EXHIBIT (d)(5)(a)
FORM OF
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the ____ day of ___________,
2000 ("Agreement"), among Morgan Keegan Select Fund, Inc., a Maryland
corporation ("Morgan Keegan Select"), Morgan Asset Management, Inc., a Tennessee
corporation ("Adviser") and T. S. J. Advisory Group, Inc., a Georgia corporation
("Sub-Adviser").
WHEREAS, the Adviser has entered into an Investment Advisory and
Administration Agreement dated __________, 2000 ("Management Agreement") with
Morgan Keegan Select, an open-end management investment company registered under
the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Morgan Keegan Select Financial Fund ("Fund") is a series of
Morgan Keegan Select; and
WHEREAS, under the Management Agreement, the Adviser has agreed to provide
certain investment advisory and administrative services to the Fund; and
WHEREAS, the Adviser is authorized under the Management Agreement to
delegate its investment advisory responsibilities to one or more persons or
companies; and
WHEREAS, the Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Morgan Keegan Select, Adviser and the Sub-Adviser agree as
follows:
1. APPOINTMENT. Adviser hereby appoints and employs the Sub-Adviser as
an investment sub-adviser, on the terms and conditions set forth herein, of the
Fund.
2. ACCEPTANCE OF APPOINTMENT. The Sub-Adviser accepts that
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
3. DUTIES AS SUB-ADVISER.
A. Subject to, and in accordance with, the supervision and direction of
Morgan Keegan Select's Board of Directors ("Board") and of the Adviser, and all
written guidelines adopted by the Board and/or the Adviser that are provided to
the Sub-Adviser, the Sub-Adviser will provide a continuous investment program
with respect to the Fund, including investment research and management for all
securities and investments and cash equivalents in the Fund. The Sub-Adviser
will determine from time to time what investments will be purchased, retained or
sold by the Fund. The Sub-Adviser will be responsible for placing purchase and
sell orders for investments and for other related transactions with respect to
the Fund. The Sub-Adviser will provide services under this Agreement in
accordance with the Fund's investment objective, policies and restrictions as
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stated in Morgan Keegan Select's currently effective registration statement
under the 1940 Act, and any amendments or supplements thereto ("Registration
Statement").
B. The Sub-Adviser agrees that, in placing orders with brokers, it will
seek to obtain the best net result in terms of price and execution; provided
that, on behalf of the Fund, the Sub-Adviser may, in its discretion, use brokers
(including brokers that may be affiliates of the Sub-Adviser to the extent
permitted by Section 3(c) hereof) 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 Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund 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. Whenever the Sub-Adviser simultaneously places orders to
purchase or sell the same security on behalf of the Fund 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. The Adviser recognizes that in some cases this procedure
may adversely affect the results obtained for the Fund.
C. The Sub-Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to actions by the Sub-Adviser on behalf of the Fund, and
will furnish the Board and the Adviser with such periodic and special reports as
the Board or the Adviser reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees
that all records that it maintains for the Fund are the property of Morgan
Keegan Select, agrees to preserve for the periods prescribed by Rule 31a-2 under
the 1940 Act any records that it maintains for Morgan Keegan Select and that are
required to be maintained by Rule 31a-1 under the 1940 Act, and further agrees
to surrender promptly to Morgan Keegan Select any records that it maintains for
the Fund upon request by Morgan Keegan Select.
D. All transactions will be consummated by payment to or delivery by
the custodian designated by Morgan Keegan Select (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 Fund, and the Sub-Adviser shall not
have possession or custody thereof. The Sub-Adviser shall advise the Custodian
and confirm in writing to Morgan Keegan Select and to the Adviser or any other
designated agent of the Fund, all investment orders for the Fund placed by it
with brokers and dealers at the time and in the manner set forth in Rule 31a-1
under the 1940 Act. Morgan Keegan Select shall issue to the Custodian such
instructions as may be appropriate in connection with the settlement of any
transaction initiated by the Sub-Adviser.
E. At such times as shall be reasonably requested by the Board or the
Adviser, the Sub-Adviser will provide the Board and the Adviser with economic
and investment analyses and reports as well as quarterly and annual reports
setting forth the performance of the Fund and make available to the Board and
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Adviser any economic, statistical and investment services that the Sub-Adviser
normally makes available to its institutional or other customers.
F. 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 valuation information or a price(s) from a party(ies)
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.
