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SUB-ADVISORY AGREEMENT
Pacific Innovations Managed Bond Fund
AGREEMENT, made as of January 1, 1998 between Bank of America
National Trust and Savings Association, a national banking association
(hereinafter called the "Manager"), and Xxxxxxx Xxxxxx Investments, Inc., a New
York Corporation (hereinafter called the "Sub-Adviser").
WHEREAS, the Pacific Innovations Managed Bond Fund
(hereinafter called the "Fund"), is a series of Pacific Innovations Trust, a
Delaware business trust (the "Trust"), in an open-end, management investment
company organized as a business trust under the laws of the State of Delaware;
and
WHEREAS, pursuant to Management Agreement dated February 27,
1997 (hereinafter called the "Management Agreement") by and between the Trust
and the Manager, the Manager has agreed to furnish investment management
services to the Fund; and
WHEREAS, the Management Agreement specifically authorizes the
Manager and sub-contract investment advisory services on behalf of the Fund to
the Sub-Adviser pursuant to a sub-advisory agreement agreeable to the Trust and
approved in accordance with the provisions of the Declaration of Trust and
Bylaws of the Trust; and
WHEREAS, the Board of Trustees of the Trust has approved this
Agreement, and the Sub-Adviser is willing to furnish such services upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Manager hereby appoints the Sub-Adviser to act as sub-investment
adviser with respect to the investment portfolio of the Fund for the period and
on the terms set forth in this Agreement and the Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. SERVICES OF SUB-ADVISER.
Subject to the oversight and supervision of the Manager and the Trust's
Board of Trustees, the Sub-Adviser will provide a continuous investment program
for the Fund, including investment research and management with respect to all
securities, investments, cash and cash equivalents in the portfolio of the Fund.
The Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The Sub-Adviser
will provide the services rendered by it under this Agreement in accordance with
the investment criteria and policies established form time to time for the Fund
by the Manager, the investment objective, policies and restrictions as stated in
the Fund's current Prospectus with respect to the Fund, and resolutions of the
Trust's Board of Trustees. Without limiting the generality of the foregoing, the
Sub-Adviser further agrees that it will maintain all books and records regarding
the securities transactions with respect to the Fund, keep books of account with
respect to the Fund and supply the Trust and its Board of Trustees with reports,
statistical data and economic information as reasonably requested.
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3. OTHER COVENANTS.
The Sub-Adviser agrees that it:
(a) will conform with all applicable rules and regulations of
the U.S. Securities and Exchange Commission and will, in addition,
conduct its activities under this Agreement in accordance with other
applicable law;
(b) will use the same skill and care in providing services
under this Agreement as it uses in providing services to other
investment funds for which it has investment responsibilities;
(c) will place orders pursuant to its investment
determinations with respect to the Fund with brokers or dealers
reasonably acceptable to the Manager including its broker-dealer
affiliate Xxxxxxx Investor Services, Inc. or any successor to it. In
executing portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the Fund the
best overall terms available. In assessing the best overall terms
available to 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
any commission or spread, if any, both the for the specific transaction
and on a continuing basis. In evaluating the best overall terms
available, and in selecting the broker-dealer to execute a particular
transaction, the Sub-Adviser may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
U.S. Securities Exchange Act of 1934 (as amended), provided with
respect to the Fund or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser exercises investment discretion. The
Sub-Adviser is authorized, subject to the prior approval of the Manager
and the Fund's Board of Trustees, to pay a broker or dealer who
provides such brokerage and research services a commission or spread
for executing a portfolio transaction with respect to the Fund that is
in excess of the amount of commission or spread another broker or
dealer would have charged for effecting that transaction if, but only
if, the Sub-Adviser determines in good faith that such commission or
spread was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer -- viewed in terms
of that particular transaction or in terms of the overall
responsibilities of the Sub-Adviser to the Fund. In no instance will
portfolio securities be purchased from or sold to the Manager, the
Sub-Adviser, or Provident Distributors, Inc. (or any of its affiliates)
acting as principal or broker, except to the extent permitted by law.
In executing portfolio transactions with respect to the Fund, the
Sub-Adviser may, but is not obligated to the extent permitted by
applicable laws and regulations, aggregate the securities to be sold or
purchased with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Fund's currently
effective Prospectus. In such event the Sub-Adviser will allocate the
securities so purchased or sold, and the expenses incurred in the
transaction, in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and such other
clients.
