Exhibit (d)(2)
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SSGA FUNDS MANAGEMENT, INC.
AND
STATE STREET MASTER FUNDS
This Agreement is made as of this May 1, 2001 between State Street Master
Funds, a Massachusetts trust (the "Trust"), and SSgA Funds Management, Inc., a
Massachusetts corporation (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), currently
consisting of the five separate portfolio series set forth on Exhibit A to this
Agreement (each a "Fund" and collectively, the "Initial Funds"), each having its
own investment policies; and
WHEREAS, the Adviser is in the business of providing investment advisory
services; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services to the Trust with respect to the Initial Funds and such other
series subsequently established by the Trust and made subject to this Agreement
in accordance with paragraph 1(b) (the "Additional Funds") (the Initial Funds
together with the Additional Funds being referred to herein as the "Funds"), and
the Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Trust and Adviser agree as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Funds: The Trust hereby appoints the Adviser to act as
investment adviser to the Initial Funds for the period and on the terms set
forth in this Agreement. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided. The
Trust warrants that the Adviser has been duly appointed to act hereunder.
(b) Additional Funds: In the event that the Trust establishes one or more
series other than the Initial Funds with respect to which it desires to retain
the Adviser to render investment advisory services hereunder, it shall so notify
the Adviser in writing, indicating the advisory fee to be payable with respect
to each Additional Fund. If the Adviser is willing to render such services at
such fee, it shall so notify the Trust in writing, whereupon each such
Additional Fund shall become a Fund hereunder. In such event, a writing signed
by both the Trust and the Adviser shall be annexed hereto as a part hereof
indicating that each such Additional Fund has become a Fund hereunder and
reflecting the agreed-upon fee schedule for each such Additional Fund.
2. ADVISORY DUTIES. Subject to the supervision of the Board of Trustees of the
Trust (the "Board"), the Adviser shall manage the investment operations and
determine the composition of the portfolio of each Fund, including the purchase,
retention and disposition of the securities and other instruments held by the
Fund, in accordance with such Fund's investment objective and policies as stated
in the then current prospectus and Statement of Additional Information for such
Fund contained in the
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Trust's Registration Statement on Form N-1A (the "Registration Statement"), as
such prospectus and Statement of Additional Information are amended or
supplemented from time to time. The Adviser's duties hereunder are subject to
the following understandings:
(a) The Adviser shall provide supervision of investments, furnish a
continuous investment program for the Funds, determine from time to time what
investments or securities will be purchased, retained or sold by the Funds, and
what portion of the assets will be invested or held uninvested as cash;
(b) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Trust's Declaration of Trust,
By-Laws, Registration Statement, and with the instructions and directions of the
Board, provided, however, the Adviser shall not be responsible for acting
contrary to any of the foregoing that are changed without notice of such change
to the Adviser; and the Adviser shall conform to and comply with the applicable
requirements of the 1940 Act and all other applicable federal or state laws and
regulations;
(c) The Adviser shall promptly communicate to the officers and Trustees of
the Trust such information relating to transactions of the Funds as they may
reasonably request. On occasions when the Adviser deems the purchase or sale of
a security to be in the best interest of a Fund as well as other clients, the
Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased, provided that all accounts are
treated equitably and fairly. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transactions, shall
be made by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Trust and to such other
clients;
(d) The Adviser shall maintain books and records with respect to the
Trust's securities transactions and shall render to the Board such periodic and
special reports as the Board may reasonably request;
(e) The Adviser shall provide the Trust with a list of all securities
transactions as reasonably requested by the Trust;
(f) The investment advisory services of the Adviser to the Trust under
this Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others.
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE COMMISSIONS. The Adviser,
subject to and in accordance with any directions which the Board may issue from
time to time, shall place, in the name of the Trust, orders for the execution of
the securities transactions in which any Fund is authorized to invest. When
placing such orders, the primary objective of the Adviser shall be to obtain the
best net price and execution ("best execution") for the Trust but this
requirement shall not be deemed to obligate the Adviser to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The Trust recognizes
that there are likely to be many cases in which different brokers are equally
able to provide such best execution and that, in selection among such brokers
with respect to particular trades, it is desirable to choose those brokers who
furnish "brokerage and research services" (as defined in Section 28(e)(3) of the
Securities and Exchange Act of 1934) or statistical quotations and other
information to the Trust and/or the Adviser in accordance with the standards set
forth below. Moreover, to the extent that it continues to be lawful to do so and
so long as the Board determines as a matter of general policy that the Trust and
the respective Funds will benefit, directly or indirectly, by doing so, the
Adviser may place orders with a broker who charges a higher commission than
another broker would have charged for effecting that transaction, provided that
the excess commission is reasonable in relation to the value of brokerage and
research
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services provided by that broker. Accordingly, the Trust and the Adviser agree
that the Adviser shall select brokers for the execution of any Fund's securities
transactions from among:
a. Those brokers and dealers who provide brokerage and research services,
or statistical quotations and other information to the Trust, specifically
including the quotations necessary to determine the Trust's net assets, in such
amount of total brokerage as may reasonably be required in light of such
services.
b. Those brokers and dealers who provide brokerage and research services
to the Adviser which relate directly to portfolio securities, actual or
potential, of the Trust, or which place the Adviser in a better position to make
decisions in connection with the management of the Trust's assets, whether or
not such data may also be useful to the Adviser in managing other portfolios or
advising other clients, in such amount of total brokerage as may reasonably be
required.
