EXHIBIT (d)(3)
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this ____ day of __________, 2005, among CitiStreet
Funds, Inc., a Maryland corporation (the "Series Fund"), CitiStreet Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
Xxxxxxx International Advisors LLC, a _______________ [corporation] [limited
liability company] (the "Subadviser").
WHEREAS, CitiStreet Funds Management LLC has entered into a management
agreement (the "Management Agreement") with the Series Fund, a diversified
open-end management investment company registered under the Investment Company
Act of 1940 (the "1940 Act"), pursuant to which CitiStreet Funds Management LLC
will act as Manager of the Series Fund; and
WHEREAS, the Series Fund is currently divided into four separate series or
Funds, each of which is established pursuant to a resolution of the Board of
Directors of the Series Fund, and the Series Fund may in the future add
additional Funds; and
WHEREAS, the Manager has the responsibility of evaluating, recommending,
and supervising investment advisers to each Fund and, in connection therewith,
desires to retain the Subadviser to provide investment advisory services to the
CitiStreet International Stock Fund (the "Fund"), the Series Fund has the
responsibility of compensating the investment advisers to each Fund and desires
to retain the Subadviser to provide investment advisory services to the Fund,
and the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Board of
Directors of the Series Fund, the Subadviser shall manage the investment
operations of the assets of the Fund allocated by the Manager to the
Subadviser (such assets referred to as the "Allocated Assets"), including
the purchase, retention and disposition of portfolio investments, in
accordance with the Fund's investment objectives, policies and
restrictions as stated in the Prospectus of the Fund (such Prospectus and
Statement of Additional Information as currently in effect and as amended
or supplemented from time to time, being herein called the "Prospectus")
and subject to the following understandings:
(i) The Subadviser shall consult periodically with the
Manager, and they shall agree upon the current investment strategy
for the Allocated Assets in the light of anticipated cash flows.
(ii) The Subadviser shall provide supervision of the Allocated
Assets' investments and determine from time to time what securities,
options, futures contracts, and other investments included in the
Allocated Assets will be purchased, retained, sold, or loaned by the
Fund, and what portion of the
Allocated Assets will be invested or held uninvested as cash or
short-term investments.
(iii) In the performance of its duties and obligations under
this Agreement, the Subadviser shall act in conformity with the
Articles of Incorporation, By-Laws, and Prospectus of the Series
Fund and with the instructions and directions of the Manager and of
the Board of Directors of the Series Fund and will conform to and
comply with the requirements of the 1940 Act, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all
other applicable federal and state laws and regulations.
(iv) The Subadviser will place orders for the securities,
options, futures contracts, and other investments to be purchased or
sold as part of the Allocated Assets with or through such persons,
brokers, dealers, or futures commission merchants (including but not
limited to persons affiliated with the Manager or Subadviser) as the
Subadviser may select in order to carry out the policy with respect
to brokerage set forth in the Series Fund's Registration Statement
and Prospectus or as the Board of Directors may direct from time to
time. In providing the Fund with investment advice and management,
the Subadviser will give primary consideration to securing the most
favorable price and efficient execution. Within the framework of
this policy, the Subadviser may consider such factors as the price
of the security, the rate of the commission, the size and difficulty
of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing
broker-dealers and futures commission merchants, and the brokerage
and research services they provide to the Subadviser or the Fund.
The parties agree that it is desirable for the Fund that the
Subadviser have access to supplemental investment and market
research and security and economic analysis that certain brokers or
futures commission merchants are able to provide. The parties
further agree that brokers and futures commission merchants that
provide such research and analysis may execute brokerage
transactions at a higher cost to the Fund than would result if
orders to execute such transactions had been placed with other
brokers on the sole basis of ability to obtain the most favorable
price and efficient execution. Therefore, notwithstanding the second
sentence of this paragraph 1(a)(iv), the Subadviser is authorized to
place orders for the purchase and sale of securities, options,
futures contracts, and other investments for the Fund with brokers
or futures commission merchants who provide the Subadviser with such
research and analysis, subject to review by the Manager and the
Series Fund's Board of Directors from time to time with respect to
the extent and continuation of this practice. The Series Fund and
the Manager acknowledge that the services provided by such brokers
or futures commission merchants may be useful to the Subadviser in
connection with the Subadviser's services to other clients.
When the Subadviser deems the purchase or sale of a security,
option, futures contract, or other investment to be in the best
interest of the Fund as well as other clients of the Subadviser, the
Subadviser, to the extent permitted by
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applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities, options, futures contracts,
or other investments to be sold or purchased in order to obtain the
most favorable price or lower brokerage commissions and efficient
execution and to allocate the shares purchased or sold among the
Series Fund and the Subadviser's other clients on a fair and
nondiscriminatory basis, in a manner consistent with the
Subadviser's fiduciary obligations to the Fund and to such other
clients.
(v) The Subadviser shall maintain all books and records with
respect to the portfolio transactions of the Allocated Assets
required by subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and by Rule
17e-1(c)(2) under the 0000 Xxx. The Subadviser shall provide to the
Series Fund and the Manager such reports and information as may be
reasonably requested by the Series Fund, its Board of Directors or
the Manager, including information requested with respect to the
periodic review of this Agreement by the Board of Directors of the
Series Fund under Section 15 of the 1940 Act.
(vi) The Subadviser shall provide the Series Fund's custodian
on each business day with information relating to all transactions
concerning the Allocated Assets and shall provide the Manager with
such information upon request of the Manager.
(vii) The investment management services provided by the
Subadviser hereunder are not exclusive, and the Subadviser shall be
free to render similar services to others.
