INVESTMENT SUBADVISORY AGREEMENT
Exhibit (d)(ii)
This
AGREEMENT is made as of this ___ day of , 2008 by and among FLC Investment
Management Company, LLC (the “Adviser”), Alley Company (the “Subadviser”), and Federal Life Trust
(the “Trust”).
WHEREAS, the Trust is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the “1940 Act”);
WHEREAS, pursuant to an Investment Advisory Agreement dated as of , 2008, between
the Adviser and the Trust, the Adviser acts as investment adviser for the Federal Life Fixed Income
Portfolio and the Federal Life Equity Portfolio of the Trust (each a “Portfolio”, and collectively,
the “Portfolios”); and
WHEREAS, the Adviser and the Trust each desire to retain the Subadviser to provide investment
advisory services to the Trust in connection with the management of all or a portion of the assets
of the Portfolios, and the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows:
1. Services Provided by Subadviser. (a) Subject to supervision and oversight by the
Adviser and the Trust’s Board of Trustees, the Subadviser shall recommend a continuous investment
program for the Portfolios in accordance with each Portfolio’s investment objectives, policies and
restrictions as stated in such Portfolio’s Prospectus (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 provide supervision of each of the Portfolio’s investments and shall
recommend, from time to time, the investment of the assets of each Portfolio.
(ii) In the performance of its duties and obligations under this Agreement, the Subadviser
shall act in conformity with the Trust’s Prospectus and with the instructions and directions of the
Adviser and of the Board of Trustees and will conform and comply with the applicable requirements
of the 1940 Act, the Internal Revenue Code of 1986, as amended, and all other applicable federal
and state laws and regulations, as each is amended from time to time.
(iii) The Subadviser at its expense will make available to the Trustees of the Portfolios and
the Adviser at reasonable times its portfolio managers and other appropriate personnel, either in
person or, at the mutual convenience of the Adviser and the Subadviser, by telephone, in order to
review the investment policies, performance and other investment related information regarding a
Portfolio and to consult with the Trustees and Adviser regarding each Portfolio’s investment
affairs, including economic, statistical and investment matters related to the Subadviser’s duties
hereunder, and will provide periodic reports to the Adviser relating to the investment strategies
it employs. The Subadviser and its personnel shall also cooperate fully with
counsel and auditors for, and the Chief Compliance Officers of, the Adviser and the Trust.
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(iv) The Subadviser at its expense will provide the Adviser and/or the Trust’s Chief
Compliance Officer with such compliance reports relating to its duties under this Agreement as may
be requested from time to time. Notwithstanding the foregoing, the Subadviser will promptly report
to the Adviser and the Trust any material violations of the federal securities laws (as defined in
Rule 38a-1 of the 0000 Xxx) that it is or should be aware of or of any material violation of the
Subadviser’s compliance policies and procedures that pertain to the Portfolios, as well as any
change in portfolio manager(s) of the Portfolios.
(v) The Subadviser represents and warrants that it has adopted a code of ethics meeting the
requirements of Rule 17j-1 under the 1940 Act and the requirements of Rule 204A-1 under the
Investment Advisers Act of 1940 and has provided the Adviser and the Trustees of the Fund a copy of
such code of ethics, together with evidence of its adoption, and will promptly provide copies of
any changes thereto, together with evidence of their adoption. Upon request of the Adviser, but in
any event no less frequently than quarterly, the Subadviser will supply the Adviser a written
report that (A) describes any issues arising under the code of ethics or procedures since the
Subadviser’s last report, including but not limited to material violations of the code of ethics or
procedures and sanctions imposed in response to the material violations; and (B) certifies that the
procedures contained in the Subadviser’s code of ethics are reasonably designed to prevent “access
persons” from violating the code of ethics.
