USALLIANZ VARIABLE INSURANCE
PRODUCTS TRUST
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT, made this 18th day of November, 2002 by and among USAllianz
Advisers, LLC (the "Manager"), USAllianz Variable Insurance Products Trust (the
"Trust") and Prudential Investment Management, Inc. (the "Portfolio Manager").
WHEREAS, the Trust is a Delaware business trust of the series type
organized under an Agreement and Declaration of Trust dated July 13, 1999 (the
"Declaration") and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, management series-type investment
company;
WHEREAS, the Manager has been appointed by the Trust, pursuant to an
investment management agreement dated April 27, 2001 ("Investment Management
Agreement"), to act as investment manager to the Trust with respect to certain
series ("Sub-Advised Funds");
WHEREAS, the Manager wishes to retain the Portfolio Manager to render
portfolio management services to the Trust with respect to the portfolio(s) set
forth in Schedule A hereto (the "Fund(s)") and the Portfolio Manager is willing
to furnish such services;
WHEREAS, the Portfolio Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed among the Manager, the Trust and the Portfolio
Manager as follows:
1. AUTHORIZATION OF USE OF SUBADVISERS. The Trust hereby authorizes the Manager,
subject to approval in each case by the Trustees of the Trust, to retain one or
more subadvisers for the Fund, and to direct that such subadvisers shall
exercise full discretion in furnishing investment advice to the Fund and
arranging for the execution of portfolio transactions for the Fund, subject only
to general oversight by the Manager and the Board of Trustees of the Trust. The
Manager shall be responsible for monitoring, or arranging for others to monitor,
compliance by the subadvisers with the investment policies and restrictions of
the Fund and with such other limitations or directions as the Board of Trustees
of the Trust may from time to time prescribe. The Manager shall report to the
Board of Trustees of the Trust regularly at such times and in such detail as the
Board may from time to time determine to be appropriate.
2. APPOINTMENT OF SUBADVISER. Pursuant to authority granted in Section 1 above
and with the approval of the Trustees of the Trust (the "Trustees"), the Manager
hereby appoints the Portfolio Manager to act as portfolio manager for the Fund
for the periods and on the terms set forth in this Agreement. The Portfolio
Manager accepts such appointment and agrees to furnish the services herein set
forth, for the compensation herein provided.
3. PORTFOLIO MANAGEMENT DUTIES. Subject to the overall supervision of the
Trustees and the Manager, the Portfolio Manager is hereby granted full
responsibility and discretion, with respect to the Fund for (a) the management
of the assets of the Fund in accordance with the Fund's investment objectives,
policies and limitations as stated in its prospectus and Statement of Additional
Information ("SAI") included as part of the Trust's registration statement filed
with the Securities and Exchange Commission (the "SEC"), as they may be amended
from time to time (the "Registration Statement"), copies of which shall be
provided to the Portfolio Manager by the Manager; and (b) the placement of
orders to purchase and sell securities for the Fund. At the request of the
Manager, the Portfolio Manager shall report to the Trustees or Manager regularly
at such times and in such detail as reasonably agreed to by the Manager and the
Portfolio Manager. The Manager has herewith furnished the Portfolio Manager
copies of the Fund's current Prospectus, SAI, Declaration, Bylaws and relevant
operating procedures (collectively, "Documents") and agrees during the
continuance of this Agreement to furnish the Portfolio Manager copies of any
amendments or supplements thereto before or at the time the amendments or
supplements become effective. Until fifteen days subsequent to acknowledgement
of receipt of such amendments or supplements by the Portfolio Manager, the
Portfolio Manager will be fully protected and entitled to rely on the Documents
most recently furnished to it by the Manager or the Trust.
The Portfolio Manager further agrees that, in performing its duties
hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code (the "Code") and all other applicable
federal and state laws and regulations, and with any applicable procedures
adopted by the Trustees;
(b) use reasonable efforts to manage the Fund, and to coordinate its activities
with the Manager, so that the Fund will qualify, and continue to qualify, as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder, and will comply, and continue to comply, with the adequate
diversification requirements of Section 817(h)(2) of the Code;
(c) place orders for the investment of the Fund directly with the issuer, or
with any broker or dealer, in accordance with applicable policies expressed in
the prospectus and/or SAI with respect to the Fund and in accordance with
applicable legal requirements. Specifically, in executing portfolio transactions
and selecting broker-dealers, the Portfolio Manager will use its best efforts to
seek best execution on behalf of the Fund. In assessing the best execution
available for any transaction, the Portfolio Manager shall consider all factors
it deems relevant, including, without limitation, the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker-dealer, the size and difficulty in executing the order,
and the reasonableness of the commission, if any (all for the specific
transaction and on a continuing basis). In evaluating the best execution
available, and in selecting the broker-dealer to execute a particular
transaction, the Portfolio Manager may also consider the brokerage and research
services (as those terms are used in Section 28(e) of the Securities and
Exchange Act of 1934) provided to the Fund and/or other accounts over which the
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(a)
Portfolio Manager or an affiliate of the Portfolio Manager exercises investment
discretion. The Portfolio Manager is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of
commissions another broker-dealer would have charged for effecting that
transaction if, but only if, the Portfolio Manager determines in good faith that
such commission was reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer viewed in terms of that
particular transaction or in terms of all of the accounts over which the
Portfolio Manager or an affiliate of the Portfolio Manager exercises investment
discretion.
Provided the investment objectives of the Fund and applicable law are
adhered to, the Portfolio Manager may aggregate sale and purchase orders of
securities and other investments held in the Fund with similar orders being made
simultaneously for other accounts managed by the Portfolio Manager, including
proprietary accounts and or with accounts of affiliates of the Portfolio
Manager, in accordance with a formula believed to be equitable to each account,
taking into consideration an advantageous selling or purchase price, brokerage
commissions and other expenses, and beneficial timing of transactions, or a
combination of these and other factors; (d) furnish to the Trust and the Manager
whatever statistical information the Trust or the Manager may reasonably request
with respect to the Fund or contemplated investments; keep the Manager and the
Trustees informed of developments materially affecting the Fund's portfolio;
and, on the Portfolio Manager's own initiative, furnish to the Trust or the
Manager from time to time whatever information the Portfolio Manager believes
appropriate for this purpose;
(e) make available to the Trust or the Manager during the normal course of
business hours, promptly upon their request, such copies of its investment
records and ledgers with respect to the Fund as may be required to assist the
Trust's administrator (the "Administrator"), the Trust and the Manager in their
compliance with applicable laws and regulations. The Portfolio Manager will
furnish the Trustees or the Manager with such periodic and special reports
regarding the Fund as the Trustees or the Manager may reasonably request;
(f) immediately notify the Trust and the Manager in the event that the Portfolio
Manager: (1) becomes aware that it is subject to a statutory disqualification
that prevents the Portfolio Manager from serving as a portfolio manager pursuant
to this Agreement; or (2) becomes aware that it is the subject of a material
administrative proceeding or enforcement action by the SEC or other regulatory
authority. The Portfolio Manager further agrees to notify the Trust and the
Manager immediately of any material fact known to the Portfolio Manager
respecting or relating to the Portfolio Manager that is not contained in the
Trust's Registration Statement regarding the Fund, or any amendment or
supplement thereto, but that is required to be disclosed therein, and of any
statement contained therein respecting or relating to the Portfolio Manager that
becomes untrue in any material respect;
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(g) in making investment decisions with respect to the Fund, use no material
non-public information that may be in its possession, nor will the Portfolio
Manager seek to obtain any such information unless such use is in compliance
with applicable law.
Except as otherwise provided in this Agreement, the Portfolio Manager
shall not be responsible hereunder for compliance monitoring, reporting or
testing or for preparing or maintaining books and records for the Fund or
otherwise providing accounting or pricing services to the Fund and such services
shall be provided by others retained by the Fund. The Portfolio Manager shall
have access to such reports and records to assist it in performing its services
hereunder.
The Portfolio Manager shall not be responsible for pursuing or
defending legal causes of action that may be based on the purchase, sale or
holding of a security by the Fund. The Portfolio Manager shall, however, provide
notice to the Manager of any such potential claim which comes to the attention
of the Portfolio Manager and provide reasonable cooperation to the Manager in
any possible proceeding, provided that all expenses incurred in connection with
such cooperation will be paid for by the Manager.
4. BANKING AND CUSTODY ACCOUNTS. In no event shall the Portfolio Manager have
any power or authority or be required to provide or arrange for banking accounts
for the Fund or to take custody of or otherwise hold money or assets on the
Fund's behalf. The Portfolio Manager shall not be required to act as the
registered holder of any investment or to provide or procure any custody or
settlement services in connection with its services hereunder. The Fund has
entered into one or more agreements with providers of banking and custody
services (Custodians) whom the Fund will authorize to act upon instructions from
properly authorized representatives of the Portfolio Manager, in connection with
its services hereunder, directing the Custodian(s) to pay, deliver or receive
cash and securities in settlement of transactions authorized by the Portfolio
Manager on the Fund's behalf The Fund's agreement(s) with such Custodian(s) will
require the Custodian(s) to settle all transactions directed by the Portfolio
Manager on the Fund's behalf at the Fund's expense.
5. ALLOCATION OF CHARGES AND EXPENSES. The Portfolio Manager shall not be
required to pay any expenses of the Trust or the Fund other than those
specifically allocated to the Portfolio Manager in this Section 5. In
particular, but without limiting the generality of the foregoing, the Portfolio
Manager shall not be responsible for the following expenses of the Trust or the
Fund: organization and offering expenses of the Trust and the Fund (including
out-of-pocket expenses, but not including the Portfolio Manager's overhead and
employee costs); fees payable to or expenses of other portfolio managers or
consultants; legal expenses; auditing and accounting expenses; interest
expenses; telephone, telex, facsimile, postage and other communications
expenses; taxes and governmental fees; fees, dues and expenses incurred by or
with respect to the Trust or the Fund in connection with membership in
investment company trade organizations; costs of insurance, including without
limitation fidelity, directors/trustees and officers, and errors and omissions
insurance; fees and expenses of the Trust's Administrator or of any custodian,
subcustodian, transfer agent, registrar, or dividend disbursing agent of the
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Trust or the Fund; payments for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; other
expenses in connection with the issuance, offering, distribution, redemption or
sale of securities issued by the Fund; expenses relating to investor and public
relations; expenses of registering and qualifying shares of the Fund for sale;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; brokerage commissions or other costs of acquiring
or disposing of any portfolio securities or other assets of the Fund, or of
entering into other transactions or engaging in any investment practices with
respect to the Fund; expenses of printing and distributing prospectuses, SAIs,
reports, notices and dividends to shareholders; costs of preparing, printing and
filing documents with regulatory agencies; costs of stationery and other office
supplies; expenses of any litigation or other extraordinary or nonrecurring
events and expenses relating to the issuance, registration and qualification of
the shares of the Fund; costs of shareholders' and other meetings; the
compensation and all expenses (specifically including travel expenses relating
to the business of the Trust or the Fund) of officers, Trustees and employees of
the Trust who are not interested persons of the Portfolio Manager; and travel
expenses (or an appropriate portion thereof) of officers or Trustees of the
Trust who are officers, directors or employees of the Portfolio Manager to the
extent that such expenses relate to attendance at meetings of the Board of
Trustees of the Trust, or any committees thereof or advisory group thereto or
other business of the Trust or the Fund.
6. COMPENSATION. As compensation for the services provided and expenses
assumed by the Portfolio Manager under this Agreement, the Manager, out of its
fees from the Fund pursuant to the Advisory Agreement, will pay the Portfolio
Manager at the end of each calendar month an investment management fee computed
daily at an annual rate equal to the percentage of the Fund's average daily net
assets specified in Schedule A hereto. The "average daily net assets" shall mean
the average of the values placed on the net Fund assets as of the time at which,
and on such days as, the Fund lawfully determines the value of its net assets in
accordance with the prospectus or otherwise. The value of the net assets of the
Fund, shall always be determined pursuant to the applicable provisions of the
Declaration and the Registration Statement. If, pursuant to such provisions, the
determination of net asset value for the Fund is suspended for any particular
business day, then for the purposes of this Section 6, the value of the net
assets as last determined shall be deemed to be the value of the net assets as
of the close of regular trading on the New York Stock Exchange, or as of such
other time as the value of the net assets of the Fund's portfolio may lawfully
be determined, on that day. If the determination of the net asset value of the
shares of the Fund has been so suspended for a period including any month end
when the Portfolio Manager's compensation is payable pursuant to this section,
then the Portfolio Manager's compensation payable at the end of such month shall
be computed on the basis of the value of the net assets as last determined
(whether during or prior to such month). If the Fund determines the value of the
net assets of its portfolio more than once on any day, then the last such
determination thereof with respect to the net assets on that day shall be deemed
to be the sole determination thereof on that day with respect to the net Assets
for the purposes of this Section 6. If the Portfolio Manager serves less than
the whole of any period specified, its compensation will be prorated.
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7. BOOKS AND RECORDS. The Portfolio Manager agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section and those rules and legal provisions. The Portfolio
Manager also agrees that records it maintains and preserves pursuant to Rules
31a-1 and 31 a-2 under the 1940 Act and otherwise in connection with its
services hereunder are the property of the Trust and will be surrendered
promptly to the Trust upon its request; provided, however, that the Portfolio
Manager may retain a copy of such records. The Portfolio Manager further agrees
that it will furnish to regulatory authorities having the requisite authority
any information or reports in connection with its services hereunder which may
be requested in order to determine whether the operations of the Trust and the
Fund are being conducted in accordance with applicable laws and regulations.
8. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Portfolio Manager shall
exercise its best judgment in rendering the services provided by it under this
Agreement. The Portfolio Manager shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust or the Fund or the
holders of the Fund's shares in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Portfolio Manager against any liability to the
Trust, the Fund or to holders of the Fund's shares to which the Portfolio
Manager would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence. As used in this Section 8, the term "Portfolio Manager"
shall include any officers, directors, employees or other affiliates of the
Portfolio Manager performing services with respect to the Trust or the Fund.
9. SERVICES NOT EXCLUSIVE. It is understood that the services of the Portfolio
Manager are not exclusive, and that nothing in this Agreement shall prevent the
Portfolio Manager or any of its affiliates from providing similar services to
other investment companies or to other series of investment companies (whether
or not their investment objectives and policies are similar to those of the Fund
or another series of the Trust) or from engaging in other activities, provided
such other services and activities do not, during the term of this Agreement,
interfere in a material manner with the Portfolio Manager's ability to meet its
obligations to the Trust, the Manager and the Fund hereunder.
The Manager and the Trust acknowledge that the Portfolio Manager and
its officers, affiliates, and employees, and the Portfolio Manager's other
clients, may at any time have, acquire, increase, decrease, or dispose of
positions in investments which are at the same time being acquired for or
disposed of from the Fund. The Portfolio Manager shall have no obligation to
acquire for the Fund a position in any investment which the Portfolio Manager,
its officers, affiliates or employees may acquire for its or their own accounts
or for the account of another client, if in the reasonable discretion of the
Portfolio Manager, it is not feasible or desirable to acquire a position in such
investment for the Fund.
The Manager and the Trust acknowledge that the Portfolio Manager may
give advice and take action with respect to any of its other clients or for its
own account which may differ from
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the timing or nature of action taken by the Portfolio Manager with respect to
the Fund. The Manager and the Trust acknowledge that the performance of the Fund
may differ from the performance of other accounts or investment companies
managed by the Portfolio Manager and that the Portfolio Manager is not expected
to replicate the holdings or returns of any other account or fund that it
manages.
When the Portfolio Manager recommends the purchase or sale of a
security for other investment companies and other clients, and at the same time
the Portfolio Manager recommends the purchase or sale of the same security for
the Fund, it is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to the Fund.
In connection with purchases or sales of portfolio securities for the account of
the Fund, neither the Portfolio Manager nor any of its Trustees, officers or
employees shall act as a principal or agent or receive any commission. If the
Portfolio Manager provides any advice to its clients concerning the shares of
the Fund or other funds of the Trust, the Portfolio Manager shall act solely as
investment counsel for such clients and not in any way on behalf of the Trust,
the Fund or another fund of the Trust.
10. DURATION AND TERMINATION. This Agreement shall continue in effect with
respect to the Fund for two years from the date set forth above and thereafter
shall continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (i) the Trustees or
(ii) by vote of a "majority" (as defined in the 0000 Xxx) of the Fund's
outstanding voting securities (as defined in the 1940 Act), provided that in
either event the continuance is also approved by a majority of the Trustees who
are not parties to this Agreement or "interested persons" (as defined in the
0000 Xxx) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated with respect to the Fund: (a) at any
time without penalty (i) by the Manager, (ii) by the Trust upon the vote of a
majority of the Trustees or (iii) by vote of the majority of the Fund's
outstanding voting securities, each upon sixty (60) days' written notice to the
Portfolio Manager; or (b) by the Portfolio Manager at any time without penalty,
upon sixty (60) days' written notice to the Trust or the Manager. This Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act).
11. AMENDMENTS. Except as otherwise provided by applicable law or regulatory
relief, no provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved, if
such approval is required by applicable law, by an affirmative vote of (i) a
majority of the outstanding voting securities of the Fund, and (ii) a majority
of the Trustees, including a majority of Trustees who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
12. PROXIES AND RIGHTS. Unless the Trust or the Manager gives written
instructions to the contrary, the Portfolio Manager shall (a) vote all proxies
solicited by or with respect to the
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issuers of securities in which the Assets are invested, using its best good
faith judgment to vote such proxies in a manner which best serves the interests
of the Fund's shareholders, and (b) exercise all other rights attaching to or
arising with respect to the Assets, subject to the Fund's investment objectives,
policies and limitations as stated in its Registration Statement, directing the
Custodian to make any required payment or settlement in connection therewith.
13. NOTICES. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Manager at 0000 Xxxxxx Xxxxx Xxxxx,
Xxxxxxxxxxx, XX 00000, Attention: Xxxxx Xxxxxxxxx, (2) to the Trust at 0000
Xxxxxx Xxxxx Xxxxx, Xxxxxxxxxxx, XX 00000, Attention: Xxxxxxx Xxxxxx, with a
copy to Xxxxxx Xxxxxxx at the same address, or (2) to the Portfolio Manager at
000 Xxxxxxxx Xxxxxx, 0 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000, Attention: Xxxx
Baptist, with a copy to Xxxxxxx Xxxxx Xxxxxxxxxx at the same address.
14. MISCELLANEOUS.
a. This Agreement shall be governed by the laws of the State of Delaware,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
b. The captions of this Agreement are included for convenience only and in no
way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
c. This Agreement constitutes the entire agreement between the parties with
respect to the services contemplated hereunder and supercedes any prior oral or
written agreements with respect to such services. 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 hereby and, to
this extent, the provisions of this Agreement shall be deemed to be severable.
d. Nothing herein shall be construed as constituting the Portfolio Manager as an
agent of the Trust or the Fund.
e. The provisions of Section 1 above shall survive any expiration or termination
of this Agreement and shall continue in effect as long as the Advisory Agreement
remains in effect.
f. This Agreement may be executed in any number of counterparts, each of with
shall be deemed an original but all of which, taken together, shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the date first above
written.
USAllianz Variable Insurance Products Trust
By /s/ Xxxxxxxxxxx X. Xxxxxxxxx
Title President and Chairman
Prudential Investment Management, Inc.
By /s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Title Senior Managing Director
USAllianz Advisers, LLC
By /s/ Xxxxxxx Xxxxxx
SVP
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SCHEDULE A
Fees payable to the Portfolio Manager pursuant to Section 6 hereof
shall be at the following annual rates for the Fund:
FUND PERCENTAGE OF AVERAGE NET ASSETS
USAZ Money Market Fund 0.25%
The management fee shall be accrued and paid to the Portfolio Manager
as provided in Section 6 of the Portfolio Management Agreement.
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DISCLOSURE STATEMENT
To: USAllianz Advisers, LLC and USAllianz Variable Insurance Products Trust Name
of agent making introduction: Prudential Investments LLC
Name of Investment Adviser: Prudential Investment Management, Inc.
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Prudential Investments LLC ("PI LLC") and Prudential Investment Management, Inc.
("PIM") have entered into an agreement pursuant to which PI LLC may contact
USAllianz Advisers, LLC and USAllianz Variable Insurance Products Trust with
respect to the procurement of investment advisory services offered by PIM. PI
LLC and PIM are wholly owned subsidiaries of Prudential Financial, Inc.
PI LLC's services to PIM under the agreement consist solely of referral of
USAllianz Advisers, LLC and USAllianz Variable Insurance Products Trust to PIM.
PI LLC, under the agreement, is not authorized to act in any other way on behalf
of PIM and is not authorized to enter into any investment advisory agreement on
behalf of PIM with any person or organization. For its services to PIM, PI LLC
may receive compensation based on the annual management fee paid to PIM by
USAllianz Advisers, LLC and USAllianz Variable Insurance Products Trust.
ACKNOWLEDGEMENT OF RECEIPT: The undersigned hereby acknowledges receipt, on the
date shown, from PI LLC of a copy of the Disclosure Statement (this document)
and PIM's Disclosure Statement (Part II of the Form ADV).
USAllianz Advisers, LLC USAllianz Variable Insurance
Products Trust
/s/ Xxxxxxx Xxxxxx /s/ Xxxxxxxxxxx X. Xxxxxxxxx
Signature Signature
Xxxxxxx Xxxxxx Xxxxxxxxxxx X. Xxxxxxxxx
Name Name
SVP President and Chairman
Title Title
11/19/02 11/19/02
Date Date
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