1
EXHIBIT 5(t)
INVESTMENT SUB-ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
AND
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
This Investment Sub-Advisory Agreement (the "Agreement") is entered
into as of _______________, 1997, by and between Travelers Asset Management
International Corporation, a Corporation duly organized and existing under the
laws of the State of New York ("TAMIC"), and The Travelers Investment
Management Company, a corporation duly organized and existing under the laws of
the Connecticut ("Sub-Adviser").
WHEREAS, TAMIC has entered into an Investment Advisory Agreement dated
_______ __, 1997, (the "Investment Advisory Agreement") with The Travelers
Series Trust (a Massachusetts business trust, hereinafter referred to as the
"Trust"). A copy of such agreement is attached as Exhibit A hereto, pursuant
to which TAMIC provides investment management and advisory services to the
Trust; and
WHEREAS, the Investment Advisory Agreement provides that TAMIC may
engage a duly organized sub-adviser, to furnish investment information,
services and advice to assist TAMIC in carrying out its responsibilities under
the Investment Advisory Agreement; and
WHEREAS, TAMIC desires to retain Sub-Adviser to render investment
advisory services to TAMIC in the manner and on the terms set forth in this
Agreement, and the Sub-Adviser desires to provide such investment advisory
services.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, TAMIC and Sub-Adviser agree as follows:
1. INVESTMENT DESCRIPTION APPOINTMENT
The Trust, which is divided into segments including the segment
known as The Mid-Cap Disciplined Equity Fund (the "Portfolio") desires to
employ its capital relating to the Portfolio by investing and reinvesting in
investments of the kind and in accordance with the investment(s), policies and
limitations specified in the prospectus (the "Prospectus") and the statement of
additional information (the "SAI") filed with the Securities and Exchange
Commission (the "SEC") as part of the Trust's Registration Statement on Form
N-1A, as amended or supplemented 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
Trust (the "Board"). TAMIC will supply copies of the Prospectus and the SAI to
the Sub-Adviser promptly after the Trust's Registration Statement is declared
effective. TAMIC agrees promptly to provide copies of all amendments and
supplements to the current Prospectus and the SAI, and copies of any procedures
adopted by the Board applicable to the Sub-Adviser and any amendments thereto
(the
2
"Board Procedures"), to the Sub-Adviser on an on-going basis. Until TAMIC
delivers any such amendment or supplement or Board Procedures, the Sub-Adviser
shall be fully protected in relying on the Prospectus and SAI and any Board
Procedures, if any, as previously furnished to the Sub-Adviser. In addition,
TAMIC shall furnish the Sub-Adviser with a certified copy of any financial
statement or report prepared for the Trust with respect to the Portfolio by
certified or independent public accountants, and with copies of any financial
statements or reports made by the Trust to shareholders or to any state or
federal regulatory agency. TAMIC shall also inform the Sub-Adviser of the
results of any audits or examinations by regulatory authorities pertaining to
the Portfolio. TAMIC further agrees to furnish the Sub-Adviser with any
materials or information that the Sub-Adviser may reasonably request to enable
it to perform its functions under this Agreement.
TAMIC and the Trust desire to employ and hereby appoint the
Sub-Adviser to act as the sub-investment adviser to the Portfolio. The
Sub-Adviser accepts the appointment and agrees to furnish the services for the
compensation and for the term set forth below. Except as specified herein, the
Sub-Adviser agrees that it shall not delegate any material obligation assumed
pursuant to this Agreement to any third party without first obtaining the
written consent of both the Trust and TAMIC.
2. SERVICES AS SUB-ADVISER
Subject to the supervision, direction and approval of the Board
and TAMIC, the Sub-Adviser shall conduct a continual program of investment,
evaluation and, if appropriate in its view, the sale and reinvestment of the
Portfolio's assets. The Sub-Adviser is authorized, in its sole discretion and
without prior consultation with TAMIC, to: (a) manage the Portfolio's assets
in accordance with the Portfolio's investment objective(s) and policies as
stated in the Prospectus and the SAI; (b) make investment decisions for the
Portfolio; (c) place purchase and sale orders for portfolio transactions on
behalf of the Portfolio and manage otherwise uninvested cash assets of the
Portfolio; (d) price such Portfolio securities as TAMIC and Sub-Adviser shall
mutually agree upon from time to time; (e) execute account documentation,
agreements, contracts and other documents as the Sub-Adviser shall be requested
by brokers, dealers, counterparties and other persons in connection with its
management of the assets of the Portfolio (in such respect, and only for this
limited purpose, the Sub-Adviser shall act as TAMIC's and the Trust's agent and
attorney-in-fact); and (f) employ professional portfolio managers and
securities analysts who provide research services to the Portfolio.
