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
0.65% 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:
