EXHIBIT (d)(xvi)
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of August 28, 2002 by and
between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and FRANKLIN ADVISORY SERVICES, LLC, a Delaware limited liability
company (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Series Trust, a Massachusetts
business trust (the "Trust"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, as amended from time to time
(the "Advisory Agreement"), pursuant to which the Adviser has agreed to provide
investment management, advisory and administrative services to the Trust, and
pursuant to it which the Adviser may delegate one or more of its duties to a
subadviser pursuant to a written subadvisory agreement; and
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of beneficial interest, no par value per share, in separately
designated portfolios representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment portfolio(s) of the Trust listed
on Schedule A attached hereto (the "Portfolio(s)"), and the Subadviser is
willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. DUTIES OF THE SUBADVISER. The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Trust. Pursuant to this Subadvisory Agreement and subject to
the oversight and review of the Adviser, the Subadviser will manage the
investment and reinvestment of the assets of each Portfolio. The Subadviser will
determine, in its discretion and subject to the oversight and review of the
Adviser, the securities and other investments to be purchased or sold, will
provide the Adviser with records concerning its activities which the Adviser or
the Trust is required to maintain, and will render regular reports to the
Adviser and to officers and Trustees of the Trust concerning its discharge of
the foregoing responsibilities. The Subadviser, as agent and attorney-in-fact of
the Trust, may, when it deems appropriate and without prior consultation with
the Adviser, (a) buy, sell, exchange, convert and otherwise trade in any stocks,
bonds and other securities including money market instruments, whether the
issuer is organized in the United States or outside the United States, (b) place
orders for the execution of such securities transactions with or through such
brokers, dealers or issuers as the Subadviser may select and (c) purchase, sell,
exchange or convert foreign currency in the spot or forward markets as necessary
to facilitate transactions in international securities for the Portfolio(s). The
Subadviser shall discharge the foregoing responsibilities subject to the control
of the officers and the Trustees of the Trust and in compliance with such
policies as the Trustees of the Trust may from time to time establish, and in
compliance with (a) the objectives, policies, restrictions and limitations for
the Portfolio(s) as set forth in the Trust's current prospectus and statement of
additional information; and (b) applicable laws and regulations.
The Subadviser represents and warrants to the Adviser that each
Portfolio will at all times be operated and managed (a) in compliance with all
applicable federal and state laws, including securities, commodities and banking
laws, governing its operations and investments. Without limiting the foregoing,
the Subadviser represents and warrants that it will cooperate with the Trust's
administrator to manage each Portfolio in compliance with (a) the applicable
provisions of Subchapter M, chapter 1 of the Code ("Subchapter M") for each
Portfolio to be treated as a "regulated investment company" under Subchapter M;
(b) the diversification requirements specified in the Internal Revenue Service's
regulations under Section 817(h) of the Code; (c) the provisions of the Act and
rules adopted thereunder; (d) applicable state insurance laws; (e) the
objectives, policies, restrictions and limitations for the Portfolio(s) as set
forth in the Trust's current prospectus and statement of additional information
as most recently provided by the Adviser to the Subadviser; and (f) the policies
and procedures as adopted by the Trustees of the Trust as furnished to the
Subadviser. The Subadviser shall furnish information readily available to it to
the Adviser, as requested, for purposes of compliance with the distribution
requirements necessary to avoid payment of any excise tax pursuant to Section
4982 of the Code.
The Subadviser further represents and warrants that to the extent that
any statements or omissions made in any Registration Statement for the Contracts
or shares of the Trust, or any amendment or supplement thereto, are made in
reliance upon and in conformity with information furnished by the Subadviser
expressly for use therein, such Registration Statement and any amendments or
supplements thereto will, when they become effective, conform in all material
respects to the requirements of the Securities Act of 1933 and the rules and
regulations of the Commission thereunder (the "1933 Act") and the Act and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
The Subadviser agrees: (a) to maintain a level of errors and omissions
or professional liability insurance coverage that, at all times during the
course of this Agreement, is appropriate given the nature of its business, and
(b) from time to time and upon reasonable request, to supply evidence of such
coverage to the Adviser.
