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EXHIBIT d.5(b)(7)
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT made this 7th day of October, 1998, by and between THE VARIABLE
ANNUITY LIFE INSURANCE COMPANY, hereinafter referred to as "VALIC," and
NEUBERGER&BERMAN MANAGEMENT, INC., hereinafter referred to as the "SUB-ADVISER."
VALIC represents the following:
(a) VALIC is a life insurance company organized under Chapter
3 of the Texas Insurance Code and an investment adviser registered
under the Investment Advisers Act of 1940, as amended ("Advisers Act").
(b) VALIC is engaged as the investment adviser of American
General Mid Cap Value Fund pursuant to an Investment Advisory Agreement
dated October 7, 1998 between VALIC and American General Series
Portfolio Company 2 ("FUND"), an investment company organized under the
laws of Delaware as a business trust, as a series type of investment
company issuing separate classes (or series) of shares of beneficial
interest and is registered as a diversified, open-end, management
investment company under the Investment Company Act of 1940, as amended
("1940 Act"). The 1940 Act prohibits any person from acting as an
investment adviser of a registered investment company except pursuant
to a written contract.
(c) The FUND currently consists of twenty-three portfolios
("Funds"): American General International Value Fund, American General
International Growth Fund, American General Large Cap Value Fund,
American General Large Cap Growth Fund, American General Mid Cap Value
Fund, American General Mid Cap Growth Fund, American General Small Cap
Value Fund, American General Small Cap Growth Fund, American General
Socially Responsible Fund, American General Money Market Fund, American
General Domestic Bond Fund, American General S&P 500 Index Fund,
American General Mid Cap Index Fund, American General Small Cap Index
Fund, American General Balanced Fund, American General Conservative
Growth Lifestyle Fund, American General Moderate Growth Lifestyle Fund,
American General Growth Lifestyle Fund, American General Core Bond
Fund, American General Strategic Bond Fund, American General High Yield
Bond Fund, American General Municipal Bond Fund and American General
Municipal Money Market Fund. In accordance with the FUND's Agreement
and Declaration of Trust (the "Declaration"), new Funds may be added to
the FUND upon approval of the FUND's Board of Trustees without approval
of the FUND's shareholders. This Agreement will apply only to the
Fund(s) set forth on the attached Schedule A, and any other Funds as
may be added or deleted by amendment to the attached Schedule A
("Covered Funds").
(d) VALIC desires to enter into an Investment Sub-Advisory
Agreement with the SUB-ADVISER for all or a portion of the assets of
the Fund(s) set forth on the attached Schedule A, and any other Funds
as may be added or deleted by amendment to the attached Schedule A
("Covered Funds") which VALIC determines from time to time to assign to
the SUB-ADVISER.
(e) The SUB-ADVISER represents that it is engaged principally
in the business of rendering investment advisory services and is
registered as an investment adviser under the Advisers Act.
VALIC and the SUB-ADVISER AGREE AS FOLLOWS:
This Agreement will apply only to the Covered Funds.
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1. SERVICES RENDERED AND EXPENSES PAID BY THE SUB-ADVISER
The SUB-ADVISER, subject to the control, direction, and supervision of
VALIC and the FUND's Board of Trustees and in conformity with the 1940 Act, all
applicable laws and regulations thereunder, all other applicable federal and
state laws and regulations, including section 817(h) of the Internal Revenue
Code of 1986, as amended (the "Code"), the FUND's Declaration, Bylaws,
registration statements, prospectus and stated investment objectives, policies
and restrictions and any applicable procedures adopted by the FUND's Board of
Trustees shall:
(a) manage the investment and reinvestment of the assets,
other than cash, of the Covered Funds including, for example, the
evaluation of pertinent economic, statistical, financial, and other
data, the determination of the industries and companies to be
represented in each Covered Fund's portfolio, and the formulation and
implementation of investment programs.
