Exhibit 5(i)
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the _____ day of __________________, 1998 by
and among SECURITY CAPITAL GLOBAL CAPITAL MANAGEMENT GROUP INCORPORATED, a
Delaware corporation (the "Adviser"), and SECURITY CAPITAL GLOBAL CAPITAL
MANAGEMENT GROUP (ASIA) INCORPORATED, a Delaware corporation (the "Sub-
Adviser").
WHEREAS, the Adviser is the investment adviser to Security Capital Real
Estate Mutual Funds Incorporated ("Fund"), which is an open-end, management
investment company with non-diversified investment portfolios, registered under
the Investment Company Act of 1940, as amended (the 1940 Act"); and
WHEREAS, the Adviser wishes to retain the Sub-Adviser for purposes of
rendering advisory services to Security Capital Asia/Pacific Real Estate Shares
("SC-ASIA") and the Adviser in connection with the Adviser's responsibilities to
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 SUB-ADVISER
The Fund hereby appoints the Sub-Adviser to act as SC-ASIA's Sub-Adviser
under the supervision of the Adviser and the Fund's Board of Directors, and the
Sub-Adviser hereby accepts such appointment, subject to the terms and conditions
contained herein.
2. DUTIES OF SUB-ADVISER
In carrying out its obligations under Section 1 hereof and under the
supervision of the Adviser and the Fund's Board of Directors, the Sub-Adviser
shall:
(a) provide SC-ASIA with such executive, administrative and clerical
services as are deemed advisable by the Adviser and the Fund's Board of
Directors;
(b) determine which issuers and securities shall be represented in SC-
ASIA's portfolio in accordance with the SC-ASIA's investment objectives and
policies and regularly report thereon to Adviser and the Fund's Board of
Directors;
(c) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers for SC-ASIA's portfolio in
accordance with SC-ASIA's investment objectives and policies and regularly
report thereon to the Adviser and the Fund's Board of Directors;
(d) take, on behalf of SC-ASIA, all actions which appear to SC-ASIA to
be necessary to carry into effect such purchase and sale programs as
aforesaid, including the placing of orders for the purchase and sale of
securities of SC-ASIA;
(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 SC-ASIA,
and whether concerning the individual issuers whose securities are included
in SC-ASIA's portfolio or the activities in which they engage, or with
respect to securities which the Adviser considers desirable for inclusion
in the SC-ASIA's portfolio; and
(f) provide recommendations, in accordance with procedures and methods
established by the Fund's Board of Directors, of the fair value of
securities held by SC-ASIA for which market quotations are not readily
available for purposes of facilitating the calculation of SC-ASIA's net
asset value.
3. BROKER-DEALER RELATIONSHIPS
In circumstances when the Sub-Adviser is responsible for decisions to buy
and sell securities for SC-ASIA, broker-dealer selection, and negotiation of its
brokerage commission rates, the Sub-Adviser's primary consideration in effecting
a security transaction will be execution of orders at the most favorable price
on an overall basis. In performing this function, the Sub-Adviser shall comply
with applicable policies established by the Board of Directors and shall provide
the Adviser and the Board of Directors with such reports as the Adviser and the
Board of Directors may require in order to monitor SC-ASIA's portfolio
transaction activities. In selecting a broker-dealer to execute each particular
transaction, the Sub-Adviser 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 SC-ASIA on a continuing basis. Accordingly, the price to SC-ASIA
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 Sub-Adviser 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 SC-ASIA to pay a broker-dealer that
provides brokerage and research services to the Sub-Adviser 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 Sub-
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Adviser 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 Sub-
Adviser's overall responsibilities with respect to SC-ASIA. The Sub-Adviser is
further authorized to allocate the orders placed by it on behalf of SC-ASIA to
such broker-dealers who also provide research or statistical material or other
services to SC-ASIA or the Sub-Adviser. Such allocation shall be in such amounts
and proportions as the Sub-Adviser shall determine and the Sub-Adviser will
report on said allocation regularly to the Adviser and Board of Directors of the
Fund, indicating the brokers 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 Board of Directors may determine, the
Sub-Adviser may consider services in connection with the sale of shares of SC-
ASIA as a factor in the selection of broker-dealers to execute portfolio
transactions for SC-ASIA. Subject to the policies established by the Board of
Directors and the supervision of the Adviser, and in compliance with applicable
law, the Adviser may direct Security Capital Markets Group Incorporated ("SCMG")
to execute portfolio transactions for SC-ASIA on an agency basis. The
commissions paid to SCMG 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
SC-ASIA or one or more other accounts of the Sub-Adviser 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 Sub-Adviser. SCMG and the Sub-
Adviser may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable execution.
SC-ASIA will not deal with the Sub-Adviser, the Adviser or SCMG in any
transaction in which the Sub-Adviser or SCMG acts as a principal with respect to
any part of SC-ASIA's order. If SCMG is participating in an underwriting or
selling group, SC-ASIA 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 Securities and Exchange Commission.
4. CONTROL BY FUND'S BOARD OF DIRECTORS
Any recommendations concerning SC-ASIA's investment program proposed by the
Sub-Adviser to the Adviser and to the Fund pursuant to this Agreement, as well
as any other activities undertaken by the Sub-Adviser on behalf of SC-ASIA
pursuant hereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Sub-Adviser shall
at all times conform to:
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(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder, as amended;
(b) the provisions of the Fund's Registration Statement on Form N-1A
under the Securities Act of 1933 and the 1940 Act;
(c) the provisions of the Fund's Articles of Incorporation, as amended
from time to time;
(d) the provisions of the Fund's Bylaws, as amended from time to time;
and
(e) any other applicable provisions of federal and state law.
