THE TRAVELERS SERIES TRUST
SUBADVISORY AGREEMENT
XXX XXXXXX ENTERPRISE PORTFOLIO
This Subadvisory Agreement (this "Agreement") is entered into as of July 1,
2005 by and between Travelers Investment Adviser, Inc., a Delaware corporation
(the "Manager"), and Xxx Xxxxxx Asset Management, a Delaware corporation (the
"Subadviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated July 1,
2005 (the "Advisory Agreement") with The Travelers Series Trust (the "Fund"),
pursuant to which the Manager provides portfolio management services to the Xxx
Xxxxxx Enterprise Portfolio (the "Portfolio") of the Trust;
WHEREAS, the Subadviser has provided portfolio management services to a
portfolio of Travelers Series Fund, Inc. pursuant to a subadvisory agreement
dated October 31, 1996, which portfolio is being reorganized into the Portfolio
as of the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Subadviser agree as follows:
1. Subadvisory Services.
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a. The Subadviser shall, subject to the supervision of the Fund's Board of
Trustees and the Manager and in cooperation with the Manager, as administrator,
or with any other administrator appointed by the Manager or the Fund (the
"Administrator"), manage the investment and reinvestment of the assets of the
Portfolio. The Subadviser shall invest and reinvest the assets of the Portfolio
in conformity with (1) the investment objective, policies and restrictions of
the Portfolio set forth in the Fund's prospectus and statement of additional
information, as revised or supplemented from time to time, relating to the
Portfolio (the "Prospectus"), (2) any additional policies or guidelines
established by the Manager or by the Fund's Trustees that have been furnished
in writing to the Subadviser and (3) the provisions of the Internal Revenue
Code (the "Code") applicable to "regulated investment companies" (as defined in
Section 851 of the Code) and "segregated asset accounts" (as defined in
Section 817 of the Code) including, but not limited to, the diversification
requirements of Section 817(h) of the Code and the regulations thereunder, all
as from time to time in effect (collectively, the "Policies"), and with all
applicable provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") the rules and
regulations thereunder and the interpretive opinions thereof of the staff of
the Securities and Exchange Commission ("SEC") ("SEC Positions"); provided,
however, that the Manager agrees to inform the Subadviser of any and all
applicable state insurance law restrictions that operate to limit or restrict
the investments the Portfolio might otherwise make ("Insurance Restrictions"),
and to inform the Subadviser promptly of any changes in such Insurance
Restrictions. Subject to the foregoing, the Subadviser is authorized, in its
discretion and without prior consultation with the Manager, to buy, sell, lend
and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio, without regard to the length
of time the securities have been held and the resulting rate of portfolio
turnover or any tax considerations; and the majority or the whole of the
Portfolio may be invested in such proportions of stocks, bonds, other
securities or investment instruments, or cash, as the Subadviser shall
determine. Notwithstanding the foregoing provisions of this Section 1.a,
however, the Subadviser shall, upon written instructions from the Manager,
effect such portfolio transactions for the Portfolio as the Manager shall
determine are necessary in order for the Portfolio to comply with the Policies.
b. The Subadviser shall furnish the Manager and the Administrator daily,
weekly, monthly, quarterly and/or annual reports concerning portfolio
transactions and the investment performance of the Portfolio in such form as
may be mutually agreed upon, and agrees to review the Portfolio and discuss the
management of the Portfolio with representatives or agents of the Manager, the
Administrator or the Fund at their reasonable request. The Subadviser shall, as
part of a complete portfolio compliance testing program, perform quarterly
diversification testing under Section 817(h) of the Code. The Subadviser shall
provide timely notice each calendar quarter that such diversification was
satisfied, or if not satisfied, that corrections were made within the time
period permitted under the Code. The Subadviser shall also provide the Manager,
the Administrator or the Fund with such other information and reports as may
reasonably be requested by the Manager, the Administrator or the Fund from time
to time, including without limitation (i) all material as reasonably may be
requested by the Trustees of the Fund pursuant to Section 15(c) of the
1940 Act; (ii) monthly or quarterly compliance checklists in the form
prescribed by the Manager; and (iii) such periodic reports as may be required
by the Fund's or the Manager's compliance program under Rule 38a-1 under the
1940 Act. The Subadviser shall furnish the Manager (which may also provide it
to the Fund's Board of Trustees) with copies of all material comments that are
relevant to the Portfolio and the services provided under this Agreement
received from the SEC following routine or special SEC examinations or
inspections.
