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EXHIBIT 5.4
FORM OF
SUB-ADVISORY AGREEMENT
Pacific Innovations Global Value Fund
AGREEMENT, made as of __________ __, 1998, between Bank of America
National Trust and Savings Association, a national banking association
(hereinafter called the "Manager"), and Xxxxxxxxx, Xxxxxxxx & Company Investment
Management, L.P. (the "Sub-Adviser").
WHEREAS, the Pacific Innovations Global Value Fund (the "Fund") is a
series of Pacific Innovations Trust, a Delaware business trust (the "Trust"), an
open-end, management investment company organized as a business trust under the
laws of the state of Delaware; and
WHEREAS, pursuant to a Management Agreement dated _________ __, 1998
(the "Management Agreement") by and between the Trust and the Manager, the
Manager has agreed to furnish investment management services to the Fund; and
WHEREAS, the Management Agreement specifically authorizes the Manager to
sub-contract investment advisory services on behalf of the Fund to the
Sub-Adviser pursuant to a sub-advisory agreement agreeable to the Trust and
approved in accordance with the provisions of the Declaration of Trust and
Bylaws of the Trust; and
WHEREAS, the Board of Trustees of the Trust has approved this Agreement,
and the Sub-Adviser is willing to furnish such services upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Manager hereby appoints the Sub-Adviser to act as sub-investment
adviser with respect to the investment portfolio of the Fund for the period and
on the terms set forth in this Agreement and the Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. SERVICES OF SUB-ADVISER.
Subject to the oversight and supervision of the Manager and the Trust's
Board of Trustees, the Sub-Adviser will provide a continuous investment program
for the Fund, including investment research and management with respect to all
securities, investments, cash and cash equivalents in the portfolio of the Fund.
The Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The Sub-Adviser
will provide the services rendered by it under this Agreement in accordance with
the investment criteria and policies established from time to time for the Fund
by the Manager, the investment objective,
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policies and restrictions as stated in the Fund's current Prospectus with
respect to the Fund, and resolutions of the Trust's Board of Trustees. Without
limiting the generality of the foregoing, the Sub-Adviser further agrees that it
will maintain all books and records regarding the securities transactions with
respect to the Fund, keep books of account with respect to the Fund and supply
the Trust and its Board of Trustees with reports, statistical data and economic
information as reasonably requested.
3. OTHER COVENANTS.
The Sub-Adviser agrees that it:
(a) will conform with all applicable rules and regulations of the
U.S. Securities and Exchange Commission and will, in addition, conduct its
activities under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing services under
this Agreement as it uses in providing services to other investment funds for
which it has investment responsibilities;
(c) will place orders pursuant to its investment determinations
with respect to the Fund with brokers or dealers reasonably acceptable to the
Manager [including its broker-dealer affiliate ___________________ or any
successor to it.] In executing portfolio transactions and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek on behalf of the Fund
the best overall terms available. In assessing the best overall terms available
for any transaction, the Sub-Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of any commission or spread, if any, both for the
specific transaction and on a continuing basis. In evaluating the best overall
terms available, and in selecting the broker-dealer to execute a particular
transaction, the Sub-Adviser may also consider the brokerage and research
services as those terms are defined in Section 28(e) of the U.S. Securities
Exchange Act of 1934, (as amended) provided with respect to the Fund or other
accounts over which the Sub-Adviser or an affiliate of the Sub-Adviser exercises
investment discretion. The Sub-Adviser is authorized, subject to the prior
approval of the Manager and the Fund's Board of Trustees to pay to a broker or
dealer who provides such brokerage and research services a commission or spread
for executing a portfolio transaction with respect to the Fund that is in excess
of the amount of commission or spread another broker or dealer would have
charged for effecting that transaction if, but only if, the Sub-Adviser
determines in good faith that such commission or spread was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer -- viewed in terms of that particular transaction or in terms
of the overall responsibilities of the Sub-Adviser to the Fund. In no instance
will portfolio securities be purchased from or sold to the Manager, the
Sub-Adviser, or Concord Holding Corporation (or any of its affiliates) acting as
principal or broker, except to the extent permitted by law. In executing
portfolio transactions with respect to the Fund, the Sub-Adviser may, but is not
obligated to the extent permitted by applicable laws and regulations, aggregate
the securities to be sold or purchased with those of its other clients where
such aggregation is not inconsistent with the policies set forth in the Fund's
currently
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effective Prospectus. In such event the Sub-Adviser will allocate the securities
so purchased or sold, and the expenses incurred in the transaction, in the
manner it considers to be most equitable and consistent with its fiduciary
obligations to the Fund and such other clients;
(d) when the Sub-Adviser makes investment recommendations with
respect to the Fund, its investment advisory personnel will not inquire or take
into consideration whether the issuers of securities proposed for purchase or
sale for the account of the Fund are customers of its, or any of its affiliates'
other departments;
(e) will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund and prior or
present Fund interest holders ("Investors") or those persons or entities who
respond to inquiries concerning investment in the Fund and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder or under any other agreement with the
Trust except after prior notification to an approval in writing by the Trust,
which approval shall not be unreasonably withheld and may not be withheld where
the Sub-Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust. Nothing contained
herein, however, shall prohibit the Sub-Adviser from advertising to or
soliciting the public generally with respect to other products or services,
including, but not limited to, any advertising or marketing via radio,
television, newspapers, magazines or direct mail solicitation, regardless of
whether such advertisement or solicitation may coincidentally include prior or
present Investors or those persons or entities who have responded to inquiries
regarding the Fund, to the extent permitted by applicable law;
(f) will not purchase any securities from or sell any securities
to or engage in any financial transactions with the Manager or any of its
affiliates on behalf of the Fund. Nothing in this subsection shall in any way
prohibit the Sub-Adviser or any of its affiliates from purchasing securities
from, selling securities to or engaging in any other financial transactions with
the Manager or any of its affiliates on behalf of any other accounts managed by
the Sub-Adviser or for the Sub-Adviser's own account; and
(g) will provide the information set forth on Appendix A attached
hereto.
4. SERVICES NOT EXCLUSIVE.
The services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
The Sub-Adviser will for all purposes herein be deemed to be an independent
contractor and will, unless otherwise expressly authorized, have no authority to
act for or represent the Fund or the Manager in any way or otherwise be deemed
their agent.
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5. BOOKS AND RECORDS.
The Sub-Adviser hereby agrees that all records that it maintains with
respect to the Fund are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request,
copies of which may be retained by the Sub-Adviser. The Sub-Adviser further
agrees to maintain and to preserve the information required pursuant to and for
the periods prescribed by Rule 31a-1 and Rule 31a-2, respectively under the U.S.
Investment Company Act of 1940 (the "1940 Act").
6. EXPENSES.
During the term of this Agreement, the Sub-Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities (including brokerage commissions or spreads and other
transaction costs, if any) purchased or sold with respect to the Fund.
7. COMPENSATION.
For the services provided and the expenses assumed pursuant to this
Agreement, the Manager will pay the Sub-Adviser, and the Sub-Adviser will accept
as full compensation therefor, a fee, computed daily and payable monthly (in
arrears), at the following annual rates based on the total net assets of the
Fund as follows:
The Sub-Adviser acknowledges that it shall not be entitled to any
further compensation from the Manager in respect of the services provided and
expenses assumed by it under this Agreement. The Sub-Adviser's fees hereunder,
and the Sub-Adviser's sole recourse for payment of such fees shall be to the
Manager.
8. REDUCTION OF FEES.
The Manager and the Sub-Adviser hereby agree that the fees of the
Sub-Adviser pursuant to this Agreement shall be subject to reduction or waiver
in the event that the Manager reduces or waives all or a portion of the
Management fee otherwise due to the Manager pursuant to the Management Agreement
in order to permit the Fund to meet its initial target expense ratio of _____ of
1%. To the extent the Fund meets its initial target expense ratio including
partial or full Management fees, the Sub-Adviser shall not be required to waive
fees in order for the Fund to maintain expenses below the target expense ratio.
Such reduction or waiver shall be effective with respect to the Sub-Advisory fee
due hereunder upon thirty (30) days written notice (or facsimile) by the Manager
to the Sub-Adviser. All such reductions of the Management fee pursuant to notice
as provided herein shall be shared by and assessed against the Manager and the
Sub-Adviser equally rather than pro rata. Nothing in this section 8 shall be
interpreted to limit the ability of the Manager and the Sub-Adviser to
voluntarily and immediately waive or reduce any portion of their respective fees
nor shall any such voluntary and immediate fee reduction or waiver be construed
as a waiver
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by the Sub-Adviser of the notice provision in any future fee reductions or
waivers as provided for herein.
9. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with the performance
of this Agreement, except that the Sub-Adviser shall be liable to the Fund for
any loss resulting from a breach of fiduciary duty by the Sub-Adviser with
respect to the receipt of compensation for services or any loss resulting from
willful misfeasance, bad faith or negligence on the part of the Sub-Adviser in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Sub-Adviser acknowledges and
agrees that the performance of this Agreement is for the benefit of the Fund,
that the Sub-Adviser is therefore directly liable and responsible to the Fund
for the performance of its obligations hereunder, and that the Fund may enforce
in its own name and for itself such liability and responsibility.
10. DURATION AND TERMINATION.
This Agreement will become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue in effect until ________
__, 199_. Thereafter, if not terminated, this Agreement shall automatically
continue in effect for successive annual periods ending on _________ __,
provided such continuance is specifically approved at least annually by the vote
of a majority of the Trust's Board of Trustees at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated at any time, without the payment of any penalty, by
the Manager or by the Trust (by vote of the Trust's Board of Trustees) on sixty
days' written notice to the Sub-Adviser, or by the Sub-Adviser, on sixty days'
written notice to the Trust, provided that in each such case, notice shall be
given simultaneously to the Manager. In addition, notwithstanding anything
herein to the contrary, in the event of the termination of the Management
Agreement for any reason (whether by the Trust, by the Manager or by operation
of law) this Agreement shall terminate upon the effective date of such
termination of the Management Agreement. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the term
"assignment" shall have the same meaning as such term has in the 1940 Act.)
11. AMENDMENT 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 other
party against which enforcement of the change, waiver, discharge or termination
is sought. No amendment of this Agreement shall be effective until approved by
vote of a majority of the Trust's Trustees.
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12. MISCELLANEOUS.
The captions in the 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 shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by the internal laws, and not the
law of conflicts, of the State of California, provided that nothing herein will
be construed in a manner inconsistent with the 1940 Act, the Investment
Manager's Act of 1940, as amended, or any rule or regulation of the U.S.
Securities and Exchange Commission thereunder.
13. NAMES.
The names "Fund," "Trust" and the "Board of Trustees" refer respectively
to the Trust created and the Trustees, as trustees but not individually or
personally, acting from time to time under the Declaration of Trust, dated
September 25, 1996, which is hereby referred to and a copy of which is on file
at the principal office of the Trust. The Trustees, officers, employees and
agents of the Trust shall not personally be bound by or liable under any written
obligation, contract, instrument, certificate or other interest or undertaking
of the Trust made by the Trustees or by an officer, employee or agent of the
Trust, in his or her capacity as such, nor shall resort be had to their private
property for the satisfaction of any obligation or claim thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Bank of America National Trust Xxxxxxxxx, Xxxxxxxx & Company
and Savings Association Investment Management, L.P.
By: __________________________ By: ________________________________
Title: Title:
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APPENDIX A
TO SUB-ADVISORY AGREEMENT
1. On at least a monthly basis, the Sub-Adviser will provide to the Manager
within 15 days of the end of the month the following:
- a current schedule of all portfolio securities held by the Fund;
- a schedule of all securities sold by the Fund during the previous
month;
- a schedule of brokerage commissions or other dealer concessions
paid during the previous month and the broker or dealer to whom
such benefit flowed;
- a schedule and description of all repurchase transactions and
reverse repurchase transactions during the previous month and the
counterparties to such transactions;
- a description of the current strategies and tactics to be
employed by the Sub-Adviser on behalf of the Fund; and
- a copy of the Sub-Adviser's monthly review of the Fund's
performance against its benchmark.
2. On a periodic basis the Manager may request and the Sub-Adviser shall
deliver to the Manager within a period of time that is reasonable
depending upon the information requested the following:
- trade tickets evidencing securities trades on behalf of the Fund;
- copies of credit files regarding the issuers of portfolio
securities held by the Fund;
- a description, including any identification numbers similar to
CUSIP, and dealer through which such security was purchased on
behalf of the Fund; and
- a description including any identification numbers similar to
CUSIP and dealer through which such security was purchased/sold
on behalf of the Fund.
