EXHIBIT 4(e)
INVESTMENT ADVISORY AGREEMENT
This AGREEMENT made this 1st day of January, 2002, by and between THE VARIABLE
ANNUITY LIFE INSURANCE COMPANY, hereinafter referred to as the "ADVISER," and
VALIC Company II, hereinafter referred to as "▇▇ ▇▇."
The ADVISER and ▇▇ ▇▇ recognize the following:
(a) The ADVISER 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.
(b) ▇▇ ▇▇ is 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 an open-end,
management investment company under the Investment Company Act
of 1940 (the "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) ▇▇ ▇▇ currently consists of fifteen portfolios ("Funds"):
Aggressive Growth Lifestyle Fund
Capital Appreciation Fund
Conservative Growth Lifestyle Fund
Core Bond Fund
High Yield Bond Fund
International Growth II Fund
Large Cap Value Fund
Mid Cap Growth Fund
Mid Cap Value Fund
Moderate Growth Lifestyle Fund
Money Market II Fund
Small Cap Growth Fund
Small Cap Value Fund
Socially Responsible Fund
Strategic Bond Fund
In accordance with VC II's Agreement and Declaration of Trust
(the "Declaration") and Bylaws, new Funds may be added to ▇▇
▇▇ upon approval of VC II's Board of Trustees without approval
of VC II's shareholders. This Agreement will apply only to the
Funds set forth on the attached Schedule A, and any other Fund
as may be added or deleted by amendment to Schedule A
("Covered Funds").
The ADVISER and ▇▇ ▇▇ AGREE AS FOLLOWS:
1. SERVICES RENDERED AND EXPENSES PAID BY ADVISER
The ADVISER, subject to the control, direction, and supervision of VC
II'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 817(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), VC II's
Declaration, Bylaws, registration statements, prospectus and stated
investment objectives, policies and restrictions shall:
(a) manage the investment and reinvestment of the assets 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.
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(b) maintain a trading desk and place all orders for the purchase
and sale of portfolio investments for each Covered Fund's
account with brokers or dealers selected by the ADVISER, or
arrange for any other entity to provide a trading desk and to
place orders with brokers and dealers selected by the ADVISER,
subject to the ADVISER's control, direction, and supervision.
(c) furnish to the Covered Funds office space, facilities,
equipment and personnel adequate to provide the services
described above and pay the compensation to VC II's trustees
and officers who are interested persons of the ADVISER.
In performing the services described in paragraph (b) above, the
ADVISER shall use its best efforts to obtain for the Covered Funds the
most favorable overall price and execution. Subject to prior
authorization by VC II's Board of Trustees of appropriate policies and
procedures, the 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 ADVISER. The 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 ADVISER shall maintain records adequately demonstrating compliance
with its obligations under this Agreement and report periodically to VC
II's Board of Trustees regarding the performance of services under this
Agreement.
Except as otherwise agreed, or as otherwise provided herein, the
ADVISER shall bear the expense of discharging its responsibilities
hereunder and ▇▇ ▇▇ shall pay, or arrange for others to pay, all its
expenses other than those which part 2 of this Agreement expressly
states are payable to the ADVISER. Expenses payable by ▇▇ ▇▇ include,
but are not limited to, (i) interest and taxes; (ii) brokerage
commissions and other expenses of purchasing and selling portfolio
investments; (iii) compensation of its trustees and officers other than
those persons who are interested persons of the ADVISER; (iv) fees of
outside counsel to and of independent auditors of ▇▇ ▇▇ selected by the
Board of Trustees; (v) fees for accounting services; (vi) custodial,
registration, and transfer agency fees; (vii) expenses related to the
repurchase or redemption of its shares including expenses related to a
program of periodic repurchases or redemptions; (viii) expenses related
to issuance of its shares against payment therefor by, or on behalf of,
the subscribers thereto; (ix) fees and related expenses of registering
and qualifying ▇▇ ▇▇ and its shares for distribution under state and
federal securities laws; (x) expenses of printing and mailing to
existing shareholders of registration statements, prospectuses,
reports, notices and proxy solicitation materials of ▇▇ ▇▇; (xi) all
other expenses incidental to holding meetings of VC II's shareholders
including proxy solicitations therefor; (xii) expenses for servicing
shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for VC II's membership
in trade associations approved by the Board of Trustees; and (xv) such
non-recurring expenses as may arise, including those associated with
actions, suits, or proceedings to which ▇▇ ▇▇ is a party and the legal
obligation which ▇▇ ▇▇ may have to indemnify its officers, trustees and
employees with respect thereto. ▇▇ ▇▇ shall allocate the foregoing
expenses among the Covered Funds and, to the extent that any of the
foregoing expenses are allocated between the Covered Funds and any
other Funds or entities, such allocations shall be made pursuant to
methods approved by the Board of Trustees.
2. COMPENSATION OF ADVISER
▇▇ ▇▇ shall pay to the ADVISER, as compensation for the services
rendered, facilities furnished and expenses paid by the ADVISER, a
monthly fee based on each Covered Fund's average monthly net asset
value computed for each Covered Fund as provided for 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 ▇▇
▇▇. Any change in Schedule A pertaining to any existing or new 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.
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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 VC II's Declaration, for each business day
during a given calendar month. ▇▇ ▇▇ shall pay this fee for each
calendar month as soon as practicable after the end of that month.
The ADVISER shall promptly reduce its monthly fee by the amount of any
commissions, tender and exchange offer solicitation fees, other fees,
or similar payments received by the ADVISER, or any affiliated person
of the ADVISER, in connection with any Covered Fund's portfolio
transactions, less the amount of any direct expenses incurred by the
ADVISER, or any affiliated person of the ADVISER, in obtaining such
commissions, fees, or payments.
If the ADVISER serves for less than a whole month, the foregoing
compensation shall be prorated.
3. SCOPE OF ADVISER'S DUTIES
The ADVISER, and any person controlling, controlled by or under common
control with the 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
ADVISER renders to the Covered Funds.
Except as otherwise required by the 1940 Act, any of the shareholders,
trustees, officers and employees of ▇▇ ▇▇ may be a shareholder,
director, officer or employee of, or be otherwise interested in, the
ADVISER, and in any person controlling, controlled by or under common
control with the ADVISER; and the ADVISER, and any person controlling,
controlled by or under common control with the ADVISER, may have an
interest in ▇▇ ▇▇.
The ADVISER shall not be liable to ▇▇ ▇▇, or to any shareholder in ▇▇
▇▇, for any act or omission in rendering services under this Agreement,
or for any losses sustained in the purchase, holding, or sale of any
portfolio security, so long as there has been no willful misfeasance,
bad faith, negligence, or reckless disregard of obligations or duties
on the part of the ADVISER.
The 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 that any such
person who serves or acts as an investment adviser separate from the
ADVISER will do so pursuant to a sub-advisory agreement as provided in
the following paragraph. The compensation of any such persons will be
paid by the ADVISER, and no obligation will be incurred by, or on
behalf of, ▇▇ ▇▇ with respect to them.
Notwithstanding any other provision of this Agreement, ▇▇ ▇▇ hereby
authorizes the ADVISER to employ an investment sub-adviser for any one
or more of the Covered Funds for the purpose of providing investment
management services with respect to such Covered Funds, provided that
(a) the compensation to be paid to such investment sub-adviser shall be
the sole responsibility of the ADVISER, (b) the duties and
responsibilities of the investment sub-adviser shall be as set forth in
a sub-advisory agreement including the ADVISER and the investment
sub-adviser as parties, (c) such sub-advisory agreement shall be
adopted and approved in conformity with applicable laws and
regulations, and (d) such sub-advisory agreement may be terminated at
any time, on not more than 60 days' written notice, by the ADVISER on
notice to the sub-adviser and ▇▇ ▇▇, by the sub-adviser on notice to
the ADVISER and ▇▇ ▇▇, and by VC II's Board of Trustees or by a
majority vote of the Covered Fund's outstanding voting securities on
notice to the sub-adviser and the ADVISER.
4. DURATION OF AGREEMENT
This Agreement shall become effective as to the Covered Funds set forth
on Schedule A on the date hereof and as to any other Funds 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 the 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 ▇▇ ▇▇
trustees who are not parties to
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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 a majority of the ▇▇ ▇▇ Board of Trustees or a majority
of a Covered Fund's outstanding voting securities.
This Agreement shall automatically terminate in the event of its
assignment. This Agreement may be terminated, without the payment of
any penalty, as to any Covered Fund at any time by VC II's Board of
Trustees or by vote of a majority of that Covered Fund's outstanding
voting securities, on not more than 60 days' nor less than 30 days'
written notice to the ADVISER, or by the ADVISER, on not more than 60
days' nor less than 30 days' written notice, or upon such shorter
notice as may be mutually agreed upon.
5. APPLICABILITY OF FEDERAL SECURITIES LAWS
This Agreement shall be interpreted in accordance with applicable
federal securities laws and regulations, including definitions therein
and such exemptions as may be granted to the ADVISER or ▇▇ ▇▇ by the
Securities and Exchange Commission (the "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.
6. MISCELLANEOUS PROVISIONS
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of outstanding voting
securities" shall have their respective meanings defined in the 1940
Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted to either the ADVISER or ▇▇ ▇▇ by the
Commission, or such interpretive positions as may be taken by the
Commission or its staff, under the 1940 Act, and the term "brokerage
and research services" shall have the meaning given in the Securities
Exchange Act of 1934 and the Rules and Regulations thereunder.
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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.
VALIC COMPANY II
By:
--------------------------------
Name:
Title:
ATTEST:
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By:
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Name:
Title:
ATTEST:
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SCHEDULE A
to Investment Advisory Agreement
(Effective January 1, 2002)
Annual Fee computed at the following annual rate, based on average monthly net
asset value and payable monthly:
International Growth II Fund 0.90% on the first $100 million
0.80% over $100 million
Large Cap Value Fund 0.50%
Large Cap Growth Fund 0.55%
Mid Cap Value Fund 0.75% on the first $100 million
0.725% on the next $150 million
0.70% on the next $250 million
0.675% on the next $250 million
0.65% over $750 million
Mid Cap Growth Fund 0.65% on the first $25 million
0.55% on the next $25 million
0.45% over $50 million
Small Cap Value Fund 0.75% on the first $50 million
0.65% over $50 million
Small Cap Growth Fund 0.85%
Socially Responsible Fund 0.25%
Money Market II Fund 0.25%
Conservative Growth Lifestyle Fund 0.10%
Moderate Growth Lifestyle Fund 0.10%
Aggressive Growth Lifestyle Fund 0.10%
Core Bond Fund 0.50% on first $200 million
0.45% on next $300 million
0.40% over $500 million
Strategic Bond Fund 0.60% on first $200 million
0.50% on next $300 million
0.45% over $500 million
High Yield Bond Fund 0.70% on first $200 million
0.60% on next $300 million
0.55% over $500 million
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