Exhibit 99.23(D)(5)
INVESTMENT SUB-ADVISORY AGREEMENT
NATIONS MASTER INVESTMENT TRUST
THIS AGREEMENT is made as of August 1, 2000, by and between BANC OF
AMERICA ADVISORS, INC., a North Carolina corporation (the "Adviser"), GARTMORE
GLOBAL PARTNERS, a Delaware general partnership (the "Sub-Adviser"), and NATIONS
MASTER INVESTMENT TRUST, a Delaware business trust (the "Trust"), on behalf of
those series of the Trust now or hereafter identified on Schedule I (each a
"Master Portfolio" and collectively, the "Master Portfolios").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Adviser is registered with the Commission as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act");
WHEREAS, the Sub-Adviser is also registered with the Commission as an
investment adviser under the Advisers Act and is regulated by the Investment
Management Regulatory Organization Limited ("IMRO") of the United Kingdom in the
conduct of its investment business and is a member of IMRO;
WHEREAS, the Adviser and the Trust have entered into an investment
advisory agreement (the "Investment Advisory Agreement"), pursuant to which the
Adviser manages the investment operations of each Master Portfolio and may
delegate certain duties of the Adviser to one or more investment sub-adviser(s);
and
WHEREAS, the Adviser, with the approval of the Board of Trustees of the
Trust (the "Board"), including a majority of the Trustees who are not
"interested persons" (defined herein) of any party to this Agreement, desires to
delegate to the Sub-Adviser the duty to manage the portfolio investments of the
Master Portfolios;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment of Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser and the Sub-Adviser hereby agrees to manage the portfolio
investments of each Master Portfolio subject to the terms of this Agreement and
subject to the supervision of the Adviser and the Board.
2. Services of Sub-Adviser. The Sub-Adviser shall perform all services
necessary for the management of the portfolio investments of each Master
Portfolio, or for such portion of the assets of the Master Portfolios as the
Adviser may determine from time to time, including but not limited to:
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(a) Managing the investment and reinvestment of all
assets, now or hereafter acquired by each Master
Portfolio, including determining what securities and
other investments are to be purchased or sold for
each Master Portfolio and executing transactions
accordingly;
(b) Transmitting trades to each Master Portfolio's
custodian for settlement in accordance with each
Master Portfolio's procedures and as may be directed
by the Trust;
(c) Assisting in the preparation of all shareholder
communications, including shareholder reports, and
participating in shareholder relations, as reasonably
requested by the Adviser or the Trust;
(d) Making recommendations, or making determinations
under authority delegated by the Adviser or the
Trust, as to the manner in which voting rights,
rights to consent to Master Portfolio action and any
other rights pertaining to each Master Portfolio's
portfolio securities shall be exercised;
(e) Making recommendations to the Adviser and the Board
with respect to Master Portfolio investment policies
and procedures, and carrying out such investment
policies and procedures as are approved by the Board
or by the Adviser under authority delegated by the
Board to the Adviser;
(f) Supplying reports, evaluations, analyses, statistical
data and information to the Adviser, the Board or to
the Master Portfolios' officers and other service
providers as the Adviser or the Board may reasonably
request from time to time or as may be necessary or
appropriate for the operation of the Trust as an
open-end investment company or as necessary to comply
with Section 3(a) of this Agreement;
(g) Maintaining all books and records as are required to
comply with Section 3(a) of this Agreement with
respect to the investment decisions and securities
transactions for each Master Portfolio;
(h) Furnishing any and all other services, upon
reasonable request and subject to review by the
Board, that the Adviser from time to time determines
to be necessary or useful to perform its obligations
under the Investment Advisory Agreement or as the
Board may reasonably request from time to time.
3. Responsibilities of Sub-Adviser. In carrying out its obligations
under this Agreement, the Sub-Adviser agrees that it will:
(a) Comply with all applicable law, including but not
limited to the 1940 Act and the Advisers Act, the
rules and regulations of the Commission thereunder,
the conditions of any order affecting the Trust or a
Master Portfolio issued thereunder of which it
receives written notice from the Adviser or the
Trust, and the Conduct of Business Rules of IMRO
("IMRO Rules") to the extent that the IMRO Rules are
not inconsistent with any applicable requirements
under the 1940 Act, the Advisers Act, other United
States federal or state law, or the terms of this
Agreement;
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(b) Use the same skill and care in providing such
services as it uses in providing services to other
fiduciary accounts for which it has investment
responsibilities;
(c) Not make loans to any person for the purpose of
purchasing or carrying Master Portfolio shares;
(d) Place, or arrange for the placement of, all orders
pursuant to its investment determinations for the
Master Portfolios either directly with the issuer or
with any broker or dealer (including any affiliated
broker or dealer). In executing portfolio
transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on
behalf of each Master Portfolio the best overall
terms available. In assessing the best overall terms
available for any transaction, the Sub-Adviser shall
consider all factors that 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 or dealer, and
the reasonableness of the commission, if any, both
for the specific transaction and on a continuing
basis. In evaluating the best overall terms
available, and in selecting the broker or dealer to
execute a particular transaction, the Sub-Adviser may
also consider whether such broker or dealer furnishes
research and other information or services to the
Sub-Adviser; and
(e) Adhere to the investment objective, strategies and
policies and procedures of the Trust adopted on
behalf of each Master Portfolio.
4. Confidentiality of Information. Each party agrees that it will
treat confidentially all information provided by another party regarding such
other party's business and operations, including without limitation the
investment activities or holdings of a Master Portfolio. All confidential
information provided by a party hereto shall not be disclosed to any
unaffiliated third party without the prior consent of the providing party. The
foregoing shall not apply to any information that is public when provided or
thereafter becomes public or which is required to be disclosed by any regulatory
authority in the lawful and appropriate exercise of its jurisdiction over a
party, by any auditor of the parties hereto, by judicial or administrative
process or otherwise by applicable law or regulation.
5. Services Not Exclusive. The services furnished by the Sub-Adviser
hereunder are deemed not to be exclusive, and the Sub-Adviser shall be free to
furnish similar services to others so long as its provision of services under
this Agreement is not impaired thereby. To the extent that the purchase or sale
of securities or other investments of the same issuer may be deemed by the
Sub-Adviser to be suitable for two or more accounts managed by the Sub-Adviser,
the available securities or investments may be allocated in a manner believed by
the Sub-Adviser to be equitable to each account. It is recognized that in some
cases this procedure may adversely affect the price paid or received by a Master
Portfolio or the size of the position obtainable for or disposed of by a Master
Portfolio.
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6. Delivery of Documents. The Trust will provide the Sub-Adviser with
copies, properly certified or authenticated, of each of the following:
(a) the Trust's Certificate of Trust, as filed with the
Secretary of State of Delaware, and Declaration of
Trust (such Declaration of Trust, as presently in
effect and as from time to time amended, is herein
called the "Declaration of Trust");
(b) the Trust's Bylaws, if any;
(c) the most recent prospectus(es) and statement(s) of
additional information relating to each Master
Portfolio (such prospectus(es) together with the
related statement(s) of additional information, as
presently in effect and all amendments and
supplements thereto, are herein called the
"Prospectus"); and
(d) any and all applicable policies and procedures
approved by the Board.
The Trust will promptly furnish the Sub-Adviser with copies of any and
all amendments of or additions or supplements to the foregoing.
7. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records that it
maintains for each Master Portfolio under this Agreement are the property of the
Trust and further agrees to surrender promptly to the Trust or the Adviser any
of such records upon request. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act. However, nothing in this clause
shall be interpreted to provide the Adviser, the Trust, or the Master Portfolios
with any property right in any software owned or developed by the Sub-Adviser to
maintain such records. Upon surrendering such records, the Sub-Adviser may
retain copies of any such records necessary to meet regulatory or legal
requirements.
8. Expenses of the Master Portfolios. Except to the extent expressly
assumed by the Sub-Adviser and except to any extent required by law to be paid
or reimbursed by the Sub-Adviser, the Sub-Adviser shall have no duty to pay any
ordinary operating expenses incurred in the organization and operation of the
Master Portfolios. Ordinary operating expenses include, but are not limited to,
brokerage commissions and other transaction charges, taxes, legal, auditing,
printing, or governmental fees, other Master Portfolio service providers' fees
and expenses, expenses of issue, sale, redemption and repurchase of shares,
expenses of registering and qualifying shares for sale, expenses relating to
Board and shareholder meetings, and the cost of preparing and distributing
reports and notices to shareholders. The Sub-Adviser shall pay all other
expenses incurred by it in connection with its services under this Agreement.
