SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement (the "Agreement") is entered into this 30th day
of September, 1999, to be effective the first day of October, 1999, by and
between LSA Asset Management LLC, a Delaware limited liability company (the
"Manager"), and Xxxxxx Xxxxxxx Xxxx Xxxxxx Investment Management Inc., a
Delaware corporation (the "Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement (the "Advisory
Agreement") with LSA Variable Series Trust (the "Trust"), pursuant to which the
Manager provides portfolio management and administrative services to the Focused
Equity Fund (the "Fund").
WHEREAS, 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 portfolio management and administrative services
to the Manager in connection with the management of the Fund.
WHEREAS, the Manager desires to retain the Adviser to render portfolio
management and administrative services in the manner and on the terms set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Adviser agree as follows:
1. SUB-ADVISORY SERVICES.
a. The Adviser shall, subject to the supervision of the Manager and the
Board, and in cooperation with any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets of the
Fund. The Adviser shall manage the Fund in conformity with: (1) the investment
objective, policies and restrictions of the Fund set forth in the Trust's
then-current prospectus and statement of additional information relating to the
Fund, (2) any additional policies or guidelines established by the Manager or by
the Board that have been furnished in writing to the Adviser and (3) the
provisions of the Internal Revenue Code of 1986, as amended (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"), and
with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940, as amended (the
"1940 Act") and the rules and regulations thereunder. Subject to the foregoing,
the Adviser is authorized, in its discretion and without prior consultation with
the Manager, to buy, sell, lend and otherwise trade in any stocks, bonds and
other securities and investment instruments on behalf of the Fund, without
regard to the length of time the securities have been held and the resulting
rate of portfolio turnover or any tax considerations, and the majority or the
whole of the Fund may be invested in such proportions of stocks, bonds, other
securities or investment instruments, or cash, as the Adviser shall, in its best
judgment, determine. Notwithstanding the foregoing provisions of this Section
1.a., however, the Adviser shall, upon written instructions from the Manager,
effect such portfolio transactions for the Fund as the Manager shall determine
are necessary in order for the Fund to comply with the Policies.
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b. The Adviser shall furnish the Manager and the Administrator with
monthly, quarterly and annual reports concerning transactions and performance of
the Fund in such form as may be mutually agreed upon, and agrees to review the
Fund and discuss the management of the Fund with representatives or agents of
the Manager, the Administrator or the Fund at their reasonable request. The
Adviser shall permit all books and records with respect to the Fund to be
inspected and audited by the Manager and the Administrator at all reasonable
times during normal business hours, on reasonable notice. The Adviser shall also
provide the Manager, the Administrator or the Fund with such other information
and reports as may reasonably be requested by the Manager, the Administrator or
the Fund from time to time, including without limitation all material as
reasonably may be requested by the Board pursuant to Section 15(c) of the 1940
Act.
c. 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 the 1940 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 upon request.
d. The Adviser shall provide to the Manager a copy of its Form ADV as
filed with the Securities and Exchange Commission and as amended from time to
time and a list of the persons whom the Adviser wishes to have authorized to
give written and/ or oral instructions to custodians of assets of the Fund.
e. The Adviser shall provide the Fund's Custodian (as defined below) on
each business day with information relating to all transactions concerning the
Fund's assets and shall provide the Manager with such information upon request
of the Manager. 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 Adviser 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. OBLIGATIONS OF THE MANAGER.
a. The Manager shall provide (or cause the Fund's custodian, as defined
below, to provide) timely information to the Adviser regarding such matters as
the composition of assets of the Fund, cash requirements and cash available for
investment in the Fund, and all other information as may be reasonably necessary
for the Adviser to perform its responsibilities hereunder.
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b. The Manager has furnished the Adviser a copy of the prospectus and
statement of additional information of the Trust and agrees during the
continuance of this Agreement to furnish the Adviser copies of any revisions or
supplements thereto at, or, if practicable, before the time the revisions or
supplements become effective. No revisions shall be made nor supplements issued
regarding the Fund or the Adviser without the prior review and approval of the
Adviser. No written materials naming or relating to the Adviser, its employees
or its affiliated companies, other than materials provided or approved by the
Adviser, shall be used by the Manager, the Fund or their affiliates in offering
or marketing shares of the Fund. The Manager agrees to furnish the Adviser with
minutes of meetings of the Trustees applicable to the Fund to the extent they
may affect the duties of the Adviser, and with copies of any financial
statements or reports made by the Fund to its shareholders, and any further
materials or information which the Adviser may reasonably request to enable it
to perform its functions under this Agreement.
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 Manager shall perform quarterly and annual tax compliance tests to
ensure that the Fund is in compliance with Subchapter M 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").
3. EXPENSES.
Except for expenses specifically assumed or agreed to be paid by the
Adviser pursuant hereto, the Adviser shall not be liable for any expenses of the
Manager or the Fund including, without limitation, (a) interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund, and (c)
custodian fees and expenses. The Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement.
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4. PURCHASE AND SALE OF ASSETS.
Absent instructions from the Manager to the contrary, the Adviser shall
place all orders for the purchase and sale of securities for the Fund with
brokers or dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser, provided such orders comply with Rule 17e-1 under
the 1940 Act. To the extent consistent with applicable law, purchase or sell
orders for the Fund may be aggregated with contemporaneous purchase or sell
orders of other clients of the Adviser. The Adviser shall use its best efforts
to obtain execution of transactions for the Fund at prices which are
advantageous to the Fund and at commission rates that are reasonable in relation
to the benefits received.
5. COMPENSATION OF THE 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 following annual rate: .50% on the first $150 million; .45% on the next $100
million; .40% up to the next $250 million; and .35% 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 any period less than one month 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 the 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.
6. NON-EXCLUSIVITY.
The Manager agrees that the services of the Adviser are not to be deemed
exclusive and that the Adviser and its affiliates are free to act as investment
manager and provide other services to various investment companies and other
managed accounts and clients, except as the Adviser and the Manager may
otherwise agree from time to time in writing before or after the date hereof.
This Agreement shall not in any way limit or restrict the Adviser or any of its
directors, officers, employees or agents from buying, selling or trading any
securities or other investment instruments for its or their own account or for
the account of others for whom it or they may be acting, provided that such
activities do not adversely affect or otherwise impair the performance by the
Adviser of its duties and obligations under this Agreement. The Manager
recognizes and agrees that the Adviser may provide advice to or take action with
respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Fund. The Adviser shall for all purposes hereof be
deemed to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent the Fund or the Manager in
any way or otherwise be deemed an agent of the Fund or the Manager.
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7. REFERENCE TO MANAGER OR LIFE COMPANY OR 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)
business days after receipt of such material.
8. REFERENCE TO ADVISER OR FUND.
Any materials utilized by the Manager which contain any information
relating to the Adviser or the Fund shall be submitted to the Adviser 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) business days
after receipt of such material.
9. COMPUTER SYSTEMS.
The Adviser warrants that it will use its reasonable efforts to ensure
that the computer systems, software, hardware or equipment supplied or
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 the Federal "Year 2000 Information and
Readiness Disclosure Act" 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.
10. INDEMNIFICATION.
a. The Manager shall indemnify and hold harmless the Adviser, its
officers and directors and each person, if any, who controls, is controlled by
or is under common control, with the Adviser within the meaning of Section 15 of
the Securities Act of 1933 (the "1933 Act") ("Affiliates") 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 10, 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 2, 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 and its
Affiliates and each person, if any, who controls, is controlled by or is under
common control, with the Manager within the meaning of Section 15 of the 1933
Act, Allstate Life Insurance Company and its Affiliates, including their
separate accounts, which may invest in the Fund (collectively, the "Life
Company") against any 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, Affiliates, and the Life Company for any Liabilities
resulting from Adviser's negligent conduct or conduct that is not at the level
at which a prudent person would conduct its own affairs. The Adviser and its
Affiliates will not be liable to Manager for any Liabilities relating to the
failure of Manager or its Affiliates 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.
11. EFFECTIVE DATE AND TERMINATION.
a. 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.
b. This Agreement may, at any time, be terminated on sixty (60) days'
written notice to the Adviser by the Manager or Trustees. 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. The Adviser shall be without the protection accorded by
shareholder approval of an investment adviser's receipt of compensation under
Section 36(b) of the 1940 Act.
c. This Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement.
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d. This Agreement may be terminated by the Adviser on sixty (60) days'
written notice to the Manager.
Termination of this Agreement pursuant to this Section 11 shall be
without the payment of any penalty.
12. AMENDMENT.
This Agreement may be amended at any time by mutual consent of the
parties, provided that, if required by law, such amendment shall also have been
approved by vote of a majority of the outstanding voting securities of the Fund
and by vote of a majority of the Trustees who are not interested persons of the
Fund, the Manager or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval.
13. DEFINITIONS.
For the purpose of this Agreement, the terms "vote of a majority of the
outstanding voting securities," "interested person," "affiliated company" and
"assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the 1940 Act.
14. GENERAL.
a. The Adviser may perform its services through an affiliated company,
employee, officer or agent, and the Manager shall not be entitled to the advice,
recommendation or judgment of any specific person; provided, however, that the
persons identified in the then-current prospectus of the Fund shall perform the
Fund management duties described therein until the Adviser notifies the Manager
that one or more other affiliates, employees, officers or agents identified in
such notice shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or the application thereof
to any person or circumstances is held to be invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Illinois.
15. 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.
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16. Use of Adviser Name.
The Manager agrees that if this Agreement is terminated and the Adviser
or an affiliate thereof shall no longer be the Adviser to the Fund, the Manager
will change the name of the Fund to delete any reference to "Xxxxxx Xxxxxxx Xxxx
Xxxxxx Investment Management Inc." or "Xxxxxx Xxxxxxx Asset Management."
LSA ASSET MANAGEMENT LLC
By: /s/ Xxxx Xxxx
-------------
Name: Xxxx Xxxx
Title: President
XXXXXX XXXXXXX XXXX XXXXXX
INVESTMENT MANAGEMENT INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Managing Director
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