1
EXHIBIT 5.1
MANAGEMENT AGREEMENT
This Management Agreement is made as of ____________, 1997 between
PACIFIC INNOVATIONS TRUST, a Delaware Business Trust (herein called the
"Company"), and Bank of America National Trust and Savings Association (herein
called the "Manager").
WHEREAS, the Company is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Company wishes to retain the Manager under this
Agreement to render investment advisory and management services to the
portfolios of the Company known as the Money Market Fund, Managed Bond Fund,
Capital Income Fund, Blue Chip Fund, Mid-Cap Equity Fund, Aggressive Growth
Fund, and International Fund (the "Initial Funds", together with any other
Company portfolios which may be established later and served by the Manager
hereunder, being herein referred to collectively as the "Funds" and
individually as a "Fund"); and
WHEREAS, pursuant to a Distribution Agreement of even date
herewith (the "Distribution Agreement") between the Company and BISYS Fund
Services Limited Partnership (the "Distributor"), the Company has retained the
Distributor to provide for the sale and distribution of shares of beneficial
interest of each Fund (herein collectively called "Shares"); and
WHEREAS, the Company desires to retain the Manager to provide all
investment management and administrative services for the Funds required by
applicable law, and the Manager is willing to render such services and is a
bank exempt from registration and regulation under the Investment Advisers Act
of 1940;
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Manager.
(A) The Company hereby appoints the Manager as
manager of each Fund on the terms and for the period set forth in this
Agreement and the Manager hereby accepts such appointment and agrees to perform
the services and duties set forth herein on the terms herein provided. The
Manager may, in its discretion, provide such services through its own employees
or the employees of one or more affiliated companies that are qualified to
provide such services to the Company under applicable law and are under the
common control of BankAmerica Corporation, provided (i) that all persons, when
providing services hereunder, are functioning as part of an organized group of
persons,
2
(ii) that such organized group of persons is managed at all times by authorized
officers of the Manager, and (iii) the Manager remains obligated under Section
7 of this Agreement.
(B) In the event that the Company establishes one or
more portfolios other than the Initial Funds with respect to which it desires
to retain the Manager to render investment advisory and management services
hereunder, it shall notify the Manager in writing. If the Manager is willing
to render such services, it shall notify the Company in writing whereupon such
portfolio or portfolios shall become a Fund or Funds hereunder.
2. Administrative Services and Duties. Subject to the
supervision and control of the Company's Board of Trustees, the Manager shall
provide to the Company facilities, equipment, statistical and research data,
clerical, accounting and bookkeeping services, internal auditing and legal
services, and personnel to carry out all management services required for
operation of the business and affairs of the Funds other than those services to
be performed by any sub-adviser appointed by the Board of Trustees (each a
"Sub-adviser" and collectively the "Sub-advisers"), those services to be
provided by the Distributor pursuant to the Distribution Agreement, those
services to be performed by PNC Bank, N.A. (the "Custodian"), pursuant to the
Company's Custody Agreement, those services to be performed by PFPC Inc.
("PFPC") pursuant to the Company's Sub-Administration and Accounting Services
Agreement, those services to be performed by Pacific Mutual Life Insurance
Company ("Pacific Mutual") pursuant to the Company's Support Services
Agreement, those services to be provided by Pacific Mutual pursuant to the
Company's Transfer Agency Agreement, and those services normally performed by
the Company's counsel and auditors.
(A) The Manager's oversight responsibilities shall
include:
(1) Overseeing the performance of each
Sub-adviser under its Sub-Advisory Agreement with respect to the
Funds;
(2) Overseeing the performance of the
Custodian under the Custody Agreement with respect to the Funds;
(3) Overseeing the performance of PFPC under
Sub-Administration and Accounting Services Agreement with respect
to the Funds; and
(4) Overseeing the performance of Pacific
Mutual pursuant to the Support Services Agreement and Transfer
Agency Agreement with respect to the Funds.
(B) The Manager's other responsibilities shall
include without limitation the following services:
-2-
3
(1) Providing a facility to receive purchase
and redemption orders for Shares via toll-free telephone lines;
(2) Making available information concerning
each Fund to its shareholders; distributing written communications
to each Fund's shareholders such as periodic listings of each
Fund's securities, annual and semi-annual reports, and
prospectuses and supplements thereto; and handling shareholder
problems and calls relating to administrative matters; and
(3) Providing and supervising the services of
employees whose principal responsibility and function shall be to
preserve and strengthen each Fund's relationships with its
shareholders.
(C) The Manager shall assure that persons are
available to transmit redemption requests for Shares to the Company's transfer
agent as promptly as practicable.
(D) The Manager shall assure that persons are
available to transmit orders accepted for the purchase of Shares to the
transfer agent of the Company as promptly as practicable.
(E) The Manager shall participate in the periodic
updating of the Funds' prospectuses and statements of additional information
and shall accumulate information for and, subject to approval by the Company's
Treasurer and legal counsel, coordinate the preparation, filing, printing and
dissemination of reports to the Funds' shareholders and the Securities and
Exchange Commission (the "Commission"), including but not limited to annual
reports and semi-annual reports on Form N-SAR, notices pursuant to Rule 24f-2
and proxy materials pertaining to the Funds, and any supplements to any of the
foregoing.
(F) The Manager shall calculate dividends and capital
gain distributions to be paid by each Fund in conformity with subchapter M and
Section 817(h) of the Internal Revenue Code of 1986, as amended.
(G) The Manager shall pay all costs and expenses of
maintaining the offices of the Company, wherever located, and shall arrange for
payment by the Company of all expenses payable by the Company.
(H) The Manager, after consultation with legal
counsel for the Company, shall determine the jurisdictions in which the Shares
shall be registered or qualified for sale, if any, and, in connection
therewith, shall be responsible for the maintenance of the registration or
qualification of the Shares for sale under the securities
-3-
4
laws of any such state. Payment of any Share registration fees and any fees
for qualifying or continuing the qualification of the Company shall be made by
the Company.
(I) The Manager shall maintain such other books and
records with respect to the Funds as may be required by law or may be required
for the proper operation of the business and affairs of the Funds, other than
those required to be maintained under any Sub- Advisory Agreements to which the
Company is a party, the Custodian Agreement, the Sub-Administration and
Accounting Services Agreement, the Support Services Agreement and the Transfer
Agency Agreement, and by the Manager under Section 3 of this Agreement.
Without limiting the foregoing, the Manager shall be responsible for the proper
maintenance of the records to be maintained by the Company, throughout the term
of this Agreement.
(J) The Manager shall prepare the Funds' federal,
state and local income tax returns.
(K) The Manager shall prepare and, subject to
approval of the Company's Treasurer, disseminate to the Company's trustees each
Fund's quarterly financial statements and schedules of investments, and shall
prepare such other reports relating to the business and affairs of the Funds
(not otherwise appropriately prepared by the Company's counsel, auditors or
other Company service providers) as the officers and trustees of the Company
may from time to time reasonably request in connection with performance of
their duties.
(L) The Manager shall assist the Custodian, Transfer
Agent, counsel and auditors as required to carry out the business and
operations of the Funds.
3. Investment Services and Duties. Subject to the
supervision of the Company's Board of Trustees, the Manager shall provide a
continuous investment program for the Funds, including investment research and
management with respect to all securities and investments and cash equivalents
in the Funds. The Manager shall 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 Manager shall provide the services under this
Section 3 in accordance with the Funds' investment objectives, policies and
restrictions as stated in the Funds' then current registration statement and
resolutions of the Company's Board of Trustees and all applicable state and
federal law or rules.
(A) The Manager shall use the same skill and care in
providing services under this Section 3 as it uses in providing services to
fiduciary accounts for which it has investment responsibilities.
-4-
5
(B) The Manager shall place all orders for the
purchase and sale of portfolio securities for the account of the each Fund with
brokers or dealers selected by the Manager. In executing portfolio
transactions and selecting brokers or dealers, the Manager will use its best
efforts to seek on behalf of each Fund the best overall terms available. In
assessing the best overall terms available for any transaction the Manager
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 Manager 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 the Fund
and/or other accounts over which the Manager or any affiliate of the Manager
exercise investment discretion. The Manager is authorized, subject to the
prior approval of the Company's Board of Trustees, 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 Manager 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
Manager to that Fund and to the Company. In no instance may portfolio
securities be purchased from or sold to the Manager, any sub-adviser, or an
affiliated person of any of them acting as principal or as broker, except as
permitted by law. In executing portfolio transactions for the Funds the
Manager 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 investment portfolios and its other clients where such
aggregation is not inconsistent with the policies set forth in the Company's
registration statement. In such event, the Manager shall 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) In performing the investment advisory services
hereunder, the Manager is authorized to purchase, sell or otherwise deal with
securities or other instruments for which (i) the Manager or any Sub-adviser,
(ii) any affiliate of the Manager or any Sub-adviser, (iii) an entity in which
the Manager or any Sub-adviser has a direct or indirect interest, and (iv)
another member of a syndicate or other intermediary (where an entity referred
to in (i), (ii) or (iii) above was a member of the syndicate), has acted, now
acts or in the future will act as an underwriter, syndicate member,
market-maker, dealer, broker or in any other similar capacity, whether the
purchase, sale or other dealing occurs during the life of the syndicate or
after the close of the syndicate, provided such purchase, sale or dealing is
permitted under the 1940 Act and the rules thereunder. Insofar as permitted by
law, any rules of or under applicable law prohibiting
-5-
6
or restricting in any way an agent or fiduciary from dealing with itself or
from dealing with respect to any matter in which it may or does have a personal
interest shall not apply to the Manager, to the extent its actions are
authorized under this paragraph.