The Subadviser accepts such employment and agrees, at its own expense,
to render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
2. PORTFOLIO TRANSACTIONS. (a) The Subadviser is responsible for
decisions to buy or sell securities and other investments for the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as
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may, in the Subadviser's best judgement, provide prompt and reliable execution
of the transactions at favorable prices and reasonable commission rates. In
selecting such broker-dealers or futures commission merchants, the Subadviser
shall consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Trustees may determine and consistent with Section 28(e) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Subadviser
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, 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 Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the
Adviser and its affiliates or any other subadviser to the Trust and its
respective affiliates, as broker-dealers or futures commission merchants to
effect portfolio transactions in securities and other investments for a
Portfolio; provided, however, that for each Portfolio the average annual
percentage of portfolio transactions which are engaged in with the Subadviser's
affiliates, the Adviser and its affiliates or any other subadviser to the Trust
and its respective affiliates, may not exceed 25 % of the Portfolio's total
transactions in securities and other investments during the Trust's fiscal year.
The Adviser shall maintain and provide the Subadviser with a list of all
broker-dealers affiliated with Adviser or with another subadviser and shall
provide the Subadviser with updates to the list as needed. The Subadviser will
promptly communicate to the Adviser and to the officers and the Trustees of the
Trust such information relating to portfolio transactions as they may reasonably
request. To the extent consistent with applicable law, the Subadviser may
aggregate purchase or sell orders for the Portfolio with contemporaneous
purchase or sell orders of other clients of the1 1 Subadviser or its affiliated
persons. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Subadviser
in the manner the Subadviser determines to be equitable and consistent with its
and its affiliates' fiduciary obligations to the Portfolio and to such other
clients. The Adviser hereby acknowledges that such aggregation of orders may not
result in more favorable pricing or lower brokerage commissions in all
instances.
(b) Notwithstanding Section 2(a) above, for such purposes as obtaining
investment research products and services, covering fees and expenses, and
rewarding sales or distribution, the Adviser may direct the Subadviser to effect
a specific percentage of a Portfolio's transactions
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in securities and other investments to certain broker-dealers and futures
commission merchants'. In designating the use of a particular broker-dealer or
futures commission merchant, the Adviser and Subadviser acknowledge:
(1) All brokerage transactions are subject to best execution. As
such, Subadviser will use its best efforts to direct non-risk
commission transactions to a particular broker-dealer or
futures commission merchant designated by the Adviser provided
that the Subadviser obtains best execution;
(2) Such direction may result in the Portfolio paying a higher
commission, depending upon the Portfolio's arrangements with
the particular broker-dealer or futures commission merchant,
or such other factors as market conditions, share values,
capabilities of the particular broker-dealer or futures
commission merchant, etc.;
(3) If the Adviser directs payments of an excessive amount of
commissions, the executions may not be accomplished as
rapidly. In addition, the Portfolio may forfeit the possible
advantage derived from the aggregation of multiple orders as a
single "bunched" transaction where Subadviser would, in some
instances, be in a better position to negotiate commissions;
and
(4) Subadviser does not make commitments to allocate fixed or
definite amounts of commissions to brokers. As such the
Subadviser may be unable to fulfill the Adviser's request for
direction due to the reasons stated above.
3. COMPENSATION OF THE SUBADVISER. The Subadviser shall not be entitled
to receive any payment from the Trust and shall look solely and exclusively to
the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
assets managed by the Subadviser for each Portfolio listed thereon. Such fee
shall be accrued daily and paid monthly as soon as practicable after the end of
each month (i.e., the applicable annual fee rate divided by 365 applied to each
prior days' net assets in order to calculate the daily accrual). For purposes of
calculating the Subadviser's fee, the average daily net asset value of a
Portfolio shall mean the average daily net assets for which the Subadviser
actually provides advisory services, and shall be determined by taking an
average of all determinations of such net asset value during the month. If the
Subadviser shall provide its ser1 1 vices under this Agreement for less than the
whole of any month, the foregoing compensation shall be prorated.