In addition, (i) the Sub-Adviser shall furnish TAMIC or its designee
(e.g., the custodian bank for the Portfolio) daily information concerning
portfolio transactions and periodic reports concerning transactions and
performance of the Portfolio in such form as may be mutually agreed upon from
time to time. In addition, the Sub-Adviser agrees to review the performance of
the services provided to the Portfolio pursuant to this Agreement and to
discuss the management of the Portfolio with TAMIC and the Board as either or
both shall reasonably request.
2
3
(ii) Unless TAMIC gives the Sub-Adviser written instructions to the
contrary, the Sub-Adviser shall use its good faith judgment in a manner which
it reasonably believes best serves the interests of the Portfolio's
shareholders to vote or abstain from voting all proxies solicited by or with
respect to the issuers of securities in which assets of the Portfolio may be
invested.
(iii) With respect to the provision of services by the Sub-Adviser
hereunder, the Sub-Adviser shall maintain and preserve such records related to
the Portfolio's transactions as are required under any applicable state or
federal securities law or regulation including: the Investment Company Act of
1940, as amended (the "1940 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the Investment Advisers Act of 1940, as amended
(the "Advisers Act) (collectively, the "Record Retention Rules"). TAMIC shall
maintain and preserve all books and other records not related to the
Portfolio's transactions as required under the Record Retention Rules. The
Sub-Adviser shall furnish to TAMIC all of the information relating to the
Sub-Advisory services contemplated hereunder that TAMIC shall reasonably
request within a reasonable period of time after TAMIC makes such request. The
Sub-Adviser agrees that all records which it maintains under the Record
Retention Rules for the Portfolio are the property of the Trust and the
Sub-Adviser will surrender, within a reasonable period of time after a request
for such records from TAMIC or the Trust, copies of any of such records.
(iv) The Sub-Adviser shall test for compliance with applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
Consistency with the Code shall include, in addition to quarterly and annual
reporting requirements described herein, notifying TAMIC if the Sub-Adviser
becomes aware of any actual or potential deviation from the requirements of
Code Sections 817 and 851. The Sub-Adviser shall also cooperate promptly in
supplying information to TAMIC or its designee in order to facilitate monthly
or quarterly testing for consistency with such applicable Code Sections.
Should the Sub-Adviser become aware of any violations of such sections, it will
take immediate action to remedy any such violation.
(v) The Sub-Adviser shall maintain a written code of ethics (the
"Code of Ethics") that it reasonably believes complies with the requirements of
Rule 17(j) under the 1940 Act, a copy of which it will provide to TAMIC or
Trust upon any reasonable request. The Sub-Adviser shall follow such Code of
Ethics in all material respects in performing its services under this Agreement
and will supply the Board with a quarterly certification with respect to such
compliance. Further, the Sub-Adviser represents that it has policies and
procedures regarding the detection and prevention and the misuse of material,
nonpublic information by the Sub-Adviser and its employees as required by the
Xxxxxxx Xxxxxxx and Securities Fraud Enforcement Act of 1988.
(vi) The Sub-Adviser shall manage the investment and reinvestment of
the assets of the Portfolio in a manner consistent with the diversification
requirements of Section 817 and Section 851 of the Code. The Sub-Adviser will
also manage the investments of the Portfolio in a manner consistent with any
and all investment restrictions (including diversification requirements)
contained in the 1940 Act, any SEC No-Action Letter or order or rule
promulgated by the SEC applicable to the Portfolio, and any applicable state
securities law or regulation.
3
4
(viii) The Sub-Adviser shall submit on a quarterly basis to the Board
and TAMIC a written certification detailing any variation from applicable
investment policies or procedure, or from its Code of Ethics. The Sub-Adviser
shall use its best efforts to correct any such deviation.
