EXHIBIT 99(13)
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT ("AGREEMENT"), effective as of the
14th day of January, 2005, by and between MEMBERS CAPITAL ADVISORS, INC., an
Iowa corporation ("MCA" or the "ADVISER"), AND XXXXXXXX CAPITAL MANAGEMENT,
INC., a New York corporation (the "SUB-ADVISER").
Adviser and Sub-Adviser agree as follows:
1. Adviser hereby engages the services of Sub-Adviser in connection with
Adviser's management of a portion of the assets (which could be up to 100%) of
the HIGH INCOME FUND (the "PORTFOLIO") of the ULTRA SERIES FUNDS (the "FUND").
Adviser intends to use a manager of managers approach to the management of the
Portfolio, as well as other portfolios in the Fund. Therefore, the number of
sub-advisers and the percentage of assets of the Portfolio managed by each
sub-adviser will be determined by the Fund's Board of Trustees and MCA from time
to time. Sub-Adviser will be given thirty (30) days' written notice of all
changes effecting this Agreement or the Sub-Adviser's role hereunder, provided,
however, that no such change shall be effective until receipt thereof by the
Sub-Adviser. Pursuant to this Agreement and subject to the oversight and
supervision by Adviser and the officers and the Board of Trustees of the Fund,
Sub-Adviser shall manage the investment and reinvestment of the assets of the
Portfolio as requested by MCA.
2. Sub-Adviser hereby accepts the appointment by Adviser in the foregoing
capacity 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. All other expenses to be incurred in the operation of the
Portfolio will be borne by the Fund.
3. In particular, Sub-Adviser shall furnish continuously an investment program
for the Portfolio and shall determine from time to time in its discretion the
securities and other investments to be purchased or sold or exchanged and what
portions of the Portfolio shall be held in various securities, cash or other
investments. In this connection, Sub-Adviser shall provide Adviser and the
officers and Trustees of the Fund with such reports and documentation as the
latter shall reasonably request regarding Sub-Adviser's management of the
Portfolio's assets.
4. Sub-Adviser shall carry out its responsibilities under this Agreement in
compliance with: (a) the Portfolio's investment objective, policies and
restrictions as set forth in the Fund's current registration statement, (b) such
policies or directives as the Fund's Trustees may from time to time establish or
issue and deliver to the Sub-Adviser, and (c) applicable law and related
regulations. Adviser shall promptly notify Sub-Adviser of changes to (a) or (b)
above and shall notify Sub-Adviser of changes to (c) above promptly after it
becomes aware of such changes and any such changes shall not affect any
transaction initiated prior to the receipt of notice thereof by Sub-Adviser.
5. The Sub-Adviser and Adviser acknowledge that the Sub-Adviser is not the
compliance agent for the Fund or for the Adviser, and does not have access to
all of the Fund's or the Portfolio's books and records necessary to perform
certain compliance testing. To the extent that the Sub-Adviser has agreed to
perform the services specified in this Agreement in accordance with the Fund's
registration statement, the Fund's Declaration of Trust, the Portfolio's
prospectus and any policies adopted by the Fund's Board of Trustees applicable
to the Portfolio, and in accordance with applicable law, the Sub-Adviser shall
perform such services based upon its books and records with respect to the
Portfolio, which comprise a portion the Portfolio's books and records, and upon
information and written instructions received from the Fund or the Adviser, and
shall not be held responsible under this Agreement so long as it performs such
services in accordance with this Agreement. The Adviser shall promptly provide
the Sub- Adviser with copies of the Fund's registration statement, the Fund's
Declaration of Trust, the Portfolio's currently effective prospectus and any
written policies or procedures adopted by the Fund's Board of Trustees
applicable to the Portfolio and any amendments or revisions thereto; provided,
however, that any such amendments and revisions shall not binding on the Sub-
Adviser until received.
6. Sub-Adviser shall take all actions which it considers necessary to implement
the investment policies of the Portfolio, and in particular, to place all orders
for the purchase or sale of securities or other investments for the Portfolio
with brokers or dealers selected by it, and to that end, Sub-Adviser is
authorized as the agent of the Fund to give instructions to the Fund's custodian
as to deliveries of securities or other investments and payments of cash for the
account of the Portfolio. In connection with the selection of brokers or dealers
and the placing of purchase and sale orders with respect to investments of the
Portfolio, Sub-Adviser is directed at all times to seek to obtain best execution
and price within the policy guidelines determined by the Fund's Board of
Trustees and set forth in the Fund's current registration statement.
In addition to seeking the best price and execution, Sub-Adviser may also
take into consideration research and statistical information and wire and other
quotation services provided by brokers and dealers to Sub-Adviser. Sub-Adviser
is also authorized to effect individual securities transactions at commission
rates in excess of the minimum commission rates available, if it determines in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or Sub-Adviser's overall
responsibilities with respect to the Portfolio. The policies with respect to
brokerage allocation, determined from time to time by the Fund's Board of
Trustees are those disclosed in the Fund's currently effective registration
statement. Sub-Adviser will periodically evaluate the statistical data, research
and other investment services provided to it by brokers and dealers. Such
services may be used by Sub-Adviser in connection with the performance of its
obligations under this Agreement or in connection with other advisory or
investment operations including using such information in managing its own
accounts and the accounts of its other clients.
2
On occasions when Sub-Adviser deems the purchase or sale of a security to
be in the best interest of the Portfolio as well as other clients of the
Sub-Adviser, the Sub-Adviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transactions, will be made by the Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
7. Unless the Adviser gives the Sub-Adviser written instructions to the
contrary, the Sub- Adviser shall vote or abstain from voting all proxies
solicited by or with respect to the issuers of securities in which assets of the
Portfolio may be invested in accordance with the Sub-Adviser's Proxy Voting
Policy and Procedures (as the same may be amended from time to time).
8. Sub-Adviser's services under this Agreement are not exclusive. Sub-Adviser
may provide the same or similar services to other clients. The Adviser
understands and agrees that the Sub-Adviser and its employees and affiliates may
give advice and effect transactions for their own account and for the account of
other clients for which they provide investment advisory services, including
other clients' discretionary accounts, that may differ from advice given, or the
time or nature of action taken, with respect to the Portfolio. The Adviser also
understands that the Sub-Adviser may render advice and/or take action on
securities of companies with respect to which the Sub-Adviser acts as investment
adviser and that in certain instances, it may be necessary for the Sub-Adviser
to execute transactions between or among client accounts (including rebalancing
trades between client accounts) by executing simultaneous purchase and sale
orders for the same security with a broker/dealer selected in accordance with
the Sub- Adviser's applicable policies and procedures. The Adviser further
understands and agrees that nothing contained in this Agreement shall be deemed
to impose upon the Sub-Adviser any obligation to purchase or sell, or to
recommend for purchase or sale, for the Portfolio any security or other asset
that the Sub-Adviser or its employees or affiliates may purchase or sell for
their own account or for the account of any other client, if in the sole
discretion of the Sub-Adviser it is for any reason undesirable or impracticable
to take such action or make such recommendation for the Portfolio. Sub-Adviser
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Adviser, the Fund or the Portfolio or otherwise be
deemed agents of the Adviser, the Fund or the Portfolio.
9. Sub-Adviser or an affiliated person of Sub-Adviser may act as broker for the
Portfolio in connection with the purchase or sale of securities or other
investments for the Portfolio, subject to: (a) the requirement that Sub-Adviser
seek to obtain best execution and price within the policy guidelines determined
by the Fund's Board of Trustees and set forth in the Fund's current registration
statement; (b) the provisions of the Investment Advisers Act of 1940 (the
"ADVISERS Act"); (c) the provisions of the Securities Exchange Act of 1934, as
amended; and (d) other applicable provisions of law. Such brokerage services are
not within the scope of the duties of
3
Sub-Adviser under this Agreement. Subject to the requirements of applicable law
and any procedures adopted by Fund's board of Trustees, Sub-Adviser or its
affiliated persons may receive brokerage commissions, fees or other remuneration
from the Portfolio or the Fund for such services in addition to Sub-Adviser's
fees for services under this Agreement.
10. For the services rendered, the facilities furnished and the expenses assumed
by Sub-Adviser, Adviser shall pay Sub-Adviser at the end of each month, a fee
based on the average daily net assets of the Portfolio at the following annual
rates:
First $100 million 0.375%
Next $150 million 0.350%
Next $250 million 0.325%
Above $500 million 0.300%
Sub-Adviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of the Portfolio shall be determined in the manner and on the dates set
forth in the current prospectus of the Fund, and, on days on which the net
assets are not so determined, the net asset value computation to be used shall
be as determined on the next day on which the net assets shall have been
determined. In the event of termination of this Agreement, all compensation due
through the date of termination will be calculated on a pro-rated basis through
the date of termination and paid within thirty business days of the date of
termination.
During any period when the determination of net asset value is suspended,
the net asset value of the Portfolio as of the last business day prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding business day until it is again determined.
