EXHIBIT 5(m)
SUB-ADVISORY AGREEMENT
International Bond Portfolio
AGREEMENT dated as of January 1, 1997, between PNC Asset Management
Group, Inc., a Delaware corporation ("Adviser"), and BLACKROCK FINANCIAL
MANAGEMENT, INC., a Delaware limited corporation ("Sub-Adviser").
WHEREAS, Adviser has agreed to furnish investment advisory services to the
International Bond Portfolio (the "Portfolio") of Compass Capital Funds (the
"Fund"), an open-end, management investment company registered under the
Investment Company Act of 1940 ("1940 Act"); and
WHEREAS, Adviser wishes to retain the Sub-Adviser to provide it with sub-
advisory services as described below in connection with Adviser's advisory
activities on behalf of the Portfolio;
WHEREAS, the advisory agreement between Adviser and the Fund dated January
4, 1996 (such Agreement or the most recent successor agreement between such
parties relating to advisory services to the Portfolio is referred to herein as
the "Advisory Agreement") contemplates that Adviser may sub-contract investment
advisory services with respect to the Portfolio to a sub-adviser pursuant to a
sub-advisory agreement agreeable to the Fund and approved in accordance with the
provisions of the 1940 Act;
WHEREAS, this Agreement has been approved in accordance with the provisions
of the 1940 Act, and 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. Adviser hereby appoints Sub-Adviser to act as sub-adviser
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with respect to the Portfolio as provided in Section 2 of the Advisory
Agreement. Sub-Adviser accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Services of Sub-Adviser. Subject to the oversight and supervision of
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Adviser and the Fund's Board of Trustees, Sub-Adviser will supervise the day-to-
day operations of the Portfolio and perform the following services: (i) provide
investment
research and credit analysis concerning the Portfolio's investments, (ii)
conduct a continual program of investment of the Portfolio's assets, (iii)
determine what portion of the Portfolio's assets will be invested in cash, cash
equivalents and money market instruments, (iv) place orders for all purchases
and sales of the investments made for the Portfolio, and (v) maintain the books
and records as are required to support Fund operations (in conjunction with
record-keeping and accounting functions performed by Adviser). In addition,
Sub-Adviser will keep the Fund and Adviser informed of developments materially
affecting the Fund and shall, on its own initiative, furnish to the Fund from
time to time whatever information Sub-Adviser believes appropriate for this
purpose. Sub-Adviser will communicate to Adviser on each day that a purchase or
sale of an instrument is effected for the Portfolio (i) the name of the issuer,
(ii) the amount of the purchase or sale, (iii) the name of the broker or dealer,
if any, through which the purchase or sale will be effected, (iv) the CUSIP
number of the instrument, if any, and (v) such other information as Adviser may
reasonably require for purposes of fulfilling its obligations to the Fund under
the Advisory Agreement. Sub-Adviser will provide the services rendered by it
under this Agreement in accordance with the Portfolio's investment objectives,
policies and restrictions as stated in the Portfolio's Prospectus and Statement
of Additional Information (as currently in effect and as they may be amended or
supplemented from time to time), and the resolutions of the Fund's Board of
Trustees.
