Exhibit d(4)
FORM OF
SUB-MANAGEMENT AGREEMENT
VARIABLE ANNUITY PORTFOLIOS
CitiSelect(R) VIP Folio 100
SUB-MANAGEMENT AGREEMENT, dated as of _____________ ___, ____, by and
between Variable Annuity Portfolios, a Massachusetts business trust (the
"Trust"), and Franklin Advisory Services, Inc., a Delaware corporation (the
"Subadviser").
W I T N E S S E T H:
WHEREAS, Citibank, N.A. (the "Manager") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as CitiSelect(R) VIP Folio 100 (the "Fund"), and
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act"), and
WHEREAS, the Manager has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Fund, and the Subadviser
is willing to provide such investment advisory services for the Fund on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Appointment of the Subadviser. In accordance with and subject to the
Management Agreement between the Trust and the Manager (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as Subadviser with
respect to the Fund for the period and on the terms set forth in this
Agreement. The Subadviser accepts such appointment and agrees to manage the
Fund assets as are allocated to it by the Manager for the compensation provided
by this Agreement.
2. Duties of the Subadviser. The Subadviser shall manage the Fund assets
as are allocated to it by the Manager. Notwithstanding any provision of this
Agreement, the Manager shall retain all rights and ultimate responsibilities to
supervise and, in its discretion, conduct investment advisory activities
relating to the Trust. The Subadviser shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund allocated by the Manager to the Subadviser shall be held
uninvested, subject always to the restrictions of the Trust's Declaration of
Trust, dated October 25, 1996, and By-laws, as each may be amended from time to
time (respectively, the "Declaration" and the "By-Laws"), the provisions of the
1940 Act, the then-current Registration Statement of the Trust with respect to
the Fund, and subject, further, to the Subadviser, if requested, notifying the
Manager in advance of the Subadviser's intention to purchase any securities
except insofar as the requirement for such notification may be waived or
limited by the Manager, it being understood that the Subadviser shall be
responsible for compliance with any restrictions imposed in writing by the
Manager from time to time in order to facilitate compliance with the
above-mentioned restrictions and such other restrictions as the Manager may
determine. Further, the Manager or the Trustees of the Trust may at any time,
upon written notice to the Subadviser, suspend or restrict the right of the
Subadviser to determine what securities shall be purchased or sold on behalf of
the Fund and what portion, if any, of the assets of the Fund allocated by the
Manager to the Subadviser shall be held uninvested. The Subadviser shall also,
as requested, make recommendations to the Manager as to the manner in which
proxies, voting rights, rights to consent to corporate action and any other
rights pertaining to the Fund's portfolio securities shall be exercised.
However, in no event shall the Subadviser have the power to exercise proxies or
voting rights or be responsible for record-keeping relating to such items.
Should the Board of Trustees of the Trust or the Manager at any time, however,
make any definite determination as to investment policy applicable to the Fund
and notify the Subadviser thereof in writing, the Subadviser 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 Subadviser shall take, on behalf of the Fund, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for the Fund's account with the brokers or dealers selected by it,
and to that end the Subadviser is authorized as the agent of the Trust to give
instructions to the custodian and any subcustodian of the Fund as to deliveries
of securities and payments of cash for the account of the Fund. The Subadviser
will advise the Manager on the same day it gives any such instructions. In
connection with the selection of such brokers or dealers and the placing of
such orders, brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which the Subadviser or its affiliates exercise investment discretion. The
Subadviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Fund which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities which the Subadviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Trust shall periodically review the
commissions paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits to
the Fund. In making purchases or sales of securities or other property for the
account of the Fund, the Subadviser may deal with affiliated brokers and/or
dealers as defined by the 1940 Act and to the extent such actions are permitted
by the 1940 Act. The Board of Trustees of the Trust, in its discretion, may
instruct the Subadviser to effect all or a portion of its securities
transactions with one or more brokers and/or dealers selected by the Board of
Trustees, if it determines that the use of such brokers and/or dealers is in
the best interest of the Trust. The Subadviser shall not be responsible for and
shall be held harmless with respect to any execution costs incurred by the
Trust relating to securities transactions conducted with brokers and/or dealers
in accordance with instructions given to the Subadviser by the Trust's Board of
Trustees. In addition, the Board of Trustees acknowledges that to the extent
the Subadviser is directed to use a particular broker and/or dealer, it may not
be able to obtain best execution on all trades executed through that broker
and/or dealer.
3. Allocation of Charges and Expenses. The Subadviser shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 2 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the Fund
all of its own expenses allocable to the Fund including, without limitation,
organization costs of the Fund; compensation of Trustees who are not
"interested persons" of the Trust; governmental fees; interest charges; loan
commitment fees; taxes; membership dues in industry associations allocable to
the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, registrar or dividend disbursing agent of the
Trust; expenses of issuing and redeeming shares of beneficial interests and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders in the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the issuance of shares of beneficial interests in the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.