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9. Compensation. Except as otherwise provided herein, for the services
provided to each Master Portfolio and the expenses assumed pursuant to this
Agreement, the Adviser will pay the Sub-Adviser and the Sub-Adviser will accept
as full compensation therefor a fee determined in accordance with Schedule I
attached hereto. It is understood that the Adviser shall be solely responsible
for compensating the Sub-Adviser for performing any of the duties delegated to
the Sub-Adviser and the Sub-Adviser agrees that it shall have no claim against
the Trust or any Master Portfolio with respect to compensation under this
Agreement.
10. Liability of Sub-Adviser. The Sub-Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Adviser
or the Trust in connection with the performance of its duties under this
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services, from willful misfeasance, bad faith
or negligence on the part of the Sub-Adviser or any of its officers, directors,
employees or agents, in connection with the performance of their duties under
this Agreement, from reckless disregard by it or its officers, directors,
employees or agents of any of their obligations and duties under this Agreement,
or from any violations of securities laws, rules, regulations, statutes and
codes, whether federal or state, by the Sub-Adviser or any of its officers,
directors, employees or agents.
11. Indemnification. The Sub-Adviser shall indemnify and hold harmless
the Master Portfolios and the Adviser from and against any and all direct or
indirect claims, losses, liabilities or damages (including reasonable attorney's
fees and other related expenses) resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services, from willful misfeasance,
bad faith or negligence on the part of the Sub-Adviser or any of its officers,
directors, employees or agents, in connection with the performance of their
duties under this Agreement, from reckless disregard by it or its officers,
directors, employees or agents of any of their obligations and duties under this
Agreement, or resulting from any violations of securities laws, rules,
regulations, statutes and codes, whether federal or state, by the Sub-Adviser or
any of its officers, directors, employees or agents; provided, however, that the
Sub-Adviser shall not be required to indemnify or otherwise hold the Master
Portfolios or the Adviser harmless under this Section 11 where the claim
against, or the loss, liability or damage experienced by the Master Portfolios
or the Adviser, is caused by or is otherwise directly related to the Master
Portfolios' or the Adviser's own willful misfeasance, bad faith or negligence,
or to the reckless disregard by the Master Portfolios or the Adviser of their
duties under this Agreement.
12. Term and Approval. This Agreement will become effective as of the
date set forth herein above, and shall continue in effect until the second
anniversary of its effective date. This Agreement will become effective with
respect to each additional Master Portfolio as of the date set forth on Schedule
I when each such Master Portfolio is added thereto. The Agreement shall continue
in effect for a Master Portfolio after the second anniversary of the effective
date for successive annual periods ending on each anniversary of such date,
provided that the continuation of the Agreement is specifically approved for the
Master Portfolio at least annually:
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(a)(i) by the Board or (ii) by the vote of "a majority of
the outstanding voting securities" of the Master
Portfolio (as defined in Section 2(a)(42) of the 0000
Xxx); and
(b) by the affirmative vote of a majority of the Trustees
of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 0000 Xxx) of
a party to this Agreement (other than as Trustees of
the Trust), by votes cast in person at a meeting
specifically called for such purpose.
13. Termination. This Agreement may be terminated without payment of
any penalty at any time by:
(a) the Trust with respect to a Master Portfolio, by vote
of the Board or by vote of a majority of a Master
Portfolio's outstanding voting securities, upon sixty
(60) days' written notice to the other parties to
this Agreement; or
(b) the Adviser or the Sub-Adviser with respect to a
Master Portfolio, upon sixty (60) days' written
notice to the other parties to this Agreement.
Any party entitled to notice may waive the notice provided for herein.
This Agreement shall automatically terminate in the event of its assignment,
unless an order is issued by the Commission conditionally or unconditionally
exempting such assignment from the provisions of Section 15(a) of the 1940 Act,
in which event this Agreement shall remain in full force and effect subject to
the terms of such order. For the purposes of this paragraph, the definitions
contained in Section 2(a) of the 1940 Act and the applicable rules under the
1940 Act shall apply.
14. Code of Ethics. The Sub-Adviser represents that it has adopted a
written code of ethics complying with the requirements of Rule 17j-1 under the
1940 Act and will provide the Adviser or the Trust with a copy of such code, any
amendments or supplements thereto and its policies and/or procedures implemented
to ensure compliance therewith.
