Exhibit 5 (d)
THE XXXXXX SQUARE STRATEGIC EQUITY FUND
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the 7th day of June 1998, among
The Xxxxxx Square Strategic Equity Fund, a Massachusetts business trust (the
"Fund"), Wilmington Trust Company (the "Adviser"), a corporation organized under
the laws of the State of Delaware and Xxxxxxx Xxxxxx Investments, Inc., a
corporation organized under the laws of the State of Delaware (the
"Sub-Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and
offers for public sale distinct series of shares of beneficial interest; and
WHEREAS, The International Equity Portfolio (the "Portfolio") is a
series of the Fund; and
WHEREAS, the Adviser acts as the investment adviser for the Portfolio
pursuant to the terms of an Investment Advisory Agreement between the Fund and
the Adviser under which the Adviser is responsible for the coordination of
investment of the Portfolio's assets in portfolio securities; and
WHEREAS, the Adviser is authorized under the Investment Advisory Agreement
to delegate its investment responsibilities to one or more persons or companies;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, the Fund, the Adviser and the Sub-Adviser agree as follows:
1. APPOINTMENT OF SUB-ADVISER. The Fund hereby appoints and employs the
Sub-Adviser as a discretionary portfolio manager, on the terms and
conditions set forth herein, of those assets of the Portfolio which the
Adviser determines to assign to the Sub-Adviser (those assets being
referred to as the "Portfolio Account"). The Adviser may, from time to
time, make additions to and withdrawals, including cash and cash
equivalents, from the Portfolio Account.
2. ACCEPTANCE OF APPOINTMENT. The Sub-Adviser accepts its appointment as a
discretionary portfolio manager and agrees to use its professional
judgment to make investment decisions for the Portfolio with respect to
the investments of the Portfolio Account and to implement such decisions
on a timely basis in accordance with the provisions of this Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnish the Sub-Adviser with copies
properly certified or authenticated of each of the following and will
promptly provide the Sub-Adviser with copies properly certified or
authenticated of any amendment or supplement thereto:
(a) The Portfolio's Investment Advisory Agreement;
(b) The Fund's most recent effective registration statement and
financial statements as filed with the Securities and Exchange
Commission;
(c) The Fund's Declaration of Trust and By-Laws; and
(d) Any policies, procedures or instructions adopted or approved by the
Fund's Board of Trustees relating to obligations and services
provided by the Sub-Adviser.
4. PORTFOLIO MANAGEMENT SERVICES OF THE SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for
investment by the Portfolio, to purchase and to sell securities for the
Portfolio Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
Sections 6 and 7 hereof and Schedule A hereto (as amended from time to
time). In providing portfolio management services to the Portfolio
Account, the Sub-Adviser shall be subject to and shall conform to such
investment restrictions as are set forth in the 1940 Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
applicable statutes and regulations of foreign jurisdictions, the
supervision and control of the Board of Trustees of the Fund, such
specific instructions as the Board of Trustees may adopt and communicate
to the Sub-Adviser, the investment objective, policies and restrictions of
the Fund applicable to the Portfolio furnished pursuant to Section 5 of
this Agreement, the provisions of Schedule A and Schedule B hereto and
other instructions communicated to the Sub-Adviser by the Adviser. The
Sub-Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Portfolio Account, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. The Sub-Adviser shall
maintain on behalf of the Fund the records listed in Schedule B hereto (as
amended from time to time). At the Fund's reasonable request, the
Sub-Adviser will consult with the Fund or with the Adviser with respect to
any decision made by it with respect to the investments of the Portfolio
Account.
5. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Fund will provide the
Sub-Adviser with the statement of investment objective, policies and
restrictions applicable to the Portfolio as contained in the Portfolio's
Prospectus and Statement of Additional Information, all amendments or
supplements to the Prospectus and Statement of Additional Information, and
any instructions adopted by the Board of Trustees supplemental thereto.
The Fund agrees, on an ongoing basis, to notify the Sub-Adviser in writing
of each change in the fundamental and non-fundamental investment policies
of the Portfolio and will provide the Sub-Adviser with such further
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information concerning the investment objective, policies, restrictions
and such other information applicable thereto as the Sub-Adviser may from
time to time reasonably request for performance of its obligations under
this Agreement. The Fund retains the right, on written notice to the
Sub-Adviser from the Fund or the Adviser, to modify any such objective,
policies or restrictions in any manner at any time.