4. Compensation of the Subadviser. For the services to be rendered by the
Subadviser hereunder, the Trust shall pay to the Subadviser from the assets of
the Fund an investment subadvisory fee, accrued daily and paid monthly, at an
annual rate equal to the percentages specified below of the aggregate assets of
the Fund allocated to the Subadviser:
0.55% on the first $250 million; and
0.50% on remaining assets.
If the Subadviser serves as investment subadviser for less than the whole of
any period specified in this Section 4, the compensation to the Subadviser
shall be prorated. The fee shall be paid to Subadviser by the tenth business
day following the end of the month.
5. Covenants of the Subadviser. The Subadviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's principal
underwriter or distributor, as principals in making purchases or sales of
securities or other property for the account of a Fund, except as permitted by
the 1940 Act, will not take a long or short position in shares of beneficial
interests of the Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
Registration Statement applicable to the Fund relative to the Subadviser and
its directors and officers.
6. Limitation of Liability of the Subadviser. The Subadviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution of securities
transactions for the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Section 6, the term
"Subadviser" shall include directors, officers and employees of the Subadviser
as well as the Subadviser itself. The Manager is expressly made a third party
beneficiary of this Agreement, and may enforce any obligations of the
Subadviser under this Agreement and recover directly from the Subadviser for
any liability the Subadviser may have hereunder.
7. Indemnification. The Trust and the Manager agree to indemnify and hold
harmless the Subadviser against any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees) arising out of or
based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement, prospectus or statement of
additional information for the Trust or contained in the sales literature or
other promotional material for the Trust (or any statement or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading provided that this
agreement to indemnify shall not apply as to the Subadviser if such statement
or omission or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the Trust or the
Manager by or on behalf of the Subadviser for use in the registration
statement, prospectus or statement of additional information for the Fund or
sales literature or other promotional material (or any amendment or supplement)
or otherwise for use in connection with the sale of shares of the Trust.
The Subadviser agrees to indemnify and hold harmless the Trust and the
Manager against any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees) arising out of or based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional information for
the Trust or contained in the sales literature or other promotional material
for the Trust (or any statement or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to indemnify
shall apply as to the Trust and/or the Manager only if such statement or
omission or such alleged statement or omission was made in reasonable reliance
upon and in conformity with information furnished to the Trust or the Manager
by or on behalf of the Subadviser for use in the registration statement,
prospectus or statement of additional information for the Fund or sales
literature or other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of shares of the Trust.
8. Activities of the Subadviser. The services of the Subadviser to the
Fund are not to be deemed to be exclusive, the Subadviser being free to render
investment advisory and/or other services to others, including accounts or
investment management companies with similar or identical investment objectives
to the Fund. It is understood that Trustees, officers, and shareholders of the
Trust or the Manager are or may be or may become interested in the Subadviser,
as directors, officers, employees, or otherwise and that directors, officers,
and employees of the Subadviser are or may become similarly interested in the
Trust or the Manager and that the Subadviser may be or may become interested in
the Trust as a shareholder or otherwise.
9. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, and shall
govern the relations between the parties hereto thereafter and shall remain in
force until ___________ __, ____, on which date it will terminate unless its
continuance after ___________ __, ____ is "specifically approved at least
annually" (a) by the vote of a majority of the Trustees of the Trust who are
not "interested persons" of the Trust or of the Manager or of the Subadviser at
a meeting specifically called for the purpose of voting on such approval, and
(b) by the Board of Trustees of the Trust or by "vote of a majority of the
outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees, (ii) the "vote of a majority of the outstanding
voting securities" of the Fund, or (iii) the Manager, in each case on not more
than 60 days' nor less than 30 days' written notice to the other party. This
Agreement may be terminated at any time without the payment of any penalty by
the Subadviser on not less than 90 days' written notice to the Trust and the
Manager. This Agreement shall automatically terminate in the event of its
"assignment."
This Agreement constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the Subadviser and the
"vote of a majority of the outstanding voting securities" of the Fund (except
for any such amendment as may be effected in the absence of such approval
without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person," and
"Interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the particular series of the
Trust to which a particular obligation relates; that any liability of the Trust
under this Agreement, or in connection with the transactions contemplated
herein, shall be discharged only out of the assets of the particular series of
the Trust to which a particular obligation relates; and that no other series of
the Trust shall be liable with respect to this Agreement or in connection with
the transactions contemplated herein.
The undersigned officer of the Trust has executed this Agreement not
individually but in his capacity as an officer of the Trust under the
Declaration, and the obligations of this Agreement are not binding upon any of
the Trustees, officers or shareholders of the Trust individually.
10. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts provided, however, that nothing herein will be construed in a
manner inconsistent with the 1940 Act, the Investment Advisers Act of 1940 or
any rules or regulations of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
hereunto duly authorized, all as of the day and year first above written.
VARIABLE ANNUITY PORTFOLIOS FRANKLIN ADVISORY SERVICES INC.
By:__________________________ By:____________________________
Title:_______________________ Title:_________________________
The foregoing is acknowledged:
CITIBANK, N.A.
By:__________________________
Title:_______________________