3. BROKERAGE
In selecting brokers or dealers (including, if permitted by
applicable law and appropriate Board Procedures, any broker or dealer
affiliated with either TAMIC or the Sub-Adviser) to execute transactions on
behalf of the Portfolio, 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 and nature of the market in the security, the price of
the security, the size of the order, the timing of the transaction, the
difficulty of the transaction, the reputation, experience, financial condition
and execution capability of the broker or dealer, the quality of the service
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 0000 Xxx) provided to the
Portfolio and/or other accounts over which the Sub-Adviser or its affiliates
exercise investment discretion. Nothing in this paragraph shall be deemed to
prohibit the Sub-Adviser from paying an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker, or dealer would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such member, broker, or dealer, viewed in terms
of either that particular transaction or its overall responsibilities with
respect to the Portfolio and/or other accounts over which the Sub-Adviser or
its affiliate exercise investment discretion.
4. COMPENSATION
In consideration of the services rendered pursuant to this
Agreement, TAMIC will pay the Sub-Adviser an annual fee calculated at the rate
of .35% of the Portfolio's average daily net assets; the fee is calculated
daily and paid monthly. The Sub-Adviser shall have no right to obtain
compensation directly from the Trust or the Portfolio for services provided
hereunder and agrees to look solely to TAMIC for payment of fees due. 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 a 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 Portfolio's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or the SAI.
4
5
5. EXPENSES
The Sub-Adviser shall bear all expenses in connection with the
performance of its services under this Agreement. In no event will the
Sub-Adviser bear brokerage costs, custodian fees, auditors fees or other
expenses to be borne by the Portfolio or the Trust. The Portfolio will bear
certain other expenses to be incurred in its operation, including, but not
limited to, investment advisory fees, sub-advisory fees (other than
sub-advisory fees paid pursuant to this Agreement) and administration fees;
fees for necessary professional and brokerage services; costs relating to local
administration of securities; fees for any pricing service; the costs of
regulatory compliance; and pro rata costs associated with maintaining the
Trust's legal existence and shareholder relations. The Portfolio shall assume
all other expenses not specifically assumed by the Sub-Adviser hereunder or by
TAMIC under the Investment Advisory Agreement entered into between TAMIC and
the Trust.
6. STANDARD OF CARE
The Sub-Adviser shall exercise reasonable care and act in a
manner consistent with applicable federal and state laws and regulations in
rendering the services it agrees to provide under this Agreement. Neither the
Sub-Adviser nor its officers, directors, employees, agents, legal
representatives or persons controlled by it (collectively, the "Related
Persons") shall be liable for or subject to any damages, expenses, or losses in
connection with any error of judgment or mistake of law or for any loss
suffered by the Trust, the Portfolio or TAMIC or any shareholder, director,
trustee or officer thereof, 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 TAMIC,
the Trust or to the shareholders of the Trust 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 disregard of its obligations and duties under this Agreement.
7. LIABILITY
Except as may otherwise be provided by the 1940 Act or federal
securities laws, neither Sub-Adviser nor any Related Persons shall be subject
to any liability or subject to any damages, expenses, or losses in connection
with any error of judgment, mistake of law, or any loss to TAMIC or the Trust
arising out of any investment or other act or omission in the course of,
connected with, or arising out of any services to be rendered under this
Agreement, except by reason of either willful misfeasance, bad faith, or gross
negligence in the performance of its duties hereunder, or by reason of reckless
disregard of its obligations and duties under this Agreement. TAMIC shall hold
harmless and indemnify Sub-Adviser and each Related Person against any loss,
liability, claim, cost, damage or expense (including reasonable investigation
and defense costs and reasonable attorneys fees and costs) arising by reason of
any matter to which this Agreement relates unless the Sub-Adviser is liable/or
negligent in the performance of its
5
6
duties or it has disregard of its obligations and duties under this Agreement.
The Sub-Adviser shall hold harmless the Trust and TAMIC for any loss,
liability, cost, damage, or expenses arising from any claim resulting from the
Sub-Adviser's negligence in connection with the performance of its duties or
the disregard of its obligations and duties under this Agreement.
Promptly after receipt by a party seeking to be indemnified under this
Section 7 (the "Indemnified Party") of notice of the commencement of any
action, the Indemnified Party shall, if a claim in respect thereof is to be
made against a party against whom indemnification is sought under this Section
7 (the "Indemnifying Party"), notify the Indemnifying Party in writing of the
commencement thereof; but the omission to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability which it may have to any
Indemnified Party otherwise than under the provisions hereof, and shall relieve
it from liability hereunder only to the extent that such omission results in
the forfeiture by the Indemnifying Party of rights or defenses with respect to
such action.
In any action or proceeding, following provision of proper notice by
the Indemnified Party of the existence of such action, the Indemnifying Party
shall be entitled to participate in any such action and, to the extent that it
shall wish, participate jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel of its choice (unless any
conflict of interest requires the appointment of separate counsel), and after
notice from the Indemnifying Party to such Indemnified Party of its election to
assume the defense of the action, the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any legal expense of the other counsel
subsequently incurred without the Indemnifying Party's consent by such
Indemnified Party in connection with the defense thereof. The Indemnified
Party shall cooperate in the defense or settlement of claims so assumed. The
Indemnified Party shall not be liable hereunder for the settlement by the
Indemnified Party for any claim or demand unless it has previously approved the
settlement or it has been notified of such claim or demand and has failed to
provide a defense in accordance with the provisions hereof. In the event that
any proceeding against the Indemnified Party shall be commenced by the
Indemnified Party in connection with this Agreement, or the transactions
contemplated hereunder, and such proceeding shall be finally determined by a
court of competent jurisdiction in favor of the Indemnifying Party, the
Indemnified Party shall be liable to the Indemnifying Party for any reasonable
attorney's fees and court costs relating to such proceedings.
The indemnifications provided in this Section 7 shall survive the
termination of this Agreement.
8. TERM OF AGREEMENT
This Agreement shall become effective August 1, 1996, (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 as required by the 1940 Act. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board or by vote of holders of a
majority (as defined in the 1940 Act and the rules thereunder) of the
outstanding voting securities
6
7
of the Trust, or upon 60 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).
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
TAMIC understands that the Sub-Adviser acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary and
other managed accounts, as an investment manager or adviser to other investment
companies, including any offshore entities, or accounts. TAMIC has no
objection to the Sub-Adviser's so acting, provided that whenever the Portfolio
and one or more other investment companies or accounts managed or 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 and account. TAMIC recognizes that in some cases
this procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, TAMIC 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. This Agreement shall not in any way limit or restrict Sub-Adviser 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 will not adversely affect or otherwise impair the
performance by Sub-Adviser of its duties and obligations under this Agreement.
10. COOPERATION WITH REGULATORY AUTHORITIES OR OTHER ACTIONS
The parties to this Agreement each agree to cooperate in a
reasonable manner with each other in the event that any of them should become
involved in a legal, administrative, judicial or regulatory action, claim, or
suit as a result of performing its obligations under this Agreement.
11. REPRESENTATIONS AND WARRANTIES OF TAMIC
TAMIC represents and warrants to the Sub-Adviser as follows:
a. TAMIC is registered as an investment adviser under the
Advisers Act;
b. TAMIC is a corporation duly organized and validly existing
under the laws of the State of New York with the power to
own and possess its assets and carry on its business as it
is now being conducted;
c. The execution, delivery and performance by TAMIC of this
Agreement are within TAMIC's powers and have been duly
authorized by all necessary action
7
8
on the part of its directors, and no action by or in
respect of, or filing with, any governmental body, agency
or official is required on the part of TAMIC for the
execution, delivery and performance of this Agreement by
the parties hereto, and the execution, delivery and
performance of this Agreement by the parties hereto does
not contravene or constitute a default under: (i) any
provision of applicable law, rule or regulation; (ii)
TAMIC's Articles of Incorporation or By-Laws; or (iii) any
agreement, judgment, injunction, order, decree or other
instruments binding upon TAMIC;
d. This Agreement is a valid and binding Agreement of TAMIC;
e. TAMIC has provided the Sub-Adviser with a copy of its Form
ADV as most recently filed with the SEC and TAMIC further
represents that it will, within a reasonable time after
filing any amendment to its Form ADV with the SEC, furnish
a copy of such amendments to the Sub-Adviser. The
information contained in TAMIC's Form ADV is accurate and
complete in all material respects and does not omit to
state any material fact necessary in order to make the
statements made, in light of the circumstances under this
they were made, not misleading;
f. TAMIC acknowledges that it received a copy of the
Sub-Adviser's current Form ADV.
12. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER
a. The Sub-Adviser is registered as an investment adviser
under the Advisers Act;
b. The Sub-Adviser is a corporation duly organized and validly
existing under the laws of the State of Delaware with the
power to own and possess its assets and carry on its
business as it is now being conducted;
c. The execution, delivery and performance by the Sub-Adviser
of this Agreement are within the Sub-Adviser's posers and
have been duly authorized by all necessary action on the
part of its directors, and no action by or in respect of,
or filing with, any governmental body, agency or official
is required on the part of the Sub-Adviser for the
execution, delivery and performance of this Agreement by
the parties hereto, and the execution, delivery and
performance of this Agreement by the parties hereto does
not contravene or constitute a default under: (i) any
provision of applicable law, rule or regulation; (ii) the
Sub-Adviser's Articles of Incorporation or By-Laws; or
(iii) any agreement, judgment, injunction, order, decree or
other instruments binding upon the Sub-Adviser;
d. This Agreement is a valid and binding Agreement of the
Sub-Adviser;
e. The Sub-Adviser has provided TAMIC with a copy of its Form
ADV as most recently filed with the SEC and will, promptly
after filing any amendment to its Form ADV and the SEC,
furnish a copy of such amendments to TAMIC. The
information contained in the Sub-Adviser's form ADV is
accurate and complete in all material respects and does not
omit to state any material fact
8
9
necessary in order to make the statements made, in light of
the circumstances under which they were made, not
misleading;
f. The Sub-Adviser acknowledges that it received a copy of
TAMIC's current Form ADV.
13. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct its obligations under this Agreement in
a manner consistent with applicable laws and regulations, including but not
limited to Sections 2a-7, 5(b), 12, 17, 18, and 36 of the 1940 Act. TAMIC
shall conduct its investment advisory activities in a manner consistent with a
Code of Ethics maintained pursuant to Section 17(j) of the 1940 Act. TAMIC
agrees to use good faith efforts to ensure that any Sub-Adviser for the
Portfolio appointed shall adopt and follow a similar Code of Ethics. TAMIC
also agrees that it shall conduct its activities in a manner consistent with
any No-Action Letter, order or rule promulgated by the SEC applicable to the
Trust or any of the Portfolios.
14. MISCELLANEOUS
This Agreement may be signed in one or more counterpart.
Each party to this Agreement represents and warrants that it is
validly existing and taken all necessary action to obtain the requisite
authority to enter into this Agreement and to perform the duties contemplated
herein.
The Trust represents that a copy of the Declaration of Trust is
on file with the Secretary of the Commonwealth of Massachusetts.
This Agreement shall be governed by the laws of the State of
Connecticut.
Each party agrees to comply with all applicable reporting
requirements pursuant to state and federal laws and regulations.
All representations and warranties made by the sub-Adviser and
TAMIC herein shall survive for the duration of this Agreement and the parties
hereto shall immediately notify, but in no event later than five (5) days, each
other in writing upon becoming aware that any of the foregoing representations
and warranties are no longer true.
15. USE OF NAME
The Trust and TAMIC, together with its subsidiaries and
affiliates may use the names "The Travelers Investment Management Company" or
"TIMCO" or any derivative thereof or logo associated therewith in offering
materials of the Portfolio only with the prior
9
10
approval of the Sub-Adviser and only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect. At such time as
this Agreement shall no longer be in effect, the Trust and TAMIC together with
its subsidiaries and affiliates each agree that they shall cease to use such
names or any other name indicating that it is advised by or otherwise connected
with the Sub-Adviser and shall promptly change its name accordingly. The Trust
acknowledges that it has adopted the name "The Travelers Investment Management
Company" or "TIMCO" or any derivative thereof or logo associated therewith in
offering materials of the Portfolio only with the prior approval of the
Sub-Adviser and through permission of the Sub-Adviser, and agrees that the
Sub-Adviser reserves to itself and any successor to its business the right to
grant the non-exclusive right to use the aforementioned names or any similar
names to any other corporation or entity, including but not limited to any
investment company of which the Sub-Adviser or any subsidiary or affiliate
thereof or any successor to the business of any thereof shall be the investment
advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Sub-Advisory Agreement to be signed by their respective officials thereunto
duly authorized as of the day and year first above written.
Travelers Asset Management International Corporation
By:
-------------------------------------------------
Its:
------------------------------------------------
The Travelers Investment Management Company
By:
-------------------------------------------------
Its:
------------------------------------------------
10
