1
SUB-ADVISORY AGREEMENT
BETWEEN
SECURITY FIRST INVESTMENT MANAGEMENT CORPORATION
AND
XXXXXXXXX & XXXXXX, LLC
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 XXXXXXXXX
& XXXXXX, LLC, a limited liability company organized and existing under the laws
of Delaware, (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 Bond Series, (the "Bond Series"), which are 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 Bond Series
pursuant to a Master Investment Advisory Agreement, and as such has authority
and responsibility for supervising and directing the investments of the Bond
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 Bond 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; provided, however, that nothing in this Agreement shall be
interpreted to derogate the responsibilities of the Adviser to the Trust or the
Bond 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 Bond Series with respect to the purchase, holding or sale of
securities in accordance with the stated investment objectives and policies of
the Bond Series as communicated to the Sub-Adviser by Adviser in writing and as
is required to comply with the terms of the Master Investment Management and
Advisory Agreement, the diversification
2
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 Bond 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 Bond 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 Bond 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.
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 Bond Series for which it serves as Sub-Adviser 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 Bond 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
the Bond 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 Bond 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 Bond 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 Sub-Adviser such other
information relating to the business affairs of the Trust and the Bond Series as
the Sub-Adviser at any time, or from time to time, reasonably requires in order
to discharge its obligations hereunder.
(2)
3
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 Bond 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 Bond
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 Sub-Adviser such transaction or
investment appears unsuitable, impractical or undesirable for the Bond 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 Bond Series on the basis of any
material non-public ("inside") information.
12. (a) This Agreement shall take effect as to the Bond Series on
, 1997 ("Effective Date") and shall continue in effect for a period of one
year 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 Bond 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 Bond 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 Bond 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 Bond Series upon sixty (60) days' prior written notice to both
parties hereto, provided, that in the case of termination by the Bond 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 Bond Series.
(d) This Agreement may not be amended without the written consent of the
Adviser and Sub-Adviser, and, to the extent required by the Investment Company
Act of 1940, an affirmative vote of a majority of the outstanding voting
securities of the Bond 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.
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 Bond 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 Bond 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.
(3)
4
15. Neither the Sub-Adviser nor any of its principals, 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 Xxxxxxxxx & Xxxxxx, LLC, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, Attention: C. Xxxx Xxxxxxxx, 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 Bond 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto 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
------------------------------------ -------------------------------
Assistant Secretary
Attest: XXXXXXXXX & XXXXXX, LLC
/s/ By: /s/ XXXXXX XxXXXXXX
------------------------------------ -------------------------------
(4)
