1
EXHIBIT d.5(b)(5)
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 CAPITAL
GUARDIAN TRUST COMPANY, 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 American
General International Value Fund, American General Domestic Bond Fund
and American General Balanced 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) The SUB-ADVISER is engaged principally in the business of
rendering investment advisory services and is exempt from registration
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 Funds which VALIC determines from time to time to assign
to the SUB- ADVISER.
VALIC and the SUB-ADVISER AGREE AS FOLLOWS:
1. SERVICES RENDERED AND EXPENSES PAID BY 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 provisions of:
(I) the 1940 Act; (ii) all applicable laws and regulations thereunder; and
1
2
(iii) all other applicable federal and state laws and regulations, including
section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
as are set forth in the Fund's Compliance Manual as mutually agreed upon by
VALIC and the SUB-ADVISER and in conformity with 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, which are communicated in writing to the SUB-ADVISER, shall:
(a) manage the investment and reinvestment of the assets,
other than the investment of 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 (which may include futures contracts
and options thereon) for each Covered Fund's account with brokers or
dealers (which may include 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 (which may include
futures commission merchants) selected by the SUB-ADVISER, which
brokers or dealers may include brokers or dealers (which may include
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 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 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 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
required or requested by applicable federal or state authorities.
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 Funds.
2
3
The SUB-ADVISER will not invest cash for the Covered Funds. The
investment of cash 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 quarterly 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 quarter as soon as
practicable after the end of that quarter but in any event no later than thirty
(30) days following the end of the quarter.
If the SUB-ADVISER serves for less than a whole quarter, 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.
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
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 exempt from registration as an investment
adviser under the Advisers Act: (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
3
4
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.
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 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.
4
5
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.
The parties agree that the name "Capital Guardian Trust Company," the
names of the SUB-ADVISER's affiliates within the Capital Group of Companies,
Inc., and any derivative or logo or trade or service xxxx, are the valuable
property of the SUB-ADVISER and its affiliates. VALIC shall have the right to
use such name(s), derivatives, logos, trade or service marks only with the
prior written approval of the SUB-ADVISER, which approval shall not be
unreasonably withheld so long as this Agreement is in effect. Upon termination
of this Agreement, VALIC shall forthwith cease to use such name(s),
derivatives, logos, trade or service marks. VALIC agrees that it will review
with the SUB-ADVISER any advertisement, sales literature or notice prior to its
use that makes reference to the SUB-ADVISER so that the SUB- ADVISER may review
the context in which it is referred to, it being agreed that the SUB-ADVISER
shall have no responsibility to ensure the adequacy of the form or content of
such materials for purposes of the 1940 Act or other applicable laws and
regulations. If the Covered Funds or VALIC makes any unauthorized use of the
SUB-ADVISER's name(s), derivatives, logos, trade or service marks, the parties
acknowledge that the SUB-ADVISER shall suffer irreparable harm for which
monetary damages are inadequate and thus, the SUB-ADVISER shall be entitle to
injunctive relief. 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.
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 a 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, reports, advertisements, sales
literature, or other materials pertaining to the Funds to the extent any such
statement or omission was made in reliance on information provided by the
SUB-ADVISER to VALIC for the express purpose of inclusion in such materials.
VALIC shall indemnify and hold harmless the SUB-ADVISER (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 any matter which
does not require the SUB-ADVISER to provide an indemnity under the preceding
paragraph, including without limitation, any claim that is based upon any
untrue statement of a 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 not misleading
contained
5
6
in the registration statement, proxy materials, reports, advertisements, sales
literature, or other materials pertaining to the Funds except those statements
that were provided 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.
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.
-----------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Chairman and CEO
ATTEST:
/s/ XXXX X. XXXXXX
----------------------------
CAPITAL GUARDIAN TRUST COMPANY
By: /s/ XXXXXXX X. CONVOY
-----------------------------------
Name: Xxxxxxx X. Convoy
Title: Senior Vice President
ATTEST:
/s/ [ILLEGIBLE]
---------------------
6
7
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 quarterly:
Covered Fund Fee
------------ ---
American General International Value Fund* 0.75% of the first $25 million
0.60% of the next $25 million
0.425% of the next $200 million
0.375% on the excess over $250 million
American General Domestic Bond Fund* 0.35% of the first $50 million
0.20% of the next $50 million
0.18% of the next $200 million
0.15% on the excess over $300 million
American General Balanced Fund* 0.55% of the first $25 million
0.40% of the next $25 million
0.20% on the excess over $50 million
*Fees with respect to each Fund are aggregated and the Sub-Adviser
applies a 5% discount to all fees if all fees are between $1.25
million and $4 million, a 7.5% discount to all fees between $4 million
and $8 million, and a 12.5% discount to all fees if total fees exceed
$12 million.
7