6. TRANSACTION PROCEDURES. All transactions will be consummated by payment to
or delivery by the custodian designated by the Fund (the "Custodian"), or
such depositories or agents as may be designated by the Custodian in
writing, of all cash and/or securities due to or from the Portfolio
Account, and the Sub-Adviser shall not have possession or custody thereof.
The Sub-Adviser shall advise the Custodian and confirm in writing to the
Fund and to the administrator designated by the Fund or any other
designated agent of the Fund, all investment orders for the Portfolio
Account placed by it with brokers and dealers at the time and in the
manner set forth in Schedule B hereto (as amended from time to time). The
Fund shall issue to the Custodian such instructions as may be appropriate
in connection with the settlement of any transaction initiated by the
Sub-Adviser. The Fund shall be responsible for all custodial arrangements
and the payment of all custodial charges and fees, and, upon giving proper
instructions to the Custodian, the Sub-Adviser shall have no
responsibility or liability with respect to custodial arrangements or the
acts, omissions or other conduct of the Custodian, except that it shall be
the responsibility of the Sub-Adviser to take appropriate action if the
Custodian fails to confirm in writing proper execution of the
instructions.
7. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have authority and
discretion to select brokers and dealers (including brokers that may be
affiliates of the Sub-Adviser to the extent permitted by Section 7(c)
hereof) to execute portfolio transactions initiated by the Sub-Adviser,
and for the selection of the markets on or in which the transactions will
be executed, subject to the following and subject to conformance with the
policies and procedures disclosed in the Fund's Prospectus and Statement
of Additional Information and the policies and procedures adopted by the
Fund's Board of Trustees.
(a) In executing portfolio transactions, the Sub-Adviser will give
primary consideration to securing the best price and execution.
Consistent with this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other
clients of the Sub-Adviser may be a party. It is understood that
neither the Fund, the Adviser nor the Sub-Adviser has adopted a
formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and
market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission.
Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolio with such certain
brokers, subject to review by the Fund's Board of Trustees from time
to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Sub-Adviser in connection with its
services to other clients. The Sub-Adviser is also authorized to
place orders with certain brokers for services deemed by the Adviser
to be beneficial for the Fund; and the Sub-Adviser shall follow the
directions of the Adviser or the Fund in this regard.
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(b) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as
other clients, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the best price and execution. In such event,
allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund in respect of
the Portfolio and to such other clients.
(c) The Sub-Adviser agrees that it will not execute without the prior
written approval of the Adviser any portfolio transactions for the
Portfolio Account with a broker or dealer which is (i) an affiliated
person of the Fund, including the Adviser or any Sub-Adviser for any
Portfolio of the Fund; (ii) a principal underwriter of the Fund's
shares; or (iii) an affiliated person of such an affiliated person
or principal underwriter. The Adviser agrees that it will provide
the Sub-Adviser with a list of such brokers and dealers.
(d) The Adviser shall render regular reports to the Fund of the total
brokerage business placed and the manner in which the allocation has
been accomplished.
8. PROXIES. The Sub-Adviser will vote all proxies solicited by or with
respect to issuers of securities in which assets of the Portfolio Account
may be invested from time to time. At the request of the Sub-Adviser, the
Adviser shall provide the Sub-Adviser with its recommendations as to the
voting of such proxies.
9. REPORTS TO THE SUB-ADVISER. The Fund will provide the Sub-Adviser with
such periodic reports concerning the status of the Portfolio Account as
the Sub-Adviser may reasonably request.
10. FEES FOR SERVICES. The compensation of the Sub-Adviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the provisions of the
Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub-Adviser,
and the Sub-Adviser agrees to seek payment of the Sub-Adviser's fees
solely from the Adviser.
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11. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Fund acknowledges that
the Sub-Adviser or one or more of its affiliated persons may have
investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that the Sub-Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of Section 7(b) hereof, the Fund agrees that the
Sub-Adviser or its affiliated persons may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing
or nature of action taken with respect to the Portfolio Account, provided
that the Sub-Adviser acts in good faith, and provided further, that it is
the Sub-Adviser's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Account over a period of time on
a fair and equitable basis relative to the Affiliated Accounts, taking
into account the investment objective and policies of the Portfolio and
any specific investment restrictions applicable thereto. The Fund
acknowledges that one or more of the Affiliated Accounts may at any time
hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Portfolio Account may have an
interest from time to time, whether in transactions which involve the
Portfolio Account or otherwise. The Sub-Adviser shall have no obligation
to acquire for the Portfolio Account a position in any investment which
any Affiliated Account may acquire, and the Fund shall have no first
refusal, co-investment or other rights in respect of any such investment,
either for the Portfolio Account or otherwise.
12. CERTIFICATE OF AUTHORITY. The Fund, the Adviser and the Sub-Adviser shall
furnish to each other from time to time certified copies of the
resolutions of their Boards of Trustees/Directors or executive committees,
as the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of the Fund, a Portfolio Account, the
Adviser and/or the Sub-Adviser.
13. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions
from the Fund or the Adviser, provided, however, that such acts or
omissions shall not have resulted from the Sub-Adviser's willful
misfeasance, bad faith, gross negligence or a reckless disregard of duty.
Nothing in this Section 13 shall be construed in a manner inconsistent
with Section 17(i) of the 1940 Act.
14. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser and
the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all material non public information pertaining
to the Portfolio Account and the actions of the Sub-Adviser, the Adviser
and the Fund in respect thereof.
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15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in the event
of such assignment. The Sub-Adviser shall notify the Fund and the Adviser
in writing sufficiently in advance of any proposed change of control
within the meaning of the 1940 Act to enable the Fund and the Adviser to
take the steps necessary to enter into a new contract with the
Sub-Adviser.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE FUND. The Fund
represents, warrants and agrees that:
(a) The Sub-Adviser has been duly appointed by the Board of Trustees of
the Fund to provide investment services to the Portfolio Account as
contemplated hereby.
(b) The Fund will deliver to the Sub-Adviser a true and complete copy of
its then current Prospectus and Statement of Additional Information
as effective from time to time and such other documents or
instruments governing the investment of the Portfolio Account and
such other information as is necessary for the Sub-Adviser to carry
out its obligations under this Agreement.
(c) The Fund is currently in compliance and shall at all times continue
to comply with the requirements imposed upon the Fund by applicable
law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
(a) The Adviser has been duly authorized by the Board of Trustees of the
Fund to delegate to the Sub-Adviser the provision of investment
services to the Portfolio Account as contemplated hereby.
(b) The Adviser is currently in compliance and shall at all times
continue to comply with the requirements imposed upon the Adviser by
applicable law and regulations.
18. REPRESENTATIONS. WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The
Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act") or is a "bank" as
defined in Section 202(a)(2) of the Advisers Act.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the 1940 Act,
the records identified in Schedule B. The Sub-Adviser agrees that
such records (unless otherwise indicated on Schedule B) are the
property of the Fund, and will be surrendered to the Fund promptly
upon request. The Sub-Adviser agrees to keep confidential all
records of the Fund and information relating to the Fund, unless the
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release of such records or information is otherwise consented to in
writing by the Fund or the Adviser. The Fund and the Adviser agree
that such consent shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal
contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Portfolio Account as the
Adviser or the Fund may from time to time require to ensure
compliance with the 1940 Act, the Internal Revenue Code, applicable
state securities laws and applicable statutes and regulations of
foreign jurisdictions.
(d) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and Section 204A
of the Advisers Act and has provided the Fund with a copy of the
code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this
Agreement is in effect, the president or a vice president or general
partner of the Sub-Adviser shall certify to the Fund that the
Sub-Adviser has complied with the requirements of Rule 17j-1 and
Section 204A 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 the Fund,
the Sub-Adviser shall permit the Fund, its employees or its agents
to examine the reports required to be made to the Sub-Adviser by
Rule 17j-1(c)(1).
(e) The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of
such amendment to the Fund and the Adviser.
(f) The Sub-Adviser will immediately notify the Fund and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser
from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or otherwise. The Sub-Adviser
will also immediately notify the Fund and the Adviser if it is
served or otherwise receives notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Portfolio.
19. AMENDMENT. This Agreement may be amended at any time, but only by written
agreement among the Sub-Adviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Trustees and, to the extent required by the 1940
Act, the shareholders of the Portfolio in the manner required by the 1940
Act and the rules thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
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20. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
first written above and shall remain in force for a period of time of two
years from such date, and from year to year thereafter but only so long as
such continuance is specifically approved at least annually by the vote of
a majority of the Directors who are not interested persons of the Fund,
the Adviser or the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that this Agreement may be continued
"annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder.
21. TERMINATION.
(a) This Agreement may be terminated by the Fund (by a vote of the Board
of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio), without the payment
of any penalty, immediately upon written notice to the other parties
hereto, in the event of a material breach of any provision thereof
by the party so notified or otherwise by the Fund, upon sixty (60)
days' written notice to the other parties hereto, but any such
termination shall not affect the status, obligations or liabilities
of any party hereto to the others.
