Exhibit (d)(3)
FORM OF
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement (this "Agreement") is entered into as of
_____________, 2002 by and between Travelers Asset Management International
Company LLC, a New York limited liability company ("TAMIC"), and Janus Capital
Corporation, a Colorado corporation ("Sub- Adviser").
WHEREAS, TAMIC has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Capital Appreciation Fund, a Massachusetts
business trust (the "Trust"), pursuant to which TAMIC provides investment
management and advisory services to the Trust;
WHEREAS, the Investment Advisory Agreement provides that TAMIC may engage
a sub- adviser to furnish investment information and advice to assist TAMIC in
carrying out its responsibilities under the Investment Advisory Agreement;
WHEREAS, TAMIC desires to retain Sub-Adviser to render investment
advisory services to XXXX C in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, TAMIC and Sub-Adviser agree as follows:
1. SUB-ADVISER SERVICES.
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(a) Sub-Adviser shall, subject to the supervision of TAMIC and the
Board of Trustees of the Trust (the "Board"), manage the
investment and reinvestment of the assets of the Trust. Subject to
the investment objectives, policies and restrictions set forth in
the Trust's Declaration of Trust and in its registration statement
under the Securities Act of 1933 and the Investment Company Act of
1940, and to the statement of investment guidelines to be agreed
upon from time to time between TAMIC and Sub-Adviser, and subject
further to the requirements under the Internal Revenue Code of
1986, as amended (the "Code") described in Section l(b) below,
Sub-Adviser is authorized, in its discretion and without prior
consultation with TAMIC, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments
on behalf of the Trust, and the majority or the whole of the
Trust's assets may be invested in such proportions of stocks,
bonds, other securities or investment instruments, or cash as
Sub-Adviser shall determine. Sub-Adviser shall furnish TAMIC
quarterly and annual reports concerning transactions and
performance of the Trust.
(b) Sub-Adviser shall manage the investment and reinvestment of the
assets of the Trust in compliance with the diversification
requirements of Sections 817(h) and 851(b)(4)
of the Code, and with the annual gross income qualification
requirements of Sections 851 (b )(2) and 851 (b )(3 ) of the Code.
2. OBLIGATIONS OF TAMIC.
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(a) TAMIC shall provide timely information to Sub-Adviser regarding
such matters as the composition of assets in the Trust, cash
requirements and cash available for investment in the Trust, and
all other information as may be reasonably necessary for
Sub-Adviser to perform its responsibilities hereunder.
(b) TAMIC shall furnish Sub-Adviser a copy of the Trust's registration
statement currently in effect and agrees during the continuance of
this Agreement to furnish Sub-Adviser copies of any amendments or
supplements thereto before or at the time the amendments or
supplements become effective. TAMIC shall also furnish Sub-Adviser
with minutes of meetings of the Board to the extent they may
affect the duties of Sub-Adviser, a certified copy of any
financial statements or reports prepared for the Trust by
certified or independent public accountants, and with copies of
any financial statements or reports made by the Trust to its
shareholders or to any governmental body or securities exchange,
and any further materials or information which Sub-Adviser may
reasonably request to enable it to perform its functions under
this Agreement.
3. CUSTODIAN. TAMIC shall provide Sub-Adviser with a copy of the Trust's
agreement with the Custodian (the "Custodian") designated to hold the
Trust's assets and any modification thereto (the "Custody Agreement") in
advance. The Trust's assets shall be maintained in the custody of the
Custodian identified in, and in accordance with the terms and conditions
of, the Custody Agreement. Sub-Adviser shall have no liability for the
acts or omissions of the Custodian. Any assets added to the Trust shall
be delivered to the Custodian in accordance with the Custody Agreement.
4. PROPRIETARY RIGHTS. TAMIC agrees and acknowledges that Sub-Adviser is the
sole owner of the name and xxxx " Xxxxx" and that all use of any
designation comprised in whole or part of Janus (a "Xxxxx Xxxx") under
this Agreement shall inure to the benefit of Sub-Adviser. The use by
TAMIC on its own behalf or on behalf of the Trust of any Xxxxx Xxxx in
any advertisement or sales literature or other materials promoting the
Trust shall be with the prior written consent of Sub-Adviser. TAMIC shall
not, and TAMIC shall use its best efforts to cause the Trust not to,
without the prior written consent of Sub-Adviser, make representations
regarding Sub-Adviser in any disclosure document, advertisement or sales
literature or other materials promoting the Trust. Upon termination of
this Agreement for any reason, TAMIC shall cease, and TAMIC shall use its
best efforts to cause the Trust to cease, all use of any Xxxxx Xxxx(s) as
soon as reasonably practicable.
5. EXPENSES. The Trust shall pay all, and Sub-Adviser shall not be obligated
to pay any, of the Trust's organizational, operational and business
expenses pursuant hereto, including, without limitation: (a) interest and
taxes; (b) brokerage fees and commissions and other
costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Trust; and (c) transfer agent,
dividend disbursing agent, and custodian fees and expenses. Any
reimbursement of advisory fees required by any expense limitation
provision shall be the sole responsibility of The Travelers Insurance
Company, and shall not be the responsibility of Sub-Adviser. Sub-Adviser
shall pay its own expenses for the services to be provided pursuant to
this Agreement.
6. PURCHASE AND SALE OF ASSETS. Absent instructions from TAMIC to the
contrary, Sub- Adviser shall place all orders for the purchase and sale
of securities for the Trust with brokers or dealers selected by
Sub-Adviser which may include brokers or dealers affiliated with
Sub-Adviser. Purchase or sell orders for the Trust may be aggregated with
contemporaneous purchase or sell orders of other clients of Sub-Adviser,
provided that any such purchase or sell orders executed contemporaneously
shall be allocated in a manner that Sub-Adviser reasonably deems to be
equitable to all accounts involved. Sub-Adviser shall use its best
efforts to insure that the Trust shall not be disadvantaged by
Sub-Adviser buying or selling a security for another client before buying
or selling such security for the Trust. Sub-Adviser shall use its best
efforts to obtain execution of Trust transactions at prices which are
advantageous to the Trust and at commission rates that are reasonable in
relation to the benefits received. However, Sub-Adviser may select
brokers or dealers on the basis that they provide brokerage, research, or
other services or products to the Trust and/or other accounts serviced by
Sub-Adviser. Sub-Adviser may pay a broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount
of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the
value of the brokerage and research products and/or services provided by
such broker or dealer. This determination, with respect to brokerage and
research services or products, may be viewed in terms of either that
particular transaction or the overall responsibilities which Sub-Adviser
and its affiliates have with respect to the Trust and to accounts over
which they exercise investment discretion, and not all such services or
products may be used by Sub-Adviser in managing the Trust.
7. COMPENSATION OF SUB-ADVISER. TAMIC shall pay to Sub-Adviser a monthly fee
equivalent on an annual basis to the following:
ANNUAL AGGREGATE NET ASSET
MANAGEMENT FEE VALUE OF THE ACCOUNT
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0.55% of the first $100,000,000
0.50% of the next $400,000,000
0.45% of the amount over $500,000,000
The advisory fees will be deducted on each valuation date. The
Sub-Adviser shall have no right to obtain compensation directly from the
Trust or the Portfolio for services provided hereunder and agrees to look
solely to TAMIC 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
Portfolio's net assets shall be computed at the times and in the manner
specified in the Prospectus and/or the SAI.
8. NON-EXCLUSIVITY. TAMIC agrees that the services of Sub-Adviser are not to
be deemed exclusive and that Sub-Adviser and its affiliates are free to
act as investment manager and provide other services to various
investment companies and managed accounts. This Agreement shall not in
any way limit or restrict Sub-Adviser or any of its directors, officers,
employees, or agents from buying, selling or trading any securities or
other investment instruments for its or their own account or for the
account of others for whom it or they may be acting, provided that such
activities will not adversely affect or otherwise impair the performance
by Sub-Adviser of its duties and obligations under this Agreement. TAMIC
recognizes and agrees that Sub-Adviser may provide advice to or take
action with respect to other clients, which advice or action, including
the timing and nature of such action, may differ from or be identical to
advice given or action taken with respect to the Trust.
9. LIABILITY. Except as may otherwise be provided by the Investment Company
Act of 1940 or federal securities laws, neither Sub-Adviser nor any of
its officers, directors, employees or agents shall be subject to any
liability to TAMIC, the Trust or any shareholder of the Trust for any
error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the course of, connected with, or
arising out of any services to be rendered under this Agreement, except
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement. TAMIC shall hold harmless
and indemnify Sub-Adviser for any loss, liability, cost, damage or
expense (including reasonable attorneys fees and costs) arising from any
claim or demand by the Trust or any past or present shareholder of the
Trust that is not based upon the Sub-Adviser's willful misfeasance, bad
faith, or gross negligence in the performance of its duties or the
reckless disregard of its obligations and duties under this Agreement.
TAMIC acknowledges and agrees that Sub- Adviser makes no representation
or warranty, express or implied, that any level of performance or
investment results will be achieved by the Trust or that the Trust will
perform comparably with any standard or index, including other clients of
Sub-Adviser, whether public or private.
10. TERMINATION. If approved by a vote of a majority of the outstanding
voting securities of the Trust, (as defined in the Investment Company Act
of 1940), this Agreement shall become effective as of ________________,
2002, and:
(a) shall be subject to termination, without the payment of any
penalty, upon sixty days'
written notice, by (i) TAMIC or Sub-Adviser, (ii) the Board, or
(iii) by a vote of a majority of the outstanding voting securities
of the Trust;
(b) shall not be amended without prior approval of the Board, a
majority of the outstanding voting securities of the Trust, and
Sub-Adviser;
(c) shall automatically terminate upon assignment by either party; and
(d) shall continue in effect for so long as such continuance is
specifically approved (i) at least annually by the vote of a
majority of the Board who are not parties to such agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval and at which the
Board has been furnished such information as may be reasonably
necessary to evaluate the terms of said agreement; or (ii) by a
vote of a majority of the outstanding voting securities of the
Trust.
11. GENERAL.
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(a) Sub-Adviser may perform its services through any employee,
officer, or agent of Sub-Adviser, and TAMIC shall not be entitled
to the advice, recommendation or judgment of any specific person.
(b) If any term or provision of this Agreement or the application
thereof to any person or circumstances is held to be invalid or
unenforceable to any extent, the remainder of this Agreement or
the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced
to the greatest extent permitted by law.
(c) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Colorado, exclusive of conflicts of
laws.
(d) Sub-Adviser agrees that it shall furnish to the California
Commissioner of Insurance any information or reports concerning
the Trust as the Commissioner, in the performance of his or her
duties, may reasonably request.
(e) Sub-Adviser acknowledges that all books and records which it
maintains for the Trust in performing its duties under this
Agreement are the property of the Trust and subject to its
control; provided, however, that during the term of this Agreement
the Trust shall not exercise such control so as to interfere with
the performance of Sub-Adviser's duties hereunder.
(f) This Agreement is subject to the provisions of the Investment
Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Sub-Advisory
Agreement to be signed by their respective officials thereunto duly authorized
as of the day and year first above written.
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL COMPANY LLC
By:
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Name: Xxxxx X. Xxxxx
Title: President
Attest:
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Title:
JANUS CAPITAL CORPORATION
By:
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Name:
Title:
Attest:
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Title:
