1
EXHIBIT 5.4
INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
XXX XXXXXX AMERICAN CAPITAL ASSET MANAGEMENT, INC.
and
XXXX XXXXXX & CO. LIMITED
THIS AGREEMENT is made as of this 16th day of September, 1995 by and between
XXXX XXXXXX & CO. LIMITED ("XXXX XXXXXX") of Xxxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx
Xxxx, Xxxxxx XX0 0XX, Xxxxxxx, and XXX XXXXXX AMERICAN CAPITAL ASSET
MANAGEMENT, INC. ("VKAC") of 0000 Xxxx Xxx Xxxxxxxxx, Xxxxxxx, Xxxxx 00000.
WHEREAS, VKAC has heretofore sponsored and acts as Investment Adviser to Xxx
Xxxxxx American Capital Life Investment Trust (the "Trust") with respect to the
Global Equity Fund (the "Fund"); and
WHEREAS, XXXX XXXXXX has available a staff of experienced investment personnel
and facilities for providing investment sub-advisory services applicable to
that portion of the investment portfolio invested in non-U.S. securities; and
WHEREAS, VKAC represents that it is a non-private investor with regard to the
Investment Management Regulatory Organization Limited ("IMRO") rules.
WHEREAS, XXXX XXXXXX is a member of IMRO, a self-regulating organization
recognized under the Financial Services Xxx 0000 of the United Kingdom and is
willing to provide VKAC with investment advisory services on the terms and
conditions hereinafter set forth; and
WHEREAS, VKAC and XXXX XXXXXX (jointly referred to as "the Advisers") desire to
enter into an agreement for XXXX XXXXXX to provide sub-advisory services to the
Fund and to VKAC with respect to the Fund's non-U.S. investments.
NOW THEREFORE it is mutually agreed:
1. Investment Sub-Advisory Services
1.1 Investment Advice
a) Subject to the overall policies, control, direction and review of the
Fund's Trustees, XXXX XXXXXX shall keep under review the non-U.S. investments
of the Fund and continuously furnish to the Fund and to VKAC (1) investment
advice primarily for investments in securities for which the principal trading
market(s) are in non-U.S. countries; (2) economic, statistical and research
information and advice, including advice on the allocation of investments among
countries, relating only to such portion of the Fund's assets as the Advisers
shall from time to time designate ("Non-U.S. Securities"), generally with
respect to securities issued outside
2
the United States and Canada; (3) recommendations as to the voting of proxies
solicited by or with respect to Non-U.S. Securities; and (4) an investment
program with respect to Non-U.S. Securities and recommendations as to what
securities shall be purchased, sold or exchanged, and what portion, if any, of
the Non-U.S. Securities shall be held in money market instruments.
b) The Advisers are responsible for the allocation of the Fund's assets among
the various securities markets of the world. The Advisers will determine at
least quarterly the percentage of the assets that shall be allocated to each of
the Advisers (the "Asset Allocation"). The Asset Allocation will specify the
percentage and nature of the assets of the Fund allocated to each of the
Advisers for management on the effective date of the determination and will
apply to cash inflows or outflows and income and expense accruals thereafter
until such time as the Asset Allocation is redetermined. Each of the Advisers
will be responsible for the allocation of assets among the securities markets
within the area for which it is responsible. If the Advisers cannot agree on an
Asset Allocation, the Trustees shall make the final determination since the
Trustees retains in all events the control and management of the business and
affairs of the Fund.
c) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Trustees, XXXX XXXXXX shall determine the
Non-U.S. Securities to be purchased and sold by the Fund and shall place
orders for the purchase, sale or exchange of Non-U.S. Securities for the
Fund's accounts with brokers or dealers and to that end XXXX XXXXXX is
authorized by the Trustees to give instructions to the Custodian and any
Sub-Custodian of the Fund as to deliveries of such Non-U.S. Securities,
transfers of currencies and payments of cash for the account of the Fund.