6. COMPENSATION
As consideration for the services provided under this Agreement, the
Adviser will pay the Sub-Adviser the compensation specified in Schedule A
hereto.
7. EXPENSES
The Sub-Adviser, at its own expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel required
for it to execute its duties faithfully, and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of SC-ASIA under the supervision of
the Adviser and the Fund's Board of Directors.
8. BOOKS AND RECORDS
The Sub-Adviser will maintain and, at its own expense, make available to
U.S. and foreign regulatory authorities, all accounts, books and records with
respect to SC-ASIA in connection with the Sub-Adviser's provision of services
under this Agreement as are required of an investment adviser of a registered
investment company pursuant to the 1940 Act and the Investment Advisers Act of
1940 ("the "Investment Advisers Act") and the rules thereunder.
9. SUPPLEMENTAL AND OTHER ARRANGEMENTS
The Sub-Adviser may enter into arrangements with other persons affiliated
with the Sub-Adviser to better enable it to fulfill its obligations under this
Agreement.
The services of the Sub-Adviser to SC-ASIA are not to be deemed to be
exclusive, the Sub-Adviser and any person controlling, controlled by or under
common control with the Sub-Adviser being free to render investment advisory and
other services to any other person or entity.
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10. CONFLICTS OF INTEREST
It is understood that directors, officers, agents and shareholders of the
Fund are or may be interested persons of the Adviser or the Sub-Adviser within
the meaning of Section 2(a)(19) of the 1940 Act; that directors, officers,
agents and shareholders of the Adviser or the Sub-Adviser are or may be
interested persons of the Fund; that the Adviser or the Sub-Adviser may be an
interested person of the Fund within the meaning of Section 2(a)(19) of the 1940
Act; and that the existence of any such common interests shall not affect the
validity hereof or of any transactions hereunder except as otherwise provided in
the Articles of Incorporation or Bylaws of the Fund, the Adviser and/or the Sub-
Adviser, respectively, or by specific provision of applicable law.
11. REGULATION
The Sub-Adviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
12. PROVISION OF CERTAIN INFORMATION BY SUB-ADVISER
The Sub-Adviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
(a) the Sub-Adviser fails to be registered as an investment adviser
under the Investment Advisers Act or under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment adviser
in order to perform its obligations under this Agreement;
(b) the Sub-Adviser 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
trust; and
(c) the directors, managing directors or officers of, or the advisory
personnel employed by, the Sub-Adviser changes.
13. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the Fund's Directors who are
not interested persons of the Adviser or the Sub-Adviser within the meaning of
Section 2(a)(19) of the 1940 Act, cast in person at a meeting called for the
purpose of voting on such approval. Any required shareholder approval shall be
effective with respect to SC-ASIA if a majority of the outstanding voting
securities of SC-ASIA vote to approve the amendment.
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14. TERM
This Agreement shall become effective at 12:01 a.m. on the date hereof and
shall remain in force and effect, subject to Section 16 hereof, for two years
from the date hereof.
15. RENEWAL
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) either (i) by the Fund's Board
of Directors or (ii) by the vote of a majority of the outstanding voting
securities of SC-ASIA within the meaning of Section 2(a)(42) of the 1940 Act;
and (b) by the affirmative vote of a majority of the Directors who are not
"interested persons" of the Adviser or the Sub-Adviser within the meaning of
Section 2(a)(19) of the 1940 Act, by votes cast in person at a meeting
specifically called for such purpose.
16. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund within the meaning of Section
2(a)(42) of the 1940 Act, on sixty (60) days' written notice to the Adviser and
the Sub-Adviser. This Agreement may be terminated at any time, without the
payment of any penalty, by the Adviser or the Sub-Adviser on sixty (60) days'
written notice to the other party and to the Fund. The notice provided for
herein may be waived by any person to whom such notice is required. This
Agreement shall automatically terminate in the event of its assignment within
the meaning of Section 2 (a) (4) of the 1940 Act.
17. LIABILITY OF SUB-ADVISER
In the performance of its duties hereunder, the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser or its officers, directors or
employees, or reckless disregard by the Sub-Adviser of its duties under this
Agreement.
18. 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 parties hereto, it is agreed that the address of the Sub-Adviser
and the Adviser shall be 00 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000.
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19. QUESTIONS AND 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 said 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
Illinois.
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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.
Attest: SECURITY CAPITAL GLOBAL CAPITAL
MANAGEMENT GROUP INCORPORATED
By:
------------------------------ ---------------------------------
Title:
Attest: SECURITY CAPITAL GLOBAL CAPITAL
MANAGEMENT GROUP (ASIA)
INCORPORATED
By:
------------------------------ ---------------------------------
Title:
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SCHEDULE A
COMPENSATION
The compensation payable to the Sub-Adviser hereunder shall be 100% of the
Sub-Adviser's actual costs, which include the items enumerated below, plus 10%
xxxx-up.
Components of Cost
. Payroll and related expenses
. Professional fees
. Office/Occupancy expenses
. Travel Expenses
The compensation set forth in this Schedule A shall remain in force only so
long as SC-ASIA is the Sub-Adviser's sole client. At such time as the Sub-
Adviser is engaged to provide services to another client, the Sub-Adviser's
compensation shall be reset by mutual agreement of the parties hereto with the
approval of the Board of Directors and the shareholders of SC-ASIA as required
by the 1940 Act.
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