(d) When the Sub-Adviser makes investment recommendations with
respect to the Fund, its investment advisory personnel will not inquire
or take into consideration whether the issuers of securities proposed
for purchase or sale for the account of the Fund are customers of its,
or any of its affiliates' other departments.
(e) Will treat confidentially and as proprietary information
of the Fund all records and other information relative to the Fund and
prior or present Fund interest holders ("Investors") or those persons
or entities who respond to inquiries concerning investment in the Fund
and will not use such records and information for any purpose other
than performance of its responsibilities and duties hereunder or under
any other agreement with the Trust except after prior notification to
an approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Sub-Adviser may
be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust. Nothing contained
herein, however, shall prohibit the Sub-Adviser from advertising to or
soliciting the public generally with respect
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to other products or services, including, but not limited to, any
advertising or marketing via radio, television, newspapers, magazines
or direct mail solicitation, regardless of whether such advertisement
or solicitation may coincidentally include prior or present Investors
or those persons or entities who have responded to inquiries regarding
the Fund, to the extent permitted by applicable law.
(f) Will not purchase any securities from or sell any
securities to or engage in any financial transactions with the Manager
or any of its affiliates on behalf of the Fund. Nothing in this
subsection shall in any way prohibit the Sub-Adviser or any of its
affiliates from purchasing securities from, selling securities to or
engaging in any other financial transactions with the Manager or any of
its affiliates on behalf of any other accounts managed by the
Sub-Adviser or for the Sub-Adviser's own account.
(g) Will provide the information set forth on Appendix A
attached hereto.
4. 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 services under this Agreement are not impaired thereby.
The Sub-Adviser will for all purposes herein be deemed to be an independent
contractor and will, unless otherwise expressly authorized, have no authority to
act for or represent the Fund or the Manager in any way or otherwise be deemed
their agent.
5. BOOKS AND RECORDS.
The Sub-Adviser hereby agrees that all records that it maintains with
respect to the Fund are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request,
copies of which may be retained by the Sub-Adviser. The Sub-Adviser further
agrees to maintain and to preserve the information required pursuant to and for
the periods prescribed by Rule 31a-1 and Rule 31a-2, respectively under the U.S.
Investment Company Act of 1940 (the "1940 Act").
6. EXPENSES.
During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions or spreads
and other transaction costs, if any) purchased or sold with respect to the Fund.
7. COMPENSATION.
For the services provided and the expenses assumed pursuant to this
Agreement, the Manager will pay the Sub-Adviser, and the Sub-Adviser will accept
as full compensation therefor, a fee, computed daily and payable monthly (in
arrears), at the following annual rates based upon the total net assets of the
Fund as follows:
FUND ASSETS RATE OF SUB-ADVISORY FEE
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0 - $25 million 0.20%
in excess of $25 million up to and including $50 0.15%
million
in excess of $50 million .10%
The Sub-Adviser acknowledges that it shall not be entitled to any
further compensation from the Manager in respect of the services provided and
expenses assumed by it under this Agreement. The Sub-Adviser's fees hereunder,
and the Sub-Adviser's sold recourse for payment of such fees shall be to the
Manager.
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8. REDUCTION OF FEES.
The Manager and Sub-Adviser hereby agree that the fees of the
Sub-Adviser pursuant to this Agreement shall be subject to reduction or waiver
in the event that the Manager reduces or waives all or a portion of the
Management fee otherwise due to the Manager pursuant to the Management Agreement
in order to permit the Fund to meet its initial target expense ratio of 0.75 of
1%. To the extent Fund meets its initial target expense ratio including partial
or full Management fees, the Sub-Adviser shall not be required to waive fees in
order for the Fund to maintain expenses below the target expense ratio. Such
reduction or waiver shall be effective with respect to the Sub-Advisory fee due
hereunder upon thirty (30) days' written notice (or facsimile) by the Manager to
the Sub- Adviser. All such reductions of the Management fee pursuant to notice
as provided herein shall be shared by and assessed against the Manager and the
Sub-Adviser equally rather than pro rata. Nothing in this section 8 shall be
interpreted to limit the ability of the Manager and the Sub-Adviser to
voluntarily and immediately waive or reduce any portion of their respective fees
nor shall any such voluntary and immediate fee reduction or waiver be construed
as a waiver by the Sub-Adviser of the notice provision in any further fee
reductions or waivers as provided for herein.
9. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
performance of this Agreement, except that the Sub-Adviser shall be liable shall
be liable to the Fund for any loss resulting from a breach of fiduciary duty by
the Sub-Adviser with respect to the receipt of compensation for services or any
loss resulting from willful misfeasance, bad faith or negligence on the part of
the Sub-Adviser in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement. The Sub-Adviser
acknowledges and agrees that the performance of this Agreement is for the
benefit of the Fund, that the Sub-Adviser is therefore directly liable and
responsible to the Fund for the performance of its obligations hereunder, and
that the Fund may enforce in its own name and for itself such liability and
responsibility.
10. DURATION AND TERMINATION.
This Agreement will become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue in effect until February
27, 1999. Thereafter, if not terminated, this Agreement shall automatically
continue in effect for successive annual periods ending on February 27, provided
such continuance is specifically approved at least annually by the vote of a
majority of the Trust's Board of Trustees at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by the Manager or by
the Trust (by vote of the Trust's Board of Trustees) on sixty days' written
notice to the Sub-Adviser, or by the Sub-Adviser, on sixty days' written notice
to the Trust, provided that in each such case, notice shall be given
simultaneously to the Manager. In addition, notwithstanding anything herein to
the contrary, in the event of the termination of the Management Agreement for
any reason (whether by the Trust, by the Manager or by operation of law) this
Agreement shall terminate upon the effective date of such termination of the
Management Agreement. This Agreement will immediately terminate in the event of
its assignment. (As used in this Agreement, the term "assignment" shall have the
same meaning as such term has in the 1940 Act.)
11. AMENDMENT TO THIS AGREEMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective until approved by vote
of a majority of the Trust's Trustees.
12. MISCELLANEOUS.
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The captions of this Agreement are included for convenience of
reference only and in no may define or delimit any of the provisions hereof or
otherwise affect their construction or effect. 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. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and shall be governed by the internal laws, and
not the law of conflicts, of the State of California, provided that nothing
herein will be construed in a manner inconsistent with the 1940 Act, the
Investment Manager's Act of 1940, as amended, any rule or regulation of the U.S.
Securities and Exchange Commission thereunder.
13. NAMES.
The names "Fund," "Trust" and the "Board of Trustees," refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration of
Trust, dated September 25, 1996, which is hereby referred to and a copy of which
is on file at the principal office of the Trust. The Trustees, officers,
employees and agents of the Trust shall not personally be bound by or liable
under any written obligation, contract, instrument, certificate or other
instrument or undertaking of the Trust made by the Trustees or by an officer,
employee or agent of the Trust, in his or her capacity as such, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
thereunder.
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.
BANK OF AMERICA NATIONAL TRUST AND SAVINGS XXXXXXX XXXXXX INVESTMENTS, INC.
ASSOCIATION
By: By:
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Title: Title:
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APPENDIX A
TO SUB-ADVISORY AGREEMENT
1. On at least a monthly basis, the Sub-Adviser will provide to the
Manager within 15 days of the end of the month the following:
- a current schedule of all portfolio securities held by the
Fund;
- a schedule of all securities sold by the Fund during the
previous month;
- a schedule of brokerage commissions or other dealer
concessions paid during the previous month and the broker or
dealer to whom such benefit flowed;
- a schedule and description of all repurchase transactions and
reverse repurchase transactions during the previous month and
the counterparties to such transactions;
- a description of the current strategies and tactics to be
employed by the Sub-Adviser on behalf of the Fund; and
- a copy of the Sub-Adviser's monthly review of the Fund's
performance against its benchmark.
2. On a periodic basis the Manager may request and the Sub-Adviser shall
deliver to the Manager within a period of time that is reasonable
depending upon the information requested the following:
- trade tickets evidencing securities trades on behalf of the
Fund;
- copies of credit files regarding the issuers of portfolio
securities held by the Fund;
- a description, including any identification numbers similar to
CUSIP, and dealer through which such security was purchased on
behalf of the Fund; and
- a description including any identification numbers similar to
CUSIP and dealer through which such security was
purchased/sold on behalf of the Fund.
