GE FUNDS
GE TAX-EXEMPT FUND
SUB-ADVISORY AGREEMENT
Agreement made as of ______________, 1997, between GE
INVESTMENT MANAGEMENT INCORPORATED ("GEIM"), a Delaware corporation, and XXXXX
BROTHERS XXXXXXXX & CO. (the "Sub-Adviser"), a New York partnership (the
"Agreement").
RECITALS
GEIM has entered into an Amended and Restated Investment
Advisory and Administration Agreement dated as of the date hereof, ("Advisory
Agreement") with GE Funds ("Trust"), an open-end management investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act"),
with respect to GE Tax-Exempt Fund ("Fund"), a series of the Trust;
Pursuant to Section 1(f) of the Advisory Agreement, GEIM is
authorized to delegate its investment advisory responsibilities to other
investment advisers, subject to the requirements of the 1940 Act;
GEIM wishes to retain the Sub-Adviser to furnish certain
investment advisory services to GEIM and the Fund, and the Sub-Adviser is
willing to furnish those services; and
GEIM 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. GEIM hereby appoints the Sub-Adviser as a
sub-investment 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 GEIM and the
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 GEIM on a
macro level from time to time regarding matters pertaining to the Fund,
including market strategy and portfolio characteristics such as the average
weighted maturity of the Fund's portfolio, duration of the Fund's portfolio and
the quality of Fund investments. The Sub-Adviser will provide services under
this Agreement in accordance with the Fund's investment objective, policies and
restrictions as stated in the Trust's current Registration Statement on Form
N-1A and any amendments or supplements thereto (the "Registration Statement")
and the Trust's Declaration of Trust and By-Laws ("Constituent Documents"). In
this connection and in connection with the further duties set forth in
paragraphs 2(b) - (g) below, the Sub-Adviser shall provide GEIM and the Board
with such periodic reports and documentation as GEIM or the Board shall request
regarding the Sub-Adviser's management of the Fund's assets and compliance with
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) such policies, procedures or directives as the Board may from
time to time establish or issue, and (4) applicable law and related regulations.
In particular, in carrying out its duties as Sub-Advisor, Sub-Adviser shall make
every effort to ensure the Fund continuously qualifies as a regulated investment
company under sub-chapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). GEIM shall promptly notify the Sub-Adviser of changes to (1), (2)
or (3) above and shall notify the Sub-Adviser of changes to (4) above promptly
after it becomes aware of such changes.
(c) The Sub-Adviser shall take all actions which it considers
necessary to implement the investment objective 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 Trust to give
instructions to the Trust's custodian 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 and set forth in the Registration Statement.
In addition to seeking the best price and execution, to the
extent covered by Section 28(e) of the Securities Exchange Act of 1934 (the
"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 those
disclosed in the Registration Statement. The Sub-Adviser will periodically
evaluate the statistical data, research and other
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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 (the "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 GEIM
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 Trust 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 Trust 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 GEIM with such periodic and special
reports as the Board or GEIM reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees
that all records which it maintains for the Fund are the property of the Trust,
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records which it maintains for the Trust and which are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Trust any records which it maintains for the Trust upon request
by the Trust.
(f) At such times as shall reasonably be requested by the
Board or GEIM, the Sub-Adviser will provide the Board and GEIM with economic and
investment analyses and reports as well as quarterly reports setting forth the
Fund's performance and make available to the Board and GEIM 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.
(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 Trust's accounting services agent
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or GEIM to obtain independent sources of market value for all other portfolio
securities.
3. Further Duties. In all matters relating to the performance
of this Agreement, the Sub-Adviser will act in conformity with the Constituent
Documents and Registration Statement and with the written instructions and
directions of the Board and GEIM and will comply with the requirements of the
1940 Act, the Advisers Act, the rules under each, and Subchapter M of the Code
as applicable to regulated investment companies. In addition, the Sub-Adviser
will act in conformity with all other applicable federal and state laws and
regulations. GEIM agrees to provide to the Sub-Adviser copies of the Constituent
Documents, Registration Statement and any amendments or supplements to any of
these materials as soon as practicable after such materials become available.
