SUB-INVESTMENT ADVISORY AGREEMENT
Exhibit (g)(2)
AGREEMENT dated as of September 30, 2003, between ING Clarion Real Estate Income Fund, a
Delaware statutory trust (the “Trust”), ING Clarion Real Estate Securities, L.P., a Delaware
limited partnership (the “Advisor”), and ING Clarion Capital LLC, a New York limited liability
company (the “Sub-Advisor”).
WHEREAS, the Advisor has agreed to furnish investment advisory services to the Trust, a
closed-end management investment company registered under the Investment Company Act of 1940, as
amended (the “1940 Act”);
WHEREAS, the Advisor wishes to retain the Sub-Advisor to provide it with certain sub-advisory
services as described below in connection with Advisor’s advisory activities on behalf of the
Trust;
WHEREAS, the advisory agreement between the Advisor and the Trust, dated September 30, 2003
(such agreement or the most recent successor agreement between such parties relating to advisory
services to the Trust is referred to herein as the “Advisory Agreement”) contemplates that the
Advisor may subcontract investment advisory services with respect to the Trust to a sub-advisor
pursuant to a sub-advisory agreement agreeable to the Trust and approved in accordance with the
provisions of the 1940 Act; and
WHEREAS, this Agreement has been approved in accordance with the provisions of the 1940 Act,
and the Sub-Advisor is willing to furnish such services upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants herein contained and
other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by
and between the parties hereto as follows:
1. Appointment. The Advisor hereby appoints the Sub-Advisor to act as sub-advisor
with respect to the Trust and the Sub-Advisor accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Services of the Sub-Advisor. Subject to the succeeding provisions of this section,
the oversight and supervision of the Advisor and the direction and control of the Trust’s Board of
Trustees, the Sub-Advisor will perform certain of the day-to-day operations of the Trust, which may
include one or more of the following services, at the request of the Advisor: (a) acting as
investment advisor for and managing the investment and reinvestment of those assets of the Trust as
the Advisor may from time to time request and in connection therewith have complete discretion in
purchasing and selling such securities and other assets for the Trust and in voting, exercising
consents and exercising all other rights appertaining to such securities and other assets on behalf
of the Trust; (b) arranging, subject to the provisions of paragraph 3 hereof, for the purchase and
sale of securities and other assets of the Trust; (c) providing investment research and credit
analysis concerning the Trust’s investments, (d) assist the Advisor in determining what portion of
the Trust’s assets will be invested in cash, cash equivalents and money market instruments, (e)
placing orders for all purchases and sales of such investments
made for the Trust, and (f) maintaining the books and records as are required to support Trust
investment operations. At the request of the Advisor, the Sub-Advisor will also, subject to the
oversight and supervision of the Advisor and the direction and control of the Trust’s Board of
Trustees, provide to the Advisor or the Trust any of the facilities and equipment and perform any
of the services described in Section 3 of the Advisory Agreement. In addition, the Sub-Advisor will
keep the Trust and the Advisor informed of developments materially affecting the Trust and shall,
on its own initiative, furnish to the Trust from time to time whatever information the Sub-Advisor
believes appropriate for this purpose. The Sub-Advisor will periodically communicate to the
Advisor, at such times as the Advisor may direct, information concerning the purchase and sale of
securities for the Trust, including: (a) the name of the issuer, (b) the amount of the purchase or
sale, (c) the name of the broker or dealer, if any, through which the purchase or sale is effected,
(d) the CUSIP number of the instrument, if any, and (e) such other information as the Advisor may
reasonably require for purposes of fulfilling its obligations to the Trust under the Advisory
Agreement. The Sub-Advisor will provide the services rendered by it under this Agreement in
accordance with the Trust’s investment objectives, policies and restrictions (as currently in
effect and as they may be amended or supplemented from time to time) as stated in the Trust’s
Prospectus and Statement of Additional Information and the resolutions of the Trust’s Board of
Trustees.