15. Insurance. The Sub-Adviser shall maintain for the term of this
Agreement and provide evidence thereof to the Trust or the Adviser a blanket
bond and professional liability (error and omissions) insurance in an amount
reasonably acceptable to Adviser.
16. Representations and Warranties. Each party to this Agreement
represents and warrants that the execution, delivery and performance of its
obligations under this Agreement are within its powers, have been duly
authorized by all necessary actions and that this Agreement constitutes a legal,
valid and binding obligation enforceable against it in accordance with its
terms. The Sub-Adviser further represents and warrants that it is duly
registered as an investment adviser under the Advisers Act.
17. Amendment of this Agreement. No provision of this Agreement may be
changed, discharged or terminated except by an instrument in writing signed by
all parties.
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18. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to such address as may be
designated for the receipt of such notice. Until further notice, it is agreed
that the address of the Trust shall be c/o Stephens Inc., 000 Xxxxxx Xxxxxx,
Xxxxxx Xxxx, Xxxxxxxx 00000, Attention: Secretary, that of the Adviser shall be
Xxx Xxxx xx Xxxxxxx Xxxxx, 00xx Xxxxx, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxx
Xxxxxxxx 00000, Attention: President and that of the Sub-Adviser shall be
Xxxxxxxx Xxxxx, 0 Xxxxxxxxx Xxxxx, Xxxxxx XX0X 0XX, Xxxxxxx, Attention: Xxxxx
Xxxxxxx (Director), Xxxxxxx Xxxxxx (Chief Investment Officer), and Xxxxx Xxxxxxx
(Relationship Manager). The Sub-Adviser agrees to promptly notify the Adviser
and the Trust in writing of the occurrence of any event which could have a
material impact on the performance of its duties under this Agreement, including
but not limited to (i) the occurrence of any event which could disqualify the
Sub-Adviser from serving as an investment adviser pursuant to Section 9 of the
1940 Act; (ii) any material change in the Sub-Adviser's business activities;
(iii) any event that would constitute a change in control of the Sub-Adviser;
(iv) any change in the portfolio manager or portfolio management team of a
Master Portfolio; (v) the existence of any pending or threatened audit,
investigation, examination, complaint or other inquiry (other than routine
audits or regulatory examinations or inspections) relating to any Master
Portfolio; and (vi) any material violation of the Sub-Adviser's code of ethics.
19. Release. The names "Nations Master Investment Trust" and "Trustees
of Nations Master Investment Trust" refer respectively to the Trust created by
the Declaration of Trust and the Trustees as Trustees but not individually or
personally. All parties hereto acknowledge and agree that any and all
liabilities of the Trust arising, directly or indirectly, under this Agreement
will be satisfied solely out of the assets of the Trust and that no Trustee,
officer or shareholder shall be personally liable for any such liabilities. All
persons dealing with any Master Portfolio of the Trust must look solely to the
property belonging to such Master Portfolio for the enforcement of any claims
against the Trust.
20. Miscellaneous. This Agreement contains the entire understanding of
the parties hereto. Each provision of this Agreement is intended to be
severable. 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 thereby.
21. Governing Law. This Agreement shall be governed by, and construed
in accordance with, Delaware law and the federal securities laws, including the
1940 Act and the Advisers Act.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
23. Use of the Name "Nations Funds". The Sub-Adviser agrees that it
will not use the name "Nations Funds", any derivative thereof, or the name of
the Adviser, the Trust or any Master Portfolio except in accordance with such
policies and procedures as may be mutually agreed to in writing.
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24. IMRO Rules. Addendum A attached hereto sets forth certain
requirements under the IMRO Rules which are applicable to the Sub-Adviser, that
are expressly incorporated herein and made a part hereof, but only to the extent
that such requirements are not inconsistent with any applicable requirements
under the 1940 Act, the Advisers Act, other United States federal or state law,
or the policies and procedures of the Trust.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
NATIONS MASTER INVESTMENT TRUST
on behalf of the Master Portfolios
By: /s/ A. Xxx Xxxxxx
--------------------------------
A. Xxx Xxxxxx
President and Chairman of
the Board of Trustees
BANC OF AMERICA ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Xxxxxx X. Xxxxxx
President
GARTMORE GLOBAL PARTNERS
By: /s/ Xxxxx Xxxxxxx
--------------------------------
Xxxxx Xxxxxxx
Director
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SCHEDULE I
The Adviser shall pay the Sub-Adviser, as full compensation for
services provided and expenses assumed hereunder, a sub-advisory fee for each
Master Portfolio, computed daily and payable monthly at the annual rates listed
below as a percentage of the average daily net assets of the Master Portfolio
under the Sub-Adviser's management:
Rate of
Master Portfolio Compensation Effective Date
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Nations International Equity Master Portfolio 0.65% of the first $60,000,000 of the 8/1/00
Master Portfolio's average daily net
assets; plus, 0.55% of the next
$130,000,000 of the Master
Portfolio's average daily net assets;
plus 0.45% of the next $200,000,000
of the Master Portfolio's average
daily net assets; plus 0.40% of the
Master Portfolio's average daily net
assets in excess of $390,000,000.
Approved: April 26, 2000
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ADDENDUM A
1. To the extent that the Sub-Adviser receives any commissions or other
forms of remuneration, directly or indirectly, in connection with
Master Portfolio transactions, no portion of the Sub-Adviser's accrued
investment advisory fee shall be abated thereby.
2. Subject to the supervision of the Adviser and the policies and ultimate
control of the Company's Board of Trustees, the Sub-Adviser shall
advise the Trust and the Adviser on the management of the Master
Portfolios' investments in accordance with the terms of this Agreement
and in accordance with the investment parameters (including, inter
alia, percentage limitations, quality standards, investment selection
criteria and types of permissible investments and investment
techniques, such as borrowing, options and futures transactions,
portfolio securities lending, etc.) established pursuant to the
investment objectives, policies and restrictions specifically embodied
in the Trust's Registration Statement on Form N-1A, and any amendments
thereto, under the Securities Act of 1933 and the 1940 Act (the "Fund's
Registration Statement").
3. The Sub-Adviser shall not have or maintain custody of any securities,
cash or other assets of the Master Portfolios. Custody of the Funds'
assets will be maintained by the custodian bank pursuant to an
agreement approved by the Funds' Board of Trustees. It is expected that
such custodian, or any successor thereto, will not be an "Associate" of
the Sub-Adviser as that term is defined under IMRO Rules.
4. In the event the Master Portfolios or the Adviser has a significant
complaint regarding the services provided by the Sub-Adviser under the
Sub-Advisory Agreement by and among the Trust, the Adviser and the
Sub-Adviser, a Master Portfolio officer should communicate such
complaint to the Sub-Adviser, whereupon such complaint will be recorded
on a standard form prepared by the Sub-Adviser for such purposes. The
Sub-Adviser's complaints procedure requires that if a complaint has not
been cleared within twenty-one (21) days, the Sub-Adviser must so
advise IMRO and the Master Portfolio also must be advised that it has
the right to issue its complaint directly to the Investment Ombudsman.
A statement describing the Master Portfolios' right to compensation (if
any) in the event that the Sub-Adviser is unable to meet its
liabilities is available on request.
5. The Sub-Adviser will provide to the Funds' Board of Trustees written
financial reports and analyses on the Master Portfolios' securities
transactions and the operations of comparable investment companies on a
quarterly basis or more frequently as requested by the Board of
Trustees. Such reports and analyses shall include information as of the
last day of an applicable reporting period.
6. The Master Portfolios may from time to time request or instruct the
Sub-Adviser, directly or through the Adviser, to act or not to act
regarding certain Master Portfolio-related investment and/or
operational matters. Such request or instructions will be communicated
orally or in writing to the Sub-Adviser, directly or through the
Adviser and will be acknowledged in the same manner in which they are
communicated. To the extent that a particular request or instruction
is, or may be, refused (i.e., because it (a) is in contravention of (i)
a law or regulation, (ii) an investment policy of the Master Portfolio,
or (iii) a provision of this Agreement or (b) is not operationally
feasible), such refusal shall be communicated by the Sub-Adviser,
including through the Adviser, and the Master Portfolio and the
Sub-Adviser, upon advice of counsel, shall discuss alternatives and
determine an appropriate course of action which will be reported to the
full Board at the next meeting of the Master Portfolio's Board of
Trustees for its approval.
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7. Notwithstanding that all required disclosure concerning the risks
associated with the Master Portfolios permissible investments and
investment techniques is included in the Funds' Registration Statement,
which Statement is intended for review by the investors in the Funds
and to be retained by them for future reference, with respect to the
Master Portfolios' specified use of options and futures transactions,
the following shall be specifically noted herein:
"Options and futures markets can be highly volatile and
transactions of this type carry a high risk of loss. Moreover,
a relatively small adverse market movement with respect to
these types of transactions may result not only in loss of the
original investment but also in unquantifiable further loss
exceeding any margin deposited."
Further, in managing the Master Portfolios' assets, the Sub-Adviser
shall consider the risks associated with the Master Portfolio's
permissible investments and investment techniques.
8. The Sub-Adviser or its representatives may from time to time recommend
to the Master Portfolios or effect on behalf of the Master Portfolios
with respect to Master Portfolio transactions in securities the subject
of a recent new issue, the price of which transactions may have been
influenced by bids made or transactions effected for the purpose of
stabilizing the price of those securities. Such transactions would at
all times be effected in accordance with the provisions of IMRO Rule 14
and, in particular, with the conditions of the IMRO Rule 14.02,
including the requirement that the Sub-Adviser, with respect to any
specific transaction, communicate to the Master Portfolio orally or in
writing a statement in a form substantially similar to that which is
set forth in IMRO Rule 14.02(c). In addition, with respect to these
transactions, it is understood when executing this Agreement and
thereafter when approving the continuance of this Agreement in
accordance with its terms, that management of the Master Portfolio has
carefully read the following paragraphs in order to enable Master
Portfolio management to judge whether it wishes a Master Portfolio's
assets to be invested at all in such securities or, if so, whether it
wishes to authorize the Sub-Adviser generally to effect transactions in
such securities on behalf of the Master Portfolio without further
reference to Master Portfolio management or whether Master Portfolio
management wishes to be consulted before any particular transaction is
effected on behalf of the Master Portfolio.
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Stabilization is a process whereby the market price of a security is
pegged or fixed during the period in which a new issue of securities is
sold to the public. Stabilization may take place in the new issue or in
other securities related to the new issue in such a way that the price
of the other securities may affect the price of the new issue or vice
versa.
The reason stabilization is permitted is that when a new issue is
brought to market the sudden glut will sometimes force the price lower
for a period of time before buyers are found for the securities on
offer.
As long as it obeys a strict set of rules, the "stabilizing manager,"
normally the issuing house chiefly responsible for bringing a new issue
to market, is entitled to buy securities in the market that it has
previously sold to investors or allotted to institutions who were
included in the new issue but who have decided not to continue
participating. The effect of this may be to keep the price at a higher
level than would otherwise be the case during the period of
stabilizing.
The rules referred to above in the immediately preceding paragraph
limit the period in which the stabilizing manager may stabilize, fix
the price at which it may stabilize (in the case of shares and warrants
but not bonds), and require the stabilizing manager to disclose that it
may be (but not that it is) stabilizing. The fact that a new issue or a
related security is being stabilized does not in itself mean that
investors are not interested in the issue, but neither should the
existence of transactions in an issue where the stabilizing may take
place be relied upon as an indication that investors are interested in
the new issue or interested in purchasing at the price at which
transactions are taking place.
9. A report containing the Master Portfolios' financial statements
(including the contents and valuation of the Master Portfolios) shall
be submitted to shareholders and to the Securities and Exchange
Commission at least semi-annually. Such reports shall include
information as at the last day of any semi-annual period for which such
reports relate. To the extent that any performance information is
included in such report, it shall conform to the standards set forth in
the Master Portfolios' Registration Statement.