(b) maintain a trading desk and place orders for the purchase
and sale of portfolio investments (including futures contracts and
options thereon) for each Covered Fund's account with brokers or
dealers (including futures commission merchants) selected by the
SUB-ADVISER, or arrange for any other entity to provide a trading desk
and to place orders with brokers and dealers (including futures
commission merchants) selected by the SUB-ADVISER, subject to the
SUB-ADVISER's control, direction, and supervision, which brokers or
dealers may include brokers or dealers (including futures commission
merchants) affiliated with the SUB-ADVISER, subject to applicable law.
In performing the services described in paragraph (b) above, the
SUB-ADVISER shall use its best efforts to obtain for the Covered Funds the most
favorable overall price and execution. Subject to approval by the FUND's Board
of Trustees of appropriate policies and procedures, the SUB-ADVISER may cause
the Covered Funds to pay to a broker a commission, for effecting a portfolio
transaction, in excess of the commission another broker would have charged for
effecting the same transaction, if the first broker provided brokerage and/or
research services, including statistical data, to the SUB-ADVISER. The
SUB-ADVISER shall not be deemed to have acted unlawfully, or to have breached
any duty created by this Agreement, or otherwise, solely by reason of acting
according to such authorization.
The SUB-ADVISER shall maintain records adequately demonstrating
compliance with its obligations under this Agreement and report periodically to
VALIC and the FUND's Board of Trustees regarding the performance of services
under this Agreement. The SUB-ADVISER will make available to VALIC and the FUND
promptly upon their reasonable request all of the Covered Funds' investment
records and ledgers to assist VALIC and the FUND in compliance with respect to
each Covered Fund's securities transactions as required by the 1940 Act and the
Advisers Act, as well as other applicable laws. The SUB-ADVISER will furnish the
FUND's Board of Trustees such periodic and special reports as VALIC and the
FUND's Board of Trustees may reasonably request. The SUB-ADVISER will furnish to
regulatory authorities any information or reports in connection with such
services which may be requested in order to ascertain whether the operations of
the Covered Funds are being conducted in a manner consistent with applicable
laws and regulations. The SUB-ADVISER will not disclose any records or
information obtained pursuant to this Agreement in any manner whatsoever except
as expressly authorized in this Agreement, and will keep confidential any
information obtained pursuant to this service relationship, and disclose such
information only if VALIC or the Board of Trustees of the FUND has authorized
such disclosure, or if such information is or hereafter becomes ascertainable
from public or published information or trade sources, or if such disclosure is
expressly required or requested by applicable federal or state authorities.
Notwithstanding the foregoing, the SUB-ADVISER may disclose the total return
earned by the Covered Funds and may include such total return in the calculation
of composite performance information without prior approval by VALIC or the
Board of Trustees of the Fund.
Should VALIC at any time make any definite determination as to
investment policy and notify the SUB- ADVISER of such determination in writing,
the SUB-ADVISER shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked.
The SUB-ADVISER will not hold money or investments on behalf of the
FUND. The money and investments will be held by the Custodian of the FUND. The
SUB-ADVISER will arrange for the transmission to the Custodian for
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the FUND, on a daily basis, such confirmation, trade tickets and other documents
as may be necessary to enable it to perform its administrative responsibilities
with respect to the Covered Funds.
The SUB-ADVISER will not perform cash management services for the
Covered Funds. The cash management function will be performed by VALIC.
The SUB-ADVISER shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise provided or authorized, have
no authority to act for or represent VALIC or the FUND other than in furtherance
of the SUB-ADVISER's duties and responsibilities as set forth in this Agreement.
Except as otherwise agreed, or as otherwise provided herein, the
SUB-ADVISER shall bear the expense of discharging its responsibilities hereunder
and VALIC shall pay, or arrange for others to pay, all VALIC's expenses, except
that VALIC shall in all events pay the compensation described in Section 2 of
this Agreement.
2. COMPENSATION OF THE SUB-ADVISER
VALIC shall pay to the SUB-ADVISER, as compensation for the services
rendered and expenses paid by the SUB-ADVISER, a monthly fee or fees based on
each Covered Fund's average monthly net asset value computed for each Covered
Fund as provided for herein and in the fee schedule attached hereto as Schedule
A. Schedule A may be amended from time to time, provided that amendments are
made in conformity with applicable laws and regulations and the Declaration and
Bylaws of the FUND. Any change in Schedule A pertaining to any new or existing
Fund shall not be deemed to affect the interest of any other Fund and shall not
require the approval of shareholders of any other Fund.
The average monthly net asset value shall be determined by taking the
mean average of all of the determinations of net asset value, made in the manner
provided in the FUND's Declaration, for each business day during a given
calendar month. VALIC shall pay this fee for each calendar month as soon as
practicable after the end of that month, but in any event no later than ten (10)
days following the end of the month.
If the SUB-ADVISER serves for less than a whole month, the foregoing
compensation shall be prorated.
The payment of advisory fees related to the services of the SUB-ADVISER
under this Agreement shall be the sole responsibility of VALIC and shall not be
the responsibility of the FUND.
3. SCOPE OF THE SUB-ADVISER'S ACTIVITIES
The SUB-ADVISER, and any person controlled by or under common control
with the SUB-ADVISER, shall remain free to provide similar investment advisory
services to other persons or engage in any other business or activity which does
not impair the services which the SUB-ADVISER renders to the Covered Funds.
Except as otherwise required by the 1940 Act, any of the shareholders,
directors, officers and employees of VALIC may be a shareholder, director,
officer or employee of, or be otherwise interested in, the SUB-ADVISER, and in
any person controlling, controlled by or under common control with the
SUB-ADVISER; and the SUB-ADVISER, and any person controlling, controlled by or
under common control with the SUB-ADVISER, may have an interest in VALIC.
The SUB-ADVISER shall not be liable to VALIC, the FUND, or to any
shareholder in the FUND, and VALIC shall indemnify the SUB-ADVISER, for any act
or omission in rendering services under this Agreement, or for any losses
claims, damages, liabilities or litigation (including reasonable counsel fees
and expenses) sustained in connection with the matters to which this Agreement
relates, so long as there has been no willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties on the part of the
SUB-ADVISER.
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4. REPRESENTATIONS OF THE SUB-ADVISER AND VALIC
The SUB-ADVISER represents, warrants, and agrees as follows:
(a) The SUB-ADVISER (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so
long as this Agreement remains in effect: (ii) is not prohibited by the
1940 Act or the Advisers Act from performing the services contemplated
by this Agreement; (iii) has met, and will continue to meet for so long
as this Agreement remains in effect, any applicable federal or state
requirements, or the applicable requirements of any regulatory or
industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement, (iv) has the
authority to enter into and perform the services contemplated by this
Agreement, and (v) will immediately notify VALIC of the occurrence of
any event that would disqualify the SUB-ADVISER from serving as an
investment adviser of an investment company pursuant to Section 9(a) of
the 1940 Act or otherwise.
(b) The SUB-ADVISER has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and if
it has not already done so, will provide VALIC and the FUND with a copy
of such code of ethics together with evidence of its adoption.
(c) The SUB-ADVISER has provided VALIC and the FUND with a
copy of its Form ADV as most recently filed with the SEC and will
promptly after filing any amendment to its Form ADV with the SEC,
furnish a copy of such amendment to VALIC.
VALIC represents, warrants, and agrees as follows:
VALIC: (i) is registered as an investment adviser under the Advisers
Act and will continue to be so registered for so long as this Agreement remains
in effect: (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and will
continue to meet for so long as this Agreement remains in effect, any applicable
federal or state requirements, or the applicable requirements of any regulatory
or industry self-regulatory agency, necessary to be met in order to perform the
services contemplated by this Agreement, (iv) has the authority to enter into
and perform the services contemplated by this Agreement, and (v) will
immediately notify the SUB-ADVISER of the occurrence of any event that would
disqualify VALIC from serving as an investment adviser of an investment company
pursuant to Section 9(a) of the 1940 Act or otherwise.
5. TERM OF AGREEMENT
This Agreement shall become effective as to the Fund(s) set forth on
Schedule A on the date hereof and as to any other Fund on the date of the
Amendment to Schedule A adding such Fund in accordance with this Agreement.
Unless sooner terminated as provided herein, this Agreement shall continue in
effect for two years from its effective date. Thereafter, this Agreement shall
continue in effect, but with respect to any Covered Fund, subject to the
termination provisions and all other terms and conditions hereof, only so long
as such continuance is approved at least annually by the vote of a majority of
the FUND's trustees who are not parties to this Agreement or interested persons
of any such parties, cast in person at a meeting called for the purpose of
voting on such approval, and by a vote of a majority of the FUND's Board of
Trustees or a majority of that Fund's outstanding voting securities.
This Agreement shall automatically terminate in the event of its
assignment, as that term is defined in the 1940 Act, or in the event of the
termination of the Investment Advisory Agreement between VALIC and the FUND as
it relates to any Covered Fund. The Agreement may be terminated as to any
Covered Fund at any time, without the payment of any penalty, by vote of the
FUND's Board of Trustees or by vote of a majority of that Covered Fund's
outstanding voting securities on at least 60 days' prior written notice to the
SUB-ADVISER. This Agreement may also
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be terminated by VALIC: (i) on at least 60 days' prior written notice to the
SUB-ADVISER, without the payment of any penalty; or (ii) if the SUB-ADVISER
becomes unable to discharge its duties and obligations under this Agreement. The
SUB-ADVISER may terminate this Agreement at any time, or preclude its renewal
without the payment of any penalty, on at least 60 days' prior written notice to
VALIC.
6. OTHER MATTERS
The SUB-ADVISER may from time to time employ or associate with itself
any person or persons believed to be particularly fitted to assist in its
performance of services under this Agreement, provided no such person serves or
acts as an investment adviser separate from the SUB-ADVISER so as to require a
new written contract pursuant to the 1940 Act. The compensation of any such
persons will be paid by the SUB-ADVISER, and no obligation will be incurred by,
or on behalf of, VALIC or the FUND with respect to them.
The SUB-ADVISER agrees that all books and records which it maintains
for the FUND are the FUND's property. The SUB-ADVISER also agrees upon request
of VALIC or the FUND, to promptly surrender the books and records in accordance
with the 1940 Act and rules thereunder. The SUB-ADVISER further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
VALIC has herewith furnished the SUB-ADVISER copies of the FUND's
Prospectus, Statement of Additional Information, Declaration and Bylaws as
currently in effect and agrees during the continuance of this Agreement to
furnish the SUB-ADVISER copies of any amendments or supplements thereto before
or at the time the amendments or supplements become effective.
The SUB-ADVISER is authorized to honor and act on any notice,
instruction or confirmation given by VALIC on behalf of the FUND in writing
signed or sent by any of the persons whose names, addresses and specimen
signatures will be provided by VALIC from time to time. The SUB-ADVISER shall
not be liable for so acting in good faith upon such instructions, confirmation
or authority, notwithstanding that it shall subsequently be shown that the same
was not given or signed or sent by an authorized person.
VALIC agrees to furnish the SUB-ADVISER at its principal office prior
to use thereof, copies of all prospectuses, proxy statements, reports to
shareholders, sales literature, or other material prepared for distribution to
interest holders of the FUND or the public that refer in any way to the
SUB-ADVISER, and not to use such material if the SUB-ADVISER reasonably objects
in writing within ten (10) business days (or such other time as may be mutually
agreed) after receipt thereof. In the event of termination of this agreement,
VALIC will continue to furnish to the SUB-ADVISER copies of any of the
above-mentioned materials that refer in any way to SUB-ADVISER. VALIC shall
furnish or otherwise make available to the SUB-ADVISER such other information
relating to the business affairs of VALIC and the FUND as the SUB-ADVISER at any
time, or from time to time, may reasonably request in order to discharge
obligations hereunder. Subject to provisions of this paragraph, SUB-ADVISER
grants VALIC and the FUND a non-exclusive right to use the "Neuberger&Berman"
name in connection with the SUB-ADVISER's management of the FUND (i) for so long
as the Agreement, any other investment management agreement between VALIC and
SUB-ADVISER with respect to the FUND, or to any extension, renewal or amendment
thereof, remain in effect, and (ii) for subsequent periods as long as required
by law, rule or regulation or to the extent necessary to refer to or illustrate
the historical performance of the FUND.
VALIC agrees to indemnify the SUB-ADVISER for losses and claims which
arise (i) as a result of a failure by VALIC to provide the services or furnish
materials required under the terms of this Investment Sub-Advisory Agreement, or
(ii) as the result of any untrue statement of a material fact or any omission to
state a material fact required to be stated or necessary to make the statements,
in light of the circumstances under which they were made, not misleading in any
registration statements, proxy materials, reports, advertisements, sales
literature, or other materials
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pertaining to the FUND, except insofar as any such statement or omission was
made in reliance on information provided by the SUB-ADVISER or its affiliates.
The SUB-ADVISER agrees to indemnify VALIC for losses and claims which
arise (i) as a result of a failure by the SUB-ADVISER to provide the services or
furnish the materials required under the terms of this Investment Sub- Advisory
Agreement, including a negligent failure whether unintentional or in good faith
or otherwise, to comply with the diversification requirements specified in
section 817(h), and the qualification standards of Subchapter M of the Code, as
amended, and the regulations thereunder, (other than a failure which is
subsequently timely corrected by the SUB- ADVISER in accordance with applicable
law and regulations such that no loss is incurred by VALIC or a Covered Fund) or
(ii) as the result of any untrue statement of a material fact or any omission to
state a material fact required to be stated or necessary to make the statements,
in light of the circumstances under which they were made, not misleading in any
registration statements, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the FUND to the extent any such
statement or omission was made in reliance on information provided by the SUB-
ADVISER or its affiliates. Provided, however, that the SUB-ADVISER's
responsibility for indemnification pursuant to this paragraph shall not, for any
Covered Fund, exceed the lesser of $1,000,000 or 2% of the Covered Fund's net
assets (measured as of the end of the first calendar quarter during which
non-compliance occurred) for any failure to comply with the diversification
requirements specified in section 817(h) or the qualification of Subchapter M of
the Code.
7. APPLICABILITY OF FEDERAL SECURITIES LAWS
This Agreement shall be interpreted in accordance with the laws of the
State of Texas and applicable federal securities laws and regulations, including
definitions therein and such exemptions as may be granted to VALIC or the
SUB-ADVISER by the Securities and Exchange Commission or such interpretive
positions as may be taken by the Commission or its staff. To the extent that the
applicable law of the State of Texas, or any of the provisions herein, conflict
with applicable provisions of the federal securities laws, the latter shall
control.
The parties hereto have each caused this Agreement to be signed in
duplicate on its behalf by its duly authorized officer on the above date.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ XXXXXX X. XXXX, XX.
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Name: Xxxxxx X. Xxxx, Xx.
Title: Chairman and CEO
ATTEST:
/s/ XXXX X. XXXXXX
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NEUBERGER&BERMAN MANAGEMENT, INC.
By: /s/ XXXXXXX XXXXXX
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Name: Xxxxxxx Xxxxxx
Title: Senior Vice President
ATTEST:
/s/ XXXXXXXX X. XXXXXXX
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SCHEDULE A
(Effective October 7, 1998)
Annual Fee computed at the following annual rate, based on average daily net
asset value for each month and payable monthly:
Covered Fund Fee
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American General Mid Cap Value Fund 0.50% of the first $100 million
0.475% of the next $150 million
0.45% of the next $250 million
0.425% of the next $250 million
0.40% on the excess over $750 million
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