EXHIBIT 4(d)(5)
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 X. X.
XXXXXX INVESTMENT MANAGEMENT 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 - XX Xxxxxx Small Cap Growth Fund (the
"Fund") pursuant to an Investment Advisory 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 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
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 selecting brokers or dealers to execute transactions on behalf of
the Covered Fund(s), the SUB-ADVISER will seek the best overall terms
available. In assessing the best overall terms available for any
transaction, the SUB-ADVISER will consider factors it deems relevant,
including, without limitation, the breadth of the market in the
security, the price of the security, the financial condition and
execution capability of the brokers or dealers and the reasonableness
of the commission, if any, for the specific transaction and on a
continuing basis. In selecting brokers or dealers to execute a
particular transaction, and in evaluating the best overall terms
available, the SUB-ADVISER is authorized to consider the brokerage and
research services (within the meaning of Section 28(e) of the
Securities and Exchange Act of 1934, as amended) provided to the
Covered Fund(s) and/or other accounts over which the SUB-ADVISER or its
affiliates exercise discretion.
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 complying with regulations applicable 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 NAFV II 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.
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
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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-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
VALIC understands that the SUB-ADVISER and its affiliates now act, will
continue to act and may act in the future as investment adviser to
fiduciary and other managed accounts and as investment adviser to other
investment companies, and VALIC has no objection to the SUB-ADVISER so
acting, provided that whenever a Covered Fund and one or more other
accounts or investment companies advised by the SUB-ADVISER have
available funds for investment, investments suitable and appropriate
for each will be allocated in accordance with a methodology believed to
be equitable to each entity. The SUB-ADVISER similarly agrees to
allocate opportunities to sell securities. VALIC recognizes that, in
some cases, this procedure may limit the size of the position that may
be acquired or sold for a Covered Fund. In addition, VALIC understands
that the persons employed by the SUB-ADVISER to assist in the
performance of the SUB-ADVISER's duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed
to limit or restrict the right of the SUB-ADVISER or any affiliate of
the SUB-ADVISER to engage in and devote time and attention to other
business or to render services of whatever kind or nature.
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.
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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.
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.
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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 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 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, advertisements or sales
literature, pertaining to the Fund, except insofar as any such
statement or omission was made in reliance on information provided in
writing by the SUB-ADVISER or its affiliates.
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The SUB-ADVISER shall indemnify and hold harmless VALIC (and its
affiliated companies and their respective officers, directors and
employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses)
arising out of or in connection with (1) any willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties
of the SUB-ADVISER in performing hereunder; or (2) any untrue statement
of material fact or any omission to state a material fact required to
be stated or necessary to make statements, in light of the
circumstances under which they are made, not misleading in any
registration statement, proxy materials, advertisements or sales
literature, pertaining to the Funds to the extent any such statement or
omission was made in reliance on information provided in writing by the
SUB-ADVISER to VALIC for the express purpose of inclusion in such
materials.
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: Xxxxx Xxxxxxxx
X.X. Xxxxxx Investment Management, Inc.
1211 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 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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X. X. XXXXXX INVESTMENT MANAGEMENT INC.
By:
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Name:
Title:
ATTEST:
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