EXHIBIT 4(d)(2)
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT made this 29th day of August, 2001, by and between THE VARIABLE
ANNUITY LIFE INSURANCE COMPANY, hereinafter referred to as "VALIC," and
FIDUCIARY MANAGEMENT ASSOCIATES, INC., hereinafter referred to as the
"SUB-ADVISER."
VALIC and the SUB-ADVISER recognize 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 North
American Small Cap Value Fund (the Fund"), pursuant
to an Investment Advisory Agreement between VALIC and
North American Funds Variable Product Series II
("NAFV II"), an investment company organized under
the laws of Delaware as a business trust. NAFV II is
a series type of investment company issuing separate
classes (or series) of shares of beneficial interest
and is registered as an 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) NAFV II currently consists of fifteen portfolios
("Funds"):
North American - AG Aggressive Growth Lifestyle Fund
North American - AG Conservative Growth Lifestyle
Fund
North American - AG Core Bond Fund
North American - AG High Yield Bond Fund
North American - AG Moderate Growth Lifestyle Fund
North American - AG 2 Money Market Fund
North American - AG Socially Responsible Fund
North American - AG Strategic Bond Fund
North American - Xxxxxxx Xxxxx Large Cap Growth Fund
North American International Growth Fund
North American - INVESCO Mid Cap Growth Fund
North American - X.X. Xxxxxx Small Cap Growth Fund
North American - Xxxxxxxxx Xxxxxx Mid Cap Value Fund
North American Small Cap Value Fund
North American - State Street Large Cap Value Fund
In accordance with the NAFV II Agreement and
Declaration of Trust (the "Declaration"), new Funds
may be added upon approval of the Board of Trustees
without the approval of 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 Fund(s)").
(d) The SUB-ADVISER is engaged principally in the
business of rendering investment advisory services
and is registered as an investment adviser under the
Advisers Act.
(e) VALIC desires to enter into an Investment
Sub-Advisory Agreement with the SUB-ADVISER for all
or a portion of the assets of the Covered Fund(s)
which VALIC determines from time to time to assign to
the SUB-ADVISER.
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VALIC and the SUB-ADVISER AGREE AS FOLLOWS:
1. SERVICES RENDERED AND EXPENSES PAID BY THE SUB-ADVISER
The SUB-ADVISER, subject to the control, direction, and supervision of
VALIC and the NAFV II 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 NAFV II Declaration, Bylaws, registration statements, prospectus
and stated investment objectives, policies and restrictions and any
applicable procedures adopted by the NAFV II Board of Trustees shall:
(a) manage the investment and reinvestment of the assets,
other than cash, of the Covered Fund(s) 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
Fund(s) the most favorable overall price and execution. Subject to
approval by the NAFV II Board of Trustees of appropriate policies and
procedures, the SUB-ADVISER may cause the Covered Fund(s) 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 NAFV II Board of Trustees regarding the
performance of services under this Agreement. The SUB-ADVISER will make
available to VALIC and NAFV II promptly upon their request all of the
Covered Fund(s)' investment records and ledgers to assist VALIC and
NAFV II 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 NAFV II
Board of Trustees such periodic and special reports as VALIC and the
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 Fund(s) are being conducted in a manner
consistent with applicable laws and regulations. The SUB-ADVISER 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, and will keep confidential any information obtained
pursuant to this service relationship, and disclose such information
only if VALIC or the Board of Trustees 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.
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Should VALIC at any time make any definite determination as to
investment policy and notify the SUB-ADVISER of such determination, 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 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
Fund(s).
The SUB-ADVISOR will not perform cash management services for the
Covered Fund(s). 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 NAFV II Declaration and Bylaws. 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 NAFV II 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 thirty (30) 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 Fund(s).
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, NAFV II, 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 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 with a copy of
such code of ethics together with evidence of its adoption.
(c) The SUB-ADVISER has provided VALIC 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 NAFV II
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 NAFV II
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
NAFV II as it relates to any Covered Fund; provided that the
termination of an Interim Investment Advisory Agreement between NAFV II
and VALIC, pursuant to Rule 15a-4 under the 1940 Act upon shareholder
approval of a definitive Investment Advisory Agreement with respect to
a Covered Fund, shall not result in the termination of this Agreement
as to such Covered Fund. The Agreement may be terminated as to any
Covered Fund at any
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time, without the payment of any penalty, by vote of the Board of
Trustees or by vote of a majority of that Covered Fund's outstanding
voting securities on 30-60 days' prior written notice to the
SUB-ADVISER. This Agreement may also be terminated by VALIC: (i) on
30-60 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 the 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.
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 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 SUB-ADVISER to provide the
services or furnish the materials required under the terms of this
Investment
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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.
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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.
8. AMENDMENT AND WAIVER
Provisions of this Agreement may be amended, waived, discharged or
terminated only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is
sought. The Agreement may be amended by mutual written consent of the
parties, subject to the requirements of the 1940 Act and the rules and
regulations promulgated and orders granted thereunder.
9. NOTICES
All notices hereunder shall be given in writing (and shall be deemed to
have been duly given upon receipt) by delivery in person, by facsimile,
by registered or certified mail or by overnight delivery (postage
prepaid, return receipt requested) to VALIC and to SUB-ADVISER at the
address of each set forth below:
If to VALIC:
Attn: Xxxx X. Xxxxxx, Esq.
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to SUB-ADVISER:
Attn: Xxx Xxxxxxx
Fiduciary Management Associates, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
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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:
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Name:
Title:
ATTEST:
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FIDUCIARY MANAGEMENT ASSOCIATES, INC.
By:
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Name:
Title:
ATTEST:
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