EXHIBIT 99.(d)(3)
INVESTMENT ADVISORY CONTRACT
PIMCO Variable Insurance Trust
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
____________________, 1998
PIMCO Advisors L.P.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
RE: Equity Income Portfolio
Small-Cap Value Portfolio
Capital Appreciation Portfolio
Mid-Cap Growth Portfolio
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
PIMCO Advisors L.P. (the "Adviser") as follows:
1. The Trust is an open-end investment company which currently has sixteen
separate investment portfolios, four of which are subject to this agreement:
the Equity Income Portfolio, Small-Cap Value Portfolio, Capital Appreciation
Portfolio, and Mid-Cap Growth Portfolio (the "Portfolios"). Additional
investment portfolios may be established in the future. This Contract shall
pertain to the Portfolios and to such additional investment portfolios as shall
be designated in Supplements to this Contract, as further agreed between the
Trust and the Adviser. The Trust engages in the business of investing and
reinvesting the assets of each Portfolio in the manner and in accordance with
the investment objective and restrictions applicable to that Portfolio as
specified in the currently effective Prospectuses (the "Prospectus") for the
Trust included in the registration statement, as amended from time to time (the
"Registration Statement"), filed by the Trust under the Investment Company Act
of 1940 (the "1940 Act") and the Securities Act of 1933 ("1933 Act"). Copies of
the documents referred to in the preceding sentence have been furnished to the
Adviser. Any amendments to those documents shall be furnished to the Adviser
promptly. Pursuant to a Distribution Contract, as amended (the "Distribution
Contract"), between the Trust and PIMCO Funds Distributors LLC (the
"Distributor"), the Trust has employed the Distributor to serve as principal
underwriter for the shares of beneficial interest of the Trust. Pursuant to an
Administration Agreement ("Administration Agreement") between the Trust and
Pacific Investment Management Company ("PIMCO"), the Trust has retained PIMCO to
provide the Trust with administrative and other services.
2. The Trust hereby appoints the Adviser to provide the investment
advisory services specified in this Contract and the Adviser hereby accepts such
appointment.
3. (a) The Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this contract and (ii) provide or procure all services,
equipment and facilities necessary to perform its obligations under this
Contract.
(b) The Trust shall be responsible for all of its expenses and
liabilities, including compensation of its Trustees who are not affiliated with
the Adviser, the Distributor or any of their affiliates; taxes and governmental
fees; interest charges; fees and expenses of the Trust's independent accountants
and legal counsel; trade association membership dues; fees and expenses of any
custodian (including maintenance of books and accounts and calculation of the
net asset value of shares of the Trust), transfer agent, registrar and dividend
disbursing agent of the Trust; expenses of issuing, selling, redeeming,
registering and qualifying for sale shares of beneficial interest in the Trust;
expenses of preparing and printing share certificates, prospectuses and reports
to shareholders or other appropriate recipients, notices, proxy statements and
reports to regulatory agencies; the cost of office supplies, including
stationery; travel expenses of all officers, Trustees and employees; insurance
premiums; brokerage and other expenses of executing portfolio transactions;
expenses of shareholders' or variable insurance contract holders' meetings;
organizational expenses; and extraordinary expenses. Notwithstanding the
foregoing, the Trust may enter into a separate agreement, which shall be
controlling over this contract, as amended, pursuant to which some or all of the
foregoing expenses of this Section 3(b) shall be the responsibility of the other
party or parties to that agreement.
4. (a) The Adviser shall provide to the Trust investment guidance and
policy direction in connection with the management of the Portfolios, including
oral and written research, analysis, advice, and statistical and economic data
and information.
Consistent with the investment objectives, policies and restrictions
applicable to the Trust and the Portfolios, the Adviser will determine the
securities and other assets to be purchased or sold by each Portfolio and will
determine what portion of each Portfolio shall be invested in securities or
other assets, and what portion, if any, should be held uninvested.
The Trust will have the benefit of the investment analysis and
research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to investment
advisory clients of the Adviser. It is understood that the Adviser will not use
any inside information pertinent to investment decisions undertaken in
connection with this Contract that may be in its possession or in the possession
of any of its affiliates, nor will the Adviser seek to obtain any such
information.
