INVESTMENT SUB-ADVISORY AGREEMENT
NATIONS RESERVES
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
RESERVES, a Massachusetts business trust (the "Trust"), on behalf of those
series of the Trust now or hereafter identified on Schedule I (each a "Fund" and
collectively, the "Funds").
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 Fund 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
Funds;
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 Fund 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 Fund,
including but not limited to:
(a) Managing the investment and reinvestment of all assets,
now or hereafter acquired by each Fund, including
determining what securities and other
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investments are to be purchased or sold for each Fund
and executing transactions accordingly;
(b) Transmitting trades to each Fund's custodian for
settlement in accordance with each Fund'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
Fund action and any other rights pertaining to each
Fund's portfolio securities shall be exercised;
(e) Making recommendations to the Adviser and the Board with
respect to Fund 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
Funds' 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 Fund;
(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
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with any applicable requirements under the 1940 Act,
the Advisers Act, other United States federal or
state law, or the terms of this Agreement;
(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 Fund shares;
(d) Place, or arrange for the placement of, all orders
pursuant to its investment determinations for the Funds
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 Fund 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 Fund.
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 Fund. 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
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may adversely affect the price paid or received by a Fund or the size of the
position obtainable for or disposed of by a Fund.
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 Agreement and Declaration of Trust (such
Agreement and 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 Fund (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 Fund 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 Funds 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 Funds. 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 Funds.
Ordinary operating expenses include, but are not limited to, brokerage
commissions and other transaction charges, taxes, legal, auditing, printing, or
governmental fees, other Fund 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 Fund 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 Fund with respect to compensation under this Agreement. To the
extent that the advisory fee the Adviser receives pursuant to the Investment
Advisory Agreement with respect to a Fund is reduced or reimbursed, and there is
no corresponding increase in another fee received by the Adviser from the Fund,
the fee that the Sub-Adviser would otherwise receive pursuant to this Agreement
shall be reduced or reimbursed proportionately. The parties agree that an
increase in another fee that is attributable to an enhancement in non-advisory
services provided to a Fund shall not be deemed to correspond to a reduction or
reimbursement of fees received under the Investment Advisory 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 Funds 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 Funds or
the Adviser harmless under this Section 11 where the claim against, or the loss,
liability or damage experienced by the Funds or the Adviser, is caused by or is
otherwise directly related to the Funds' or the Adviser's own willful
misfeasance, bad faith or negligence, or to the reckless disregard by the Funds
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 Fund as of the date set
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forth on Schedule I when each such Fund is added thereto. The Agreement shall
continue in effect for a Fund 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 Fund at
least annually:
(a)(i) by the Board or (ii) by the vote of "a majority of
the outstanding voting securities" of the Fund (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 Fund, by vote of the
Board or by vote of a majority of a Fund'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
Fund, 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
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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.
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 Fund;
(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 Fund; and (vi) any material
violation of the Sub-Adviser's code of ethics.
19. Release. The names "Nations Reserves" and "Trustees of Nations
Reserves" 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 Fund of
the Trust must look solely to the property belonging to such Fund 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
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Master Portfolio except in accordance with such policies and procedures as may
be mutually agreed to in writing.
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 RESERVES
on behalf of the Funds
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
------------------------------
Name: Xxxxx Xxxxxxx
Title: 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
Fund, computed daily and payable monthly at the annual rates listed below as a
percentage of the average daily net assets of the Fund under the Sub-Adviser's
management:
Rate of
Fund Compensation Effective Date
---- ------------ --------------
Nations Emerging Markets Fund 0.66% 8/1/00
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 Fund
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 Trust's Board of Trustees, the Sub-Adviser shall advise
the Trust and the Adviser on the management of the Funds' 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 Funds. 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 Funds 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 Fund 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 Fund also must be advised that it has the right to issue its
complaint directly to the Investment Ombudsman. A statement describing
the Funds' 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 Funds' 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 Funds may from time to time request or instruct the Sub-Adviser,
directly or through the Adviser, to act or not to act regarding certain
Fund-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
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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 Fund, 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 Fund 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 Fund's Board of Trustees for its
approval.
7. Notwithstanding that all required disclosure concerning the risks
associated with the Funds' 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 Funds'
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 Funds' assets, the Sub-Adviser shall consider
the risks associated with the Fund's permissible investments and
investment techniques.
8. The Sub-Adviser or its representatives may from time to time recommend
to the Funds or effect on behalf of the Funds with respect to Fund
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 Fund 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 Fund has
carefully read the following paragraphs in order to enable Fund
management to judge whether it wishes a Fund'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 Fund without further reference to Fund management or
whether Fund management wishes to be consulted before any particular
transaction is effected on behalf of the Fund.
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
A-2
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 Funds' financial statements (including the
contents and valuation of the Funds) 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 Funds' 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 Funds 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
Company, 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 Fund'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 Funds 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
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