10. Except as permitted by or pursuant to Section 17 of the 1940 Act and
the Rules promulgated thereunder, the Sub-Adviser, or an "affiliate"
thereof (as that term is defined in the 1940 Act), may not effect
transactions: (i) with or for the Funds in which the Sub-Adviser or
such affiliate has directly or indirectly a material interest or a
relationship of any kind with another party which may involve a
conflict with the Sub-Adviser's responsibilities to the Master
Portfolios as a sub-investment adviser; or (ii) with or through the
agency or another person with whom the Sub-Adviser or such affiliate
maintains an arrangement as described in Rule 6.01 of Chapter IV of the
IMRO Rules.
11. Upon termination of the Sub-Advisory Agreement by and among the Trust,
the Adviser and the Sub-Adviser, unless otherwise directed by the
Fund's Board of Trustees, all securities positions and other portfolio
transactions then in progress shall be transferred to the successor
investment adviser selected by the Board of Trustees. Termination shall
be without prejudice to the completion of transactions already
initiated.
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12. The Sub-Adviser shall be entitled at its discretion to disclose any
information known to it relating to the Master Portfolio's business or
affairs to the Securities and Investment Board or to IMRO on the terms
that the information so disclosed shall not without its consent be
further disclosed otherwise than is permitted in respect of Restricted
Information under the provisions of Part VIII of the Financial Services
Act of 1986.
13. The Master Portfolios and the Adviser agree to waive their right to
receive a contract note for each transaction and agree to waive the
right to receive the information which would have been contained in the
contract notes in the periodic valuation.
14. The initial value and composition of the assets managed by the
Sub-Adviser under this Agreement shall be as agreed.
15. The Sub-Adviser may effect transactions under this Agreement with or
through the agency of a person who provides services under any Soft
Commission Agreement and such transactions will be effected in
accordance with the IMRO Rule of Best Execution disregarding any
benefit which might enure directly or indirectly to the Funds or the
Adviser from the services or benefit provided under any such
arrangement. It is the policy of the Sub-Adviser's group ("Gartmore")
to conduct part of its business through brokers on an agency basis,
rather than dealing direct as principal with market makers, because of
the benefits of the services which they provide.
Gartmore uses a number of full service brokers who provide research
which benefits the whole range of Gartmore's clients by contributing to
its investment decision making processes. These services are provided
on a no commitment basis.
Gartmore also uses agency brokers offering soft commission arrangements
to obtain more specialized services which also benefits the full range
of our clients by assisting in our investment decision making
processes. Some such specialized services are also obtained for the
benefit of one or more specific clients.
Services from agency brokers through soft commission arrangements are
obtained in exchange for a commitment from Gartmore to provide them
with an agreed amount of business. Currently, Gartmore has a policy of
committing no more than 25% of its total commission payments to soft
commission arrangements. When Gartmore decides through whom to effect a
securities transaction on our client's behalf and whether to transact
the business on a soft commission basis, Gartmore takes no account of
the benefits derived from the soft commission arrangement and will also
provide best execution.
Although some of the services obtained by soft commission arrangements
are also available for cash, Gartmore prefers to obtain them through
agency brokers because this practice results, we believe, in an
efficient use of commission payments and it also helps to minimize the
extent to which such costs need to be defrayed by other means, such as
clients' fees.
A-4
VAT is generally chargeable on the services received under a soft
commission arrangement but part of the VAT is recoverable from Customs
and Excise. In practice, the agency broker will pay the supplier of the
services provided under the soft commission arrangement for the cost of
those services. As the benefits provided by soft commission
arrangements must consist only of disclosable softing services and must
not include cash received following the recovery of VAT, Gartmore will
pay soft commission brokers a cash equivalent of the recoverable VAT.
The broker will pay the supplier the full cost of the services
(including VAT) and will charge our soft commission account with the
net amount. Gartmore will recover part of the VAT from Customs and
Excise.
This soft commission policy applies on a combined basis to the Gartmore
group as a whole.
Gartmore has entered into soft commission agreements with the
following:
Xxxxxxx Xxxxx Xxxxxx
Xxxxxx Xxxxxxx & Co Ltd
ABN Amro Equities (UK) Ltd
Credit Suisse First Boston
Deutsche Bank XX
Xxxxxxx Xxxxxx Read
Xxxxxxx X'Xxxxx & Co
Xxxxxxx Xxxxx International
Dresdner Kleinwort Xxxxxx Securities Ltd
Instinet UK Ltd
HSBC Investment Bank PLC
A-5