4. Expenses. During the term of this Agreement, the
Sub-Adviser will bear all expenses incurred by it in connection with its
sub-investment advisory services under this Agreement.
5. 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:
.20% of the first $25,000,000; .175% of the next $25,000,000;
.15% of the next $50,000,000; and .125% of amounts in excess
of $100,000,000.
The Sub-Adviser's fee shall be paid by GEIM out of GEIM's
advisory fee, to the extent such fee is received by GEIM pursuant to the
Advisory Agreement. 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 Trust, 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 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.
6. Limitation Of Liability. The Sub-Adviser shall not be
liable for any error
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of judgment or mistake of law or for any loss suffered by the Fund, the Trust or
its shareholders or by GEIM in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
7. Indemnification.
(a) GEIM agrees to indemnify 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"), for any loss
or expense (including attorneys' fees) arising out of any claim, demand, action
or suit in the event that the Sub-Adviser has been found to be without fault and
GEIM has been found at fault (i) by the final judgment of a court of competent
jurisdiction or (ii) in any order of settlement of any claim, demand, action or
suit that has been approved by the Board of Directors of GEIM.
(b) The Sub-Adviser agrees to indemnify GEIM, its officers and
directors, and any person who controls GEIM within the meaning of Section 15 of
the 1933 Act for any loss or expense (including attorneys' fees) arising out of
any claim, demand, action or suit in the event that GEIM has been found to be
without fault and the Sub-Adviser has been found at fault (i) by the final
judgment of a court of competent jurisdiction or (ii) in any order of settlement
of any claim, demand, action or suit that has been approved by the Board of
Directors of the Sub-Adviser.
8. Representations of Sub-Adviser. The Sub-Adviser represents,
warrants and agrees as follows:
(a) The Sub-Adviser (i) is a "bank" as defined by the Advisers
Act and therefore is exempt from registration under the Advisers Act and will
continue to be a "bank" as defined by the Advisers Act and exempt from
registration under the Advisors Act 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 this 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 GEIM of the occurrence of any event that
would disqualify the Sub-Adviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise; (vi)
is either registered as a Commodity Trading Adviser under the Commodity Exchange
Act with the Commodity Futures Trading Commission and the National Futures
Association, or is exempt from such registration; and (vii) is duly organized
and validly existing under the Laws of the State of New York with the power to
own and possess its assets and carry
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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 GEIM and the Board with a copy of that code of ethics, together with
evidence of its adoption. Within fifteen days of the end of the last calendar
quarter of each year that this Agreement is in effect, a general partner of the
Sub-Adviser shall certify to GEIM 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 GEIM, the Sub-Adviser shall permit GEIM, 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.
(c) The Sub-Adviser will notify GEIM of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel of the
Sub-Adviser, including in particular portfolio management personnel responsible
for the Fund's assets, in each case prior to or promptly after such change.
9. Representations and Warranties of GEIM. GEIM represents,
warrants and agrees that GEIM (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 GEIM of the Advisory Agreement does not contravene or constitute
a default under any agreement binding upon GEIM; (v) will promptly notify the
Adviser of the occurrence of any event that would disqualify GEIM 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 of Delaware with the power to own and possess its assets and carry on
its business as it is now being conducted.
10. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Sub-Adviser and GEIM
pursuant to Sections 8 and 9, 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.
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11. Duration and Termination.
(a) This Agreement shall become effective upon the date first
above written and will continue in effect until __________, 1999 and will
continue automatically 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 "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
GEIM: (i) upon 60 days' written notice to the Sub-Adviser; (ii) upon material
breach by the Sub-Adviser of any of the representations and warranties set forth
in Paragraph 8 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 GEIM. This Agreement will terminate automatically in the
event of its assignment or upon termination of the Advisory Agreement.
12. 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 Trust receives
an SEC order or opinion of counsel permitting it to modify the Agreement without
such vote).
13. 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.
14. 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
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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.
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.
Attest: GE INVESTMENT MANAGEMENT INCORPORATED
BY:_______________________________
Name:
Title:
Attest: XXXXX BROTHERS XXXXXXXX & CO.
BY:_______________________________
Name:
Title:
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