11. Sub-Adviser hereby undertakes and agrees to maintain, in the form and for
the period required by Rule 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), all records relating to the Portfolio's investments
that are generated in connection with the Sub-Adviser's provision of services
hereunder that are required to be maintained by the Fund pursuant to the
requirements of Rule 31a-l under the 1940 Act.
Sub-Adviser agrees that all books and records which it maintains for the
Portfolio or the Fund are the property of the Fund and further agrees to
surrender promptly to the Adviser or the Fund any such books, records or
information upon the Adviser's or the Fund's request. All such books and records
shall be made available, within five business days of a written request, to the
Fund's accountants or auditors during regular business hours at Sub-Adviser's
offices. Adviser and the Fund or either of their authorized representatives
shall have the right to copy any records in the possession of Sub-Adviser which
pertain to the Portfolio or the Fund. Such books, records, information or
reports shall be made available to properly authorized government
representatives consistent with state and federal law and/or regulations. In the
event of the
4
termination of this Agreement, all such books, records or other information
shall be returned to Adviser or the Fund free from any claim or assertion of
rights by Sub-Adviser. Nothing herein shall preclude the Sub-Adviser from making
such copies of the books, records and other information of the Portfolio or the
Fund as are necessary for the Sub-Adviser to comply with the legal and
regulatory requirements applicable to the Sub-Adviser.
12. The Adviser and Sub-Adviser shall cooperate with each other in providing
information, reports and other materials to regulatory and administrative bodies
having proper jurisdiction over the Portfolio, the Adviser and the Sub-Adviser
in connection with the services provided pursuant to this Agreement; provided,
however, that this agreement to cooperate does not apply to the provision of
information, reports and other materials which either the Adviser or the Sub-
Adviser reasonably believes the regulatory or administrative body does not have
the authority to request or is the privileged or confidential information of the
Adviser or Sub-Adviser.
13. Each party hereto agrees that it will not disclose or use any records or
information obtained pursuant to this Agreement in any manner whatsoever except
as authorized in this Agreement and that it will keep confidential any
non-public information obtained pursuant to this Agreement and disclose such
information only if the other party has authorized such disclosure, or if such
disclosure is required by federal or state regulatory authorities or other
applicable governmental laws, rules and regulations, subpoenas or court orders.
Notwithstanding the foregoing, the Adviser agrees that the Sub-Adviser may refer
to the performance record of the Portfolio.
14. In the absence of willful misfeasance, bad faith or gross negligence on the
part of Sub- Adviser or its officers, Trustees or employees, or reckless
disregard by Sub-Adviser of its duties under this Agreement, Sub-Adviser shall
not be liable to Adviser, the Portfolio, the Fund or to any shareholder of the
Portfolio for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security, 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 the receipt of compensation for services. The Adviser shall indemnify
the Sub-Adviser for any damages and related expenses (including reasonable
attorneys' fees) incurred by the Sub-Adviser as a result of the performance of
its duties hereunder, unless the same shall result from behavior found by a
final judicial determination to constitute willful, bad faith, gross negligence
or a reckless disregard of the Sub- Adviser's obligations hereunder.
15. Representations and Warranties.
a. Adviser represents and warrants that:
(1) Adviser is registered with the U.S. Securities and Exchange
Commission under the Advisers Act. The Adviser shall remain so registered
throughout the term of this
5
Agreement and shall notify Sub-Adviser immediately if Adviser ceases to be so
registered as an investment adviser;
(2) The Adviser is a corporation duly organized and validly existing
under the laws of the State of Iowa with the power to own and possess its assets
and carry on its business as it is now being conducted;
(3) The execution, delivery and performance by the Adviser of this
Agreement are within the Adviser's powers and have been duly authorized by all
necessary action on the part of its directors, and no action by or in respect
of, or filing with, any governmental body, agency or official is required on the
part of the Adviser for the execution, delivery and performance of this
Agreement by the parties hereto, and the execution, delivery and performance of
this Agreement by the parties hereto does not contravene or constitute a default
under: (a) any provision of applicable law, rule or regulation; (b) the Advisers
Articles of Incorporation or Bylaws; or (c) any agreement, judgment, injunction,
order, decree or other instruments binding upon the Adviser;
(4) This Agreement is a valid and binding Agreement of the Adviser;
(5) The Adviser has provided the Sub-Adviser with a copy of its Form
ADV as most recently filed with the Securities and Exchange Commission ("SEC")
and the Adviser further represents that it will, within a reasonable time after
filing any amendment to its Form ADV with the SEC furnish a copy of such
amendments to the Sub-Adviser. The information contained in the Adviser's Form
ADV is accurate and complete in all material respects and does not omit to state
any material fact necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading; and
(6) The Adviser acknowledges that it received a copy of the
Sub-Adviser's current Form ADV II, at least 48 hours prior to the execution of
this Agreement and has delivered a copy of the same to the Fund.
