Exhibit 23(d)(66)
Active Bond Fund
INTERIM
SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
XXXX XXXXXXX VARIABLE SERIES TRUST I
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
AND
XXXX XXXXXXX LIFE INSURANCE COMPANY
INTERIM SUB-INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of June 2, 2003 by and among Xxxx Xxxxxxx Variable Series
Trust I, a Massachusetts business trust (the "Trust"), Pacific Investment
Management Company LLC, a Delaware limited liability company ("Sub-Advisor"),
and Xxxx Xxxxxxx Life Insurance Company, a Massachusetts corporation ("JHLICO").
WHEREAS, the Trust is organized and is engaged in business as an open-end
management investment company and is so registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, XXXXXX and Sub-Advisor are each engaged in the business of
rendering investment advice under the Investment Advisers Act of 1940, as
amended; and
WHEREAS, the Trust is authorized to issue its shares in separate classes,
with each such class representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Trust offers shares in several classes, one of which is
designated as the Active Bond Fund (together with all other classes established
by the Trust, collectively referred to as the "Funds"), each of which pursues
its investment objectives through separate investment policies; and
WHEREAS, the Trust has retained JHLICO to render investment management
services to the Trust pursuant to an investment management agreement dated as of
April 12, 1988 (the "Investment Management Agreement"), pursuant to which it may
contract with one or more sub-managers with respect to the Active Bond Fund.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-INVESTMENT MANAGER
(a) Subject Fund. Sub-Advisor is hereby appointed and Sub-Advisor xxxxxx
accepts the appointment to act as an investment adviser and manager to the
Active Bond Fund (the "Subject Fund") effective June 2, 2003 for the period and
on the terms herein set forth, and for the compensation herein provided.
(b) Incumbency Certificates. Sub-Advisor shall furnish to JHLICO,
immediately upon execution of this Agreement, a certificate of a senior officer
of Sub-Advisor setting forth (by name and title, and including specimen
signatures) those officers of Sub-Advisor who are authorized to give
instructions for the Subject Fund pursuant to the provisions of this Agreement.
Sub-Advisor shall promptly provide supplemental certificates in connection with
each additional Subject Fund (if any) and further supplemental certificates, as
needed, to reflect all changes with respect to such authorized officers for any
Subject Fund. On behalf of the Trust, JHLICO shall instruct the custodian for
the Subject Fund to accept instructions with respect to the Subject Fund from
the officers of Sub-Advisor so named.
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(c) Independent Contractor. Sub-Advisor shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or be deemed an agent of
the Trust.
(d) Sub-Advisor's Representations. Sub-Advisor represents, warrants and
agrees (i) that it is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and that it will remain so registered and will
comply with the requirements of said Act, and the rules and regulations
thereunder, at all times while this Agreement remains in effect, (ii) that it
will promptly notify JHLICO if the foregoing representation and agreement shall
cease to be true in any material respect at any time during the term of this
Agreement, (iii) that it will promptly notify JHLICO of any material change in
the ownership of Sub-Advisor or of any change in personnel responsible for
managing the Subject Fund, (iv) that it has adopted a code of ethics complying
with the requirements of Section 17(j) and Rule 17j-1 under the 1940 Act and
will amend such code, or adopt a supplementary code of ethics, to the extent
required under Section 406 of the Xxxxxxxx-Xxxxx Act of 2002 and the rules
promulgated thereunder, and has and will provide true and complete copies of
each such code to the Trust and to JHLICO, and has and will adopt procedures
designed to prevent violations of any such codes, (v) that it has furnished the
Trust and JHLICO each with a copy of Sub-Advisor's Form ADV, Part II, as most
recently filed with the Securities and Exchange Commission ("SEC"), and will
promptly furnish copies of each future amendment thereto; (vi) that it has
furnished the Trust and JHLICO each with a copy of its Disclosure Document, as
amended, dated March 31, 2003, on file with the Commodity Futures Trading
Commission; and (vii) that it presently maintains, and shall continue to
maintain as long as this Agreement is in effect, sufficient Directors &
Officers, Errors & Omissions and fidelity bond insurance coverages to provide
coverage to JHLICO, the Trust and the Subject Fund for any claims or losses
arising from, or in connection with, the activities of Sub-Advisor and its
officers and employees with respect to the Subject Fund.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
Sub-Advisor will provide for the Subject Fund's assets as may be designated
to it by JHLICO from time to time (the "Subject Assets") a continuing and
suitable investment program consistent with the investment objectives, policies,
guidelines and restrictions of said Fund, as established by the Trust and
JHLICO. From time to time, JHLICO or the Trust may provide Sub-Advisor with
additional or amended investment policies, guidelines and restrictions.
