GE INVESTMENTS FUNDS, INC.
SMALL-CAP VALUE EQUITY FUND
SUB-ADVISORY AGREEMENT
This agreement ("Agreement") is made as of March 16, 2000, between GE
ASSET MANAGEMENT INCORPORATED ("GEAM"), a Delaware corporation, GE INVESTMENTS
FUNDS, INC., a Virginia corporation ("Company"), on behalf of the SMALL-CAP
VALUE EQUITY FUND ("Fund"), a series of the Company, solely with respect to
Section 6(b) of this Agreement, and PALISADE CAPITAL MANAGEMENT, L.L.C., a New
Jersey limited liability company ("Sub-Adviser").
RECITALS
GEAM has entered into an Investment Advisory and Administration
Agreement dated March 16, 2000 ("Advisory Agreement") with the Company, an
open-end management investment company registered under the Investment Company
Act of 1940, as amended ("1940 Act"), with respect to the Fund, a series of the
Company;
Pursuant to Section 1 of the Advisory Agreement, GEAM is authorized to
delegate its investment advisory responsibilities to other investment advisers,
subject to the requirements of the 1940 Act;
GEAM wishes to retain the Sub-Adviser to furnish certain investment
advisory services to GEAM and the Fund, and the Sub-Adviser is willing to
furnish those services; and
GEAM intends that this Agreement will become effective when approved in
accordance with Section 15 of the 1940 Act;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. APPOINTMENT. GEAM hereby appoints the Sub-Adviser as an investment
sub-adviser with respect to the Fund's assets for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts that appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the oversight and supervision of GEAM and the Board of
Directors of the Company ("Board"), the Sub-Adviser will provide a continuous
investment program for the Fund's assets, including investment research and
management. The Sub-Adviser will determine from time to time what investments
will be purchased, retained or sold by the Fund. The Sub-Adviser will be
responsible for placing purchase and sell orders for Fund investments.
The Sub-Adviser will consult with GEAM from time to time regarding matters
pertaining to the Fund, including market strategy and portfolio
characteristics. The Sub-Adviser will provide services under this Agreement
in accordance with the Fund's investment objective, policies and restrictions
as stated in the Company's current Registration Statement on Form N-1A and
any amendments or supplements thereto ("Registration Statement") and the
Company's Certificate of Incorporation and By-Laws, if any, ("Constituent
Documents"). In this connection and in connection with the further duties set
forth in paragraphs 2(b)-(k) below, the Sub-Adviser shall provide GEAM and
the Board with such periodic reports and documentation as GEAM or the Board
shall reasonably request regarding the Sub-Adviser's management of the Fund's
assets, compliance with applicable laws and rules and the Registration
Statement and all requirements hereunder.
(b) The Sub-Adviser shall carry out its responsibilities under this
Agreement in compliance with: (1) the Fund's investment objective, policies and
restrictions as set forth in the Registration Statement, (2) the Constituent
Documents, (3) all investment guidelines, policies, procedures or directives of
the Company or GEAM provided to the Sub-Adviser, (4) the 1940 Act and the rules
promulgated thereunder, and (5) other applicable federal and state laws and
related regulations. In particular, in carrying out its duties as Sub-Adviser,
Sub-Adviser shall, to the extent within its control, make every effort to ensure
that the Fund continuously qualifies as a regulated investment company under
sub-chapter M of the Internal Revenue Code of 1986, as amended ("Code") and the
regulations promulgated thereunder. GEAM shall promptly notify the Sub-Adviser
of changes to (1), (2) or (3) above and shall consult with Sub-Adviser before
making any changes relating solely to the Fund's investment objective, policies
and restrictions as set forth in the Registration Statement.
(c) The Sub-Adviser shall take all actions which it considers necessary
to implement the investment objectives and policies of the Fund, and in
particular, to place all orders for the purchase or sale of securities or other
investments for the Fund with brokers or dealers selected by it, and to that
end, the Sub-Adviser is authorized as the agent of the Company to give
instructions to the Company's custodian(s) as to deliveries of securities or
other investments and payments of cash for the account of the Fund. In
connection with the selection of brokers or dealers and the placing of purchase
and sale orders with respect to investments of the Fund, the Sub-Adviser is
directed at all times to seek to obtain best execution and price within the
policy guidelines determined by the Board.
In addition to seeking the best price and execution, to the extent
covered by Section 28(e) of the Securities Exchange Act of 1934, as amended
("1934 Act"), the Sub-Adviser is also authorized to take into consideration
research and statistical information and wire and other quotation services
provided by brokers and dealers to the Sub-Adviser. The Sub-Adviser is also
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if it determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund. The policies with respect to
brokerage allocation, determined from time to time by the Board, are disclosed
in the Registration
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Statement. The Sub-Adviser will periodically evaluate the statistical data,
research and other investment services provided to it by brokers and dealers.
Such services may be used by the Sub-Adviser in connection with the
performance of its obligations under this Agreement or in connection with
other advisory or investment operations, including using such information in
managing its own accounts. The Sub-Adviser is also authorized to use
soft-dollar services as requested by the Board from time to time. Whenever
the Sub-Adviser simultaneously places orders to purchase or sell the same
security on behalf of the Fund and one or more other accounts advised by the
Sub-Adviser, the orders will be allocated as to price and amount among all
such accounts in a manner believed to be equitable by the Sub-Adviser to each
account.
(d) Subject to: (1) the requirement that the Sub-Adviser seek to obtain
best execution and price within the policy guidelines determined by the Board
and set forth in the Registration Statement, (2) the provisions of the 1940 Act
and the Investment Advisers Act of 1940, as amended ("Advisers Act"), (3) the
provisions of the 1934 Act, and (4) other applicable provisions of law, the
Sub-Adviser or an affiliated person of the Sub-Adviser or of GEAM may act as
broker for the Fund in connection with the purchase or sale of securities or
other investments for the Fund. Such brokerage services are not within the scope
of the duties of the Sub-Adviser under this Agreement. Subject to the
requirements of applicable law and any procedures adopted by the Board, the
Sub-Adviser or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Fund or the Company for such services in addition to
the Sub-Adviser's fees for services under this Agreement.
(e) The Sub-Adviser will maintain all books and records required to be
maintained by the Company pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions on behalf of the Fund, and
will furnish the Board and GEAM with such periodic and special reports as the
Board or GEAM reasonably may request. The Sub-Adviser shall permit the books and
records maintained with respect to the Fund to be inspected and audited by the
Company, GEAM or their respective agents at all reasonable times during normal
business hours upon reasonable notice. In compliance with the requirements of
Rule 3la-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records
which it maintains for the Fund are the property of the Company, agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any records
which it maintains for the Company and which are required to be maintained by
Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly to the
Company any records which it maintains for the Company upon request by the
Company.
(f) At such times as shall reasonably be requested, the Sub-Adviser
will provide to the Board and GEAM economic and investment analyses and reports,
information required in the Registration Statement and information necessary for
GEAM and the Board to review the Fund or discuss the management of it. The
Sub-Adviser will provide quarterly reports setting forth the Fund's performance
and the Sub-Adviser's private account composite performance and will complete on
a quarterly basis the checklist provided to it by GEAM regarding the Fund's
investments and transactions. The Sub-Adviser shall make available to the Board
and GEAM any economic, statistical and investment services normally available to
institutional or other customers of the Sub-Adviser. The Sub-Adviser will make
available its officers and employees to meet with the Board on reasonable notice
to review the Fund's investments.
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(g) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting the Board in
determining the fair valuation of any illiquid portfolio securities and will
assist the Company's accounting services agent or GEAM to obtain independent
sources of market value for all other portfolio securities.
(h) At such times as shall be reasonably requested by GEAM, the
Sub-Adviser shall review and certify in writing that the information stated in
the Company's Registration Statement relating to the Sub-Adviser, its management
of the Fund, including investment objectives, strategies and related risks, and
its performance history is true, correct and complete to the best of its
knowledge.
(i) The Sub-Adviser will promptly notify GEAM of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders or members, as applicable, and any changes in the key personnel of
the Sub-Adviser, including without limitation portfolio management personnel
responsible for the Fund's assets, in each case prior to or promptly after such
change. Notwithstanding the foregoing, the Sub-Adviser will promptly notify GEAM
of any existing agreement, or upon entering into any agreement, that may result
in a change of control of the Sub-Adviser, including without limitation the
retention of an agent to assist in the sale of all, or a significant portion, of
the business of the Sub-Adviser.
(j) The Sub-Adviser will calculate its private account composite
performance in compliance with the Performance Presentation Standards of the
Association for Investment Management Research and such performance will be
reviewed at least annually by an independent accounting firm.
(k) Within fifteen days of the end of the last calendar quarter of each
year that this Agreement is in effect, the president or a vice president of the
Sub-Adviser shall certify to GEAM that the Sub-Adviser has complied with the
requirements of Rule 17j-1 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 GEAM, the Sub-Adviser shall permit GEAM, its employees or
its agents to examine the reports required to be made to the Sub-Adviser by Rule
17j-1(c)(1) and all other records relevant to the Sub-Adviser's code of ethics.
3. EXPENSES. During the term of this Agreement, the Sub-Adviser will
bear all expenses incurred by it in connection with its investment sub-advisory
services under this Agreement.
4. COMPENSATION.
For the services rendered, the facilities furnished and the expenses
assumed by the Sub-Adviser, the Adviser shall pay the Sub-Adviser no later than
the twentieth (20th) business day following the end of each calendar month a fee
based on the average daily net assets of the Fund at the following annual rates:
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.450% of the first $25,000,000; .400% of the next $50,000,000; and
.375% of the next $100,000,000 and .350% of amounts in excess of $175,000,000.
The Sub-Adviser's fee shall be paid by GEAM out of GEAM's advisory fee
to the extent such fee is received by GEAM pursuant to the Advisory Agreement.
To the extent that GEAM determines to waive, or to reimburse the Fund for, all
or a portion of its advisory fee, the Sub-Adviser agrees to a reduction of its
fee pro-rata.
The Sub-Adviser's fee shall be accrued daily at 1/365th of the
applicable annual rate set forth above. For the purpose of accruing
compensation, the net assets of the Fund shall be determined in the manner and
on the dates set forth in the current prospectus of the Company, and, on dates
on which the net assets are not so determined, the net asset value computation
to be used shall be as determined on the next day on which the net assets shall
have been determined. In the event of termination of this Agreement, all
compensation due through the date of termination will be calculated on a
pro-rated basis through the date of termination and paid within thirty (30)
business days of the date of termination.
During any period when the determination of net asset value is
suspended, the net asset value of the Fund as of the last business day prior to
such suspension shall for this purpose be deemed to be the net asset value at
the close of each succeeding business day until it is again determined.
5. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable to the
Company or GEAM for any loss resulting from the Sub-Adviser's acts or omissions
as Sub-Adviser to the Fund, except to the extent any such losses result from bad
faith, willful misfeasance, reckless disregard or gross negligence on the part
of the Sub-Adviser or any of its directors, officers or employees in the
performance of the Sub-Adviser's duties and obligations under this Agreement.
6. INDEMNIFICATION.
(a) GEAM agrees to indemnify and hold the Sub-Adviser, its officers and
directors, and any person who controls the Sub-Adviser within the meaning of
Section 15 of the Securities Act of 1933, as amended ("1933 Act") harmless from
any and all direct or indirect liabilities, losses or damages (including
reasonable attorneys' fees) suffered by Sub-Adviser resulting from (i) GEAM's
breach of its duties under the Advisory Agreement or (ii) bad faith, willful
misfeasance, reckless disregard or gross negligence on the part of GEAM or any
of its directors, officers or employees in the performance of GEAM's duties and
obligations under this Agreement, except to the extent such loss results from
the Sub-Adviser's own willful misfeasance, bad faith, reckless disregard or
gross negligence in the performance of Sub-Adviser's duties and obligations
under this Agreement.
(b) The Fund agrees to indemnify and hold the Sub-Adviser, its officers
and directors, and any person who controls the Sub-Adviser within the meaning
the 1933 Act harmless from any and all direct or indirect liabilities, losses or
damages (including reasonable
5
attorneys' fees) suffered by Sub-Adviser resulting from any misrepresentation
of a material fact in the Registration Statement or the omission of a fact
necessary to make information contained in the Registration Statement not
misleading, except to the extent that such loss results from information in
the Registration Statement that was provided by Sub-Adviser.
