Exhibit (h)(5)(I)
EXPENSE LIMITATION AGREEMENT
EXPENSE LIMITATION AGREEMENT ("Agreement"), effective as of 1st day of
June, 2002, by and between LSA Variable Series Trust, a Delaware business
trust (the "Trust"), on behalf of the Capital Appreciation Fund (the "Fund"),
and LSA Asset Management LLC, a Delaware limited liability company (the
"Manager").
W I T N E S S E T H:
WHEREAS, the Trust, on behalf of the Fund, and the Manager have entered
into a Management Agreement ("Management Agreement"), pursuant to which the
Manager renders investment management and administration services to the Fund
for compensation based on the value of the average daily net assets of the
Fund; and
WHEREAS, the Trust and the Manager have determined that it is appropriate
and in the best interests of the Fund and its shareholders to maintain Fund
expenses at a level below that to which the Fund would normally be subject
during the term of this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. EXPENSE LIMIT.
1.1. LIMITATION. To the extent that the aggregate expense of every
character incurred by the Fund during the term of this Agreement including,
but not limited to, investment management and administration fees of the
Manager (but excluding interest, taxes, brokerage commissions, and other
expenditures which are capitalized in accordance with generally accepted
accounting principles, and other extraordinary expenses not incurred in the
ordinary course of the Fund's business) ("Fund Operating Expenses"),
exceeds the "Expense Limit," which is 1.20% of the average daily net assets
of the Fund, such excess amount ("Excess Amount") shall be the liability
of the Manager.
1.2. METHOD OF COMPUTATION. To determine the Manager's liability
for the Excess Amount, the Fund Operating Expenses shall be annualized
monthly as of the last day of the month. If the annualized Fund Operating
Expenses for any month exceed 1/12th of the Expense Limit, the Manager
shall first waive or reduce its investment management and administration
fee for such month, as appropriate, to the extent necessary to pay such
Excess Amount. In the event the Excess Amount exceeds the amount of the
investment management and administration fee for such month, the Manager,
in addition to waiving its entire investment management and administration
fee for such month, shall also remit to the Fund the difference between the
Excess Amount and the amount due as the investment management and
administration fee. Notwithstanding anything contained herein to the
contrary, if the Fund participates in one or more commission recapture
programs ("Recapture Programs"), the Excess Amount shall be determined
after the receipt by the Fund of any amount(s) received through the
Recapture Programs and the subsequent payment by the Fund of custodian and
transfer agent expenses in a like amount.
1.3. YEAR-END ADJUSTMENT. If necessary, on or before the last day
of the first month following the termination of this Agreement, or as soon
as practicable thereafter, an adjustment payment shall be made by the
appropriate party in order to ensure that the actual Fund Operating
Expenses for the period covered by this Agreement (including any
reimbursement payments made under Section 2 of this Agreement) do not
exceed the Expense Limit.
2. REIMBURSEMENT OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS.
2.1. REIMBURSEMENT. If, in any year in which the Management
Agreement remains in effect, estimated aggregate Fund Operating Expenses
for the fiscal year are less than the Expense Limit for that year, the
Manager shall be entitled to reimbursement by the Portfolio, in whole or in
part as provided below, of the investment management and administration
fees waived or reduced, and other payments remitted by the Manager to the
Fund pursuant to Section 1 hereof. The total amount of reimbursement to
which the Manager may be entitled ("Reimbursement Amount") shall equal, at
any time, the sum of all investment management and administration fees
waived or reduced by the Manager, and all other payments, if any, remitted
by the Manager to the Fund pursuant to Section 1 hereof, commencing with
the effective date of this Agreement and continuing through each of the
next three (3) fiscal years, less any reimbursement paid from time to time
by the Fund to the Manager pursuant to this Agreement with respect to such
waivers, reductions, and payments. The Reimbursement Amount, and any
portion thereof, shall not include any additional charges or fees
whatsoever including, but not limited to, interest accruable on the
Reimbursement Amount.
2.2. METHOD OF COMPUTATION. To determine the amount of the Fund's
payment, if any, to reimburse the Manager for the Reimbursement Amount,
each month Fund Operating Expenses shall be annualized as of the last day
of the month. If the annualized Fund Operating Expenses for any month are
less than the Expense Limit, the Fund shall pay to the Manager an amount
sufficient to increase the annualized Fund Operating Expenses to an amount
no greater than the Expense Limit, provided that such amount paid to the
Manager will in no event exceed the Reimbursement Amount.
2.3. YEAR-END ADJUSTMENT. If necessary, on or before the last
day of the first month of each succeeding fiscal year, or as soon as
practicable thereafter, an adjustment payment shall be made by the
appropriate party in order to ensure that the actual Fund Operating
Expenses for the prior fiscal year (including any reimbursement payments
made hereunder with respect to such fiscal year) do not exceed the Expense
Limit.
3. TERMINATION OF AGREEMENT. This Agreement shall continue in effect
until the earlier of (a) the termination of the Management Agreement; or
(b) April 30, 2003.
4. MISCELLANEOUS.
4.1. NOTICES. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, (a) if to the
Manager, to LSA Asset Management LLC, 0000 Xxxxxxx Xxxx, Xxxxx X0X,
Xxxxxxxxxx, Xxxxxxxx, 00000; and (b) if to the Trust, at the foregoing
office of the Manager.
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4.2. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any
of the provisions hereof or otherwise affect their construction or effect.
4.3. INTERPRETATION. Nothing herein contained shall be deemed to
require the Trust to take any action contrary to its Agreement and
Declaration of Trust or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve
or deprive the Board of Trustees of its responsibility for and control of
the conduct of the affairs of the Trust.
4.4. SURVIVAL OF COVENANTS. The covenants made herein by the
parties shall survive any termination of this Agreement.
4.5. DEFINITIONS. Any question of interpretation of any term or
provision of this Agreement including, but not limited to, the investment
management and administration fee, the computations of net asset values,
and the allocation of expenses, having a counterpart in or otherwise
derived from the terms and provisions of the Management Agreement, shall
have the same meaning as and be resolved by reference to such Agreement.
4.6. AMENDMENT. This Agreement may be amended or modified only
upon the written consent of the parties hereto.
4.7. GOVERNING LAW. Except insofar as the Investment Company
Act of 1940, as amended, or other federal laws and regulations may be
controlling, this Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized, as of the day and year
first above written.
LSA VARIABLE SERIES TRUST, ON BEHALF OF
THE CAPITAL APPRECIATION FUND
By: /s/ Xxxx X. Xxxxxx
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Title: President
LSA ASSET MANAGEMENT LLC
By: /s/ Xxxxxxxx X. Xxxxxxx
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Title: Chief Operations Officer
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