Sub-Advisor, as sub-investment manager, will manage the investment and
reinvestment of the Subject Assets, and perform the functions set forth below,
(i) subject to the overall supervision, direction, control and review of JHLICO
and the Board of Trustees of the Trust, and (ii) consistent with the applicable
investment objectives, policies, guidelines and restrictions, the provisions of
the Trust's Declaration of Trust, By-laws, prospectus, statement of additional
information (each as in effect from time to time), the 1940 Act and all other
applicable laws and regulations. In the event that, in addition to Sub-Advisor,
other investment advisers or sub-managers are appointed by the Trust or JHLICO
to render investment advisory services to the Subject Fund, JHLICO and the Trust
each acknowledges and agrees that Sub-Advisor will not be held responsible for
such other investment advisers' or sub-managers' compliance with policies and
limitations applicable to the Subject Fund.
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By its signature below, Sub-Advisor acknowledges receipt of a copy of the
Trust's Declaration of Trust, By-laws, prospectus, and statement of additional
information, each as in effect on the date of this Agreement.
Sub-Advisor will, at its own expense:
(a) upon request, furnish the Trust with research, economic and statistical
data in connection with the investments and investment policies of the Subject
Assets;
(b) submit such reports and information as JHLICO or the Trust's Board of
Trustees may reasonably request in order to assist the custodian in its
determination of the market value of the Subject Assets;
(c) place orders for purchases, exchanges and sales of portfolio
investments for the Subject Assets and, in connection therewith, execute any and
all documents as attorney-in-fact for the Subject Fund as may reasonably be
necessary, desirable, or convenient and consistent with the investment
objectives, policies, guidelines and restrictions of said Fund;
(d) give instructions to the Subject Fund's custodian concerning the
delivery of securities and transfer of cash for the Subject Assets;
(e) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by the Trust, to the
extent not maintained by the custodian, transfer agent or JHLICO;
(f) at or prior to the close of business each day, provide the custodian
and JHLICO's Fund Operations unit with trade information for each transaction
effected for the Subject Assets, and promptly provide to the custodian
information on all brokerage or dealer confirmations;
(g) as soon as practicable following the end of each calendar month,
provide JHLICO with information on all transactions effected for the Subject
Assets during the month, a summary listing all investments held in such Fund as
of the last day of the month, and such other information as JHLICO may
reasonably request in connection with the accounting services that JHLICO
provides for the Subject Fund; and
(h) absent specific instructions to the contrary provided to it by JHLICO
and subject to its receipt of all necessary voting materials, vote all proxies
with respect to investments of the Subject Assets in accordance with
Sub-Advisor's proxy voting policy as most recently provided to JHLICO.
On its own initiative, Sub-Advisor will apprise JHLICO and the Trust of
important political and economic developments materially affecting the
marketplace or the Subject Assets, and will furnish JHLICO and the Trust's Board
of Trustees from time to time such information as is appropriate for this
purpose. An account manager of Sub-Advisor assigned to this relationship shall
be available to meet in Boston, Massachusetts or other reasonable locations as
often as
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quarterly to discuss the Subject Assets and Sub-Advisor's management thereof and
shall make the portfolio manager responsible for management of the Subject
Assets (or in his absence, a member of Sub-Advisor's portfolio management team
familiar with Subject Fund and the Subject Assets) available to meet on an
annual basis in Boston, Massachusetts. Sub-Advisor will also make qualified
personnel available in Boston or other reasonable locations upon reasonable
request to educate JHLICO sales personnel with respect thereto, and for such
other purposes as the Trust or JHLICO may request.
The Trust and JHLICO will provide timely information to Sub-Advisor
regarding such matters as purchases and redemptions of shares in the Subject
Fund and the cash requirements of, and cash available for investment in, the
Subject Assets. JHLICO will timely provide Sub-Advisor with monthly accounting
statements for the Subject Assets, and such other information (including,
without limitation, reports concerning the classification of Subject Fund
securities for purposes of Subchapter M of the Internal Revenue Code and
Treasury Regulations Section 1.817) as may be reasonably necessary for
Sub-Advisor to perform its responsibilities hereunder.
3. ALLOCATION OF EXPENSES.
Each party to this Agreement shall bear the costs and expenses of
performing its obligations hereunder. In this regard, the Trust specifically
agrees to assume the expense of:
(a) brokerage commissions for transactions in the portfolio investments of
the Trust and similar fees and charges for the acquisition, disposition, lending
or borrowing of such portfolio investments;
(b) custodian fees and expenses;
(c) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Trust to federal, state or other governmental agencies; and
(d) interest payable on the Trust's borrowings.
Nothing in this Agreement shall alter the allocation of expenses and costs
agreed upon between the Trust and JHLICO in the Investment Management Agreement
or any other agreement to which they are parties.
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4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject as herein
provided, JHLICO shall pay to Sub-Advisor a fee (for the payment of which the
Trust shall have no obligation or liability), based on the Current Net Assets of
the Subject Assets, as set forth in Schedule I attached hereto and made a part
hereof. Such fee shall be accrued daily and payable monthly, as soon as
practicable after the last day of each calendar month. In the case of
termination of this Agreement, the fee with respect to the Subject Assets
accrued to but excluding the date of termination shall be paid promptly
following such termination. For purposes of computing the amount of advisory fee
accrued for any day, "Current Net Assets" shall mean the net assets of the
Subject Assets as of the most recent preceding day for which the Subject Fund's
net assets were computed.
From the effective date of said Schedule I, the fees paid by JHLICO shall not
exceed the lowest rate of fees paid by any other investment advisory client of
Sub-Advisor, except where such other client has materially dissimilar investment
style, servicing requirements or investment discretion or has a significantly
higher value of assets being managed by Sub-Advisor or such assets are derived
from a special market for which Sub-Advisor charges lower fees generally or such
assets are managed entirely pursuant to a performance fee schedule.
5. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the Subject Assets,
Sub-Advisor will place purchase and sell orders for the Subject Fund with or
through such banks, brokers, dealers or other firms dealing in securities
("Brokers") as it determines, which may include Brokers that are affiliated
persons of Sub-Advisor, provided such orders are exempt from the provisions of
Section 17(a), (d) and (e) of the 1940 Act. Sub-Advisor is authorized to select
the Brokers that will execute purchase and sale transactions for the Subject
Fund and to use its best efforts to obtain the best available price and most
favorable execution in relation to the services received on behalf of the
Subject Fund with respect to all such purchases and sales of portfolio
securities for said Subject Assets. The Sub-Advisor shall maintain records
adequate to demonstrate compliance with this requirement. Subject to this
primary requirement, and maintaining as its first consideration the benefits to
the Subject Fund and its shareholders, Sub-Advisor shall have the right subject
to the control of the Board of Trustees, and to the extent authorized by the
Securities Exchange Act of 1934, to follow a policy of selecting Brokers who
furnish brokerage and research services to the Subject Fund or to Sub-Advisor,
and who charge a higher commission rate to the Subject Fund than may result when
allocating brokerage solely on the basis of seeking the prices which are
advantageous to the Subject Fund; provided, however, that any such higher
commission rate shall be reasonable and no less advantageous to the Subject
Fund. Sub-Advisor shall determine in good faith that such higher cost was
reasonable in relation to the value of the brokerage and research services
provided to the Subject Fund and JHLICO. In selecting Brokers, Sub-Advisor may
also consider the reliability, integrity and financial condition of the Broker,
and the size of and difficulty in executing the order.
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Sub-Advisor will not receive any tender offer solicitation fees or similar
payments in connection with the tender of investments of any Fund.
6. OWNERSHIP OF INFORMATION, RECORDS, AND CONFIDENTIALITY.
The Trust shall own and control all records maintained hereunder by
Sub-Advisor on the Trust's behalf and, in the event of termination of this
Agreement for any reason, all records relating to the Subject Assets shall be
promptly returned to the Trust, free from any claim or retention of rights by
Sub-Advisor, provided that (subject to the last paragraph of this Section 6)
Sub-Advisor may retain copies of such records. Sub-Advisor also agrees, upon
request of the Trust, promptly to surrender such books and records or, at its
expense, copies thereof, to the Trust or to make such books and records
available for audit or inspection at Sub-Advisor's business offices at any time
during normal business hours upon reasonable prior notice: (a) by
representatives of regulatory authorities, or other persons reasonably
designated by the Trust. Sub-Advisor further agrees to maintain, prepare and
preserve such books and records in accordance with the 1940 Act and rules
thereunder, including but not limited to Section 31 and Rules 31a-1 and 31a-2,
to the extent such records are not maintained by the custodian, transfer agent
or JHLICO, and to supply all information requested by any securities and
insurance regulatory authorities to determine whether all securities laws and
regulations are being complied with. Sub-Advisor shall supply the Board of
Trustees and officers of the Trust and JHLICO with all statistical information
regarding investments and reinvestments of the Subject Assets which is
reasonably required by them and reasonably available to Sub-Advisor.
Sub-Advisor shall not disclose or use any records or information obtained
pursuant hereto in any manner whatsoever except as expressly authorized herein,
and will keep confidential any information obtained pursuant hereto, and
disclose such information only if the Trust has authorized such disclosure, or
if such disclosure is expressly required by applicable federal or state
regulatory authorities.
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect Sub-Advisor or JHLICO
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations and duties under this Agreement or the Investment Management
Agreement; or any failure to comply with section 1(e)(i), (ii), (iii), (iv) or
(vi) of this Agreement. Nor shall any provision hereof be deemed to protect any
trustee or officer of the Trust against any such liability to which he or she
might otherwise be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of his or her duties or the reckless
disregard of his or her obligations and duties. Sub-Advisor shall employ only
qualified personnel to manage the Subject Assets; shall comply with all
applicable laws and regulations in the discharge of its duties under this
Agreement; shall (as provided in Section 2 above) comply with the investment
objectives, policies, guidelines and restrictions of the Subject Fund and with
the provisions of the Trust's Declaration of Trust, By-laws, prospectus and
statement of additional information or any supplements thereto; shall manage the
Subject Fund as a regulated investment company in accordance with subchapter M
of the Internal Revenue Code of 1986, as amended
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(the "Code"), and Treasury Regulations Section 1.817-5(b); shall act at all
times in the best interests of the Trust; and shall discharge its duties with
the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters
would use in the conduct of a similar enterprise. However, Sub-Advisor shall not
be deemed by virtue of this Agreement to have made any representation or
warranty that any level of investment performance or level of investment results
will be achieved.
8. IN-KIND SECURITIES
The Trust may desire to include within the Subject Assets certain "in-kind"
securities (the "In-Kind Securities"). In such event, a list of the In-Kind
Securities to be transferred to the Subject Assets shall be provided by the
custodian to Sub-Advisor.
The Trust acknowledges and agrees that some or all of the In-Kind Securities may
have value for the Subject Fund and it may be in the Trust's best interest to
retain them, but in order to comply with the investment objectives or strategies
of the Subject Assets, some or all of such assets may be liquidated at such
times and in such manner as is deemed appropriate by Sub-Advisor and the
proceeds be invested in compliance with the investment objectives of the Subject
Fund.
The Trust acknowledges and agrees that Sub-Advisor Manager will use its
reasonable efforts to obtain the best execution. However, there can be no
assurances that Sub-Advisor will or can obtain the best execution. Sub-Advisor
will not be liable to the Trust for the prices obtained in connection with any
sale of the In-Kind Securities and the Trust acknowledges that such prices may
in fact be much lower than the prices at which such In-Kind Securities are
presently carried in the Trust's account. Sub-Advisor shall maintain a log of
all transactions placed through all securities brokerage firms including the
name of the firm, a description of each transaction, the date of each
transaction and the amount or commissions paid.
Sub-Advisor shall invest the proceeds from the sale of the assets, together with
any assets remaining unsold, in accordance with the investment guidelines of the
Subject Fund. In the event any assets contributed in-kind into the Subject
Assets are not compliant with the investment guidelines for the Subject Fund,
the Trust acknowledges and agrees that Sub-Advisor can continue to hold such
assets in the Subject Assets without regard to the Trust's investment guidelines
for the Subject Fund.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective on June 2, 2003
and,unless terminated as herein provided, this Agreement shall remain in full
force and effect until the earlier of (i) 150 days from the date hereof; (ii)
the date a superseding agreement which has been approved by a vote of a majority
of the outstanding voting shares of the Subject fund becomes effective; or (iii)
such other time as may be mutually agreed to by the parties hereto.
The terms "assignment," "vote of a majority of the outstanding shares" and
"interested person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and rules thereunder.
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(b) Termination. This Agreement may be terminated at any time, without
payment of any penalty, by the Trust pursuant to a vote of the Trustees of the
Trust or a vote of a majority of the outstanding shares of the Subject Fund,
which termination shall be effective immediately upon delivery of written notice
thereof to Sub-Advisor and JHLICO. This Agreement may be terminated by
Sub-Advisor on at least ninety days' prior written notice to the Trust and
JHLICO, and may be terminated by JHLICO on at least ninety days' prior written
notice to the Trust and Sub-Advisor.
(c) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment or if the Investment
Management Agreement is terminated.
10. SERVICES NOT EXCLUSIVE; USE OF SUB-ADVISOR'S NAME AND LOGO.
The services of Sub-Advisor to the Trust are not to be deemed exclusive and
it shall be free to render similar services to others so long as its services
hereunder are not impaired thereby. It is specifically understood that partners,
officers and employees of Sub-Advisor and of its subsidiaries and affiliates may
continue to engage in providing portfolio management services and advice to
other investment companies, whether or not registered, and other investment
advisory clients.
During the term of this Agreement, subject to Sub-Advisor's consent (which
consent shall not be unreasonably withheld and which may be presumed unless an
objection is made to a proposed use as hereinafter provided), JHLICO and the
Trust shall have the non-exclusive and non-transferable right to use
Sub-Advisor's name and logo in all materials relating to the Subject Fund,
including all prospectuses, proxy statements, reports to shareholders, sales
literature and other written materials prepared for distribution to shareholders
of the Trust or the public. However, prior to printing or distributing of any
materials which refer to Sub-Advisor, JHLICO shall consult with Sub-Advisor and
shall furnish to Sub-Advisor a copy of such materials. Sub-Advisor agrees to
cooperate with XXXXXX and to review such materials promptly. JHLICO shall not
print or distribute such materials if Sub-Advisor reasonably objects in writing,
within five (5) business days of its receipt of such copy (or such other time as
may be mutually agreed), to the manner in which its name and logo are to be
used.
Sub-Advisers will not consult with any other sub-manager to the Subject
Fund or to any other Fund of the Trust concerning transactions of the Subject
Assets in securities or other assets, except as such consultations may be
reasonably necessary in order to ensure compliance with paragraphs (a) and (b)
of Rule 12d3-1 under the 1940 Act.
11. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of the
Subject Assets, Sub-Advisor and its partners, officers and employees will not
act as principal or agent or receive any commission. Nothing in this Agreement,
however, shall preclude the combination of orders for
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the sale or purchase of portfolio securities of the Subject Assets with those
for other accounts managed by Sub-Advisor or its affiliates, if orders are
allocated in a manner deemed equitable by Sub-Advisor among the accounts and at
a price approximately averaged.
12. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing. No amendment of this
Agreement shall be effective until approved specifically by (a) the Board of
Trustees of the Trust, or by vote of a majority of the outstanding shares of the
Subject Fund, and (b) by vote of a majority of those trustees of the Trust who
are not interested persons of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval.
13. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the trustees, shareholders, officers, agents or
employees of the Trust personally, but only bind the trust property of the
Trust, as provided in the Trust's Declaration of Trust.
14. NOTICES
Notices and other communications required or permitted under this Agreement
shall be in writing, shall be deemed to be effectively delivered when actually
received, and may be delivered by US mail (first class, postage prepaid), by
facsimile transmission, by hand or by commercial overnight delivery service,
addressed as follows:
SUB-INVESTMENT MANAGER:
Pacific Investment Management Company LLC
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Chief Legal Officer
cc: Xxxxx X. Xxxxx, Senior Vice President
Fax #: 000-000-0000
JHLICO: Xxxx Xxxxxxx Life Insurance Company
000 Xxxxxxxxx Xxxxxx
P.O. Box 111
Boston, MA 02117
Attention: Xxxxxxx X. Xxxxx
Fax #: 000-000-0000
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TRUST: Xxxx Xxxxxxx Variable Series Trust I
000 Xxxxxxxxx Xxxxxx
P.O. Box 111
Boston, MA 02117
Attention: Xxxxxxx X. Xxxxx
Fax #: 000-000-0000
15. GOVERNING LAW.
This agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act and
rules thereunder.
16. ASSIGNMENT.
This Agreement may not be assigned by any party, either in whole or in
part, without the prior written consent of the other parties; provided, however,
that any assignment that results in a change of actual control or management of
Sub-Advisor or of the investment manager of the Subject Fund (within the meaning
of Rule 2a-6 under the 1940 Act) shall terminate this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day first set forth above.
ATTEST: XXXX XXXXXXX VARIABLE SERIES
TRUST I
By:
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Name:
Title:
ATTEST: XXXX XXXXXXX LIFE
INSURANCE COMPANY
By:
-------------------------- ---------------------------------
Name:
Title:
ATTEST: PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
By:
-------------------------- ---------------------------------
Name:
Title:
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SCHEDULE I
FEES
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For the Subject Assets of the Active Bond Fund:
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Current Net Assets Under Management Sub-Advisory Fee
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On the first $100 million 25.0 basis points (0.25%) per annum
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On the next $150 million 20.0 basis points (0.20%) per annum
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On the next $250 million 16.0 basis points (0.16%) per annum
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On the next $500 million 12.5 basis points (0.125%) per annum
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On amounts over $1 billion 10.0 basis points (0.10%) per annum
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