(c) The Sub-Adviser agrees to indemnify and hold GEAM, its officers and
directors, and any person who controls GEAM within the meaning of Section 15 of
the 1933 Act, and the Company harmless from any and all direct or indirect
liabilities, losses or damages (including reasonable attorneys' fees) suffered
by GEAM, its officers and directors, and any person who controls GEAM within the
meaning of Section 15 of the 1933 Act, and the Company resulting from (i)
Sub-Adviser's breach of its duties hereunder or (ii) bad faith, willful
misfeasance, reckless disregard or gross negligence on the part of the
Sub-Adviser or any of its directors, officers or employees in the performance of
the Sub-Adviser's duties and obligations under this Agreement, except to the
extent such loss results from the Company's or GEAM's own willful misfeasance,
bad faith, reckless disregard or gross negligence in the performance of their
respective duties and obligations under the Advisory Agreement or this
Agreement.
7. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER. The Sub-Adviser
represents, warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under
the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Agreement; (iii)
has met, and will seek to continue to meet for so long as this Agreement remains
in effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by the Advisory Agreement;
(iv) has the authority to enter into and perform the services contemplated by
this Agreement and the execution, delivery and performance by the Sub-Adviser of
this Agreement does not contravene or constitute a default under any agreement
binding upon the Sub-Adviser; (v) will promptly notify GEAM of the occurrence of
any event that would disqualify it from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise; (vi)
has filed a notice of exemption pursuant to Rule 4.14 under the Commodity
Exchange Act with the Commodity Futures Trading Commission and the National
Futures Association, or is not required to file such exemption; and (vii) is
duly organized and validly existing under the laws of the state in which it was
organized with the power to own and possess its assets and carry on its business
as it is now being conducted.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide GEAM and the
Board with a copy of that code of ethics, together with evidence of its
adoption.
(c) The Sub-Adviser certifies that the information stated in
Post-Effective Amendment No. to the Company's Registration Statement relating
to the Sub-Adviser, its
6
management of the Fund and its performance history is true, correct and
complete to the best of its knowledge.
8. REPRESENTATIONS AND WARRANTIES OF GEAM. GEAM represents, warrants
and agrees that GEAM (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by the Advisory Agreement; (iii) has
met, and will seek to continue to meet for so long as this Agreement remains in
effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by the Advisory Agreement;
(iv) has the authority to enter into and perform the services contemplated by
the Advisory Agreement and the execution, delivery and performance by GEAM of
the Advisory Agreement does not contravene or constitute a default under any
agreement binding upon GEAM; (v) will promptly notify the Sub-Adviser of the
occurrence of any event that would disqualify GEAM from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; (vi) has filed a notice of exemption pursuant to Rule 4.14 under the
Commodity Exchange Act with the Commodity Futures Trading Commission and the
National Futures Association, or is not required to file such exemption; (vii)
is duly organized and validly existing under the Laws of the State of Delaware
with the power to own and possess its assets and carry on its business as it is
now being conducted; and (viii) it has furnished the Sub-Adviser with true and
complete copies of the Constituent Documents and the Registration Statement and
will provide to the Sub-Adviser copies of any amendments or supplements to any
of these materials as soon as practicable after such materials become available.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE
INFORMATION. All representations and warranties made by the Sub-Adviser and GEAM
pursuant to Sections 7 and 8, respectively, shall survive for the duration of
this Agreement and the parties hereto shall promptly notify each other in
writing upon becoming aware that any of the foregoing representations and
warranties are no longer true.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective upon the date first above
written and will continue for an initial two-year term and will continue
thereafter so long as the continuance is specifically approved at least annually
(a) by the Board or (b) by a vote of a majority of the Fund's outstanding voting
securities, as defined in the 1940 Act, provided that in either event the
continuance is also approved by a majority of the Board who are not parties to
this Agreement or "interested persons" (as defined in the 0000 Xxx) of any party
to this Agreement, by vote cast in person at a meeting called for the purpose of
voting on the approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty, by the Board, or by vote of a majority of the Fund's outstanding
voting securities, on 60 days' written notice to the Sub-Adviser. This Agreement
may also be terminated, without the payment of any penalty, by GEAM: (i) upon 60
days' written notice to the Sub-Adviser; (ii) upon
7
material breach by the Sub-Adviser of any of the representations and
warranties set forth in Paragraph 7 of this Agreement; or (iii) if the
Sub-Adviser becomes unable to discharge its duties and obligations under this
Agreement, including circumstances such as financial insolvency of the
Sub-Adviser or other circumstances that could adversely affect the Fund. The
Sub-Adviser may terminate this Agreement at any time, without the payment of
a penalty, on 60 days' written notice to GEAM. This Agreement will terminate
automatically in the event of its assignment, including without limitation, a
change of control of the Sub-Adviser, or upon termination of the Advisory
Agreement.