3. Covenants. (a) In the performance of its duties under this Agreement, the
Sub-Advisor shall at all times conform to, and act in accordance with, any requirements imposed by:
(i) the provisions of the 1940 Act and the Investment Advisers Act of 1940, as amended (the
“Advisers Act”) and all applicable Rules and Regulations of the Securities and Exchange Commission
(the “SEC”); (ii) any other applicable provision of law; (iii) the provisions of the Agreement and
Declaration of Trust, as amended and restated, and By-Laws of the Trust, as such documents are
amended from time to time; (iv) the investment objectives and policies of the Trust as set forth in
its Registration Statement on Form N-2; and (v) any policies and determinations of the Board of the
Trustees of the Trust and
(b) In addition, the Sub-Advisor will: (i) place orders either directly with the issuer or
with any broker or dealer. Subject to the other provisions of this paragraph, in placing orders
with brokers and dealers, the Sub-Advisor will attempt to obtain the best price and the most
favorable execution of its orders. In placing orders, the Sub-Advisor will consider the experience
and skill of the firm’s securities traders as well as the firm’s financial responsibility and
administrative efficiency. Consistent with this obligation, the Sub-Advisor may select brokers on
the basis of the research, statistical and pricing services they provide to the Trust and other
clients of the Advisor or the Sub-Advisor. Information and research received from such brokers will
be in addition to, and not in lieu of, the services required to be performed by the Sub-Advisor
hereunder. A commission paid to such brokers may be higher than that which another qualified broker
would have charged for effecting the same transaction, provided that the Sub-Advisor determines in
good faith that such commission is reasonable in terms either of the transaction or the overall
responsibility of the Advisor and the Sub-Advisor to the Trust’s and their other clients and that
the total commissions paid by the Trust will be reasonable in relation to the benefits to the Trust
over the long-term. In addition, the Sub-Advisor is authorized to take into account the sale of
shares of the Trust in allocating purchase and sale orders for portfolio securities to brokers or
dealers (including brokers and dealers that are affiliated with the Advisor or the Sub-Advisor),
provided that the Sub-Advisor believes that the quality of the transaction
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and the commission are comparable to what they would be with other qualified firms. In no
instance, however, will the Trust’s securities be purchased from or sold to the Advisor, the
Sub-Advisor or any affiliated person thereof, except to the extent permitted by the SEC or by
applicable law;
(ii) maintain books and records with respect to the Trust’s securities
transactions and will render to the Advisor and the Trust’s Board of Trustees such
periodic and special reports as they may request;
(iii) maintain a policy and practice of conducting its investment advisory
services hereunder independently of the commercial banking operations of its
affiliates. When the Sub-Advisor makes investment recommendations for the Trust,
its investment advisory personnel will not inquire or take into consideration
whether the issuer of securities proposed for purchase or sale for the Trust’s
account are customers of the commercial department of its affiliates; and
(iv) treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust, and the Trust’s prior, current
or potential shareholders, and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be withheld where the Sub-Advisor may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when so
requested by the Trust.
4. Services Not Exclusive. Nothing in this Agreement shall prevent the Sub-Advisor or
any officer, employee or other affiliate thereof from acting as investment advisor for any other
person, firm or corporation, or from engaging in any other lawful activity, and shall not in any
way limit or restrict the Sub-Advisor or any of its officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting; provided, however, that the Sub-Advisor will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations under this
Agreement.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Sub-Advisor hereby agrees that all records which it maintains for the Trust are the
property of the Trust and further agrees to surrender promptly to the Trust any such records upon
the Trust’s request. The Sub-Advisor further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act (to
the extent such books and records are not maintained by the Advisor).
6. Agency Cross Transactions. From time to time, the Sub-Advisor or brokers or
dealers affiliated with it may find themselves in a position to buy for certain of their brokerage
clients (each an “Account”) securities which the Sub-Advisor’s investment advisory clients wish to
sell, and to sell for certain of their brokerage clients securities which advisory clients wish to
buy. Where one of the parties is an advisory client, the Advisor or the affiliated
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broker or dealer cannot participate in this type of transaction (known as a cross transaction)
on behalf of an advisory client and retain commissions from both parties to the transaction without
the advisory client’s consent. This is because in a situation where the Sub-Advisor is making the
investment decision (as opposed to a brokerage client who makes his own investment decisions), and
the Sub-Advisor or an affiliate is receiving commissions from one or both sides of the transaction,
there is a potential conflicting division of loyalties and responsibilities on the Sub-Advisor’s
part regarding the advisory client. The SEC has adopted a rule under the Advisers Act which
permits the Sub-Advisor or its affiliates to participate on behalf of an Account in agency cross
transactions if the advisory client has given written consent in advance. By execution of this
Agreement, the Trust authorizes the Sub-Advisor or its affiliates to participate in agency cross
transactions involving an Account. The Trust may revoke its consent at any time by written notice
to the Sub-Advisor.
