EX-99.B(d)tgtsubadv3
INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made as of the 24th day of June, 2003, by and
between Xxxxxxx & Xxxx Investment Management Company, a Kansas
corporation, registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Adviser") and State Street Research & Management
Company, a Delaware corporation, registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Sub-Adviser").
WHEREAS, the Adviser is the investment manager to W&R Target Funds,
Inc. (the "Fund"), an open-end diversified management investment company
organized as a series fund, registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish it
with portfolio selection and related research and statistical services in
connection with the Adviser's investment advisory activities on behalf of
the Fund's Small Cap Value Portfolio (hereinafter "Portfolio"), and the
Sub-Adviser desires to furnish such services to the Adviser;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:
1. Appointment of Sub-Adviser
In accordance with and subject to the Investment Advisory Agreement
between the Fund and the Adviser, the Adviser hereby appoints the Sub-
Adviser to perform portfolio selection services described herein for
investment and reinvestment of the Portfolio, subject to the control and
direction of the Fund's Board of Directors, for the period and on the terms
hereinafter set forth. The Sub-Adviser accepts such appointment and agrees
to furnish the services hereinafter set forth for the compensation herein
provided. The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized, have no authority to act for or represent the Fund or the
Adviser in any way or otherwise be deemed an agent of the Fund or the
Adviser.
2. Obligations of and Services to be Provided by the Sub-Adviser
(a) The Sub-Adviser shall provide the following services and assume
the following obligations with respect to the Portfolio of the Fund:
(1) The investment of the assets of the Portfolio shall at all
times be subject to the applicable provisions of the Articles
of Incorporation, the Bylaws, the Registration Statement, the
current Prospectus and the Statement of Additional Information
of the Fund and shall conform to the investment objectives,
policies and restrictions of the Portfolio as set forth in
such documents and as interpreted from time to time by the
Board of Directors of the Fund and by the Adviser and
communicated in writing to the Sub-Adviser, including
diversification of the holdings of the Portfolio as a
segregated asset account in accordance with Section 817 of the
Internal Revenue Code, as amended (the "Code"), and Regulation
Section 1.817-5 thereunder, provided that the Adviser shall be
responsible for ensuring that each Portfolio is "adequately
diversified" if and to the extent required by Section 817(h)
of the Code and Regulation 1.817-5 thereunder. Within the
framework of the investment objectives, policies and
restrictions of the Portfolio, and subject to the supervision
of the Adviser, the Sub-Adviser shall have the sole and
exclusive responsibility for the making and execution of all
investment decisions for the Portfolio. The Adviser agrees to
promptly inform the Sub-Adviser if such objective, policies or
restrictions change and to deliver to the Sub-Adviser updated
documents, if prepared.
(2) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Portfolio, the Sub-Adviser
shall: (1) 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 Portfolio or are under
consideration for inclusion therein; (2) formulate and
implement a continuous investment program for the Portfolio
consistent with the investment objective and related
investment policies for such Portfolio as set forth in the
Fund's Registration Statement, as amended; and (3) take such
steps as are necessary to implement the aforementioned
investment program by purchase and sale of securities
including the placing, or directing the placement through an
affiliate of the Sub-Adviser, of orders for such purchases and
sales.
(3) In connection with the purchase and sale of securities of the
Portfolio, the Sub-Adviser shall arrange for the transmission
to the Adviser (or its designee) and the Custodian for the
Fund on a daily basis such confirmation, trade tickets and
other documents as may be necessary to enable them to perform
their administrative responsibilities with respect to the
Portfolio. With respect to portfolio securities to be
purchased or sold through the Depository Trust Company, the
Sub-Adviser shall arrange for the automatic transmission of
the I.D. confirmation of the trade to the Custodian of the
Portfolio. The Sub-Adviser shall render such reports to the
Adviser and/or to the Fund's Board of Directors concerning the
investment activity and portfolio composition of the
Portfolio in such form and at such intervals as the Adviser or
the Board may from time to time reasonably require.
(4) The Sub-Adviser shall, in the name of the Fund, place or
direct the placement of orders for the execution of portfolio
transactions in accordance with the policies with respect
thereto, as set forth in the Fund's Registration Statement, as
amended from time to time, and under the 1933 Act and the 1940
Act. In connection with the placement of orders for the
execution of the Fund's portfolio transactions, the Sub-
Adviser shall create and maintain all necessary brokerage
records of the Fund in accordance with all applicable law,
rules and regulations, including but not limited to, records
required by Section 31(a) of the 1940 Act. All records shall
be the property of the Fund and shall be available for
inspection and use by the Securities and Exchange Commission,
the Fund or any person retained by the Fund. Where applicable,
such records shall be maintained by the Sub-Adviser for the
period and in the place required by Rule 31a-2 under the 1940
Act.
(5) In placing orders or directing the placement of orders for the
execution of portfolio transactions, the Sub-Adviser shall
select brokers and dealers for the execution of the
Portfolio's transactions. In selecting brokers or dealers to
execute such orders, the Sub-Adviser is expressly authorized
to consider the fact that a broker or dealer has furnished
statistical, research or other information or services which
enhance the Sub-Adviser's investment research and portfolio
management capability generally. It is further understood in
accordance with Section 28(e) of the Securities Exchange Act
of 1934, as amended, that the Sub-Adviser may negotiate with
and assign to a broker a commission which may exceed the
commission which another broker would have charged for
effecting the transaction if the Sub-Adviser determines in
good faith that the amount of commission charged was
reasonable in relation to the value of brokerage and/or
research services (as defined in Section 28(e)) provided by
such broker, viewed in terms either of the Portfolio or the
Sub-Adviser's overall responsibilities to the Sub-Adviser's
discretionary accounts.
(b) The Sub-Adviser shall use the same skill and care in providing
services to the Fund as it uses in providing services to other fiduciary
accounts for which it has investment responsibility. The Sub-Adviser will
comply with all applicable rules and regulations of the Securities and
Exchange Commission.
3. Expenses
During the terms of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement.
4. Compensation
In payment for the investment sub-advisory services to be rendered by
the Sub-Adviser in respect of the Portfolio hereunder, the Adviser shall
pay to the Sub-Adviser as full compensation for all services hereunder a
fee computed at an annual rate which shall be a percentage of the average
daily value of the net assets of the Portfolio. The fee shall be accrued
daily and shall be based on the net asset values of all of the issued and
outstanding shares of the Portfolio as determined as of the close of each
business day pursuant to the Articles of Incorporation, Bylaws and
currently effective Prospectus and Statement of Additional Information of
the Fund. The fee shall be payable in arrears on the last day of each
calendar month.
The amount of such annual fee, as applied to the average daily value
of the net assets of the Portfolio shall be as described in the schedule
below:
Assets* Fee
On the first $500 million 0.65%
On the next $500 million 0.60%
On all assets in excess of $1 billion 0.50%
*The term "assets" for purposes of each of the breakpoints set forth
above shall include all 'small cap value' assets sub-advised by the
Sub-Adviser for the Adviser or its affiliates, in addition to the assets of
the Portfolio. The aggregation of the assets for purposes of the
breakpoints, shall be calculated quarterly based upon the aggregate assets
on March 31st, June 30th, September 30th and December 31st of each calendar
year (or portion thereof) that this agreement is effective.
5. Renewal and Termination
This Agreement shall continue in effect until September 30, 2003, and
from year to year thereafter provided such continuance is specifically
approved at least annually by a vote of the holders of the majority of the
outstanding voting securities of the Portfolio, or by a vote of the
majority of the Fund's Board of Directors. And further provided that such
continuance is also approved annually by a vote of the majority of the
Fund's Board of Directors who are not parties to this Agreement or
interested persons of parties hereto, cast in person at a meeting called
for the purpose of voting on such approval. This Agreement may be
terminated at any time without payment of penalty: (i) by the Fund's Board
of Directors or by a vote of a majority of the outstanding voting
securities of the class of capital stock of the Portfolio on sixty days'
prior written notice, or (ii) by either party hereto upon sixty days' prior
written notice to the other. This Agreement will terminate automatically
upon any termination of the Investment Advisory Agreement between the Fund
and the Adviser or in the event of its assignment. The terms "interested
person," "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act.
