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 Porfolio Management Agreement.
