EXHIBIT (d)(2)(iii)
INTERIM SUB-ADVISORY AGREEMENT
BETWEEN
AFBA 5STAR INVESTMENT MANAGEMENT COMPANY
AND
FINANCIAL COUNSELORS, INC.
THIS AGREEMENT is made by and between AFBA 5Star Investment Management
Company, a Virginia corporation with its principal office at 000 X. Xxxxxxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (the "Manager"), and Financial Counselors,
Inc., a _________________________________ with its principal office at 000 X.
00xx Xxxxxx, Xxxxxx Xxxx, XX 00000 (the "Sub-Adviser").
WITNESSETH:
WHEREAS, AFBA 5Star Fund, Inc. (the "Company") is an investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and is organized as a Maryland corporation;
WHEREAS, the AFBA 5Star High Yield Fund (the "Fund") is a series of the
Company;
WHEREAS, the Manager and the Company, on behalf of the Fund, have
entered into an agreement (the "Management Agreement") whereby the Manager will
provide investment advisory services to the Company with respect to the Fund;
WHEREAS, the Manager has the authority under the Management Agreement
to retain sub-advisers to assist the Manager in providing investment advisory
services to the Company;
WHEREAS, the Manager and the Sub-Adviser are registered investment
advisers under the Investment Advisers Act of 1940, as amended, and engage in
the business of providing investment advisory services; and
WHEREAS, the Board of Directors (the "Board" or the "Directors") of the
Company and the Manager desire that the Manager retain the Sub-Adviser to
supply, subject to the control and supervision of the Board and the Manager, the
following services: research, analysis, advice and recommendations with respect
to the purchase and sale of securities and the making of investment commitments;
statistical information and reports as may be reasonably required; and general
assistance in the supervision of the investments of the Fund;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. During the term of this Agreement, or any extension or
extensions thereof, the Sub-Adviser will, to the best of its ability, furnish
the foregoing services.
2. As compensation, the Manager will pay the Sub-Adviser monthly
in arrears the Sub-Adviser's costs in connection with the performance of the
foregoing services, which costs shall be subject to review by the Board or its
designee; provided, however, that such costs do not exceed 0.33% of the average
daily net assets of the Fund.
3. (a) This Agreement shall become effective on July 16,
2007; PROVIDED, HOWEVER, that this Agreement shall not become effective with
respect to the Fund unless it has first been approved by the Company's Board of
1
Directors, including a majority of those Directors who are not parties hereto or
"interested persons" (as such term is defined in the 1940 Act) of the Company.
This Agreement shall continue in effect until such time as a Sub-Advisory
Agreement between the Manager and Sub-Adviser is approved by the vote of a
majority of the outstanding voting securities of the Fund (such vote currently
scheduled to take place at a Fund shareholder meeting to be held on or about
September 12, 2007) and executed by the parties thereto, or it is terminated
pursuant to subparagraph (c) below, whichever is earlier.
(b) No amendment to this Agreement shall be effective
unless approved in the manner required by the 1940 Act and the rules thereunder.
(c) This Agreement may be terminated by the Manager or
the Company at any time, without the payment of a penalty, on written notice to
the Sub-Adviser of the Manager's or the Company's intention to do so, in the
case of the Company pursuant to action by the Board or pursuant to the vote of a
majority of the outstanding voting securities of the Fund. The Sub-Adviser may
terminate this Agreement at any time, without the payment of a penalty, on sixty
(60) days' written notice to the Manager and the Company of its intention to do
so. Upon termination of this Agreement, the obligations of all the parties
hereunder shall cease and terminate as of the date of such termination, except
for (i) any obligation to respond for a breach of this Agreement committed prior
to such termination; and (ii) the obligation of the Manager to pay to the
Sub-Adviser the compensation provided in Paragraph 2 hereof, prorated to the
date of termination. This Agreement shall automatically terminate in the event
of its assignment; provided, however, that the Sub-Adviser may assign this
Agreement to a wholly owned subsidiary as long as the Sub-Adviser guarantees
full and complete performance of all of its obligations under this Agreement.
This Agreement shall automatically terminate upon the termination of the
Management Agreement.
4. a. The Sub-Adviser shall place and execute Fund orders
for the purchase and sale of portfolio securities with broker-dealers. Subject
to the obtaining the best available execution, the Sub-Adviser is authorized to
place orders for the purchase and sale of portfolio securities for the Fund with
such broker-dealers as it may select from time to time. Subject to subparagraph
(b) below, the Sub-Adviser is also authorized to place transactions with brokers
who provide research or statistical information or analyses to the Fund, to the
Sub-Adviser, or to any other client for which the Sub-Adviser provides
investment advisory services. Subject to obtaining the best available execution,
the Sub-Adviser may also place brokerage transactions with broker-dealers who
sell shares of the Fund. Broker-dealers who sell shares of the Fund shall only
receive orders for the purchase or sale of portfolio securities to the extent
that the placing of such orders is in compliance with the Rules of the U.S.
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. The Sub-Adviser also agrees that it will cooperate with the
Company to execute instructions that brokerage transactions be allocated to
brokers or dealers who provide benefits directly to the Company or any Fund.
b. Notwithstanding the provisions of subparagraph (a)
above and subject to such policies and procedures as may be adopted by the Board
of Directors and officers of the Company, the Sub-Adviser is authorized to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
in such instances where the Sub-Adviser has determined in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such member, broker or dealer, viewed in terms
of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Company and to other clients or funds for
which the Sub-Adviser exercises investment discretion.
2
5. It is understood and agreed that the services to be rendered
by the Sub-Adviser to the Manager under the provisions of this Agreement are not
to be deemed to be exclusive, and the Sub-Adviser shall be free to render
similar or different services to others so long as its ability to render the
services provided for in this Agreement shall not be impaired thereby, and
provided further that the services to be rendered by the Sub-Adviser to the
Manager under this Agreement and the compensation provided for in Paragraph 2
hereof shall be limited solely to services with reference to the Company.
6. The Manager agrees that it will furnish currently to
Sub-Adviser all information reasonably necessary to permit Sub-Adviser to give
the advice called for under this Agreement and such information with reference
to the Company that is reasonably necessary to permit Sub-Adviser to carry out
its responsibilities under this Agreement, and the parties agree that they will
from time to time consult and make appropriate arrangements as to specific
information that it is required under this paragraph and the frequency and
manner with which it shall be supplied.
7. The Sub-Adviser shall not be liable for any error of judgment
or mistake at law or for any loss suffered by Manager of the Company in
connection with any matters to which this Agreement relates except that nothing
herein contained shall be construed to protect the Sub-Adviser against any
liability by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reckless disregard of its obligations or duties
under this agreement.
8. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and duly attested as of the 12 day of
July, 2007.
FINANCIAL COUNSELORS, INC.
By: /s/Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
Attest:
By: /s/Xxx X. Xxxxxx
--------------------------
Name: Xxx X. Xxxxxx
Title: Assistant Secretary
AFBA 5STAR INVESTMENT MANAGEMENT CO.
By: /s/Xxxxxx X. Xxxxxxxx, Xx.
--------------------------------
Name: Xxxxxx X. Xxxxxxxx, Xx.
Title: President
Attest:
By: /s/Xxxx X. Xxxxx
--------------------------------
Name: Xxxx X. Xxxxx
Title: Director of Key Accounts
3
