INVESTMENT MANAGEMENT AGREEMENT
This agreement, dated April 7, 1994, by and between FLEET INVESTMENT ADVISORS
INC., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("FIA") and
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, Tower ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Skandia"), sets forth the terms pursuant to which FIA will
provide investment management services with respect to certain assets to be
maintained by Skandia as described below.
1. Investment Description.
(a) Skandia desires to employ certain assets ("Assets") to fund the
liabilities it incurs under certain annuity plans it issues ("Liabilities").
These Assets may be maintained in one or more non-unitized separate accounts
established by Skandia under Title 38, Section 38-145a of the Connecticut
General Statutes. The Liabilities may be created under group or individual
contracts. The annuity plans may be offered and issued by Skandia pursuant to
one or more registration statements under the Securities Act of 1933.
(b) Skandia desires to invest and reinvest the Assets of each separate
account in accordance with:
(i) the Investment Policy (attached as Exhibit A) which Skandia has
provided to FIA as may be amended from time to time by Skandia and provided in
writing to FIA; and
(ii) any prospectus as may be in effect from time to time in relation to
sales of annuities to be funded by the Assets in such separate account. Skandia
will provide copies of such prospectus as may from time to time be amended.
(c) Skandia's goal is to achieve rates of return for the invested
Assets that will allow Skandia to recover its expenses over the time periods
assumed in the pricing of each annuity plan, obtain a profit and meet its
Liabilities, including supporting the "Rates" guaranteed under such plan or
plans. As to deferred annuities that are in their accumulation phase, "Rates"
means any interest rate guaranteed to be credited from time to time for the
account of contract owners or certificates holders. As to immediate annuities or
deferred annuities in their payout phase, "Rates" means both periodic payments
under such annuities as well as any guaranteed surrender values. Skandia
understands and agrees that FIA can give no assurance that Skandia's goal will
be achieved.
2. Appointment.
Skandia hereby appoints FIA to manage the Assets. Skandia wishes to
benefit from FIA's investment expertise, investment analysis, strategies and
recommendations. FIA accepts such appointment pursuant to the terms of this
Agreement. Skandia retains the right to appoint other investment managers with
respect to any of its assets other than designated Assets.
3. Duties of the Parties.
(a) FIA shall act in strict conformity with the Investment Policy
provided by Skandia, and will provide notice to Skandia in the event of any
occurrence which would prevent FIA from acting in strict conformity with such
Investment Policy. The timeliness of any such notice shall be in accordance with
the standard of care described in Paragraph 6 of this agreement.
(b) Skandia will determine Rates and reserve levels to be maintained by
Skandia in relation to the default risk of the Assets ("Reserves") for the
annuity plans. Skandia will consult frequently with FIA regarding the rates of
return obtainable from various possible portfolios of investment of the Assets,
the degree to which such possible portfolios of investments match the
corresponding Liabilities, and the levels of risk inherent in such possible
portfolios. It is also understood that Skandia will rely in large part on the
information and analysis provided by FIA regarding such possible portfolios in
determining the Rates and Reserves, and that provision of such information and
analysis is subject to the standard of care described in Paragraph 6.
(c) Skandia will inform FIA on at least a weekly basis of:
(i) changes in the Liabilities under any plan and any changes in the
amounts available for investment;
(ii)the durations of the Liabilities under each plan;
(iii) the rates of return assumed by Skandia in the establishment of any
Liabilities;
(iv)whether the immunized portfolio structure, as defined below, is to be
monitored separately for each plan or for any aggregation of plans; and
(v) any other information necessary from Skandia for FIA to meets its
duties and render the services to be provided pursuant to this Agreement.
(d) FIA will supervise the investment of the Assets and will conduct a
continuing program of evaluation of both the quality of the investments and the
degree to which an immunized portfolio structure(s) is maintained.
(e) It is understood that immunized portfolio structure means that:
(i) the durations of a portfolio of Assets should match the durations of
the corresponding Liabilities within the parameters determined by Skandia and
provided to FIA in writing;
(ii)the convexity of the portfolio of Assets generally will be equal to or
greater than the convexity of the portfolio of corresponding Liabilities;
(iii) the present value of the cash flows from such a portfolio should be
equal to or greater than the present values of the corresponding Liability cash
flows; and
(iv)FIA will attempt to minimize the immunization risk due to non-parallel
shifts in the yield curve.
(f) FIA shall make investment decisions regarding the Assets, including
but not limited to the determination of the specific issuers and issues of
securities to be held as Assets, as well as the timing of all attempts to
purchase or sell securities.
(g) Subject to the Investment Policy, FIA, in its discretion and
without obligation on its part to give prior notice to Skandia, shall, through
accounts with brokers or dealers that FIA ▇▇▇ select, buy, sell, exchange,
convert or otherwise trade in any stocks, bonds and other securities.
(h) FIA will provide Skandia with all reports as agreed to by the
parties. Skandia may from time to time amend such reporting requirements.
(i) FIA shall act in strict conformity with the Investment Advisers Act
of 1940, as the same may be amended from time to time, and any other applicable
regulatory requirements applicable to FIA.
4. Assets.
The Assets shall initially consist of those listed, if any, in Exhibit
B to this Agreement plus all additions thereto, investments, reinvestments and
proceeds of the sale thereof, including, without limitation, all dividends,
interest and appreciation, if any, on investments less any withdrawals from and
depreciations of the investments.
5. Valuation.
In computing the market value of all securities in the separate
accounts, each security listed on any national securities exchange will be
valued at the last reported sale price on the valuation date based upon the
reported consolidated transactions on national securities exchanges. Listed
stocks not traded on such date and all unlisted stocks regularly traded in the
over-the-counter market will be valued at the mean of the latest available bid
and asked price quotations furnished to FIA by such source as may be deemed
appropriate by FIA. Any other securities will be valued in such manner as
determined in good faith by FIA to reflect their fair market value.
6. Standard of Care.
(a) In rendering the services described herein, FIA shall use its best
efforts, exercise its best judgment, and act with the skill, prudence and
diligence and in a manner consistent with the standards of other highly
qualified investment managers acting in similar circumstances. FIA shall not be
liable for any error of judgment or for any loss suffered by Skandia in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect FIA against any
liability to Skandia to which FIA would otherwise be subject by reason of
willful misconduct or negligence on its part in the performance of its duties or
by reason of FIA' reckless disregard of its obligations and duties under this
Agreement.
(b) FIA will discharge its duties under this Agreement solely in the
interest of, and for the exclusive purpose of and benefit of, Skandia.
7. Custody of Assets.
Skandia shall have sole discretion over the appointment of a custodian
of the Assets.
8. Confidential Relationship.
All information and advice furnished by either party to this Agreement
known to be confidential or which the parties should have reason to know is
confidential shall be treated as such and shall not be disclosed to third
parties except as may be required by law during the term of this Agreement and
subsequent to the termination of the Agreement.
9. Allocation of Brokerage.
In executing transactions for the separate accounts and selecting
brokers or dealers, FIA will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any transaction for
the separate accounts, FIA will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, FIA may consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended
{the "Exchange Act"}) provided to the separate accounts and/or other accounts
over which FIA or an affiliate exercises investment discretion. FIA must
disclose, on an annual basis, to Skandia all such commissions or other
compensation paid for such transactions or services.
10. Compensation.
In consideration of the services rendered pursuant to this Agreement,
Skandia will pay FIA in advance on a quarterly basis, a fee computed on the
basis of the market value of the total Assets as of the last day of the
preceding quarter in accordance with the fee schedule attached to this Agreement
as Exhibit C. The fee schedule may be amended from time to time by FIA upon
thirty (30) days written notice to Skandia. In the event of termination of this
Agreement, fees will be prorated to the date of termination and any unearned
portion of prepaid fees will be refunded to Skandia. Notwithstanding the above,
the first quarter's fees shall be computed on the basis of the market value of
the total Assets on the date services are first rendered hereunder. If services
are provided during the first calendar quarter for a period shorter than a full
quarter, the compensation shall be prorated. For the purpose of determining fees
payable to FIA, the value of any separate account's total Assets shall be
computed at the times and in the manner specified in the Prospectus as from time
to time in effect for the plan being funded by Assets in such separate account.
11. Expenses.
FIA will bear all expenses in connection with the performance of its
services under this Agreement, with no right of reimbursement from Skandia.
12. Representations and Warranties.
(a) FIA represent and warrants to Skandia that it is a registered
investment adviser under the Investment Advisers Act of 1940.
(b) Skandia represents and warrants to FIA: (i) that it has the
authority to appoint FIA to manage the Assets as contemplated hereunder; and
(ii) that this Agreement is in compliance with all laws and regulations
applicable to Skandia.
13. Form ADV.
Skandia acknowledges receipt of Part II of FIA' form ADV more than
forty-eight (48) hours prior to the date of the execution of this Agreement.
14. Termination.
This Agreement may be terminated by either party without cause upon
thirty (30) days' written notice.
15. Non-Assignability.
No assignment (as that term is defined in the Investment Advisers Act
of 1940) of this Agreement shall be made by FIA without the written consent of
Skandia.
16. Notices.
All notices, instructions, and advices with respect to any of the
matters contemplated by this Agreement may be deemed duly given when delivered
to:
(a) American Skandia Life Assurance Corporation
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) Fleet Investment Advisors Inc.
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
17. Entire Agreement: Amendment.
This Agreement states the entire Agreement of the parties with respect
to the subject matter thereof and supersedes all other agreements or
understandings with respect to such subject matter, and may not be modified or
amended except by a writing signed by the parties to this Agreement.
18. Governing Law.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Connecticut.
19. Effective Date.
This Agreement shall become effective on the day and year first above
written.
IN WITNESS WHEREOF, Skandia and FIA have executed this Investment
Management Agreement on the day and year first above written.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: ______________________________________
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
Its Senior Vice President
FLEET INVESTMENT ADVISORS INC.
By: ______________________________________
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇.
EXHIBIT A
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INVESTMENT POLICY FOR THE MARKET VALUE
ADJUSTED ANNUITY SEPARATE ACCOUNT
A. Investment Objectives
The investment objectives of the separate account assets associated with the
Market Value Adjusted Annuity product managed by FIA (the "Funds") are within
the following guidelines, to:
1. provide a target total rate of return for the Funds of an amount above
the then current return on United States Securities, such target total rate to
be determined by periodic consultations between Skandia and ▇▇▇,
▇. provide a rate to the holders of certain annuity plans (the "Customers")
issued by Skandia, competitive with similar products;
3. enable Skandia to meet its primary commitment to the Customers (a fixed
sum at maturity); and
4. minimize defaults as defined in paragraph B.5. below.
B. Guidelines Applicable to Investment of Assets
The applicable guidelines for the investment of the Funds include the
following:
1. FIA will manage the Funds in accordance with the requirements of the
appropriate United States of America ("U.S."), and applicable state regulatory
authorities ("Regulations"). Skandia assumes responsibility to furnish FIA with
all other regulations and to furnish, in a timely manner, any amendments or
changes made to such other regulations. FIA may rely solely on the applicability
and accuracy of the regulations furnished by Skandia;
2. FIA shall manage the Funds so as to maintain, within a reasonable
tolerance, an immunized portfolio structure (asset/liability duration match) at
all times;
3. subject to subparagraphs 1 through 2, above, FIA may invest the Funds in cash
(U.S. Dollars), money market instruments (as defined in paragraph (a) below),
U.S. Government obligations (as defined in paragraph (b) below), municipal
obligations, short, intermediate and long-term corporate obligations, Eurodollar
corporate obligations, futures (including, but not limited to, Treasury futures,
and index futures), and options on futures, on fixed income securities and on
indices thereof. Futures and options will not be utilized for speculative
purposes.
a) Investments in money market instruments shall include banker's
acceptances, certificates of deposit and Eurodollar certificates of deposit of
banks rated B/C by ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and double-A by Standard & Poor's and
Moody's, and that have a minimum of one billion dollars in assets, commercial
paper and letter-of-credit commercial paper rated Al-P1 by Standard & Poor's and
Moody's, and short-term obligations of the U.S. Government and its agencies.
b) Investments in obligations of the U.S. Government, its agencies and
instrumentalities include obligations of the Government National Mortgage
Association, the Federal Home Loan Banks, the Federal National Mortgage
Association, and the Student Loan Marketing Association the Federal Home Loan
Mortgage Corporation, and the Resolution Trust Corporation, as well as any other
entity whose debt instruments are full faith and credit obligations of the U.S.
Government. Obligations of the U.S. Government also include receipts issued by
the U.S. Treasury that evidence ownership in either the future interest payments
or the future principal payments on underlying U.S. Treasury securities. FIA, in
its judgment, shall determine acceptable maturities for the U.S.
Government obligations it purchases for the Fund;
4. FIA shall only purchase fixed income securities that are in one of the top
four generic lettered rating classifications as established by either Standard &
Poor's or ▇▇▇▇▇'▇ Investors Service, Inc., except for the Federal agencies
listed in 3.b., above. In addition:
a) FIA may or may not sell a fixed income security that falls below one of
these top four generic lettered rating classifications subsequent to purchase,
and
b) investments in fixed income securities shall not exceed 25% of the
market value of the Assets of the Fund in any one industry and shall be
restricted to 10% of Assets of the Fund investments in any one issuer at the
time of purchase (percentages are calculated with respect to purchase cost);
5. FIA will sell from the Fund, and treat as a default, any fixed income
security that declines in market value by 25% or more (in relation to its
purchase cost), independent of general interest rate movements.
EXHIBIT B
INITIAL ASSETS
Units SMV(ml) Security Description Cusip Coupon
3385 3.385 Cash USD 3.390
483 0.492 Select Auto Loan 91-2 81617HAB 7.650
1000 1.039 Ryder System Inc. 783549AX 9.200
608 0.635 FNMA 8 1/2% 15s 8.500
1000 1.133 Comdisco Inc ▇▇▇ ▇▇▇▇▇▇▇▇ 9.990
1000 1.181 Chrysler Corp 171196AM 10.950
1000 1.160 Florida Nat'l Bank 341018AB 9.875
1000 1.146 ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ 9.750
1000 1.193 Security ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ 10.300
1545 1.446 FNMA 6 1/2% 30N 99TBC135 6.500
1500 1.439 GNMA 7 % 30N 7.000
495 0.711 US Treasury Bonds 912810DQ 12.000
1000 1.178 Ford Capital BV 345220AB 9.500
1000 0.873 ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 6.875
Maturity Qual Sect Type Price Yield Parallel
10MAY94 AAA CS L 100.000 3.390 0.09
15JUL96 AAA Auto E 101.375 5.836 0.73
15MAR98 BAA I O 103.500 5.388 0.90
01JUL03 AGCY FN15 O 103.750 6.386 1.05
30JUN97 BAA I N 109.545 6.671 2.69
01AUG17 BAA I Os 116.285 6.882 3.74
15MAY99 BAA B N 112.297 6.975 3.93
15JUN99 A B N 111.697 7.024 4.02
15MAY01 A B N 115.906 7.385 5.03
01MAR24 AGCY FN30 O 93.063 8.001 5.32
01SEP23 AGCY GN30 O 95.344 8.017 6.49
15MAY05 TREA TR N 139.125 6.902 6.70
01JUN10 A I N 114.608 7.884 8.49
15SEP33 AA TEL O 87.000 7.959 11.32
Twist Concave Convex
0.15 0.08 0.00
0.53 0.11 0.01
0.70 0.12 -0.07
0.86 0.93 -1.19
1.08 1.21 0.09
1.24 1.29 -0.92
1.00 2.55 0.20
1.00 2.64 0.21
0.86 3.94 0.33
0.83 3.38 0.42
0.73 3.53 0.47
0.68 5.93 0.63
0.58 7.19 1.07
0.60 5.55 1.36
Such Assets shall also consist of those assets allocated to such non-unitized
separate accounts in support of annuity contracts issued pursuant to Skandia's
Registration Statement No. 33-67614 (the "Galaxy Annuity") on Form S-1, or other
Skandia Registrations of the Galaxy Annuity. At such time as the Assets under
management of FIA reach or exceed $70 million, Skandia in the exercise of its
sole discretion, may from time to time remove the Initial Assets, or any part
thereof, from FIA's management under this Agreement.
EXHIBIT C
FEES
The fee to be paid by Skandia to FIA for the investment management services
provided in accordance with the Agreement to which this schedule is attached is
as follows:
.25% of 1% on the first $150 million of the total Assets
.22% of 1% on the next $150 million of the total Assets
.15% of 1% on the balance
These fees are calculated and charged at the end of each calendar quarter at
one-fourth of the applicable annual rate.