(b) The Adviser also shall provide to the officers of the Trust
administrative assistance in connection with the operation of the Trust and the
Portfolios, which shall include (i) compliance with all reasonable requests of
the Trust for information, including information required in connection with the
Trust's filings with the Securities and Exchange Commission and
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state securities commissions, and (ii) such other services as the Adviser shall
from time to time determine to be necessary or useful to the administration of
the Trust and the Portfolios.
(c) As manager of the assets of the Portfolios, the Adviser shall make
investments for the account of the Portfolios in accordance with the Adviser's
best judgment and within the investment objectives, policies, and restrictions
set forth in the Prospectus, the 1940 Act and the provisions of the Internal
Revenue Code relating to regulated investment companies that serve as underlying
investment media of variable insurance contracts, subject to policy decisions
adopted by the Trust's Board of Trustees.
(d) The Adviser shall furnish to the Trust's Board of Trustees
periodic reports on the investment performance of the Trust and the Portfolios
and on the performance of its obligations under this Contract and shall supply
such additional reports and information as the Trust's officers or Board of
Trustees shall reasonably request.
(e) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of a Portfolio as well as other of its
clients, the Adviser, to the extent permitted by applicable law, may aggregate
the securities to be so sold or purchased in order to obtain the best execution
of the order or lower brokerage commissions, if any. The Adviser may also on
occasion purchase or sell a particular security for one or more clients in
different amounts. On either occasion, and to the extent permitted by applicable
law and regulations, allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by the Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Trust and to such other customers.
(f) The Adviser may cause a Portfolio to pay a broker which provides
brokerage and research services to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker might have
charged. Such higher commissions may not be paid unless the Adviser determines
in good faith that the amount paid is reasonable in relation to the services
received in terms of the particular transaction or the Adviser's overall
responsibilities to the Trust and any other of the Adviser's clients.
5. (a) The Adviser shall immediately notify the Trust in the event (1)
that the Securities and Exchange Commission has censured the Adviser; placed
limitations upon its activities, functions or operations; suspended or revoked
its registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that any Portfolio has ceased to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, or
(3) upon having a reasonable basis for believing that any Portfolio has ceased
to comply with the diversification provisions of Section 817(h) of the Internal
Revenue Code or the Regulations thereunder. The Adviser further agrees to notify
the Trust immediately of any material fact known to the Adviser respecting or
relating to the Adviser that is not contained in the Registration Statement or
Prospectus for the Trust, or any amendment or supplement thereto, or of any
statement contained therein that becomes untrue.
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(b) The Adviser shall be responsible for making inquiries and for
reasonably ensuring that any employee of the Adviser, any person or firm that
the Adviser has employed or with which it has associated, or any employee has
not, to the best of the Adviser's knowledge, in any material connection with the
handling of Trust assets: (i) been convicted, in the last ten (10) years, of any
felony or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, or involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code; or (ii) been
found by any state regulatory authority, within the last ten (10) years, to have
violated or to have acknowledged violation of any provision of any state
insurance law involving fraud, deceit or knowing misrepresentation; or (iii)
been found by any federal or state regulatory authorities, within the last ten
(10) years, to have violated or to have acknowledged violation of any provisions
of federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
6. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this Contract. As an
inducement to the Adviser's undertaking to render these services, the Trust
agrees that the Adviser shall not be liable under this Contract for any mistake
in judgment or in any other event whatsoever, provided that nothing in this
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Contract shall be deemed to protect or purport to protect the Adviser against
any liability to the Trust or its shareholders to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's duties under this Contract or by
reason of the Adviser's reckless disregard of its obligations and duties
hereunder.
7. In consideration of the services to be rendered by the Adviser under
this Contract, each Portfolio shall pay the Adviser a monthly fee on the first
business day of each month, based upon the average daily value (as determined on
each business day at the time set forth in the Prospectus for determining net
asset value per share) of the net assets of the Portfolio during the preceding
month, at the following annual rates: Equity Income Portfolio: .60%; Small-Cap
Value Portfolio: .70%; Capital Appreciation Portfolio: .60%; and Mid-Cap Growth
Portfolio: .60%.
If the fees payable to the Adviser pursuant to this paragraph 6 begin
to accrue before the end of any month or if this Contract terminates before the
end of any month, the fees for the period from that date to the end of that
month or from the beginning of that month to the date of termination, as the
case may be, shall be prorated according to the proportion which the period
bears to the full month in which the effectiveness or termination occurs. For
purposes of calculating the monthly fees, the value of the net assets of each
Portfolio shall be computed in the manner specified in the Prospectus for the
computation of net asset value. For purposes of this Contract, a "business day"
is any day the New York Stock Exchange is open for trading or as otherwise
provided in the Trust's prospectus.
8. If the aggregate expenses of every character incurred by, or allocated
to, the Trust in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
any extraordinary expense (including, without limitation, litigation and
indemnification expense), but including the fees payable under this Contract
("includable expenses"), shall exceed any expense limitations applicable to the
Trust, the Adviser
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shall pay the Trust an amount equal to that excess. With respect to portions of
a fiscal year in which this Contract shall be in effect, the foregoing
limitations shall be prorated according to the proportion which that portion of
the fiscal year bears to the full fiscal year. At the end of each month of the
Trust's fiscal year, the Adviser will review the includable expenses accrued
during that fiscal year to the end of the period and shall estimate the
contemplated includable expenses for the balance of that fiscal year. If, as a
result of that review and estimation, it appears likely that the includable
expenses will exceed the limitations referred to in this paragraph 7 for a
fiscal year with respect to the Trust, the monthly fees relating to the Trust
payable to the Adviser under this Contract and under the Administration
Agreement for such month shall be reduced, subject to a later reimbursement to
reflect actual expenses, by an amount equal to a pro rata portion (prorated on
the basis of the remaining months of the fiscal year, including the month just
ended) of the amount by which the includable expenses for the fiscal year (less
an amount equal to the aggregate of actual reductions made pursuant to this
provision with respect to prior months of the fiscal year) are expected to
exceed the limitations provided in this paragraph 7. For purposes of the
foregoing, the value of the net assets of each Portfolio of the Trust shall be
computed in the manner specified in paragraph 6, and any payments required to be
made by the Adviser shall be made once a year promptly after the end of the
Trust's fiscal year.
9. The Trust and the Adviser acknowledge that the Trust will offer its
shares so that it may serve as an investment vehicle for variable annuity
contracts and variable life insurance policies issued by insurance companies, as
well as to qualified pension and retirement plans and other appropriate
investors. Shares of the Portfolios may be offered only to separate accounts and
general accounts of insurance companies that are approved in writing by the
Adviser. The Adviser shall be under no obligation to investigate insurance
companies to which the Trust offers or proposes to offer its shares.
10. (a) This Contract shall become effective with respect to the
Portfolios on _________________, 1998 (and, with respect to any amendment, or
with respect to any additional portfolio, the date of the amendment or
Supplement hereto) and shall continue in effect with respect to a Portfolio for
a period of more than two years from that date (or, with respect to any
additional portfolio, the date of the Supplement) only so long as the
continuance is specifically approved at least annually (i) by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Portfolio or by the Trust's Board of Trustees and (ii) by the vote, cast in
person at a meeting called for the purpose, of a majority of the Trust's
trustees who are not parties to this Contract or "interested persons" (as
defined in the 1940 Act) of any such party.
(b) This Contract may be terminated with respect to a Portfolio (or
any additional portfolio) at any time, without the payment of any penalty, by a
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Portfolio or by a vote of a majority of the Trust's entire Board of
Trustees on 60 days' written notice to the Adviser or by the Adviser on 60 days'
written notice to the Trust. This Contract (or any Supplement hereto) shall
terminate automatically in the event of its assignment (as defined in the 1940
Act).
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11. Except to the extent necessary to perform the Adviser's obligations
under this Contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
12. The investment management services of the Adviser to the Trust under
this contract are not to be deemed exclusive as to the Adviser and the Adviser
will be free to render similar services to others.
13. This Contract shall be construed in accordance with the laws of the
State of California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act.
14. The Declaration of Trust establishing the Trust, dated October 3, 1997
provides that the name "PIMCO Variable Insurance Trust" refers to the trustees
under the Declaration collectively as trustees and not as individuals or
personally, and that no shareholder, trustee, officer, employee or agent of the
Trust shall be subject to claims against or obligations of the Trust to any
extent whatsoever, but that the Trust estate only shall be liable.
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO VARIABLE INSURANCE TRUST
By:_____________________________________
Title: Trustee and President
ACCEPTED:
PIMCO ADVISORS L.P.
By:_______________________________
Title:
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