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SUB-ADVISORY AGREEMENT
BETWEEN
SECURITY FIRST INVESTMENT MANAGEMENT CORPORATION
AND
X. XXXX PRICE ASSOCIATES, INC.
SUB-ADVISORY AGREEMENT, made this 30th day of October, 1997, by and between
SECURITY FIRST INVESTMENT MANAGEMENT CORPORATION, a corporation organized and
existing under the laws of the State of Delaware (the "Adviser"), and X. XXXX
PRICE ASSOCIATES, INC., a corporation organized and existing under the laws of
the State of Maryland, (the "Sub-Adviser").
WITNESSETH:
WHEREAS, Security First Trust (the "Trust") is an open-end, diversified,
management investment company, registered as such under the Investment Company
Act of 1940 consisting of multiple investment series; and
WHEREAS, shares of the Trust are made available only to fund variable
contracts offered by life insurance companies; and
WHEREAS, at present the Trust is comprised of four investment series one of
which is the X. Xxxx Price Growth and Income Series (the "Growth and Income
Series"), which is to be operated as the underlying investment media for certain
variable contracts funded through separate accounts of life insurance companies;
and
WHEREAS, the Trust has contracted with the Adviser for the Adviser to
provide investment advisory, business management and administrative services to
the investment series of the Trust pursuant to a Master Investment Management
and Advisory Agreement; and
WHEREAS, the Adviser is authorized by the terms of the Master Investment
Management and Advisory Agreement with the Trust to enter into sub-advisory
agreements with third parties; and
WHEREAS, the Sub-Adviser is engaged principally in the business of rendering
investment advisory services to registered investment companies and other
clients and is registered as an investment adviser under the Investment Advisers
Act of 1940;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
1. The Adviser acts as investment adviser and manager for the Growth and
Income Series pursuant to a Master Investment Advisory Agreement, and as such
has authority and responsibility for supervising and directing the investments
of the Growth and Income Series in accordance with its investment objectives and
policies, programs and restrictions as stated in the Trust's registration
statement and its current prospectus and statement of additional information,
and such other limitations as are imposed upon the Trust pursuant to section
817(h) of the Internal Revenue Code of 1986. Pursuant to its agreement with the
Trust, the Adviser, as agent and attorney-in-fact for the Growth and Income
Series may, when it deems appropriate, (a) buy, sell, exchange, convert and
otherwise trade in any stocks, bonds or other securities, and (b) place orders
for the execution of such security transactions with or through such brokers,
dealers or issuers as the Adviser may select subject, however, at all times to
the supervision of the Board of Trustees of the Trust. The Adviser may delegate
any of the foregoing authority to Sub-Adviser to the extent, in the opinion of
counsel for the Adviser, such delegation is consistent with life insurance
company separate account ownership of the Trust shares for federal income tax
purposes; provided, however, that nothing in this Agreement shall be interpreted
to derogate the responsibilities of the Adviser to the Trust or the Growth and
Income Series under the aforementioned Master Investment Management and Advisory
Agreement.
2. The Adviser hereby employs Sub-Adviser to render the advisory services
set forth herein for the fee specified herein.
3. During the term of this Agreement, or any continuance or extension
thereof, and unless otherwise limited by the Adviser as hereinafter provided,
the Sub-Adviser will, to the best of its ability, exercise investment discretion
on behalf of the Growth and Income Series with respect to the purchase, holding
or sale of securities in accordance with the
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stated investment objectives and policies of the Growth and Income Series as
communicated to the Sub-Adviser by Adviser and as is required to comply with the
terms of the Master Investment Management and Advisory Agreement, the
diversification requirements of the Investment Company Act of 1940 and section
817(h) of the Internal Revenue Code. The Sub-Adviser shall not be required to
respond to inquiries from the Adviser with regard to specific securities other
than securities which are or have been held by the Growth and Income Series
during the time this Agreement is in effect. The Adviser reserves the right,
subject to shareholder approval as required by law, to limit the authority of
the Sub-Adviser herein solely in its discretion. The Sub-Adviser shall, for all
purposes stated herein, be deemed an independent contractor and shall not have
custody of any of the assets of the Trust nor authority to act for or represent
the Growth and Income Series except as expressly provided herein.
4. The Sub-Adviser may employ, retain or otherwise avail itself of the
services or facilities of other persons or organizations for the purposes of
obtaining such statistical and other factual information, such advice regarding
economic factors and trends, such advice as to occasional transactions in
specific securities or such other information, advice or assistance as the
SubAdviser may deem necessary, appropriate or convenient for the discharge of
its obligations hereunder or otherwise helpful to the Growth and Income Series,
or in the discharge of Sub-Adviser's overall responsibilities with respect to
the other accounts which it serves as investment adviser or sub-adviser. The
SubAdviser is authorized to allocate brokerage and principal business to firms
that provide such services or facilities and to cause the Growth and Income
Series to pay a member of a securities exchange or any other securities broker
or dealer, an amount of commission for effecting a securities transaction in
excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, if the Sub-Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research service (as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided by
such member, broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Sub-Adviser with respect to
the accounts as to which the Sub-Adviser exercises investment discretion (as
that term is defined in Section 3(a)(35) of the Securities Exchange Act of
1934).
5. The Sub-Adviser shall obtain and evaluate such information relating to
the economy, industries, businesses, securities markets and securities as it may
deem necessary or useful in the discharge of its obligations hereunder and shall
formulate and implement a continuing program for performance of its services
pursuant to this Agreement.
6. The Sub-Adviser, its officers, directors and employees, shall make
available and provide such information relating to itself, its organization, its
personnel, and its activities as may be required by the Trust in the preparation
of registration statements, prospectuses, proxy materials, reports and other
documents required by federal and state securities laws. In addition, the
SubAdviser, its officers, directors and employees shall provide such information
to the Board of Trustees of the Trust as said Board shall request and which may
be reasonably necessary for the Board to evaluate the terms of this Agreement in
accordance with the requirements of the Investment Company Act of 1940.
7. The Sub-Adviser agrees to maintain and preserve for such period or
periods as the Securities and Exchange Commission may prescribe by rules and
regulations, such accounts, books, and other documents as constitute the records
forming the basis for all reports, including financial statements required to be
filed pursuant to the Act and for the Trust's auditor's certification. The
SubAdviser agrees that all accounts, books and other records maintained and
preserved as required hereby shall 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 Trust's auditors, the Trust or any
representative of the Trust, or any governmental agency or other instrumentality
having regulatory authority over the Trust. It is expressly understood and
agreed that any books and records maintained by the Sub-Adviser on behalf of the
Trust shall, at all times remain the property of the Trust. Moreover, the
Adviser agrees to supply the Sub-Adviser with copies of all documents filed by
the Trust with the Securities and Exchange Commission and with such other
information relating to the Trust's affairs as the Sub-Adviser may reasonably
request.
8. The Adviser shall pay the Sub-Adviser a fee, based on the value of the
net assets of the Growth and Income Series for which it serves as SubAdviser
subject to this Agreement as determined in accordance with the Trust's current
prospectus and statement of additional information, and computed as follows:
(a) The fee shall be at the annual rate of 0.35 of 1% of the average
daily net assets of the Growth and Income Series.
(b) The fee shall be accrued for each calendar day and the sum of the
daily fee accruals shall be paid monthly to the Sub-Adviser as soon as is
practicable after the end of each succeeding calendar month. The daily fee
accruals will be computed by multiplying the fraction of one over the number
of calendar days in the year by the annual rate described in subparagraph
(a) of this Paragraph 8, and multiplying this product by the net assets of
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the Growth and Income Series as determined in accordance with the procedures
set forth in the Trust's current prospectus and statement of additional
information as of the close of business on the previous business day.
9. The Adviser agrees to furnish the Sub-Adviser at its principal office all
post-effective amendments to the Trust's registration statement and all
prospectuses, statements of additional information, proxy materials, reports to
shareholders, sales literature, and other material prepared for distribution to
persons having a beneficial interest in shares of the Growth and Income Series,
or to the public, which refer in any way to the Sub-Adviser ten (10) days prior
to use thereof and not to use such material if the Sub-Adviser shall object
thereto in writing within seven (7) days after receipt of such material. In the
event of termination of this Agreement, the Adviser shall ensure that the Growth
and Income Series will, on written request of the Sub-Adviser, forthwith delete
any reference to the Sub-Adviser from any materials described in the preceding
sentence. The Adviser shall furnish or otherwise make available to the
SubAdviser such other information relating to the business affairs of the Trust
and the Growth and Income Series as the Sub-Adviser at any time, or from time to
time, reasonably requires in order to discharge its obligations hereunder.
10. Nothing herein contained shall limit the freedom of the Sub-Adviser or
any affiliated person of the Sub-Adviser to render investment supervisory and
management administrative services to other investment companies, to act as
investment adviser or investment counselor to other persons, firms, or
corporations, or to engage in other business activities. The Adviser understands
and agrees that the Sub-Adviser may give advice and take action with respect to
any of its other clients which may differ from advice given to the Adviser so
long as it is the Sub-Adviser's policy, to the extent practical, to allocate
investment opportunities to the Growth and Income Series over a period of time
on a fair and equitable basis relative to other clients. It is understood that
the Sub-Adviser shall not have any obligation to recommend for purchase or sale,
for the Growth and Income Series any security which the Sub-Adviser, its
principals, affiliates or employees may purchase or sell for its or their own
accounts or for the account of any other client, if in the opinion of the
SubAdviser such transaction or investment appears unsuitable, impractical or
undesirable for the Growth and Income Series. In discharging its duties
hereunder, Sub-Adviser shall be governed by the requirements of the Investment
Company Act of 1940, including, but not limited to, Section 17 thereof.
11. The Sub-Adviser shall not purchase or sell, or recommend the purchase or
sale of the securities of any issuer for the Growth and Income Series on the
basis of any material non-public ("inside") information.
12. (a) This Agreement shall take effect as to the Growth and Income Series
on , 1997 ("Effective Date") and shall continue in effect for a period
of two years provided that prior to the Effective Date the terms of this
Agreement have been approved by a vote of (i) a majority of the members of the
Board of Trustees of the Trust, including a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined in the Investment
Company Act of 1940) of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) a majority of the outstanding
"voting securities" (as defined in the Act) of the Growth and Income Series.
(b) This Agreement shall continue in effect from year to year after the
initial period so long as such continuance is specifically approved at least
annually by the Board of Trustees of the Trust, or by vote of a majority of the
outstanding voting securities of the Growth and Income Series, and, concurrently
with such approval by the Board of Trustees or prior to such approval by the
holders of the outstanding voting securities of the Growth and Income Series, as
the case may be, by the vote, cast in person at a meeting called for the purpose
of voting on such approval, of a majority of Trustees of the Trust who are not
parties to this Agreement or "interested persons" (as defined in the Investment
Company Act of 1940) of any such party; and the Sub-Adviser shall not have
notified the Adviser nor shall the Adviser have notified the Sub-Adviser in
writing that it does not desire such continuation at least sixty (60) days prior
to the termination date of this Agreement.
(c) This Agreement may be terminated by either party hereto, without the
payment of any penalty, upon sixty (60) days' notice in writing to the other
party, or by the Growth and Income Series upon sixty (60) days' prior written
notice to both parties hereto, provided, that in the case of termination by the
Growth and Income Series, such actions shall have been authorized by resolution
of the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Growth and Income Series.
(d) This Agreement may not be amended without the written consent of the
Adviser and Sub-Adviser, and affirmative vote of a majority of the outstanding
voting securities of the Growth and Income Series and by a vote of a majority of
the Board of Trustees of the Trust 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.
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13. This Agreement shall terminate automatically in the event of its
assignment by either party. For the purpose of this paragraph, the term
"assignment" shall have the meaning set forth in Section 2(a)(4) of the
Investment Company Act of 1940.
14. To the extent that such is required by state law, if the aggregate
expenses of the Growth and Income Series in any fiscal year exceed 2.5% of the
first $30,000,000 of the average net asset value of the Series for that year,
2.0% of the next $70,000,000 of the average net asset value of such Series for
that year, plus 1.5% of the remaining average net assets for that year (all
calculated on a daily basis), the Sub-Adviser agrees to waive such portion of
its fee, as may be necessary to provide for any such excess expenses, but such
waiver shall not exceed the full amount of the fee for such year except as may
be elected by the Sub-Adviser in its discretion. For this purpose, aggregate
expenses of the Growth and Income Series shall include the compensation of the
Adviser, but shall exclude interest, taxes, brokerage fees on portfolio
transactions, commissions paid on the distribution of Trust shares, and certain
extraordinary expenses including litigation expenses. For the purposes of this
paragraph the term "fiscal year" shall be prorated in the event of a period of
less than a full fiscal year. The expense limitation shall be that part of 2.5%,
2.0% or 1.5% as the case may be, proportional to the portion of a full fiscal
year elapsed.
15. Neither the Sub-Adviser nor any of its officers, directors, or
employees, performing services under this Agreement shall be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust or the
Adviser in connection with the matters to which this Agreement relates, except
for loss resulting from willful misfeasance, bad faith, or gross negligence in
the performance of its duties or from reckless disregard by the Sub-Adviser or
such person of the duties of the Sub-Adviser under this Agreement.
16. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Investment Company Act of 1940 shall be resolved by reference to such
term or provision of that Act and to interpretations thereof, if any, by the
United States Courts, and by rules, regulations or orders of the Securities and
Exchange Commission validly issued pursuant to said Act. Specifically, the terms
"affiliated person," as used in paragraph 8, and "vote of a majority of the
outstanding voting securities," and "interested person," as used in paragraph 10
hereof, shall have the meanings assigned to them by Section 2(a) of the
Investment Company Act of 1940. In addition, where the effect of a requirement
of the Investment Company Act of 1940 reflected in any provision of this
Agreement is relaxed by a rule, regulation or order of the Securities and
Exchange Commission or state regulatory authorities, whether of special or of
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
17. Unless otherwise specified herein, all notices, instructions and advice
with respect to securities transactions or other matters contemplated by this
Agreement shall be deemed duly given to Sub-Adviser when received in writing by
Sub-Adviser at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, to the Trust at
00000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 and to the Adviser
at 00000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000. Sub-Adviser may
rely upon any notice (written or oral) from any person which Sub-Adviser
reasonably believes to be genuine and authorized.
18. Nothing herein contained shall be deemed to prevent the Adviser from
contracting with other investment advisory organizations other than Sub-Adviser
to provide investment advisory services on a sub-advisory basis to one or more
investment series of the Trust other than the Growth and Income Series.
19. This writing constitutes the entire agreement between the parties and
no conditions or warranties shall be implied herefrom unless expressly set forth
herein.
20. This Agreement shall be governed by the laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers "hereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and the year first above
written.
SECURITY FIRST INVESTMENT
MANAGEMENT CORPORATION
Attest:
/s/ XXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXXXXX
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Assistant Secretary
Attest: X. XXXX PRICE ASSOCIATES, INC.
/s/ XXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXXXX
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