If the Fund inadvertently fails the diversification requirements of
Section 817(h) of the Code, the Subadviser shall assist the Manager in the
preparation of any request for relief or argument to the Commissioner of the
Internal Revenue Service pursuant to Treas. Reg. Section 1-817-5(c)(2) and
Revenue Procedure 92-25 (or its successor).
c. The Subadviser shall provide to the Manager a copy of the Subadviser's
Form ADV as filed with the SEC and any amendments or restatements thereof in
the future and a list of the persons whom the Subadviser wishes to have
authorized to give written and/or oral instructions to custodians of assets of
the Portfolio.
d. Unless the Manager gives the Subadviser written instructions to the
contrary, the Subadviser shall, in a prudent and diligent manner, vote proxies
in the best interests of clients as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders. The Manager shall
instruct the Fund's custodian, the Administrator, and other parties providing
services to a Portfolio to promptly forward misdirected proxy statements to the
Subadviser. The Subadviser shall provide the Fund in a timely manner with such
records of its proxy voting on behalf of each Portfolio as necessary for the
Fund to comply with the requirements of Form N-PX or any successor law, rule,
regulation or SEC Position.
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e. The Subadviser represents, warrants and agrees that it has adopted and
implemented, and throughout the term of this Agreement will maintain in effect
and implement, policies and procedures reasonably designed to prevent, detect
and correct violations by the Subadviser and its supervised persons, and, to
the extent the activities of the Subadviser could affect the Fund, by the Fund,
of "federal securities laws" (as defined in Rule 38a-1 under the 1940 Act), and
that the Subadviser has provided the Fund with true and complete copies of its
policies and procedures (or summaries thereof) and related information
requested by the Fund. The Subadviser agrees to cooperate with periodic reviews
by the Fund's compliance personnel of the Subadviser's policies and procedures,
their operation and implementation and other compliance matters and to provide
to the Fund from time to time such additional information and certifications in
respect of the Subadviser's policies and procedures, compliance by the
Subadviser with federal securities laws and related matters as the Fund's
compliance personnel may reasonably request. The Subadviser agrees to promptly
notify the Manager of any material compliance violations that affect a
Portfolio.
f. In accordance with Rule 17a-10 under the 1940 Act and any other
applicable law, the Subadviser shall not consult with any other subadviser to
the Portfolio or any subadviser to any other portfolio of the Trust or to any
other investment company or investment company series for which the Manager or
an affiliated person of the Manager serves as investment adviser concerning
transactions for the Portfolio in securities or other assets, other than for
purposes of complying with conditions of paragraphs (a) and (b) of Rule 12d3-1
under the 1940 Act.
g. As the delegate of the Trustees of the Fund, the Subadviser shall assist
the Manager in connection with its valuation process for any securities in the
Portfolio for which current market quotations are not readily available or
reliable.
h. The Subadviser and the Manager acknowledge that the Subadviser is not the
compliance agent for the Portfolio or for the Manager, and does not have access
to all of the Portfolio's books and records necessary to perform certain
compliance testing. The Subadviser agrees that any and all books and records
which it maintains for the Fund are the Fund's property. The Subadviser also
agrees upon request of the Manager or the Fund, promptly to surrender any such
books and records to the requester or make such books and records available for
inspection by representatives of regulatory authorities. The Subadviser shall
permit any such books and records it maintains with respect to the Portfolio to
be inspected and audited by the Manager and the Administrator at all reasonable
times during normal business hours, upon reasonable notice. The Subadviser
further agrees to maintain and preserve any such books and records in
accordance with the Investment Company Act and rules thereunder.
2. Obligations of the Manager.
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a. The Manager shall provide (or cause the Fund's custodian to provide)
information to the Subadviser in a timely manner regarding such matters as the
composition of assets in the Portfolio, cash requirements and cash available
for investment in the Portfolio, and all other information as may be reasonably
necessary for the Subadviser to perform its responsibilities hereunder.
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b. The Manager has furnished the Subadviser a copy of the Prospectus and
agrees during the continuance of this Agreement to furnish the Subadviser
copies of any revisions or supplements thereto at, or, if practicable, before
the time the revisions or supplements become effective. The Manager agrees to
furnish the Subadviser with relevant sections of minutes of meetings of the
Trustees of the Fund applicable to the Portfolio to the extent they may affect
the duties of the Subadviser, and with copies of any financial statements or
reports of the Fund with respect to the Portfolio to its shareholders, and any
further materials or information which the Subadviser may reasonably request to
enable it to perform its functions under this Agreement, including, but not
limited to, timely information relating to any Insurance Restrictions.
3. Custodian. The Portfolio assets shall be maintained in the custody of its
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custodian. Any assets added to the Portfolio shall be delivered directly to
such custodian. The Subadviser shall have no liability for the acts or
omissions of any custodian of the Portfolio's assets.
