SUBADVISORY AGREEMENT
Exhibit (d)(xxxix)
This SUBADVISORY AGREEMENT is dated as of December 1, 2006 by and between AIG SUNAMERICA ASSET
MANAGEMENT CORP., a Delaware corporation (the “Adviser”), and WESTERN ASSET MANAGEMENT COMPANY, a
California corporation (the “Subadviser”).
WITNESSETH:
WHEREAS, the Adviser and Seasons 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). In
addition, the custodian shall provide the Subadviser with daily reports regarding the cash levels
in the Portfolio. 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
(a) be operated and managed in compliance with all applicable federal and state laws, including
securities, commodities and banking laws, governing its operations and investments; (b) so as not
to jeopardize either the treatment of the variable annuity contracts which offer the Portfolio(s)
(the “Contracts”) as annuity contracts for purposes of the Internal Revenue Code of 1986, as
amended (the “Code”), or the eligibility of the Contracts to qualify for sale to the public in any
state where they may otherwise be sold; and (c) to minimize any taxes and/or penalties payable by
the Trust or the Portfolio(s). Without limiting the foregoing, the Subadviser represents and
warrants that it will 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. The
Subadviser shall furnish information 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 statements or omissions in the
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.
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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 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 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 the 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
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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, the Adviser may direct the Subadviser to effect
a specific percentage of a Portfolio’s transactions 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; provided however, if in the Subadviser’s reasonable judgment it is unable to negotiate services with the directed broker that would satisfy the requirement of best execution, Subadviser may execute such brokerage transaction with another broker offering such best execution; | ||
| (2) | Such direction may result in the Subadviser paying a higher commission, depending upon the Subadviser’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 Subadviser directs payments of an excessive amount of commissions, the executions may not be accomplished as rapidly. In addition, the Subadviser 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
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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 services 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.
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. The Trust understands and acknowledges that the Subadviser may provide
advice to other clients that may differ from advice given or the time or nature of action taken to
or on behalf of the Trust. Nothing herein contained shall be construed to prevent Subadviser from,
or any of its officers, directors, affiliates and/or employees in any way from purchasing or
selling any securities for its or their own account prior to, simultaneously with, subsequent to or
opposite from any recommendation to the Trust.
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
AIG 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 Adviser will vote proxies relating to the Portfolio’s
securities. The Adviser will vote all such proxies in accordance with such proxy voting guidelines
and procedures adopted by the Board of Trustees. The Adviser may, on certain non-routine matters,
consult with the Subadviser before voting proxies relating to the Portfolio’s securities. The
Adviser will instruct the custodian and other parties providing services to the Trust promptly to
forward to the proxy voting service copies of all proxies and shareholder communications relating
to securities held by each Portfolio (other than materials relating to legal proceedings).
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
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investments of the Portfolio(s) that are required to be maintained by the Trust pursuant to
the requirements of Rule 31a-1 of that Act. Any records required to be maintained and preserved
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,
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
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to protect such other persons against any liability to which such person 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 90 days’ written
notice to the Adviser and the Trust; provided, however, that this Agreement may not be terminated
by the Subadviser unless another subadvisory agreement has been approved by the Trust in accordance
with the Act, or after six months’ written notice, whichever is earlier. 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.
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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.
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. Confidentiality. The Subadviser will not disclose or use any records or
information obtained pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement or as reasonably required to execute transactions on behalf of the
Portfolios, and will keep confidential any non-public information obtained directly as a result of
this service relationship, and the Subadviser shall disclose such non-public information only if
the Adviser or the Board of Trustees has authorized such disclosure by prior written consent, or if
such information is or hereafter otherwise is known by the Subadviser or has been disclosed,
directly or indirectly, by the Adviser or the Trust to others becomes ascertainable from public or
published information or trade sources, or if such disclosure is expressly required or requested by
applicable federal or state regulatory authorities, or to the extent such disclosure is reasonably
required by auditors or attorneys of the Subadviser in connection with the performance of their
professional services or as may otherwise be contemplated by this Agreement. Notwithstanding the
foregoing, the Subadviser may disclose the total return earned by the Portfolios and may include
such total return in the calculation of composite performance information.
To the extent the Adviser is permitted under applicable law, it shall keep all advice and
information received from the Subadviser, in the course of Subadviser’s retention under this
Agreement, confidential and shall not disclose such information to third parties.
20. 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:
|
Western Asset Management Company | |
| 000 X. Xxxxxxxx Xxxx. | ||
| Xxxxxxxx, XX 00000 | ||
| Attention: General Counsel |
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Adviser:
|
AIG SunAmerica Asset Management Corp. | |
| Harborside Financial Center | ||
| 0000 Xxxxx 0 | ||
| Xxxxxx Xxxx, XX 00000 | ||
| Attention: Xxxxxxx X. Xxxxxxxx | ||
| Senior Vice President and | ||
| General Counsel | ||
with a copy to:
|
AIG Retirement Services, Inc. | |
| 0 XxxXxxxxxx Xxxxxx | ||
| Xxxxxxx Xxxx | ||
| Xxx Xxxxxxx, XX 00000-0000 | ||
| Attention: Xxxxxxx X. Xxxxxx | ||
| Assistant Secretary of Seasons 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.
| AIG SUNAMERICA ASSET MANAGEMENT CORP. | ||||
| By: | /s/ XXXXX X. XXXXXXX | |||
| Name: Title: |
Xxxxx X. Xxxxxxx President and Chief Executive Officer |
|||
| WESTERN ASSET MANAGEMENT COMPANY | ||||
| By: | /s/ XXXXX X. XXXXX | |||
| Name: Title: |
Xxxxx X. Xxxxx Head of Client Service and Marketing Support |
|||
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