EX-99.B(5)(b)
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 31st day of January, 1995 by and
among FLAG INVESTORS EQUITY PARTNERS FUND, INC., a Maryland corporation (the
"Fund"), INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), and ALEX. XXXXX INVESTMENT MANAGEMENT, a Maryland limited
partnership (the "Sub-Advisor").
WHEREAS, the Advisor is the investment advisor to the Fund, which
is an open-end, diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Advisor wish to retain the Sub-Advisor
for purposes of rendering advisory services to the Fund and the Advisor in
connection with the Advisor'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-Advisor. The Fund hereby appoints the Sub-
Advisor to act as the Fund's Sub-Advisor under the supervision of the Fund's
Board of Directors and the Advisor, and the Sub-Advisor hereby accepts such
appointment, all subject to the terms and conditions contained herein.
2. Delivery of Documents. The Fund has furnished the Sub-Advisor
with copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, filed with the Secretary
of State of the State of Maryland on November 29, 1994 and all
amendments thereto (such Articles of Incorporation, as presently in
effect as they shall from time to time be amended are herein called the
"Articles of Incorporation");
(b) The Fund's Bylaws and all amendments thereto (such By-Laws, as
presently in effect as they shall from time to time be amended, are
herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and shareholders
authorizing the appointment of the Sub-Advisor and approving this
Agreement;
(d) The Fund's Notification of Registration Filed Pursuant to
Section 8(a) of the Investment Company Act of 1940 on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") on November 30, 1994;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-86832)
and under the 1940 Act as filed with the SEC on November 30, 1994
relating to the shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments are supplements thereto are
herein called "Prospectus").
The Fund will furnish the Sub-Advisor from time to time with
copies, properly certified or authenticated, of all amendments or supplements
to the foregoing, if any, and all documents, notices and reports filed with
the SEC.
3. Duties of Sub-Advisor. In carrying out its obligations under
Section 1 hereof, the Sub-Advisor shall:
(a) provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of
Directors;
(b) determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report thereon to the
Fund's Board of Directors;
(c) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Fund's Board of Directors;
(d) take, on behalf of the Fund, all actions which appear to
the Fund 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 the Fund; and
(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 the Fund, and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which they engage, or with respect to securities which the Advisor
considers desirable for inclusion in the Fund's portfolio.
4. Broker-Dealer Relationships. In circumstances when the Sub-
Advisor is responsible for decisions to buy and sell securities for the Fund,
broker-dealer selection, and negotiation of its brokerage commission rates,
the Sub-Advisor'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-Advisor shall comply with applicable
policies established by the Board of Directors and shall provide the Board of
Directors with such reports as the Board of Directors may require in order to
monitor the Fund's portfolio transaction activities. In selecting a broker-
dealer to execute each particular transaction, the Sub-Advisor 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 the Fund on a
continuing basis. Accordingly, the price to the Fund 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-Advisor 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 the Fund to pay a broker-
dealer that provides brokerage and research services to the Sub-Advisor 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-Advisor 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-Advisor's overall
responsibilities with respect to the Fund. The Sub-Advisor is further
authorized to allocate the orders placed by it on behalf of the Fund to such
broker-dealers who also provide research or statistical material or other
services to the Fund or the Sub-Advisor. Such allocation shall be in such
amounts and proportions as the Sub-Advisor shall determine and the Sub-
Advisor will report on said allocation regularly to the Board of Directors of
the Fund, indicating the brokers to whom such allocations have been made and
the basis therefor.
Consistent with the Rules of Fair Practice 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
Directors may determine, the Sub-Advisor may consider services in connection
with the sale of shares of the Fund as a factor in the selection of broker-
dealers to execute portfolio transactions for the Fund.
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Subject to the policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct Alex. Xxxxx & Sons
Incorporated ("Alex. Xxxxx") to execute portfolio transactions for the Fund
on an agency basis. The commissions paid to Alex. Xxxxx 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 the Fund or one or more
other accounts of the Sub-Advisor 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-Advisor. Alex. Xxxxx and the Sub-Advisor
may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable
execution.
The Fund will not deal with the Sub-Advisor or Alex. Xxxxx in any
transaction in which the Sub-Advisor or Alex. Xxxxx acts as a principal with
respect to any part of the Fund's order. If Alex. Xxxxx is participating in
an underwriting or selling group, the Fund 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 SEC.
5. Control by Fund's Board of Directors. Any recommendations
concerning the Fund's investment program for the Fund proposed by the Sub-
Advisor to the Fund and the Advisor pursuant to this Agreement, as well as
any other activities undertaken by the Sub-Advisor on behalf of the Fund
pursuant hereto, shall at all times be subject to any applicable directives
of the Board of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Sub-Advisor shall at all times conform
to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder, as amended;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the By-Laws; and
(e) any other applicable provisions of Federal and State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund, the Sub-Advisor and the Advisor as follows:
(a) The Sub-Advisor shall furnish, at its expense and without
cost to the Fund, the services of the President and certain Vice
Presidents of the Fund, to the extent that such officers may be required
by the Fund for the proper conduct of its affairs.
(b) The Sub-Advisor shall maintain, at its expense and
without cost to the Fund, a trading function in order to carry out its
obligations under Section 3 hereof to place orders for the purchase and
sale of portfolio securities for the Fund.
(c) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: payments to
the Advisor under the Investment Advisory Agreement between the Fund and
the Advisor; payments to the Fund's distributor under the Fund's plan of
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distribution; the charges and expenses of any registrar, any custodian
or depository appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commission
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; the costs and expenses of
engraving or printing of 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 SEC and
various states and other jurisdictions (including filing fees, legal
fees and disbursements of counsel); the costs and expenses of printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and
of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Directors or Director members
of any advisory board or committee; 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 Directors of the Fund who are not "interested
persons" (as defined in the 0000 Xxx) of the Fund and of independent
certified public 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 Directors) 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.
8. Compensation. For the services to be rendered hereunder by
the Sub-Advisor, the Advisor shall pay to the Sub-Advisor monthly
compensation equal to the sum of the amounts determined by applying the
following annual rates to the Fund's average daily net assets: .75% of the
first $50 million of the Fund's average daily net assets, .60% of the next
$150 million of the Fund's average daily net assets, and .50% of the Fund's
average daily net assets in excess of $200 million. Except as hereinafter
set forth, compensation under this Agreement shall be calculated and accrued
daily and the amounts of the daily accruals paid monthly. 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 that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculations of the fees as set forth above. Subject to the provisions of
Section 10 hereof, payment of the Sub-Advisor's compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated in Section 10 hereof.
9. Additional Responsibilities. The Sub-Advisor may, but shall
not be under any duty to, perform services on behalf of the Fund which are
not required by this Agreement upon the request of the Fund's Board of
Directors. Such services will be performed on behalf of the Fund and the
Sub-Advisor's charges in rendering such services will be billed monthly to
the Fund, subject to examination by the Fund's independent certified public
accountants. Payment or assumption by the Sub-Advisor of any Fund expense
that the Sub-Advisor is not required to pay or assume under this Agreement
shall not relieve the Sub-Advisor of any of its obligations to the Fund nor
obligate the Sub-Advisor to pay or assume any similar Fund expenses on any
subsequent occasions.
10. Expense Limitation. If, for any fiscal year of the Fund, the
amount of the fee which the Advisor would otherwise receive from the Fund
pursuant to the Investment Advisory Agreement between the Fund and the
Advisor is reduced pursuant to the expense limitation provisions of the
Investment Advisory Agreement, the fee which the Sub-Advisor would otherwise
receive from the Advisor pursuant to Section 8 of this Agreement shall also
be reduced proportionately, and, if such amount should exceed such monthly
fee, the Sub-Advisor agrees to repay the Advisor such amount of its fee
previously received with respect to such fiscal year as may be required to
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make up the deficiency no later than the last day of the following month. In
no event will the Sub-Advisor be required to reimburse the Advisor for any
amount in excess of the fee its receives pursuant to this Agreement during
the fiscal year of the Fund in which the reimbursement is required.
11. 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 13
hereof, for two years from the date hereof.
12. 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) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities of the Fund (as
defined in Section 2(a)(42) of the 0000 Xxx); and
(b) by the affirmative vote of a majority of the Directors
who are not parties to this Agreement or "interested persons" of a party
to this Agreement (other than as Directors of the Fund) by votes cast in
person at a meeting specifically called for such purpose.
13. 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 (as
defined in Section 2(a)(42) of the 1940 Act), on sixty (60) days' written
notice to the Advisor and the Sub-Advisor. This Agreement may be terminated
at any time, without the payment of any penalty, by the Sub-Advisor on sixty
(60) days' written notice to the Fund and the Advisor. 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 (as
defined in Section 2(a)(4) of the 1940 Act).
14. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor and the Fund are not to be deemed to be exclusive, and the Sub-
Advisor shall be free to render investment advisory or other services to
others (including other investment companies) and to engage in other
activities, so long as its services under this Agreement are not impaired
thereby. It is understood and agreed that partners of the Sub-Advisor may
serve as officers or Directors of the Fund, and that officers or Directors of
the Fund may serve as officers or partners of the Sub-Advisor to the extent
permitted by law; and that the partners of the Sub-Advisory are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers or
directors of any other firm or corporation, including other investment
companies.
15. Liability of Sub-Advisor. In the performance of its duties
hereunder, the Sub-Advisor 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-Advisor 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-Advisor or its officers, directors or employees, or reckless
disregard by the Sub-Advisor of its duties under this Agreement.
16. 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 party, it is agreed that the
address of the Sub-Advisor, of the Advisor and of the Fund for this purpose
shall be 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
17. 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
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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 Maryland.
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: FLAG INVESTORS EQUITY PARTNERS FUND, INC.
/s/ X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxx
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Attest: INVESTMENT COMPANY CAPITAL CORP.
/s/ X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
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Attest: ALEX. XXXXX INVESTMENT MANAGEMENT
By Alex. Xxxxx & Sons Incorporated,
a General Partner
/s/ X. Xxxxxxx By: /s/ J. Xxxxxx Xxxxx
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