d) In performing these services, XXXX XXXXXX shall adhere to the Fund's
investment objectives, restrictions and limitations as contained in its
Prospectus, Statement of Additional Information, or Agreement and Declaration
of Trust and shall comply with all statutory and regulatory restrictions,
limitations and requirements applicable to the activity of the Fund.
e) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Trustees, XXXX XXXXXX shall have executed
and performed on behalf of and at the expense of the Fund:
i) Purchases, sales, exchanges, conversions, and placement or orders for
execution, and
2
3
ii) Reporting of all transactions to VKAC and to other entities as directed by
VKAC or by the Trustees.
f) XXXX XXXXXX shall provide the Trustees at least quarterly, in advance of
the regular meetings of the Trustees, a report of its activities hereunder on
behalf of the Fund and its proposed strategy for the next quarter, all in such
form and detail as requested by the Trustees. XXXX XXXXXX shall also make an
investment officer available to attend such meetings of the Trustees as the
Trustees may reasonably request.
1.2 Restriction of XXXX XXXXXX'x Powers
(a) XXXX XXXXXX shall not commit the Fund to any extent beyond the amount of
the cash and securities placed by the Fund under the control of the XXXX
XXXXXX.
(b) In carrying out its duties hereunder XXXX XXXXXX shall comply with all
reasonable instruction of the Fund or VKAC in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Trustees or by any other person authorized by a resolution of the
Trustees provided a certified copy of such resolution has been supplied to XXXX
XXXXXX.
(c) All securities, cash, and other assets of the Fund shall be placed and
maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Trustees as custodian and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the Investment Company Act
of 1940 (the "1940 Act")) approved by the Trustees as sub-custodians.
(d) Persons authorized by resolution of the Trustees shall have the right to
inspect and copy contracts, notes, vouchers, and copies of entries in books or
electronic recording media relating to the Fund's transactions at the
registered office of XXXX XXXXXX at any time during normal business hours. Such
records, in relation to each transaction effected by XXXX XXXXXX on behalf of
the Fund shall be maintained by XXXX XXXXXX for a period of seven years from
the date of such transaction.
1.3 Purchase and Sale of Securities
In performing the services described above, XXXX XXXXXX shall use its best
efforts to obtain for the Fund the most favorable price and execution
available. Subject to prior authorization of appropriate policies and
procedures by the Trustees, XXXX XXXXXX may, to the extent authorized by law,
cause the Fund to pay a broker or dealer who provides brokerage and research
services an amount of commission for effecting the Fund's investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, in
3
4
recognition of the brokerage and research services provided by the broker or
dealer. To the extent authorized by law, XXXX XXXXXX shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of such action.
1.4 Custodian
XXXX XXXXXX shall not act as Custodian for the securities or any other assets
of the Fund. All such assets shall be held by the Custodian or Sub-Custodian
appointed by the Trustees.
2. Duties of VKAC
2.1 Provision of Information
VKAC shall advise XXXX XXXXXX from time to time with respect to the Fund of its
investment objectives and of any changes or modifications thereto, as well as
any specific investment restrictions or limitations by sending to XXXX XXXXXX a
copy of each registration statement relating to the Fund as filed with the
Securities and Exchange Commission. As requested by XXXX XXXXXX, VKAC shall
furnish such information to XXXX XXXXXX as to holdings, purchases, and sales of
the securities under its management as will reasonably enable XXXX XXXXXX to
furnish its investment advice under this Agreement.
2.2 Compensation to XXXX XXXXXX
The fee for the services provided under this Agreement will be determined as
follows:
(a) An amount for each month (or such other valuation period as may be
mutually agreed upon) equivalent, on an annual basis, to 50% of the
compensation actually received by VKAC pursuant to the investment advisory fee
schedule set forth in the Investment Advisory Agreement between the Fund and
VKAC taking into account any waiver or return to the Fund of any or all of such
advisory fee by VKAC (with any such return of fees to be treated as if not
actually received). The value of the assets of the Fund shall be computed as of
the close of business on the last day of each valuation period for the Fund,
using the average of all the daily determinations of the net value of the
assets of the Fund.