4. Expenses. Except for expenses specifically assumed or agreed to be paid
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by the Subadviser pursuant hereto, the Subadviser shall not be liable for any
expenses of the Manager or the Fund including, without limitation, (a) interest
and taxes, (b) brokerage commissions and other costs in connection with the
purchase or sale of securities or other investment instruments with respect to
the Portfolio, and (c) custodian fees and expenses. The Subadviser will pay its
own expenses incurred in furnishing the services to be provided by it pursuant
to this Agreement.
5. Purchase and Sale of Assets. Absent instructions from the Manager to the
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contrary, the Subadviser shall place all orders for the purchase and sale of
securities for the Portfolio with brokers or dealers selected by the
Subadviser, which may include brokers or dealers affiliated with the Subadviser
provided such orders comply with Rule 17e-1 (or any successor or other relevant
regulations) under the 1940 Act in all respects. To the extent consistent with
applicable law and then-current SEC Positions, purchase or sell orders for the
Portfolio may be aggregated with contemporaneous purchase or sell orders of
other clients of the Subadviser. The Subadviser shall use its best efforts to
obtain Portfolio securities at prices which are advantageous to the Portfolio
and at commission rates that are reasonable in relation to the benefits
received. However, the Subadviser may select brokers or dealers on the basis
that they provide brokerage, research or other services or products to the
Portfolio and/or other accounts serviced by the Subadviser. Not all such
services or products need to be used by the Subadviser in managing the
Portfolio. The Subadviser agrees that securities are to be purchased through
brokers and dealers that, in the Subadviser's best judgment, offer the best
combination of price and execution. The Subadviser, in seeking to obtain best
execution of portfolio transactions for the Portfolio, may consider the quality
and reliability of brokerage services, as well as research and investment
information and other services provided by brokers or dealers. Accordingly, the
Subadviser's selection of a broker or dealer for transactions for the Portfolio
may take into account such relevant factors as (i) price, (ii) the broker's or
dealer's facilities, reliability and financial responsibility, (iii) when
relevant, the ability of the broker to effect securities transactions,
particularly with regard to such aspects as timing, order size and execution of
the order, (iv) the broker's or dealer's recordkeeping capabilities and (v) the
research and other services provided by such broker or dealer to the Subadviser
which are expected to enhance its general portfolio management capabilities
(collectively, "Research"), notwithstanding that the Portfolio may not be the
exclusive beneficiary of such Research. Commission rates, being a component of
price is
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one factor considered together with other factors. The Subadviser shall not be
obligated to seek in advance competitive bidding for the most favorable
commission rate applicable to any particular transaction for the Portfolio or
to select any broker-dealer on the basis of its purported posted commission
rate. Accordingly, in compliance with Section 28(e) of the Securities Exchange
Act of 1934, as amended, the Subadviser, in its discretion, may cause the
Portfolio to pay a commission for effecting a transaction for the Portfolio in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, provided that the Subadviser has determined in
good faith that the commission is reasonable in relation to the value of the
brokerage and/or Research provided by the broker to the Subadviser viewed in
terms of that particular transaction or its overall responsibilities with
respect to the account as to which the Subadviser exercises investment
discretion. From time to time, when determined by the Subadviser in its
capacity of a fiduciary to be in the best interest of the Portfolio, the
Subadviser may purchase securities from or sell securities on behalf of the
Portfolio to another account managed by the Subadviser at prevailing market
levels in accordance with the procedures under Rule 17a-7 under the 1940 Act
and other applicable law.
6. Compensation of the Subadviser. As full compensation for all services
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rendered, facilities furnished and expenses borne by the Subadviser hereunder,
the Manager shall pay the Subadviser compensation at the annual rate of
[0.325%]. Such compensation shall be payable monthly in arrears or at such
other intervals, not less frequently than quarterly, as the Manager is paid by
the Portfolio pursuant to the Advisory Agreement. If the Subadviser shall serve
for less than the whole of any month or other agreed-upon interval, the
foregoing compensation shall be prorated. The Manager may from time to time
waive the compensation it is entitled to receive from the Fund; however, any
such waiver will have no effect on the Manager's obligation to pay the
Subadviser the compensation provided for herein.
7. Non-Exclusivity. The Manager agrees that the services of the Subadviser
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are not to be deemed exclusive and that the Subadviser and its affiliates are
free to act as investment manager and provide other services to various
investment companies and other managed accounts, except as the Subadviser and
the Manager or the Administrator may otherwise agree from time to time in
writing before or after the date hereof. This Agreement shall not in any way
limit or restrict the Subadviser or any of its directors, officers, employees
or agents from buying, selling or trading any securities or other investment
instruments for its or their own account or for the account of others for whom
it or they may be acting, provided that such activities do not adversely affect
or otherwise impair the performance by the Subadviser of its duties and
obligations under this Agreement. The Manager recognizes and agrees that the
Subadviser may provide advice to or take action with respect to other clients,
which advice or action, including the timing and nature of such action, may
differ from or be identical to advice given or action taken with respect to the
Portfolio. The Subadviser shall for all purposes hereof be deemed to be an
independent contractor and shall, unless otherwise provided or authorized, have
no authority to act for or represent the Fund or the Manager in any way or
otherwise be deemed an agent of the Fund or the Manager except in connection
with the investment management services provided by the Subadviser hereunder.
8. Liability and Indemnification.
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a. Except as may otherwise be provided by the 1940 Act or other federal
securities laws, in the absence of the Subadviser's willful misfeasance, bad
faith or gross negligence or reckless disregard of its obligations or duties
hereunder ("Disabling Conduct"), neither the Subadviser nor any of its
affiliates or its or their officers, directors, employees or agents (the "MS
Parties") shall be subject to any liability to the Manager, the Fund, the
Portfolio or any shareholder of the Portfolio or the Fund for any error in
judgment, mistake of law or loss arising out of any investment, or any other
act or omission in the course of, connected with, or arising out of any service
to be rendered under this Agreement, nor shall the Subadviser be liable for any
loss suffered as a consequence of any action or inaction of other service
providers to the Fund or Portfolio in failing to observe the instructions of
the Manager or Subadviser. Nothing in this Agreement shall operate or purport
to operate in any way to exculpate, waive or limit the liability of the
Subadviser for, and the Subadviser shall indemnify and hold harmless the Fund,
the Manager, all affiliated persons (as described in Section 15 of the 1933
Act) (collectively, "Manager Indemnitees") against any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) to which any of the Manager Indemnitees may become subject under the
1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at common
law or otherwise arising out of or based on (i) any willful misconduct, bad
faith, reckless disregard or gross negligence of the Subadviser in the
performance of any of its duties or obligations hereunder or (ii) any untrue
statement of a material fact contained in the Prospectus, proxy materials,
reports, advertisements, sales literature, or other materials pertaining to the
Portfolio or the omission to state therein a material fact known to the
Subadviser which was required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Manager or the Fund by the
Subadviser Indemnitees (as defined below) for use therein.
b. Except as may otherwise be provided by the 1940 Act or any other federal
securities law, the Manager and the Fund shall not be liable for any losses,
claims, damages, liabilities or litigation (including legal and other expenses)
incurred or suffered by the Subadviser as a result of any error of judgment or
mistake of law by the Manager with respect to the Portfolio, except that
nothing in this Agreement shall operate or purport to operate in any way to
exculpate, waive or limit the liability of the Manager for, and the Manager
shall indemnify and hold harmless the Subadviser, all affiliated persons
thereof (within the meaning of Section 2(a)(3) of the 0000 Xxx) and all
controlling persons (as described in Section 15 of the 1933 Act) (collectively,
"Subadviser Indemnitees") against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which any of the Subadviser Indemnitees may become subject under the 1933 Act,
the 1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of or based on (i) any willful misconduct, bad faith,
reckless disregard or gross negligence of the Manager in the performance of any
of its duties or obligations hereunder, (ii) any failure by the Manager to
properly notify the Subadviser of changes to the Prospectus or other
requirements that leads to any such losses, claims, damages, liabilities or
litigation to which any of the Subadviser Indemnitees may be subject or
(iii) any untrue statement of a material fact contained in the Prospectus,
proxy materials, reports, advertisements, sales literature, or other materials
pertaining to the Portfolio or the omission to state therein a material fact
known to the Manager which was required to be stated therein or necessary to
make the statements therein not misleading,
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unless such statement or omission was made in reliance upon information
furnished to the Manager or the Fund by a Subadviser Indemnitee for use therein.
The Manager acknowledges and agrees that the Subadviser makes no
representation or warranty, express or implied, that any level of performance
or investment results will be achieved by the Portfolio or that the Portfolio
will perform comparably with any standard or index, including other clients of
the Subadviser, whether public or private.
c. The Subadviser acknowledges that it has received notice of and accepts
the limitations upon the Fund's liability set forth in this Agreement. The
Subadviser agrees that any of the Fund's obligations shall be limited to the
assets of the Portfolio and that the Subadviser shall not seek satisfaction of
any such obligation from the shareholders of the Fund nor from any Fund
officer, employee or agent of the Fund.
