SUB-INVESTMENT ADVISORY AGREEMENT
XXXXX XXXXXX INCOME FUNDS
(Xxxxx Xxxxxx Convertible Fund)
November 22, 1999
Dear Sirs:
Xxxxx Xxxxxx Income Funds (the "Company"), a trust organized
under the laws of the Commonwealth of Massachusetts, on behalf of
Xxxxx Xxxxxx Convertible Fund (the "Fund"), and SSB Citi Fund
Management LLC (the "Adviser") each confirms its agreement with
Salomon Brothers Asset Management Inc. (the "Sub-Adviser") as
follows:
1.Investment Description; Appointment
The Company desires to employ its capital relating to the Fund
by investing and reinvesting in investments of the kind and in
accordance with the investment objective(s), policies and
limitations specified in its Master Trust Agreement, as amended
from time to time (the "Master Trust Agreement"), in the
Prospectus relating to the Fund (the "Prospectus") and the
Statement of Additional Information relating to the Fund (the
"Statement") filed with the Securities and Exchange Commission as
part of the Company's Registration Statement on Form N-1A, as
amended from time to time, and in the manner and to the extent as
may from time to time be approved by the Board of Trustees of the
Company (the "Board"). Copies of the Prospectus, the Statement
and the Master Trust Agreement have been or will be submitted to
the Sub-Adviser. The Company agrees to provide copies of all
amendments to the Prospectus, the Statement and the Master Trust
Agreement to the Sub-Adviser on an on-going basis. The Company
employs the Adviser as the investment adviser to the Fund, and
the Company and the Adviser desire to employ and hereby appoint
the Sub-Adviser to act as the sub-investment adviser to the Fund.
The Sub-Adviser accepts the appointment and agrees to furnish the
services for the
compensation set forth below.
0.Xxxxxxxx as Sub-Investment Adviser
Subject to the supervision, direction and approval of the Board
of the Company and the Adviser, the Sub-Adviser will: (a) manage
the Fund's portfolio in accordance with the Fund's investment
objective(s) and policies as stated in the Master Trust
Agreement, the Prospectus and the Statement; (b) make investment
decisions for the Fund; (c) place purchase and sale orders for
portfolio transactions for the Fund; and (d) employ professional
portfolio managers and securities analysts who provide research
services to the Fund. In providing those services, the Sub-
Adviser will conduct a continual program of investment,
evaluation and, if appropriate, sale and reinvestment of the
Fund's assets.
3.Brokerage
In selecting brokers or dealers to execute transactions on
behalf of the Fund, the Sub-Adviser will seek the best overall
terms available. In assessing the best overall terms available
for any transaction, the Sub-Adviser will consider factors it
deems relevant, including, but not limited to, the breadth of the
market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and
the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or
dealers to execute a particular transaction, and in evaluating
the best overall terms available, the Sub-Adviser is authorized
to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of
1934) provided to the Fund and/or other accounts over which the
Sub-Adviser or its affiliates exercise investment discretion.
4.Information Provided to the Company
The Sub-Adviser will keep the Adviser and the Company informed
of developments materially affecting the Fund and will, on its
own initiative, furnish the Adviser and the Company from time to
time with whatever information the Sub-Adviser believes is
appropriate for this purpose.
5.Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering
the services listed in paragraphs 2 and 3 above. The Sub-Adviser
shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund and the Adviser in
connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Sub-Adviser against any
liability to the Adviser, the Company or the shareholders of the
Fund to which the Sub-Adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the
Sub-Adviser's reckless disregard of its obligations and duties
under this Agreement.
