SUB-ADMINISTRATION AGREEMENT
This SUB-ADMINISTRATION AGREEMENT (the "Agreement") is made as of
December 1, 1998 by and among THE BANK OF NEW YORK ("BNY"), NATIONSBANC
ADVISORS, INC. ("NBAI") and NATIONS ANNUITY TRUST (the "Annuity Trust").
WHEREAS, the Annuity Trust is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, NBAI serves as the Co-Administrator for the investment
portfolios of the Annuity Trust pursuant to a separate Co-Administration
Agreement; and
WHEREAS, NBAI desires to retain BNY to render certain
sub-administrative services to the Annuity Trust and to NBAI, as
Co-Administrator of the Annuity Trust, and BNY is willing to render such
services.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed among the parties hereto as follows:
1. Appointment and Duties as Sub-Administrator.
(a) NBAI hereby appoints BNY to act as Sub-Administrator of the Annuity
Trust and to render sub-administrative services for each portfolio of the
Annuity Trust listed on Schedule I (individually, a "Fund" and collectively, the
"Funds") and BNY hereby accepts such appointment and agrees to render the
services and duties set forth in Schedule II as it may be amended from time to
time, for the compensation and on the terms herein provided. Each new investment
portfolio established in the future by the Annuity Trust or NBAI will become a
"Fund" for all purposes hereunder when BNY receives a revised Schedule I from
NBAI or the Annuity Trust that includes such new portfolio.
(b) Subject to the other provisions of this Section 1, in performing
all services under this Agreement, BNY shall (i) act in conformity with the
Annuity Trust's Declaration of Trust and Bylaws (the "Bylaws"), the 1940 Act and
the rules thereunder, including but not limited to Rules 31a-1 to 31a-3, and
other applicable laws and regulations, as the same may be amended from time to
time, and the Annuity Trust's Registration Statement, as such Registration
Statement may be amended from time to time; (ii) consult and coordinate with
NBAI and the Annuity Trust, as necessary and appropriate; and (iii) advise and
report to NBAI and the Annuity Trust, as necessary or appropriate, with respect
to any compliance matters that come to its attention. In performing all services
under this Agreement BNY shall meet the minimum quality of service standards set
forth on Schedule III.
(c) The Annuity Trust has furnished BNY and NBAI with copies properly
certified or authenticated of each of the following: (i) the Annuity Trust's
Declaration of Trust or other organizational document and all amendments thereto
(the "Declaration"); (ii) the Annuity Trust's Bylaws; (iii) resolutions of the
Annuity Trust's Board of Trustees or other governing body (the
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"Board") authorizing the execution, delivery and performance of this Agreement
by the Annuity Trust; (iv) the Annuity Trust's most recent Post-Effective
Amendment to its Registration Statement on Form N-1A (the "Registration
Statement") under the Securities Act of 1933, as amended, and under the 1940 Act
(File Nos. 333-40265 and 881-08481), as filed with the Securities and Exchange
Commission (the "SEC") relating to the Funds' shares (the "Shares"); (iv) the
Funds' current Prospectus(es); (v) the Funds' current Statement(s) of Additional
Information; and (vi) the pricing procedures applicable to the calculation of
the Funds' net asset values as approved by the Annuity Trust's Board (the
"Pricing Procedures"). It is solely the Annuity Trust's responsibility to
furnish BNY from time to time with copies, properly certified or authenticated,
of all amendments of or supplements to the foregoing, and BNY will not be held
to have knowledge of any such amendments or supplements until the same are
actually received by BNY. Furthermore, the Annuity Trust will provide BNY with
any other documents that BNY and NBAI may reasonably request and will notify BNY
and NBAI as soon as possible of any matter materially affecting either BNY's or
NBAI's performance of its services under this Agreement.
(d)(i) BNY undertakes to report on a regular basis to NBAI and the
Annuity Trust regarding: (A) the readiness of its computer systems, or those
used by it in the performance of its duties hereunder, properly to record,
store, process, calculate or present calendar dates falling on and after, and
time spans including, September 9, 1999, January 1, 2000 or February 29, 2000
(the "Subject Dates") as a result of the occurrence, or use of data containing
any such Subject Dates; (B) the readiness of its computer systems or those used
by it in the performance of its duties hereunder, to calculate any information
dependent on or relating to dates on or after the Subject Dates; and (C) its
ability to perform the administration and fund accounting services set forth in
Schedule II (the "Services") in accordance with any applicable performance
standards set forth in Schedule III (the "Standards") with respect to the
maintenance of records or processing of data containing dates falling on or
after the Subject Dates, provided that, with respect to computers used but not
owned by BNY and third-party computer systems other than InvestOne, BNY's
responsibility shall be limited to seeking similar reports from such owners or
third parties and promptly forwarding such reports to NBAI. Without limiting the
foregoing, BNY undertakes to notify NBAI and the Annuity Trust, in writing, of
any concerns believed by BNY to be material regarding the events described in
this paragraph, provided that, with respect to computers owned by others and
third-party computer systems other than InvestOne, BNY's responsibility shall be
limited to seeking similar notice from such owners or third parties and promptly
forwarding such notifications to NBAI.
