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Exhibit 5(b)-4.3
INVESTMENT SUB-ADVISORY AGREEMENT
Effective as of October 31, 1996
Xxx Xxxxxx American Capital Management, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Sierra
Investment Advisors Corporation ("Sierra Advisors"), a corporation organized
under the laws of the state of California, hereby agree with Xxx Xxxxxx American
Capital Management Inc. (the "Sub-Advisor"), a corporation organized under the
laws of the state of Delaware, as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Company desires to employ the capital of the Company's investment
funds listed on Annex A hereto (individually, a "Fund" and collectively, the
"Funds") by investing and reinvesting in investments of the kind and in
accordance with the limitations specified in its Master Trust Agreement, as
amended, and in their Prospectus and Statement of Additional Information
relating to the Funds as in effect and which may be amended from time to time,
and in such manner and to such extent as may from time to time be approved by
the Board of Trustees of the Company. Copies of the Funds' Prospectus and
Statement of Additional Information and the Company's Master Trust Agreement, as
amended, have been or will be submitted to the Sub-Advisor. The Company agrees
to provide copies of all amendments to the Funds' Prospectus and Statement of
Additional Information and the Company's Master Trust Agreement to the Sub-
Advisor on an on-going basis. The Company desires to employ and hereby appoints
the Sub-Advisor to act as investment sub-advisor to the Funds. The Sub-Advisor
accepts the appointment and agrees to furnish the services described herein for
the compensation set forth below.
2. SERVICES AS INVESTMENT SUB-ADVISOR
Subject to the supervision of the Board of Trustees of the Company and
of Sierra Advisors, the Funds' investment adviser, the Sub-Advisor will (a) act
in conformity with the Company's Master Trust Agreement, the Investment Company
Act of 1940, the Investment Advisers Act of 1940 and the Internal Revenue Code
of 1986, as the same may from time to time be amended, (b) make investment
decisions for the Funds in accordance with the Funds' investment objectives and
policies as stated in the Funds' Prospectus and Statement of Additional
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Information as in effect and, after notice to the Sub-Advisor, and which may be
amended from time to time, (c) place purchase and sale orders on behalf of the
Funds to effectuate the investment decisions made, (d) maintain books and
records with respect to the securities transactions of the Funds and will
furnish the Company's Board of Trustees such periodic, regular and special
reports as the Board may request; and (e) treat confidentially and as
proprietary information of the Company, all records and other information
relative to the Company and prior, present or potential shareholders; and will
not use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Company, which approval shall not be unreasonably
withheld and such records may not be withheld where the Sub-Advisor 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 Company. In providing those services, the Sub-Advisor will
supervise the Funds' investments and conduct a continual program of investment,
evaluation and, if appropriate, sale and reinvestment of the Funds' assets. In
addition, the Sub-Advisor will furnish the Funds or Sierra Advisors with
whatever statistical information the Funds or Sierra Advisors may reasonably
request with respect to the instruments that the Funds may hold or contemplate
purchasing.
3. BROKERAGE
In executing transactions for the Funds and selecting brokers or
dealers, the Sub-Advisor will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Funds and their shareholders. In assessing the best overall
terms available for any Funds transactions, the Sub-Advisor will consider all
factors it deems relevant including, but not limited to, 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 for the specific transaction and on a continuing basis. Pursuant to
its investment determinations for the Funds, in placing orders with brokers and
dealers, the Sub-Advisor will attempt to obtain the best net price and the most
favorable execution of its orders. Consistent with this obligation, when the
execution and price offered by two or more brokers or dealers are comparable,
the Sub-Advisor may, in its discretion, purchase and sell portfolio securities
to and from brokers and dealers who provide the Company with research advice and
other services.
4. INFORMATION PROVIDED TO THE COMPANY
The Sub-Advisor will keep the Company and Sierra Advisors informed of
developments materially affecting the Funds, and will on its own initiative,
furnish the Company and Sierra Advisors on at least a quarterly basis with
whatever information the Sub-Advisor believes is appropriate for this purpose.
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5. STANDARD OF CARE
The Sub-Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Sub-Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Funds in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
6. COMPENSATION
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-Advisor on the first business day of each month
a fee for the previous month the fees detailed in Annex A attached to this
Agreement. The Sub-Advisor shall have no right to obtain compensation directly
from the Funds or the Company for services provided hereunder and agrees to look
solely to Sierra Advisors for payment of fees due. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Sub-Advisor, the
value of the Funds' net assets shall be computed at the times and in the manner
specified in the Funds' Prospectus or Statement of Additional Information
relating to the Funds as from time to time in effect.
Should it be determined that the Investment Sub-Advisory Agreements
between the Trust, Advisor and Sub-Advisor for the Funds listed in Annex A, are
terminated as a result of the assignment thereof prior to the effective date of
this Agreement, compensation hereunder shall commence as of the date of such
termination.
7. EXPENSES
The Sub-Advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and commissions, if any; fees of
trustees of the Company who are not officers, directors or employees of the
Sub-Advisor, Sierra Advisors, the Funds' sub-administrator or any of their
affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing
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agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Company's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Funds and of the
officers or Board of Trustees of the Company; and any extraordinary expenses. In
addition, the Funds pay a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act of
1940, as amended.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Company understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Advisor so acting, provided that whenever the Funds and one or more
other accounts or investment companies advised by the Sub-Advisor have available
funds for investment, investments suitable and appropriate for each will be
allocated in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may limit the
size of the position that may be acquired or disposed of for the Funds. In
addition, the Company understands that the persons employed by the Sub-Advisor
to assist in the performance of the Sub-Advisor's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Advisor or any affiliate of
the Sub-Advisor to engage in and devote time and attention to other business or
to render services of whatever kind or nature.
9. TERM OF AGREEMENT
This Agreement shall become effective as of the date first written
above, shall continue for a period of two years thereafter, and shall continue
in effect for a period of more than two years thereafter only so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Company or (ii) a vote of a "majority" (as defined in the
Investment Company Act of 1940, as amended) of the Funds' outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Board of Trustees who are not "interested persons" (as defined
in said Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 30 days' written notice, by Sierra Advisors, the Board of
Trustees of the Company or by vote of holders of a majority of the Funds'
shares, or upon 90 days' written notice, by the Sub-Advisor and, will terminate
automatically upon any termination of the advisory agreement between the Company
and Sierra Advisors. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in said
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Act). The Sub-Advisor agrees to notify the Company of any circumstances that
might result in this Agreement being deemed to be assigned.
10. REPRESENTATIONS OF THE COMPANY AND THE SUB-ADVISOR
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940,
as amended, and other applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-Advisor has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
of 1940, as amended, and other applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
11. INDEMNIFICATION
Sierra Advisors shall indemnify and hold harmless the Sub-Advisor from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement or the performance by the Sub-Advisor of
its duties hereunder; provided, however, that nothing contained herein shall
require that the Sub-Advisor be indemnified for Disqualifying Conduct.
12. AMENDMENT OF 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 with respect to any
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
13. LIMITATION OF LIABILITY
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
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14. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto.
15. GOVERNING LAW
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
Dated: 02/21/97 By /s/ F. XXXXX XXXXXX
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Name: F. Xxxxx Xxxxxx
Title: Chairman and President
SIERRA INVESTMENT ADVISORS
CORPORATION
Dated: Feb. 21, 1997 By /s/ F. XXXXXXX X. GOTH
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Name: Xxxxxxx X. Goth
Title: Chief Operating Officer
Accepted:
XXX XXXXXX AMERICAN CAPITAL MANAGEMENT INC.
By /s/ XXXXXX X. XXXXXXXX Dated: 3/10/97
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Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President
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ANNEX A
For the services provided and expenses assumed pursuant to the
Agreement, the Sub-Advisor will be paid a monthly fee, absent fee waivers, based
upon each Fund's average daily net assets as follows:
After After
50; 75; After After
First next next 100; 125; Over
FUND 50* 25 25 next 25 next 25 150
---- ----- ----- ----- ------- ------- -----
California Municipal Fund(1)......................... .20% .20% .20% .20% .20% .15%
--- --- ---- ---- ---- ----
National Municipal Fund(1)........................... .20% .20% .20% .20% .20% .15%
--- --- ---- ---- ---- ----
Florida Insured Municipal Fund....................... .20% .20% .125% .125% .125% .125%
--- --- ---- ---- ---- ----
California Insured Intermediate
Municipal Fund................................... .20% .20% .125% .125% .125% .125%
--- --- ---- ---- ---- ----
* Amount of assets in millions of dollars ($Mil.)
(1) With respect to each of the California Municipal and National Municipal
Funds, when the combined average daily net assets of the California
Municipal and National Municipal Funds (the "Combined Assets") exceed $750
million, the Sub-Advisor will be paid a fee with respect to each Fund in
proportion to each Fund's average net assets at the following annual rate:
.15% of the Combined Assets up to $1 billion; plus .125% of the Combined
Assets over $1 billion.
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