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EXHIBIT 5(B)
INVESTMENT ADVISORY AGREEMENT
[Non-Money Market Funds]
THIS AGREEMENT is made as of the 22nd of April, 1992 between
PACIFIC HORIZON FUNDS, INC., a Maryland corporation (herein called the
"Company"), and Bank of America National Trust and Savings Association (the
"Adviser").
WHEREAS, the Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, Security Pacific National Bank currently furnishes
investment advisory services to the Company's non-money market funds pursuant
to an Investment Advisory Agreement dated as of the 22nd of April, 1992 (the
"Current Agreement"); and
WHEREAS, Security Pacific National Bank is this day merging
with the Adviser (the "Merger"); and
WHEREAS, the Company desires to retain the Adviser to
furnish investment advisory services to the Company following the Merger;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) The Company hereby appoints the Adviser to
act as investment adviser to the following investment portfolios of the
Company: Aggressive Growth Fund, Capital Income Fund, U.S. Government
Securities Fund and California Tax-Exempt Bond Fund (the "Initial Funds") for
the period and on the terms set forth in this Agreement. The Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
(b) In the event that the Company establishes one
or more investment portfolios other than the Initial Funds with respect to
which it desires to retain the Adviser to act as investment adviser hereunder,
it shall notify the Adviser in writing. If the Adviser is willing to render
such services under this Agreement it shall notify the Company in writing
whereupon such investment portfolio shall become a Fund hereunder and shall be
subject to the provisions of this Agreement to the same extent as the Initial
Funds except to the extent that said provisions (including those relating to
the compensation payable by the Fund
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to the Adviser) are modified with respect to such Fund in writing by the
Company and the Adviser at the time. The Initial Funds and any additional Fund
established hereunder in accordance with this paragraph are sometimes
collectively referred to herein as the "Funds" and individually as a "Fund."
2. Services.
Subject to the supervision of the Company's Board of
Directors, the Adviser will provide a continuous investment program for each of
the Funds, including investment research and management with respect to all
securities and investments and cash equivalents in the Funds. The Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by the Company with respect to each Fund. The
Adviser will provide the services under this Agreement in accordance with each
Fund's investment objective, policies and restrictions as stated in the Fund's
Prospectus, as from time to time amended, and resolutions of the Company's
Board of Directors. The Adviser further agrees that it:
(a) will conform with all applicable Rules and
Regulations of the Securities and Exchange Commission and will in addition
conduct its activities under this Agreement in accordance with other applicable
law, including but not limited to banking law.
(b) will place all orders for the purchase and
sale of portfolio securities for the account of each Fund with brokers or
dealers selected by the Adviser. In executing portfolio transactions and
selecting brokers or dealers, the Adviser will use its best efforts to seek on
behalf of the Company and each Fund the best overall terms available. In
assessing the best overall terms available for any transaction the Adviser
shall consider all factors 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 the
commission, if any, both for the specific transaction and on a continuing
basis. In evaluating the best overall terms available, and in selecting the
broker or dealer to execute a particular transaction, the Adviser may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to any Fund
and/or other accounts over which the Adviser or any affiliate of the Adviser
exercises investment discretion. The Adviser is authorized, subject to the
prior approval of the Company's Board of Directors, to pay to a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for any Fund which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction if, but only if, the Adviser
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determines in good faith that such commission 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 Adviser to the particular Fund and to the Company. In
no instance will portfolio securities be purchased from or sold to the Adviser
or Concord Financial Group, Inc. or an affiliated person of either acting as
principal or as broker, except as permitted by law. In executing portfolio
transactions for any Fund the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased with those of other Funds and its other
clients where such aggregation is not inconsistent with the policies set forth
in the Funds' registration statement. In such event, the Adviser will allocate
the securities so purchased or sold, and the expenses incurred in the
transaction, in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Funds and such other clients.
(c) will maintain all books and records with
respect to the securities transactions of the Company's Funds, keep books of
account with respect to such Funds and furnish the Company's Board of Directors
such periodic special reports as the Board may request.
(d) will maintain a policy and practice of
conducting its investment advisory operations independently of its commercial
banking operations. When the Adviser makes investment recommendations for a
Fund, its investment advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale
for the Fund's account are customers of its commercial department. In dealing
with commercial customers, the Adviser's commercial department will not inquire
or take into consideration whether securities of those customers are held by
the Funds.
(e) will treat confidentially and as proprietary
information of the Company all records and other information relative to the
Company and prior or present shareholders or those persons or entities who
respond to Concord Financial Group, Inc. inquiries concerning investment in the
Company, 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 Company except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where the 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
Company. Nothing contained herein, however, shall prohibit the Adviser from
advertising to or soliciting the
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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 Company
shareholders or those persons or entities who have responded to Concord
Financial Group, Inc. inquiries.
