INVESTMENT MANAGEMENT AGREEMENT
This agreement, dated October 25, 1990, by and between X.X. Xxxxxx Investment
Management Inc. 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 ("JPMIM") and
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, Tower Xxx Xxxxxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxxxxx 00000 ("Skandia"), sets forth the terms pursuant to which JPMIM will
provide Investment management services with respect to certain assets to be
maintained by Skandia as described below.
1. Investment Description
(a) Skandia desires to employ certain assets ("Assets") to fund the
liabilities it incurs under certain annuity plans it issues ("Liabilities").
These Assets may be maintained in one or more non-utilized separate accounts
established by Skandia under Title 38, Section 38-145a of the Connecticut
General Statutes. The Liabilities may be created under group or individual
contracts. The annuity plans may be offered and issued by Skandia pursuant to
one or more registration statements under the Securities Act of 1933.
(b) Skandia desires to invest and reinvest the Assets of each separate
account in accordance with:
(i) the Investment Policy which Skandia has provided to JPMIM, as may be
amended from time to time by Skandia and provided in writing to JPMIM; and
(ii) any prospectus as may be in effect from time to time in
relation to sales of annuities to be funded by the Assets in such separate
account. Skandia will provide copies of such prospectus as may from time to time
be amended.
(c) Skandia's goal is to achieve rates of return for the invested
Assets that will allow Skandia to recover its expenses over the time periods
assumed in the pricing of each annuity plan, obtain a profit and meet its
Liabilities, including supporting the "Rates" guaranteed under such plan or
plans. As to deferred annuities that are in their accumulation phase, "Rates"
means any interest rate guaranteed to be credited from time to time for the
account of contract owners or certificates holders. As to immediate annuities or
deferred annuities in their payout phase, "Rates" means both periodic payments
under such annuities as well as any guaranteed surrender values. Skandia
understands and agrees that JPMIM can give no assurance that Skandia's goal will
be achieved.
2. Appointment
Skandia hereby appoints JPMIM to manage the Assets. Skandia wishes to benefit
from JPMIM's investment expertise, investment analysis, strategies and
recommendations. JPMIM accepts such appointment pursuant to the terms of this
Agreement. Skandia retains the right to appoint other investment managers with
respect to any of it assets other than designated Assets.
3. Duties of the Parties
(a) JPMIM shall act in strict conformity with the Investment Policy
provided by Skandia, and will provide notice to Skandia in the event of any
occurrence which would prevent JPMIM from acting in strict conformity with such
Investment Policy. The timeliness of any such notice shall be in accordance with
the standard of care described in Paragraph 6 of this agreement
(b) Skandia will determine Rates and reserve levels to be maintained by
Skandia in relation to the default risk of the Assets ("Reserves") for the
annuity plans. Skandia will consult frequently with JPMIM regarding the rates of
return obtainable from various possible portfolios of investment of the Assets,
the degree to which such possible portfolios of investments match the
corresponding Liabilities, and the levels of risk inherent in such possible
portfolios. It is also understood that Skandia will rely in large part on the
information and analysis provided by JPMIM regarding such possible portfolios in
determining the Rates and Reserves, and that provision of such information and
analysis is subject to the standard of care described In Paragraph 6.
(c) Skandia will inform JPMIM of:
(i) changes in the Liabilities under any plan and any changes in the
amounts available for investment;
(ii) the durations of the Liabilities under each plan;
(iii) the rates of return assumed by Skandia in the establishment of any
Liabilities;
(iv) whether the immunized portfolio structure, as defined below, is to be
monitored separately for each plan or for any aggregation of plans; and
(v) any other information necessary from Skandia for JPMIM to meets its
duties and render the services to be provided pursuant to this Agreement.
(d) JPMIM will supervise the investment of the Assets and will conduct
a continuing program of evaluation of both the quality of the investments and
the degree to which an immunized portfolio structure(s) is maintained.
(e) It is understood that immunized portfolio structure means that:
(i) the durations of a portfolio of Assets should match the durations of
the corresponding Liabilities within the parameters determined by Skandia and
provided to JPMIM In writing;
ii) the convexity of the portfolio of Assets generally will be equal to or
greater than the convexity of the portfolio of corresponding Liabilities;
iii) the present value of the cash flows from such a portfolio should be
equal to or greater than the present values of the corresponding Liability cash
flows; and
(iv) JPMIM will attempt to minimize the immunization risk due to
non-parallel shifts in the yield curve.
(f) JPMIM shall make investment decisions regarding the Assets,
including but not limited to the determination of the specific issuers and
issues of securities to be held as Assets, as well as the timing of all attempts
to purchase or sell securities.
(g) Subject to the Investment Policy, JPMIM, in its discretion and
without obligation on its part to give prior notice to Skandia, shall, through
accounts with brokers or dealers that JPMIM may select buy, sell, exchange,
convert or otherwise trade in any stocks, bonds and other securities.
(h) JPMIM will provide Skandia with all reports as agreed to by the
parties. Skandia may from time to time amend such reporting requirements.
(i) JPMIM shall act in strict conformity with the Investment Advisers
Act of 1940, as the same may be amended from time to time and any other
applicable regulatory requirements applicable to JPMIM.
4. Assets
The Assets shall initially consist of those listed, if any, in Schedule A to
this Agreement plus all additions thereto, investments, reinvestments and
proceeds of the sale thereof, including, without limitations, all dividends,
interest and appreciation, if any, on investments less withdrawals from and
depreciation of, if any, the investments.
5. Valuation
In computing the market value of all securities in the separate accounts, each
security listed on any national securities exchange will be valued at the last
reported sale price on the valuation date based upon the reported consolidated
transactions on national securities exchanges. Listed stocks not traded on such
date and all unlisted stocks regularly traded in the over-the-counter market
will be valued at the mean of the latest available bid and asked price
quotations furnished to JPMIM by such source as may be deemed appropriate by
JPMIM. Any other securities will be valued in such manner as determined in good
faith by JPMIM to reflect their fair market value.
6. Standard of Care
(a) In rendering the services described herein, JPMIM shall use its
best efforts, exercise its best judgment, and act with the skill, prudence and
diligence and in a manner consistent with the standards of other highly
qualified investment managers acting in similar circumstances. JPMIM shall not
be liable for any error of judgment or for any loss suffered by Skandia in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect JPMIM against
any liability to Skandia to which JPMIM would otherwise be subject by reason of
willful misconduct or negligence on its part in the performance of its duties or
by reason of JPMIM's reckless disregard of its obligations and duties under this
Agreement.
(b) JPMIM will discharge its duties under this Agreement solely in the
interest of, and for the exclusive purpose of and benefit of, Skandia.
7. Custody of Assets
Skandia shall have sole discretion over the appointment of a custodian
of the Assets.
8. Confidential Relationship
All information and advice furnished by either party to this Agreement known to
be confidential or which the parties should have reason to know is confidential
shall be treated as such and shall not be disclosed to third parties except as
may be required by law during the term of this Agreement and subsequent to the
termination of this Agreement.
9. Trading for JPMIM's Own Account
JPMIM shall promptly notify Skandia of any purchases or sales by or on behalf of
JPMIM for its own accounts or accounts of affiliates, if such purchases or sales
are made, respectively, at about times when JPMIM is selling or purchasing such
securities for one or more of the separate accounts.
10. Allocation of Brokerage
In executing transactions for the separate accounts and selecting brokers or
dealers, JPMIM will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any transaction for
the separate accounts, JPMIM will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, JPMIM may consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended {the "Exchange Act"}) provided to the separate accounts and/or other
accounts over which JPMIM or an affiliate exercises investment discretion. JPMIM
must disclose to Skandia all such commissions or other compensation paid for
such transactions or services.
11. Compensation
In consideration of the services rendered pursuant to this Agreement, Skandia
will pay JPMIM in advance on a quarterly basis, a fee computed on the basis of
the market value of the total Assets as of the last day of the preceding quarter
in accordance with the fee schedule attached to this Agreement as Schedule B.
The fee schedule may be amended from time to time by JPMIM upon thirty (30) days
written notice to Skandia. In the event of termination of this Agreement, fees
will be prorated to the date of termination and any unearned portion of prepaid
fees will be refunded to Skandia. Notwithstanding the above, the first quarter's
fee shall be computed on the basis of the market value of the total Assets on
the date services are first rendered hereunder. If the services during the first
calendar quarter are less than a full quarter, the compensation shall be
prorated. For the purpose of determining fees payable to JPMIM, the value of any
separate account's total Assets shall be computed at the times and in the manner
specified in the Prospectus as from time to time in affect for the plan being
funded by Assets in such separate account.
12. Expenses
JPMIM will bear all expenses in connection with the performance of its services
under this Agreement, with no right of reimbursement from Skandia.
13. Representations and Warranties
(a) JPMIM represents and warrants to Skandia that it is a registered
investment adviser under the Investment Advisers Act of 1940.
(b) Skandia represents and warrants to JPMIM: (i) that is has the authority
to appoint JPMIM to manage the Assets as contemplated hereunder; and (ii) that
this Agreement is in compliance with all laws and regulations applicable to
Skandia.
14. ADV Form
Skandia acknowledges receipt of Part II of JPMIM's form ADV more than
forty-eight (48) hours prior to the date of the execution of this Agreement.
15. Termination
This Agreement may be terminated by either party without cause upon thirty (30)
days' written notice.
16. Non-Assignability
No assignment (as that term is defined in the Investment Advisers Act of 1940)
of this Agreement shall be made by JPMIM without the written consent of Skandia.
17. Notices
All notices, instructions, and advices with respect to any of the matters
contemplated by this Agreement may be deemed duly given when delivered to:
(a) American Skandia Life Assurance Corporation
Xxxxx Xxx, Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxxxx C.S. Dismorr
Executive Vice President
(b) X. X. Xxxxxx Investment Management Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxx
Vice President
I8. Entire Agreement: Amendment
This Agreement states the entire Agreement of the parties with respect to the
subject matter thereof and supersedes all other agreements or understandings
with respect to such subject matter, and may not be modified or amended except
by a writing signed by the parties to this Agreement.
19. Governing Law
This Agreement shall be governed by, and construed in accordance with the laws
of the State of New York.
20. Effective Date
This Agreement shall become effective on the day and year first above written.
IN WITNESS WHEREOF, Skandia and JPMIM have executed this Investment Management
Agreement on the day and year first above written.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: /s/______________________
Xxxxxxx C.S. Dismorr
Executive Vice President
X.X. XXXXXX INVESTMENT MANAGEMENT INC.
By: /s/ _______________________
Xxxx X. Xxxxxxxx
Vice President
SCHEDULE B
COMPENSATION
The fee to be paid by Skandia to JPMIM for the Investment management services
provided pursuant to the Agreement to which this Schedule is attached is as
follows:
.30 of 1% on the first $75 million of the total Assets
.25 of 1% on the next $75 million of the total Assets
.22 of 1% on the next $150 million of the total Assets
.15 of 1% on the balance
However, starting one year from the effective date of the Agreement to which
this Schedule is attached, there will be a minimum annual fee of $75,000.00.
These fees are calculated and charged at the end of each calendar quarter at
one-fourth of the applicable annual rate.
SCHEDULE A
Assets at inception of the agreement (All assets listed, other than
U.S. Treasury Notes, are bonds of the listed issuers).
CUSIP # Description
912827-TJ-1 U. S. Treasury Note
912827-XC-1 U. S. Treasury Note
912827-YG-1 U. S. Treasury Note
912827-YY-2 U. S. Treasury Note
373334-CD-1 Georgia Power Co.
452092-BE-8 Illinois Power Co.
000000-XX-0 Xxxx xx Xxxxxx Xxxx.
00000X-XX-0 Comdisco Inc.
201615-BT-7 Commercial Cr Group, Inc.
239753-AR-7 Xxxxxx Xxxxxx Corp.
320194-AE-3 First Fidelity Bancorp
345399-ZG-7 Ford Motor Credit Corp.
590188-CT-3 Xxxxxxx Xxxxx & Co. Inc.
783549-AX-6 Ryder System Notes
0000XX-XX-0 Xxxxxxxxxxxx Financial
960394-AK-0 Westinghouse
AMENDMENT TO THE INVESTMENT MANAGEMENT AGREEMENT
The Investment Management Agreement by and between X.X. Xxxxxx Investment
Management Inc. ("JPMIM") and American Skandia Life Assurance Corporation, dated
October 25, 1990 is hereby amended. The Agreement is amended by the addition of
the following:
Skandia specifically authorizes JPMIM:
(a) to purchase, sell, hold and generally deal in and with all
futures contracts (and options on such contracts), including,
without limitation, futures contracts with respect to
financial instruments and any group or index of securities (or
any interest therein based upon the value thereof), and in
connection therewith to deposit or cause to be deposited any
Assets as collateral with any agent, all on such terms and
conditions as JPMIM shall determine; and
(b) to grant, purchase, sell, exercise, permit to expire, permit
to be held in escrow, and otherwise to acquire, dispose of,
hold and generally deal in any manner with and in all forms
of options in any combination, all on such terms and
conditions as JPMIM shall determine.
Skandia agrees and understands that any such trading is subject to the
following conditions:
1. In accordance with the rules and regulations of the
Commodity Futures Trading Commission ("CFTC") and other regulations, JPMIM is
authorized to and may reveal Skandia's identity, address and estimated net worth
to any broker through which futures contracts or options are traded, and JPMIM
is authorized on Skandia's behalf to execute a Customer Application.
2. In accordance with CFTC regulations, Skandia will submit to
JPMIM a signed Risk Disclosure Statement and an Options on Futures Risk
Disclosure Statement for each broker through which futures contracts and/or
options are traded for Skandia's account. Skandia is well aware of the risks
involved in futures contracts and options trading.
3. JPMIM is authorized to select the brokerage firms through
which futures contracts and options are traded for Skandia's account and to sign
as our agent any account agreements or other documents required or deemed
appropriate by such brokers or by JPMIM. Skandia will instruct JPMIM as to
whether such accounts are to be opened on behalf of any of Skandia's separate
accounts. In connection with the opening of each account with each broker
through which futures contracts and/or options are traded for Skandia's account,
Skandia specifically authorizes JPMIM to execute on Skandia's behalf Customer,
Procedural and Safekeeping Agreements and Customer's Options Agreements. When
orders are placed with such brokers, JPMIM will issue suitable instructions (as
hereinafter defined) to Connecticut National Bank ("CNB") or other custodian
appointed by Skandia ("Custodian") regarding deliveries, receipts, acceptances
and payments.
4. Skandia understands that the CFTC requires that anyone
trading in futures contracts must advance collateral to meet initial and
maintenance margins. In addition, collateral may be required for trading in
options.
5. Skandia understands that the CFTC requires that anyone
trading in futures contracts meet a daily variation margin. Such variation
margin is satisfied in cash. JPMIM is hereby authorized to instruct CNB or any
other Custodian to deliver funds by Federal Funds Wire or other method JPMIM
chooses to an account designated by the broker to meet the daily variation
margin for Skandia's account.
Skandia will cause CNB or any other Custodian to accept JPMIM's instructions in
connection with transactions in futures contracts and options, and Skandia
agrees that CNB or any other Custodian shall be under no duty or obligation to
review or question any such instructions.
This Amendment shall become effective on December 31, 1990. Skandia and JPMIM
have executed this Amendment on December 31,1990.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: /s/ _____________________________
Xxxxxxx C.S. Dismorr
Executive Vice President
X.X. XXXXXX INVESTMENT MANAGEMENT INC.
By: /s/ _____________________________
Xxxx X. Xxxxxxxx
Vice President