(b) The foregoing fee shall be paid in cash by VKAC to XXXX XXXXXX within five
(5) business days after the last day of the valuation period.
3. Miscellaneous
3.1 Activities of XXXX XXXXXX
4
5
The services of XXXX XXXXXX as Sub-Adviser to VKAC under this Agreement are not
to be deemed exclusive, XXXX XXXXXX and its affiliates being free to render
services to others. It is understood that shareholders, directors, officers and
employees of XXXX XXXXXX may become interested in the Fund or VKAC as a
shareholder, trustee, officer, partner or otherwise.
3.2 Services to Other Clients
VKAC acknowledges that XXXX XXXXXX may have investment responsibilities, or
render investment advice to, or perform other investment advisory services for,
other individuals or entities, ("Clients"). Subject to the provisions of this
paragraph, VKAC agrees that XXXX XXXXXX may give advice or exercise investment
responsibility and take such other action with respect to such Clients which
may differ from advice given or the timing or nature of action taken with
respect to the Fund, provided that XXXX XXXXXX acts in good faith, and
provided, further, that it is XXXX XXXXXX policy to allocate, within its
reasonable discretion, investment opportunities to the Fund over a period of
time on a fair and equitable basis relative to the Clients, taking into account
the investment objectives and policies of the Fund and any specific investment
restrictions applicable thereto. VKAC acknowledges that one or more of the
Clients may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Fund may have an
interest from time to time, whether in transactions which may involve the Fund
or otherwise. XXXX XXXXXX shall have no obligation to acquire for the Fund a
position in any investment which any Client may acquire, and VKAC shall have no
first refusal, coinvestment or other rights in respect of any such investment,
either for the Fund or otherwise.
3.3 Best Efforts
It is understood and agreed that in furnishing the investment advice and other
services as herein provided, XXXX XXXXXX shall use its best professional
judgment to recommend actions which will provide favorable results for the
Fund. XXXX XXXXXX shall not be liable to the Fund or to any shareholder of the
Fund to any greater degree than VKAC.
3.4 Indemnity for Taxes
a) Notwithstanding any other provision of this Agreement, VKAC shall indemnify
and save XXXX XXXXXX and each of its affiliates, officers, directors and
employees (each an "Indemnified Party") harmless from, against, for and in
respect of all taxes imposed by the United Kingdom on VKAC or the Fund, in
relation to the matters contemplated by this Agreement in the event that any
such tax is assessed or charged on an Indemnified Party as a branch or agent of
VKAC or the Fund.
5
6
b) VKAC will not be liable under this indemnification provision with respect
to any liabilities incurred by reason of an Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Fund.
c) VKAC will not be liable under this indemnification provision with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified VKAC in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated agent). In
case any such action is brought against the Indemnified Parties, VKAC will be
entitled to participate, at its own expense, in the defense thereof. VKAC also
will be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from VKAC to such party of VKAC's
election to assume the defense thereof, the Indemnified Party will bear the
fees and expenses of any additional counsel retained by it, and VKAC will not
be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof.
3.5 Duration of Agreement
a) This Agreement, unless terminated pursuant to paragraph b or c below, shall
have an initial term of two years, and thereafter shall continue in effect from
year to year, provided its continued applicability is specifically approved at
least annually by the Trustees or by a vote of the holders of a majority of the
outstanding shares of the Fund. In addition, such continuation shall be
approved by vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. As used in this paragraph,
the term "interested person" shall have the same meaning as set forth in the
1940 Act.
b) This Agreement may be terminated by sixty (60) days' written notice by
either VKAC or XXXX XXXXXX to the other party. The Agreement may also be
terminated at any time, without the payment of any penalty, by the Fund (by
vote of the Trustees or, by the vote of a majority of the outstanding voting
securities of such Fund), on sixty (60) days' written notice to both VKAC and
XXXX XXXXXX. This Agreement shall automatically terminate in the event of the
termination of the investment advisory agreement between VKAC and the Fund.
c) This Agreement shall terminate in the event of its assignment. The term
"assignment" for this purpose shall have the same meaning
6
7
set forth in Section 2(a)(4) of the 0000 Xxx.
d) Termination shall be without prejudice to the completion of any
transactions which XXXX XXXXXX shall have committed to on behalf of the Fund
prior to the time of termination. XXXX XXXXXX shall not effect and the Fund
shall not be entitled to instruct XXXX XXXXXX to effect any further
transactions on behalf of the Fund subsequent to the time termination takes
effect.
e) This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
i) if VKAC or XXXX XXXXXX shall go into liquidation (except a voluntary
liquidation for the purpose of and followed by a bona fide reconstruction or
amalgamation upon terms previously approved in writing by the party not in
liquidation) or if a receiver or receiver and manager of any of the assets of
any of them is appointed; or
ii) if either of the parties hereto shall commit any breach of the provisions
hereof and shall not have remedied such breach within 30 days after the service
of notice by the party not in breach on the other requiring the same to be
remedied.
f) On the termination of this Agreement and completion of all matters referred
to in the foregoing paragraph (d) XXXX XXXXXX shall deliver or cause to be
delivered to the Fund copies of all documents, records and books of the Fund
required to be maintained pursuant to Rules 31a-1 or 31a-2 of the 1940 Act
which are in XXXX XXXXXX'x possession, power or control and which are valid and
in force at the date of termination.
3.6 Notices
Any notice, request, instruction, or other document to be given under this
Agreement by any party hereto to the other parties shall be in writing and
delivered personally or sent by mail or telecopy (with a hard copy to follow),
If to XXXX XXXXXX, to:
Xxxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx Xxxx
Xxxxxx XX0 0XX
Xxxxxxx
attn: The Xxx. Xxxxx Xxxxxxxx
7
8
with a copy to:
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
telecopy: (000) 000-0000
attn: Xxxxxxx X. Xxxxx
and a copy to:
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
telecopy: (000) 000-0000
attn: Xxxxxx X. Xxxxxxx, Esq.
and a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
telecopy: (000) 000-0000
attn: Xxxxxxxx X. Xxxxxxx, Esq.
If to VKAC, to:
0000 Xxxx Xxx Xxxx.
Xxxxxxx, XX 00000
telecopy: (000) 000-0000
attn: Xxx Xxxxxx
with a copy to:
0000 Xxxx Xxx Xxxx.
Xxxxxxx, XX 00000
telecopy: (000) 000-0000
attn: Xxxx X. Xxxxxx, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be presumed to have
been duly given to the party to which it is addressed, on the date three (3)
days after mailing, and in the case of delivery by telecopy, on the date the
hard copy is received.
8
9
3.7 IMRO Rules
As a member of IMRO and in light of IMRO Rules, the Sub-Adviser places on
record that it regards this Agreement as not necessitating any ancillary
agreement with the Fund or VKAC on the grounds that, within meanings of the
IMRO Rules (a) the Fund is an open-ended investment company and a business
investor, (b) VKAC is a professional investor and (c) the subject matter of
this Agreement is a scheme management activity.
3.8 Choice of Law
This Agreement shall be construed according to, and the rights and liabilities
of the parties hereto shall be governed by, the laws of the United States and
the State of California.
3.9 Miscellaneous Provisions
The execution of this Agreement has been authorized by the Trust's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Trust or
the Trustees of the Trust as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Trust individually but are binding only upon
the assets and property of the Trust. A Certificate of Trust in respect of the
Trust is on file with the Secretary of State of Delaware.
IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.
XXXX XXXXXX & CO. LIMITED
By: /s/ XXXXX X. X. XXXXXXXX
_____________________________________
Name: Xxxxx X. X. Xxxxxxxx
___________________________________
Its: Chief Executive
___________________________________
XXX XXXXXX AMERICAN CAPITAL ASSET MANAGEMENT, INC.
/s/ XXXX X. XXXXXX
By: ____________________________________
Name: Xxxx X. Xxxxxx
___________________________________
Its: Vice President
___________________________________
9