(ii) NBAI or the Annuity Trust shall have the right to terminate this
Agreement if there is a "material failure" by BNY to perform any of the Services
in accordance with the Standards due to a failure by computers owned or used by
BNY in performing its duties hereunder to properly process the occurrence of the
Subject Dates or data containing the Subject Dates. As used in this Section
1(d), the term "material failure" shall be limited to a failure to provide any
of the Services in accordance with the Standards, provided that no such failure
shall be deemed a "material failure" if such failure occurs at or about the time
other major financial institutions similar to BNY providing similar services in
a similar volume to investment companies similar to the Annuity Trust are
experiencing similar failures, and, provided further, that no failure by BNY
shall be or be deemed a "material failure" if BNY substantially provides the
Services under a contingency plan, it being agreed that, to the extent that the
parties mutually
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agree, the time frames and deadlines set forth in Schedule III of this Agreement
and elsewhere shall not be considered in determining whether BNY is
substantially providing the Services in accordance with the Standards. NBAI and
the Annuity Trust agree to act reasonably and in good faith in considering any
request by BNY to extend time frames and deadlines.
(iii) In the event there is a "material failure" by BNY to provide the
Services and such "material failure" is not cured by BNY within 10 days after
such material failure arises, NBAI or the Annuity Trust shall have the right to
terminate this Agreement upon the giving of 60 days written notice to BNY. BNY
shall, notwithstanding any other provision contained in this Agreement, have no
liability to the Annuity Trust or NBAI under this Agreement if such "material
failure" initially arose out of or was caused by a failure of a computer used
but not owned by BNY or owned by a third party (other than InvestOne) to
properly process the Subject Dates or data containing the Subject Dates, and BNY
shall be entitled to any compensation and reimbursement for out-of-pocket
expense as may then be due and payable, as well as agreed-upon out-of-pocket
expenses incurred in connection with such a termination. If such a termination
is the result of a "material failure" initially arising out of, or caused by a
failure of computers owned by BNY or a failure by InvestOne, then, first, BNY's
liability hereunder for such failure shall, notwithstanding any other provision
contained in this Agreement to the contrary, be limited to the lesser of (x) the
fees paid to a successor service provider during the six months next succeeding
the date of termination to the extent such fees exceed the fees that would have
been paid to BNY hereunder, and (y) $1,000,000; and second, BNY shall not be
entitled to out-of-pocket expenses incurred in connection with such a
termination.
(iv) In the event of conflict between this Section 1(d) and any other
provision contained in this Agreement, this Section 1(d) shall control.
(v) NBAI and the Annuity Trust each agree to hold all of the provisions
of this Section 1(d) in strict confidence and not to disclose, nor permit
disclosure of, such provisions.
(e) Subject to the direction and approval of the Annuity Trust's Board
and appropriate officers and the provisions of this Agreement, BNY shall provide
to each Fund the administrative services set forth on Schedule II attached
hereto. In performing such services hereunder, BNY shall provide, at its
expense, office space, facilities, equipment and personnel. BNY shall not
provide any services relating to the management, investment advisory or
sub-advisory functions of any Fund, distribution of shares of any Fund,
maintenance of any Fund's financial records (except as otherwise agreed by the
parties) or any services normally performed by the Funds' counsel or independent
accountants. Upon receipt of the Annuity Trust's prior written consent, BNY may
delegate any of its duties and obligations hereunder to any delegee or agent
whenever and on such terms and conditions as it deems necessary or appropriate.
Unless expressly agreed in writing, BNY shall not be relieved of liability or
responsibility for the performance of any duties or obligations delegated to a
delegee or agent, provided that BNY shall have no liability for duties or
obligations that are delegated to a delegee or agent at the instruction of the
Annuity Trust or NBAI. The Annuity Trust and NBAI shall cause their respective
officers, and shall use reasonable efforts to cause the Annuity Trust's or
NBAI's legal counsel, independent accountants, and transfer agent to cooperate
with BNY and to provide BNY, upon BNY's reasonable written request, such
information, documents and advice relating to such Fund as is within the
possession or knowledge of such persons, in order to enable BNY
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to perform its duties hereunder. Such cooperation or provision of information,
documents or advice shall be at no cost to BNY, provided BNY's request is
reasonable and NBAI shall have been notified of the request. In connection with
its duties hereunder, BNY shall be entitled to reasonably rely upon any
documents relating to a Fund provided to BNY by any of the aforementioned
persons. BNY may apply to the Annuity Trust or NBAI for written instructions
with respect to any matter arising in connection with BNY's performance
hereunder. If, after a reasonable period of time, BNY receives no response to
any such application, BNY may then notify the Annuity Trust or NBAI of
reasonable action that BNY shall take if written instructions are not received
within a stated period of time after such notice, and then BNY shall not be
liable for taking such reasonable action as if written instructions had been
provided. BNY is entitled to reasonably rely and act in accordance with written
instructions believed to have been given by authorized persons and shall incur
no costs for such reasonable reliance. BNY shall have no duties or
responsibilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement and Schedule II hereto, and no covenant
or obligation shall be implied against BNY in connection with this Agreement.
(f) The Annuity Trust and NBAI, for itself and not for the others,
hereby represents and warrants to BNY, which representations and warranties
shall be deemed to be continuing, that: (i) it is duly organized and existing
under the laws of the jurisdiction of its organization, with full power to carry
on its business as now conducted, to enter into this Agreement and to perform
its obligations hereunder; (ii) this Agreement has been duly authorized,
executed and delivered by it in accordance with all requisite action and
constitutes a valid and legally binding obligation, enforceable in accordance
with its terms; (iii) it is conducting its business substantially in compliance
with all applicable laws and regulations, both state and federal, and has
obtained all regulatory licenses, approvals and consents necessary to carry on
its business as now conducted; (iv) there is no statute, regulation, rule, order
or judgment binding on it and no provision of its Declaration or Bylaws, nor of
any mortgage, indenture, credit agreement or other contract binding on it or
affecting its property which would prohibit its execution or performance of this
Agreement; and (v) the Annuity Trust and NBAI will use reasonable efforts to
promptly notify BNY of any errors or omissions contained in any reports,
calculations, valuations and other items of information, provided that any
failure by the Annuity Trust or NBAI to detect any such errors or omissions
shall not relieve BNY of any resulting liability therefrom. To the extent that
NBAI has actual knowledge of any such error or omission and fails to use
reasonable efforts to promptly notify BNY, BNY shall be relieved of any
liability that BNY may have mitigated had NBAI provided notice of such error or
omission to BNY.
(g) BNY hereby represents and warrants to the Annuity Trust and NBAI,
which representations and warranties shall be deemed to be continuing, that: (i)
it is duly organized and existing under the laws of the jurisdiction of its
organization, with full power to carry on its business as now conducted, to
enter into this Agreement and to perform its obligations hereunder; (ii) this
Agreement has been duly authorized, executed and delivered by it in accordance
with all requisite action and constitutes a valid and legally binding
obligation, enforceable in accordance with its terms; and (iii) it is conducting
its business substantially in compliance with all applicable laws and
regulations, both state and federal, and has obtained all regulatory licenses,
approvals and consents necessary to carry on its business as now conducted;
there is no statute, regulation, rule, order or judgment binding on it and no
provision of its Declaration or Bylaws, nor of any mortgage, indenture, credit
agreement or other contract
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binding on it or affecting its property which would prohibit its execution or
performance of this Agreement.
2. Compensation. For the services to be rendered, the facilities to be
furnished and the compensation and other expenses to be borne by BNY, as
provided for in this Agreement, BNY shall be entitled to receive a monthly fee
from NBAI and reimbursement for out-of-pocket expenses as set forth in Schedule
IV to this Agreement. It is understood that NBAI shall be responsible for BNY's
monthly fee for its services hereunder, and BNY agrees that it shall have no
claim against the Annuity Trust or the Funds with respect to compensation under
this Agreement.
3. Recordkeeping. BNY shall, as agent for the Annuity Trust, and
subject to the direction and approval of the Annuity Trust's Board and the
provisions of this Agreement, maintain and keep current the books, accounts and
other documents, if any, pursuant to the services and duties provided by BNY as
set forth in Schedule II of this Agreement, and preserve any such books,
accounts and other documents in accordance with the applicable provisions of
Rule 31a-2 of the 1940 Act. Such books, accounts and other documents shall be
made available upon reasonable request for inspection by officers, employees and
auditors of the Annuity Trust and NBAI during BNY's normal business hours. All
records maintained and preserved by BNY pursuant to this Agreement which the
Annuity Trust is required to maintain and preserve in accordance with Rule 31a-2
of the 1940 Act shall be and remain the property of the Annuity Trust and shall
be surrendered to the Annuity Trust promptly upon request in the form in which
such records have been maintained and preserved. Upon reasonable request of the
Annuity Trust, BNY shall provide in data files or hard copy, whichever the
Annuity Trust shall reasonably elect, any records included in any such delivery
which are maintained by BNY on a computer disc, or are similarly maintained, and
the Annuity Trust shall reimburse BNY for its expenses of providing such hard
copy.
4. Standard of Care; Indemnification.
(a) BNY shall at all times act in good faith and agrees to use its best
efforts to fulfill its obligations under this Agreement, but assumes no
responsibility for loss or damage to the Annuity Trust unless such loss or
damages is caused by BNY's own negligence, bad faith or willful misconduct or
that of its directors, officers or employees. BNY shall be responsible hereunder
for all direct damages resulting from its own negligence, bad faith or willful
misconduct, provided however that it shall not be responsible for lost profits
or lost business arising under or in connection with this Agreement. It is
understood and agreed that for purposes of this Section 4(a), "direct damages"
shall include, but shall not be limited to, all legal costs, penalties,
reimbursement for excess distribution and redemption payments, repurchasing
costs for servicing agents and reimbursement to the Funds for net asset value
breaks (as calculated under the Pricing Procedures).
(b) The Annuity Trust, on behalf of each Fund, will indemnify BNY
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses of a
defense against any claim, demand, action or suit), relating to the particular
Fund and arising from any one or more of the following: (i) errors in records or
instructions, explanations, information, specifications or documentation of any
kind, as the case
5
may be, supplied to BNY by any person described in Section 1 hereof or by any
third party described in Section 5; (ii) action or inaction taken or omitted to
be taken by BNY pursuant to written or oral instructions described in this
Agreement (or otherwise without bad faith, negligence or willful misconduct);
(iii) any action taken or omitted to be taken by BNY in good faith in accordance
with the advice or opinion of counsel for a Fund, the Annuity Trust, NBAI
(obtained in accordance with the procedures set forth in this Agreement) or its
own counsel; (iv) any improper use by the Fund, the Annuity Trust, NBAI or their
respective agents, of any valuations or computations supplied by BNY pursuant to
this Agreement; (v) the method of valuation of the securities and the method of
computing a Fund's net asset value or any other amount computed by BNY
hereunder, provided BNY has followed the Pricing Procedures; and (vi) any
valuation of securities, net asset value or other amount provided by a Fund or
NBAI. BNY will not confess any claim or settle or make any compromise in any
instance in which the Annuity Trust will be asked to provide indemnification,
except with the Annuity Trust's prior written consent. Any amounts payable by
the Annuity Trust under this Section 4(b) shall be satisfied only against the
assets of the Fund involved in the claim, demand, action or suit and not against
the assets of any other investment portfolio of the Annuity Trust.
