SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement (the "Agreement") is entered into by and
between LSA Asset Management LLC, a Delaware limited liability company (the
"Manager"), and RS Investment Management, L.P. a California limited partnership
(the "Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement, effective
October 1, 1999, (the "Advisory Agreement") and attached as Exhibit A to this
Agreement, with LSA Variable Series Trust (the "Trust"), pursuant to which the
Manager provides portfolio management and administrative services to the RS
Investment Management Emerging Growth Domestic 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 in the form previously provided by the Manager to the Adviser, (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 or cause to be reviewed 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.
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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.
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. 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.
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 and in accordance with instruction(s)
given to the Custodian by a representative of the Adviser properly authorized to
give such instruction(s) 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 (Manager's "Tax Compliance Reports"). 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").
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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.
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 will place orders for the
purchase or sale of securities for the Fund with or through brokers and dealers
in conformity with the policy with respect to brokerage as set forth in the
Trust's then-current prospectus and statement of additional information relating
to the Fund, or as the Board of Trustees may direct from time to time.
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: .64% of the first $100 million in assets; .60% of assets
in excess of $100 million, but less than $200 million; and .55% of assets in
excess of $200 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.
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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 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 ability of the
Adviser to perform 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.
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's separate account investing
in the Fund (including any information relating to any of the life insurance
company's 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 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 Manager. No such materials shall be used if the Adviser
reasonably objects in writing to such use within five (5) business days after
receipt of such material.
9. COMPUTER SYSTEMS.
Adviser and its affiliates, on the one hand, and Manager and its affiliates
on the other hand, represent and warrant to each other that they will use
reasonable commercial efforts to (a) review all of their respective hardware
and/or software comprising computer systems which will be used in connection
with this Agreement (individually, the "Computer System" and collectively, the
"Computer Systems") to determine if such Computer Systems are Year 2000
Compliant (as defined below), (b) render such Computer Systems Year 2000
Compliant prior to any part of such Computer Systems suffering a material
malfunction due to its not being made Year 2000 Compliant on a timely basis, and
(c) jointly test any interfaces between Adviser and its affiliates' Computer
System and Manager and its affiliates' Computer System so as to determine that
they are capable of interfacing without material malfunctions. In the event that
any portion of such Computer System materially malfunctions due to the failure
to be made Year 2000 Compliant on a timely basis, the party responsible for
operating and/or maintaining such Computer System shall use good faith efforts
to correct the malfunction and render the relevant portion of the Computer
System Year 2000 Compliant in order to mitigate the damages from such
malfunction and to avoid any further material malfunction. Adviser and its
affiliates and manager and its affiliates represent and warrant to each other
that they have devoted sufficient resources in terms of funding personnel and
project time to satisfy their respective obligations under this warranty.
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For the purpose of this Section 9, "Year 2000 Compliant" shall mean that
the referenced Computer System will correctly differentiate between years, in
different centuries, that end in the same two digits, and will accurately
process date/time data (including, but not limited to, calculating, comparing
and sequencing) from, into, and between the centuries including leap year
calculations, provided that any hardware or software not being operated and/or
maintained as part of the referenced Computer System, is itself Year 2000
Compliant.
10. INDEMNIFICATION.
a. The Manager shall indemnify and hold harmless the Adviser, its officers
and directors and each person, if any, who controls 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.
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 Adviser's not taking any corrective action required to be taken based on
consultations with Manager; however, if any Tax Compliance Report is not
properly prepared by Manager which gives rise to the liabilities, Manager shall
indemnify Adviser with respect to such liabilities.
c. The Adviser shall indemnify and hold harmless the Manager and its
Affiliates and each person, if any, who controls the Manager within the meaning
of Section 15 of the 1933 Act, Allstate Life Insurance Company and its
Affiliates (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 not taking any
appropriate corrective action required to be taken based on Adviser's
consultations with Manager. 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
(including the failure of Manager to advise Advisor of any insurance related
restrictions as described in paragraph 2 hereof), 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.
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11. EFFECTIVE DATE AND TERMINATION.
a. This Agreement shall become effective as of October 1, 1999, 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. The Manager or Trustees may at any time, terminate this Agreement on
sixty (60) days' written notice to the Adviser. 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 any benefit accruing as a result of
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.
d. The Adviser on sixty (60) days' written notice to the Manager may
terminate this Agreement.
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.
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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.
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 "RS Investment
Management."
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IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement on this 30th day of September,
1999, effective October 1, 1999.
LSA ASSET MANAGEMENT LLC
By: /s/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Title: President
RS INVESTMENT MANAGEMENT, L.P.
By: /s/ Xxxxxx Xxxxx
----------------
Name: Xxxxxx Xxxxx
Title: Chief Financial Officer
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EXHIBIT A
[MANAGEMENT AGREEMENT BETWEEN LSA VARIABLE SERIES TRUST AND LSA
ASSET MANAGEMENT LLC, EFFECTIVE OCTOBER 1, 1999, IS INCORPORATED
HEREIN BY REFERENCE]
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