The Adviser agrees that no investment decision will be made or influenced
by a desire to provide brokerage for allocation in accordance with the
foregoing, and that the right to make such allocation of brokerage shall not
interfere with the Adviser's primary duty to obtain the best execution for the
Trust.
4. BOOKS AND RECORDS. The Adviser shall keep the Trust's books and records
required to be maintained by it pursuant to paragraph 2(d) hereof. The Adviser
agrees that all records which it maintains for the Trust are the property of the
Trust and it shall surrender promptly to the Trust any of such records upon the
Trust's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Securities and Exchange Commission (the
"Commission") under the 1940 Act any such records as are required to be
maintained by Rule 31a-1(f) of the Commission under the 1940 Act. Nothing herein
shall prevent the Adviser from maintaining its own records as required by law,
which may be a duplication of the Trust's records.
5. REPORTS TO ADVISER. The Trust agrees to furnish the Adviser at its principal
office all prospectuses, proxy statements, reports to stockholders, sales
literature or other material prepared for distribution to shareholders of the
Trust or the public, which refer in any way to the Adviser, if reasonably
practicable ten (10) days prior to use thereof and not to use such material if
the Adviser should object thereto in writing within seven (7) days after receipt
of such material; provided, however, that the Adviser hereby approves all uses
of its name which merely refer in accurate terms to its appointment as
investment adviser hereunder, which merely identifies the Trust, or which are
required by the Commission or a state securities commission. In the event of
termination of this Agreement, the Trust shall, on written request of the
Adviser, forthwith delete any reference to the Adviser from any materials
described in the preceding sentence. The Trust shall furnish or otherwise make
available to the Adviser such other information relating to the business affairs
of the Trust as the Adviser at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
6. PROXIES. Unless the Trust gives written instructions to the contrary, the
Adviser shall vote or not vote all proxies solicited by or with respect to the
issuers of securities in which assets of any Fund may be invested. The Adviser
shall use its best good faith judgment to vote or not vote such proxies in a
manner which best serves the interests of the Trust's shareholders. The Trust
has received and reviewed the proxy guidelines of the Adviser which indicate how
the Adviser will vote.
7. EXPENSES. During the term of this Agreement, the Adviser shall pay all of its
own expenses incurred by it in connection with its activities under this
Agreement and each Fund of the Trust shall bear all expenses that are incurred
in its operations not specifically assumed by the Adviser.
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Expenses borne by each Fund will include but not be limited to the
following (or the Fund's proportionate share of the following): (a) brokerage
commissions relating to securities purchased or sold by the Fund or any losses
incurred in connection therewith; (b) fees payable to and expenses incurred on
behalf of the Fund by the Trust's administrator; (c) expenses of organizing the
Trust and the Fund; (d) fees and expenses of registering and maintaining the
registration of the Fund's shares and the Trust under federal securities laws
and making and maintaining any notice filings required under any state
securities laws; (e) fees and salaries payable to the Trust's Trustees and
officers who are not officers or employees of the Adviser or any underwriter of
the Trust; (f) taxes (including any income or franchise taxes) and governmental
fees; (g) costs of any liability, uncollectible items of deposit and other
insurance or fidelity bonds; (h) any costs, expenses or losses arising out of
any liability of or claim for damage or other relief asserted against the Trust
or the Fund for violation of any law; (i) legal, accounting and auditing
expenses, including legal fees of special counsel for the independent Trustees,
if any; (j) charges of custodians, transfer agents and other agents; (k) costs
of preparing share certificates (if any); (l) expenses of setting in type and
printing prospectuses and Statements of Additional Information and supplements
thereto for existing shareholders, reports and statements to shareholders and
proxy material; (m) any extraordinary expenses (including fees and disbursements
of counsel) incurred by the Trust or the Fund; and (n) fees and other expenses
incurred in connection with membership in investment company organizations.
8. COMPENSATION OF THE ADVISER. For the services to be rendered by the Adviser
as provided in this Agreement, the Trust shall pay to the Adviser such
compensation as is designated in Exhibit A to this Agreement, so long as the
Adviser has not waived all or a portion of such compensation.
