EXHIBIT (g)(2)
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of [ ], 2003, between ING Clarion Real
Estate Income Fund, a Delaware statutory trust (the "Trust"), ING Clarion Real
Estate Securities, Inc., a Delaware corporation (the "Advisor"), and Clarion
Capital LLC, a New York limited liability company (the "Sub-Advisor").
WHEREAS, the Advisor has agreed to furnish investment advisory
services to the Trust, a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor wishes to retain the Sub-Advisor to
provide it with certain sub-advisory services as described below in connection
with Advisor's advisory activities on behalf of the Trust;
WHEREAS, the advisory agreement between the Advisor and the
Trust, dated [ ], 2003 (such agreement or the most recent successor agreement
between such parties relating to advisory services to the Trust is referred to
herein as the "Advisory Agreement") contemplates that the Advisor may
sub-contract investment advisory services with respect to the Trust to a
sub-advisor pursuant to a sub-advisory agreement agreeable to the Trust and
approved in accordance with the provisions of the 1940 Act; and
WHEREAS, this Agreement has been approved in accordance with
the provisions of the 1940 Act, and the Sub-Advisor is willing to furnish such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:
1. Appointment. The Advisor hereby appoints the
Sub-Advisor to act as sub-advisor with respect to the Trust and the Sub-Advisor
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Services of the Sub-Advisor. Subject to the
succeeding provisions of this section, the oversight and supervision of the
Advisor and the
direction and control of the Trust's Board of Trustees, the Sub-Advisor will
perform certain of the day-to-day operations of the Trust, which may include one
or more of the following services, at the request of the Advisor: (a) acting as
investment advisor for and managing the investment and reinvestment of those
assets of the Trust as the Advisor may from time to time request and in
connection therewith have complete discretion in purchasing and selling such
securities and other assets for the Trust and in voting, exercising consents and
exercising all other rights appertaining to such securities and other assets on
behalf of the Trust; (b) arranging, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets of the Trust;
(c) providing investment research and credit analysis concerning the Trust's
investments, (d) assist the Advisor in determining what portion of the Trust's
assets will be invested in cash, cash equivalents and money market instruments,
(e) placing orders for all purchases and sales of such investments made for the
Trust, and (f) maintaining the books and records as are required to support
Trust investment operations. At the request of the Advisor, the Sub-Advisor will
also, subject to the oversight and supervision of the Advisor and the direction
and control of the Trust's Board of Trustees, provide to the Advisor or the
Trust any of the facilities and equipment and perform any of the services
described in Section 3 of the Advisory Agreement. In addition, the Sub-Advisor
will keep the Trust and the Advisor informed of developments materially
affecting the Trust and shall, on its own initiative, furnish to the Trust from
time to time whatever information the Sub-Advisor believes appropriate for this
purpose. The Sub-Advisor will periodically communicate to the Advisor, at such
times as the Advisor may direct, information concerning the purchase and sale of
securities for the Trust, including: (a) the name of the issuer, (b) the amount
of the purchase or sale, (c) the name of the broker or dealer, if any, through
which the purchase or sale is effected, (d) the CUSIP number of the instrument,
if any, and (e) such other information as the Advisor may reasonably require for
purposes of fulfilling its obligations to the Trust under the Advisory
Agreement. The Sub-Advisor will provide the services rendered by it under this
Agreement in accordance with the Trust's investment objectives, policies and
restrictions (as currently in effect and as they may be amended or supplemented
from time to time) as stated in the Trust's Prospectus and Statement of
Additional Information and the resolutions of the Trust's Board of Trustees.
3. Covenants. (a) In the performance of its duties under
this Agreement, the Sub-Advisor shall at all times conform to, and act in
accordance with, any requirements imposed by: (i) the provisions of the 1940 Act
and the Investment Advisers Act of 1940, as amended (the "Advisers Act") and all
applicable Rules and Regulations of the Securities and Exchange Commission (the
"SEC"); (ii) any other applicable provision of law; (iii) the provisions of the
Agreement and
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Declaration of Trust, as amended and restated, and By-Laws of the Trust, as such
documents are amended from time to time; (iv) the investment objectives and
policies of the Trust as set forth in its Registration Statement on Form N-2;
and (v) any policies and determinations of the Board of the Trustees of the
Trust and
(b) In addition, the Sub-Advisor will: (i) place
orders either directly with the issuer or with any broker or dealer. Subject to
the other provisions of this paragraph, in placing orders with brokers and
dealers, the Sub-Advisor will attempt to obtain the best price and the most
favorable execution of its orders. In placing orders, the Sub-Advisor will
consider the experience and skill of the firm's securities traders as well as
the firm's financial responsibility and administrative efficiency. Consistent
with this obligation, the Sub-Advisor may select brokers on the basis of the
research, statistical and pricing services they provide to the Trust and other
clients of the Advisor or the Sub-Advisor. Information and research received
from such brokers will be in addition to, and not in lieu of, the services
required to be performed by the Sub-Advisor hereunder. A commission paid to such
brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Sub-Advisor
determines in good faith that such commission is reasonable in terms either of
the transaction or the overall responsibility of the Advisor and the Sub-Advisor
to the Trust's and their other clients and that the total commissions paid by
the Trust will be reasonable in relation to the benefits to the Trust over the
long-term. In addition, the Sub-Advisor is authorized to take into account the
sale of shares of the Trust in allocating purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with the Advisor or the Sub-Advisor), provided that the Sub-Advisor
believes that the quality of the transaction and the commission are comparable
to what they would be with other qualified firms. In no instance, however, will
the Trust's securities be purchased from or sold to the Advisor, the Sub-Advisor
or any affiliated person thereof, except to the extent permitted by the SEC or
by applicable law;
(ii) maintain books and records with respect to
the Trust's securities transactions and will render to the Advisor and
the Trust's Board of Trustees such periodic and special reports as they
may request;
(iii) maintain a policy and practice of conducting
its investment advisory services hereunder independently of the
commercial banking operations of its affiliates. When the Sub-Advisor
makes investment recommendations for the Trust, its investment advisory
personnel will not inquire or take into consideration whether the
issuer of securities proposed for
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purchase or sale for the Trust's account are customers of the
commercial department of its affiliates; and
(iv) treat confidentially and as proprietary
information of the Trust all records and other information relative to
the Trust, and the Trust's prior, current or potential shareholders,
and will not use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld
where the Sub-Advisor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by
the Trust.
4. Services Not Exclusive. Nothing in this Agreement
shall prevent the Sub-Advisor or any officer, employee or other affiliate
thereof from acting as investment advisor for any other person, firm or
corporation, or from engaging in any other lawful activity, and shall not in any
way limit or restrict the Sub-Advisor or any of its officers, employees or
agents from buying, selling or trading any securities for its or their own
accounts or for the accounts of others for whom it or they may be acting;
provided, however, that the Sub-Advisor will undertake no activities which, in
its judgment, will adversely affect the performance of its obligations under
this Agreement.
5. Books and Records. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees
that all records which it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any such records upon the
Trust's request. The Sub-Advisor further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act (to the extent such books and
records are not maintained by the Advisor).
6. Agency Cross Transactions. From time to time, the
Sub-Advisor or brokers or dealers affiliated with it may find themselves in a
position to buy for certain of their brokerage clients (each an "Account")
securities which the Sub-Advisor's investment advisory clients wish to sell, and
to sell for certain of their brokerage clients securities which advisory clients
wish to buy. Where one of the parties is an advisory client, the Advisor or the
affiliated broker or dealer cannot participate in this type of transaction
(known as a cross transaction) on behalf of an advisory client and retain
commissions from both parties to the transaction without
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the advisory client's consent. This is because in a situation where the
Sub-Advisor is making the investment decision (as opposed to a brokerage client
who makes his own investment decisions), and the Sub-Advisor or an affiliate is
receiving commissions from one or both sides of the transaction, there is a
potential conflicting division of loyalties and responsibilities on the
Sub-Advisor's part regarding the advisory client. The SEC has adopted a rule
under the Advisers Act which permits the Sub-Advisor or its affiliates to
participate on behalf of an Account in agency cross transactions if the advisory
client has given written consent in advance. By execution of this Agreement, the
Trust authorizes the Sub-Advisor or its affiliates to participate in agency
cross transactions involving an Account. The Trust may revoke its consent at any
time by written notice to the Sub-Advisor.
7. Expenses. During the term of this Agreement, the
Sub-Advisor will bear all costs and expenses of its employees and any overhead
incurred by the Sub-Advisor in connection with its duties hereunder; provided
that the Board of Trustees of the Trust may approve reimbursement to the
Sub-Advisor of the pro-rata portion of the salaries, bonuses, health insurance,
retirement benefits and all similar employment costs for the time spent on Trust
operations (other than the provision of investment advice and administrative
services required to be provided hereunder) of all personnel employed by the
Sub-Advisor who devote substantial time to the Trust operations or the
operations of other investment companies advised or sub-advised by the
Sub-Advisor.
8. Compensation.
(a) The Advisor agrees to pay to the Sub-Advisor
and the Sub-Advisor agrees to accept as full compensation for all services
rendered by the Sub-Advisor as such, a monthly fee in arrears at an annual rate
equal to 100% of the investment advisory fee received by the Advisor in respect
of that portion of the Trust's average daily net assets managed by the
Sub-Adviser (the "Sub-Advised Portion") plus the proportionate amount of the
outstanding leverage of the Trust attributable to the Sub-Advised Portion;
provided, however, that the Sub-Advisor shall not receive any payments pursuant
to this Section 8(a) until the Advisor has received an investment advisory fee
in an amount equal to the offering costs and expenses assumed by the Advisor in
the Trust's initial public offering of common shares.
(b) For purposes of this Agreement, the Managed
Assets of the Trust shall be calculated pursuant to the procedures adopted by
resolutions of
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the Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
9. Indemnity.
(a) The Trust hereby agrees to indemnify the
Sub-Advisor and each of the Sub-Advisor's directors, officers, employees,
agents, associates and controlling persons and the directors, partners, members,
officers, employees and agents thereof (including any individual who serves at
the Sub-Advisor's request as director, officer, partner, member, trustee or the
like of another entity) (each such person being an "Indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable state law) reasonably incurred by such Indemnitee in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which such Indemnitee may be or may have been involved as
a party or otherwise or with which such Indemnitee may be or may have been
threatened, while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity, except with respect
to any matter as to which such Indemnitee shall have been adjudicated not to
have acted in good faith in the reasonable belief that such Indemnitee's action
was in the best interest of the Trust and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee had no reasonable cause to
believe that the conduct was unlawful; provided, however, that (1) no Indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such Indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard
of the duties involved in the conduct of such Indemnitee's position (the conduct
referred to in such clauses (i) through (iv) being sometimes referred to herein
as "disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such Indemnitee, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such Indemnitee
appears to have acted in good faith in the reasonable belief that such
Indemnitee's action was in the best interest of the Trust and did not involve
disabling conduct by such Indemnitee and (3) with respect to any action, suit or
other proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust.
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(b) The Trust shall make advance payments in
connection with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation of the Indemnitee's good faith belief that the standard of conduct
necessary for indemnification has been met and a written undertaking to
reimburse the Trust unless it is subsequently determined that such Indemnitee is
entitled to such indemnification and if the trustees of the Trust determine that
the facts then known to them would not preclude indemnification. In addition, at
least one of the following conditions must be met: (A) the Indemnitee shall
provide a security for such Indemnitee-undertaking, (B) the Trust shall be
insured against losses arising by reason of any lawful advance, or (C) a
majority of a quorum consisting of trustees of the Trust who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the 0000
Xxx) nor parties to the proceeding ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to
indemnification hereunder shall be made (1) by a final decision on the merits by
a court or other body before whom the proceeding was brought that such
Indemnitee is not liable by reason of disabling conduct, or (2) in the absence
of such a decision, by (i) a majority vote of a quorum of the Disinterested
Non-Party Trustees of the Trust, or (ii) if such a quorum is not obtainable or
even, if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall be authorized
shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these
provisions shall not exclude any other right to which such Indemnitee may be
lawfully entitled.
10. Limitation on Liability.
(a) The Sub-Advisor will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Advisor or
by the Trust in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
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(b) Notwithstanding anything to the contrary
contained in this Agreement, the parties hereto acknowledge and agree that, as
provided in Section 5.1 of Article V of the Declaration of Trust, this Agreement
is executed by the Trustees and/or officers of the Trust, not individually but
as such Trustees and/or officers of the Trust, and the obligations hereunder are
not binding upon any of the Trustees or Shareholders individually but bind only
the estate of the Trust.
11. Duration and Termination. This Agreement shall become
effective as of the date hereof and, unless sooner terminated with respect to
the Trust as provided herein, shall continue in effect for a period of two
years. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Trust for successive periods of 12 months, provided such
continuance is specifically approved at least annually by both (a) the vote of a
majority of the Trust's Board of Trustees or a vote of a majority of the
outstanding voting securities of the Trust at the time outstanding and entitled
to vote and (b) by the vote of a majority of the Trustees, who are not parties
to this Agreement or interested persons (as such term is defined in the 0000
Xxx) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated by the Trust or the Advisor at any time, without the payment of any
penalty, upon giving the Sub-Advisor 60 days' notice (which notice may be waived
by the Sub-Advisor), provided that such termination by the Trust or the Advisor
shall be directed or approved by the vote of a majority of the Trustees of the
Trust in office at the time or by the vote of the holders of a majority of the
voting securities of the Trust at the time outstanding and entitled to vote, or
by the Sub-Advisor on 60 days' written notice (which notice may be waived by the
Trust and the Advisor), and will terminate automatically upon any termination of
the Advisory Agreement between the Trust and the Advisor. This Agreement will
also immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings of such terms
in the 1940 Act.)
12. Notices. Any notice under this Agreement shall be in
writing to the other party at such address as the other party may designate from
time to time for the receipt of such notice and shall be deemed to be received
on the earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.
13. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an
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instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Any amendment of this
Agreement shall be subject to the 1940 Act.
14. 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 on, and shall inure to the
benefit of the parties hereto and their respective successors.
15. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York for contracts
to be performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
16. Counterparts. This Agreement may be executed in
counterparts by the parties hereto, each of which shall constitute an original
counterpart, and all of which, together, shall constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers designated below as
of the day and year first above written.
ING CLARION REAL ESTATE SECURITIES, INC
By:____________________________________
Name:
Title:
CLARION CAPITAL LLC
By:____________________________________
Name:
Title:
ING CLARION REAL ESTATE INCOME FUND
By:____________________________________
Name:
Title:
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