5. Fund Accounting Services.
(a) BNY, in performing the services required of it under the terms of
this Agreement, shall be entitled to rely fully on the accuracy and validity of
any and all instructions, explanations, information, specifications and
documentation furnished to it by a Fund and shall have no duty or obligation to
review the accuracy, validity or propriety of such instructions, explanations,
information, specifications or documentation, including, without limitation,
evaluations of securities; the amounts or formula for calculating the amounts
and times of accrual of Fund's liabilities and expenses; the amounts receivable
and the amounts payable on the sale or purchase of securities; and amounts
receivable or amounts payable for the sale or redemption of Fund shares effected
by or on behalf of the Fund. In the event BNY's computations hereunder rely, in
whole or in part, upon information, including, without limitation, bid, offer or
market values of securities or other assets, or accruals of interest or earnings
thereon, from a pricing or similar service utilized, or subscribed to, by BNY
which BNY in its judgment deems reliable, or any other third party pricing
source designated by the Annuity Trust, BNY shall not be responsible for, under
any duty to inquire into, or deemed to make any assurances with respect to, the
accuracy or completeness of such information. BNY shall not be required to
inquire into any valuation of securities or other assets by the Fund or any
third party described in this Section, even though BNY in performing services
similar to the services provided pursuant to this Agreement for others may
receive different valuations of the same or different securities of the same
issuers.
(b) Subject to the provisions of this Agreement and the direction and
approval of the Annuity Trust's Board, BNY shall perform the computations
described in Schedule II at such times and dates and in the manner specified or
described in the then-current Prospectus(es) of a Fund. To the extent valuation
of securities or a computation specified or described in a Fund's Pricing
Procedures or then-current effective Prospectus is at any time inconsistent with
any applicable laws or regulations, the Annuity Trust or NBAI shall immediately
so notify BNY in writing and thereafter shall furnish BNY at all appropriate
times with the values of such securities and such Fund's net asset value or
other amounts otherwise to be calculated by BNY,
6
or, subject to the prior approval of BNY, instruct BNY in writing to value
securities and make such computations in a manner which the Annuity Trust or
NBAI then represents in writing to be consistent with all applicable laws and
regulations. The Annuity Trust or NBAI may also from time to time, subject to
the prior approval of BNY, instruct BNY in writing to make computations other
than as specified in this Section of this Agreement. By giving such instruction,
the Annuity Trust or NBAI shall be deemed to have represented that such
instruction is consistent with all applicable laws and regulations and the
then-current effective Prospectus of the particular Fund. The Annuity Trust or
NBAI shall have sole responsibility for determining the method of valuation of
securities and the method of computations, and all computations, valuation of
securities and the method of computing each Fund's net asset value shall be
subject to approval by the Annuity Trust and NBAI. BNY shall not be liable for
relying on any price provided by any pricing service believed by BNY to be
reliable, and the Annuity Trust or NBAI shall furnish values when the same are
not available from a pricing service utilized by BNY, with such furnishing to
constitute an instruction to BNY to rely on the provided values.
(c) BNY shall be responsible for determining and properly reflecting in
the computations made by it made by it under this Agreement: (i) the taxable
nature of any distribution or amount received or deemed received by, or payable
to, a Fund; (ii) the taxable nature or effect on a Fund or its shareholders of
any corporate actions, class actions, tax reclaims, tax refunds, or similar
events; (iii) the taxable nature or taxable amount of any distribution or
dividend paid, payable or deemed paid, by a Fund to its shareholders; (iv) the
effect under any federal, state, or foreign income tax laws of a Fund making or
not making any distribution or dividend payment, or any election with respect
thereto; or (v) any tax accounting; provided, however, that if BNY is not
certain of the taxable nature, amount or effect of any such item, it may seek
instructions regarding the proper treatment of such item from the Annuity Trust
or NBAI in accordance with the procedures set forth in Section 1(e), above, and
shall have no liability for acting in reliance on such instructions.
6. Termination of Agreement.
(a) This Agreement shall become effective as of the date first set
forth above and shall remain in full force and effect unless terminated pursuant
to the provisions of Section 6(b).
(b) This Agreement may be terminated at any time without payment of any
penalty, upon 60 days' written notice to BNY, by NBAI or by vote of the Board of
the Annuity Trust, or upon 180 days' written notice to NBAI and the Annuity
Trust, by BNY. Upon any such termination, BNY will cooperate with and assist the
Annuity Trust, NBAI, their agents and any successor administrator(s) or
sub-administrator(s) in the substitution/conversion process. In connection with
any termination of this Agreement, unless BNY is in breach of this Agreement,
the Funds and NBAI agree to pay BNY any compensation and reimbursement for
out-of-pocket expenses as may then be due and payable, as well as agreed-upon
out-of-pocket expenses incurred in connection with a termination. If BNY is in
breach of this Agreement, the Funds and NBAI may offset any compensation or
reimbursement amounts owed to BNY by the amount of damages, costs and expenses
incurred as a result of BNY's breach, including costs, expenses and reasonable
incremental fees for a period not to exceed one year incurred in connection with
a conversion by the Annuity Trust and NBAI to a successor service provider. In
the event of a
7
dispute as to the amount of such damages, the Funds and NBAI agree to escrow the
set-off amount.
(c) Sections 4 and 8 shall survive this Agreement's termination.
7. Amendments. Except as expressly provided in the first paragraph of
Section 1, no provision of this Agreement may be amended or modified orally, but
only by an instrument in writing signed by the party against which enforcement
of the amendment or modification is sought.
