Exhibit No. 4(b)
SUB-ADVISORY CONTRACT
Contract made as of February 8, 2001 between XXXXXXXX XXXXXXXX ASSET
MANAGEMENT INC., a Delaware corporation ("Xxxxxxxx Xxxxxxxx"), and DSI
INTERNATIONAL MANAGEMENT, INC., a Delaware corporation ("Sub-Adviser").
RECITALS
(1) Xxxxxxxx Xxxxxxxx has entered into an Investment Advisory and
Administration Agreement, dated February 8, 2001 ("Management Agreement"), with
PaineWebber Financial Services Growth Fund Inc. ("Fund"), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended ("Investment Company Act");
(2) The Fund offers for public sale a single distinct series of shares
of common stock, which corresponds to a distinct portfolio and is known as
"PaineWebber Financial Services Growth Fund" ("Series"), and may offer
additional distinct series in the future;
(3) Under the Management Agreement, Xxxxxxxx Xxxxxxxx has agreed to
provide certain investment advisory and administrative services to the Series;
(4) The Management Agreement permits Xxxxxxxx Xxxxxxxx to delegate
certain of its duties as investment adviser thereunder to a sub-adviser;
(5) Xxxxxxxx Xxxxxxxx desires to retain the Sub-Adviser to furnish
certain investment advisory services with respect to PaineWebber Financial
Services Growth Fund; and
(6) The Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Xxxxxxxx Xxxxxxxx and the Sub-Adviser agree as follows:
1. Appointment. Xxxxxxxx Xxxxxxxx hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Series for the period and on the
terms set forth in this Contract. 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 supervision and direction of the Fund's Board of
Directors ("Board") and review by Xxxxxxxx Xxxxxxxx, and any written guidelines
adopted by the Board or Xxxxxxxx Xxxxxxxx, the Sub-Adviser will provide a
continuous investment program for the Series, including investment research and
management with respect to all securities and investments and cash equivalents
in the Series. The Sub-Adviser will determine from time to time what investments
will be purchased, retained or sold by the Series. The Sub-Adviser will be
responsible for placing purchase and sell orders for investments and for other
related transactions. The Sub-Adviser will
provide services under this Contract in accordance with the Series' investment
objective, policies and restrictions as stated in the Fund's currently effective
registration statement under the Investment Company Act, and any amendments or
supplements thereto ("Registration Statement").
(b) The Sub-Adviser agrees that, in placing orders with brokers, it
will obtain the best net result in terms of price and execution; provided that,
on behalf of the Series, the Sub-Adviser may, in its discretion, use brokers who
provide the Sub-Adviser with research, analysis, advice and similar services to
execute portfolio transactions, and the Sub-Adviser may pay to those brokers in
return for brokerage and research services a higher commission than may be
charged by other brokers, subject to the Sub-Adviser's determining in good faith
that such commission is reasonable in terms either of the particular transaction
or of the overall responsibility of the Sub-Adviser to the Series and its other
clients and that the total commissions paid by the Series will be reasonable in
relation to the benefits to the Series over the long term. In no instance will
portfolio securities be purchased from or sold to the Sub-Adviser, or any
affiliated person thereof, except in accordance with the federal securities laws
and the rules and regulations thereunder. The Sub-Adviser may aggregate sales
and purchase orders with respect to the assets of the Series with similar orders
being made simultaneously for other accounts advised by the Sub-Adviser or its
affiliates. Whenever the Sub-Adviser simultaneously places orders to purchase or
sell the same security on behalf of the Series 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 over time to each
account. Xxxxxxxx Xxxxxxxx recognizes that in some cases this procedure may
adversely affect the results obtained for the Series.
(c) The Sub-Adviser will maintain all books and records required to be
maintained pursuant to the Investment Company Act and the rules and regulations
promulgated thereunder with respect to actions by the Sub-Adviser on behalf of
the Series, and will furnish the Board and Xxxxxxxx Xxxxxxxx with such periodic
and special reports as the Board or Xxxxxxxx Xxxxxxxx reasonably may request. In
compliance with the requirements of Rule 31a-3 under the Investment Company Act,
the Sub-Adviser hereby agrees that all records that it maintains for the Series
are the property of the Fund, agrees to preserve for the periods prescribed by
Rule 31a-2 under the Investment Company Act any records that it maintains for
the Fund and that are required to be maintained by Rule 31a-1 under the
Investment Company Act, and further agrees to surrender promptly to the Fund any
records that it maintains for the Series upon request by the Fund.
(d) At such times as shall be reasonably requested by the Board or
Xxxxxxxx Xxxxxxxx, the Sub-Adviser will provide the Board and Xxxxxxxx Xxxxxxxx
with economic and investment analyses and reports and make available to the
Board and Xxxxxxxx Xxxxxxxx any economic, statistical and investment services
that the Sub-Adviser normally makes available to its institutional or other
customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price from one or more parties independent of the Sub-Adviser
for each portfolio security for which the custodian does not obtain prices in
the ordinary course of business from an automated pricing service.
2
3. Further Duties. In all matters relating to the performance of this
Contract, the Sub-Adviser will act in conformity with the Fund's Articles of
Incorporation, By-Laws and Registration Statement and with the written
instructions and written directions of the Board and Xxxxxxxx Xxxxxxxx; and will
comply with the requirements of the Investment Company Act and the Investment
Advisers Act of 1940, as amended ("Advisers Act") and the rules under each,
Subchapter M of the Internal Revenue Code ("Code"), as applicable to regulated
investment companies; and all other federal and state laws and regulations
applicable to the Fund and the Series. Xxxxxxxx Xxxxxxxx agrees to provide to
the Sub-Adviser copies of the Fund's Articles of Incorporation, By-Laws,
Registration Statement, written instructions and directions of the Board and
Xxxxxxxx Xxxxxxxx, and any amendments or supplements to any of these materials
as soon as practicable after such materials become available; and further agrees
to identify to the Sub-Adviser in writing any broker-dealers that are affiliated
with Xxxxxxxx Xxxxxxxx (other than PaineWebber Incorporated and Xxxxxxxx
Xxxxxxxx itself).
4. Expenses. During the term of this Contract, the Sub-Adviser will
bear all expenses incurred by it in connection with its services under this
Contract.
5. Compensation.
(a) For the services provided and the expenses assumed by the
Sub-Adviser pursuant to this Contract, Xxxxxxxx Xxxxxxxx, not the Series, will
pay to the Sub-Adviser a sub-advisory fee, computed daily and paid monthly, at
an annual rate of 0.35% of the Series' average daily net assets.
(b) The fee shall be accrued daily and payable monthly to the
Sub-Adviser on or before the last business day of the next succeeding calendar
month.
(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion that such period
bears to the full month in which such effectiveness or termination occurs.
6. Limitation of Liability. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Series, the
Fund, its shareholders or by Xxxxxxxx Xxxxxxxx in connection with the matters to
which this Contract 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 Contract.
Nothing in this paragraph shall be deemed a limitation or waiver of any
obligation or duty that may not by law be limited or waived.
7. Representations of Sub-Adviser. The Sub-Adviser represents, warrants
and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under
the Advisers Act and will continue to be so registered for so long as this
Contract remains in effect; (ii) is not prohibited by the Investment Company Act
or the Advisers Act from performing the services contemplated by this Contract;
(iii) has met and will seek to continue to meet for so long as this Contract
remains in effect, any other applicable federal or state requirements, or the
applicable
3
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Contract; (iv) has
the authority to enter into and perform the services contemplated by this
Contract; and (v) will promptly notify Xxxxxxxx Xxxxxxxx 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 Investment
Company Act or otherwise.
(b) The Sub-Adviser has adopted a written code of ethics and
appropriate procedures (collectively, "Code") pursuant to Rule 17j-1 under the
Investment Company Act. No less frequently than annually, the Sub-Adviser shall
furnish the Board with a written report that (i) describes any issues arising
under the Code since the last report to the Board, including information about
material violations of the Code and sanctions imposed in response to the
material violations, (ii) certifies that the Code adopted is reasonably
necessary to prevent directors and employees, including access persons (as that
term is defined under Rule 17j-1) from future violations of the Code; and (iii)
provides a copy of the current Code together with both a written description of
all material changes to it and a written description of the Code's mechanisms
for compliance with Rule 17j-1 and why the Sub-Adviser believes the Code is
reasonably designed to meet the requirements of Rule 17j-1. Upon request, the
Sub-Adviser agrees to assist Xxxxxxxx Xxxxxxxx and the Board with all reasonable
requests related to the Code, including providing assurances that it is
complying with its obligations under Rule 17j-1, as it may be amended from time
to time.
(c) The Sub-Adviser has provided Xxxxxxxx Xxxxxxxx with a copy of its
Form ADV, which as of the date of this Agreement is its Form ADV as most
recently filed with the Securities and Exchange Commission ("SEC") and promptly
will furnish a copy of all amendments to Xxxxxxxx Xxxxxxxx at least annually.
(d) The Sub-Adviser will notify Xxxxxxxx Xxxxxxxx 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 who are either
the portfolio manager(s) of the Series or senior management of the Sub-Adviser,
in each case prior to, or promptly after, such change.
(e) The Sub-Adviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with the
Series, the Fund, Xxxxxxxx Xxxxxxxx or any of their respective affiliates in
offering, marketing or other promotional materials without the prior express
written consent of Xxxxxxxx Xxxxxxxx.
8. Services Not Exclusive. The services furnished by the Sub-Adviser
hereunder are not to be deemed exclusive and the Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties hereunder
in writing. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of the Sub-Adviser, who may also be a Director,
officer or employee of the Fund, to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
4
9. Duration and Termination.
(a) This Contract shall become effective upon the date first above
written, provided that this Contract shall not take effect unless it has first
been approved: (i) by a vote of a majority of those Directors of the Fund who
are not parties to this Contract or interested persons of any such party
("Independent Directors"), cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by vote of a majority of the Series'
outstanding securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually: (i) by a vote of a majority of the Independent Directors, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or by vote of a majority of the outstanding voting securities
of the Series.
(c) Notwithstanding the foregoing, this Contract may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote
of a majority of the outstanding voting securities of the Series on 60 days'
written notice to the Sub-Adviser. This Contract may also be terminated, without
the payment of any penalty, by Xxxxxxxx Xxxxxxxx: (i) upon 120 days' written
notice to the Sub-Adviser; (ii) upon material breach by the Sub-Adviser of any
representations and warranties set forth in Paragraph 7 of this Contract, if
such breach has not been cured within a 20 day period after notice of such
breach; or (iii) immediately if, in the reasonable judgment of Xxxxxxxx
Xxxxxxxx, the Sub-Adviser becomes unable to discharge its duties and obligations
under this Contract, including circumstances such as financial insolvency of the
Sub-Adviser or other circumstances that could adversely affect the Series. The
Sub-Adviser may terminate this Contract at any time, without the payment of any
penalty, on 120 days written notice to Xxxxxxxx Xxxxxxxx. This Contract will
terminate automatically in the event of its assignment or upon termination of
the Advisory Contract as it relates to the Series.
10. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract shall be
effective until approved by a vote of a majority of the Independent Directors.
11. Governing Law. This Contract shall be construed in accordance with
the Investment Company 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 Investment Company Act, the latter shall control.
12. Miscellaneous. The captions in this Contract 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 Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser,"
5
"net assets," "sale," "sell" and "security" shall have the same meaning as such
terms have in the Investment Company 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
Contract is made less restrictive by a 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 Contract may be
signed in counterparts.
13. Notices. Any notice herein required is to be in writing and is
deemed to have been given to the Sub-Adviser or Xxxxxxxx Xxxxxxxx upon receipt
of the same at their respective addresses set forth below. All written notices
required or permitted to be given under this Contract will be delivered by
personal service, by postage mail - return receipt requested or by facsimile
machine or a similar means of same day delivery which provides evidence of
receipt (with a confirming copy by mail as set forth herein). All notices
provided to Xxxxxxxx Xxxxxxxx will be sent to the attention of Xxxxxx X.
X'Xxxxxxx, Deputy General Counsel. All notices provided to the Sub-Adviser will
be sent to the attention of Xxxx X. Xxxxxxxx, Xx., Executive Vice President and
Chief Operating Officer of the Sub-Adviser.
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.
XXXXXXXX XXXXXXXX ASSET
MANAGEMENT INC.
00 Xxxx 00xx Xxxxxx
Xxxxxx: Xxx Xxxx, Xxx Xxxx 00000-0000
By: /s/ Xxxxxx XxXxxxxx By: /s/ Xxxxxx X. X'Xxxxxxx
--------------------------------- -----------------------
Name: Xxxxxx Xxxxxxxx Name: Xxxxxx X. X'Xxxxxxx
Title: Assistant Vice President Title: Senior Vice President
DSI INTERNATIONAL
MANAGEMENT, INC.
000 Xxxxxxx 0
Xxxxxx: Xxxxxxx, XX 00000
By: /s/ Xxxxxx X. Xxxxxx, Xx. By: /s/ Xxxx X. Xxxxxxxx, Xx.
--------------------------------- -------------------------
Name: Xxxxxx X. Xxxxxx, Xx. Name: Xxxx X. Xxxxxxxx, Xx.
Title: FVP Title: Executive Vice President
6
