FORM OF SUBADVISORY AGREEMENT
Xxxxx Xxxxxx Sector Series Inc.
Financial Services Fund
February 14, 2000
Citibank, N.A..
Dear Sirs:
Xxxxx Xxxxxx Sector Series Inc. (the "Company"), a
corporation organized under the laws of the State of
Maryland on behalf of the Xxxxx Xxxxxx Financial
Services Fund (the "Fund") and SSB Citi Fund
Management LLC. (the "Manager"), each confirms its
agreement with Citibank, N.A. (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
the prospectus (the "Prospectus") and the statement of
additional information (the "Statement") filed with
the Securities and Exchange Commission as part of the
Company'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 Directors of the Company (the
"Board"). Copies of the Prospectus, the Statement,
the Company's Bylaws (the "Bylaws") and any policies
or procedures adopted by the Board and in effect from
time-to-time related to the Company and the Sub-
Adviser (the "Procedures") have been or will be
submitted to the Sub-Adviser. The Company agrees
promptly to provide copies of all amendments and
supplements to the current Prospectus, the Statement,
the Bylaws and Procedures to the Sub-Adviser on an on-
going basis. Until the Company delivers any such
amendment or supplement to the Sub-Adviser, the Sub-
Adviser shall be fully protected in relying on the
Prospectus, Statement, Bylaws and Procedures as
previously furnished to the Sub-Adviser. The Company
employs the Manager as the manager to the Portfolio
pursuant to the Management Agreement dated February
14, 2000(the "Management Agreement"), and the Company
and the Manager 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.
2. Services as Sub-Adviser
Subject to the supervision, direction and approval of
the Board of the Company and the Manager, the Sub-
Adviser shall conduct a continual program of
investment, evaluation and, if appropriate in the view
of the Sub-Adviser, sale and reinvestment of the
Fund's assets. The Sub-Adviser is authorized, in its
sole discretion and without prior consultation with
the Manager, to: (a) manage the Fund's assets in
accordance with the Fund's investment objective(s) and
policies as stated in the Prospectus and the
Statement; (b) make investment decisions for the Fund;
(c) place purchase and sale orders for portfolio
transactions on behalf of the Fund; and (d) employ
professional portfolio managers and securities
analysts who provide research services to the Fund.
In addition, (i) the Sub-Adviser shall furnish the
Manager daily information concerning portfolio
transactions and quarterly and annual reports
concerning transactions and performance of the Fund in
such form as may be mutually agreed upon, and the Sub-
Adviser agrees to review the Fund and discuss the
management of it with the Manager and the Board of
Directors of the Company.
(ii) Unless the Manager 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
Fund'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 Fund may be
invested.
(iii) The Sub-Adviser shall maintain and preserve such
records related to the Fund's transactions as shall be
required under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Manager shall maintain
and preserve all books and other records not related
to the Fund's transactions as required under the 1940
Act and shall timely furnish to Sub-Adviser all
information and copies of books and records reasonably
requested by Sub-Adviser to comply with any request
made in connection with a regulatory inspection. The
Sub-Adviser shall timely furnish to the Manager all
information relating to the Sub-Adviser's services
hereunder reasonably requested by the Manager to keep
and preserve the books and records of the Fund. The
Sub-Adviser agrees that all records which it maintains
for the Fund are the property of the Company and the
Sub-Adviser will surrender promptly to the Company
copies of any of such records.
(iv) The Sub-Adviser shall maintain compliance
procedures for the Fund that it reasonably believes
are adequate to ensure the Fund's compliance with (A)
the 1940 Act and the rules and regulations promulgated
thereunder and (B) the Fund's investment objective(s)
and policies as stated in the Prospectus and
Statement.
(v) The Sub-Adviser has adopted a written code of
ethics that it reasonably believes complies with the
requirements of Rule 17j-1 under the 1940 Act, which
it will provide to the Company. The Sub-Adviser has
written policies and procedures reasonably designed to
prevent the misuse of material, nonpublic information
by the Sub-Adviser or any person associated with the
Sub-Adviser.
3. Brokerage
In selecting brokers or dealers (including, if
permitted by applicable law, Xxxxxxx Xxxxx Barney Inc.
or any other broker or dealer affiliated with the
Manager or the Sub-Adviser) 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,
as amended) provided to the Fund 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
Fund and/or other accounts over which the Sub-Adviser
or its affiliates exercise investment discretion. In
making purchases or sales of securities or other
property for the account of the Fund, the Sub-Adviser
may deal with itself or its affiliates, or with the
Fund's underwriter or distributor, to the extent such
actions are permitted by the 1940 Act.
4. Information Provided to the Company and the Manager
The Sub-Adviser shall keep the Company and the Manager
informed of developments materially affecting the
Fund's holdings, and shall, on its own initiative,
furnish the Company and the Manager from time to time
with whatever information the Sub-Adviser believes is
appropriate for this purpose.
5. Compensation
(i) In consideration of the services rendered pursuant
to this Agreement, the Manager will pay the Sub-
Adviser an annual fee calculated at the rate of 0.50%
of the Fund'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 Company for services provided hereunder and
agrees to look solely to the Manager 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 Fund's net assets shall be
computed at the times and in the manner specified in
the Prospectus and/or the Statement.
(ii) The Sub-Adviser agrees that, to the extent that
the fee that is payable to the Manager by the Fund is
reduced by action of the Board, the fee payable to the
Sub-Adviser shall be reduced pro rata. Additionally,
to the extent that any part of the fee that is payable
to the Manager is waived by the Manager, the Sub-
Adviser agrees to waive its fees proportionately. The
Manager agrees to consult with the Sub-Adviser prior
to making a decision as to whether to waive its fees.
6. Expenses
The Sub-Adviser shall bear all expenses (excluding
brokerage costs, custodian fees, auditors fees or
other expenses to be borne by the Fund or the Company)
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, 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 services; the costs
of regulatory compliance; and pro rata costs
associated with maintaining the Company's legal
existence and shareholder relations. All other
expenses not specifically assumed by the Sub-Adviser
hereunder or by the Manager under the Management
Agreement are borne by the Fund or the Company.
7. Standard of Care
The Sub-Adviser shall exercise its best judgment and
shall act in good faith 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 or
the Manager in connection with the matters to which
this Agreement relates as well as in connection with
the performance of its obligations under this
Agreement, provided that nothing in this Agreement
shall be deemed to protect or purport to protect the
Sub-Adviser against any liability to the Manager, the
Company or to the shareholders of the Portfolio 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.
8. Term and Amendments of Agreement
This Agreement shall become effective February 14,
2000 (the "Effective Date") and shall continue for an
initial two-year term. This Agreement 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 of the
Company or by vote of holders of a majority (as
defined in the 1940 Act and the rules thereunder) of
the outstanding voting securities of the Fund, or upon
60 days' written notice by the Sub-Adviser except as
otherwise agreed by the Manager and 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). This Agreement may be
amended only if such amendment is approved by the vote
of a majority of the outstanding voting securities of
the Fund (except for any amendment as may be effected
in the absence of such approval without violating the
1940 Act).
9. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts,
and may act in the future, unless otherwise agreed to
by the parties, as investment manager, adviser, or
sub-adviser to other investment companies and/or
managed accounts, including offshore entities. Sub-
Adviser agrees that whenever the Portfolio and one or
more other 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 process designed by the
Sub-Adviser to provide equitable treatment to each
company and account. 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.
10. Representations
The Company and Fund represent that (i) a copy of the
Company's Articles of Incorporation, dated
______________, together with all amendments thereto,
is on file with the Secretary of the State of
Maryland, (ii) the appointment of the Manager has been
duly authorized, (iii) the appointment of the Sub-
Adviser has been duly authorized, and (iv) they have
acted, and will continue to act, in conformity with
the 1940 Act and other applicable laws.
The Sub-Adviser represents that it is authorized to
perform the services described herein.
Each of the parties hereto represents that the
Agreement has been duly authorized, executed and
delivered by all required corporate action.
11. Materials
The Manager shall not publish or distribute or allow
the Company or the Fund to publish or distribute any
information, including but not limited to registration
statements, advertising or promotional materials,
specifically describing the Sub-Adviser, without prior
written consent of the Sub-Adviser, which consent
shall not be unreasonably withheld or delayed. If the
Sub-Adviser has not notified the Manager of its
disapproval of sample materials within three (3)
business days after its receipt thereof, such
materials shall be deemed approved. Materials
substantially similar to materials approved on an
earlier occasion shall also be deemed approved.
12. Governing Law
This Agreement shall be governed by the internal laws
of the State of Maryland, without regard to the
conflict of law principles thereof; provided, however,
that to the extent that anything herein is
inconsistent with the 1940 Act, the 1940 Act shall
control.
13. Notice
Any notice, advice or report to be given pursuant to
this Agreement shall be deemed sufficient if delivered
or mailed by registered, certified or overnight mail,
postage prepaid addressed by the party giving notice
to the other party at the last address furnished by
the other party:
To the Company at:
Xxxxx Xxxxxx Sector Series Inc.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. XxXxxxxx
To the Manager at:
SSB Citi Fund Management LLC
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. XxXxxxxx
To the Sub-Adviser at:
Citibank N.A.
Attention: Xxxxxxxx X. Xxxxxxxx
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
14. Counterparts
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original, but such counterparts shall, together,
constitute only one instrument.
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:
SSB CITI FUND MANAGEMENT LLC.
____________________________
By:
XXXXX XXXXXX SECTOR SERIES INC.
_____________________________
By:
Accepted:
CITIBANK N.A.
______________________________
By:
