Exhibit 5(a)
MONITREND MUTUAL FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 13th day of December, 1996, by and between MONITREND
MUTUAL FUND (the "Trust") , a Massachusetts business trust, and PACIFIC
INCOME ADVISERS, INC., a Delaware corporation, (the "Adviser") .
WHEREAS, a series of the Trust having separate assets and liabilities
exists entitled the "Adjustable Rate Series" or the "Adjustable Rate Fund"
(hereafter the "Adjustable Rate Fund"); and
WHEREAS, the Trust desires to retain the Adviser as investment adviser to
the Adjustable Rate Fund and enter into an investment advisory agreement
(i.e., this Agreement) relating to the Adjustable Rate Fund which shall
apply only to the Adjustable Rate Fund; and
WHEREAS, this Agreement has been, or will be, approved by the shareholders
of the Adjustable Rate Fund and by the Board of Trustees of the Trust,
including a majority of the Trustees who are not "interested persons," as
defined in the Investment Company Act of 1940 ("1940 Act");
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
managerial investment adviser to the Trust with respect to the investment
of the assets of the Adjustable Rate Fund and to supervise and arrange the
purchase and sale of securities held in the portfolio of the Adjustable
Rate Fund and the Adjustable Rate Fund's use of hedging instruments.
2. Duties and Obligations of the Adviser with respect to Investment
of Assets of the Adjustable Rate Fund
(a) Subject to the succeeding provisions of this section and subject
to the direction and control of the Board of Trustees of the Trust, the
Adviser shall:
(i) Decide what securities and hedging instruments shall
be purchased or sold by the Trust with respect to the Adjustable
Rate Fund and when; and
(ii) Arrange for the purchase and the sale of securities
and hedging instruments held in the portfolio of the Adjustable
Rate Fund by placing purchase and sale orders for the Trust with
respect to the Adjustable Rate Fund.
(b) Any investment purchases or sales made by the Adviser shall at
all times conform to, and be in accordance with, any requirements imposed
by: (1) the provisions of the 1940 Act and of any rules or regulations in
force thereunder; (2) the provisions of the Commodity Exchange Act and of
any rules or regulations in force thereunder; (3) any other applicable
provisions of law; (4) the provisions of the Declaration of Trust and By-
Laws of the Trust as amended from time to time; (5) any policies and
determinations of the Board of Trustees of the Trust; and (6) the
fundamental policies of the Trust relating to the Adjustable Rate Fund, as
reflected in the Trust's registration statement under the 1940 Act, or as
amended by the shareholders of the Adjustable Rate Fund.
(c) The Adviser shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the Adviser shall
not be liable for any loss sustained by reason of the purchase, sale or
retention of any security or hedging instrument, whether or not such
purchase, sale or retention shall have been based on its own investigation
and research or upon investigation and research made by any other
individual, firm or corporation, if such purchase, sale or retention shall
have been made and such other individual, firm or corporation shall have
been selected in good faith. Nothing herein contained shall, however, be
construed to protect the Adviser against any liability to the Trust or its
security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Adviser or any
affiliated person (as defined in the 0000 Xxx) of the Adviser from acting
as investment adviser or manager and/or principal underwriter for any
other person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying, selling or
trading any securities or hedging instruments for its or their own
accounts or the accounts of others for whom it or they may be acting,
provided, however, that the Adviser expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(e) It is agreed that the Adviser shall have no responsibility or
liability for the accuracy or completeness of the Trust's Registration
statement under the Act or the Securities Act of 1933 except for
information supplied by the Adviser for inclusion therein. The Trust
agrees to indemnify the Adviser to the full extent permitted by the
Trust's Declaration of Trust.
3. Broker-Dealer Relationships
The Adviser is responsible for decisions to buy and sell securities
for the Adjustable Rate Fund, broker-dealer selection and negotiation of
brokerage commission rates. The Adviser's primary consideration in
effecting a securities transaction will be execution at the most favorable
price. The Trust understands that a substantial amount of the portfolio
transactions of the Adjustable Rate Fund may be transacted with primary
market makers acting as principal on a net basis, with no brokerage being
paid by the Adjustable Rate Fund. Such principal transactions may,
however, result in a profit to market makers. In certain instances the
Adviser may make purchases of underwritten issues for the Adjustable Rate
Fund at prices which include underwriting fees. In selecting a broker-
dealer to execute each particular transaction, the Adviser will take the
following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the
size of and difficulty in executing the order; and the value of the
expected contribution of the broker-dealer to the investment performance
of the Adjustable Rate Fund on a continuing basis. Accordingly, the price
to the Adjustable Rate Fund in any transaction may be less favorable than
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees of the Trust may
determine, the Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Adjustable Rate Fund to pay a broker or
dealer that provides brokerage or research services to the Adviser an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Trust. The Adviser is further
authorized to allocate the orders placed by it on behalf of the Adjustable
Rate Fund to such brokers or dealers who also provide research or
statistical material, or other services, to the Trust, the Adviser, or any
affiliate of either. Such allocation shall be in such amounts and
proportions as the Adviser shall determine, and the Adviser shall report
on such allocations regularly to the Trust, indicating the broker-dealers
to whom such allocations have been made and the basis therefor. The
Adviser is also authorized to consider sales of shares as a factor in the
selection of brokers or dealers to execute portfolio transactions, subject
to the requirements of best execution, i.e., that such brokers or dealers
are able to execute the order promptly and at the best obtainable
securities price. In the Agreement, the term "broker" and "broker-dealer"
shall include futures commission merchants.