7. Expenses. During the term of this Agreement, the Sub-Advisor will bear all costs
and expenses of its employees and any overhead incurred by the Sub-Advisor in connection with its
duties hereunder; provided that the Board of Trustees of the Trust may approve reimbursement to the
Sub-Advisor of the pro-rata portion of the salaries, bonuses, health insurance, retirement benefits
and all similar employment costs for the time spent on Trust operations (other than the provision
of investment advice and administrative services required to be provided hereunder) of all
personnel employed by the Sub-Advisor who devote substantial time to the Trust operations or the
operations of other investment companies advised or sub-advised by the Sub-Advisor.
8. Compensation.
(a) The Advisor agrees to pay to the Sub-Advisor and the Sub-Advisor agrees to accept as full
compensation for all services rendered by the Sub-Advisor as such, a monthly fee in arrears at an
annual rate equal to 100% of the investment advisory fee received by the Advisor in respect of that
portion of the Trust’s average daily net assets managed by the Sub-Adviser (the “Sub-Advised
Portion”) plus the proportionate amount of the outstanding leverage of the Trust attributable to
the Sub-Advised Portion; provided, however, that the Sub-Advisor shall not receive
any payments pursuant to this Section 8(a) until the Advisor has received an investment advisory
fee in an amount equal to the offering costs and expenses assumed by the Advisor in the Trust’s
initial public offering of common shares.
(b) For purposes of this Agreement, the Managed Assets of the Trust shall be calculated
pursuant to the procedures adopted by resolutions of the Trustees of the Trust for calculating the
value of the Trust’s assets or delegating such calculations to third parties.
9. Indemnity.
(a) The Trust hereby agrees to indemnify the Sub-Advisor and each of the Sub-Advisor’s
directors, officers, employees, agents, associates and controlling persons and the directors,
partners, members, officers, employees and agents thereof (including any individual who serves at
the Sub-Advisor’s request as director, officer, partner, member, trustee or the like of another
entity) (each such person being an “Indemnitee”) against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
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penalties, and counsel fees (all as provided in accordance with applicable state law)
reasonably incurred by such Indemnitee in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court or administrative or
investigative body in which such Indemnitee may be or may have been involved as a party or
otherwise or with which such Indemnitee may be or may have been threatened, while acting in any
capacity set forth herein or thereafter by reason of such Indemnitee having acted in any such
capacity, except with respect to any matter as to which such Indemnitee shall have been adjudicated
not to have acted in good faith in the reasonable belief that such Indemnitee’s action was in the
best interest of the Trust and furthermore, in the case of any criminal proceeding, so long as such
Indemnitee had no reasonable cause to believe that the conduct was unlawful; provided, however,
that (1) no Indemnitee shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such Indemnitee arising by reason of (i) willful misfeasance, (ii)
bad faith, (iii) gross negligence or (iv) reckless disregard of the duties involved in the conduct
of such Indemnitee’s position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as “disabling conduct”), (2) as to any matter disposed of by
settlement or a compromise payment by such Indemnitee, pursuant to a consent decree or otherwise,
no indemnification either for said payment or for any other expenses shall be provided unless there
has been a determination that such settlement or compromise is in the best interests of the Trust
and that such Indemnitee appears to have acted in good faith in the reasonable belief that such
Indemnitee’s action was in the best interest of the Trust and did not involve disabling conduct by
such Indemnitee and (3) with respect to any action, suit or other proceeding voluntarily prosecuted
by any Indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such Indemnitee was authorized by a majority of the full Board
of Trustees of the Trust.
(b) The Trust shall make advance payments in connection with the expenses of defending any
action with respect to which indemnification might be sought hereunder if the Trust receives a
written affirmation of the Indemnitee’s good faith belief that the standard of conduct necessary
for indemnification has been met and a written undertaking to reimburse the Trust unless it is
subsequently determined that such Indemnitee is entitled to such indemnification and if the
trustees of the Trust determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be met: (A) the
Indemnitee shall provide a security for such Indemnitee-undertaking, (B) the Trust shall be insured
against losses arising by reason of any lawful advance, or (C) a majority of a quorum consisting of
trustees of the Trust who are neither “interested persons” of the Trust (as defined in Section
2(a)(19) of the 0000 Xxx) nor parties to the proceeding (“Disinterested Non-Party Trustees”) or an
independent legal counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the
Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification hereunder shall be made (1) by a final
decision on the merits by a court or other body before whom the proceeding was brought that such
Indemnitee is not liable by reason of disabling conduct, or (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of the Trust, or (ii) if
such a quorum is not obtainable or even, if obtainable, if a majority vote of such quorum so
directs, independent legal counsel in a written opinion. All determinations that advance payments
in connection with the expense of defending any
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proceeding shall be authorized shall be made in accordance with the immediately preceding
clause (2) above.
The rights accruing to any Indemnitee under these provisions shall not exclude any other right
to which such Indemnitee may be lawfully entitled.
10. Limitation on Liability.
(a) The Sub-Advisor will not be liable for any error of judgment or mistake of law or for any
loss suffered by the Advisor or by the Trust in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation
for services or 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 duties under this
Agreement.
(b) Notwithstanding anything to the contrary contained in this Agreement, the parties hereto
acknowledge and agree that, as provided in Section 5.1 of Article V of the Declaration of Trust,
this Agreement is executed by the Trustees and/or officers of the Trust, not individually but as
such Trustees and/or officers of the Trust, and the obligations hereunder are not binding upon any
of the Trustees or Shareholders individually but bind only the estate of the Trust.
11. Duration and Termination. This Agreement shall become effective as of the date
hereof and, unless sooner terminated with respect to the Trust as provided herein, shall continue
in effect for a period of two years. Thereafter, if not terminated, this Agreement shall continue
in effect with respect to the Trust for successive periods of 12 months, provided such continuance
is specifically approved at least annually by both (a) the vote of a majority of the Trust’s Board
of Trustees or a vote of a majority of the outstanding voting securities of the Trust at the time
outstanding and entitled to vote and (b) by the vote of a majority of the Trustees, who are not
parties to this Agreement or interested persons (as such term is defined in the 0000 Xxx) of any
such party, cast in person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Trust or the Advisor at any
time, without the payment of any penalty, upon giving the Sub-Advisor 60 days’ notice (which notice
may be waived by the Sub-Advisor), provided that such termination by the Trust or the Advisor shall
be directed or approved by the vote of a majority of the Trustees of the Trust in office at the
time or by the vote of the holders of a majority of the voting securities of the Trust at the time
outstanding and entitled to vote, or by the Sub-Advisor on 60 days’ written notice (which notice
may be waived by the Trust and the Advisor), and will terminate automatically upon any termination
of the Advisory Agreement between the Trust and the Advisor. This Agreement will also immediately
terminate in the event of its assignment. (As used in this Agreement, the terms “majority of the
outstanding voting securities,” “interested person” and “assignment” shall have the same meanings
of such terms in the 1940 Act.)
12. Notices. Any notice under this Agreement shall be in writing to the other party
at such address as the other party may designate from time to time for the receipt of such notice
and shall be deemed to be received on the earlier of the date actually received or on the fourth
day after the postmark if such notice is mailed first class postage prepaid.
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13. 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. Any amendment
of this Agreement shall be subject to the 1940 Act.
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 on, and shall inure to the benefit of the parties hereto
and their respective successors.
15. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York for contracts to be performed entirely therein without
reference to choice of law principles thereof and in accordance with the applicable provisions of
the 1940 Act.
16. Counterparts. This Agreement may be executed in counterparts by the parties
hereto, each of which shall constitute an original counterpart, and all of which, together, shall
constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized officers designated below as of the day and year first above written.
| ING CLARION REAL ESTATE SECURITIES, L.P. |
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| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Senior Vice President | |||
| ING CLARION CAPITAL LLC |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| ING CLARION REAL ESTATE INCOME FUND |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Secretary | |||
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized officers designated below as of the day and year first above written.
| ING CLARION REAL ESTATE SECURITIES, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| ING CLARION CAPITAL LLC |
||||
| By: | /s/ Xxxxxx Xxxxxx | |||
| Name: | Xxxxxx Xxxxxx | |||
| Title: | President | |||
| ING CLARION REAL ESTATE INCOME FUND |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
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