(viii) Absent specific instructions to the contrary provided
to it by the Manager, and subject to the Subadviser's receipt of all
necessary voting materials, the Subadviser shall vote all proxies
with respect to investments of the allocated assets in accordance
with the Subadviser's proxy voting policy as most recently provided
to the Manager. The Subadviser shall maintain records relating to
the proxy votes and shall provide such records to the Manager upon
reasonable request so that the Series Fund can meet its obligations
to file proxy information with the Securities and Exchange
Commission.
(ix) The Subadviser shall not consult with any other
subadviser for the Fund (or with any other subadviser for any fund
of the Series Fund) concerning transactions of the Fund in
securities or other assets.
(x) The Subadviser's responsibility in providing advice to the
Fund is limited to providing advice with respect to the Allocated
Assets.
(b) Services to be furnished by the Subadviser under this Agreement
may be furnished through the medium of any directors, officers, or
employees of the Subadviser or its affiliates.
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(c) The Subadviser shall keep the books and records with respect to
the Allocated Assets required to be maintained by the Subadviser pursuant
to paragraph 1(a)(v) hereof and shall timely furnish to the Manager or the
Series Fund's custodian all information relating to the Subadviser's
services hereunder needed to keep the other books and records of the Fund
required by Rules 17e-1(c)(2) and 31a-1 under the 1940 Act. The Subadviser
agrees that all records which it maintains for the Fund are the property
of the Fund and the Subadviser will surrender promptly to the Fund any of
such records upon the Fund's request, provided however that the Subadviser
may retain a copy of such records. The Subadviser further agrees to
preserve for the periods prescribed by Rules 17e-1(c)(2) and 31a-2 under
the 1940 Act any such records as are required to be maintained by it
pursuant to paragraph 1(a)(v) hereof.
(d) The Subadviser agrees to maintain procedures adequate to ensure
its compliance with the 1940 Act, the Investment Advisers Act of 1940, the
Internal Revenue Code of 1986, and other applicable state and federal laws
and regulations.
(e) The Subadviser shall furnish to the Manager, upon the Manager's
reasonable request, copies of all records prepared in connection with (i)
the performance of this Agreement and (ii) the maintenance of compliance
procedures pursuant to paragraph 1(d) hereof.
(f) The Subadviser agrees to provide upon reasonable request of the
Manager or the Series Fund, information regarding the Subadviser,
including but not limited to background information about the Subadviser
and its personnel and performance data, for use in connection with efforts
to promote the Series Fund and the registration and sale of its shares.
2. The Manager shall continue to have responsibility for all services to
be provided to the Fund pursuant to the Management Agreement and shall oversee
and review the Subadviser's performance of its duties under this Agreement.
3. The Series Fund shall pay the Subadviser, for the services provided and
the expenses assumed pursuant to this Subadvisory Agreement, a fee at an annual
rate of 0.50% of the average daily Net Allocated Assets up to and including $100
million, plus a fee at an annual rate of 0.45% of the average daily Net
Allocated Assets over $100 million and up to and including $150 million, plus a
fee at an annual rate of 0.40% of the average daily Net Allocated Assets over
$150 million. The term "Net Allocated Assets" means the Allocated Assets less
related liabilities as determined by the Manager or its designee. This fee will
be computed daily and paid monthly.
4. The Subadviser shall not be liable for any loss suffered by the Series
Fund or the Manager as a result of any act or omission of the Subadviser in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 0000 Xxx) or
loss resulting from
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willful misfeasance, bad faith or gross negligence on the Subadviser's part in
the performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement. The Series Fund shall indemnify the Subadviser
and hold it harmless from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Subadviser resulting from
actions from which it is relieved of responsibility by this paragraph. The
Subadviser shall indemnify the Series Fund and the Manager and hold them
harmless from all loss, cost, damage and expense, including reasonable expenses
for legal counsel, incurred by the Series Fund and the Manager resulting from
actions from which the Subadviser is not relieved of responsibility by this
paragraph.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the
Series Fund or by vote of a majority of the outstanding voting securities (as
defined in the 0000 Xxx) of the Fund, or by the Manager or the Subadviser at any
time, without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 0000 Xxx) or
upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers, or employees to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit the Subadviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual, or association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Subadviser in any
way, prior to use thereof and not to use material if the Subadviser reasonably
objects in writing five business days (or such other time as may be mutually
agreed) after receipt thereof. Such materials may be furnished to the Subadviser
hereunder by first class mail, overnight delivery, facsimile transmission,
electronic transmission, or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the
Series Fund must be obtained in conformity with the requirements of the 1940
Act.
9. Except as otherwise specifically provided in this Agreement, any notice or
other communication required to be given pursuant to this Agreement shall be
deemed duly given if delivered or mailed by certified or registered mail, return
receipt requested and postage prepaid, (1) to the CitiStreet Funds, Inc. at Xxx
Xxxxx Xxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000, Attention: President; (2) to
CitiStreet Funds Management LLC at Xxx Xxxxx Xxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx
00000, Attention: Secretary; or (3) to ___________________________________,
Attention: __________________.
10. This Agreement shall be governed by the laws of the State of New
Jersey.
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11. This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
CITISTREET FUNDS, INC.
By: __________________________________
Xxxx X. Xxxxxxxx
President
CITISTREET FUNDS MANAGEMENT LLC
By: __________________________________
Xxxx X. Xxxxxxxx
Executive Vice President
XXXXXXX INTERNATIONAL ADVISORS LLC
By: __________________________________
Name:
Title:
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