SUB-ADVISORY AGREEMENT
BETWEEN LSA Asset Management LLC
a Delaware limited liability company
and
SALOMON BROTHERS ASSET MANAGEMENT, INC
a Delaware corporation
It is hereby agreed by and between LSA Asset Management LLC (the "Manager") and
XXXXXXX XXXXXXXX ASSET MANAGEMENT, INC., (the "Adviser"), as follows:
1.
ENGAGEMENT OF ADVISER. LSA Variable Series Trust, a Delaware business trust (the
"Trust") has entered into an Investment Management Agreement with the Manager
effective October 1, 1999, on behalf of the Salomon Brothers Value Equity Fund
(the "Fund"). The Manager is authorized, with the approval of the Board of
Trustees of the Trust (the "Board" or "Trustees" as the context requires), to
retain the Adviser to provide investment advisory services to the Manager in
connection with the management of the Fund. Manager hereby engages the services
of Adviser in furtherance of its Investment Management Agreement with the Trust.
Pursuant to this Sub-Advisory Agreement and subject to the supervision of the
Manager and the Board, and in cooperation with any administrator appointed by
the Manager (the "Administrator"), the Adviser will manage the investment and
reinvestment of the assets of the Fund.
In this regard, Adviser will determine in its discretion the securities to
be purchased or sold, will provide Manager with records concerning its
activities which Manager or the Trust is required to maintain, and will render
regular reports to Manager, Trustees and the Board concerning its discharge of
the foregoing responsibilities. Adviser will discharge the foregoing
responsibilities subject to the control of the Board and in compliance with such
policies as the Board may from time to time establish, and in compliance with
the objectives, policies, and limitations for the Fund set forth in the Fund's
then-current prospectus and statement of additional information. Manager
represents that the engagement of Adviser xxxxxxxxx has been duly authorized by
the Trust in accordance with the Investment Company Act of 1940 (the "1940
Act"). Manager agrees to inform Adviser of any and all applicable state
insurance law restrictions on investments that operate to limit or restrict the
investments the Fund may otherwise make, and to inform Adviser promptly of any
changes in such requirements.
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Adviser accepts its engagement under this Section 1 and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement;
provided, however, that Adviser will not be required to pay the cost (including
taxes, brokerage commissions and other transaction costs, if any) of securities
and other investments purchased or sold for the Fund.
The Manager shall perform quarterly and annual tax compliance tests to
ensure that the Fund is in compliance with Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code") and Section 817(h) of the Code. In
connection with such compliance tests, the Manager shall prepare and provide
reports to the Adviser within ten (10) business days of a calendar quarter end
relating to the diversification of the Fund under Subchapter M and Section
817(h) of the Code. The Adviser shall review such reports for purposes of
determining compliance with such diversification requirements. If it is
determined that the Fund is not in compliance with the requirements noted above,
the Adviser, in consultation with the Manager, will take prompt action to bring
the Fund back into compliance within the time permitted under the Code (the
Adviser's "Tax Compliance Responsibilities").
CUSTODIAN. The Manager shall provide the Adviser with a copy of the Trust's
agreement with the custodian designated to hold the assets of the Fund (the
"Custodian") and any modifications thereto (the "Custody Agreement"), copies of
such modifications to be provided to the Adviser a reasonable time in advance of
the effectiveness of such modifications. The assets of the Fund shall be
maintained in the custody of the Custodian identified in, and in accordance with
the terms and conditions of, the Custody Agreement (or any sub-custodian
properly appointed as provided in the Custody Agreement). The Adviser shall have
no liability for the acts or omissions of the Custodian unless such act or
omission is required by and taken in reliance upon instruction given to the
Custodian by a representative of the Adviser properly authorized to give such
instruction under the Custody Agreement. Any assets added to the Fund shall be
delivered directly to the Custodian.
The Adviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the securities
held in the Fund. The Manager shall instruct the Custodian of the Fund and other
parties providing services to the Fund to promptly forward misdirected proxy
materials to the Adviser.