4. OTHER SERVICES. At the request of the Trust or the Adviser, the
Subadviser in its discretion may make available to the Trust, office facilities,
equipment, personnel and other services in order to facilitate meetings or other
similar functions. Such office facilities, equipment, personnel and services
shall be provided for or rendered by the Subadviser and billed to the Trust or
the Adviser at the Subadviser's cost.
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5. REPORTS. The Trust, the Adviser and the Subadviser agree to furnish
to each other, if applicable, current prospectuses, statements of additional
information, proxy statements, reports of shareholders, certified copies of
their financial statements, and such other information with regard to their
affairs and that of the Trust as each may reasonably request.
6. STATUS OF THE SUBADVISER. The services of the Subadviser to the
Adviser and the Trust are not to be deemed exclusive, and the Subadviser shall
be free to render similar services to others so long as its services to the
Trust are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
Adviser understands that the Subadviser may give advice and take
action with respect to any of its other clients or for its own account which may
differ from the timing or nature of action taken by the Subadviser with respect
to the Portfolio(s). Nothing in this Agreement shall impose upon the Subadviser
any obligation to purchase or sell, or to recommend for purchase or sale, any
security which the Subadviser, or its shareholders, directors, officers,
employees or affiliates may purchase or sell for its or their own account(s) or
for the account of any other client.
7. ADVERTISING. Subadviser shall not provide or in any way distribute
any sales or advertising materials, whether or not related to the Trust, to any
employee or representative of SunAmerica Capital Services, Inc. ("SACS") or its
affiliates, including wholesaling personnel, unless such material has been
received and approved, in writing, by the Adviser.
8. PROXY VOTING. The Subadviser will vote proxies relating to the
Assets of each Portfolio for which Subadviser exercises investment discretion.
Subadviser will vote all such proxies in accordance with such proxy voting
guidelines as Subadviser may, from time to time, establish. Subadviser will not,
however, advise and will use its best efforts not to take any action for the
Adviser, the Trust or a Portfolio in any legal proceedings, including
bankruptcies or class actions, involving securities held or previously held by a
Portfolio or the issuers of the securities ("Legal Proceedings"). The Adviser
will instruct the custodian and other parties providing services to the Trust
promptly to forward to Subadviser copies of all proxies and shareholder
communications relating to securities held by each Portfolio (other than
materials relating to Legal Proceedings). The Adviser agrees that Subadviser
will not be responsible or liable for failing to vote any proxies where it has
not received such proxies or related shareholder communications on a timely
basis.
9. CERTAIN RECORDS. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the Subadviser's investments for the Portfolio(s) that
are required to be maintained by Subadviser on behalf of the Trust pursuant to
the requirements of Rule 31a-1 of that Act. Subadviser shall provide reasonable
access to or copies of any records required to be maintained and preserved
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pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the
Act which are prepared or maintained by the Subadviser on behalf of the Trust.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it 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, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
10. REFERENCE TO THE SUBADVISER. Neither the Trust nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
11. LIABILITY OF THE SUBADVISER. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties ("disabling conduct") hereunder on the part of the Subadviser (and its
officers, directors/trustees, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Subadviser) the
Subadviser shall not be subject to liability to the Adviser (and its officers,
directors/trustees, agents, employees, controlling persons, shareholders and any
other person or entity affiliated with the Adviser) or to the Trust (and its
officers, directors/trustees, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Trust) for any
act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) from any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses)
arising from Subadviser's rendering of services under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser (and its officers, directors/trustees, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the
Adviser) and/or the Trust (and its officers, directors/trustees, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Trust) against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses), to
which the Adviser and/or the Trust and their affiliates or such
directors/trustees, officers or controlling person may become subject under the
Act, the 1933 Act, under other statutes, common law or otherwise, which arise
from the Subadviser's disabling conduct described above, including but not
limited to any material failure by the Subadviser to comply with the provisions
and representations and warranties set forth in Section 1 of this Agreement;
provided, however, that in no case is the Subadviser's indemnity in favor of any
person deemed to protect such other persons against any liability to which such
person
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would otherwise be subject by reasons of willful misfeasance, bad faith, or
gross negligence in the performance of his, her or its duties or by reason of
his, her or its reckless disregard of obligations and duties under this
Agreement.
12. PERMISSIBLE INTERESTS. Trustees and agents of the Trust are or may
be interested in the Subadviser (or any successor thereof) as
directors/trustees, partners, officers, or shareholders, or otherwise;
directors/trustees, partners, officers, agents, and shareholders of the
Subadviser are or may be interested in the Trust as trustees, or otherwise; and
the Subadviser (or any successor) is or may be interested in the Trust in some
manner.
13. TERM OF THE AGREEMENT. This Agreement shall continue in full force
and effect with respect to each Portfolio until two years from the date hereof,
and from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those 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, and (ii) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Portfolio voting separately from any other
series of the Trust.
With respect to each Portfolio, this Agreement may be terminated at
any time, without payment of a penalty by the Portfolio or the Trust, by vote of
a majority of the Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Act) of the Portfolio, voting separately from any
other series of the Trust, or by the Adviser, on not less than 30 nor more than
60 days' written notice to the Subadviser. With respect to each Portfolio, this
Agreement may be terminated by the Subadviser at any time, without the payment
of any penalty, on not less than 60 days' written notice to the Adviser and the
Trust or such other notice period as the parties may agree. The termination of
this Agreement with respect to any Portfolio or the addition of any Portfolio to
Schedule A hereto (in the manner required by the Act) shall not affect the
continued effectiveness of this Agreement with respect to each other Portfolio
subject hereto. This Agreement shall automatically terminate in the event of its
assignment (as defined by the Act). This Agreement will also terminate in the
event that the Advisory Agreement by and between the Trust and the Adviser is
terminated.
14. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
15. AMENDMENTS. This Agreement may be amended by mutual consent in
writing, but the consent of the Trust must be obtained in conformity with the
requirements of the Act.
16. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable provisions of the Act. To
the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
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17. PERSONAL LIABILITY. The Declaration of the Trust establishing the
Trust (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, and, in accordance with that Declaration, no
Trustee, shareholder, officer, employee or agent of the Trust shall be held to
any personal liability, nor shall resort be had to their private property for
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust, but the "Trust Property," as defined in the Declaration,
only shall be liable.
18. SEPARATE SERIES. Pursuant to the provisions of the Declaration,
each Portfolio is a separate series of the Trust, and all debts, liabilities,
obligations and expenses of a particular Portfolio shall be enforceable only
against the assets of that Portfolio and not against the assets of any other
Portfolio or of the Trust as a whole.
19. NOTICES. All notices shall be in writing and deemed properly given
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Franklin Advisory Services, LLC
Xxx Xxxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
with a copy to: Franklin Xxxxxxxxx Investments
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000-0000
Attention: General Counsel
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
000 Xxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Senior Vice President and
General Counsel
with a copy to: SunAmerica Inc.
0 XxxXxxxxxx Xxxxxx
Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Secretary of SunAmerica Series Trust
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IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
FRANKLIN ADVISORY SERVICES, LLC
By:
------------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
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SCHEDULE A
ANNUAL FEE
(AS A PERCENTAGE OF THE AVERAGE
DAILY NET ASSETS THE SUBADVISER
PORTFOLIO(s) MANAGES IN THE PORTFOLIO)
------------ -------------------------------
Small Company Value Portfolio 0.600% first $200 million
0.520% next $300 million
0.500% over $500 million
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