INVESTMENT SUBADVISORY AGREEMENT
Exhibit (d)(2)
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 1st day of September, 2005, among CitiStreet Funds, Inc., a Maryland corporation (the “Series Fund”), CitiStreet Funds Management LLC, a New Jersey limited liability company (the “Manager”), and Alliance Capital Management L.P., a Delaware limited partnership (the “Subadviser”).
WHEREAS, CitiStreet Funds Management LLC has entered into a management agreement (the “Management Agreement”) with the Series Fund, a diversified open-end management investment company registered under the Investment Company Act of 1940 (the “1940 Act”), pursuant to which CitiStreet Funds Management LLC will act as Manager of the Series Fund; and
WHEREAS, the Series Fund is currently divided into four separate series or Funds, each of which is established pursuant to a resolution of the Board of Directors of the Series Fund, and the Series Fund may in the future add additional Funds; and
WHEREAS, the Manager has the responsibility of evaluating, recommending, and supervising investment advisers to each Fund and, in connection therewith, desires to retain the Subadviser to provide investment advisory services to the CitiStreet International Stock Fund (the “Fund”), the Series Fund has the responsibility of compensating the investment advisers to each Fund and desires to retain the Subadviser to provide investment advisory services to the Fund, and the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Board of Directors of the Series Fund, the Subadviser shall manage the investment operations of the assets of the Fund allocated by the Manager to the Subadviser (such assets referred to as the “Allocated Assets”), including the purchase, retention and disposition of portfolio investments, in accordance with the Fund’s investment objectives, policies and restrictions as stated in the Prospectus of the Fund (such Prospectus and Statement of Additional Information as currently in effect and as amended or supplemented from time to time, being herein called the “Prospectus”) and subject to the following understandings:
(i) The Subadviser shall consult periodically with the Manager, and they shall agree upon the current investment strategy for the Allocated Assets in the light of anticipated cash flows.
(ii) The Subadviser shall provide supervision of the Allocated Assets’ investments and determine from time to time what securities, options, futures contracts, and other investments included in the Allocated Assets will be purchased, retained or sold by the Fund, and what portion of the Allocated Assets will be invested or held uninvested as cash or short-term investments.
(iii) In the performance of its duties and obligations under this Agreement, the Subadviser shall act in conformity with the Articles of Incorporation, By-Laws, and Prospectus of the Series Fund and with the instructions and directions of the Manager and of the Board of Directors of the Series Fund and will conform to and comply with the requirements of the 1940 Act, the Investment Advisers Act of 1940, the Internal Revenue Code of 1986, and all other applicable federal and state laws and regulations.
(iv) The Subadviser will place orders for the securities, options, futures contracts, and other investments to be purchased or sold as part of the Allocated Assets with or through such persons, brokers, dealers, or futures commission merchants (including but not limited to persons affiliated with the Manager or Subadviser) as the Subadviser may select in order to carry out the policy with respect to brokerage set forth in the Series Fund’s Registration Statement and Prospectus or as the Board of Directors may direct from time to time. In providing the Fund with investment advice and management, the Subadviser will give primary consideration to securing the most favorable price and efficient execution. Within the framework of this policy, the Subadviser may consider such factors as the price of the security, the rate of the commission, the size and difficulty of the order, the reliability, integrity, financial condition, general execution and operational capabilities of competing broker-dealers and futures commission merchants, and the brokerage and research services they provide to the Subadviser or the Fund. The parties agree that it is desirable for the Fund that the Subadviser have access to supplemental investment and market research and security and economic analysis that certain brokers or futures commission merchants are able to provide. The parties further agree that brokers and futures commission merchants that provide such research and analysis may execute brokerage transactions at a higher cost to the Fund than would result if orders to execute such transactions had been placed with other brokers on the sole basis of ability to obtain the most favorable price and efficient execution. Therefore, notwithstanding the second sentence of this paragraph 1(a)(iv), the Subadviser is authorized to place orders for the purchase and sale of securities, options, futures contracts, and other investments for the Fund with brokers or futures commission merchants who provide the Subadviser with such research and analysis, subject to review by the Manager and the Series Fund’s Board of Directors from time to time with respect to the extent and continuation of this practice. The Series Fund and the Manager acknowledge that the services provided by such brokers or futures commission merchants may be useful to the Subadviser in connection with the Subadviser’s services to other clients.
When the Subadviser deems the purchase or sale of a security, option, futures contract, or other investment to be in the best interest of the Fund as well as other clients of the Subadviser, the Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities, options, futures contracts, or other investments to be sold
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or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution and to allocate the shares purchased or sold among the Series Fund and the Subadviser’s other clients on a fair and nondiscriminatory basis, in a manner consistent with the Subadviser’s fiduciary obligations to the Fund and to such other clients.
(v) The Subadviser shall maintain all books and records with respect to the portfolio transactions of the Allocated Assets required by subparagraphs (b)(5), (6), (7), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and by Rule 17e-1(c)(2) under the 0000 Xxx. The Subadviser shall provide to the Series Fund and the Manager such reports and information as may be reasonably requested by the Series Fund, its Board of Directors or the Manager, including information requested with respect to the periodic review of this Agreement by the Board of Directors of the Series Fund under Section 15 of the 1940 Act.
(vi) The Subadviser shall provide the Series Fund’s custodian on each business day with information relating to all transactions concerning the Allocated Assets and shall provide the Manager with such information upon request of the Manager.
(vii) The investment management services provided by the Subadviser hereunder are not exclusive, and the Subadviser shall be free to render similar services to others.
(viii) Absent specific instructions to the contrary provided to it by the Manager, and subject to the Subadviser’s receipt of all necessary voting materials, the Subadviser shall use its best efforts to vote all proxies with respect to investments of the Allocated Assets in accordance with the Subadviser’s proxy voting policy as most recently provided to the Manager. The Subadviser shall maintain records relating to the proxy votes and shall provide such records to the Manager upon reasonable request so that the Series Fund can meet its obligations to file proxy information with the Securities and Exchange Commission.
(ix) The Subadviser shall not consult with any other subadviser for the Fund (or with any other subadviser for any fund of the Series Fund) concerning transactions of the Fund in securities or other assets.
(x) The Subadviser’s responsibility in providing advice to the Fund is limited to providing advice with respect to the Allocated Assets.
(b) Services to be furnished by the Subadviser under this Agreement may be furnished through the medium of any directors, officers, or employees of the Subadviser or its affiliates.
(c) The Subadviser shall keep the books and records with respect to the Allocated Assets required to be maintained by the Subadviser pursuant to
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paragraph 1(a)(v) hereof and shall timely furnish to the Manager or the Series Fund’s custodian all information relating to the Subadviser’s services hereunder needed to keep the other books and records of the Fund required by Rules 17e-1(c)(2) and 31a-1 under the 1940 Act. The Subadviser agrees that all records which it maintains for the Fund are the property of the Fund, and the Subadviser will surrender promptly to the Fund any of such records upon the Fund’s request, provided however that the Subadviser may retain a copy of such records. The Subadviser further agrees to preserve for the periods prescribed by Rules 17e-1(c)(2) and 31a-2 under the 1940 Act any such records as are required to be maintained by it pursuant to paragraph 1(a)(v) hereof.
(d) The Subadviser agrees to maintain procedures adequate to ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940, the Internal Revenue Code of 1986, and other applicable state and federal laws and regulations.
(e) The Subadviser shall furnish to the Manager, upon the Manager’s reasonable request, copies of all records prepared in connection with (i) the performance of this Agreement, and (ii) the maintenance of compliance procedures pursuant to paragraph 1(d) hereof.
(f) The Subadviser agrees to provide, upon reasonable request of the Manager or the Series Fund, information regarding the Subadviser, including but not limited to background information about the Subadviser and its personnel and performance data, for use in connection with efforts to promote the Series Fund and the registration and sale of its shares.
2. The Manager shall continue to have responsibility for all services to be provided to the Fund pursuant to the Management Agreement and shall oversee and review the Subadviser’s performance of its duties under this Agreement.