8. Confidentiality. All books, records, information and data pertaining
to the business of the Annuity Trust, or its prior, present or potential
shareholders that are exchanged or received in connection with the performance
of BNY's duties under this Agreement shall remain confidential and shall not be
disclosed to any other person, except as specifically authorized by the Annuity
Trust or as may be required by law, and shall not be used for any purpose other
than performance of its responsibilities and duties hereunder, and except that
BNY retains the right to disclose matters subject to confidentiality to its
examiners, regulators, internal or external auditors, its accountants, its
internal and external counsel, and to any other entity whenever it is advised by
its internal or external counsel that it is reasonably likely that BNY would be
liable for a failure to do so. BNY will endeavor to provide written notice to
the Annuity Trust and NBAI at least five business days prior to any disclosures
pursuant to this Section 8, but, provided it shall have provided as much notice
as is reasonably practicable under the circumstances, BNY shall have no
liability for any failure to do so.
9. Service to Other Companies. The Annuity Trust and NBAI acknowledge
that BNY now provides, will continue to provide and may in the future provide
administrative or other services to other investment companies or series of
investment companies, and the Annuity Trust and NBAI have no objection to BNY so
doing. The Annuity Trust and NBAI further acknowledge that the persons employed
by BNY to assist in the performance of BNY's duties under this Agreement may not
devote their full time to such service and nothing contained in this Agreement
shall be deemed to limit or restrict the right of BNY or any affiliate of BNY to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
10. Conversion Schedule. If the Annuity Trust and NBAI, in the exercise
of their reasonable judgment, cannot meet the conversion schedule set forth in
Schedule VI as a result of BNY's inability to provide, or to confirm that it is
capable of providing, the services described in Schedule II or to meet the
quality of service standards set forth in Schedule III with respect to one or
more Funds in accordance with the conversion schedule attached as Schedule VI,
then BNY shall be obligated to pay any resulting incremental costs incurred by
the Annuity Trust or NBAI, including any incremental fees payable to First Data
Investors Services Group by the Annuity Trust or NBAI.
11. Miscellaneous.
(a) This Agreement shall be construed in accordance with the laws of
the State of New York, without regard to conflict of laws principles thereof.
Each Fund, the Annuity Trust
8
and NBAI hereby consent to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute arising hereunder. To
the extent that in any such jurisdiction any of the aforementioned persons may
now or hereafter be entitled to claim, for itself or its assets, immunity from
suit, execution, attachment (before or after judgment) or other legal process,
each irrevocably agrees not to claim, and it hereby waives, such immunity.
(b) In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby, and if any provision is inapplicable to any
person or circumstances, it shall nevertheless remain applicable to all other
persons and circumstances.
(c) Each and every right granted to BNY, the Annuity Trust or NBAI
hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of BNY, the Annuity Trust or
NBAI to exercise, and no delay in exercising, any right will operate as a waiver
thereof, nor will any single or partial exercise by BNY, the Annuity Trust or
NBAI of any right preclude any other or future exercise thereof or the exercise
of any other right.
(d) BNY shall not be responsible for delays or errors that occur by
reason of circumstances beyond its reasonable control in the performance of its
duties under this Agreement, provided that reasonable back-up and disaster
recovery systems are in place, including, without limitation, labor
difficulties, mechanical breakdowns, computer breakdowns or malfunctions
(hardware or software), flood or catastrophe, acts of God, failures of
transportation, communication or power supply, or other similar circumstances.
Nor shall BNY be responsible for delays or failures to supply the information or
services specified in this Agreement where such delays or failures are caused by
the failure of any person(s) other than BNY to supply any instructions,
explanations, information, specifications or documentation deemed necessary by
BNY in the performance of its duties under this Agreement.
(e) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Annuity Trust, BNY and/or NBAI shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Annuity Trust:
Nations Annuity Trust
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Xx.
To NBAI:
NationsBanc Advisors, Inc.
One Bank of America Plaza
000 Xxxxx Xxxxx Xxxxxx, XX0-000-00-00
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx
9
To BNY:
The Bank of New York
00 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Grunston
(f) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement may not be assigned by BNY, nor may BNY delegate
responsibility for the performance of any of its duties hereunder, without the
written consent of the other parties hereto.
(g) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(h) The captions of 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.
(i) This Agreement constitutes the entire agreement between the parties
hereto with respect to the provision by BNY of sub-administrative services and
the receipt of fees therefor, and supersedes all prior arrangements or
understandings, written or oral, with respect to the provision by BNY of such
services and the receipt of fees therefor.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
THE BANK OF NEW YORK
By: /s/ Xxxxxxx X. Grunston
---------------------------
Xxxxxxx X. Grunston
Vice President
NATIONSBANC ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
Senior Vice President and
Chief Operating Officer
NATIONS ANNUITY TRUST
By: /s/ Xxxxx X. Xxxxx, Xx.
---------------------------
Xxxxx X. Xxxxx, Xx.
Assistant Secretary
11
SCHEDULE I
1. Nations Annuity Value Portfolio
2. Nations International Growth Portfolio
3. Nations Disciplined Equity Portfolio
4. Nations Xxxxxxx Focused Equities Portfolio
5. Nations Xxxxxxx Growth & Income Portfolio
6. Nations Managed Index Portfolio
7. Nations Managed SmallCap Index Portfolio
8. Nations Balanced Assets Portfolio
I-1
SCHEDULE II
FUND ADMINISTRATION SERVICES
BNY shall perform the following sub-administrative services, in
addition to any other services agreed to from time to time:
o Monitor and document compliance by the Funds with their policies and
restrictions as delineated in their Prospectuses and Statements of
Additional Information, including any supplements or amendments thereto,
and with the rules and regulations under the 1940 Act utilizing Xxxxxxx
River Development's compliance monitoring system or by such other means as
the parties may agree. NBAI shall be responsible for communicating such
policies and restrictions, including any changes thereto, to BNY by such
means as the parties agree.
