FLAG INVESTORS EQUITY PARTNERS FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 4th day of
June, 1999 by and between FLAG INVESTORS EQUITY PARTNERS FUND, INC., a
Maryland corporation (the "Fund"), and INVESTMENT COMPANY CAPITAL CORP., a
Maryland corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under
the Investment Advisers Act of 1940, as amended, and engages in the business
of acting as an investment advisor; and
WHEREAS, the Fund and the Advisor desire to enter into an agreement
to provide investment advisory and administrative services for 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 INVESTMENT ADVISOR. The Fund hereby appoints the
Advisor to act as the Fund's investment advisor. The Advisor shall manage the
Fund's affairs and shall supervise all aspects of the Fund's operations
(except as otherwise set forth herein), including the investment and
reinvestment of the cash, securities or other properties comprising the
Fund's assets, subject at all times to the policies and control of the Fund's
Board of Directors. The Advisor shall give the Fund the benefit of its best
judgment, efforts and facilities in rendering its services as Advisor.
2. DELIVERY OF DOCUMENTS. The Fund has furnished the Advisor with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, filed with the State
of Maryland on November 29, 1994 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 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 November 30, 1994;
(e) The Fund's Registration Statement on Form N-1 under
the Securities Act of 1933, as amended (the "1933 Act") (File No.
2-87336) and under the 1940 Act as filed with the SEC on November
30, 1994 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 "Prospectus").
The Fund will furnish the 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.
3. DUTIES OF INVESTMENT ADVISOR. In carrying out its obligations under
Section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Fund's operations,
except for distribution services;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment
objective and policies of the Fund;
(c) provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of
Directors;
(d) provide the Fund with, or obtain for it, adequate office
space and all necessary office equipment and services, including
telephone service, utilities, stationery, supplies and similar items
for the Fund's principal office;
(e) 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;
(f) determine which issuers and securities shall be represented
in the Fund's portfolio and regularly report thereon to the Fund's
Board of Directors;
(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs;
(h) supervise the operations of the Fund's transfer and
dividend disbursing agent;
(i) provide the Fund with such administrative and clerical
services for the maintenance of certain shareholder records, as are
deemed advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns,
reports to the Fund's shareholders and reports to and filings with the
SEC and state Blue Sky authorities.
4. BROKER-DEALER RELATIONSHIPS. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Fund,
broker-dealer selection, and negotiation of its brokerage commission rates,
the Advisor's primary consideration in effecting a securities transactions
will be to obtain the best price and execution on an overall basis. In
performing this function the 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 certain instances the
Advisor may make purchases of underwritten issues at prices which include
underwriting fees. In selecting a broker-dealer to execute each particular
transaction, the 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 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 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 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 Advisor's overall
responsibilities with respect to the Fund. The 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 Advisor. Such allocation shall be in such amounts
and proportions as the Advisor shall determine and the Advisor will report on
said allocation regularly to the Board of Directors of the Fund, indicating
the broker-dealers 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 determine,
the 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 Advisor may direct DB Alex. Xxxxx LLC
("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 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 Advisor. DB Alex. Xxxxx and the 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 Advisor or DB Alex. Xxxxx in any
transaction in which the 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 BOARD OF DIRECTORS. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as
any other activities undertaken by the Advisor on behalf of the Fund pursuant
thereto, 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 Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(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
between the Fund and the Advisor as follows:
(a) The 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 Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation:
payments to the Fund's distributor under the Fund's plan of
distribution; the charges and expenses of any registrar, any
custodian or 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 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 independent certified public
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 and 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. DELEGATION OF RESPONSIBILITIES.
(a) Subject to the approval of the Board of Directors
including a majority of the Fund's Directors who are not
"interested persons" (as defined by the 0000 Xxx) of the Fund and
shareholders of the Fund, the Advisor may delegate to a
sub-advisor certain of its duties enumerated in Section 3 hereof.
The Advisor shall continue to supervise the performance of any
such sub-advisor and shall report regularly thereon to the Fund's
Board of Directors, but shall not be responsible for the
sub-advisor's performance under a sub-advisory agreement.
(b) The 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
Advisor's charge in rendering such services may be billed monthly
to the Fund, subject to examination by the Fund's independent
certified public accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to
pay or assume under this Agreement shall not relieve the Advisor
of any of its obligations to the Fund nor obligate the Advisor to
pay or assume any similar Fund expenses on any subsequent
occasions.
9. COMPENSATION. For the services to be rendered and the expenses
assumed by the Advisor, the Fund shall pay to the Advisor monthly
compensation at an annual rate of 1.00% of the first $50 million of the
Fund's average net daily assets, 0.85% of the next $50 million of the Fund's
average daily net assets, 0.80% of the next $100 million of the Fund's
average daily net assets and 0.70% of the Fund's average daily net assets
exceeding $200 million.
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 Advisor's compensation for the preceding month shall be
made as promptly as possible.
10. NON-EXCLUSIVITY. The services of the Advisor to the Fund are not
to be deemed to be exclusive, and the 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 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 Advisor to the extent permitted by law; and that the
officers and directors of the 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.
11. TERM AND RENEWAL. This Agreement shall become effective as of
the date hereof and shall continue in force and effect, subject to Section 12
hereof, for two years from the date hereof. 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 the 1940 Act); and
(b) by the affirmative vote of a majority of the Directors
who are not parties to this Agreement or "interested persons" (as
defined in the 0000 Xxx) 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, without the
payment of any penalty, by the Fund upon a vote of the Fund's Board of
Directors or a vote of a majority of the Fund's outstanding voting securities
(as defined in the 0000 Xxx) or by the Advisor, upon sixty (60) days' written
notice to the other party. The notice provided for herein may be waived by
either party. This Agreement shall automatically terminate in the event of
its assignment (as defined in the 1940 Act).
13. LIABILITY OF ADVISOR. In the performance of its duties
hereunder, the 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
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 Advisor
or its officers, directors or employees, or reckless disregard by the Advisor
of its duties under this Agreement.
14. 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
Fund and the Advisor for this purpose shall be Xxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000.
15. QUESTIONS OF 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 the 1940 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.
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.
[SEAL] FLAG INVESTORS EQUITY PARTNERS FUND, INC.
Attest: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxxx Name: Xxxxx Xxxxx
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Title: President
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[SEAL] INVESTMENT COMPANY CAPITAL CORP.
Attest: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxxxx
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Title: Exeutive Vice President
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