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EXHIBIT EX-99D.1.
ADVISORY AGREEMENT
This Advisory Agreement ("Contract") is made as of the ________ day of
________, 2001, between AB FUNDS TRUST, a Delaware business trust ("Trust"), and
SBC FINANCIAL SERVICES, INC. ("Adviser"), a nonprofit corporation organized
under the laws of the State of Texas and registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act").
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company, and
is authorized to offer for sale distinct series of shares of beneficial
interest; and
WHEREAS the Trust desires to retain the Adviser as investment adviser
to furnish certain portfolio management services to the Trust with respect to
the series of shares of beneficial interest of the Trust listed on Schedule A
hereto, as such schedule may be amended from time to time (each a "Fund"), and
the Adviser is willing to furnish such services;
WHEREAS the Trust may desire to have one or more investment
sub-advisers (each a "Sub-Adviser") provide investment advisory and portfolio
management services with respect to each Fund or a designated portion thereof;
and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Adviser as investment
adviser of the Trust and each FUND for the period and on the terms set forth in
this Contract. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Employment; Duties of the Adviser.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and any written guidelines, policies and procedures adopted
by the Trust, the Adviser will provide a continuous investment program for all
or a designated portion of the assets ("Segment") of each Fund, including
investment research and discretionary management with respect to all securities
and investments and cash equivalents in each Fund or Segment. The Adviser will
determine from time to time what investments will be purchased, retained or sold
by each Fund or Segment. The Adviser will be responsible for placing purchase
and sell orders for investments and for other related transactions for each Fund
or Segment. The Adviser will provide services under this Contract in accordance
with each Fund's investment objective, policies and restrictions as stated in
the Trust's currently effective registration statement under the 1940 Act, and
any amendments or supplements thereto ("Registration Statement").
(b) In accordance with each Fund's investment policies described in the
Registration Statement, the Adviser is responsible for avoiding investment of
Fund assets in any company that is publicly recognized, as determined by the
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Annuity Board of the Southern Baptist Convention ("Annuity Board"), as being in
the liquor, tobacco, gambling, pornography or abortion industries, or any
company whose products, services or activities are publicly recognized, as
determined by the Annuity Board, as being incompatible with the moral and
ethical posture of the Annuity Board. The Adviser will maintain a list of such
prohibited companies and in its sole discretion will amend or supplement the
list from time to time. The Adviser will provide the Sub-Advisers with such
amendments or supplements on a timely basis.
(c) The Adviser agrees that, in placing orders with brokers, it will
seek to obtain the best net result in terms of price and execution; provided
that, on behalf of each Fund, and in compliance with Section 28(e) of the
Securities Exchange Act of 1934, the Adviser may, in its discretion, use brokers
who provide the Adviser with research, analysis, advice and similar services to
execute portfolio transactions, and the Adviser may pay to those brokers in
return for brokerage and research services a higher commission than may be
charged by other brokers, subject to the Adviser's determining in good faith
that such commission is reasonable in terms either of the particular transaction
or of the overall responsibility of the Adviser to the Fund and its other
clients and that the total commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long term. The Adviser agrees to
provide the Trust periodically with reports or other information regarding
brokerage and benefits received therefrom. In no instance will portfolio
securities be purchased from or sold to the Adviser, any other investment
sub-adviser that serves as sub-adviser to one or more series of the Trust, or
any affiliated person thereof, except in accordance with the federal securities
laws and the rules and regulations thereunder, or in accordance with an order of
exemption received from the United States Securities and Exchange Commission
("SEC"). Whenever the Adviser simultaneously places orders to purchase or sell
the same security on behalf of a Fund and one or more other accounts advised by
the Adviser, the orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable over time to each account.
(d) The Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions by the Adviser on behalf of each Fund or
Segment, and will furnish the Board with such periodic and special reports as
the Board reasonably may request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Adviser hereby agrees that all records that it
maintains for a Fund are the property of the Trust, agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any records that it
maintains for the Trust and that are required to be maintained by Rule 31a-1
under the 1940 Act, and further agrees to surrender promptly to the Trust any
records that it maintains for a Fund upon request by the Trust.
(e) All transactions will be consummated by payment to or delivery by
the custodian designated by the Trust (the "Custodian"), or such depositories or
agents as may be designated by the Custodian in writing, of all cash and/or
securities due to or from a Fund or Segment, and the Adviser shall not have
possession or custody thereof. The Adviser shall advise the Custodian and
confirm in writing to the Trust and any other designated agent of the Fund,
including the Administrator, all investment orders for the Fund placed by it
with brokers and dealers at the time and in the manner set forth in Rule 31a-1
under the 1940 Act. For purposes of the foregoing sentence, communication via
electronic means will be acceptable as agreed to in writing from time to time by
the Trust. The Trust shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated by
the Adviser. The Trust shall be responsible for all custodial arrangements and
the payment of all custodial charges and fees, and, upon giving proper
instructions to the Custodian, the Adviser
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shall have no responsibility or liability with respect to custodial arrangements
or the acts, omissions or other conduct of the Custodian, except that it shall
be the responsibility of the Adviser to notify the Trust if the Custodian fails
to confirm in writing proper execution of the instructions.
(f) At such times as shall be reasonably requested by the Board, the
Adviser will provide the Board with economic and investment analyses and reports
as well as quarterly reports setting forth the investment performance of a Fund
or Segment.
(g) In accordance with procedures adopted by the Board, as amended from
time to time, the Adviser will assist the Administrator and/or each Fund in
determining the fair valuation of all portfolio securities held in a Fund or
Segment and will use its reasonable efforts to arrange for the provision of
valuation information or a price(s) from one or more parties independent of the
Adviser for each portfolio security held in a Fund or Segment for which the
Administrator does not obtain prices in the ordinary course of business from an
automated pricing service.
3. Retention of a Sub-Adviser. Subject to approval of the Board, the
Adviser may retain one or more Sub-Advisers for a Fund, at the Fund's own cost
and expense, to provide any or all of the services specified in Section 2 hereof
with regard to any Fund or Segment thereof. In the event that the Adviser
retains one or more Sub-Adviser(s) for a Fund, the following provisions apply:
(a) Subject to the oversight and direction of the Board, the Adviser
will provide to the Trust investment management evaluation services by
performing initial reviews of prospective Sub-Adviser(s) for each Fund and
supervising and monitoring performance of the Sub-Adviser(s) thereafter. The
Adviser agrees to report to the Board the results of its evaluation, supervision
and monitoring functions and to keep certain books and records of the Trust in
connection therewith. The Adviser further agrees to communicate performance
expectations and evaluations to the Sub-Adviser(s), and to recommend to the
Board whether agreements with Sub-Adviser(s) should be renewed, modified or
terminated.
(b) The Adviser will be responsible for informing the Sub-Adviser(s) of
the investment objective(s), policies and restrictions of the Fund(s) for which
each Sub-Adviser is responsible, for providing the Sub-Adviser with all written
guidelines, policies and procedures adopted by the Trust or the Adviser, for
informing the Sub-Adviser(s) or ascertaining that it is aware of other legal and
regulatory responsibilities applicable to the Sub-Adviser(s) with respect to the
Fund(s) for which each Sub-Adviser is responsible, and for timely monitoring
each Sub-Adviser's discharge of its duties, including general oversight of the
voting of proxies by the Sub-Adviser(s); but the Adviser is not responsible for
the specific actions (or inactions) of a Sub-Adviser in the performance of the
duties assigned to it.
(c) With respect to each Sub-Adviser for a Fund, the Adviser shall
enter into an agreement ("Sub-Advisory Agreement") with the Sub-Adviser which
shall be subject to approval in accordance with the 1940 Act, as modified by any
order of exemption received from the United States Securities and Exchange
Commission ("SEC").
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(d) Each Fund shall be responsible for the fees payable to and shall
pay the Sub-Adviser(s) of the Fund the fee as specified in the Sub-Advisory
Agreement relating thereto.
4. Further Duties. In all matters relating to the performance of this
Contract, the Adviser will act in conformity with the Trust's Trust Instrument,
By-Laws and Registration Statement and with all written guidelines, policies and
procedures adopted by the Trust and applicable to the Funds and will comply with
the requirements of the 1940 Act, the Advisers Act, and the rules under each,
and all other applicable federal and state laws and regulations.
5. Indemnification.
(a) The Adviser shall indemnify the Trust or any of its trustees,
officers, employees or affiliates for all losses, damages, liabilities, costs
and expenses (including legal) ("Losses") incurred by the Trust by reason of or
arising out of any act or omission by the Adviser under this Contract, or any
breach of warranty, representation or agreement hereunder, except to the extent
that such Losses arise as a result of the negligence, gross negligence, willful
misfeasance or bad faith of the Trust.
(b) The Trust shall indemnify the Adviser or any of its directors,
officers, employees or affiliates for all losses, damages, liabilities, costs
and expenses (including legal) ("Losses") incurred by the Adviser by reason of
or arising out of any act or omission by the Trust under this Contract, or any
breach of warranty, representation or agreement hereunder, except to the extent
that such Losses arise as a result of the negligence, gross negligence, willful
misfeasance or bad faith of the Adviser or the Adviser's breach of fiduciary
duty to the Trust.
6. Representations, Warranties and Agreements of the Trust. The Trust
represents, warrants, and agrees that:
(a) The Adviser has been duly appointed by the Board of Trustees of the
Trust to provide investment services to the Funds as contemplated hereby.
(b) The Trust will deliver or cause to be delivered to the Adviser a
true and complete copy of the Trust's Registration Statement as effective from
time to time, and such other documents or instruments governing the investment
of the Funds and such other information as reasonably requested by the Adviser,
as is necessary for the Adviser to carry out its obligations under this
Contract.
7. Representations, Warranties and Agreements of the Adviser. The
Adviser represents, warrants, and agrees that:
(a) The Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Contract
remains in effect; (ii) is not prohibited by the 1940 Act, the Advisers Act or
other law, regulation or order from performing the services contemplated by this
Contract; (iii) has met and will seek to continue to meet for so long as this
Contract remains in effect, any other applicable federal or state requirements,
or the applicable requirements of any regulatory or industry self-regulatory
agency necessary to be met in order to perform the services contemplated by this
Contract; (iv) has the authority to enter into and perform the services
contemplated by this Contract; and (v) will promptly notify the Trust of the
occurrence
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of any event that would disqualify the Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise. The Adviser will also immediately notify the Trust if it is served or
otherwise receives notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, or any threat thereof, before or by any
court, public board or body, involving the affairs of the Funds.
(b) The Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide the Trust with a
copy of such code of ethics, together with evidence of its adoption and a
certification that the Adviser has adopted procedures reasonably necessary to
prevent violations of such code of ethics. Within thirty (30) days following the
end of the last calendar quarter of each year that this Contract is in effect, a
senior officer of the Adviser shall furnish to the Trust (a) a written report
that describes any issues arising under the code of ethics or procedures during
the relevant period, including, but not limited to, information about material
violations of the code or procedures and sanctions imposed in response to
material violations; and (b) a written certification that the Adviser has
adopted procedures reasonably necessary to prevent violations of the code of
ethics. In addition, the Adviser shall (i) promptly report to the Board in
writing any material amendments to its code of ethics; (ii) immediately furnish
to the Board all material information regarding any violation of the code of
ethics by any person who would be considered an Access Person under the Trust's
and Adviser's code of ethics; and (iii) provide quarterly reports to the
appropriate compliance officer on any material violations of the Adviser's code
of ethics during the period so indicated. The Adviser shall permit the Trust,
the Board, and/or the Trust's employees or agents to examine the reports
required to be made to the Adviser by Rule 17j-1(c)(1) and all other records
relevant to the Adviser's code of ethics.
(c) The Adviser has provided the Trust with a copy of its Form ADV,
which as of the date of this Contract is its Form ADV as most recently filed
with the SEC and promptly will furnish a copy of all amendments to the Trust at
least annually. Such amendments shall reflect all changes in the Sub-Adviser's
organizational structure, professional staff or other significant developments
affecting the Sub-Adviser, as required by the Investment Advisers Act of 1940.
(d) The Adviser will notify the Trust of any change of control of the
Adviser, including any change of its general partners, controlling persons or
25% shareholders, as applicable, and any changes in the key personnel who are
either the portfolio manager(s) of a Fund or senior management of the Adviser,
in each case prior to such change if the Adviser is aware of such change but in
any event not later than promptly after such change. The Adviser agrees to bear
all reasonable expenses of the Trust, if any, arising out of such change.
(e) The Adviser agrees to maintain an appropriate level of errors and
omissions or professional liability insurance coverage equal to not less than
$5,000,000.
8. Services Not Exclusive. The services furnished by the Adviser
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of the Adviser, who may also be a
Trustee, officer or employee of the Trust, 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 other business, whether of a similar nature or a dissimilar nature.
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9. Confidentiality. Subject to the duty of the parties to comply with
applicable law, including any demand of any regulatory or taxing authority
having jurisdiction, the parties hereto shall treat as confidential all material
non-public information pertaining to the Funds and the actions of the Adviser,
the Sub-Advisers and the Trust in respect thereof.
10. Expenses.
(a) During the term of this Contract, each Fund will bear all expenses,
not specifically assumed by the Adviser, incurred in its operations and the
offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to the
following (or each Fund's proportionate share of the following): (i) the cost
(including brokerage commissions) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Fund by the Adviser under this Contract;
(iii) filing fees and expenses relating to the registrations and qualification
of the Fund's shares and the Trust under federal and/or state securities laws
and maintaining such registration and qualifications; (iv) fees and salaries, if
any, payable to the Trust's Trustees and officers who are not interested persons
(within the meaning of Section 2(a)(19) of the 0000 Xxx) of the Trust or the
Adviser; (v) all expenses incurred in connection with the Trustees' services,
including travel expenses; (vi) taxes (including any income or franchise taxes)
and governmental fees; (vii) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (viii) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Trust or the Fund for violation of any law; (ix) legal,
accounting and auditing expenses, including legal fees of special counsel for
those Trustees of the Trust who are not interested persons of the Trust; (x)
charges of custodians, transfer agents and other agents; (xi) costs of preparing
share certificates, if any; (xii) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders;
(xiii) costs of mailing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials to
existing shareholders; (xiv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Trust is a party and the expenses the Trust may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, agents and
shareholders) incurred by the Trust or the Fund; (xv) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (xvi) costs of mailing and tabulating proxies
and costs of meetings of shareholders, the Board and any committees thereof;
(xvii) the cost of investment company literature and other publications provided
by the Trust to its Trustees and officers; (xviii) costs of mailing, stationery
and communications equipment; (xix) expenses incident to any dividend,
withdrawal or redemption options; (xx) charges and expenses of any outside
pricing service used to value portfolio securities; (xxi) interest on borrowings
of the Trust; and (xxii) fees or expenses related to license agreements with
respect to securities indices.
(c) The Adviser will assume the cost of any compensation for services
provided to the Trust received by the officers of the Trust and by those
Trustees who are interested persons of the Trust.
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(d) The payment or assumption by the Adviser of any expenses of the
Trust or a Fund that the Adviser is not required by this Contract to pay or
assume shall not obligate the Adviser to pay or assume the same or any similar
expense of the Trust or a Fund on any subsequent occasion.
11. Compensation.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to a Fund, the Trust will pay to the Adviser a fee,
computed daily and paid monthly, at an annual rate as set forth on Schedule A
hereto (as such schedule may be amended from time to time), expressed as a
percentage of average daily net assets of the Fund.
(b) The fee shall be computed daily and paid monthly to the Adviser on
or before the first business day of the next succeeding calendar month.
(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective day to the end of the month
or from the beginning of such month to the date of termination, 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 occurs.
12. Limitation of Liability of the Adviser. The Adviser shall not be
liable for any loss due solely to a mistake of investment judgment, but shall be
liable for any loss which is incurred by reason of an act or omission of its
employee, partner, director or affiliate, if such act or omission involves
willful misfeasance, bad faith or gross negligence, or breach of its duties or
obligations hereunder, whether express or implied. Nothing in this paragraph
shall be deemed a limitation or waiver of any obligation or duty that may not by
law be limited or waived.
13. Limitation of Trust and Shareholder Liability. The Adviser is
hereby expressly put on notice of the limitation of shareholder liability as set
forth in the Trust Instrument of the Trust and agrees that obligations assumed
by the Trust pursuant to this Contract shall be limited in all cases to the
Trust and its assets, and if the liability relates to one or more series of the
Trust, the obligations hereunder of the Trust shall be limited to the respective
assets of the Fund. The Adviser further agrees that it shall not seek
satisfaction of any such obligation from the shareholders or any individual
shareholder of the Trust or the Funds, nor any officer, director or trustee of
the Trust, neither as a group nor individually.
14. Duration and Termination.
(a) This Contract shall become effective for each Fund upon the
commencement of operations of the Trust, provided that this Contract has been
approved for each Fund by a vote of the Board, including a majority of those
Trustees of the Trust who are not parties to this Contract or interested persons
of any such party ("Independent Trustees") cast in person at a meeting called
for the purpose of voting on such approval, and by vote of a majority of the
outstanding securities of each Fund.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect until June 30, 2003. Thereafter, if not terminated, this
Contract shall continue automatically from
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year to year, provided that such continuance is specifically approved in
accordance with the 1940 Act: (i) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a majority of the outstanding
voting securities of each Fund.
(c) Notwithstanding the foregoing, with respect to a Fund, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund upon delivery of sixty (60) days' written notice to the
Adviser and may be terminated by the Adviser at any time, without the payment of
any penalty, upon delivery of sixty (60) days' written notice to the Trust.
Termination of this Contract with respect to a Fund shall in no way affect the
continued validity of this Contract or the performance thereunder with respect
to any other Fund. This Contract shall terminate automatically in the event of
its assignment.
15. Additional Funds. In the event that the Trust establishes one or
more series of shares with respect to which it desires to have the Adviser
render services under this Contract, it shall so notify the Adviser in writing.
If the Adviser agrees in writing to provide said services, such series of shares
shall become a Fund hereunder upon execution of a new Schedule A and compliance
with the requirements of the 1940 Act and the rules and regulations thereunder.
16. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no material amendment of this Contract
as to a Fund shall be effective until approved (i) by the vote of a majority of
the Independent Trustees, and (ii) by the vote of a majority of the outstanding
voting securities of a Fund (unless the Trust receives an SEC order or no-action
letter permitting it to modify the Contract without such vote or a regulation
exists under the 1940 Act that permits such action without such vote).
17. Governing Law. This Contract shall be construed in accordance with
the 1940 Act and the laws of the State of Delaware, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of Delaware conflict with the applicable provisions of the 1940 Act,
the latter shall control.
18. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation
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or order. This Contract and the Schedule(s) attached hereto embody the entire
agreement and understanding among the parties. This Contract may be signed in
counterpart.
19. Notices. Any notice herein required is to be in writing and is
deemed to have been given to the Adviser or the Trust upon receipt of the same
at their respective addresses set forth below. All written notices required or
permitted to be given under this Contract will be delivered by personal service,
by postage mail - return receipt requested or by facsimile machine or a similar
means of same day delivery which provides evidence of receipt (with a confirming
copy by mail as set forth herein). All notices provided to Adviser will be sent
to the attention of ________________. All notices provided to the Trust will be
sent to the attention of
____________________.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
AB FUNDS TRUST
[ADDRESS]
Attest:
By:_____________________ By:______________________
Name: Name:
Title: Title:
SBC FINANCIAL SERVICES, INC.
[ADDRESS]
Attest:
By:_____________________ By:______________________
Name: Name:
Title: Title:
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EXHIBIT EX-99D.1.
AB FUNDS TRUST
INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
Series Annual Fee