o Provide income attribution summary schedules necessary for year-end tax
reporting, including the attached examples. Provide a gross up for foreign
taxes on a per share basis and the redesignation of income and capital
gains on a per share basis.
o Prepare federal, state, excise and local income tax returns for the Funds
and file such returns upon the approval of the Funds' independent
accountants; monitor, report on and prepare periodic worksheet and tax
provision packages with respect to Sub-Chapter M qualifications; prepare
and file all Form 1099s with respect to the Funds' Trustees; monitor
compliance with Section 4982 of the Internal Revenue Code; calculate and
maintain records pertaining to original issue discount and premium
amortization as required; identify wash sales and all other book/tax
differences, and report results to the Funds' independent accountants and
Funds management; and such other duties relating to federal and/or state
tax compliance as the parties may agree. BNY shall be responsible for
providing all pertinent tax information to the Funds' independent
accountants.
o Prepare Return of Capital Statement of Position 93-2 adjustments.
o Support NBAI in its preparation of the schedules and provide NBAI unaudited
quarterly and semi-annual and audited annual financial statements and
schedules of Fund investments by providing, without limitation, each Funds'
schedule of investments and general ledger in electronic format and/or hard
copy, as required, and such other information as may be necessary to
complete such financial reports.
o Prepare statistical reports for outside information services (referenced in
Schedule V), and such other information services as the parties may agree,
including the ICI expense survey.
o Attend Fund shareholder and Board of Trustees meetings as requested by
NBAI, including making such presentations as are appropriate, and, with
respect to the Fund administration services described herein, provide such
periodic and special reports to the Annuity Trust and NBAI as the Annuity
Trust and NBAI shall reasonably request.
II-1
FUND ACCOUNTING SERVICES
BNY shall provide all accounting and recordkeeping services necessary
and appropriate for the business of the Funds, including but not limited to
those set forth below.
Required Records; Ledgers and Journals
BNY shall keep current the following accounts and records relating to
the business of the Funds, in such form as is required by the 1940 Act and the
rules thereunder, and generally accepted accounting principles, to support all
filings under applicable federal and state tax laws and regulations and as may
be mutually agreed to among the Annuity Trust, NBAI and BNY, and shall make
available to NBAI and/or the Annuity Trust upon request:
1. Cash Receipts Journal
2. Cash Disbursements Journal
3. Dividends Paid and Payable Schedule (book vs. tax basis)
4. Purchase and Sales Journals - Portfolio Securities
5. Realized/Unrealized Gain (Loss) Reports
6. Subscription and Redemption Journals
7. Security Ledgers - Transaction Report and Tax Lot Holdings Report
8. Broker Ledger - Commission Report
9. Daily Expense Accruals
10. Daily Interest Accruals
11. Daily Trial Balance
12. Portfolio Interest Receivable and Income Journal
13. Portfolio Dividend Receivable and Income Register
14. Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security
15. Aged Receivables (dividends, interest, tax reclaiming)
16. Portfolio Turnover Rate
17. Cash reconciliations
18. Position reconciliations
BNY will be responsible for maintaining, in accordance with Section 31
and the rules thereunder of the 1940 Act, all books and records so required and
generated in the course of performing their duties under this agreement.
Further, at a minimum, BNY shall maintain on-site the above referenced reports
as of each month end for the most recent fiscal year-ended and the current
fiscal year.
II-2
Daily Accounting Services
BNY shall perform the following services on each Business Day:
1. Calculate Net Asset Value (NAV), and Public Offering Price (POP)
Per Share Pursuant to SEC formulas:
o Update the valuation of security positions held by each Fund's
portfolio in accordance with the Fund's Pricing Procedures and any
other appropriate procedures established by the Board and NBAI as
NBAI shall provide BNY in writing
o When instructed by NBAI, enter manual prices supplied by broker
and link to pricing procedures
o Calculate each Fund's NAV/POP in accordance with the applicable
Pricing Procedures approved by the Annuity Trust's Board of
Trustees and prepare NAV proof sheet. Review components of change
in NAV for reasonableness based on the tolerance levels as NBAI
shall direct BNY in writing
o Review variance reporting for price changes in individual
securities using variance levels established by Fund and report to
Fund portfolio managers and to NBAI
o Review for ex-dividend items indicated by pricing sources; trace
to general ledger for agreement
o Communicate required pricing and yield information (NAV/POP), as
appropriate, to NBAI, the Funds' Transfer Agent and Sub-Transfer
Agent and, electronically, to NASDAQ and to such other third
parties as designated by the Funds with respect to its various
distribution channels. In addition, provide Fund share activity to
NBAI.