3. Other Sub-Adviser Covenants. Sub-Adviser further agrees that it:
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(a) will comply with all applicable Rules and Regulations of the Securities
and Exchange Commission (the "SEC") and will in addition conduct its activities
under this Agreement in accordance with other applicable law;
(b) will place orders either directly with the issuer or with any broker or
dealer. Subject to the other provisions of this paragraph, in placing orders
with brokers and dealers, Sub-Adviser will attempt to obtain the best price and
the most favorable execution of its orders. In placing orders, Sub-Adviser will
consider the experience and skill of the firm's securities traders as well as
the firm's financial responsibility and administrative efficiency. Consistent
with this obligation, Sub-Adviser may, subject to the approval of the Fund's
Board of Trustees, select brokers on the basis of the research, statistical and
pricing services they provide to the Portfolio and other clients of Adviser or
Sub-Adviser. Information and research received from such brokers will be in
addition to, and not in lieu of, the services required to be performed by Sub-
Adviser hereunder. A commission paid to such brokers may be higher than that
which another qualified broker would have
charged for effecting the same transaction, provided that Sub-Adviser determines
in good faith that such commission is reasonable in terms either of the
transaction or the overall responsibility of Adviser and Sub-Adviser to the
Portfolio and their other clients and that the total commissions paid by the
Portfolio will be reasonable in relation to the benefits to the Portfolio over
the long-term. In addition, Sub-Adviser is authorized to take into account the
sale of shares of the Fund in allocating purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with Adviser, Sub-Adviser or the Fund's distributor), provided that
Sub-Adviser believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified firms. In no instance,
however, will the Portfolio's securities be purchased from or sold to the
Adviser, Sub-Adviser, the Fund's distributor or any affiliated person thereof,
except to the extent permitted by the SEC or by applicable law;
(c) will maintain or cause Adviser to maintain books and records with
respect to the Portfolio's securities transactions and will render to Adviser
and the Fund's Board of Trustees such periodic and special reports as they may
request;
(d) will maintain a policy and practice of conducting its investment
advisory services hereunder independently of the commercial banking operations
of its affiliates. When Sub-Adviser makes investment recommendations for the
Portfolio, its investment advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale for
the Portfolio's account are customers of the commercial department of its
affiliates; and
(e) will treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund, the Portfolio's and the
Fund's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Fund, which approval shall not be unreasonably withheld and may not be
withheld where 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 Fund.
4. Services Not Exclusive. Sub-Adviser's services hereunder are not
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deemed to be exclusive, and Sub-Adviser shall be free to render similar services
to others so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
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under the 1940 Act, Sub-Adviser hereby agrees that all records which it
maintains for the Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request. Sub-
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
6. Expenses. During the term of this Agreement, Sub-Adviser will pay all
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expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities, and other investments (including
brokerage commissions and other transaction charges, if any) purchased or sold
for the Portfolio.
7. Compensation. For the services which the Sub-Adviser will render to
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Adviser under this Agreement, Adviser will pay to Sub-Adviser a fee, computed
daily and payable monthly, at the following annual rates for the Portfolio: .40%
of the first $1 billion of the Portfolio's average daily net assets, .35% of the
next $1 billion of the Portfolio's average daily net assets, .325% of the next
$1 billion of the Portfolio's average daily net assets and .30% of the average
daily net assets of the Portfolio in excess of $3 billion.
If the Adviser waives any or all of its advisory fee payable under the
Advisory Agreement, or reimburses the Fund pursuant to Section 8(b) of that
Agreement, with respect to the Portfolio, the Sub-Adviser will bear its share of
the amount of such waiver or reimbursement by waiving fees otherwise payable to
it hereunder on a proportionate basis to be determined by comparing the
aggregate fees that would otherwise be paid to it hereunder with respect to the
Portfolio to the aggregate fees that would otherwise be paid by the Fund to the
Adviser under the Advisory Agreement with respect to the Portfolio. Adviser
shall inform Sub-Adviser prior to waiving any advisory fees.
8. Limitation on Liability. Sub-Adviser will not be liable for any error
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of judgment or mistake of law or for any loss suffered by Adviser or by the
Portfolio in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as of
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the date hereof and, unless sooner terminated as provided herein, shall continue
in effect until March 31, 1998. Thereafter, if not terminated, this Agreement
shall continue in effect for successive annual periods ending on March 31,
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Fund's Board of Trustees who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Fund's Board
of Trustees or by a vote of a majority of the outstanding voting securities of
the Portfolio. Notwithstanding the foregoing, this Agreement may be terminated
at any time, without the payment of any penalty, by the Fund (by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio), or by Adviser or Sub-Adviser on 60 days' written
notice, and will terminate automatically upon any termination of the Advisory
Agreement between the Fund and Adviser. This Agreement will also immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings of such terms in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
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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. Any amendment of this Agreement shall be
subject to the 1940 Act.
11. Miscellaneous. The captions in this Agreement are included for
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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 on, and shall inure to the
benefit of, the parties hereto and their respective successors and shall be
governed by Delaware law.
12. Counterparts. This Agreement may be executed in counterparts by the
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parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
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.
PNC ASSET MANAGEMENT GROUP, INC.
/s/ Xxxxxxx X. Xxxxxxxx
By:______________________________
BLACKROCK FINANCIAL MANAGEMENT, INC.
/s/ Xxxxx Xxxxxxxxxxx
By:______________________________
