FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
XXX XXXXXX AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
AND
XXXXXX XXXXXXX ASSET MANAGEMENT INC.
THIS AGREEMENT is made as of this 2nd day of July, 1997 by and between XXX
XXXXXX AMERICAN CAPITAL INVESTMENT ADVISORY CORP. ("VKAC") a Delaware
corporation, and XXXXXX XXXXXXX ASSET MANAGEMENT INC. ("MSAM"), a Delaware
corporation.
WHEREAS, VKAC acts as Investment Adviser to Xxxxxx Xxxxxxx Fund, Inc. (the
"Company") and each of its series identified at Schedule A (the "Funds");
WHEREAS, MSAM has available a staff of experienced investment personnel and
facilities for providing investment sub-advisory services to the Funds;
WHEREAS, MSAM is an investment adviser registered under the Investment Advisers
Act of 1940, as amended, and is willing to provide VKAC with investment advisory
services on the terms and conditions hereinafter set forth; and
WHEREAS, VKAC and MSAM (jointly referred to as "the Advisers") desire to enter
into an agreement for MSAM to provide sub-advisory services to the Company and
to VKAC with respect to the investment of the assets of each of the Funds.
NOW THEREFORE it is mutually agreed:
1. INVESTMENT SUB-ADVISORY SERVICES.
(a) INVESTMENT ADVICE
i. Effective on July 2, 1997, and subject to the overall policies,
control, direction and review of the Company's Directors and VKAC, MSAM shall
manage the investment and reinvestment of the assets of each of the Funds,
continuously review, supervise and administer the investment program of each of
the Funds, determine in its discretion the securities to be purchased or sold
and the portion of each Fund's assets to be held uninvested, to provide the
Company with records concerning MSAM's activities which the Company is required
to maintain, and to render regular reports to the Company's officers and Board
of Directors concerning MSAM's discharge of the foregoing responsibilities.
ii. Unless otherwise instructed by VKAC or the Directors, and subject to
the provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Directors, MSAM shall determine the
securities to be purchased and sold by the Funds and shall place orders for the
purchase, sale or exchange of securities for the Funds' accounts with brokers or
dealers and to that end MSAM is authorized by the Directors to give instructions
to the custodian and any sub-custodian of the Company as to deliveries of such
securities, transfers of currencies and payments of cash for the accounts of the
Funds.
iii. In performing these services, MSAM shall adhere to each Fund's
respective investment objective, policies and limitations as contained in its
Prospectus or Statement of Additional Information, and the Company's Articles of
Incorporation and By-Laws and shall comply with all statutory and regulatory
restrictions, limitations and requirements applicable to the activity of the
Company.
iv. Unless otherwise instructed by VKAC or the Directors, and subject to
the provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Directors, MSAM shall have executed and
performed on behalf of and at the expense of the respective Funds:
(1) Purchases, sales, exchanges, conversions, and placement or orders for
execution; and
(2) Reporting of all transactions to VKAC and to other entities as
directed by VKAC or by the Directors.
v. MSAM shall provide the Directors at least quarterly, in advance of the
regular meetings of the Directors, a report of its activities hereunder on
behalf of the Company and the Funds and MSAM's proposed strategy for the next
quarter, all in such form and detail as requested by the Directors. MSAM shall
also make an investment officer available to attend such meetings of the
Directors as the Directors may reasonably request.
(b) RESTRICTION OF MSAM'S POWERS
i. In carrying out its duties hereunder, MSAM shall comply with all
reasonable instructions of the Company or VKAC in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Directors or by any other person authorized by a resolution of the
Directors provided a certified copy of such resolution has been supplied to
MSAM.
ii. All securities, cash and other assets of the Funds shall be placed and
maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Directors as custodian and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the Investment Company Act
of 1940, as amended (the "1940 Act")) approved by the Directors as
sub-custodians.
iii. Persons authorized by resolution of the Directors shall have the right
to inspect and copy contracts, notes, vouchers, and copies of entries in books
or electronic recording media relating to the Company's transactions at the
registered office of MSAM at any time during normal business hours. Such
records, in relation to each transaction effected by MSAM on behalf of the
Company shall be maintained by MSAM for a period of seven years from the date of
such transaction.
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(c) PURCHASE AND SALE OF SECURITIES
In performing the services described above, MSAM shall use its best efforts
to obtain for the Funds the most favorable price and execution available.
Subject to prior authorization of appropriate policies and procedures by the
Directors, MSAM may, to the extent authorized by law, cause the Funds to pay a
broker or dealer who provides brokerage and research services an amount of
commission for effecting the Fund's investment transactions in excess of the
amount of commission another broker or dealer would have charged for effecting
such transactions, in recognition of the brokerage and research services
provided by the broker or dealer. To the extent authorized by law, MSAM 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.
(d) CUSTODIAN
MSAM shall not act as custodian for the securities or any other assets of
the Company. All such assets shall be held by the custodian or sub-custodian
appointed by the Directors.
2. DUTIES OF VKAC.
(a) PROVISION OF INFORMATION
VKAC shall advise MSAM from time to time with respect to each Fund of its
investment objective and policies and of any changes or modifications thereto,
as well as any specific investment limitations by sending to MSAM a copy of each
registration statement or amendment thereto relating to the Company as filed
with the Securities and Exchange Commission. As requested by MSAM, VKAC shall
furnish such information to MSAM as to holdings, purchases, and sales of the
securities under its management as will reasonably enable MSAM to furnish its
investment advice under this Agreement.
(b) COMPENSATION TO MSAM
The fee for the services provided under this Agreement will be determined
as follows:
i. VKAC shall pay MSAM a monthly fee for its services to the Funds as
investment sub-adviser calculated as follows: If average daily net assets of a
Fund during the monthly period are less than or equal to $500 million, VKAC
shall pay MSAM one-half of the total investment advisory fee payable to VKAC by
the Fund (after application of any fee waivers in effect) for such monthly
period. If a Fund's average daily net assets for the monthly period are greater
than $500 million, VKAC shall pay MSAM a fee for such monthly period equal to
the greater of (a) one half of what the total advisory fee payable to VKAC by
the Fund (after application of any fee waivers in effect) for such period would
have been had the Fund's average daily net assets during such period been equal
to $500 million, or (b) forty-five percent (45%) of the total investment
advisory fee payable to VKAC by the Fund (after application of any fee waivers
in effect) for such monthly period.
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ii. The foregoing fee shall be paid in cash by VKAC to MSAM within five
(5) business days after the last day of the valuation period.
3. MISCELLANEOUS.
(a) ACTIVITIES OF MSAM
The services of MSAM as sub-adviser to VKAC under this Agreement are not to
be deemed exclusive, MSAM and its affiliates being free to render services to
others. It is understood that shareholders, directors, officers and employees
of MSAM may become interested in the Company or VKAC as shareholders,
directors, officers, partners or otherwise.
(b) SERVICES TO OTHER CLIENTS
VKAC acknowledges that MSAM 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 MSAM 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 Company, provided that MSAM acts in good faith, and provided, further, that
it is MSAM policy to allocate, within its reasonable discretion, investment
opportunities to the Funds 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 Funds and any specific investment limitations 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 Funds may have an interest from time to time,
whether in transactions which may involve the Funds or otherwise MSAM shall have
no obligation to acquire for any 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 Funds or otherwise.
(c) BEST EFFORTS
It is understood and agreed that in furnishing the investment advice and
other services as herein provided, MSAM shall use its best professional judgment
to recommend actions which will provide favorable results for the Funds. MSAM
shall not be liable to the Company or to any shareholder of the Company to any
greater degree than VKAC.
(d) DURATION OF AGREEMENT
i. This Agreement, unless terminated pursuant to paragraph (ii), (iii) or
(iv) below, shall continue in effect through July 2, 1999, and thereafter shall
continue in effect from year to year, provided that its continued applicability
is specifically approved at least annually by the Directors or by a vote of the
holders of a majority of the outstanding shares of the appropriate Funds. In
addition, such continuation shall be approved by vote of a majority of the
Directors who
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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.
ii. This Agreement may be terminated by sixty (60) days' written notice by
either VKAC or MSAM to the other party, provided that VKAC's termination of this
Agreement shall be approved by vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any such party. The
Agreement may also be terminated at any time, without the payment of any
penalty, by one or more Funds (by vote of the Directors or, by the vote of a
majority of the outstanding voting securities of such Fund(s)), on sixty (60)
days' written notice to both VKAC and MSAM. This Agreement shall automatically
terminate in the event of the termination of the investment advisory agreement
between VKAC and the Company.
iii. This Agreement shall terminate in the event of its assignment. The
term "assignment" for this purpose shall have the same meaning set forth in
Section 2(a)(4) of the 1940 Act.
iv. This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:
(i) If VKAC or MSAM 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.
v. Termination shall be without prejudice to the completion of any
transactions which MSAM shall have committed to on behalf of the Funds prior to
the time of termination. MSAM shall not effect and the Company shall not be
entitled to instruct MSAM to effect any further transactions on behalf of the
Funds subsequent to the time termination takes effect.
vi. On the termination of this Agreement and completion of all matters
referred to in the foregoing paragraph (v) MSAM shall deliver or cause to be
delivered to the Company copies of all documents, records and books of the
Company required to be maintained pursuant to Rules 31a-1 or 31a-2 of the 1940
Act which are in MSAM's possession, power or control and which are valid and in
force at the date of termination.
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(e) 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 MSAM to:
Xxxxxx Xxxxxxx Asset Management Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esquire
with a copy to:
Xxxxxx Xxxxxxx Asset Management Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esquire
If to VKAC, to:
Xxx Xxxxxx American Capital Investment Advisory Corp.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxxx
with a copy to:
Xxx Xxxxxx American Capital Investment Advisory Corp.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esquire
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.
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(f) 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 New York, without regard to the conflicts of laws
principles thereof.
IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.
XXX XXXXXX AMERICAN CAPITAL XXXXXX XXXXXXX ASSET
INVESTMENT ADVISORY CORP. MANAGEMENT INC.
By: By:
-------------------------- ---------------------------
Name: Name:
------------------------- -------------------------
Its: Its:
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Schedule A
Fund*
----
Emerging Markets Debt Fund
Global Fixed Income Fund
High Yield Fund
Worldwide High Income Fund
Asian Growth Fund
Emerging Markets Fund
European Equity Fund
Global Equity Allocation Fund
Global Equity Fund
International Magnum Fund
Japanese Equity Fund
Latin American Fund
Aggressive Equity Fund
American Value Fund
Equity Growth Fund
Growth and Income Fund
U.S. Real Estate Fund
Government Obligations Money Market Fund
Money Market Fund
Tax-Free Money Market Fund
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* For ease of reference, the words "Xxxxxx Xxxxxxx," which begin the name
of each Fund have been omitted.
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