Exhibit 23(d)(1)(iii)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this __ day of ________, 1999, by and between LM
Institutional Advisors, Inc. ("Manager"), a Maryland corporation, and
Batterymarch Financial Management, Inc. ("Batterymarch"), a Maryland
corporation, each of which is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended.
WHEREAS, the Manager is the manager of certain of the series of LM
Institutional Fund Advisors II, Inc. (the "Corporation"), an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Manager wishes to retain Batterymarch to provide certain
investment advisory services in connection with the Manager's management of
Batterymarch US Small Capitalization Equity Portfolio ("Fund"), a series of the
Corporation; and
WHEREAS, Batterymarch is willing to furnish such services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. Appointment. The Manager hereby appoints Batterymarch as investment
adviser for the Fund for the period and on the terms set forth in this
Agreement. Batterymarch accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Manager has furnished Batterymarch with
copies of each of the following:
(a) The Corporation's Articles of Incorporation and all amendments
thereto (such Articles of Incorporation, as presently in effect and as they
shall from time to time be amended, are herein called the "Articles");
(b) The Corporation's By-Laws and all amendments thereto (such By-Laws,
as presently in effect and as they shall from time to time be amended, are
herein called the "By-Laws");
(c) Resolutions of the Corporation's Board of Directors (the
"Directors") authorizing the appointment of the Manager as the manager and
Batterymarch as investment adviser and approving the Investment Management
Agreement between the Manager and the Corporation with respect to the Fund dated
September 16, 1999 (the "Management Agreement") and this Agreement;
(d) The Fund's most recent prospectus (such prospectus, as presently in
effect, and all amendments and supplements thereto are herein called the
"Prospectus"); and
(e) The Fund's most recent statement of additional information (such
statement of additional information, as presently in effect, and all amendments
and supplements thereto are herein called the "Statement of Additional
Information").
The Manager will furnish Batterymarch from time to time with copies of all
amendments of or supplements to the foregoing.
3. Investment Advisory Services. (a) Subject to the supervision of the
Directors and the Manager, Batterymarch shall as requested by the Manager
regularly provide the Fund with investment research, advice, management and
supervision and shall furnish a continuous investment program for the Fund
consistent with the Fund's investment objectives, policies, and restrictions as
stated in the Fund's current Prospectus and Statement of Additional Information.
Batterymarch shall as requested by the Manager determine from time to time what
securities or other property will be purchased, retained or sold by the Fund,
and shall implement those decisions, all subject to the provisions of the
Corporation's Articles and By-Laws, the 1940 Act, the applicable rules and
regulations of the Securities and Exchange Commission, and other applicable
federal and state law, as well as the investment objectives, policies, and
restrictions of the Fund, as each of the foregoing may be amended from time to
time. Batterymarch will as requested by the Manager place orders pursuant to its
investment determinations for the Fund either directly with the issuer or with
any broker, dealer or futures commission merchant (collectively, a "broker"). In
the selection of brokers and the placing of orders for the purchase and sale of
portfolio investments for the Fund, Batterymarch shall seek to obtain for the
Fund the most favorable price and execution available, except to the extent it
may be permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for the Fund
the most favorable price and execution available, Batterymarch, bearing in mind
the Fund's best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into consideration market prices and trends,
the reputation, experience and financial stability of the broker involved and
the quality of service rendered by the broker in other transactions. Subject to
such policies as the Directors may determine and communicate to Batterymarch in
writing, Batterymarch shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker that provides brokerage and research
services to Batterymarch or any affiliated person of Batterymarch an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker would have charged for effecting that
transaction, if Batterymarch determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that particular
transaction or Batterymarch's overall responsibilities with respect to the Fund
and to other clients of Batterymarch and any affiliated person of Batterymarch
as to which Batterymarch or any affiliated person of Batterymarch
exercises investment discretion. Batterymarch shall also perform such other
functions of management and supervision as may be requested by the Manager and
agreed to by Batterymarch.
(b) Batterymarch will as requested by the Manager oversee the
maintenance of all books and records with respect to the investment transactions
of the Fund in accordance with all applicable federal and state laws and
regulations, and will furnish the Directors with such periodic and special
reports as the Directors or the Manager reasonably may request.
(c) The Corporation hereby agrees that any entity or person associated
with Batterymarch (or with any affiliated person of Batterymarch) which is a
member of a national securities exchange is authorized to effect any transaction
on such exchange for the account of the Fund which is permitted by Section 11(a)
of the Securities Exchange Act of 1934, as amended, and Rule 11a2-2(T)
thereunder, and the Corporation hereby consents to the retention of compensation
for such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv) or otherwise.
4. Services Not Exclusive. Batterymarch's services hereunder are not
deemed to be exclusive, and Batterymarch shall be free to render similar
services to others. It is understood that persons employed by Batterymarch to
assist in the performance of its duties hereunder might not devote their full
time to such service. Nothing herein contained shall be deemed to limit or
restrict the right of Batterymarch or any affiliate of Batterymarch to engage in
and devote time and attention to other businesses or to render services of
whatever kind or nature.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Batterymarch hereby agrees that all books and records which
it maintains for the Fund are property of the Fund and further agrees to
surrender promptly to the Fund or its agents any of such records upon the Fund's
request. Batterymarch further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records required to be maintained by Rule
31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, Batterymarch will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities and other property (including
brokerage commissions, if any) purchased for the Fund.
7. Compensation. For the services which Batterymarch will render to the
Manager and the Fund under this Agreement, the Manager will pay Batterymarch a
fee, computed daily and paid monthly, at an annual rate of 0.65% of the average
daily net assets of the Fund. The average daily net assets of the Fund shall in
all cases be based only on business days and be computed as of the time of the
regular close of business of the New York Stock Exchange, or such other time as
may be determined by the Directors of the Corporation. Fees due to Batterymarch
hereunder shall be paid promptly to Batterymarch by the Manager following its
receipt of fees from the Fund. If this Agreement is terminated as of any date
not the last day of a calendar month, a final fee shall be paid promptly after
the date of termination and shall be based on the percentage of days of the
month during which the contract was still in effect.
8. Limitation of Liability. In the absence of willful misfeasance, bad
faith or gross negligence on the part of Batterymarch, or reckless disregard of
its obligations and duties hereunder, Batterymarch shall not be subject to any
liability to the Manager, the Fund or any shareholder of the Fund, for any act
or omission in the course of, or connected with, rendering services hereunder.
9. Definitions. As used in this Agreement, the terms "assignment,"
"interested person," "affiliated person," and "majority of the outstanding
voting securities" shall have the meanings given to them by Section 2(a) of the
1940 Act, subject to such exemptions and interpretations as may be granted by
the Securities and Exchange Commission by any rule, regulation or order; the
term "specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules and regulations thereunder; and the
term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
10. Term. This Agreement shall become effective upon its execution, and
shall remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 12) until terminated as follows:
a. The Corporation may at any time terminate this Agreement by
not more than 60 days' written notice delivered or mailed by registered
mail, postage prepaid, to the Manager and Batterymarch, or
b. If (i) the Directors or the shareholders of the Fund by
vote of a majority of the outstanding voting securities of the Fund,
and (ii) a majority of the Directors who are not interested persons of
the Corporation, the Manager or Batterymarch, by vote cast in person at
a meeting called for the purpose of voting on such approval, do not
specifically approve at least annually the continuance of this
Agreement, then this Agreement shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, Batterymarch may
continue to serve hereunder in a manner consistent with the 1940 Act
and the rules and regulations thereunder, or
c. The Manager may at any time terminate this Agreement by not
less than 60 days' written notice delivered or mailed by registered
mail, postage prepaid, to Batterymarch, and Batterymarch may at any
time terminate this Agreement by not less than 60 days' written notice
delivered or mailed by registered mail, postage prepaid, to the
Manager.
Action by the Corporation under paragraph (a) of this Section 10 may be
taken either (i) by vote of a majority of the Directors, or (ii) by the vote of
a majority of the outstanding voting securities of the Fund.
11. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
12. No Assignment; Amendments. This Agreement shall terminate
automatically in the event of its assignment or in the event that the Management
Agreement shall have terminated for any reason. Any termination of this
Agreement pursuant to Section 10 shall be without the payment of any penalty.
This Agreement shall not be amended unless such amendment is approved by the
vote of a majority of the outstanding voting securities of the Fund (provided
that such shareholder approval is required by the 1940 Act and the rules and
regulations thereunder, giving effect to any interpretations of the Securities
and Exchange Commission and its staff) and by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of the
Directors who are not interested persons of the Corporation, the Manager or
Batterymarch.
13. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. Should any part of this Agreement be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.
14. Non-Exclusive Right. In the event this Agreement is terminated or
upon written notice from Batterymarch at any time, the Corporation hereby agrees
that it will eliminate from the Fund's name any reference to the name of
"Batterymarch." The Corporation, on behalf of the Fund, shall have the
non-exclusive use of the name "Batterymarch" in whole or in part only so long as
this Agreement is effective or until such notice is given.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
LM INSTITUTIONAL ADVISORS, INC.
Attest:
By: ____________________ By: _______________________________________
BATTERYMARCH FINANCIAL MANAGEMENT, INC.
Attest:
By: ____________________ By: ________________________________________
The foregoing is accepted by:
LM INSTITUTIONAL FUND ADVISORS II, INC.
Attest:
By: ____________________ By: ________________________________________