(vi) The Subadviser will review draft reports to shareholders and other documents provided or
available to it and provide comments on a timely basis. Adviser will provide such documents to
Subadviser in a reasonable timeframe prior to the due date. In addition, the Subadviser and each
officer and portfolio manager thereof designated by the Adviser will provide on a timely basis such
certifications or sub-certifications as the Adviser or the Trust may reasonably request in order to
support and facilitate certifications required to be provided by the Trust’s Principal Executive
Officer and Principal Accounting Officer.
(vii) The Subadviser shall maintain all books and records with respect to each Portfolio’s
portfolio transactions required by the 1940 Act and shall render to the Trust’s Board of Trustees
such periodic and special reports as the Trust’s Board of Trustees may reasonably request.
(viii) The investment management services provided by the Subadviser under this Agreement are
not to be deemed exclusive and the Subadviser shall be free to render similar services to others,
as long as such services do not impair the services rendered to the Adviser or the Trust. The
Subadviser shall keep each Portfolio’s books and records required to be maintained by the
Subadviser pursuant to paragraph 1(a) of this Agreement and shall timely furnish to the Adviser all
information relating to the Subadviser’s services under this Agreement needed by the Adviser to
keep the other books and records of the Portfolio required by Rule 31a-1 under the 1940 Act. The
Subadviser agrees that all records that it maintains on behalf of the Portfolio are property of the
Portfolio and the Subadviser will surrender promptly to the Portfolio any of such records upon the
Portfolio’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 Rule 31a-2 under the 1940 Act
any such records as are required to be maintained
by it pursuant to paragraph 1(a) of this Agreement.
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2. Delivery of Trust Documents. The Adviser has delivered to the Subadviser copies of
each of the following documents and will deliver to it all future amendments and supplements, if
any:
(a) Certified resolutions of the Trust’s Board of Trustees authorizing the appointment of
the Subadviser and approving the form of this Agreement;
(b) Registration Statement under the 1940 Act and the Securities Act of 1933, as amended on
Form N-1A (the “Registration Statement”), as filed with the Securities and Exchange Commission (the
“Commission”) relating to each Portfolio and shares of the Portfolio’s beneficial shares, and all
amendments thereto; and
(c) Prospectus(es) of each Portfolio.
3. Compensation. In consideration for the services to be performed under this Agreement,
the Subadviser shall receive from the Adviser an annual management fee, accrued daily at the rate
of 1/365th of the applicable advisory fee rate and payable monthly as soon as practicable after the
last day of each month in the amount of 25 basis points of each Portfolio’s daily net assets during
the month. The fee will be paid to the Subadviser from the Adviser’s advisory fee from each
Portfolio. This fee will be computed daily and paid to the Subadviser monthly.
4. Standard Of Care; Limitation Of Liability. The Subadviser will exercise its best
judgment in rendering the services described herein. The Subadviser shall not be liable for any
error of judgment or for any loss suffered by the Portfolios or the Adviser in connection with
performance of its obligations under this Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its duties or from
reckless disregard by the Subadviser of its obligations and duties under this Agreement, or a loss
resulting from a breach of fiduciary duty with respect to receipt of compensation for services (in
which case any award of damages shall be limited to the period and amount set forth in Section
36(b)(3) of the 1940 Act). Certain federal laws, including federal securities laws, impose
liabilities under certain circumstances on persons who act in good faith and therefore nothing
contained herein shall in any way constitute a waiver or limitation of any rights that the Trust
may have under any such federal laws.
5. Brokerage And Avoidance Of Conflicts Of Interest. In connection with purchases or sales
of portfolio securities for the account of any Portfolio, neither the Subadviser nor any of its
trustees, officers or employees will act as a principal or agent or receive any commission with
respect to such purchases or sales. The Subadviser or its agents shall arrange for the placing of
all orders for the purchase and sale of portfolio securities for each Portfolio’s account with
brokers or dealers selected by the Subadviser. In the selection of such brokers or dealers and the
placing of such orders, the Subadviser will use its best efforts to seek for each Portfolio the
most favorable execution and net price available and will consider all factors the Suibadviser
deems relevant in making such decisions including, but not limited to, price (including any
applicable brokerage commission or dealer spread), size of order, difficulty of execution, and
operational facilities of the firm involved and the firm’s risk in positioning a block of
securities.