(b) This Agreement may also be terminated by the Adviser or the
Sub-Adviser, without the payment of any penalty immediately upon
written notice to the other parties hereto, in the event of a
material breach of any provision thereof by the party so notified if
such breach shall not have been cured within a 20-day period after
notice of such breach or otherwise by the Adviser or the Sub-Adviser
upon sixty (60) days' written notice to the other parties hereto,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others.
22. SHAREHOLDER LIABILITY. The Adviser and Sub-Adviser are hereby expressly
put on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust of the Fund and agree that obligations assumed by
the Fund pursuant to this Agreement shall be limited in all cases to the
Fund and its assets, and if the liability relates to one or more
Portfolios, the obligations hereunder shall be limited to the respective
assets of such Portfolio or Portfolios. The Adviser and Sub-Adviser
further agree that they shall not seek satisfaction of any such obligation
from the shareholders or any individual shareholder of the Portfolios of
the Fund, nor from the Trustees or any individual Trustee of the Fund.
23. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person," "principal underwriter" and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to any applicable orders of exemption issued by the
Securities and Exchange Commission.
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24. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties
to this Agreement at their principal place of business.
25. SEVERABILITY. 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.
26. GOVERNING LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the
State of Delaware.
27. ENTIRE AGREEMENT. This Agreement and the Schedules attached hereto
embodies the entire agreement and understanding between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
THE XXXXXX SQUARE STRATEGIC EQUITY FUND
on behalf of
THE INTERNATIONAL EQUITY PORTFOLIO
By: /s/ Xxxxxx X. Xxxxxxxxx, President
--------------------------------------------
Xxxxxx X. Xxxxxxxxx, President
XXXXXXX XXXXXX INVESTMENTS, INC.
By: /s/ Xxxxxxxx Xxxxx
--------------------------------------------
Xxxxxxxx Xxxxx
Title: Managing Director
WILMINGTON TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx, Senior Vice President
---------------------------------------------
Xxxxxx X. Xxxxxxxxx, Senior Vice President
SCHEDULES: A. Operating Procedures
B. Record Keeping Requirements
C Fee Schedule
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SCHEDULE A
OPERATING PROCEDURES
From time to time the Adviser shall issue written Operating Procedures which
shall govern reporting of transactions and other matters so as to facilitate (i)
the monitoring of the Fund's compliance with the restrictions and limitations
applicable to the operations of a registered investment company and (ii) the
preparation of reports to the Board of Trustees, regulatory authorities and
shareholders.
SUBSTANTIVE LIMITATIONS
A. The Sub-Adviser will manage the Portfolio Account as if the Portfolio
Account were a registered investment company subject to the investment
objective, policies and limitations applicable to the Portfolio stated in
the Fund's Prospectus and Statement of Additional Information, as from
time to time in effect, included in the Fund's registration statement or a
supplement thereto under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), as each may be amended from time to
time; provided, however, that if a more stringent restriction or
limitation than any of the foregoing is stated in Section B of this
Schedule, the more stringent restriction or limitation shall apply to the
Portfolio Account.
B. The Sub-Adviser shall not, without the written approval of the Adviser, on
behalf of the Portfolio Account:
1. purchase securities of any issuer if such purchase would cause more
than 3.33 % of the voting securities of such issuer to be held in
the Portfolio Account (1940 Act ss.5(b)(1); IRC*
ss.851(b)(4)(a)(ii));
2. purchase securities if such purchase would cause:
a. more than 1 % of the outstanding voting stock of any other
investment company to be held in the Portfolio Account (1940
Act ss.12(d)(1)(A)(i)),
b. securities issued by any other investment company having an
aggregate value in excess of 5 % of the value of the total
assets in the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(i)),
c. securities issued by all other investment companies having an
aggregate value in excess of 10% of the value of the total
assets of the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(iii)),
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* Internal Revenue Code
A-1
d. more than 3.33% of the outstanding voting stock of any
registered closed-end investment company to be held in the
Portfolio Account, and by any other investment company having
as its investment adviser any of the Sub-Advisers, the
Adviser, or any other investment adviser to the Fund (1940 Act
ss.12(d)(1)(C));
3. purchase securities of any insurance company if such purchase would cause
more than 3.33% of the outstanding voting securities of any insurance
company to be held in the Portfolio Account (1940 Act ss.12(d)(2)); or
4. purchase securities of or any interest in any person who is a broker, a
dealer, is engaged in the business of underwriting, is an investment
adviser to an investment company or is a registered investment adviser
under the Investment Advisers Act of 1940. unless
a. such purchase is of a security of any issuer that, in its most
recent fiscal year, derived 15% or less of its gross revenues from
securities-related activities (1940 Act Rule 12d3-l(a)), or
b. despite the fact that such purchase is of any security of any issuer
that derived more than 15% of its gross revenues from
securities-related activities:
(1) immediately after the purchase of any equity security, the
Portfolio Account would not own more than 5% of outstanding
securities of that class of the issuer's equity securities
(1940 Act Rule 12d3-1(b)(1));
(2) immediately after the purchase of any debt security, the
Portfolio Account would not own more than 10% of the
outstanding principal amount of the issuer's debt securities
(1940 Act Rule 12d3-1(b)(2)); and
(3) immediately after the purchase, not more than 5% of the value
of the Portfolio Account's total assets would be invested in
the issuer's securities (1940 Act Rule 12d3-1(b)(3)).
C. In the event that the number of Sub-Advisers shall vary from three (3),
the percentage limitations of Subsections B1, B2a, B2d, B3, B4b(1) and
B4b(4) of this Schedule shall be adjusted (i) in the case of an increase
in the number of Sub-Advisers, proportionately downward and (ii) in the
case of a decrease of the number of Sub-Advisers, proportionately upward.
The Adviser shall notify the Sub-Adviser of an increase or decrease in the
number of Sub-Advisers and the proportionate decrease or increase in the
percentages specified in the subsections enumerated in the preceding
sentence, but the Adviser's failure to do so shall not affect the
operation of this Section C of this Schedule.
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D. The Sub-Adviser will manage the Portfolio Account so that no more than
10% of the gross income of the Portfolio Account is derived from any
source other than dividends, interest, payments with respect to
securities loans (as defined in IRCss.512(a)(5)), and gains from the
sale or other disposition of stock or securities (as defined in the
1940 Actss.2(a)(36)) or foreign currencies, or other income (including,
but not limited to, gains from options, futures, or forward contracts)
derived with respect to the Portfolio's business of investing in such
stock, securities, or currencies (IRCss.851(b)(2)).
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SCHEDULE B
RECORD KEEPING REQUIREMENTS
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER:
A. (Rule 31a-l(b)(5) and (6)). A record of each brokerage order, and all
other portfolio purchases and sales, given by the Sub-Adviser on behalf of
the Portfolio Account for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
1. the name of the broker;
2. the terms and conditions of the order and of any modification or
cancellation thereof;
3. the time of entry or cancellation;
4. the price at which executed;
5. the time of receipt of a report of execution; and
6. the name of the person who placed the order on behalf of the
Portfolio Account.
B. (Rule 31a-l(b)(9)). A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases (e.g. execution ability, execution and research) upon which the
allocation of orders for the purchase and sale of portfolio securities to
named brokers or dealers was effected, and the division of brokerage
commissions or other compensation on such purchase and sale orders. Such
record:
1. shall include the consideration given to:
a. the sale of shares of the Fund by brokers or dealers;
b. the supplying of services or benefits by brokers or dealers
to:
(1) the Fund,
(2) the Adviser,
(3) the Sub-Adviser, and
(4) any person other than the foregoing; and
B-1
c. any other consideration other than the technical
qualifications of the brokers and dealers as such;
2. shall show the nature of the services or benefits made available;
3. shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation; and
4. shall show the name of the person responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation.
C. (Rule 31a-l(b)(10)). A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is
made by a committee or group, a record shall be kept of the names of
its members who participate in the authorization. There shall be
retained as part of this record: any memorandum, recommendation or
instruction supporting or authorizing the purchase or sale of portfolio
securities and such other information as is appropriate to support the
authorization.*
D. (Rule 31a-1(f)). Such accounts, books and other documents as are required
to be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Sub-Adviser's
transactions with respect to the Portfolio Account.
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* Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation, i.e., buy, sell, hold) or any internal reports or
portfolio adviser reviews.
B-2
SCHEDULE C
FEE SCHEDULE
For the services to be provided to the Portfolio pursuant to the attached
Sub-Advisory Agreement, the Adviser shall pay the Sub-Adviser a monthly fee in
accordance with the following formula:
Monthly Fee = (.50% x net asset value of the Sub-Adviser's Portfolio Account on
the last business day of the month) / 12
Such fee shall be payable in arrears within 15 business days following the end
of each month.
C-1
