XXXX XXXXXXX FUNDS II
SUBADVISORY AGREEMENT
AGREEMENT made this ____ day of __________, 2005, between Xxxx Xxxxxxx
Investment Management Services, LLC, a Delaware limited liability company ("MSS"
or "Adviser"), and Salomon Brothers Asset Management, Inc., a Delaware
corporation (the "Subadviser"). In consideration of the mutual covenants
contained herein, the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of Xxxx Xxxxxxx Funds II (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the portfolios of the Trust specified in Appendix A to this Agreement
as it shall be amended by the Adviser and the Subadviser from time to time (the
"Portfolio" or "Portfolios"). The Subadviser will be an independent contractor
and will have no authority to act for or represent the Trust or Adviser in any
way or otherwise be deemed an agent unless expressly authorized in this
Agreement or another writing by the Trust and Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
a. Subject always to the direction and control of the Trustees of the Trust,
the Subadviser will manage the investments and determine the composition of
the assets of the Portfolios. In fulfilling its obligations to manage the
investments and reinvestments of the assets of the Portfolios, the
Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial and
other information affecting the economy generally and individual
companies or industries the securities of which are included in the
Portfolios or are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related
investment policies for each such portfolio as described in the
Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing
of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide assistance in determining the fair value of certain securities
when market quotations are not readily available for purposes of
calculating net asset value for
the Trust's Custodian in accordance with the procedures and methods
established by the Trustees of the Trust.
b. The Subadviser, at its expense, will furnish (i) all necessary investment
and management facilities, including salaries of personnel required for it
to execute its duties faithfully, and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolios (excluding
determination of net asset value and shareholder accounting services).
c. The Adviser has furnished or will furnish the Subadviser with copies of the
Portfolios, Registration Statements, Prospectuses, Statements of Additional
Information, Declaration of Trust and By-laws as currently in effect and
agrees during the continuance of this Agreement to furnish promptly the
Subadviser with copies of any amendments or supplements thereto at the time
the amendments or supplements become effective. Until the Adviser delivers
any such amendment or supplement to the Subadviser, the Subadviser may rely
on the Prospectuses and Statements of Additional Information and any
supplements thereto previously furnished to the Subadviser.
d. The Subadviser will select brokers and dealers to effect all transactions
subject to the following conditions: The Subadviser will place all
necessary orders with brokers, dealers, or issuers, and will negotiate
brokerage commissions if applicable. The Subadviser is directed at all
times to seek to execute brokerage transactions for the Portfolios in
accordance with such policies or practices as may be established by the
Trustees and described in the Trust's registration statement as amended.
The Subadviser may pay a broker-dealer which provided research and
brokerage services a higher commission for a particular transaction than
otherwise might have been charges by another broker-dealer, if the
Subadviser determines that the higher commission is reasonable in relation
to the value of the brokerage and research services that such broker-dealer
provides, viewed in terms of either the particular transaction or the
Subadviser's overall responsibilities with respect to accounts managed by
the subadviser. The Subadviser may use for the benefit of the Subadviser's
other client's or make available to companies affiliated with the
Subadviser or to its directors for the benefit of its clients, any such
brokerage and research services that the Subadviser obtains from brokers or
dealers.
e. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios as are required of an investment adviser of a registered
investment company pursuant to the Investment Company Act of 1940 ("the
Investment Company Act") and Investment Advisers Act of 1940 (the
"Investment Advisers Act") and the rules thereunder.
f. The Subadviser shall vote proxies relating to the Portfolio's investment
securities in accordance with the Trust's proxy voting policies and
procedures, which provide that the Subadviser shall vote all proxies
relating to securities held by the Portfolio and, subject to the Trust's
policies and procedures, shall use proxy voting policies and procedures
adopted by the Subadviser in conformance with Rule 206(4)-6 under the
Investment Advisers Act. The Subadviser shall review its proxy voting
activities on a periodic basis with the Trustees.
2
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Portfolio the
compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its directors, officers or employees
shall be liable to the Adviser or Trust for any loss suffered by the Adviser or
Trust resulting from its acts or omissions as Subadviser to the Portfolios,
except for losses resulting from willful misfeasance, bad faith, or gross
negligence in the performance of, or from reckless disregard or, the duties of
the Subadviser or any of its directors, officers or employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as Trustees, officers,
stockholders or otherwise; that directors, officers, agents and stockholders of
the Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions thereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Articles of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on the later of its execution or its
approval by the Board of Trustees of the Trust (as described below). Thereafter,
the Agreement will continue in effect for a period more than two years from the
date of its execution only so long as such continuance is specifically approved
at least annually either by the Trustees of the Trust or by a majority of the
outstanding voting securities of each of the Portfolios, provided that in either
event such continuance shall also be approved by the vote of a majority of the
Trustees of the Trust who are not interested persons (as defined in the
Investment Company Act) of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. Any required
shareholder approval of the Agreement or of any continuance of the Agreement
3
shall be effective with respect to any Portfolio if a majority of the
outstanding voting securities of the series (as defined in Rule 18f-2(h) under
the Investment Company Act) of shares of that Portfolio votes to approve the
Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved by a majority of the outstanding voting
securities of (a) any other Portfolio affected by the Agreement or (b) all the
Portfolios of the Trust.
If any required shareholder approval of the Agreement or any continuance of
the Agreement is not obtained, the Subadviser will continue to act as investment
subadviser with respect to such Portfolio pending the required approval of the
Agreement or its continuance or of any contract with the Subadviser or a
different adviser or subadviser or other definitive action; provided, that the
compensation received by the Subadviser in respect of such Portfolio during such
period is in compliance with Rule 15a-4 under the Investment Company Act.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio by
the vote of a majority of the outstanding voting securities of such Portfolio,
on sixty days' written notice to the Adviser and the Subadviser, or by the
Adviser or Subadviser on sixty days' written notice to the Trust and the other
party. This agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment Company
Act) or in the event the Advisory Agreement between the Adviser and the Trust
terminates for any reason.
9. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. The Subadviser fails to be registered as an investment adviser under the
Investment Adviser's Act or under the laws of any jurisdiction in which the
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this agreement.
b. the Subadviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust; and
c. the chief executive officer or controlling stockholder of the Subadviser or
the portfolio manager of any Portfolio changes.
10. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the Trustees of the Trust and
by the vote of a majority of the Trustees of the Trust who are not interested
person of any party to this Agreement cast in person at a meeting called for the
purpose of voting on such approval. Any required shareholder approval shall be
effective with respect to any Portfolio if a majority of the outstanding voting
securities of that Portfolio vote to approve the amendment, notwithstanding that
the amendment
4
may not have been approved by a majority of the outstanding voting securities of
(a) any other Portfolio affected by the amendment or (b) all the Portfolios of
the Trust.
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties with respect to the Portfolios listed in Appendix A.
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed , insofar as is possible, as
if such portion had never been contained herein.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of the Commonwealth of Massachusetts, or any of the provisions in this Agreement
conflict with applicable provisions of the Investment Company Act, the latter
shall control.
16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that the name " Xxxx
Xxxxxxx Funds II" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
portfolio thereof, but only the assets belonging to the Trust, or to the
particular Portfolio with respect to which such obligation or claim arose, shall
be liable.
5
17. CONSULTATION WITH SUBADVISERS TO OTHER TRUST PORTFOLIOS
As required by Rule 17a-10 under the Investment Company Act of 1940, the
Subadviser is prohibited from consulting with the entities listed below
concerning transactions for a Portfolio in securities or other assets:
1. other subadvisers to a Portfolio
2. other subadvisers to a Trust portfolio
3. other subadvisers to a portfolio under common control with the
Portfolio
18. CONFIDENTIALITY OF TRUST PORTFOLIO HOLDINGS
The parties agree to treat Trust portfolio holdings as confidential
information in accordance with the Trust's "Policy Regarding Disclosure of
Portfolio Holdings," as such policy may be amended from time to time, and to
prohibit their employees from trading on any such confidential information.
All information furnished by one part to the other party to the other party
(including their respective agents, employees and representatives) hereunder
shall be treated as confidential and shall not be disclosed to third parties,
except if it is otherwise in the public domain or, with notice to the other
party, as may be necessary to comply with applicable laws, rules, regulations
subpoenas or court orders. Further, the Adviser and Trust agree that information
supplied by the Subadviser, including approved lists, internal procedures,
compliance procedures and any board materials, is valuable to the Subadviser,
and the Adviser and Trust agree not to disclose any of the information contained
in such materials, except: (i) as required by applicable law or regulation; (ii)
as required by state or federal regulatory authorities; (iii) to the Board,
counsel to the Board, counsel to the Trust, the independent accountants and any
other agent of the Portfolios; or (iv) as otherwise agreed to by the parties in
writing.
19. COMPLIANCE
Upon execution of this Agreement, the Subadviser shall provide the Adviser
with the Subadviser's written policies and procedures ("Compliance Policies") as
required by Rule 206(4)-7 under the Investment Advisers Act. Throughout the term
of this Agreement, the Subadviser shall promptly submit to the Adviser: (i) any
material changes to the Compliance Policies, (ii) notification of the
commencement of a regulatory examination of the Subadviser and documentation
describing the results of any such examination and of any periodic testing of
the Compliance Policies, and (iii) notification of any material compliance
matter that relates to the services provided by the Subadviser to the Trust
including but not limited to any material violation of the Compliance Policies
or of the Subadviser's code of ethics and/or related code. Throughout the term
of this Agreement, the Subadviser shall provide the Adviser with any
certifications, information and access to personnel and resources (including
those resources that will permit testing of the Compliance Policies by the
Adviser) that the Adviser may reasonably request to enable the Trust to comply
with Rule 38a-1 under the Investment Company Act.
