SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 31st day of May, 1997 by and between Xxxx Xxxxxx
InterCapital Inc., a Delaware corporation (herein referred to as the "Investment
Manager"), and Xxxxxx Xxxxxxxx Investment Services Limited, a British
corporation (herein referred to as the "Sub-Adviser").
WHEREAS, Xxxx Xxxxxx International SmallCap Fund (herein referred to as the
"Fund") is engaged in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Investment Manager has entered into an Investment Management
Agreement with the Fund (the "Investment Management Agreement") wherein the
Investment Manager has agreed to provide investment management services to the
Fund; and
WHEREAS, the Sub-Adviser is registered as an investment adviser as under the
Investment Advisers Act of 1940 and is a member of the Investment Management
Regulatory Organization (IMRO), and, as such, is regulated by IMRO in the
conduct of its investment business in the U.K., and engages in the business of
acting as an investment adviser; and
WHEREAS, the Investment Manager desires to retain the services of the
Sub-Adviser to render investment advisery services for the Fund in the manner
and on the terms and conditions hereinafter set forth; and
WHEREAS, the Sub-Adviser desires to be retained by the Investment Manager to
perform services on said terms and conditions:
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Subject to the supervision of the Fund, its officers and Trustees,
and the Investment Manager, and in accordance with the investment objectives,
policies and restrictions set forth in the then-current Registration
Statement relating to the Fund, and such investment objectives, policies and
restrictions from time to time prescribed by the Trustees of the Fund and
communicated by the Investment Manager to the Sub-Adviser, the Sub-Adviser
agrees to provide the Fund with investment advisery services with respect to
the Fund's investments to obtain and evaluate such information and advice
relating to the economy, securities markets and securities as it deems
necessary or useful to discharge its duties hereunder; to continuously manage
the assets of the Fund in a manner consistent with the investment objective
and policies of the Fund; to make decisions as to foreign currency matters
and make determinations as to forward foreign exchange contracts and options
and futures contracts in foreign currencies; shall determine the securities
to be purchased, sold or otherwise disposed of by the Fund and the timing of
such purchases, sales and dispositions; to take such further action,
including the placing of purchase and sale orders on behalf of the Fund, as
it shall deem necessary or appropriate; to furnish to or place at the
disposal of the Fund and the Investment Manager such of the information,
evaluations, analyses and opinions formulated or obtained by it in the
discharge of its duties as the Fund and the Investment Manager may, from time
to time, reasonably request. The Investment Manager and the Sub-Adviser shall
each make its officers and employees available to the other from time to time
at reasonable times to review investment policies of the Fund and to consult
with each other.
2. The Sub-Adviser shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Sub-Adviser shall
be deemed to include persons employed or otherwise retained by the
Sub-Adviser to furnish statistical and other factual data, advice regarding
economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Investment Manager may desire. The Sub-Adviser shall maintain whatever
records as may be required to be maintained by it under the Act. All such
records so maintained shall be made available to the Fund, upon the request
of the Investment Manager or the Fund.
3. The Fund will, from time to time, furnish or otherwise make
available to the Sub-Adviser such financial reports, proxy statements and
other information relating to the business and affairs of the Fund as the
Sub-Adviser may reasonably require in order to discharge its duties and
obligations hereunder or to comply with any applicable law and regulations
and the investment objectives, policies and restrictions from time to time
prescribed by the Trustees of the Fund.
4. The Sub-Adviser shall bear the cost of rendering the investment
advisery services to be performed by it under this Agreement, and shall, at
its own expense, pay the compensation of the officers and employees, if any,
of the Fund, employed by the Sub-Adviser, and such clerical help and
bookkeeping services as the Sub-Adviser shall reasonably require in
performing its duties hereunder.
5. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: any fees paid to the
Investment Manager; fees pursuant to any plan of distribution that the Fund
may adopt; the charges and expenses of any registrar, any custodian,
sub-custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock transfer or
dividend 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 or pursuant to any foreign laws; the cost and expense
of engraving or printing 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 Securities and Exchange
Commission and various states and other jurisdictions or pursuant to any
foreign laws (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing (including typesetting) and
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisery board or
committee who are not employees of the Investment Manager or Sub-Adviser; 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 Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund, the Investment Manager or the
Sub-Adviser, and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Trustees) 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.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Sub-Adviser, the Investment Manager shall pay to the
Sub-Adviser monthly compensation equal to 40% of its monthly compensation
receivable pursuant to the Investment Management Agreement. Any subsequent
change in the Investment Management Agreement which has the effect of raising
or lowering the compensation of the Investment Manager will have the
concomitant effect of raising or lowering the fee payable to the Sub-Adviser
under this Agreement. In addition, if the Investment Manager has undertaken
in the Fund's Registration Statement as filed under the Act (the
"Registration Statement") or elsewhere to waive all or part of its fee under
the Investment Management Agreement, the Sub-Adviser's fee payable under this
Agreement will be proportionately waived in whole or in part. The calculation
of the fee payable to the Sub-Adviser pursuant to this Agreement will be
made, each month, at the time designated for the monthly calculation of the
fee payable to the Investment Manager pursuant to the Investment Management
Agreement. 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
the part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fee as set forth above. Subject
to the provisions of paragraph 7 hereof, payment of the Sub-Adviser's
compensation for the preceding month shall be made as promptly as possible
after completion of the computations contemplated by paragraph 7 hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to the Investment Management
Agreement, for any fiscal year ending on a date on which
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this Agreement is in effect, exceed the expense limitations applicable to the
Fund imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Sub-Adviser shall
reduce its advisery fee to the extent of 40% of such excess and, if required,
pursuant to any such laws or regulations, will reimburse the Investment Manager
for annual operating expenses in the amount of 40% of such excess of any expense
limitation that may be applicable, it being understood that the Investment
Manager has agreed to effect a reduction and reimbursement of 100% of such
excess in accordance with the terms of the Investment Management Agreement;
provided, however, there shall be excluded from such expenses the amount of any
interest, taxes, brokerage commissions, distribution fees and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by the
Fund. Such reduction, if any, shall be computed and accrued daily, shall be
settled on a monthly basis, and shall be based upon the expense limitation
applicable to the Fund as at the end of the last business day of the month.
Should two or more such expense limitations be applicable as at the end of the
last business day of the month, that expense limitation which results in the
largest reduction in the Investment Manager's fee or the largest expense
reimbursement shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities in the Fund's portfolio, the record dates for which fall on
or prior to the last day of such fiscal year, but shall not include gains from
the sale of securities.
8. The Sub-Adviser will use its best efforts in the performance of
investment activities on behalf of the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Sub-Adviser shall not be liable to the Investment
Manager or the Fund or any of its investors for any error of judgment or
mistake of law or for any act or omission by the Sub-Adviser or for any
losses sustained by the Fund or its investors.
9. It is understood that any of the shareholders, Trustees, officers
and employees of the Fund may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the
Sub-Adviser and any person controlled by or under common control with the
Sub-Adviser may have an interest in the Fund. It is also understood that the
Sub-Adviser and any affiliated persons thereof or any persons controlled by
or under common control with the Sub-Adviser have and may have advisery,
management service or other contracts with other organizations and persons,
and may have other interests and businesses, and further may purchase, sell
or trade any securities or commodities for their own accounts or for the
account of others for whom they may be acting; PROVIDED, HOWEVER, that
neither the Sub-Adviser nor any of its affiliates organized with a corporate
name or other name under which it is performing its business activities which
contains the names "Xxxxxx Xxxxxxxx" shall undertake to act as investment
adviser or sub-adviser for any other U.S. registered investment company sold
primarily to retail investors, whose investment policy is to invest primarily
in securities issued by "international smallcap" companies, as that term is
described in the Registration Statement and which is sponsored, distributed
or managed by a U.S. registered broker-dealer or one of its affiliates.
10. This Agreement shall remain in effect until April 30, 1999 and
from year to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority, as defined in the Act, of the
outstanding voting securities of the Fund or by the Trustees of the Fund;
provided, that in either event such continuance is also approved annually by
the vote of a majority of the Trustees of the Fund who are not parties to
this Agreement or "interested persons" (as defined in the Act) of any such
party, which vote must be cast in person at a meeting called for the purpose
of voting on such approval; provided, however, that (a) the Fund may, at any
time and without the payment of any penalty, terminate this Agreement upon
thirty days' written notice to the Investment Manager and the Sub-Adviser,
either by majority vote of the Trustees of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund; (b) this Agreement
shall immediately terminate in the event of its assignment (within the
meaning of the Act) unless such automatic termination shall be prevented by
an exemptive order of the Securities and Exchange Commission; (c) this
Agreement shall immediately terminate in the event of the termination of
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the Investment Management Agreement; (d) the Investment Manager may terminate
this Agreement without payment of penalty on thirty days' written notice to the
Fund and the Sub-Adviser and; (e) the Sub-Adviser may terminate this Agreement
without the payment of penalty on thirty days' written notice to the Fund and
the Investment Manager. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed post-paid, to the other party at the
principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund,
the Investment Manager nor the Sub-Adviser shall be liable for failing to do
so.
12. This Agreement shall be construed in accordance with the law of
the State of New York and the applicable provisions of the Act. To the extent
the applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
XXXX XXXXXX INTERCAPITAL INC.
By: ..................................
Attest: ..............................
XXXXXX XXXXXXXX INVESTMENT
SERVICES LIMITED
By: ..................................
Attest: ..............................
Accepted and agreed to as of
the day and year first above written:
XXXX XXXXXX INTERNATIONAL
SMALLCAP FUND
By: ..................................
Attest: ..............................
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