3. Services Not Exclusive. The Adviser will for all
purposes herein be deemed to be an independent contractor and will, unless
otherwise expressly provided herein or authorized by the Board of Directors
from time to time, have no authority to act for or represent the Company in any
way or otherwise be deemed its agent. The investment management services
furnished by the Adviser hereunder are not deemed exclusive, and the Adviser
will be free to furnish similar services to others so long as its services
under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the
requirements of Rule 3la-3 under the 1940 Act, the Adviser hereby agrees that
all records which it maintains for the Company are the property of the Company
and further agrees to surrender promptly to the Company any such records upon
the Company's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 3la-2 under the 1940 Act the records required to be
maintained by Rule 3la-1 under the 1940 Act.
5. Expenses. During the term of this Agreement, the
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, if any) purchased for the Company.
6. Compensation. For the services provided and the
expenses assumed pursuant to this Agreement, the Company will pay the Adviser
and the Adviser will accept as full compensation therefor a fee, computed daily
and paid monthly (in arrears), at an annual rate of .45% of the net assets of
the Capital Income Fund; .60% of the net assets of the Aggressive Growth Fund;
.35% of the net assets of the U.S. Government Securities Fund; and .40% of the
net assets of the California Tax-Exempt Bond Fund. Such fee as is attributable
to each Fund will be a separate charge to each such Fund and will be the
several (and not joint or joint and several) obligation of each such Fund.
If in any fiscal year the aggregate expenses of any Fund (as
defined under the securities regulations of any state having jurisdiction over
such Fund) exceed the expense limitations of any such state, the Adviser will
reimburse the Fund for a portion of such excess expenses equal to such excess
times the ratio of the fees otherwise payable with respect to
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such Fund to the Adviser hereunder to the aggregate fees otherwise payable with
respect to such Fund to the Adviser hereunder and to the Fund's Administrator
under its Administration Agreement with the Company. The obligation of the
Adviser to reimburse any Fund hereunder is limited in any fiscal year to the
amount of its fee hereunder for such fiscal year with respect to such Fund;
provided, however, that notwithstanding the foregoing, the Adviser will
reimburse any Fund for such proportion of such excess expenses regardless of
the amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the Fund so
require. Such expense reimbursement, if any, will be estimated and accrued
daily and paid on a monthly basis.
7. Limitation of Liability. The Adviser will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Company 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 negligence on the part of the Adviser in the performance of its duties
or from reckless disregard by it of its obligations and duties under this
Agreement.
8. Duration and Termination. This Agreement will become
effective with respect to an Initial Fund on the date of the consummation of
the Merger of Security Pacific National Bank and the Adviser, provided that the
shareholders of the Fund have previously approved the Agreement in accordance
with the requirements of the 1940 Act. This Agreement will become effective
with respect to any additional Fund on the date of receipt by the Company of
notice from the Adviser in accordance with Section 1(b) hereof that the Adviser
is willing to serve as investment adviser with respect to such Fund, provided
that this Agreement (as supplemented by the terms specified in any notice and
agreement pursuant to Section 1(b) hereof) shall have been approved by the
shareholder(s) of the Fund in accordance with the requirements of the 1940 Act.
Unless sooner terminated as provided herein, this Agreement will continue in
effect until October 31, 1993. Thereafter, if not terminated, this Agreement
shall continue in effect as to a particular Fund for successive annual periods,
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Company's Board of Directors 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
Company's Board of Directors or by vote of a majority of the outstanding voting
securities of such Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to any Fund at any time, without the payment of any penalty, by
the Company (by vote of the Company's Board of Directors or by vote of a
majority of the outstanding voting securities of such
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Fund), or by the Adviser, on sixty days' written notice. 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" will have the same meaning as the meaning
of such terms in the 1940 Act.)
9. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. No amendment of this
Agreement will be effective as to a particular Fund until approved by vote of a
majority of the outstanding voting securities of such Fund.
10. Notices. Notices of any kind to be given to the
Adviser hereunder by the Company will be in writing and will be duly given if
mailed or delivered to the Adviser at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxx, or at such other address
or to such individual as will be so specified by the Adviser to the Company.
Notices of any kind to be given to the Company hereunder by the Adviser will be
in writing and will be duly given if mailed or delivered to the Company at 000
Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X.
Xxxxxxx (with a copy to one Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, President), or at such other
address or to such individual as will be so specified by the Company to the
Adviser.
11. 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 shall be 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 will inure to the
benefit of the parties hereto and their respective successors and will be
governed by New York law; provided that nothing herein will be construed in a
manner inconsistent with the 1940
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Act, the Investment Advisers Act of 1940 or any rule or regulation of the
Securities and Exchange Commission 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.
PACIFIC HORIZON FUNDS, INC.
By:/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Xxxxx X. Xxxx
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And: /s/ Xxxxx XxXxxxx-Xxxxxx
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