6
20. USE OF NAMES
The parties agree that the name of the Adviser and Subadviser, the names of
the affiliates of the Adviser and the Subadviser and any derivative, logo,
trademark, service xxxx or trade name are the valuable property of the Adviser
and Subadviser and their affiliates, respectively. Upon termination of this
Agreement, the Adviser and the Subadviser shall forthwith cease to use such
name(s), derivatives, logos, trademarks, service marks or trades names of the
other party. [It is understood that the Subadviser shall have no responsibility
to ensure the adequacy of the form or content of such materials for purposes of
the Investment Company Act or other applicable laws and regulations. - please
explain this provision] If the Adviser or the Subadviser makes an unauthorized
use of the other party's names, derivatives, logos, trademarks, service marks or
trade names, it is acknowledged that such other party shall suffer irreparable
hardship for which monetary damages are inadequate and therefore such other
party will be entitled to injunctive relief.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the dated first
mentioned above.
XXXX XXXXXXX INVESTMENT MANAGEMENT
SERVICES, LLC
By: Xxxx Xxxxxxx Life Insurance Company
(U.S.A.), Managing Member
By:
------------------------------------
Xxxx X. XxxXxxx III
Chairman
SALOMON BROTHERS ASSET MANAGEMENT, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
8
APPENDIX A
The Subadviser shall serve as investment subadviser for each Portfolio of
the Trust listed below. The Adviser will pay the Subadviser, as full
compensation for all services provided under this Agreement with respect to each
Portfolio, the fee computed separately for such Portfolio at an annual rate as
follows (the "Subadviser Fee"):
BETWEEN
BETWEEN $200 MILLION
FIRST $50 MILLION AND AND EXCESS OVER
$50 MILLION $200MILLION $500 MILLION $500 MILLION
OF AGGREGATE OF AGGREGATE OF AGGREGATE OF AGGREGATE
PORTFOLIO NET ASSETS* NET ASSETS* NET ASSETS* NET ASSETS*
--------- ------------ --------------- ------------ ------------
U.S. Government Securities Fund 0.200% 0.200% 0.200% 0.100%
Strategic Bond Fund 0.275% 0.275% 0.275% 0.200%
High Yield Fund 0.275% 0.275% 0.275% 0.200%
Special Value Fund 0.550% 0.550% 0.550% 0.500%
* The term Aggregate Net Assets includes the net assets of a Portfolio of the
Trust. It also includes with respect to each Portfolio the net assets of
one or more other portfolios as indicated below, but in each case only for
the period during which the Subadviser for the Portfolio also serves as the
subadviser for the other portfolio(s). For purposes of determining
Aggregate Net Assets and calculating the Subadviser Fee, the net assets of
the Portfolio and each other portfolio of the Trust are determined as of
the close of business on the previous business day of the Trust, and the
net assets of each portfolio of each other fund are determined as of the
close of business on the previous business day of that fund.
TRUST PORTFOLIO(S) OTHER PORTFOLIO(S)
----------------- ------------------
U.S. Government Securities Fund -- U.S. Government Securities Trust, a series
of Xxxx Xxxxxxx Trust
Strategic Bond Fund Strategic Bond Trust, a series of Xxxx
Xxxxxxx Trust
High Yield Fund High Yield Trust, a series of Xxxx
Xxxxxxx Trust
Special Value Fund Special Value Trust, a series of Xxxx
Xxxxxxx Trust
The Subadviser Fee for a Portfolio shall be based on the applicable annual
fee rate for the Portfolio which for each day shall be equal to (i) the sum of
the amounts determined by applying the annual percentage rates in the table to
the applicable portions of Aggregate Net Assets divided by (ii) Aggregate Net
Assets (the "Applicable Annual Fee Rate"). The Subadviser Fee for each Portfolio
shall be accrued for each calendar day, and the sum of the daily fee accruals
shall be paid monthly to the Subadviser within 30 calendar days of the end of
each month. The daily fee accruals will be computed by multiplying the fraction
of one over the number of
A-1
calendar days in the year by the Applicable Annual Fee Rate, and multiplying
this product by the net assets of the Portfolio. The Adviser shall provide
Subadviser with such information as Subadviser may reasonably request supporting
the calculation of the fees paid to it hereunder. Fees shall be paid either by
wire transfer or check, as directed by Subadviser.
If, with respect to any Portfolio, this Agreement becomes effective or
terminates, or if the manner of determining the Applicable Annual Fee Rate
changes, before the end of any month, the fee (if any) for the period from the
effective date to the end of such month or from the beginning of such month to
the date of termination or from the beginning of such month to the date such
change, as the case may be, shall be prorated according to the proportion which
such period bears to the full month in which such effectiveness or termination
or change occurs.
A-2
