1
EXHIBIT 5(b)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 14th day of November, 1997, by and between
XXXXXXX XXXXX ASSET MANAGEMENT, L.P., a Delaware limited partnership
(hereinafter referred to as "MLAM"), and XXXXXXX XXXXX ASSET MANAGEMENT U.K.
LIMITED, a corporation organized under the laws of England and Wales
(hereinafter referred to as "MLAM U.K.").
W I T N E S S E T H:
WHEREAS, XXXXXXX XXXXX STRATEGIC DIVIDEND FUND (the "Fund") is a
Massachusetts business trust engaged in business as a diversified, open-end
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, MLAM and MLAM U.K. are engaged principally in rendering
investment advisory services and are registered as investment advisers under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, MLAM U.K. is regulated by the Investment Management
Regulatory Organization, a self-regulating organization recognized under the
Financial Services Act of 1986 of the United Kingdom (hereinafter referred to as
"IMRO"), and the conduct of its investment business is regulated by IMRO; and
WHEREAS, MLAM has entered into a management agreement (the
"Management Agreement") dated August 10, 1987, pursuant to which
2
MLAM provides management and investment and advisory services to the Fund; and
WHEREAS, MLAM U.K. is willing to provide investment advisory
services to MLAM in connection with the Fund's operations on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, MLAM U.K. and MLAM hereby agree as follows:
ARTICLE I
Duties of MLAM U.K.
MLAM hereby employs MLAM U.K. to act as investment adviser to MLAM
and to furnish, or arrange for affiliates to furnish, the investment advisory
services described below, subject to the broad supervision of MLAM and the Fund,
for the period and on the terms and conditions set forth in this Agreement.
MLAM U.K. hereby accepts such employment and agrees during such period, at its
own expense, to render, or arrange for the rendering of, such services and to
assume the obligations herein set forth for the compensation provided for
herein. MLAM and its affiliates shall for all purposes herein be deemed a
Non-private Customer as defined under the rules promulgated by IMRO (hereinafter
referred to as the "IMRO Rules"). MLAM U.K. and its affiliates shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no
2
3
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
MLAM U.K. shall have the right to make unsolicited calls on MLAM and
shall provide MLAM with such investment research, advice and supervision as the
latter may from time to time consider necessary for the proper supervision of
the assets of the Fund; shall make recommendations from time to time as to
which securities shall be purchased, sold or exchanged and what portion of the
assets of the Fund shall be held in the various securities in which the Fund
invests, options, futures, options on futures or cash; all of the foregoing
subject always to the restrictions of the Articles of Incorporation and By-Laws
of the Fund, as they may be amended and/or restated from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions as
the same are set forth in the currently effective prospectus and statement of
additional information relating to the shares of the Fund under the Securities
Act of 1933, as amended (the "Prospectus" and "Statement of Additional
Information", respectively). MLAM U.K. shall make recommendations and effect
transactions with respect to foreign currency matters, including foreign
exchange contracts, foreign currency options, foreign currency futures and
related options on foreign currency futures and forward foreign currency
transactions. MLAM U.K. shall also make recommendations or take
3
4
action as to the manner in which voting rights, rights to consent to corporate
action and any other rights pertaining to the portfolio securities of the Fund
shall be exercised.
MLAM U.K. will not hold money on behalf of MLAM or the Fund, nor
will MLAM U.K. be the registered holder of the registered investments of MLAM
or the Fund or be the custodian of documents or other evidence of title.
ARTICLE II
Allocation of Charges and Expenses
MLAM U.K. assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement and shall
at its own expense provide the office space, equipment and facilities which it
is obligated to provide under Article I hereof and shall pay all compensation
of officers of the Fund and all Trustees of the Fund who are affiliated persons
of MLAM U.K.
ARTICLE III
Compensation of MLAM U.K.
For the services rendered, the facilities furnished and expenses
assumed by MLAM U.K., MLAM shall pay to MLAM U.K. a fee in an amount to be
determined from time to time by MLAM and MLAM U.K. but in no event in excess of
the amount that MLAM actually receives for providing services to the Fund
pursuant to the Management Agreement.
4
5
ARTICLE IV
Limitation of Liability of MLAM U.K.
MLAM U.K. shall not be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
in the performance of sub-advisory services rendered with respect to the Fund,
except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. As used in this Article IV, MLAM U.K. shall
include any affiliates of MLAM U.K. performing services for MLAM contemplated
hereby and directors, officers and employees of MLAM U.K. and such affiliates.
ARTICLE V
Activities of MLAM U.K.
The services of MLAM U.K. to the Fund are not to be deemed to be
exclusive, MLAM U.K. and any person controlled by or under common control with
MLAM U.K. (for purposes of this Article V referred to as "affiliates") being
free to render services to others. It is understood that Trustees, officers,
employees and shareholders of the Fund are or may become interested in MLAM U.K.
and its affiliates, as directors, officers, employees and shareholders or
otherwise and that directors, officers, employees and shareholders of MLAM U.K.
and its affiliates are or may become similarly interested in the Fund, and that
MLAM U.K. and directors, officers, employees, partners and shareholders of its
5
6
affiliates may become interested in the Fund as shareholders or otherwise.
ARTICLE VI
MLAM U.K. Statements Pursuant to IMRO Rules
Any complaints concerning MLAM U.K. should be in writing addressed
to the attention of the Managing Director of MLAM U.K. MLAM has the right to
obtain from MLAM U.K. a copy of the IMRO complaints procedure and to approach
IMRO and the Investment Ombudsman directly.
MLAM U.K. may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding Investments Not Readily
Realisable (as that term is used in the IMRO Rules) or investments denominated
in a currency other than British pound sterling. There can be no certainty that
market makers will be prepared to deal in unlisted or thinly traded securities
and an accurate valuation may be hard to obtain. The value of investments
recommended by MLAM U.K. may be subject to exchange rate fluctuations which may
have favorable or unfavorable effects on investments.
MLAM U.K. may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding options, futures or
contracts for differences. Markets can be highly volatile and such investments
carry a high degree of risk of loss exceeding the original investment and any
margin on deposit.
6
7
ARTICLE VII
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until the date of termination of the
Management Agreement (but not later than two years after the date hereof) and
thereafter, but only so long as such continuance is specifically approved at
least annually by (i) the Trustees of the Fund or by the vote of a majority of
the outstanding voting securities of the Fund and (ii) a majority of those
Trustees who 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.
This Agreement may be terminated at any time, without the payment of
any penalty, by MLAM or by vote of a majority of the outstanding voting
securities of the Fund, or by MLAM U.K., on sixty days' written notice to the
other party. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Management Agreement. Any
termination shall be without prejudice to the completion of transactions
already initiated.
7
8
ARTICLE VIII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved by(i) the Trustees of the Fund or by the vote of a
majority of outstanding voting securities of the Fund and (ii) a majority of
those Trustees who 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.
ARTICLE IX
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE X
Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein,
8
9
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By /s/ Xxxxxx Xxxxxx
------------------------------------------
Title:
XXXXXXX XXXXX ASSET MANAGEMENT U.K. LIMITED
By /s/ Xxxxxx Xxxxxx
------------------------------------------
Title:
9