3. The Series Fund shall pay the Subadviser, for the services provided and the expenses assumed pursuant to this Subadvisory Agreement, a fee at an annual rate of 0.55% of the average daily Net Allocated Assets up to and including $100 million, plus a fee at an annual rate of 0.50% of the average daily Net Allocated Assets over $100 million and up to and including $150 million, plus a fee at an annual rate of 0.40% of the average daily Net Allocated Assets over $150 million. The foregoing fee rate has been agreed to by the Subadviser in contemplation of Net Allocated Assets of not less than $100 million. In the event or at such time as the average daily Net Allocated Assets shall be less than $100 million, the fee rate payable to the Sub-Adviser shall be subject to renegotiation by the Series Fund and the Subadviser, subject to the approval requirements of the 1940 Act and any related orders of the Securities and Exchange Commission. The term “Net Allocated Assets” means the Allocated Assets less related liabilities as determined by the Manager or its designee. This fee will be computed daily and paid monthly.
4. The Subadviser shall not be liable for any loss suffered by the Series Fund or the Manager as a result of any act or omission of the Subadviser in connection with the matters to which this Agreement relates, except a loss resulting from a violation of applicable law or loss
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resulting from willful misfeasance, bad faith or gross negligence on the Subadviser’s part in the performance of its duties or from its reckless disregard of its obligations and duties under this Agreement. The Series Fund shall indemnify the Subadviser and hold it harmless from all loss, cost, damage and expense, including reasonable expenses for legal counsel, incurred by the Subadviser resulting from actions from which it is relieved of responsibility by this paragraph. The Subadviser shall indemnify the Series Fund and the Manager and hold them harmless from all loss, cost, damage and expense, including reasonable expenses for legal counsel, incurred by the Series Fund and the Manager resulting from actions from which the Subadviser is not relieved of responsibility by this paragraph.
5. This Agreement shall continue in effect for a period of more than two years from the date hereof only so long as such continuance is specifically approved at least annually in conformity with the requirements of the 1940 Act; provided, however, that this Agreement may be terminated by the Fund at any time, without the payment of any penalty, by the Board of Directors of the Series Fund or by vote of a majority of the outstanding voting securities (as defined in the 0000 Xxx) of the Fund, or by the Manager or the Subadviser at any time, without the payment of any penalty, on not more than 60 days’ nor less than 30 days’ written notice to the other party. This Agreement shall terminate automatically in the event of its assignment (as defined in the 0000 Xxx) or upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of the Subadviser’s directors, officers, or employees to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or dissimilar nature, nor limit the Subadviser’s right to engage in any other business or to render services of any kind to any other corporation, firm, individual, or association.
7. During the term of this Agreement, the Manager agrees to furnish the Subadviser at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature or other material prepared for distribution to shareholders of the Fund or the public, which refer to the Subadviser in any way, prior to use thereof and not to use material if the Subadviser reasonably objects in writing five business days (or such other time as may be mutually agreed) after receipt thereof. Such materials may be furnished to the Subadviser hereunder by first class mail, overnight delivery, facsimile transmission, electronic transmission, or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the Series Fund must be obtained in conformity with the requirements of the 1940 Act.
9. Except as otherwise specifically provided in this Agreement, any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by certified or registered mail, return receipt requested and postage prepaid, (1) to the CitiStreet Funds, Inc. at Xxx Xxxxx Xxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000, Attention: President; (2) to CitiStreet Funds Management LLC at 000 Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxxxx 00000-0000, Attention: Secretary; or (3) to Alliance Capital Management L.P., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxx.
10. This Agreement shall be governed by the laws of the State of New Jersey.
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11. This Agreement may be executed in two or more counterparts, which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
| CITISTREET FUNDS, INC. | ||
| By: |
/s/ Xxxx X. Xxxxxxxx | |
| Xxxx X. Xxxxxxxx | ||
| President | ||
| CITISTREET FUNDS MANAGEMENT LLC | ||
| By: |
/s/ Xxxx X. Xxxxxxxx | |
| Xxxx X. Xxxxxxxx | ||
| Executive Vice President | ||
| ALLIANCE CAPITAL MANAGEMENT L.P. | ||
| By: |
Alliance Capital Management | |
| Corporation, its General Partner | ||
| By: |
/s/ Xxxxx X. Xxxxxx | |
| Xxxxx X. Xxxxxx | ||
| Assistant Secretary | ||
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