6. General Provisions
(a) The Sub-Adviser may rely on information reasonably believed by it
to be accurate and reliable. Except as may otherwise be provided by the
1940 Act, neither the Sub-Adviser nor its officers, directors, employees or
agents shall be subject to any liability for any error of judgment or
mistake of law or for any loss arising out of any investment or other act
or omission in the performance by the Sub-Adviser of its duties under this
Agreement or for any loss or damage resulting from the imposition by any
government or exchange control restrictions which might affect the
liquidity of the Portfolio's assets, or from acts or omissions of
custodians or securities depositories, or from any war or political act of
any foreign government to which such assets might be exposed, provided that
nothing herein shall be deemed to protect, or purport to protect, the Sub-
Adviser against any liability to the Fund or to its shareholders to which
the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
hereunder, or by reason of the Sub-Adviser's reckless disregard of its
obligations and duties hereunder.
(b) The Adviser and the Fund's Board of Directors understand that the
value of investments made for the Portfolio may go up as well as down, is
not guaranteed and that investment decisions will not always be profitable.
The Adviser has not made and is not making any guarantees, including any
guarantee as to any specific level of performance of the Portfolio. The
Adviser and the Fund's Board of Directors acknowledge that this Portfolio
is designed for the described investment objective and is not intended as a
complete investment program. They also understand that investment decisions
made on behalf of the Portfolio by Sub-Adviser are subject to various
market and business risks.
(c) This Agreement shall not become effective unless and until it is
approved by the Board of Directors of the Fund, including a majority of the
members who are not "interested persons" to parties to this Agreement, by a
vote cast in person at a meeting called for the purpose of voting such
approval.
(d) The Adviser understands that the Sub-Adviser now acts, will
continue to act, or may act in the future, as investment adviser to
fiduciary and other managed accounts, including other investment companies,
and the Adviser has no objection to the Sub-Adviser so acting, provided
that the Sub-Adviser duly performs all obligations under this Agreement.
The Adviser also understands that the Sub-Adviser may give advice and take
action with respect to any of its other clients or for its own account
which may differ from the timing or nature of action taken by the Sub-
Adviser with respect to the Fund. Nothing in this Agreement shall impose
upon the Sub-Adviser any obligation to purchase or sell or to recommend for
purchase or sale, with respect to the Fund, any security which the Sub-
Adviser or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the account of
any other client.
(e) Except to the extent necessary to perform its obligations
hereunder, nothing herein shall be deemed to limit or restrict the right of
the Sub-Adviser, or the right of any of its officers, directors or
employees who may also be an officer, director or employee of the Fund, or
persons otherwise affiliated with the Fund (within the meaning of the 0000
Xxx) to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other trust,
corporation, firm, individual or association.
(f) Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof. This
Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of Kansas. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(g) Any notice under this Agreement shall be in writing, addressed
and delivered or mailed postage pre-paid to the appropriate party at the
following address: The Adviser and the Fund at 0000 Xxxxx Xxxxxx, X.X. Xxx
00000, Xxxxxxx Xxxxxxx, XX 00000-0000, and the Sub-Adviser at Xxx Xxxxxxxxx
Xxxxxx, Xxxxxx, XX 00000-0000 Attention: General Counsel.
IN WITNESS WHEREOF, the parties have duly executed this Agreement.
XXXXXXX & XXXX INVESTMENT MANAGEMENT COMPANY
By:________________________
Its:________________________
STATE STREET RESEARCH & MANAGEMENT COMPANY
By:_____________________
Its:_____________________
