Exhibit 5(b)
THE XXXXXX SQUARE INTERNATIONAL SECURITIES FUND, INC.
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the 1st day of February, 1993,
among The Xxxxxx Square International Securities Fund, Inc., a corporation
organized under the laws of the State of Maryland (the "Fund"), Wilmington
Trust Company ("WTC"), a corporation organized under the laws of the State of
Delaware and Xxxxxxx, Xxxxxxx & Xxxxx, Inc., a corporation organized under the
laws of the State of Delaware (the "Sub-Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company,
subject to the rules and regulations promulgated under the 1940 Act and offers
for public sale distinct series of shares of common stock ("portfolios"), par
value $0.01 per share;
WHEREAS, at the present time, the Fund has one portfolio, The Xxxxxx
Square International Equity Fund (the "Portfolio");
WHEREAS, each such share of the Portfolio represents an undivided
interest in the assets, subject to the liabilities, allocated to the
Portfolio; and
WHEREAS, WTC (the "Adviser") acts as the investment adviser for the Fund
pursuant to the terms of an Investment Advisory Agreement between the Fund and
the Adviser under which the Adviser is responsible for the coordination of
investment of the Portfolio's assets in portfolio securities. However,
specific portfolio purchases and sales for the investment portfolio of the
Portfolio of the Fund, or a portion thereof, may be made by advisory
organizations recommended by the Adviser and approved by the Board of
Directors of the Fund;
NOW THEREFORE, the Fund, the Adviser and the Sub-Adviser agree as
follows:
1. APPOINTMENT OF SUB-ADVISER. The Fund being duly authorized hereby
appoints and employs the Sub-Adviser as a discretionary portfolio
manager, on the terms and conditions set forth herein, of those assets of
the Portfolio which the Adviser determines to assign to the Sub-Adviser
(those assets being referred to as the "Portfolio Account"). The Adviser
may, from time to time, with the consent of the Sub-Adviser, make
additions to the Portfolio Account and may, from time to time, upon
notice to the Sub-Adviser, make withdrawals from the Portfolio Account;
provided, however, that the Adviser at any time on oral or written notice
to the Sub-Adviser may make withdrawals of cash and cash equivalents from
the Portfolio Account. The consent of the Sub-Adviser shall not be
required for the allocation of cash available to the Portfolio Account
for investment as a result of the proceeds of sales of shares of the
Portfolio exceeding redemption of shares of the Portfolio.
SUBADVAG.DOC
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Sub-Adviser
accepts the appointment as a discretionary portfolio manager and agrees
to use its professional judgment to make investment decisions for the
Portfolio with respect to the investments of the Portfolio Account and to
implement such decisions on a timely basis in accordance with the
provisions of this Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF THE SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for
investment by the Portfolio, to purchase and to sell securities for the
Portfolio Account, and upon making any purchase or sale decision, to
place orders for the execution of such portfolio transactions in
accordance with Sections 5 and 6 hereof and Schedule A hereto (as amended
from time to time). In providing portfolio management services to the
Portfolio Account, the Sub-Adviser shall be subject to and shall conform
to such investment restrictions as are set forth in the 1940 Act and the
rules thereunder, the Internal Revenue Code, applicable state securities
laws, applicable statutes and regulations of foreign jurisdictions, the
supervision and control of the Board of Directors of the Fund, such
specific instructions as the Board of Directors may adopt and communicate
to the Sub-Adviser, the investment objective, policies and restrictions
of the Fund applicable to the Portfolio furnished pursuant to Section 4
of this Agreement, the provisions of Schedule A and Schedule B hereto and
other instructions communicated to the Sub-Adviser by the Adviser. The
Sub-Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Portfolio Account, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. The Sub-Adviser shall
maintain on behalf of the Fund the records listed in Schedule B hereto
(as amended from time to time). At the Fund's reasonable request, the
Sub-Adviser will consult with the Fund or with the Adviser with respect
to any decision made by it with respect to the investments of the
Portfolio Account.
4. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Fund will provide
the Sub-Adviser with the statement of investment objective, policies and
restrictions applicable to the Fund as contained in the Fund's Prospectus
and Statement of Additional Information, and any instructions adopted by
the Board of Directors supplemental thereto. The Fund will provide the
Sub-Adviser with such further information concerning the investment
objective, policies and restrictions applicable thereto as the Sub-
Adviser may from time to time reasonably request. The Fund retains the
right, on written notice to the Sub-Adviser from the Fund or the Adviser,
to modify any such objective, policies or restrictions in any manner at
any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated by payment
to or delivery by the custodian designated by the Fund (the "Custodian"),
or such depositories or agents as may be designated by the Custodian in
writing, of all cash and/or securities due to or from the Portfolio
Account, and the Sub-Adviser shall not have possession or custody thereof
or any responsibility or liability with respect thereto. The Sub-Adviser
shall advise the Custodian and confirm in writing to the Fund and to the
administrator designated by the Fund or any other designated agent of the
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Fund, all investment orders for the Portfolio Account placed by it with
brokers and dealers at the time and in the manner set forth in Schedule B
hereto (as amended from time to time). The Fund shall issue to the
Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Sub-Adviser. The Fund
shall be responsible for all custodial arrangements and the payment of
all custodial charges and fees, and, upon giving proper instructions to
the Custodian, the Sub-Adviser shall have no responsibility or liability
with respect to custodial arrangements or the acts, omissions or other
conduct of the Custodian, except that it shall be the responsibility of
the Sub-Adviser to take appropriate action if the Custodian fails to
confirm in writing proper execution of the instructions.
6. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio
transactions initiated by the Sub-Adviser, and for the selection of the
markets on or in which the transactions will be executed, subject to the
following and subject to conformance with the policies disclosed in the
Fund's Prospectus and Statement of Additional Information.
(a) In doing so, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution.
Consistent with this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other
clients of the Sub-Adviser may be a party. It is understood that
neither the Fund, the Adviser nor the Sub-Adviser has adopted a
formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and
market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission.
Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolio with such certain
brokers, subject to review by the Fund's Board of Directors from
time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Sub-Adviser in connection with its
services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as
other clients, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price and efficient execution.
In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund in respect of
the Portfolio and to such other clients.
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The Adviser shall render regular reports to the Fund of the total
brokerage business placed and the manner in which the allocation has
been accomplished.
(b) The Sub-Adviser agrees that it will not execute without the prior
written approval of the Adviser any portfolio transactions for the
Portfolio Account with a broker or dealer which is (i) an affiliated
person of the Fund, including the Adviser, the Consultant (as
defined in the Investment Advisory Agreement between the Fund and
the Adviser) or any Sub-Adviser for any Portfolio of the Fund; (ii)
a principal underwriter of the Fund's shares; or (iii) an affiliated
person of such an affiliated person or principal underwriter. The
Adviser agrees that it will provide the Sub-Adviser with a list of
such brokers and dealers.
7. PROXIES. The Fund will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Portfolio Account may be
invested from time to time. At the request of the Fund or the Adviser,
the Sub-Adviser shall provide the Fund with its recommendations as to the
voting of such proxies.
8. REPORTS TO THE SUB-ADVISER. The Fund will provide the Sub-Adviser with
such periodic reports concerning the status of the Portfolio Account as
the Sub-Adviser may reasonably request.
9. FEES FOR SERVICES. The compensation of the Sub-Adviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the provisions of
the Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub-Adviser,
and the Sub-Adviser agrees to seek payment of the Sub-Adviser's fees
solely from the Adviser.
10. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Fund acknowledges
that the Sub-Adviser or one or more of its affiliated persons may have
investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that the Sub-Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of Section 6(b) hereof, the Fund agrees that
the Sub-Adviser or its affiliated persons may give advice or exercise
investment responsibility and take such other action with respect to
other Affiliated Accounts which may differ from the advice given or the
timing or nature of action taken with respect to the Portfolio Account,
provided that the Sub-Adviser acts in good faith, and provided further,
that it is the Sub-Adviser's policy to allocate, within its reasonable
discretion, investment opportunities to the Portfolio Account over a
period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objective and policies of
the Portfolio and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio
Account may have an interest from time to time, whether in transactions
4
which involve the Portfolio Account or otherwise. The Sub-Adviser shall
have no obligation to acquire for the Portfolio Account a position in any
investment which any Affiliated Account may acquire, and the Fund shall
have no first refusal, co-investment or other rights in respect of any
such investment, either for the Portfolio Account or otherwise.
11. CERTIFICATE OF AUTHORITY. The Fund, the Adviser and the Sub-Adviser
shall furnish to each other from time to time certified copies of the
resolutions of their Boards of Directors or executive committees, as the
case may be, evidencing the authority of officers and employees who are
authorized to act on behalf of the Fund, a Portfolio Account, the Adviser
and/or the Sub-Adviser.
12. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or
instructions from the Fund or the Adviser, provided, however, that such
acts or omissions shall not have resulted from the Sub-Adviser's willful
misfeasance, bad faith, gross negligence or a reckless disregard of duty.
Nothing in this Section 12 shall be construed in a manner inconsistent
with Section 17(i) of the 1940 Act.
13. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser and
the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all material non public information
pertaining to the Portfolio Account and the actions of the Sub-Adviser,
the Adviser and the Fund in respect thereof.
14. ASSIGNMENT. No assignment of this Agreement shall be made by the Sub-
Adviser, and this Agreement shall terminate automatically in the event of
such assignment. The Sub-Adviser shall notify the Fund and the Adviser
in writing sufficiently in advance of any proposed change of control
within the meaning of the 1940 Act to enable the Fund and the Adviser to
take the steps necessary to enter into a new contract with the Sub-
Adviser.
15. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE FUND. The Fund
represents, warrants and agrees that:
(a) The Sub-Adviser has been duly appointed by the Board of Directors of
the Fund to provide investment services to the Portfolio Account as
contemplated hereby.
(b) The Fund will deliver to the Sub-Adviser a true and complete copy of
its then current Prospectus and Statement of Additional Information
as effective from time to time and such other documents or
instruments governing the investment of the Portfolio Account and
such other information as is necessary for the Sub-Adviser to carry
out its obligations under this Agreement.
(c) The Fund is currently in compliance and shall at all times continue
to comply with the requirements imposed upon the Fund by applicable
law and regulations.
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16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
(a) The Adviser has been duly authorized by the Board of Directors of
the Fund to delegate to the Sub-Adviser the provision of investment
services to the Portfolio Account as contemplated hereby.
(b) The Adviser is currently in compliance and shall at all times
continue to comply with the requirements imposed upon the Adviser by
applicable law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The Sub-
Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act"); or is a "bank" as
defined in Section 202(a)(2) of the Advisers Act or an "insurance
company" as defined in Section 202(a)(2) of the Advisers Act.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the 1940 Act,
the records identified in Schedule B. The Sub-Adviser agrees that
such records (unless otherwise indicated on Schedule B) are the
property of the Fund, and will be surrendered to the Fund promptly
upon request.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Portfolio Account as the
Adviser or the Fund may from time to time require to ensure
compliance with the 1940 Act, the Internal Revenue Code, applicable
state securities laws and applicable statutes and regulations of
foreign jurisdictions.
(d) The Sub-Adviser will adopt a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and Section 204A
of the Advisers Act and will provide the Fund with a copy of the
code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this
Agreement is in effect, the president or a vice president or general
partner of the Sub-Adviser shall certify to the Fund that the Sub-
Adviser has complied with the requirements of Rule 17j-1 and Section
204A 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 the Fund, the Sub-Adviser
shall permit the Fund, its employees or its agents to examine the
reports required to be made to the Sub-Adviser by Rule 17j-1(c)(1).
(e) The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of
such amendment to the Fund and the Adviser.
(f) The Sub-Adviser will immediately notify the Fund and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser
6
from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement among the Sub-Adviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Directors and the shareholders of the Portfolio
in the manner required by the 1940 Act and the rules thereunder, subject
to any applicable exemptive order of the Securities and Exchange
Commission modifying the provisions of the 1940 Act with respect to
approval of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
first written above and shall remain in force for a period of time of two
years from such date, and from year to year thereafter but only so long
as such continuance is specifically approved at least annually by the
vote of a majority of the Directors who are not interested persons of the
Fund, the Adviser or the Sub-Adviser, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that this Agreement may be
continued "annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder.
20. TERMINATION.
(a) This Agreement may be terminated by the Fund (by a vote of the Board
of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio), without the payment
of any penalty, immediately upon written notice to the other parties
hereto, in the event of a breach of any provision thereof by the
party so notified or otherwise by the Fund, upon thirty (30) days'
written notice to the other parties hereto, but any such termination
shall not affect the status, obligations or liabilities of any party
hereto to the others.
(b) This Agreement may also be terminated by the Adviser or the Sub-
Adviser, immediately upon written notice to the other parties
hereto, in the event of a breach of any provision thereof by the
party so notified or otherwise by the Adviser or the Sub-Adviser
upon sixty (60) days' written notice to the other parties hereto,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others.
21. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person," "principal underwriter" and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to any applicable orders of exemption issued by the
Securities and Exchange Commission.
22. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties
to this Agreement at their principal place of business.
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23. SEVERABILITY. 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.
24. GOVERNING LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
THE XXXXXX SQUARE INTERNATIONAL SECURITIES FUND,
INC. on behalf of THE XXXXXX SQUARE
INTERNATIONAL EQUITY FUND
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx, President
XXXXXXX, XXXXXXX & XXXXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Title: Managing Director
------------------------
WILMINGTON TRUST COMPANY
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx, Senior Vice President
SCHEDULES: A. Operating Procedures
B. Record Keeping Requirements
C. Fee Schedule
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SCHEDULE A
THE XXXXXX SQUARE INTERNATIONAL SECURITIES FUND, INC.
OPERATING PROCEDURES
From time to time the Adviser shall issue written Operating Procedures which
shall govern reporting of transactions and other matters so as to facilitate
(i) the monitoring of the Fund's compliance with the restrictions and
limitations applicable to the operations of a registered investment company
and (ii) the preparation of reports to the Board of Directors, regulatory
authorities and shareholders.
SUBSTANTIVE LIMITATIONS
A. The Sub-Adviser will manage the Portfolio Account as if the Portfolio
Account were a registered investment company subject to the investment
objective, policies and limitations applicable to the Portfolio stated in
the Fund's Prospectus and Statement of Additional Information, as from
time to time in effect, included in the Fund's registration statement or
a supplement thereto under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), as each may be amended from time to
time; provided, however, that if a more stringent restriction or
limitation than any of the foregoing is stated in Section B of this
Schedule, the more stringent restriction or limitation shall apply to the
Portfolio Account.
B. The Sub-Adviser shall not, without the written approval of the Adviser,
on behalf of the Portfolio Account:
1. purchase securities of any issuer if such purchase would cause more
than 3.33% of the voting securities of such issuer to be held in the
Portfolio Account (1940 Act Section 5(b)(1); IRC* Section 851(b)(4)
(a)(ii));
2. purchase securities if such purchase would cause:
a. more than 1% of the outstanding voting stock of any other
investment company to be held in the Portfolio Account (1940
Act Section 12(d)(1)(A)(i)),
b. securities issued by any other investment company having an
aggregate value in excess of 5% of the value of the total
assets in the Portfolio Account to be held in the Portfolio
Account (1940 Act Section 12(d)(1)(A)(i)),
c. securities issued by all other investment companies having an
aggregate value in excess of 10% of the value of the total
assets of the Portfolio Account to be held in the Portfolio
Account (1940 Act Section 12(d)(1)(A)(iii)),
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* Internal Revenue Code
A-1
d. more than 3.33% of the outstanding voting stock of any
registered closed-end investment company to be held in the
Portfolio Account, and by any other investment company having
as its investment adviser any of the Sub-Advisers, the Adviser,
the Consultant (as defined in the Investment Advisory
Agreement), or any other investment adviser to the Fund (1940
Act Section 12(d)(1)(C));
3. purchase securities of any insurance company if such purchase would
cause more than 3.33% of the outstanding voting securities of any
insurance company to be held in the Portfolio Account (1940 Act
Section 12(d)(2)); or
4. purchase securities of or any interest in any person who is a
broker, a dealer, is engaged in the business of underwriting, is an
investment adviser to an investment company or is a registered
investment adviser under the Investment Advisers Act of 1940, unless
a. such purchase is of a security of any issuer that, in its most
recent fiscal year, derived 15% or less of its gross revenues
from securities-related activities (1940 Act Rule 12d3-1(a)),
or
b. despite the fact that such purchase is of any security of any
issuer that derived more than 15% of its gross revenues from
securities-related activities:
(1) after the purchase of any equity security, the
Portfolio Account would not own more than 1.67%
of outstanding securities of that class of the
issuer's equity securities;
(2) after the purchase not more than 5% of the
Portfolio Account's total assets would be
invested in the issuer's securities (whether
debt or equity);
(3) when acquired, any equity security is a "margin
security" under Regulation T of the Federal
Reserve, which generally includes any registered
security or one trading on a national exchange;
(4) after the purchase of any debt security, the
Portfolio Account would not own more than 3.33%
of the outstanding principal amount of the
issuer's debt securities; and
(5) when acquired, any debt security is investment
grade, as determined by the Fund's Board of
Directors.
C. In the event that the number of Sub-Advisers shall vary from three (3),
the percentage limitations of Subsections B1, B2a, B2d, B3, B4b(1) and
B4b(4) of this Schedule shall be adjusted (i) in the case of an increase
in the number of Sub-Advisers, proportionately downward and (ii) in the
case of a decrease of the number of Sub-Advisers, proportionately upward.
The Adviser shall notify the Sub-Adviser of an increase or decrease in
A-2
the number of Sub-Advisers and the proportionate decrease or increase in
the percentages specified in the subsections enumerated in the preceding
sentence, but the Adviser's failure to do so shall not affect the
operation of this Section C of this Schedule.
D. The Sub-Adviser will manage the Portfolio Account so that no more than
10% of the gross income of the Portfolio Account is derived from any
source
other than dividends, interest, payments with respect to securities
loans (as defined in IRC Section 512(a)(5)), and gains from the sale or
other disposition of stock or securities (as defined in the 1940 Act
Section 2(a)(36)) or foreign currencies, or other income (including,
but not limited to, gains from options, futures, or forward contracts)
derived with respect to the Portfolio's business of investing in such
stock, securities, or currencies (IRC Section 851(b)(2)).
E. The Sub-Adviser will manage the Portfolio Account so that less than 30%
of the gross income of the Portfolio Account is derived from the sale or
other disposition of stock or securities held for less than three months
(IRC Section 851(b)(3)).
A-3
SCHEDULE B
THE XXXXXX SQUARE INTERNATIONAL SECURITIES FUND, INC.
RECORD KEEPING REQUIREMENTS
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER:
A. (Rule 31a-1(b)(5) and (6)). A record of each brokerage order, and all
other portfolio purchases and sales, given by the Sub-Adviser on behalf
of the Portfolio Account for, or in connection with, the purchase or sale
of securities, whether executed or unexecuted. Such records shall
include:
1. the name of the broker;
2. the terms and conditions of the order and of any modification or
cancellation thereof;
3. the time of entry or cancellation;
4. the price at which executed;
5. the time of receipt of a report of execution; and
6. the name of the person who placed the order on behalf of the
Portfolio Account.
B. (Rule 31a-1(b)(9)). A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases (e.g. execution ability, execution and research) upon
which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such purchase and sale
orders. Such record:
1. shall include the consideration given to:
a. the sale of shares of the Fund by brokers or dealers;
b. the supplying of services or benefits by brokers or dealers to:
(1) the Fund,
(2) the Adviser,
(3) the Consultant, if any,
(4) the Sub-Adviser, and
(5) any person other than the foregoing; and
c. any other consideration other than the technical qualifications
of the brokers and dealers as such;
2. shall show the nature of the services or benefits made available;
3. shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation; and
4. shall show the name of the person responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation.
B-1
C. (Rule 31a-1(b)(10)). A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made
by a committee or group, a record shall be kept of the names of its
members who participate in the authorization. There shall be retained as
part of this record: any memorandum, recommendation or instruction
supporting or authorizing the purchase or sale of portfolio securities
and such other information as is appropriate to support the
authorization.*
D. (Rule 31a-1(f)). Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to the
extent such records are necessary or appropriate to record the Sub-
Adviser's transactions with respect to the Portfolio Account.
----------------------
* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation, i.e., buy, sell, hold) or any internal
reports or portfolio adviser reviews.
B-2
SCHEDULE C
THE XXXXXX SQUARE INTERNATIONAL SECURITIES FUND, INC.
FEE SCHEDULE
For the services to be provided to the Fund pursuant to the attached Sub-
Advisory Agreement, the Adviser shall pay the Sub-Adviser a monthly fee
calculated as a percentage of the Adviser's monthly fee ("MF", which is
equal to 1/12 of 1% of the daily values placed upon the net assets of the
Portfolio during the month) in accordance with the following formula:
Sub-Adviser's
monthly fee = .5MF X Average of the value of the net assets in
the Portfolio Account on the last business
day of the prior month and last business
day of the month
Divided By
Average of the value of the net assets in
all Portfolio Accounts in the Portfolio on
the last business day of the prior month
and last business day of the month
Such fee shall be payable in arrears within ten business days following
the end of each month.
C-1