11. CHANGE OF CONTROL OF THE SUB-ADVISER. The Sub-Adviser will be
liable to the Company and GEAM for all direct and indirect costs resulting from
a change of control of the Sub-Adviser, including without limitation all costs
associated with proxy solicitations, Board meetings, revisions to prospectuses,
statements of additional information and marketing materials, and the hiring of
another sub-adviser to the Fund. The understandings and obligations set forth in
this Section 11 shall survive the termination of this Agreement and shall be
binding upon the Sub-Adviser's successor(s) and/or assign(s).
12. EXCLUSIVITY. During the term of this Agreement, the Sub-Adviser
shall not, without the written consent of GEAM and the Board, serve as
investment adviser or investment sub-adviser to another management investment
company registered under the 1940 Act (or series thereof) with substantially
similar investment objectives, policies and restrictions as those of the Fund
("Another Small-Cap Fund"), other than a management investment company
registered under the 1940 Act (or series thereof) that is advised by GEAM,
PROVIDED, HOWEVER, that such consent is not required if the Fund has, upon
GEAM's receipt of written notification ("Notification Date") of Sub-Adviser's
intent to act as investment adviser or investment sub-adviser to Another
Small-Cap Fund, (i) more than $25 million of net assets, if the Notification
Date is on or after one year and six months from the date that the first one
hundred Fund shares are issued, (ii) more than $50 million of net assets, if the
Notification Date is on or after two years and six months from the date that the
first one hundred Fund shares are issued or (iii) more than $100 million of net
assets, if the Notification Date is on or after three years and six months from
the date that the first one hundred Fund shares are issued.
13. RIGHT OF FIRST REFUSAL. Subject to the provisions of Section 12 of
this Agreement, the Sub-Adviser shall not serve as investment adviser or
investment sub-adviser to any other management investment company registered
under the 1940 Act (or series thereof) ("Other Fund") without having first
offered in writing to serve as investment sub-adviser to a fund advised by GEAM
with similar investment objectives, policies and restrictions for an investment
sub-advisory fee not to exceed the lesser of (a) the investment sub-advisory fee
contemplated for the Other Fund and (b) the median investment sub-advisory fee
for the applicable asset class described in Lipper Analytical Services
("Lipper"), or if Lipper no longer provides such information, an independent
mutual fund data provider mutually agreed upon by GEAM and the Sub-Adviser
("Offer"). The Offer shall be valid for thirty (30) days from the date of its
receipt by GEAM. If GEAM accepts the Offer, the Sub-Adviser shall not serve as
investment adviser or investment sub-adviser to the Other Fund, unless the Board
does not
8
approve the sub-advisory agreement with GEAM or the amount of the
sub-advisory fee contemplated.
14. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no material amendment to the terms of
this Agreement shall be effective until approved by a vote of a majority of the
Fund's outstanding voting securities (unless the Company receives an SEC order
or opinion of counsel, or the issue is the subject of a position of the SEC or
its staff, permitting it to modify the Agreement without such vote).
15. GOVERNING LAW. This Agreement shall be construed in accordance with
the 1940 Act and the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of New York conflict with the applicable provisions of the 1940 Act,
the latter shall control.
16. 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 upon and shall inure to the
benefit of the parties hereto. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," "broker," "investment adviser," "net assets," "sale," "sell" and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule, regulation
or order. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is made less restrictive by rule,
regulation or order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order. This Agreement may be signed in counterpart.
9
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year first
above written.
GE ASSET MANAGEMENT INCORPORATED
BY: ___________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
GE INVESTMENTS FUNDS, INC., ON BEHALF OF SMALL-CAP
VALUE EQUITY FUND, A SERIES OF GE INVESTMENTS FUNDS,
INC., SOLELY WITH RESPECT TO SECTION 6(b) OF THIS
AGREEMENT
BY: ___________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: President
PALISADE CAPITAL MANAGEMENT, L.L.C.
BY: ____________________________________
Name:
Title:
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