INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT made this 4th day of June, 1999, by and between
THE
VARIABLE ANNUITY LIFE INSURANCE COMPANY, hereinafter referred to
as "VALIC," and BANKERS 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 S&P 500 Index Fund, American General Mid Cap Index Fund,
American General Small Cap Index Fund and American General Small
Cap
Value 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 in the business of rendering
investment advisory services and is a "bank" as defined 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 THE 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 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"),
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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
shall:
(a) manage the investment and reinvestment of the assets, other than 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 (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 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 expressly required
or requested by applicable federal or state authorities or to the extent
such disclosure is reasonably required by auditors or attorneys of the
SUB-ADVISER in connection with the performance of their professional
services.
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 information with respect to transactions as
may be necessary to enable it to perform its administrative responsibilities
with respect to the Covered Funds.
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The SUB-ADVISER will not perform cash management
services for the Covered Funds. 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 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 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
Funds.
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, 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:
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(a) The SUB-ADVISER (i) is a "bank" as defined 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 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 AdvisersAct 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)willimmediately 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
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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 FUNDin 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 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 the SUB-ADVISER to provide
the services or furnish the materials required under the terms of this
Investment 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 there 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.
7. APPLICABILITY OF FEDERAL SECURITIES LAWS
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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/ ▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President and CEO
ATTEST:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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BANKERS TRUST COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
ATTEST:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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SCHEDULE A
(Effective June 4, 1999)
Annual Fee computed at the following annual rate, based on
average daily net
asset value for each month and payable monthly:
Covered Fund
Fee
------------
---
American General Stock Index
0.02% of the first $2 billion
Index Fund
0.01% on the excess over $2 billion
No minimum annual fee
American General Mid Cap
0.03% of the first $300 million
Index Fund
0.02% on the excess over $300 million
No minimum annual fee
American General Small Cap
0.03% of the first $150 million
Index Fund
0.02% on the excess over $150 million
No minimum annual fee
American General Small Cap
0.03%
Value Fund
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SCHEDULE B
(Effective June 4, 1999)
Pursuant to Section 6, the following person has been given
signature authority
to sign on behalf of VALIC:
x /s/ ▇▇▇▇
▇. ▇▇▇▇
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--------------
▇▇▇▇ ▇.
▇▇▇▇
President
and CEO
The person holding the office indicated above, whose signature
appears above, is
authorized to sign pursuant to Section 6.
Accepted:
VALIC BANKERS TRUST
COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇
▇▇▇▇▇▇▇
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