6.Compensation
In consideration of the services rendered pursuant to this
Agreement, the Adviser will pay the Sub-Adviser on the first
business day of each month a fee for the previous month at an
annual rate based on the Fund's average daily net assets in an
amount agreed to from time to time by the parties to this
Agreement, but not to exceed the fee paid to the Adviser under
its investment advisory agreement with the Fund. The fee for the
period from the Effective Date (defined below) of the Agreement
to the end of the month during which the Effective Date occurs
shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this
Agreement before the end of any month, the fee for such part of
that month shall be prorated according to the proportion that
such period bears to the full monthly period and shall be payable
upon the date of termination of this Agreement. For the purpose
of determining fees payable to the Sub-Adviser, the value of the
Fund's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
7.Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will
bear certain other expenses to be incurred in its operation,
including, but not limited to, investment advisory fees payable
to the Adviser and administration fees; fees for necessary
professional and brokerage services; fees for any pricing
service; the costs of regulatory compliance; and costs associated
with maintaining the Company's legal existence and shareholder
relations.
8.Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's
investment advisory agreement, but excluding interest, taxes,
brokerage and extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, the
Sub-Adviser will reduce its fee by the proportion of such excess
expense equal to the proportion that its fee thereunder bears to
the aggregate of fees paid by
the Fund for investment advice and administration in that year,
to the extent required by state law. A fee reduction pursuant to
this paragraph 8, if any, will be estimated, reconciled and paid
on a monthly basis.
0.Xxxxxxxx to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will
continue to act and may act in the future as investment adviser
to fiduciary and other managed accounts, and as investment
adviser to other investment companies, and the Company has no
objection to the Sub-Adviser's so acting, provided that whenever
the Fund and one or more other investment companies advised by
the Sub-Adviser have available funds for investment, investments
suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company. The
Company recognizes that in some cases this procedure may
adversely affect the size of the position obtainable for the
Fund. In addition, the Company understands that the persons
employed by the Sub-Adviser to assist in the performance of the
Sub-Adviser's duties under this Agreement will not devote their
full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict the right of the
Sub-Adviser or any affiliate of the Sub-Adviser to engage in and
devote time and attention to other businesses or to render
services of whatever kind or nature.
10.Term of Agreement
This Agreement shall become effective as of November , 1999
(the "Effective Date") and shall continue for an initial two-year
term and shall continue thereafter so long as such continuance is
specifically approved at least annually by (i) the Board of the
Company or (ii) a vote of a "majority" (as that term is defined
in the Investment Company Act of 1940, as amended (the "1940
Act")) of the Fund's outstanding voting securities, provided that
in
either event the continuance is also approved by a majority of
the Board who are not "interested persons" (as defined in the
0000 Xxx) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of the Company or by vote of holders
of a majority of the Fund's shares, or upon 90 days' written
notice, by the Sub-Adviser. This Agreement will also terminate
automatically in the event of its assignment (as defined in the
1940 Act and the rules thereunder).
11.Representation by the Company
The Company represents that a copy of the Master Trust
Agreement is on file with the Secretary of The Commonwealth of
Massachusetts and with the Boston City Clerk.
12.Limitation of Liability
The Company, the Adviser and the Sub-Adviser agree that the
obligations of the Company under this Agreement shall not be
binding upon any of the members of the Board, shareholders,
nominees, officers, employees or agents, whether past, present or
future, of the Company, individually, but are binding only upon
the assets and property of the Fund and not upon the assets and
property of any other portfolio of the Company. The execution and
delivery of this
Agreement have been authorized by the Board and a majority of the
holders of the Fund's outstanding voting securities, and signed
by an authorized officer of the Company, acting as such, and
neither such authorization by such members of the Board and
shareholders nor such execution and delivery by such officer shall
be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind
only the assets and property of the Fund as provided in the
Master Trust Agreement.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance of this Agreement by signing and
returning the enclosed copy of this Agreement.
Very truly yours,
XXXXX XXXXXX INCOME FUNDS
on behalf of its
Convertible Fund
By: _______________________________________________
Name: Xxxxx X. XxXxxxxx
Title: Chairman of the Board
SSB CITI FUND MANAGEMENT LLC
By: _______________________________________________
Name: Xxxxx X. XxXxxxxx
Title:
Accepted:
SALOMON BROTHERS ASSET MANAGEMENT INC.
By: _______________________________________________
Name:
Title:
G:\Fund Accounting\Legal\FUNDS\SLIP\1999\secdocs\CONVAGMT