(7) The Fund: (a) is a "qualified institutional buyer" as defined in
Rule 144A under the Securities Act of 1933, as amended; and (b) has an
appropriate anti-money laundering program that complies with U.S. and other
applicable laws, rules and regulations and is designed to detect and report any
activity that raises suspicion of money laundering activities.
b. Sub-Adviser represents and warrants that:
(1) Sub-Adviser is registered with the U.S. Securities and Exchange
Commission under the Advisers Act. The Sub-Adviser shall remain so registered
throughout the term of this Agreement and shall notify Adviser immediately if
Sub-Adviser ceases to be so registered as an investment adviser;
6
(2) The Sub-Adviser is a corporation duly organized and validly
existing under the laws of the State of New York with the power to own and
possess its assets and carry on its business as it is now being conducted;
(3) The execution, delivery and performance by the Sub-Adviser of
this Agreement are within the Sub-Adviser's powers and have been duly authorized
by all necessary action on the part of the Sub-Adviser, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Sub-Adviser for the execution, delivery and
performance of this Agreement by the parties hereto;
(4) This Agreement is a valid and binding Agreement of the
Sub-Adviser;
(5) The Sub-Adviser has provided the Adviser with a copy of its Form
ADV as most recently filed with the SEC and the Sub-Adviser further represents
that it will, within a reasonable time after filing any amendment to its Form
ADV with the SEC furnish a copy of such amendments to the Adviser. The
information contained in the Sub-Adviser's Form ADV is accurate and complete in
all material respects and does not omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they are made, not misleading; and
(6) The Sub-Adviser acknowledges that it received a copy of the
Adviser's current Form ADV II, at least 48 hours prior to the execution of this
Agreement.
16. The Adviser will not use, and will not permit the Fund to use, the
Sub-Adviser's name (or that of any affiliate) or any derivative thereof or logo
associated therewith in Fund literature without prior review and approval by the
Sub-Adviser.
17. This Agreement shall not become effective unless and until it is approved by
the Board of Trustees of the Fund, including a majority of Trustees who are not
parties to this Agreement or interested persons of any such party to this
Agreement. This Agreement shall come into full force and effect on the date
which it is so approved. This Agreement shall continue in effect for two years
and shall thereafter continue in effect from year to year so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Fund, or by the vote of a majority of the outstanding shares of
the class of stock representing an interest in the Portfolio; and (ii) a
majority of those Trustees who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
18. This Agreement may be terminated at any time without the payment of any
penalty, by the Fund's Board of Trustees, or by vote of a majority of the
outstanding shares of the class of stock representing an interest in the
Portfolio on sixty (60) days written notice to the Adviser and Sub-Adviser, or
by the Adviser, or by the Sub-Adviser, on sixty (60) days written notice to the
other. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the investment advisory
agreement between the Adviser and the Fund
7
regarding the Adviser's management of the Portfolio. The termination of this
Agreement shall not affect any right or liability of a party arising prior to
termination. Notwithstanding any such termination, the Portfolio, Fund and
Adviser shall be obligated to honor all orders and trades effected by the
Sub-Adviser prior to the effective date of such termination.
19. This Agreement may not be amended by either party unless such amendment is
specifically approved by a majority of those Trustees who are not parties to
this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval, and is signed in
writing by the parties hereto.
20. The terms "assignment", "affiliated person" and "interested person", when
used in this Agreement, shall have the respective meanings specified in the 1940
Act. The term "majority of the outstanding shares of the class" means the lesser
of (a) 67% or more of the shares of such class present at a meeting if more than
50% of such shares are present or represented by proxy or (b) more than 50% of
the shares of such class.
21. This Agreement shall be construed in accordance with laws of the New York,
and applicable provisions of the Advisers Act.
22. 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.
8
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MCA INC.
Members Capital Advisors, Inc.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx, President
ATTEST:
XXXXXXXX CAPITAL MANAGEMENT, INC.
By: /s/ Xxxx X. Xxxxxxxx
----------------------------
Xxxx X. Xxxxxxxx, President
ATTEST:
9
