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 Investments LLC (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 Exhibit 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 Fund 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 (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, Statement of Additional Information, Declaration and Bylaws
(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 the
Manager or Trust delivers such amendments or supplements to 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 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 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
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 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 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, 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 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, 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 an 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;
(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.
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 and provide reasonable
cooperation to the Manager in any possible proceeding.
4. BANKING AND CUSTODY ACCOUNTS. The Portfolio Manager 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 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; 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 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.
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 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 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 negligence on its part in the performance of its duties or by reason of the
Portfolio Manager's reckless disregard of its obligations and duties under this
Agreement. 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 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 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 ▇▇▇▇ ▇▇▇) 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
▇▇▇▇ ▇▇▇) 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 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.
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 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 their Registration Statement, directing the Custodian to make any required
payment or settlement in connection therewith.
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
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.
[SIGNATURE PAGE FOLLOWS]
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/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President & Chairman
PRUDENTIAL INVESTMENTS LLC
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:Senior Managing Director
USALLIANZ ADVISERS, LLC
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice President
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.