4. Allocation of Expenses
The Adviser agrees that it will furnish the Trust, at the Adviser's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Adviser will also pay all compensation of all Trustees, officers and
employees of the Trust who are affiliated persons of the Adviser. All
operating costs and expenses relating to the Adjustable Rate Fund not
expressly assumed by the Adviser under this Agreement shall be paid by the
Trust from the assets of the Adjustable Rate Fund, including, but not
limited to (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of the Trust's Trustees
other than those affiliated with the Trust's investment advisers; (v)
legal and audit expenses; (vi) fees and expenses of the Trust's
Administrator, custodian, shareholder servicing or transfer agent and
accounting services agent; (vii) expenses incident to the issuance of the
Adjustable Rate Fund's shares, including issuance on the payment of, or
reinvestment of, dividends; (viii) fees and expenses incident to the
registration under Federal or state securities laws of the Trust or the
shares of the Adjustable Rate Fund; (ix) expenses of preparing, printing
and mailing reports and notices and proxy material to shareholders of the
Trust; (x) all other expenses incidental to holding meetings of the
Trust's shareholders; (xi) dues or assessments of or contributions to the
Investment Company Institute or any successor; (xii) such non-recurring
expenses as may arise, including litigation affecting the Trust and the
legal obligations which the Trust may have to indemnify its officers and
Trustees with respect thereto; and (xiii) all expenses which the Trust or
a series of the Trust agrees to bear in any distribution agreement or in
any plan adopted by the Trust and/or a series of the Trust pursuant to
Rule 12b-1 under the Act.
5. Compensation of the Adviser
(a) The Trust agrees to pay the Adviser and the Adviser agrees to
accept as full compensation for all services rendered by the Adviser
hereunder, an annual management fee payable monthly and computed on the
value of the net assets of the Adjustable Rate Fund as of the close of
business each business day at the following annual rates:
Assets Fee Rate
All asset levels 0.20%
(b) In the event that the expenses of the Adjustable Rate Fund
(including the fees of the Adjustable Rate Fund's Adviser and the
Administrator and amortization of organization expenses but excluding
interest, taxes, brokerage commissions, extraordinary expenses and sales
charges and distribution fees) for any fiscal year exceed the limits set
by applicable regulations of state securities commissions or the limits
set forth in the Adjustable Rate Fund's current prospectus or statement of
additional information, the Adviser will reduce its fees by the amount of
such excess. Any such reductions are subject to readjustment during the
year. The payment of the advisory fee at the end of any month will be
reduced or postponed, or if necessary, a refund or payment will be made to
the Trust as to the Adjustable Rate Fund so that at no time will there be
any accrued but unpaid liability under this expense limitation.
6. Duration and Termination
(a) This Agreement shall go into effect when approved by the holders
of a "majority" (as defined in the 0000 Xxx) of the outstanding voting
securities of the Adjustable Rate Fund and shall, unless terminated as
hereinafter provided, continue in effect until December 31, 1997 and
thereafter from year to year, but only so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not parties to
this Agreement or "interested persons" (as defined in the 0000 Xxx) of any
such party cast in person at a meeting called for the purpose of voting on
such approval, or by the vote of the holders of a "majority" (as so
defined) of the outstanding voting securities of the Adjustable Rate Fund
and by such a vote of the Trustees.
(b) This Agreement may be terminated by the Adviser at any time
without penalty upon giving the Trust sixty (60) days' written notice
(which notice may be waived by the Trust) and may be terminated by the
Trust at any time without penalty upon giving the Adviser sixty (60) days'
written notice (which notice may be waived by the Adviser), provided that
such termination by the Trust shall be directed or approved by the vote of
a majority of all of its Trustees or approved by the vote of a majority of
all of its Trustees in office at the time or by the vote of the holders of
a majority (as defined in the 0000 Xxx) of the voting securities of the
Trust at the time outstanding and entitled to vote. This Agreement shall
automatically terminate in the event of its assignment (as so defined).
7. Agreement Binding Only on Fund Property
The Adviser understands that the obligations of this Agreement are
not binding upon any shareholder of the Trust personally, but bind only
the Trust's property; the Adviser represents that it has notice of the
provisions of the Trust's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Trust.
8. Code of Ethics
The Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and has provided the Trust with a
copy of the code of ethics and evidence of its adoption. Upon written
request of the Trust, the Adviser shall permit the Trust to examine any
reports required to be made by the Adviser pursuant to Rule 17j-1(1) under
the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons all as of the day and
year first above written.
MONITREND MUTUAL FUND
By_____________________________
PACIFIC INCOME ADVISERS, INC.
By_____________________________
