Exhibit 5(d)
FORM OF SUB-MANAGEMENT AGREEMENT
VARIABLE ANNUITY PORTFOLIOS
SUB-MANAGEMENT AGREEMENT, dated as of ___________ __, 1996, by and between
Citibank, N.A., a national banking association (the "Manager"), and Pacific
Investment Management Company, a Delaware general partnership (the
"Subadviser").
W I T N E S S E T H:
WHEREAS, the Manager has been retained by Variable Annuity Portfolios, a
Massachusetts business trust (the "Trust"), to act as investment adviser to the
Trust with respect to the series of the Trust designated as CitiSelectSM VIP
Folio 200, CitiSelectSM VIP Folio 300, CitiSelectSM VIP Folio 400 and
CitiSelectSM VIP Folio 500 (each individually a "Fund" and collectively the
"Funds"), 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 wishes to engage the Subadviser to provide certain
investment advisory services for the Funds, and the Subadviser is willing to
provide such investment advisory services for the Funds 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 Manager hereby appoints the Subadviser to act as subadviser
with respect to each of the Funds for the period and on the terms set forth in
this Agreement. The Subadviser accepts such appointment and agrees to provide an
investment program with respect to the Funds for the compensation provided by
this Agreement.
2. Duties of the Subadviser. The Subadviser shall provide the Manager with
such investment advice and supervision as the Manager may from time to time
consider necessary for the proper supervision of such portion of each Fund's
investment assets as the Manager may designate from time to time.
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 furnish continuously an investment program and shall determine from time
to time what securities shall be purchased, sold or exchanged and what portion
of the assets of a 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 18, 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
that Fund, it being understood that the Subadviser shall be responsible for
compliance after a reasonable implementation period 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 a Fund and what portion, if any, of the assets of a 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 a Fund's portfolio securities shall be exercised.
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 a Fund and
notify the Subadviser thereof in writing, the Subadviser shall be bound by such
determination, following a reasonable implementation period, 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 each 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 each 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 a Fund as to deliveries of
securities and payments of cash for the account of that 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 a 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 a 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 each 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 a Fund, the Subadviser may
deal with itself or with the Trustees of the Trust or the Trust's underwriter or
distributor 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 liable for any actions or omissions of brokers and/or
dealers selected by the Board of Trustees or the Manager.
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 each Fund
all of its own expenses allocable to that 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, its Subadvisers
and their employees with respect thereto.
4. Compensation of the Subadviser. For the services to be rendered by the
Subadviser hereunder, the Manager shall pay to the Subadviser an investment
subadvisory fee, accrued daily and paid monthly, at an annual rate equal to the
percentages specified below of the aggregate assets of all Funds allocated to
the Subadviser:
0.35% on the first $200 million;
0.30% 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. Neither the Trust nor the Funds shall be liable to the Subadviser for
the compensation of the Subadviser.
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 a 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 each Fund relative to the Subadviser and
its partners, 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 a Fund including, without limitation, acts or omissions of any
brokers, dealers and custodians, except for willful misfeasance, bad faith or
gross negligence in the performance of Subadviser's 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, partners and
employees of the Subadviser as well as the Subadviser itself. The Trust, on
behalf of the Funds, 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. Activities of the Subadviser. The services of the Subadviser to the
Funds 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 Funds. 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, partners, employees, or otherwise and that directors,
officers, partners 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.
8. Aggregation of Orders. The Subadviser may aggregate sales and purchase
orders of securities with similar orders being made simultaneously for other
accounts managed by the Subadviser or with accounts of the affiliates of the
Subadviser, if in the Subadviser's reasonable judgment such aggregation shall
result in an overall economic benefit to the relevant Fund, taking into
consideration the advantageous selling or purchase price, brokerage commission
and other expenses. In accounting for such aggregated order price, commission
and other expenses shall be averaged on a per bond or share basis daily. Manager
acknowledges that the determination of such economic benefit to the relevant
Fund by the Subadviser is subjective and represents the Subadviser's evaluation
that the relevant Fund is benefited by relatively better purchase or sales
prices, lower commission expenses and beneficial timing of transactions or a
combination of these and other factors.
9. All notices provided for in this Agreement shall be sent to:
If to the Subadviser:
Pacific Investment Management Company
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxx and Xxxx Xxxxxx.
If to the Manager:
Citibank Global Asset Management
Citibank, N.A.
000 X. 00xx Xxxxxx, 0xx Xxxxx, Xxxx 6
New York, New York 10043
Attention: Xxxxxx Xxxxx
10. Special Termination Rights. Notwithstanding anything in this Agreement
to the contrary, the Manager may terminate this Agreement without penalty within
five (5) days of its execution of this Agreement by giving written notice to
such effect to the Subadviser within such five (5) day period.
11. Delivery of Part II of Form ADV. Concurrently with execution of this
Agreement, the Subadviser is delivering to the Manager a copy of Part II of its
Form ADV, as amended, on file with the Securities and Exchange Commission. The
Manager hereby acknowledges receipt of such copy.
12. Delivery of CFTC Disclosure Document. Upon the solicitation of the
Manager, the Subadviser delivered to the Manager a copy of its Disclosure
Document, dated _________ __, 1996, on file with the Commodity Futures Trading
Commission. The Manager hereby acknowledges receipt of such copy.
13. 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 _________ __, 1998, on which date it will terminate unless its
continuance after _________ __, 1998 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 each Fund.
This Agreement may be terminated as to any Fund 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 that 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 as to any Fund at any time without the
payment of any penalty by the Subadviser on not less than 90 days' written
notice to the Manager. This Agreement shall automatically terminate in the event
of its "assignment." Termination of this Agreement as to any Fund shall not
terminate this Agreement as it applies to the remaining Funds.
This Agreement constitutes the entire agreement between the parties and may
be amended as to any Fund only if such amendment is approved by the Subadviser
and the "vote of a majority of the outstanding voting securities" of that Fund
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act). Amendment of any term of this
Agreement with respect to any single Fund shall not, without more, amend such
term with respect to any other Fund.
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.
14. 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,
thereunto duly authorized, all as of the day and year first above written.
CITIBANK, N.A. PACIFIC INVESTMENT
MANAGEMENT COMPANY
By:______________________ By: PIMCO Management, Inc.
Title:___________________ its general partner
By:___________________________
Title:________________________
The foregoing is acknowledged:
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. The Trust does not hereby undertake, on behalf of the Funds or
otherwise, any obligation to the Subadviser.
VARIABLE ANNUITY PORTFOLIOS
on behalf of CitiSelectSM VIP Folio 200,
CitiSelectSM VIP Folio 300,
CitiSelectSM VIP Folio 400 and
CitiSelectSM VIP Folio 500
By:__________________________________
Name:
Title:
