order. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is made less restrictive by rule,
regulation or order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order. This Agreement may be signed in counterpart.
9
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INVESTMENT MANAGEMENT INCORPORATED
BY: ___________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title:Executive Vice President
GE FUNDS, ON BEHALF OF GE
SMALL-CAP VALUE EQUITY FUND, A SERIES OF
GE FUNDS, SOLELY WITH RESPECT TO SECTION
6(b) OF THIS AGREEMENT
BY: ___________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title:President
PALISADE CAPITAL MANAGEMENT, L.L.C.
BY: ___________________________________
Name:
Title:
10