2.
FUND TRANSACTIONS. In connection with purchases or sales of portfolio securities
for the accounts of the Fund, neither Adviser nor any of its partners, officers,
employees or affiliates will act as a principal, except as otherwise permitted
by the 1940 Act and the rules thereunder. Adviser or its agents will arrange for
the placing of orders for the purchase and sale of portfolio securities for the
Fund's account with brokers or dealers selected by Adviser. In the selection of
such brokers or dealers and the placing of such orders Adviser is directed at
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all times to seek for the Fund the most favorable execution and net price
available. It is also understood that it is desirable for the Fund that Adviser
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 the Fund than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, Adviser is authorized to consider such services provided
to the Fund and other accounts over which Adviser or any of its affiliates
exercises investment discretion and to place orders for the purchase and sale of
securities for the Fund with such brokers, subject to review by the Board from
time to time with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to Adviser
in connection with its services to other clients. Adviser may, on occasions when
it deems the purchase or sale of a security to be in the best interests of the
Fund as well as its other clients, aggregate, to the extent permitted by
applicable laws and rules, the securities to be sold or purchased in order to
obtain the most favorable execution and net price. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by Adviser in the manner it considers to be the most
equitable and consistent with its obligations to the Fund and to such other
clients. Adviser is not, however, required to aggregate securities orders.
3.
COMPENSATION OF ADVISER. As its compensation hereunder, Manager will pay to
Adviser, within twenty (20) business days after the end of each month, a fee
calculated daily as a percentage of the average daily net assets of the Fund
during that month at the annual rate of .40% of the first $250 million; .35% up
to the next $250 million; and .30% in excess of $500 million.
For the purpose of accruing compensation, the net assets of the Fund will
be determined in the manner provided in the then-current prospectus of the Fund.
The fee for the period from the initial capitalization of the Trust to the
end of the month during which such capitalization shall have occurred shall be
prorated according to the proportion that such period bears to the full monthly
period. In the event of termination of this Agreement, all compensation due to
Adviser through the date of termination will be calculated on a pro-rated basis
through the date of termination and paid within fifteen (15) business days of
the date of termination.
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4.
DELIVERY OF INFORMATION AND REPORTS. Manager agrees to furnish to Adviser
current prospectuses, statements of additional information, proxy statements,
reports of shareholders, certified copies of financial statements, charter
documents and such other information with regard to the affairs of the Fund as
Adviser may reasonably request. Adviser agrees to render to Manager such
periodic and special reports regarding its activities under this Agreement as
Manager may reasonably request. Manager represents that it and the Trust have
received Parts I and II of Adviser's Form ADV. The Adviser shall provide the
Manager with a copy of amendments to its Form ADV and a list of the persons whom
the Adviser wishes to have authorized to give written and/or oral instructions
to the Custodian of the assets of the Fund.
5.
STATUS OF ADVISER. The services of Adviser to Manager and the Fund are not to be
deemed exclusive, and Adviser is free to render similar services to others so
long as its services to the Fund are not impaired thereby. Adviser will be
deemed to be an independent contractor and will, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund in
any way or otherwise be deemed an agent of the Fund.
Without limiting the foregoing, Manager represents that it understands that
the Adviser now acts, will continue to act, or may act in the future, as
investment adviser or investment sub-adviser to fiduciary and other managed
accounts, including other investment companies and that Manager has no objection
to Adviser so acting, provided that Adviser duly performs all obligations under
this Agreement. Manager also understands that 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 Adviser with respect to the
Fund. Nothing in this Agreement imposes upon Adviser any obligation to purchase
or sell or to recommend for purchase or sale, with respect to the Fund, any
security which Adviser or its partners, officers, employees or affiliates may
purchase or sell for its or their own account(s) or for the account of any other
client.
6.
CERTAIN RECORDS. Adviser agrees to maintain, in the form and for the period
required by Rule 31a-2 under the 1940 Act, all records relating to the Fund's
investments made by Adviser that are required to be maintained by the Fund
pursuant to the requirements of Rule 31 a-1 (b)(5), (6), (7), (9) and (10) under
that Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31 a-1 and Rule 31 a-2 promulgated under the 1940 Act which
are prepared or maintained by Adviser on behalf of the Fund are the property of
the Fund and will be surrendered promptly to the Fund or Manager on request.
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Adviser agrees that all accounts, books and other records maintained and
preserved by it as required hereby will be subject at any time, and from time to
time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Fund's auditors, the Fund or any
representative of the Fund, the Manager, or any governmental agency or other
instrumentality having regulatory authority over the Fund.
7.
REFERENCE TO ADVISER. The Manager shall not publish or distribute any
information, including but not limited to registration statements, advertising
or promotional material, regarding the provision of investment advisory services
by Adviser pursuant to this Agreement, or use in advertising, publicity or
otherwise the name of Adviser or any of its affiliates, or any trade name,
trademark, trade device, service mark, symbol or any abbreviation, contraction
or simulation thereof of Adviser or its affiliates, without the prior written
consent of Adviser. Any materials utilized by the Manager which contain any
information relating to the Adviser shall be submitted to the Adviser for
approval prior to use, not less than five (5) business days before such approval
is needed by Manager.
Notwithstanding the foregoing, Manager may distribute information regarding
the provision of investment advisory services by Adviser to the Board (the
"Board Materials") without the prior written consent of Adviser. Manager will
provide copies of the Board Materials to Adviser within a reasonable time
following distribution to the Board.
REFERENCE TO MANAGER OR LIFE COMPANY OR THE TRUST. Any materials utilized by the
Adviser which contain any information relating to the Manager, a life insurance
company investing in the Fund (including any information relating to its
separate accounts or variable annuity or variable life insurance contracts) or
the Trust shall be submitted to the Manager for approval prior to use, not less
than five (5) business days before such approval is needed by the Adviser. No
such materials shall be used if the Adviser or the Manager reasonably objects in
writing to such use within five (5) days after receipt of such material.
8.
LIABILITY OF MANAGER AND ADVISER.
(a) The Manager shall indemnify and hold harmless the Adviser against any
loss, liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith) ("Liabilities")
arising out of any service, other than as provided in paragraph (b) of this
Section 8, to be rendered under this Agreement except by reason of willful
misfeasance, bad faith or gross negligence in the performance of Adviser's
duties.
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(b) With regard to the Adviser's Tax Compliance Responsibilities as set
forth in Section 1, the Manager shall not indemnify and hold harmless Adviser
for any negligent conduct or conduct that is not at the level at which a prudent
person would conduct its own affairs.
(c) The Adviser shall indemnify and hold harmless the Manager against any
loss, liability, claim, damage or expense, including but not limited to those
incurred by life insurance companies and their separate accounts that invest in
the Fund and for which the Manager or the Fund is liable ("Liabilities") arising
out of any service to be rendered under this Agreement with respect to the
Adviser's willful misfeasance, bad faith or gross negligence in the performance
of its duties under this Agreement, and further, with regard to the Adviser's
Tax Compliance Responsibilities, shall indemnify Manager for any Liabilities
resulting from Adviser's negligent conduct. The Adviser will not be liable to
Manager for any Liabilities relating to the failure of Manager to comply with
this Agreement and/or any applicable insurance laws and rules, or as a result of
any error of judgment or mistake of law, except to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to receipt of compensation for services.
9.
DURATION AND TERMINATION. This Agreement shall become effective as of the date
of its execution and shall continue in effect for a period more than two years
from the date of execution only so long as such continuance is specifically
approved by the Trustees at the times and in the manner required by Section
15(a) and (c) of the 1940 Act and the rules thereunder.
Pursuant to an Order of the Commission, the Manager may engage an Adviser
without first obtaining approval of the investment advisory agreement by a
majority of the outstanding voting securities of the Fund. This Agreement shall
become effective upon its approval by the Board.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Manager or Trustees on sixty (60) days' written notice to the
Adviser, or by the Adviser on sixty (60) days' written notice to the Manager.
This Agreement will automatically terminate in the event of its assignment.
This Agreement will automatically terminate in the event that the Investment
Management Agreement by and between the Trust and the Manager on behalf of the
Fund, referred to in Section 1, is terminated.
Notices and other writings delivered or mailed postage prepaid to Manager
and the Trust at 0000 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000, Attn: Xxxxxxx X.
Xxxxxxx, Esq., or to Adviser at Salomon Brothers Asset Management Inc., Seven
World Trade Center, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxxx X.
Xxxxxxxxx, Esq., or to such other address as Manager or Adviser may hereafter
specify by written notice to the most recent address specified by the other
party, will be deemed to have been properly delivered or given hereunder to the
respective addressee.
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As used in this Section 9, the terms "assignment," "interested persons" and
a "vote of a majority of the outstanding voting securities" will have the
respective meanings set forth in the 1940 Act and the rules thereunder.
10.
CONFIDENTIALITY. All information and advice by Adviser for the Fund will be
treated as confidential by Manager and will not be disclosed to third parties
without Adviser's prior written consent, except as required by law.
11.
COMPUTER. The Adviser warrants that, to the best of its knowledge, the computer
systems, software, hardware or equipment under its sole control and maintained
in the course of performing its services under this Agreement, shall operate,
without error, and as necessary shall accurately process all data which involve,
in any way or manner, calendar year date dependencies or considerations. The
parties agree that if any clause in this Agreement or any agreement of which
this is a part attempts to limit the Adviser's liability to the Manager in any
way or which disclaims any warranties then such clause or agreement shall not be
effective with regard to any breach of the foregoing warranty. The parties
further agree that the Federal "Year 2000 Information and Readiness Disclosure
Act" and any Year 2000 Statement and Year 2000 Disclosure (as such terms are
defined under the Act referenced) whether made or issued before, contemporaneous
with or after this Agreement shall not operate or be deemed to limit , diminish,
modify or otherwise affect the foregoing warranty the making of which Adviser
acknowledges and agrees is material to the Manager's Agreement hereunder.
The Adviser represents and warrants that to the best of its knowledge the
software utilized in the course of performing its services under this Agreement
("Software") (a) contains no hidden files, viruses or contaminants, (b) will not
replicate, transmit, or activate itself without control of a person operating
the computing equipment on which it resides, (c) will not access, alter, damage,
erase, or otherwise interfere with, the Software, including, any data or
computer programs without control of a person operating the computing equipment
on which it resides, (d) contains no key, node lock, time-out or other function,
whether implemented by electronic, mechanical or other means, which restricts or
may restrict use or access to the Software without the consent of the computer
user.
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12.
SEVERABILITY. If any provision of this Agreement is held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
AMENDMENTS. This Agreement may not be amended, altered or modified in any way
except by an addendum in writing duly executed by the proper officials of the
parties hereto.
SURVIVAL. Sections 7, 8 and 10 will survive the termination of this Agreement.
GOVERNING LAW. This Agreement will be construed in accordance with the laws of
the State of Illinois and the applicable provisions of the 1940 Act and the
rules thereunder. To the extent that the applicable laws of the State of
Illinois or any provisions herein conflict with the applicable provisions of the
1940 Act, the latter will control.
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement on the 30th day of September,
1999, to be effective as of the 1st day of October, 1999.
LSA ASSET MANAGEMENT LLC
By: /s/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Title: President
Authorized Officer
SALOMON BROTHERS ASSET MANAGEMENT, INC.
By: /s/ Xxxx Xxxxxxxxx
------------------
Name: Xxxx Xxxxxxxxx
Title: Managing Director
Authorized Officer
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