USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT, made this 28th day of February, 2003 by and among USAllianz
Advisers, LLC (the "Manager"), USAllianz Variable Insurance Products Trust (the
"Trust"), PIMCO Advisors Retail Holdings LLC ("PIMCO") and NFJ Investment Group
L.P. (the "Portfolio Manager") (PIMCO and the Portfolio Manager are referred to
collectively in this Agreement as "Adviser").
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 series of the Trust (the
"Managed Funds");
WHEREAS, the Manager wishes to retain the Adviser to render portfolio
management services to the Trust with respect to the portfolio(s) set forth in
Exhibit A hereto (the "Fund(s)") and the Adviser is willing to furnish such
services;
WHEREAS, PIMCO and the Portfolio Manager are affiliated companies and both
PIMCO and the Portfolio Manager are registered as investment advisers 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 between the Manager, PIMCO and the Portfolio Manager as
follows:
1. APPOINTMENT. Pursuant to authority granted in the Investment Management
Agreement and with the approval of the Trustees, the Manager hereby appoints the
Adviser, jointly and severally, to act as subadviser for the Fund(s) for the
periods and on the terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the overall supervision of the
Trustees of the Trust and the Manager, the Adviser is hereby granted full
responsibility and discretion, with respect to such portion of the assets of the
Fund(s) as shall be allocated to it by the Manager for management pursuant to
this Agreement from time to time (the "Assets"), for (a) the management of the
Assets in accordance with the Fund's investment objectives, policies and
limitations as stated in its prospectus and Statement of Additional Information
included as part of the Trust's registration statement filed with the Securities
and Exchange Commission ("SEC"), as they may be amended from time to time
("Registration Statement"), copies of which shall be provided to the Adviser by
the Manager; and (b) the placement of orders to purchase and sell securities for
the Fund. At the request of the Trustees or the Manager, the Adviser shall
report to the Board of Trustees of the Trust or Manager regularly at such times
and in such detail as the Board or Manager may from time to time determine to be
appropriate. The Manager has herewith furnished the Adviser copies of the Fund's
current Prospectus, Statement of Additional Information, Declaration and Bylaws
and agrees during the continuance of this Agreement to furnish the Adviser
copies of any amendments or supplements thereto before or at the time the
amendments or supplements become effective. The Adviser will be entitled to rely
on all such documents furnished to it by the Manager or the Trust.
The Adviser 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 Assets, and to coordinate its
activities with the Manager and any other adviser of the applicable Fund, 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;
(c) place orders for the investment of the Assets directly with the issuer,
or with any broker or dealer, in accordance with applicable policies expressed
in the prospectus and/or Statement of Additional Information with respect to the
Fund and in accordance with applicable legal requirements. Specifically, in
executing portfolio transactions and selecting broker-dealers, the Adviser will
use its best efforts to seek best execution on behalf of each Fund. In assessing
the best execution available for any transaction, the Adviser shall consider all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker-dealer, 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 Adviser 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 a Fund and /or other accounts over which the Adviser or an
affiliate of the Adviser exercises investment discretion. The Adviser is
authorized to pay a broker-dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for a 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 Adviser 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
investment discretion is so exercised.
Provided the investment objectives of the Fund and applicable law are
adhered to, the Adviser 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 Adviser or with accounts of affiliates of the
Adviser, if in the Adviser's reasonable judgment such aggregation shall result
in an overall economic benefit to the Fund, 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, the Manager and any other portfolio manager
whatever statistical information the Trust , the Manager or such other portfolio
manager may reasonably request with respect to the Assets or contemplated
investments; keep the Manager and the Trustees and, as appropriate, other
portfolio managers informed of developments materially affecting the Fund's
portfolio; and, on the Adviser's own initiative, furnish to the Trust, the
Manager or other portfolio manager from time to time whatever information the
Adviser believes appropriate for this purpose;
(e) make available to the Trust's administrator (the "Administrator"), the
Trust or the Manager, promptly upon their request, such copies of its investment
records and ledgers with respect to the Fund as may be required to assist the
Administrator, the Trust or the Manager in their compliance with applicable laws
and regulations. The Adviser 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
Adviser or any of their affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the PIMCO or the Portfolio Manager from
serving as a subadviser pursuant to this Agreement; or (2) becomes aware that it
is the subject of an administrative proceeding or enforcement action by the SEC
or other regulatory authority. The Adviser further agrees to notify the Trust
and the Manager immediately of any material fact known to the Adviser respecting
or relating to the Adviser 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 that
becomes untrue in any material respect;
(g) in making investment decisions with respect to the Assets, use no material
non-public information 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.
Except as otherwise provided in this Agreement, the Adviser 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 services to the Fund and such services shall be provided by others
retained by the Fund. The Adviser shall have access to such reports and records
to assist it in performing its services hereunder.
The Adviser shall not be responsible for pursuing legal causes of action that
may be based on the purchase, sale or holding of a security by a Fund. The
Adviser shall, however, provide notice to the Manager of any such potential
claim and provide reasonable cooperation to the Manager in any possible
proceeding.
3. BANKING AND CUSTODY ACCOUNTS. The Adviser shall not be required to
provide or arrange for banking accounts for the Fund or to hold money or assets
on the Fund's behalf. The Adviser 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 Adviser, 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 Adviser 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 Adviser on the Fund's
behalf.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically
provided in this section 4, the Adviser shall pay the compensation and expenses
of all its directors, officers and employees who serve as Trustees, officers and
executive employees of the Trust (including the Trust's share of payroll taxes),
and the Adviser shall make available, without expense to the Fund, the services
of its directors, officers and employees who may be duly elected officers or
Trustees of the Trust, subject to their individual consent to serve and to any
limitations imposed by law.
The Adviser shall not be required to pay any expenses of the Trust or the
Fund other than those specifically allocated to the Adviser in this section 4.
In particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Trust's employees as are officers or employees of the Adviser whose
services may be involved, 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 Adviser's overhead and employee
costs); fees payable to or expenses of other advisers 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; fees and expenses of the Trust's Administrator or of any
custodian, subcustodian, transfer agent, registrar, or dividend disbursing agent
of the 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,
Statements of Additional Information, 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 Adviser; and travel expenses (or an appropriate
portion thereof) of officers or Trustees of the Trust who are officers,
directors or employees of PIMCO or 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 Funds.
5. COMPENSATION. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Manager, out of its fees from
the Fund pursuant to the Investment Management Agreement, will pay the Adviser
at the end of each calendar month an investment management fee computed daily at
an annual rate equal to the percentage of each Fund's average daily net assets
specified in Exhibit A hereto. The "average daily net assets" shall mean the
average of the values placed on the net 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, and 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 a Fund is
suspended for any particular business day, then for the purposes of this section
5, 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 Adviser's compensation is payable pursuant to
this section, then the Adviser'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 5. If the Adviser serves less than the whole of
any period specified, its compensation will be prorated. The Adviser may from
time to time and for such periods as deemed appropriate reduce its compensation
to the extent that the Fund's expenses exceed such lower expense as the Manager
may, by notice to the Trust, voluntarily declare to be effective.
6. BOOKS AND RECORDS. The Adviser 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 Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and 31a-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. The Adviser 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.
7. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Adviser shall exercise
its best judgment in rendering the services provided by it under this Agreement.
The Adviser 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 Adviser against any liability to the Trust, the Fund or to holders of the
Fund's shares to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Adviser's reckless disregard of
its obligations and duties under this Agreement. As used in this Section 7, the
term "Adviser" shall include any officers, directors, employees or other
affiliates of PIMCO or the Portfolio Manager performing services with respect to
the Trust or the Fund.
0.XXXXXXXX NOT EXCLUSIVE. It is understood that the services of the Adviser
are not exclusive, and that nothing in this Agreement shall prevent the Adviser
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 Fund 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 Adviser's
ability to meet its obligations to the Trust, the Manager and the Fund
hereunder.
The Manager and the Trust acknowledge that PIMCO and the Portfolio Manager and
their officers, affiliates, and employees, and PIMCO's 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 Adviser shall have no obligation to
acquire for the Fund a position in any investment which PIMCO and the Portfolio
Manager and their 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 Adviser, it is not feasible or desirable to acquire a position
in such investment for the Fund.
The Manager and the Trust acknowledge that PIMCO and the Portfolio Manager may
give advice and take action with respect to any of their other clients or for
their own account which may differ from the timing or nature of action taken by
the Adviser with respect to the Funds. The Manager and the Trust acknowledge
that the performance of a Fund may differ from the performance of other accounts
or investment companies managed by PIMCO or the Portfolio Manager and that the
Adviser is not expected to replicate the holdings or returns of any other
account or fund that PIMCO or the Portfolio Manager manages.
When PIMCO or the Portfolio Manager recommends the purchase or sale of a
security for other investment companies and other clients, and at the same time
the Adviser 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 PIMCO nor the Portfolio Manager nor any of its Trustees,
officers or employees shall act as a principal or agent or receive any
commission. If PIMCO or the Portfolio Manager provides any advice to its clients
concerning the shares of the Fund or other funds of the Trust, PIMCO or 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.
9. DURATION AND TERMINATION. This Agreement shall continue in effect 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: (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 Adviser; or (b) by the Adviser 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).
10. 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 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, if such approval is required by applicable law.
11. PROXIES AND RIGHTS. Unless the Trust or the Manager gives written
instructions to the contrary, the Adviser shall (a) vote all proxies solicited
by or with respect to the 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.
12. USE OF NAME. The names "PIMCO" and "NFJ" are the property of the
Adviser for copyright and other purposes. The Adviser agrees that the names
PIMCO and NFJ may be used in the name of each Fund. Such use of the names PIMCO
and NFJ may include use of the name in prospectuses, reports, and sales
materials. The Manager and the Trust agree that the names PIMCO and NFJ may be
used by the Adviser for other investment companies, entities or purposes. In the
event that the Adviser is no longer the portfolio manager for a particular Fund
previously managed by the Adviser, the Manager and the Trust shall with
reasonable promptness take all necessary actions to remove the names "PIMCO" and
"NFJ" from the name of the Fund.
13. 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. 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 Adviser as an
agent of the Trust or the Fund.
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 XXXXXXXXXXX X. XXXXXXXXX
President
PIMCO Advisors Retail Holdings LLC
By XXXXXXX XXXXXXX
Managing Director
NFJ Investment Group L.P.
By XXX X. XXXXXX
Managing Director
USAllianz Advisers, LLC
By XXXXXXX XXXXXX
Senior Vice President
SCHEDULE A
Fees payable to the Adviser pursuant to paragraph 5 hereof shall be at
the following annual rates for each Fund:
FUND PERCENTAGE OF AVERAGE NET ASSETS
USAZ PIMCO NFJ Small-Cap Value Fund 0.50% first $250 Million
0.45% next $250 Million
0.40% next $250 Million
0.35% over $750 Million
The management fee shall be accrued and paid to the Adviser as provided in
Section 5 of the Portfolio Management Agreement.