9. Effective Date and Termination. This Agreement shall become effective as
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of July 1, 2005, and
a. unless otherwise terminated, this Agreement shall continue in effect
until June 30, 2007, and from year to year thereafter so long as such
continuance is specifically approved at least annually (i) by the Board of
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio, and (ii) by vote of a majority of the Trustees of
the Fund who are not interested persons of the Fund, the Manager or the
Subadviser, cast in person at a meeting called for the purpose of voting on
such approval;
b. this Agreement may at any time be terminated on sixty days' written
notice to the Subadviser either by vote of the Board of Trustees of the Fund or
by vote of a majority of the outstanding voting securities of the Portfolio;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Subadviser on sixty days' written
notice to the Manager and the Fund, or, if approved by the Board of Trustees of
the Fund, by the Manager on sixty days' written notice to the Subadviser; and
Termination of this Agreement pursuant to this Section 9 shall be without
the payment of any penalty. In the event of termination of this Agreement, all
compensation due to the Subadviser through the date of termination will be
calculated on a pro rata basis through the date of termination and paid on the
first business day after the next succeeding month end.
10. Amendment. This Agreement may be amended at any time by mutual consent
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of the Manager and the Subadviser, provided that, if required by law (as may be
modified by any exemptions received by the Manager), such amendment shall also
have been approved by vote of a majority of the outstanding voting securities
of the Portfolio and by vote of a majority of the Trustees of the Fund who are
not interested persons of the Fund, the Manager or the Subadviser, cast in
person at a meeting called for the purpose of voting on such approval.
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11. Certain Definitions. For the purpose of this Agreement, the terms "vote
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of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the SEC under the 1940 Act.
12. General.
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a. The Subadviser may perform its services through any employee, officer or
agent of the Subadviser, and the Manager shall not be entitled to the advice,
recommendation or judgment of any specific person; provided, however, that the
persons identified in the Prospectus of the Portfolio shall perform the
portfolio management duties described therein until the Subadviser notifies the
Manager that one or more other employees, officers or agents of the Subadviser,
identified in such notice, shall assume such duties as of a specific date. The
Subadviser shall use commercially reasonable efforts to inform the Manager of
any such events enough time prior to the event taking effect such that allows
the Manager sufficient time to prepare and file any necessary supplement to the
Prospectus.
b. If any term or provision of this Agreement or the application thereof to
any person or circumstances is held to be invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware.
13. Use of Name.
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a. The Subadviser hereby authorizes the Manager to use the name - "Xxx
Xxxxxx" - in the Portfolio's Prospectus, as well as in any advertisement or
sales literature used by the Manager or its agents to promote the Portfolio
and/or to provide information to shareholders of the Portfolio ("Portfolio
Material"), for so long as the Subadviser is an investment adviser to the
Portfolio. The Manager agrees not to use the name "Xxx Xxxxxx" or "Xxxxxx
Xxxxxxx" in any Portfolio Material unless permitted and approved by the
Subadviser; provided, however, that the Manager may use such name where (i) in
a written opinion of counsel to the Manager or the Portfolio, or as directed by
the SEC, such use is necessary to make the disclosures contained in the
Portfolio Material not misleading and (ii) the Manager provides the Subadviser
with prompt notice of the required disclosure. It is understood that the names
"Xxxxxx Xxxxxxx" and "Xxx Xxxxxx" and any derivative thereof or logos
associated with such names (collectively, the "MS Names"), are the valuable
property of the Subadviser and its affiliates and that the Manager and/or the
Portfolio shall only have the right to use the MS Names in Portfolio Materials
subject to the constraints set forth in this paragraph and with the prior
approval of the Subadviser. Upon termination of this Agreement, the Manager and
the Portfolio shall, as soon as is reasonably possible, cease to use the MS
Names.
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b. The Subadviser shall not use the name of the Fund, the Manager or any of
their affiliates in any material relating to the Subadviser in any manner not
approved prior thereto by the Manager; provided, however, that the Manager
shall approve all uses of its or the Fund's name which merely refer in accurate
terms to the appointment of the Subadviser hereunder or which are required by
the SEC or a state securities commission; and, provided, further, that in no
event shall such approval be unreasonably withheld.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
TRAVELERS INVESTMENT ADVISER, INC.
By /s/ Xxxxxxxxx X. Forget
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Name: Xxxxxxxxx Forget
Title: President
XXX XXXXXX ASSET MANAGEMENT
By /s/ Xxxxxx Xxxx
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Name: Xxxxxx Xxxx
Title: Managing Director
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