SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
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Seasons Series Trust
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AIG SunAmerica Retirement Markets, Inc.
21650 Oxnard Street
Woodland Hills, CA 91367
(800) 445-7862
March 1, 2005
Dear Contract Owner: [Logo]
The enclosed information statement details a recent subadviser change for the Cash Management Portfolio (the "Portfolio") of Seasons Series Trust (the "Trust"). On December 15, 2004, the Board of Trustees approved a decision to add Banc of America Capital Management, LLC ("BACAP") as a subadviser for the Portfolio. Accordingly, the Board of Trustees approved the engagement of BACAP to serve as subadviser effective February 14, 2005.The change in portfolio management did not result in any modifications to the Portfolio's principal investment objective or investment strategy as stated in the Trust's prospectus or to the management fee payable by the Portfolio.
As a matter of regulatory compliance, we are sending you this information statement, which describes the management structure of the Portfolio, the ownership of BACAP and the terms of the subadvisory agreement with BACAP, which the Trustees, including the Independent Trustees, have approved.
This document is for your information only and you are not required to take any action. Should you have any questions about these changes or if we can be of service to you in any other way, please call our SunLine customer service center between the hours of 5 a.m. PST and 5 p.m. PST at (800) 445-7862.
Sincerely,
/s/ JANE ALDRICH
Jane Aldrich, CFA
Vice President
AIG SunAmerica Retirement Markets, Inc
SEASONS SERIES TRUST
Cash Management Portfolio
P.O. Box 54299
Los Angeles, CA 90054-0299
________________________________
INFORMATION STATEMENT
REGARDING THE ADDITION OF A SUBADVISER
FOR THE CASH MANAGEMENT PORTFOLIO
________________________________
This information statement is being provided to the shareholders of the Cash Management Portfolio (the "Portfolio") of Seasons Series Trust (the "Trust") in lieu of a proxy statement, pursuant to the terms of an exemptive order the Trust has received from the Securities and Exchange Commission which permits AIG SunAmerica Asset Management Corp. ("SunAmerica") to hire new subadvisers and to make changes to existing subadvisory contracts with the approval of the Board of Trustees (the "Trustees"), but without obtaining shareholder approval. This information statement is being furnished on behalf of the Trustees of the Trust.
We are not asking for a proxy and you are requested not to send us a proxy. This document is for informational purposes only and you are not required to take any action.
This information statement will be mailed on or about March 1, 2005 to contract owners who chose the Portfolio as an investment option prior to January 31, 2005.
Purpose of the Information Statement
On December 15, 2004, the Trustees approved a Subadvisory Agreement between SunAmerica, the investment adviser and manager of the Portfolio, and Banc of America Capital Management, LLC ("BACAP" or "Subadviser"), with respect to the Portfolio. As of February 14, 2005, BACAP became a subadviser of the Portfolio. Prior to February 14, 2005, SunAmerica managed the Portfolio.
The Trust
The Portfolio is an investment series of the Trust, a Massachusetts business trust. The Trust entered into an Investment Advisory and Management Agreement (the "Advisory Agreement") with SunAmerica on January 1, 1999, as amended from time to time, with the approval of the Trustees. SunAmerica is an indirect, wholly-owned subsidiary of American International Group, Inc. and is located at Harborside Financial Center, 3200 Plaza 5, Jersey City, New Jersey 07311. SunAmerica selects the subadvisers for the Trust's Portfolios, manages portions of certain Portfolios, provides various administrative services and supervises the Portfolios' daily business affairs, subject to review by the Trustees. The Advisory Agreement authorizes SunAmerica to retain subadvisers for the Portfolios or portions thereof for which it does not manage the assets. SunAmerica selects subadvisers it believes will provide the Portfolios with the highest quality investment services, while obtaining, within the Portfolios' investment objective, a distinct investment style. SunAmerica monitors the activities of the subadvisers and, from time to time, will recommend the replacement of a subadviser on the basis of investment performance, style drift or other consideration.
The subadvisers to the Trust's Portfolios act pursuant to agreements with SunAmerica. Their duties include furnishing continuing advice and recommendations to the relevant portions of the Portfolios regarding securities to be purchased and sold. The subadvisers are independent of SunAmerica and discharge their responsibilities subject to the policies of the Trustees and the oversight and supervision of SunAmerica, which pays the subadvisers' fees. The Portfolios do not pay fees directly to the subadvisers. However, in accordance with procedures adopted by the Trustees, a subadviser may effect portfolio transactions through an affiliated broker-dealer, acting as an agent not as principal, and the affiliated broker-dealer may receive brokerage commissions in connection therewith as permitted by Section 17(e) of the Investment Company Act of 1940, as amended, the rules and interpretations thereunder and other applicable securities laws.
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The Subadvisory Agreement
SunAmerica previously managed the assets of the Portfolio. At a meeting held on December 15, 2004, the Trustees, including a majority of the Trustees who are not interested persons of the Portfolio or SunAmerica, approved management's recommendation to engage BACAP to manage the assets of the Portfolio in place of SunAmerica. Accordingly, the Trustees approved the Subadvisory Agreement with BACAP, which became effective February 14, 2005 (the "Subadvisory Agreement"). Management recommended BACAP in the ordinary course of its ongoing evaluation of subadviser performance and investment strategy and after extensive research and qualitative and quantitative analysis of numerous candidate firms and their organizational structure, investment process and style and long-term performance record.
The Subadvisory Agreement between SunAmerica and BACAP, on behalf of the Portfolio, provides that (i) the Subadviser shall manage the assets of the Portfolio, (ii) SunAmerica shall compensate the Subadviser for its services, (iii) the Subadviser is authorized to select the brokers or dealers to effect portfolio transactions for the Portfolio, and (iv) the Subadviser shall comply with the Portfolio's investment policies and restrictions and with applicable law. The Subadvisory Agreement will not result in an increase in fees to shareholders. The form of Subadvisory Agreement is attached to this information statement as Exhibit A.
Under the Advisory Agreement, the annual rate of the investment advisory fee payable to SunAmerica for the Portfolio is as follows: 0.55% of Assets or $307,512 for the fiscal year ended March 31, 2004.The advisory fee rate for the Portfolio is 0.55% of the first $100 million of Assets, 0.50% of the next $200 million of Assets, and 0.45% of Assets over $300 million. The term "Assets" means the average daily net assets of the Portfolio. This fee is accrued daily and paid monthly, and may be higher than those charged to other mutual funds. Prior to February 14, 2005, SunAmerica served as the Manager to the Portfolio and the Portfolio had no subadviser. Under the Subadvisory Agreement, SunAmerica will pay a subadvisory fee at the annual rate of 0.15% on first $750 million of Assets, and 0.10% over $750 million of Assets.
Information about the Subadviser
Banc of America Capital Management, LLC. BACAP is located at One Bank of America Plaza, Charlotte, NC 28255. BACAP is dedicated to providing responsible investment management and superior service and manages money for corporations, endowments and foundations, public funds/municipalities and individuals. As of December 31, 2004, BACAP had over $193 billion in assets under management. BACAP is an indirect, wholly-owned subsidiary of Bank of America, which is located at One Bank of America Plaza, Charlotte, NC 28255.
The names and positions of the directors and the principal executive officer of BACAP are as follows:
Name | Position |
Keith T. Banks | Director and President |
Roger Sayler | Director, Chief Operating Officer, Managing Director and Senior Vice President |
The address for the principal executive officer and each of the directors is One Bank of America Plaza, Charlotte, NC 28255.
BACAP is the investment adviser for another mutual fund that has an investment objective similar to the Portfolio. The name of the fund, together with information concerning the fund's assets, and the annual fees paid (as a percentage of average net assets) to BACAP for its services, are set forth below.
Fund Name | Assets as of | Fee Rate |
SunAmerica Series Trust | $360.4 | 0.15% on first $750 million; and |
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Factors Considered by the Board of Trustees
At its meeting on December 15, 2004, the Board, including a majority of the Independent Trustees, approved the Subadvisory Agreement. The Independent Trustees were separately represented by independent counsel in connection with their consideration of the approval of the Subadvisory Agreement. In considering the Subadvisory Agreement, the Board reviewed a variety of materials relating to the Portfolio and the Subadviser, which related to the nature, quality and extent of services to be provided by the Subadviser, the Portfolio's investment performance, the costs of the services to be provided by the Subadviser, terms of the Subadvisory Agreement, and the potential for economies of scale.
Nature, Quality and Extent of Services
The Board, including the Independent Trustees, considered the nature, quality and extent of services to be provided by the Subadviser. In making its evaluation, the Board considered that the Subadviser is responsible for providing investment management services, including investment research, advice and supervision, and determining which securities shall be purchased or sold by the Portfolio. The Board reviewed information regarding the Subadviser's history, structure and size, and investment experience. The Board was informed, that in management's judgment, the Subadviser has the size, visibility and resources to attract and retain highly qualified investment professionals.
The Board reviewed the qualifications, background and responsibilities of the Subadviser's staff who would be responsible for providing investment management services to the Portfolio. The Board then reviewed the Subadviser's compliance and regulatory history, including information whether it was involved in any regulatory actions or investigations. In addition, the Board reviewed information concerning the Subadviser's compliance staff who would be responsible for providing compliance functions on behalf of the Portfolio.
The Board concluded that it was satisfied with the nature, quality and extent of the services to be provided by the Subadviser and that there was a reasonable basis on which to conclude that it would provide a high quality of investment management services.
Expense Information
The Board, including the Independent Trustees, received and reviewed information regarding the Portfolio's fees (actual or contractual management fees, subadvisory fees, non-management fees, and 12b-1 fees) and expense ratios compared against the fees and expense ratios of funds in the Portfolio's Peer Group, both before and after expense waivers, caps and reimbursements, if any. The funds included in the Portfolio's Peer Group consisted of funds that are investment options under variable annuity contracts or variable life insurance contracts. The Board did not consider comparisons of the Portfolio's fees and expenses with the fees and expenses of funds offered through pension funds or institutional investors.
The Board considered that the Portfolio's management fee rates and subadvisory fee rates were higher than the median management fee rates and subadvisory fees for funds in its Peer Group. The Board noted that the Portfolio's asset size was small in terms of other funds in its Peer Group, and that the Portfolio should experience lower expense ratios as its assets grow. The Board also noted that the subadvisory fee rate contained breakpoints that would take effect once the Portfolio's assets and the assets in the SunAmerica Series Trust Cash Management Portfolio, which is also subadvised by BACAP, total $750 million. In addition, the Board considered that SunAmerica agreed to waive five basis points of its advisory fee rate, beginning February 14, 2005.
On the basis of the information considered, the Board concluded that the subadvisory fee rate was fair and reasonable in light of the usual and customary charges made for services of the same nature and quality.
Investment Performance
The Board received and reviewed information regarding the investment performance of the Portfolio compared against its benchmark and other funds in its Peer Group. The Board considered information prepared by Lipper, Inc. and information prepared by AIG SunAmerica Retirement Markets, Inc. The information prepared by AIG SunAmerica Retirement Markets was based on information received from Morningstar, Inc., an independent provider of investment company data. The Board noted that the Portfolio has underperformed its benchmark and the median for its peer Group for the one-three- and five-year periods. The Board noted that the addition of BACAP as subadviser to the Portfolio addresses concerns about the Portfolio's underperformance. In addition, the Board considered the performance of another portfolio in the SunAmerica fund complex in which BACAP subadvises that has outperformed the Portfolio for the one-, three- and five-year periods. The Board noted that management's recommendation to add BACAP as subadviser was due primarily to address performance issues.
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Costs and Benefits
The Board noted that certain subadvisers do not make financial information available because they consider it proprietary. BACAP provided consolidated financial information at the Board's September 2004 meeting and that more recent financial information was not provided at the December 2004 meeting. Because BACAP is a new subadviser to the Portfolio, there was no historical profitability to review with respect to its management of the Portfolio.
With respect to indirect costs and benefits, the Trustees were informed, based on management's judgement, that (1) any indirect costs incurred by SunAmerica in connection with rendering investment advisory services to the Trust are inconsequential to the analysis of the adequacy of the advisory fees, and (2) any collateral benefits derived as a result of providing advisory services to the Trust arede minimis and do not impact upon the reasonableness of the advisory fee.
Terms of the Subadvisory Agreement
The Trustees reviewed the terms of the Subadvisory Agreement including the duties and responsibilities undertaken by the Subadviser. The Board considered that the terms of payment for services rendered and noted that SunAmerica compensates the Subadviser out of the fees it receives from the Trust. The Board noted that the Subadvisory Agreement provides that the Subadviser will pay all of its own expenses in connection with the performance of its duties as well as the cost of maintaining the staff and personnel as necessary for it to perform its obligations. The Board also considered the termination and liability provisions of the Subadvisory Agreement.
Economies of Scale
The Trustees considered whether the Trust has benefited from economies of scale and whether there is potential for future realization of economies of scale with respect to the Portfolio. The Board concluded that the fee structure at the advisory and subadvisory level were reasonable and that no changes were currently necessary to further reflect economies of scale.
Conclusions
In reaching its decision to recommend the approval of the Subadvisory Agreement, the Board did not identify any single factor as being of principal significance, but based its recommendation on each of the factors it considered. Based upon the materials it reviewed, the representations made to it and the considerations described above, and as part of their deliberations, the Board, including the Independent Trustees, concluded that the Subadviser possesses the capability and resources to perform the duties required of it under its Subadvisory Agreement.
Based upon its review of the Subadvisory Agreement, the materials provided, and the considerations described above, the Board, including the Independent Trustees, concluded that the terms of the Subadvisory Agreement is reasonable, fair and in the best interest of the Portfolio and its shareholders, and the subadvisory fee rate provided in the Subadvisory Agreement is fair and reasonable in light of the usual and customary charges made for services of the same nature and quality.
Additional Information
The Trust is not required to hold annual meetings of the shareholders and, therefore, it cannot be determined when the next meeting of shareholders will be held. Shareholder proposals to be considered for inclusion in the proxy statement for the next meeting of shareholders must be submitted at a reasonable time before the proxy statement is mailed. Whether a proposal submitted would be included in the proxy statement will be determined in accordance with applicable state and federal law.
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Ownership of Shares
As of December 31, 2004, there were 5,544,351 shares of the Portfolio outstanding. All outstanding shares of the Portfolio are owned of record, in the aggregate by the following:
Cash Management Portfolio | |||
Shares | % | ||
Variable Annuity Account Five of AIG SunAmerica Life | 5,544,337 |
| 100.0% |
FS Variable Annuity Account Five of First SunAmerica Life | 14 |
| 0.0% |
|
|
|
|
Total Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,544,351 |
| 100.00% |
To SunAmerica's knowledge, no person owns a Contract or interests therein for more than 5% of the outstanding shares of the Portfolio. The Trustees and officers of the Trust and members of their families as a group, beneficially owned less than 1% of the beneficial interest of the Portfolio as of December 31, 2004.
Brokerage Commissions
The Portfolio did not conduct any transactions with affiliated broker/dealers for the fiscal year ended March 31, 2004.
Annual Reports
Copies of the most recent annual and semi-annual reports of the Trust are available without charge and may be obtained by writing the Trust at P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800) 445-7862.
Shareholder Proposals
The Trust is not required to hold annual shareholder meetings. If a shareholder wishes to submit proposals for consideration at a future shareholder meeting, the Trust must receive the proposal a reasonable time before the solicitation is to be made. Written proposals should be sent to Mallary Reznik, Esq., Secretary of Seasons Series Trust, 1 AIG SunAmerica Center, Los Angeles, California 90067.
| By Order of the Trustees, |
| /s/ MALLARY REZNIK |
| Mallary Reznik |
Dated: March 1, 2005
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EXHIBIT A
SUBADVISORY AGREEMENT
ThisSUBADVISORY AGREEMENT is dated as of February 14, 2005, by and betweenAIG SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and BANC OF AMERICA CAPITAL MANAGEMENT, LLC, a North Carolina limited liability company (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser andSEASONS SERIES TRUST, a Massachusetts business trust (the "Trust"), have entered into an Investment Advisory and Management Agreement dated as of January 1, 1999, as amended from time to time (the "Advisory Agreement"), pursuant to which the Adviser has agreed to provide investment management, advisory and administrative services to the Trust, and pursuant to which the Adviser may delegate one or more of its duties to a Subadviser; and
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and may issue shares of beneficial interest, no par valueper share, in separately designated portfolios representing separate funds with their own investment objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment advisory services and is registered as an investment adviserunder the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment advisory services to the investment portfolio(s) of the Trust listed on Schedule A attached hereto (the "Portfolio(s)"), and the Subadviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. The Adviser hereby engages the services of the Subadviser in furtherance of its Investment Advisory and Management Agreement with the Trust. Pursuant to this Subadvisory Agreement and subject to the oversight and review of the Adviser, the Subadviser will manage the investment and reinvestment of the assets of each Portfolio. The Subadviser will determine, in its discretion and subject to the oversight and review of the Adviser, the securities and other investments to be purchased or sold, will provide the Adviser with records concerning its activities which the Adviser or the Trust is required to maintain, and will render regular reports to the Adviser and to officers and Trustees of the Trust concerning its discharge of the foregoing responsibilities as may be reasonably requested from time to time. The Subadviser shall discharge the foregoing responsibilities subject to the control of the officers and the Trustees of the Trust and in compliance with such policies as the Trustees of the Trust may from time to time establish, and in compliance with (a) the objectives, policies, restrictions and limitations for the Portfolio(s) as set forth in the Trust's current prospectus and statement of additional information; and (b) applicable laws and regulations.
The Subadviser represents and warrants to the Adviser that, in performing its responsibilities hereunder, each Portfolio will at all times be operated and managed (a) in compliance with all applicable federal and state laws, including securities, commodities and banking laws, governing its operations and investments; (b) so as not to jeopardize either the treatment of the variable annuity contracts which offer the Portfolio(s) (the "Contracts") as annuity contracts for purposes of the Internal Revenue Code of 1986, as amended (the "Code"), or the eligibility of the Contracts to qualify for sale to the public in any state where they may otherwise be sold; and (c) to minimize any taxes and/or penalties payable by the Trust or the Portfolio(s). Without limiting the foregoing, the Subadviser represents and warrants that it will manage each Portfolio in compliance with (a) the applicable provisions of Subchapter M, chapter 1 of the Code ("Subchapter M") for each Portfolio to be treated as a "regulated investment company" under Subchapter M; (b) the diversification requirements specified in the Internal Revenue Service's regulations under Section 817(h) of the Code; (c) the provisions of the Act and rules adopted thereunder; (d) applicable state insurance laws as communicated by Adviser to Subadviser in writing; (e) the objectives, policies, restrictions and limitations for the Portfolio(s) as set forth in the Trust's current prospectus and statement of additional information as most recently provided by the Adviser to the Subadviser; and (f) the polices and procedures as adopted by the Trustees of the Trust as most recently provided by the Adviser to the Subadviser. The Subadviser shall furnish information to the Adviser, as requested, for purposes of compliance with the distribution requirements necessary to avoid payment of any excise tax pursuant to Section 4982 of the Code.
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The Subadviser further represents and warrants that to the extent that any statements or omissions made in any Registration Statement for the Contracts or shares of the Trust, or any amendment or supplement thereto, are made in reliance upon and in conformity with information furnished by the Subadviser expressly for use therein, such Registration Statement and any amendments or supplements thereto will, when they become effective, conform in all material respects to the requirements of the Securities Act of 1933 and the rules and regulations of the Commission thereunder (the "1933 Act") and the Act and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.
The Subadviser agrees: (a) to maintain a level of errors and omissions or professional liability insurance coverage that, at all times during the course of this Agreement, is appropriate given the nature of its business, and (b) from time to time and upon reasonable request, to supply evidence of such coverage to the Adviser.
The Subadviser accepts such employment and agrees, at its own expense, to render the services set forth herein and to provide the office space, furnishings, equipment and personnel required by it to perform such services on the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. (a) The Subadviser is responsible for decisions to buy or sell securities and other investments for the assets of each Portfolio, broker-dealers and futures commission merchants selection, and negotiation of brokerage commission and futures commission merchants' rates. As a general matter, in executing portfolio transactions, the Subadviser may employ or deal with such broker-dealers or futures commission merchants as may, in the Subadviser's best judgement, provide prompt and reliable execution of the transactions at favorable prices and reasonable commission rates. In selecting such broker-dealers or futures commission merchants, the Subadviser shall consider all relevant factors including price (including the applicable brokerage commission, dealer spread or futures commission merchant rate), the size of the order, the nature of the market for the security or other investment, the timing of the transaction, the reputation, experience and financial stability of the broker-dealer or futures commission merchant involved, the quality of the service, the difficulty of execution, the execution capabilities and operational facilities of the firm involved, and, in the case of securities, the firm's risk in positioning a block of securities. Subject to such policies as the Trustees may determine and, consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Subadviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of the Subadviser's having caused a Portfolio to pay a member of an exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of an exchange, broker or dealer would have charged for effecting that transaction, if the Subadviser determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such member of an exchange, broker or dealer viewed in terms of either that particular transaction or the Subadviser's overall responsibilities with respect to such Portfolio and to other clients as to which the Subadviser exercises investment discretion. In accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser and its affiliates or any other subadviser to the Trust and its respective affiliates, as broker-dealers or futures commission merchants to effect portfolio transactions in securities and other investments for a Portfolio, provided, however, that for each Portfolio, the average annual percentage of portfolio transactions which are engaged in with the Subadviser=s affiliates, the Adviser and its affiliates or any other subadviser to the Trust and its respective affiliates, may not exceed25% of the Portfolio's total transactions in securities and other investments during the Trust's fiscal year. The Subadviser will promptly communicate to the Adviser and to the officers and the Trustees of the Trust such information relating to portfolio transactions as they may reasonably request. To the extent consistent with applicable law, the Subadviser may aggregate purchase or sell orders for the Portfolio with contemporaneous purchase or sell orders of other clients of the Subadviser or its affiliated persons. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser determines to be equitable and consistent with its and its affiliates' fiduciary obligations to the Portfolio and to such other clients. The Adviser hereby acknowledges that such aggregation of orders may not result in more favorable pricing or lower brokerage commissions in all instances. The Subadviser will promptly communicate to the Adviser and to the officers and the Trustees of the Trust such information relating to portfolio transactions as they may reasonably request. To the extent consistent with applicable law, the Subadviser may aggregate purchase or sell orders for the Portfolio with contemporaneous purchase or sell orders of other clients of the Subadviser or its affiliated persons. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser determines to be equitable and consistent with its and its affiliates' fiduciary obligations to the Portfolio and to such other clients. The Adviser hereby acknowledges that such aggregation of orders may not result in more favorable pricing or lower brokerage commissions in all instances and may affect the size of the position obtained for or disposed of by a Portfolio.
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(b) Notwithstanding Section 2(a) above, for such purposes as obtaining investment research products and services, covering fees and expenses, the Adviser may direct the Subadviser to effect a specific percentage of a Portfolio's transactions in securities and other investments to certain broker-dealers and futures commission merchants. In designating the use of a particular broker-dealer or futures commission merchant, the Adviser and Subadviser acknowledge:
| (1) | All brokerage transactions are subject to best execution. As such, Subadviser will use its best efforts to direct non-risk commission transactions to a particular broker-dealer or futures commission merchant designated by the Adviser provided that the Subadviser obtains best execution; |
| (2) | Such direction may result in the Subadviser paying a higher commission, depending upon the Subadviser's arrangements with the particular broker-dealer or futures commission merchant, or such other factors as market conditions, share values, capabilities of the particular broker-dealer or futures commission merchant, etc.; |
| (3) | If the Subadviser directs payments of an excessive amount of commissions, the executions may not be accomplished as rapidly. In addition, the Subadviser may forfeit the possible advantage derived from the aggregation of multiple orders as a single "bunched" transaction where Subadviser would, in some instances, be in a better position to negotiate commissions; and |
| (4) | Subadviser does not make commitments to allocate fixed or definite amounts of commissions to brokers. As such the Subadviser may be unable to fulfill the Adviser's request for direction due to the reasons stated above. |
3. Compensation of the Subadviser. The Subadviser shall not be entitled to receive any payment from the Trust and shall look solely and exclusively to the Adviser for payment of all fees for the services rendered, facilities furnished and expenses paid by it hereunder. As full compensation for the Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a fee at the annual rates set forth in Schedule A hereto with respect to the assets managed by the Subadviser for each Portfolio listed thereon. Such fee shall be accrued daily and paid monthly as soon as practicable after the end of each month (i.e., the applicable annual fee rate divided by 365 applied to each prior days' net assets in order to calculate the daily accrual). For purposes of calculating the Subadviser's fee, the average daily net asset value of a Portfolio shall mean the average daily net assets for which the Subadviser actually provides advisory services, and shall be determined by taking an average of all determinations of such net asset value during the month. If the Subadviser shall provide its services under this Agreement for less than the whole of any month, the foregoing compensation shall be prorated.
4. Reports. The Adviser and the Subadviser agree to furnish to each other, if applicable, current prospectuses, statements of additional information, proxy statements, reports of shareholders, certified copies of their financial statements, and such other information with regard to their affairs and that of the Trust as each may reasonably request.
5. Status of the Subadviser. The services of the Subadviser to the Adviser and the Trust are not to be deemed exclusive, and the Subadviser shall be free to render similar services to others so long as its services to the Trust are not impaired thereby. The Subadviser shall be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust.
6. Certain Records. The Subadviser hereby undertakes and agrees to maintain, in the form and for the period required by Rule 31a-2 under the Act, all records relating to the investments of the Portfolio(s) that are required to be maintained by the Trust pursuant to the requirements of Rule 31a-1 of that Act. Any records required to be maintained and preserved pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are prepared or maintained by the Subadviser on behalf of the Trust are the property of the Trust and will be surrendered promptly to the Trust or the Adviser on request.
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The Subadviser agrees that all accounts, books and other records maintained and preserved by it as required hereby shall be subject at any time, and from time to time, to such reasonable periodic, special and other examinations by the Securities and Exchange Commission, the Trust's auditors, the Trust or any representative of the Trust, the Adviser, or any governmental agency or other instrumentality having regulatory authority over the Trust.
7. Reference to the Subadviser. Neither the Trust nor the Adviser or any affiliate or agent thereof shall make reference to or use the name of the Subadviser or any of its affiliates in any advertising or promotional materials without the prior approval of the Subadviser, which approval shall not be unreasonably withheld.
8. Liability of the Subadviser. (a) In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties ("disabling conduct") hereunder on the part of the Subadviser (and its officers, directors/trustees, agents, employees, controlling persons, shareholders and any other person or entity affiliated with the Subadviser), the Subadviser shall not be subject to liability to the Adviser (and its officers, directors/trustees, agents, employees, controlling persons, shareholders and any other person or entity affiliated with the Adviser) for any act or omission in the course of, or connected with, rendering services hereunder, including without limitation, any error of judgment or mistake of law or for any loss suffered by any of them in connection with the matters to which this Agreement relates, except to the extent specified in Section 36(b) of the Act concerning loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services. Except for such disabling conduct, the Adviser shall indemnify the Subadviser (and its officers, directors, partners, agents, employees, controlling persons, shareholders and any other person or entity affiliated with the Subadviser) from any and all losses, claims, damages, liabilities or litigation (including reasonable legal and other expenses) arising from Subadviser's rendering of services under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser (and its officers, directors/trustees, agents, employees, controlling persons, shareholders and any other person or entity affiliated with the Adviser) against any and all losses, claims, damages, liabilities or litigation (including reasonable legal and other expenses), to which the Adviser and/or the Trust and their affiliates or such directors/trustees, officers or controlling persons become subject under the 1933 Act, under other statutes, at common law or otherwise, arising out of or resulting from any disabling conduct on the part of the Subadviser, including but not limited to any material failure by the Subadviser to comply with the provisions and representations and warranties set forth in Section 1 of this Agreement which arises out of or results from Subadviser's disabling conduct; provided, however, that in no case is the Subadviser's indemnity in favor of any person deemed to protect such other persons against any liability to which such person would otherwise be subject by reasons of willful misfeasance, bad faith, or gross negligence in the performance of his, her or its duties or by reason of his, her or its reckless disregard of obligations and duties under this Agreement.
9. Term of the Agreement. This Agreement shall continue in full force and effect with respect to each Portfolio until two years from the date hereof, and from year to year thereafter so long as such continuance is specifically approved at least annually (i) by the vote of a majority of those Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by the Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Portfolio voting separately from any other series of the Trust.
With respect to each Portfolio, this Agreement may be terminated at any time, without payment of a penalty by the Portfolio or the Trust, by vote of a majority of the Trustees, or by vote of a majority of the outstanding voting securities (as defined in the Act) of the Portfolio, voting separately from any other series of the Trust, or by the Adviser, on not less than 30 nor more than 60 days' written notice to the Subadviser. With respect to each Portfolio, this Agreement may be terminated by the Subadviser at any time, without the payment of any penalty, on 90 days' written notice to the Adviser and the Trust. The termination of this Agreement with respect to any Portfolio or the addition of any Portfolio to Schedule A hereto (in the manner required by the Act) shall not affect the continued effectiveness of this Agreement with respect to each other Portfolio subject hereto. This Agreement shall automatically terminate in the event of its assignment (as defined by the Act). This Agreement will also terminate in the event that the Advisory Agreement by and between the Trust and the Adviser is terminated. Notwithstanding the foregoing, in the event the Securities and Exchange Commission issues an order conditionally or unconditionally exempting such assignment from the provisions of Section 15(a) of the Act, this Agreement shall continue in full force and effect, subject to any terms or conditions of such order.
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10. Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby.
11. Amendments. This Agreement may be amended by mutual consent in writing, but the consent of the Trust must be obtained in conformity with the requirements of the Act.
12. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York and the applicable provisions of the Act. To the extent the applicable laws of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the Act, the latter shall control.
13. Personal Liability. The Declaration of the Trust establishing the Trust (the "Declaration"), is on file in the office of the Secretary of the Commonwealth of Massachusetts, and, in accordance with that Declaration, no Trustee, shareholder, officer, employee or agent of the Trust shall be held to any personal liability, nor shall resort be had to their private property for satisfaction of any obligation or claim or otherwise in connection with the affairs of the Trust, but the "Trust Property," as defined in the Declaration, only shall be liable.
14. Separate Series. Pursuant to the provisions of the Declaration, each Portfolio is a separate series of the Trust, and all debts, liabilities, obligations and expenses of a particular Portfolio shall be enforceable only against the assets of that Portfolio and not against the assets of any other Portfolio or of the Trust as a whole.
15. Confidentiality. The Subadviser 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 or as reasonably required to execute transactions on behalf of the Portfolios, and will keep confidential any non-public information obtained directly as a result of this service relationship, and the Subadviser shall disclose such non-public information only if the Adviser or the Board of Trustees has authorized such disclosure by prior written consent, or if such information is or hereafter otherwise is known by the Subadviser or has been disclosed, directly or indirectly, by the Adviser or the Trust to others becomes ascertainable from public or published information or trade sources, or if such disclosure is expressly required or requested by applicable federal or state regulatory authorities, or to the extent such disclosure is reasonably required by auditors or attorneys of the Subadviser in connection with the performance of their professional services or as may otherwise be contemplated by this Agreement. Notwithstanding the foregoing, the Subadviser may disclose the total return earned by the Portfolios and may include such total return in the calculation of composite performance information.
16. Notices. All notices shall be in writing and deemed properly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
Subadviser: | Banc of America Capital Management, LLC |
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Adviser: | AIG SunAmerica Asset Management Corp. |
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with a copy to: | AIG Retirement Services, Inc. |
IN WITNESS WHEREOF, the parties have caused their respective duly authorized officers to execute this Agreement as of the date first above written.
| AIG SUNAMERICA ASSET MANAGEMENT CORP. By: /s/ PETER A HARBECK |
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| BANC OF AMERICA CAPITAL MANAGEMENT, LLC By:/s/ ROGER SAYLER |
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