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The parties agree that it is in the interests of each Portfolio that the Subadviser have access to
supplemental investment and market research and security and economic analyses provided by brokers
who may execute brokerage transactions at a higher cost to such Portfolio than may result when
brokerage is allocated to other brokers on the basis of the best price and execution. The
Subadviser is authorized to place orders for the purchase and sale of securities for each Portfolio
with such brokers, subject to review by the Trust’s Board of Trustees from time to time. In
selecting brokers or dealers to execute a particular transaction and in evaluating the best price
and execution available, the Subadviser may consider the brokerage and research services (as such
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
each Portfolio and/or other accounts over which the Adviser exercises investment discretion.
6. Duration And Termination Of This Agreement. This Agreement shall continue in effect
for a period of more than two years from the date hereof only so long as continuance is
specifically approved at least annually in conformance with the 1940 Act provided, however, that
this Agreement may be terminated (a) by a Portfolio at any time, without the payment of any
penalty, by the vote of a majority of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Portfolio, (b) by the Adviser 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
parties, or (c) by the Subadviser at any time, without the payment of any penalty, on 90 days’
written notice to the other parties. This Agreement shall terminate automatically and immediately
in the event of its assignment.
7. Additional Document Delivery Matters. During the term of this Agreement, the Adviser
agrees to furnish the Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature or other materials prepared for distribution to
shareholders of each Portfolio, the Trust or the public that refers to the Subadviser or its
clients in any way prior to use thereof and not to use material if the Subadviser reasonably
objects in writing within five business days (or such other period as may be mutually agreed upon)
after receipt thereof. The Subadviser’s right to object to such materials is limited to the
portions of such materials that expressly relate to the Subadviser, its services and its clients.
The Adviser agrees to use its reasonable best efforts to ensure that materials prepared by its
employees or agents or its affiliates that refer to the Subadviser or its clients in any way are
consistent with those materials previously approved by the Subadviser as referenced in the first
sentence of this paragraph. Sales literature may be furnished to the Subadviser by first-class
mail, electronic mail or overnight delivery service, facsimile transmission equipment or hand
delivery.
8. Amendment. No provisions of this Agreement 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 amendment of this
Agreement shall be effective until approved by the vote of the majority of the outstanding voting
securities of the applicable Portfolio or Portfolios.
9. Voting. The Adviser will take action and provide advice with respect to the voting of
securities held by the Portfolios in accordance with the Trust’s Proxy Voting Policies and
Procedures, as amended and revised from time to time.
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10. Governing Law. This Agreement shall be governed by, subject to and construed in
accordance with the 1940 Act and the Investment Advisers Act of 1940, and to the extent not
inconsistent, the laws of the State of Illinois without regard to the conflicts of law provisions
thereof. All terms used herein shall have the meanings ascribed to such terms by the 1940 Act, the
rules and regulations promulgated thereunder and the written positions of the SEC and its staff.
11. Entire Agreement. This Agreement embodies the entire agreement and understanding
among the parties hereto, and supersedes all prior agreements and understandings relating to this
Agreement’s subject matter. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; all such counterparts shall, together, constitute only one
instrument.
12. Miscellaneous. Neither the holders of shares of the Portfolios nor the officers or
trustees of the Trust in their capacities as such shall be personally liable hereunder. The
captions in this Agreement are included for convenience of reference only and in no way define or
limit any of the provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby..
13. Notice. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
If to the Trust:
If to the Adviser:
FLC Investment Management Company, LLC
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn:
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn:
If to the Subadviser:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers
designated below as of the day and year first written above.
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| By: | ||||
| Name: | ||||
| Title: | ||||
| FLC INVESTMENT MANAGEMENT COMPANY, LLC |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| ALLEY COMPANY |
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| By: | ||||
| Name: | ||||
| Title: | ||||
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