2. Dividend Rates/Yields/Dollar Weighted Average Maturity:
o Calculate, subject to the approval of NBAI, net investment income
available for distribution daily as appropriate
o Calculate daily dividend rate, and 1, 7, 30-day yields/SEC yields
o Calculate dollar weighted average maturity
3. Determine and Report Cash Availability:
o Receive daily cash and transaction statements from the Funds'
Custodian
o Complete daily bank cash reconciliations (including documentation
of any reconciling items) and notify the Funds' Custodian
o Report investable cash to NBAI and Fund sub-advisers
4. Daily Expense Accruals:
o Accrue individual expenses on a daily basis based on Instructions
provided by NBAI, except for those instances where such an
adjustment would cause a full xxxxx break in NAV, in which case
such adjustment will be included in the calculation of NAV on the
day received
o If applicable, accrue daily amortization of organization expense
as instructed by NBAI
II-3
o If applicable, accrue daily Rule 12b-1 Plan expenses
o Adjust expense accruals as instructed by NBAI and provide reports
as requested by NBAI
5. Verify and Record All Daily Income Accruals for Debt Issues:
o Track income and provide year end tax schedules
o Review and verify all interest and amortization reports
o Periodic tie-out of receivables
o Ensure security masters denote proper interest and amortization
methods as per the fund set up sheets as instructed by NBAI
6. Monitor Securities:
o Review each funds portfolio holding and current days security
trades for dividend activity
o Interface with Funds' Custodian for timely collection and postings
of corporate actions, dividends and interest pre-payments
7. Enter All Security Trades:
o Review verification of trade and interest calculations
o Verify settlement through custodian statements
o Maintain security ledger transaction reporting
o Maintain tax lot holdings o Determine realized gains or losses on
security trades
o Provide broker commission information
8. Enter All Fund Share Transactions:
o Periodically reconcile dividend payable amounts with the Funds'
Transfer Agent
o Process activity identified on transfer agent reports
o Verify settlement through custodian statements
o Reconcile to transfer agency report balances
o Process and track capital stock gain/loss activity
9. Prepare Daily Trial Balance:
o Post manual entries to general ledger
o Post custodian bank activity
o Require automated settled transactions between custody and
activity records (prepare, clear and post)
o Post shareholder and security transactions
o Post and verify income and expense accruals and resolve
differences
o Prepare general ledger
o Post corporate action activity
II-4
10. Review and Reconcile Custodian Statements:
o Verify all posted interest, dividends, expenses, and shareholder
and security payments/receipts, etc. when requested
o Post all cash settlement activity to trial balance
o Reconcile to ending cash balance accounts
o Report to NBAI the status of past due items and failed trades with
the custodian
o Reconcile cash exception Income items, tax reclaims and past due
income items with custody area
11. Preparation of Accounting Reports:
o Price Variance Report
o Trial Balance
o Portfolio Valuation
o NAV Calculation Report
o Cash Availability
o Change in NAV
o Non-standard entries
o Stale Price Report
o Other such reports as may be reasonably be requested by NBAI
Monthly/Quarterly Services
BNY shall provide the following services on a monthly or quarterly
basis, within such timeframe as may be mutually agreed upon by BNY, the Annuity
Trust and NBAI:
1. Submission of Monthly Accounting Reports as mutually agreed upon
2. Reconcile Asset Listing to Custodian Asset Listing
3. Provide Monthly Analysis and Reconciliation of Trial Balance Accounts
4. Prepare Documentation Supporting the Preparation of:
o SEC yield reporting
o Income by state reporting
o Standard Industry Code Valuation Report (please provide NBAI's
industry code classifications/is there a standard for all funds)
o Alternative Minimum Tax Income segregation schedule
II-5
5. Provide Upon Request Broker Commission and Net Trade Reports
Annual (and Semi-Annual) Accounting Services
BNY shall provide the following services on an annual and semi-annual
basis:
1. Supply auditors InvestOne reports supporting securities and shareholder
transactions, income and expense accruals, etc. during the year in
accordance with standard audit assistance requirements
2. Provide NBAI with information to assist NBAI in the preparation of NSAR
filings
Other Core Services
BNY shall provide the following services:
o Accrete discounts and amortize premiums to put and call events as
directed by NBAI and in a manner acceptable under generally
accepted accounting principles
o Process principal repayments on mortgage backed securities
o Update variable securities with current rates
o Process corporate action events through a primary vender feed, and
monitor results via Reuters, Bloomberg, or other available sources
as the parties may agree
o Perform automated portfolio pricing with a second vendor as
requested by NBAI
o Produce documents and respond to inquiries during account and SEC
examinations
Money Market Funds: Prepare daily xxxx to market reports and analysis
in compliance with Rule 2a-7 including:
o Calculating the daily portfolio weighted average maturity
o Report portfolio diversification based on trade/security
information provided by NBAI by:
Country, State, Tier, Liquidity, Asset Backed Securities,
Industry, Letter of Credit
o Listing percentage of portfolio maturing in specified intervals
(i.e., number of days)
o Providing issuer and guarantor diversification exception reporting
International Funds: BNY shall provide the following services:
o Report in base and local currency
II-6
o Processing of tax liability on foreign income subject to approval
of NBAI
o Daily variance analysis performed on FX rates for security
position held
o Produce automated bifurcation reporting in compliance with IRC
Section 988
o Xxxx to market security receivables and payables on a daily basis
o Determine portfolio exposure by country and currency
In addition to the above, BNY will provide additional support as agreed
upon from time to time (i.e., financial statement production).
II-7
SCHEDULE III
SERVICE LEVEL PERFORMANCE STANDARDS
------------------------------------------------------------ ---------------------------------------------------------------
Service Standard
------------------------------------------------------------ ---------------------------------------------------------------
1. Daily Cash Availability |_| 100% accuracy and delivery by 9:00 a.m. EST for
Money Market Funds and 9:30 a.m. EST for all
others
|_| Compensation for uninvested cash at Nations Cash
Reserves' mill rate
------------------------------------------------------------ ---------------------------------------------------------------
2. Calculation of daily NAVs |_| 100% accuracy by 5:00 p.m. EST including pricing,
expense accruals, cash activity, manual entries,
S/H activity. Delivery by 5:45 p.m. EST
------------------------------------------------------------ ---------------------------------------------------------------
3. Review of daily NAVs |_| 100% review by 5:30 p.m. EST
|_| Review of NAV components for
reasonableness including analysis
of the change in the NAV and the change
in mill rates.
|_| Review of price variance report
|_| Review of manual proof
------------------------------------------------------------ ---------------------------------------------------------------
4. NASDAQ Reporting |_| 100% accuracy and communication by 5:45 p.m. EST
------------------------------------------------------------ ---------------------------------------------------------------
5. Daily Pricing and Rate Report (DPRR) |_| 100% accuracy in nightly transmission of DPRRs
|_| Money Market Funds-5:30 p.m. EST
|_| All other funds- 6:00 p.m. EST
------------------------------------------------------------ ---------------------------------------------------------------
6. FundStation Report (SubM) |_| 100% accuracy and nightly transmission by 7:00 p.m.
EST
------------------------------------------------------------ ---------------------------------------------------------------
7. Processing of trade tickets |_| 100% accuracy and processed by T+1 if received by
the following cut-off times:
|_| All Funds (except International) - 10:00 am (T+1)
|_| International - 12:00 p.m. (T+1)
|_| Same day settlements - 1:30 p.m.
------------------------------------------------------------ ---------------------------------------------------------------
III-1
------------------------------------------------------------ ---------------------------------------------------------------
Service Standard
------------------------------------------------------------ ---------------------------------------------------------------
8. Problem Resolution (general) |_| NAV impact analysis within 1 day
|_| Clear and timely communication of 100% of issues
|_| Ongoing Tracking
------------------------------------------------------------ ---------------------------------------------------------------
9. Cash reconciliations |_| Performed daily and sent daily to NBAI (Money Market
Funds) and sent weekly to NBAI (all other funds)
|_| Issues communicated to NBAI same day
|_| Outstanding items addressed within 1 business day
------------------------------------------------------------ ---------------------------------------------------------------
10. Position Reconciliations |_| Performed daily and sent weekly to NBAI
|_| Issues communicated to NBAI same day
|_| Open issues addressed within 2 business days
------------------------------------------------------------ ---------------------------------------------------------------
11. Tax reporting
|_| Federal, state, tax returns |_| Tax provision package prepared within time
parameters as set by NBAI/Independent tax
|_| Tax provision packages including Sub-M and excise personnel (PWC)
tax amounts/ distributions
|_| Estimates of tax requirements prepared as required
|_| Identification of all book/tax differences by NBAI for proper tax planning
|_| Capital gain estimate preparations
------------------------------------------------------------ ---------------------------------------------------------------
12. Statistical Reports |_| Filed within the time parameters as set forth by
each statistical service
------------------------------------------------------------ ---------------------------------------------------------------
13. Expense accruals/payments |_| Payments made on the business day written
instructions from an authorized signator received
|_| Expense accruals made with 100% accuracy based upon
written instructions from NBAI
------------------------------------------------------------ ---------------------------------------------------------------
14. Management Reports |_| Provided to NBAI within 10 business days of month end
------------------------------------------------------------ ---------------------------------------------------------------
III-2
------------------------------------------------------------ ---------------------------------------------------------------
Service Standard
------------------------------------------------------------ ---------------------------------------------------------------
15. Year end tax reports |_| Provided to NBAI within the time frame agreed to
------------------------------------------------------------ ---------------------------------------------------------------
16. Annual/Semi-Annual Reports |_| Provide Trial Balance within 5 business days after
annual/semi-annual period
|_| Provide additional financial statement support as
agreed to
------------------------------------------------------------ ---------------------------------------------------------------
17. Daily Reports |_| To be provided on the following day
|_| Provide detailed portfolio valuation
|_| Trial Balance
------------------------------------------------------------ ---------------------------------------------------------------
18. Daily Cash Sweep |_| 100% accuracy and communication by 2:00 p.m. EST
|_| Nations Cash Reserves
|_| AIM
|_| Nuveen
------------------------------------------------------------ ---------------------------------------------------------------
19. Post Dividends / Corporate Actions |_| 100% accuracy and posted on effective date
------------------------------------------------------------ ---------------------------------------------------------------
20. Monthly Reconciliations |_| Complete reconciliations within 10 business days
------------------------------------------------------------ ---------------------------------------------------------------
21. Reporting to Sub-Advisors |_| Provide nightly and other periodic reporting to
Nations Funds Sub-Advisors
------------------------------------------------------------ ---------------------------------------------------------------
22. Compliance |_| Provide compliance reports as requested by NBAI
------------------------------------------------------------ ---------------------------------------------------------------
III-3
SCHEDULE IV
(Attached)
IV-1
SCHEDULE V
All Database Companies Quarterly List
----------------------- --------------
AMG Data Services Lipper
Xxxxxx'x Morningstar
Bloomberg CDA Wiesenberger
CDA Wiesenberger Investment Company Institute
Commerce Clearing House (CCH) S&P Micropal
Forbes Institute for Economic Research
Institute for Economic Research Value Line
Interactive Data Services Media General Financial Services
Investment Company Institute LCG Associates
LCG Associates Closed End Fund Digest (Closed End Only)
Lipper Lipper - International (Closed End Only)
Media General
Xxxxx'x Investors Service
Morningstar
S&P Micropal
Strategic Insights
Value Line
V-1
SCHEDULE VI
Conversion Schedule
-----------------------------------------------------------------------------
Fund Type Number of Funds No Later Than
-----------------------------------------------------------------------------
Money Market Funds 9 Funds 12/1/98
-----------------------------------------------------------------------------
Variable Annuity Funds 8 Funds 12/31/98
-----------------------------------------------------------------------------
International Funds: 8 Funds 12/31/98
- Global Government
- Emerging Markets
- Pacific Growth
- International Equity
- International Growth
- International Value
- 2 Xxxxxxx Funds
-----------------------------------------------------------------------------
All Remaining Funds 44 Funds 2/15/99
-----------------------------------------------------------------------------
VI-1