4. FURTHER DUTIES. In all matters relating to the performance of this
Agreement, the Sub-Adviser will act in conformity with Morgan Keegan Select's
Articles of Incorporation, By-Laws and Registration Statement and with the
written instructions and written directions of the Board and the Adviser; and
will comply with the requirements of the 1940 Act and the Investment Advisers
Act of 1940, as amended ("Advisers Act") and the rules under each, and all other
federal and state laws and regulations applicable to Morgan Keegan Select and
the Fund. The Adviser agrees to provide to the Sub-Adviser copies of Morgan
Keegan Select's Articles of Incorporation, By-Laws, Registration Statement,
written instructions and directions of the Board and the Adviser, and any
amendments or supplements to any of these materials as soon as practicable after
such materials become available.
5. PROXIES. The Sub-Adviser will vote all proxies solicited by or with
respect to issuers of securities in which assets of the Fund may be invested
from time to time. At the request of the Sub-Adviser, the Adviser shall provide
the Sub-Adviser with its or Morgan Keegan Select's recommendations as to the
voting of such proxies.
6. EXPENSES. During the term of this Agreement, the Sub-Adviser will
bear all expenses incurred by it in connection with its services under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the Fund.
7. COMPENSATION. For the services provided and the expenses assumed by
the Sub-Adviser pursuant to this Agreement, Adviser, not the Fund, will pay
Sub-Adviser a sub-advisory fee in accordance with the attached Schedule A.
8. 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 Fund, Morgan
Keegan Select, its shareholders or by the Adviser in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
services and duties or from reckless disregard by it of its obligations and
duties under this Agreement. 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.
9. REPRESENTATIONS OF MORGAN KEEGAN SELECT. Morgan Keegan Select
represents, warrants and agrees that:
A. The Sub-Adviser has been duly appointed by the Adviser to provide
investment services to the Fund Account as contemplated hereby.
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B. Morgan Keegan Select will deliver to the Sub-Adviser a true and
complete copy of the Fund's Registration Statement as effective from time to
time and such other documents or instruments governing the investment of the
Fund and such other information as is necessary for the Sub-Adviser to carry out
its obligations under this Agreement.
C. Morgan Keegan Select is currently in compliance and shall at all times
continue to comply with the requirements imposed upon Morgan Keegan Select by
applicable law and regulations.
10. REPRESENTATIONS OF ADVISER. The Adviser represents, warrants and
agrees that:
A. The Adviser has been duly authorized by the Board of Directors of
Morgan Keegan Select to delegate to the Sub-Adviser the provision of investment
services to the Fund 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.
11. 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 Agreement
remains in effect; (ii) is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Agreement; (iii) has met and will seek to continue to meet for so long as this
Agreement remains in effect, any other applicable federal or state requirements,
or the applicable requirements of any regulatory or industry self-regulatory
agency necessary to be met in order to perform the services contemplated by this
Agreement; (iv) has the authority to enter into and perform the services
contemplated by this Agreement; and (v) will promptly notify Adviser 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 1940
Act or otherwise. The Sub-Adviser will also immediately notify the Fund and the
Adviser if it is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund.
B. The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide the Adviser
and the Board with a copy of such code of ethics, together with evidence of its
adoption. Within forty-five days of the end of the last calendar quarter of each
year that this Agreement is in effect, the president or a vice-president of the
Sub-Adviser shall certify to the Adviser that the Sub-Adviser has complied with
the requirements of Rule 17j-1 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 Adviser, the Sub-Adviser shall permit the Adviser,
its employees or its agents to examine the reports required to be made to the
Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
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C. The Sub-Adviser has provided Morgan Keegan Select and the Adviser
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 Morgan Keegan Select and
the Adviser at least annually.
D. The Sub-Adviser agrees to maintain an appropriate level of errors
and omissions or professional liability insurance coverage.
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 Morgan
Keegan Select, the Fund, the Adviser or any of their respective affiliates in
offering, marketing or other promotional materials without the express written
consent of the Adviser.
12. SERVICES NOT EXCLUSIVE. The Sub-Adviser has notified Morgan Keegan
Select and the Adviser of any investment companies registered under the 1940 Act
to which it provides investment advisory services, and the Sub-Adviser will not
without the written consent of the Adviser and Morgan Keegan Select, provide
investment advisory services to any investment company registered under the 1940
Act other than those it provides such services to as of the date of this
agreement. The services furnished by the Sub-Adviser hereunder are not to be
deemed to be exclusive, and the Sub-Adviser shall be free to furnish similar
services to others, except as noted above and as prohibited by applicable law or
agreed upon in writing among the Sub-Adviser and the Adviser, Morgan Keegan
Select or the Fund.
13. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser and the
Adviser 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 Fund and the
actions of the Sub-Adviser, the Adviser and the Fund in respect thereof.
14. EFFECTIVE DATE; TERM.
This Agreement shall continue in effect for two years and from year to
year thereafter only so long as specifically approved annually by (i) vote of a
majority of those directors of Morgan Keegan Select 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, and (ii) by the Board or by
vote of a majority of the outstanding voting securities of the Fund.
15. ASSIGNMENT. No "assignment" of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in event of such
assignment. The Sub-Adviser will notify the Adviser of any change of control of
the Sub-Adviser, including any change of its controlling persons or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Fund or senior management of the Sub-Adviser, in
each case prior to, or promptly after, such change. The Sub-Adviser agrees to
bear all reasonable expenses of the Fund, if any, arising out of such change in
control.
16. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Sub-Adviser, Morgan Keegan Select and the Adviser
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and, where required by the 1940 Act, the shareholders of the Fund in the manner
required by the 1940 Act and the rules thereunder.
17. TERMINATION. This Agreement:
A. may at any time be terminated without payment of any penalty
by Morgan Keegan Select (by vote of the Board or by "vote of a
majority of the outstanding voting securities") on sixty (60)
days' written notice to the Adviser and Sub-Adviser;
B. shall immediately terminate in the event of its "assignment"
or upon termination of the Management Agreement as it relates
to the Fund.
C. may be terminated by the Advisor on sixty (60) days' written
notice to the Sub-Adviser and Morgan Keegan Select;
D. may be terminated by the Sub-Adviser at any time after a year
from the date of this agreement on sixty (60) days' written
notice to the Advisor and Morgan Keegan Select; and
18. DEFINITIONS. As used in this Agreement, the terms "affiliated
person," "interested person," "assignment," "broker," "control," "interested
person," "investment adviser," "net assets," "sale," "sell," "security," 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 SEC.
19. 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.
20. 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.
21. GOVERNING LAW. To the extent that state law has not been preempted
by the provisions of any law of the United States, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Maryland.
22. 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. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors. Where the effect of a requirement of the
federal securities laws reflected in any provision of this Agreement 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
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of such rule, regulation or order. This Agreement and the Schedule(s) attached
hereto embody the entire agreement and understanding among the parties. This
Agreement may be signed in counterparts.
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.
MORGAN KEEGAN SELECT FUND, INC.
Attest:
By:_____________________ By:______________________
Name: Name:
Title: Title:
MORGAN ASSET MANAGEMENT, INC.
50 North Front Street
Memphis, Tennessee 38103
Attest:
By:_____________________ By:______________________
Name: Name:
Title: Title:
T.S.J. ADVISORY GROUP, INC.
3650 Mansell Road
Alpharetta, Georgia 30022
Attest:
By:_______________________ By:_____________________________
Name: Name:
Title: Title:
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SCHEDULE A
SUB-ADVISORY FEES
FEE SCHEDULE
FUND Annualized % of average
DAILY NET ASSETS
Morgan Keegan Select Financial Fund 0.75%
This sub-advisory fee shall be payable quarterly as soon as practicable
after the last day of each quarter based on the average of the daily values
placed on the net assets of the Morgan Keegan Select Financial Fund ("Fund") as
determined at the close of business on each day throughout the quarter. The
assets of the Fund will be valued separately as of the close of regular trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern time) on each
business day throughout the quarter or, if Morgan Keegan Select Fund, Inc.
("Morgan Keegan Select") lawfully determines the value of the net assets of the
Fund as of some other time on each business day, as of such time. The first
payment of such fee shall be made as promptly as possible at the end of the
quarter next succeeding the effective date of this Agreement. In the event that
T . S. J. Advisory Group, Inc.'s ("Sub-Adviser") right to such fee commences on
a date other than the last day of the quarter, the fee for such quarter shall be
based on the average daily assets of the Fund in that period from the date of
commencement to the last day of the quarter. If Morgan Keegan Select determines
the value of the net assets of the Fund more than once on any business day, the
last such determination on that day shall be deemed to be the sole determination
on that day. The value of net assets shall be determined pursuant to the
applicable provisions of Morgan Keegan Select's Articles of Incorporation, its
By-Laws and the 1940 Act. If, pursuant to such provisions, the determination of
the net asset value of the Fund is suspended for any particular business day,
then the value of the net assets of the Fund on that day shall be deemed to be
the value of its net assets as determined on the preceding business day. If the
determination of the net asset value of the Fund has been suspended for more
than one quarter, the Sub-Adviser's compensation payable at the end of that
quarter shall be computed on the basis of the value of the net assets of the
Fund as last determined (whether during or prior to such quarter).
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