1
EXHIBIT 5(c)
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT executed as of April 25, 1997 by and between UNION BANK OF CALIFORNIA,
N.A. (the "Advisor"), and TOKYO-MITSUBISHI ASSET MANAGEMENT (UK), LTD. (the
"SubAdvisor"), a subsidiary of Bank of Tokyo, Ltd.
WHEREAS, Advisor is the investment manager for HighMark Funds (the "Trust"), an
open-end management investment company registered under the Investment Company
Act of 1940, as amended ("1940 Act"); and
WHEREAS, Advisor desires to retain SubAdvisor as its agent to furnish investment
advisory services for the Trust's International Equity investment portfolio (the
"Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Appointment. Advisor hereby appoints SubAdvisor to provide certain
sub-investment advisory services to the Fund for the period and on the terms set
forth in this Agreement. SubAdvisor accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
2. Delivery of Documents. Advisor has furnished or will furnish SubAdvisor
with copies properly certified or authenticated of each of the following:
(a) the Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts on March 10,
1987, and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Declaration of Trust");
(b) the Trust's By-Laws and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of SubAdvisor and approving this Agreement;
(d) the Trust's Notification of Registration of Form N-8A under the
Investment Company Act of 1940 (the "1940 Act") as filed with the
Securities and Exchange Commission (the "SEC") on March 12, 1987 and
all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 33-12608) and
under the 1940 Act as filed with the SEC and all amendments thereto
insofar as such Registration Statement and such amendments relate to
the Funds;
1
2
(f) the Trust's most recent prospectuses and Statement of Additional
Information for the Funds (such prospectuses and Statement of
Additional Information, as presently in effect, and all amendments and
supplements thereto are herein collectively called the "Prospectus");
and
(g) such other materials and documents as SubAdvisor shall reasonably
request.
Advisor will furnish SubAdvisor from time to time with copies of all amendments
of or supplements to the foregoing.
3. Management. Subject always to the supervision of the Trust's Board of
Trustees and Advisor, SubAdvisor will furnish an investment program in respect
of, and make investment decisions for the assets of the Fund entrusted to it
hereunder and place all orders for the purchase and sale of securities, all on
behalf of the Fund. In the performance of its duties, SubAdvisor will satisfy
its fiduciary duties to the Fund (as set forth in Section 8 below), and will
monitor the Fund investments, and will comply with the provisions of the Trust's
Declaration of Trust and By-Laws, as amended from time to time, and the stated
investment objectives, policies and restrictions of the Fund. SubAdvisor and
Advisor will each make its officers and employees available to the other from
time to time at reasonable times to review investment policies of the Fund and
to consult with each other regarding the investment affairs of the Fund.
SubAdvisor shall also make itself reasonably available to the Board of Trustees
at such times as the Board of Trustees shall request.
SubAdvisor represents and warrants that it is in compliance with all applicable
Rules and Regulations of the SEC pertaining to its investment advisory
activities and agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will maintain registration with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and will conform with all
applicable Rules and Regulations of the SEC pertaining to its
investment advisory activities;
(c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer.
In providing the Funds with investment supervision, the SubAdvisor will
give primary consideration to securing the most favorable price and
efficient execution. Within the framework of this policy, the
SubAdvisor may consider the financial responsibility, research and
investment information
2
3
and other services provided by brokers or dealers who may effect or be
a party to any such transaction or other transactions to which the
SubAdvisor's other clients may be a party. it is understood that it is
desirable for the Fund that the SubAdvisor have access to supplemental
investment and market research and security and economic analysis
provided by brokers who may execute brokerage transactions at a higher
cost to the Fund than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the SubAdvisor is authorized to place orders for
the purchase and sale of securities for the Fund with such brokers,
subject to such guidelines as shall be established by the Advisor and
reviewed by the Trust's Board of Trustees from time to time with
respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to
the SubAdvisor in connection with the SubAdvisor's services to other
clients.