9. LIMITATION OF ADVISER'S LIABILITY. In the absence of (a) willful misfeasance,
bad faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (b) reckless disregard by the Adviser of its
obligations and duties hereunder, or (c) 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 1940 Act), the Adviser shall not be subject
to any liability whatsoever to the Trust, or to any shareholder of the Trust,
for any error of judgment, mistake of law or any other act or omission in the
course of, or connected with, rendering services hereunder including, without
limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the Trust.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective with respect to each Initial
Fund on the date hereof, or, with respect to any Additional Fund on the date of
the written notification specified in Section 1(b). This Agreement, unless
sooner terminated as provided herein, shall continue for each Fund for two years
following the effective date of this Agreement with respect to the Fund, and
thereafter shall continue for periods of one year so long as such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Board who are not parties to this Agreement or "interested
persons" (as defined in the 0000 Xxx) of any such party, cast in person at a
meeting called for the purpose of voting such approval, and (b) by the Board or
by vote of a majority of the outstanding voting securities of the Fund in
accordance with the provisions of the 1940 Act.
(b) This Agreement may be terminated by the Trust at any time, without the
payment of any penalty, by the Board or by the majority vote of either the
entire Board or by vote of a majority of the outstanding voting securities of
the Fund (in accordance with the provisions of the 0000 Xxx) on 60 days' written
notice to the Adviser. This Agreement may also be terminated by the Adviser on
90 days' written
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notice to the Trust. This Agreement will automatically and immediately terminate
in the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
11. CHOICE OF LAW. This Agreement shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and any applicable federal law.
12. LIMITATION OF LIABILITY. The Declaration of Trust dated July 27, 1999,
establishing the Trust, which is hereby referred to and a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts, provides that the
name State Street Master Trust means the Trustees from time to time serving (as
Trustees but not personally) under such Declaration of Trust. It is expressly
acknowledged and agreed that the obligations of the Trust hereunder shall not be
binding upon any of the interest holders, Trustees, officers, employees or
agents of the Trust, personally, but shall bind only the trust property of the
Trust, as provided in its Declaration of Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust and signed by
an officer of the Trust, acting as such, and neither such authorization by such
Trustees 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 trust property of the Trust as provided in
its Declaration of Trust.
IN WITNESS WHEREOF, the due execution hereof as of the date first above
written.
Attest: STATE STREET MASTER FUNDS
By: By: /s/Xxxxxxxx Xxxxxxx
------------------------------ ------------------------------------
Xxxxxxxx Xxxxxxx
President
Attest: SSGA FUNDS MANAGEMENT, INC.
By: /s/Xxxx Xxxxxx By: /s/Xxxxxxx X. Xxxx, Xx.
------------------------------ ------------------------------------
Xxxxxxx X. Xxxx, Xx.
President
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EXHIBIT A
INVESTMENT ADVISORY FEE SCHEDULE
SSgA Funds Management, Inc. will bear the cost of providing
administration, custody and transfer agency services to each of the Portfolios
listed below. As consideration for the SSgA Funds Management, Inc.'s services as
adviser, and State Street Bank and Trust Company's services as administrator,
transfer agent and custodian to each of the following Portfolios (and for
assuming ordinary operating expenses of the Portfolios, including ordinary legal
and audit expenses), SSgA Funds Management, Inc. shall be entitled to receive
from each Portfolio an annual fee, accrued daily at the rate of 1/365th of the
applicable fee rate and payable monthly on the first business day of each month,
of the following annual percentages of each Portfolio's average daily net assets
during the month:
Annual percentage of
Fund average daily net assets
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STATE STREET EQUITY 500 INDEX PORTFOLIO .045%
STATE STREET EQUITY 2000 INDEX PORTFOLIO .10%
STATE STREET EQUITY 400 INDEX PORTFOLIO .08%
STATE STREET MSCI(R) EAFE(R) INDEX PORTFOLIO .15%
STATE STREET AGGREGATE BOND INDEX PORTFOLIO .10%
As consideration for the SSgA Funds Management, Inc.'s services as
investment adviser to the State Street Money Market Portfolio and the State
Street U.S. Government Money Market Portfolio (the "Money Market Portfolios"),
SSgA Funds Management, Inc. shall be entitled to receive from each Money Market
Portfolio an annual fee, accrued daily at the rate of 1/365th of the applicable
fee rate and payable monthly on the first business day of each month, of the
following annual percentages of each Money Market Portfolio's average daily net
assets during the month:
Fund average daily net assets
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STATE STREET MONEY MARKET PORTFOLIO .10%
STATE STREET U.S. GOVERNMENT MONEY MARKET PORTFOLIO .10%
SSgA Funds Management, Inc. hereby instructs the Portfolios to pay the
above referenced fees to State Street Bank and Trust Company until further
notice.
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