On occasions when the SubAdvisor deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients of the
SubAdvisor, the SubAdvisor, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the SubAdvisor in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Fund and to
such other clients. In no instance will portfolio securities be purchased from
or sold to Advisor, SubAdvisor, SEI Financial Services Company or any affiliated
person of either the Trust, Advisor, SEI Financial Services Company or
SubAdvisor that Advisor has identified to the SubAdvisor in writing, except as
may be permitted under the 1940 Act;
(d) will report regularly to Advisor and will make appropriate persons
available for the purpose of reviewing at reasonable times with
representatives of Advisor and the Board of Trustees the management of
the Fund, including, without limitation, review of the general
investment strategy of the Fund, the performance of the Fund in
relation to standard industry indices and general conditions affecting
the marketplace and will provide various other reports from time to
time as reasonably requested by Advisor;
(e) will maintain books and records with respect to the Trust's
securities transactions required by subparagraphs (b)(5), (6), (7),
(9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act
and will furnish Advisor and the Trust's Board of Trustees such
periodic and special reports as the Board of Trustees may request;
(f) will act upon instructions form Advisor not inconsistent with the
3
4
fiduciary duties hereunder; and
(g) will treat confidentially and as proprietary information of the
Trust all such records and other information relative to the Trust
maintained by the SubAdvisor, 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 Trust, which approval shall not be
unreasonably withheld and may not be withheld where SubAdvisor 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.
SubAdvisor shall have the right to execute and deliver, or cause its nominee to
execute and deliver, all proxies and notices of meetings and other notices
affecting or relating to the securities of the Fund.
4. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, SubAdvisor hereby agrees that all records which it maintains
for the Trust are the property of the Trust and further agrees to surrender
promptly to the Trust any of such records upon the Trust's request. SubAdvisor
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act.
SubAdvisor may delegate its responsibilities under this Section to affiliates
that perform custody and/or fund accounting services for the Fund, which
delegation shall not, however, relieve the SubAdvisor of its responsibilities
under this paragraph 4.
5. Expenses. During the terms of this Agreement, SubAdvisor will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Trust.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Advisor will pay the SubAdvisor, and the SubAdvisor
agrees to accept as full compensation therefor, a sub-advisory fee, accrued
daily and payable monthly, in accordance with Schedule A hereto. The fee will be
calculated based on the average monthly market value of the assets under the
Sub-Advisor's management and will be paid to the Sub-Advisor monthly. From time
to time, SubAdvisor may agree to waive or reduce some or all of the compensation
to which it is entitled under this Agreement.
7. Services to Others. Advisor understands, and has advised the Trust's
Board of Trustees, that SubAdvisor now acts, and may in the future act, as an
investment adviser to fiduciary and other managed accounts, and as investment
advisor, sub-investment adviser, and/or administrator to other investment
4
5
companies. Advisor has no objection to SubAdvisor's acts in such capacities, as
long as such services do not impair the services rendered to Advisor or the
Trust. Advisor recognizes, and has advised the Trust's Board of Trustees, that
in some cases this procedure may adversely affect the size of the position that
the Fund may obtain in a particular security. In addition, Advisor understands,
and has advised the Trust's Board of Trustees, that the persons employed by
SubAdvisor to assist in SubAdvisor's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement will be
deemed to limit or restrict the right of SubAdvisor or any of its affiliates to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
8. Limitation of Liability. The SubAdvisor shall not be liable for any
error or judgment or for any loss suffered by the Fund or Advisor in connection
with performance of its obligations under this Agreement, except 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 1940 Act), or
a loss resulting from willful misfeasance, bad faith or gross negligence on the
SubAdvisor's part in the performance of its duties or from reckless disregard of
its obligations and duties under this Agreement, except as may otherwise be
provided under provisions or applicable state law which cannot be waived or
modified hereby.
9. Indemnification. Advisor and SubAdvisor each agree to indemnify the
other against any claim against, loss or liability to such other party
(including reasonable attorneys' fees) arising out of any action on the part of
the indemnifying party which constitutes willful misfeasance, bad faith or gross
negligence.
10. Duration of Termination. This Agreement will become effective as of the
date hereof, provided that it has been approved by vote of a majority of the
outstanding voting securities of the Fund in accordance with the requirements
under the 1940 Act, and, unless sooner terminated as provided herein, will
continue in effect for one year.
Thereafter, if not terminated, this Agreement will continue in effect for the
Funds through July 31, 1997 and thereafter from year to year, provided that such
continuation is specifically approved at least annually (a) by the vote of a
majority of those members of the Trust's Board of Trustees who are not
interested persons of the Trust, SubAdvisor, or Advisor, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Trust's Board of Trustees or by the vote of majority of all
votes attributable to the outstanding Shares of the Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to the Funds at any time, without
the payment of any penalty, on sixty (60) day's written notice by Advisor or by
SubAdvisor. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities", "interested persons" and "assignment" have the same meaning
of such terms in the
5
6
1940 Act.)
11. 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.
12. SubAdvisor Information. During the terms of this Agreement, Advisor
agrees to furnish the SubAdvisor at SubAdvisor's principal office all
prospectuses, proxy statements, reports to stockholders, sales literature or
other materials prepared for distribution to stockholders of the Fund, the Trust
or the public that refer to the SubAdvisor or its clients in any way prior to
use thereof and not to use material if the SubAdvisor reasonably objects in
writing within five business days (or such other period as may be mutually
agreed) after receipt thereof. The SubAdvisor's right to object to such
materials is limited to the portions of such materials that expressly relate to
the SubAdvisor, its services and its clients. The Advisor agrees to use its
reasonable best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the SubAdvisor or its clients in any way
are consistent with those materials previously approved by the SubAdvisor as
referenced in the first sentence of this paragraph. Sales literature may be
furnished to the SubAdvisor by first-class or overnight mail, facsimile
transmission equipment or hand delivery.
13. Severability. Should any part of this Agreement be held 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 shall
inure to the benefit of the parties hereto and their respective successors.
14. Notices. Any notice, advice or report to be given pursuant to this
Agreement shall be delivered or mailed:
To Advisor at:
Pacific Alliance Capital Management
Union Bank of California, N.A.
000 "X" Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxx, President
6
7
To the SubAdvisor at:
Tokyo-Mitsubishi Asset Management (UK), Ltd.
00-00 Xxxxxxxx Xxxxxx
Xxxxxx, XX0X 0XX
Xxxxxxx
Attention: Xxxxx Xxxxxxx, Company Secretary
To the Trust or the Fund at:
HighMark Funds
0 Xxxxxxx Xxxxxx Xxxx
Xxxx, Xxxxxxxxxxxx 00000
Attention: Legal Department
15. Change of Law. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is altered by a rule, regulation or
order of the Commission, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order.
16. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. if any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be affected
thereby. This Agreement will be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and will be governed by the
laws of the Commonwealth of Massachusetts.
The name "HighMark Funds" and "Trustees of the HighMark Funds" refer
respectively to the Trust created by, and the Trustees, as trustees but not
individually or personally, acting from time to time under, the Declaration of
the Trust, to which reference is hereby made and copy of which is on file at the
office of the Secretary of State of the Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "HighMark Funds" entered in the name or on
behalf thereof by any of the Trustees, representatives or agents are made not
individually but only in such capacities and are not binding upon any of the
Trustees, Shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and persons dealing with the Funds must look solely to
the assets of the Trust belonging to such Funds for the enforcement of any
claims against the Trust.
7
8
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officer designated below as of the day and year first above
written.
UNION BANK OF CALIFORNIA, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
TOKYO-MITSUBISHI ASSET MANAGEMENT (UK),
LTD.
By:________________________________
Name:______________________________
Title:_____________________________
8
9
SCHEDULE A
HIGHMARK INTERNATIONAL EQUITY FUND
Advisory Fee: 95 b.p. (will waive 20 b.p.)
Subadvisory Fee: 30 b.p.
9
10
SCHEDULE B
SUBADVISOR PERFORMANCE STANDARDS
1. Outperform the Xxxxxx Xxxxxxx EAFE Index.
10