(D) The Manager shall maintain books and records with
respect to the securities transactions of the Company, and furnish the
Company's Board of Trustees such periodic and special reports as the Board may
request.
(E) The Manager shall maintain a policy and practice
of conducting its investment advisory operations independently of its
commercial banking operations. When the Manager makes investment
recommendations for a Fund, its investment advisory personnel shall 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 Manager's commercial
department shall not inquire or take into consideration whether securities of
those customers are held by the Funds except as required by law.
(F) The Manager shall review, monitor and report to
the Board of Trustees regarding the performance and investment practices,
strategies, and procedures of the Manager and any Sub-adviser appointed by the
Board of Trustees, and shall assist and consult with any Sub-adviser in
connection with the Fund's continuous investment program.
4. Compliance with Governing Instruments and Laws. In
performing its duties as Manager for the Funds, the Manager shall act in
conformity with the Company's Declaration of Trust, Bylaws, prospectuses and
statements of additional information, and the instructions and directions of
the Board of Trustees of the Company. In addition, the Manager shall conform
to and comply with the requirements of the 1940 Act, the Rules and Regulations
of the Commission, and all other applicable federal or state laws and
regulations, including, but not limited to, Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and Section 817(h) of Subchapter
L of the Code.
5. Services Not Exclusive. The Manager shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Board of Trustees from
time to time, have no authority to act for or represent the Company in any way
or otherwise be deemed its agent. The services furnished by the Manager
hereunder are not deemed exclusive, and the Manager shall be free to furnish
similar services to others so long as its services under this Agreement are not
impaired thereby.
6. Books and Records. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Manager hereby agrees that all records which
it maintains for the Company are the property of the Company and further agrees
to surrender promptly to
-6-
7
the Company any such records upon the Company's request. The Manager agrees to
obtain all Company records held by any subcontractor upon the termination of
such subcontractor. The Manager 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. The Company shall have the right
to inspect, audit or request copies of any and all records pertaining to this
Agreement.
7. Subcontractors. It is understood that the Manager may
from time to time employ or associate with itself such person or persons as the
Manager may believe to be particularly fitted to assist in the performance of
this Agreement; provided, however, that the compensation of such person or
persons shall be paid to the Manager. Without limiting the generality of the
foregoing, it is understood that the Manager and the Company intend to enter
into an agreement with PFPC under which PFPC will provide certain
administration services to the Company ("subadministration services"), and that
the Manager shall pay PFPC for the provision of such subadministration
services. It is understood that the Manager shall be as fully responsible to
the Company for the acts and omissions of any subcontractor as it is for its
own acts and omissions. It is also understood that the Manager and the Company
intend to enter into an agreement with PFPC under which PFPC will provide
certain accounting, bookkeeping, pricing and dividend distribution calculation
services ("accounting services") with respect to the Funds, and that the Funds
shall pay PFPC for the provision of such accounting services.
8. Expenses Assumed as Manager. Except as otherwise stated
in this Agreement, the Manager shall pay all expenses incurred by it in
performing its services and duties hereunder as Manager including the fees of
any subadviser and the cost of any independent pricing service used in
connection with the Funds (other than the cost of securities purchased for the
Company). The Company shall bear other expenses incurred in the operation of
the Funds, including without limitation taxes, interest, brokerage fees and
commissions, if any, fees of trustees who are not officers, directors,
partners, employees or holders of 5 percent or more of the outstanding voting
securities of the Manager or any of its affiliates, Commission fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, outside auditing and legal expenses, costs of maintaining trust
existence, costs of preparing and printing prospectuses or any supplements or
amendments thereto necessary for the continued effective registration of the
Shares under federal or state securities laws, costs of printing and
distributing any prospectus, supplement or amendment thereto for existing
shareholders of the Funds described therein, costs of shareholders' reports and
meetings, and any extraordinary expenses.
9. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, the Company shall pay the Manager a fee,
computed daily and payable monthly, at the following annual rates of the
average net assets of each Fund: Money Market Fund - .22%; Managed Bond Fund -
.37%; Capital Income Fund -
-7-
8
.48%; Mid-Cap Equity Fund - .53%; Blue Chip Fund - .53%; Aggressive Growth Fund
- .61%; and International Fund - .66%. Such fee as is attributable to each
Fund shall be a separate (and not joint or joint and several) obligation of
each such Fund. Notwithstanding anything to the contrary herein, if in any
fiscal year the aggregate operating expenses of any Fund, other than interest,
taxes, brokerage commissions and extraordinary expenses, exceed the following
expense limitations, the Company may deduct from the fees to be paid pursuant
to this Agreement, or the Manager shall bear such excess, to the extent of its
management fees with respect to such Fund for such year less 0.02% of the
average net assets of the Fund for such year: Money Market Fund - .60%; Managed
Bond Fund - .75%; Capital Income Fund - .87%; Blue Chip Fund - .94%; Mid-Cap
Equity Fund - .94%; Aggressive Growth Fund - 1.03%; and International Fund -
1.24%. Such deduction or payment, if any, will be estimated and accrued daily
and paid on a monthly basis.
10. Confidentiality. The Manager shall 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 the Distributor's inquiries concerning investment in
the Company, and shall 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 Manager 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 Manager 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 Company shareholders or those persons
or entities who have responded to inquiries with respect to the Funds.
11. Limitations of Liability. Subject to the provisions of
this Agreement concerning the Manager's responsibilities for the acts and
omissions of persons employed or associated with the Manager, the Manager shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Company or by any Fund in connection with the matters to which
this Agreement relates, 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 its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
director, employee or agent of the Manager, who may be or become an officer,
director, employee or agent of the Company, shall be deemed, when rendering
services to the Company or to any Fund, or acting on any business of the
Company or of any Fund (other than services or business in connection
-8-
9
with the Manager's duties as Manager hereunder or under any other agreement
with the Company) to be rendering such services to or acting solely for the
Company or Fund and not as an officer, director, employee or agent or one under
the control or direction of the Manager even though paid by the Manager.
The Manager acknowledges and agrees that the Declaration of Trust
of the Company provides that the Trustees of the Company and the officers of
the Company executing this Agreement on behalf of the Company shall not be
personally bound hereby or liable hereunder, nor shall resort be had to their
private property or the private property of the shareholders of the Company for
the satisfaction of any claim or obligation under this Agreement.
12. Duration or Termination. This Agreement shall become
effective as of the date first written above and, unless sooner terminated as
provided herein, shall continue until __________, 1999. Thereafter, this
Agreement will be extended with respect to a particular Fund for successive
one-year periods ending on October 31st of each year, provided each such
extension is specifically approved at least annually (a) by vote of a majority
of those members of the Company'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 Company's Board of
Trustees or by vote of a majority of the outstanding voting securities of such
Fund. This Agreement may be terminated by the Company at any time with respect
to any Fund, without the payment of any penalty, by vote of a majority of the
entire Board of Trustees of the Company or by a vote of a majority of the
outstanding voting securities of such Fund on 60 days' written notice to the
Manager, or by the Manager at any time, without the payment of penalty, on 60
days' written notice to the Company. 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"
shall have the same meanings as such terms have in the 1940 Act.
13. Names. The name "Pacific Innovations Trust, a Delaware
Business Trust" refers to the trust created and the trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated September 25, 1996, as amended, which is hereby referred to and a
copy of which is on file at the principal office of the Company. The trustees,
officers, employees and agents of the Company shall not personally be bound by
or liable under any written obligation, contract, instrument, certificate or
other interest or undertaking of the Company made by the trustees or by an
officer, employee or agent of the Company, 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. All persons dealing with any series or class
of shares of the Company may enforce claims against the Company only against
the assets belonging to such series or class.
-9-
10
14. Notices. Notices of any kind to be given to the Company
hereunder by the Manager shall be in writing and shall be duly given if mailed
or delivered to the Company at the following:
Pacific Innovations Trust, a
Delaware Business Trust
c/o PFPC Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxx X'Xxxxx, Esq.
Vedder, Price, Xxxxxxx & Kammholz
000 X. XxXxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
or at such other address or to such individual as shall be so specified by the
Company to the Manager. Notices of any kind to be given to the Manager
hereunder by the Company shall be in writing and shall be duly given if mailed
or delivered to the Manager at:
Bank of America National Trust and
Savings Association
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx XxXxxxx-Xxxxxx
With a copy to:
Bank of America National Trust and Savings Association
000 Xxxxxxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxx Xxxxx, Esq.
or at such other address or to such individual as shall be so specified by the
Manager to the Company.
15. 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 shall not
be affected thereby. Subject to the provisions of
-10-
11
Section 12 hereof, 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 Delaware law (without regard to principles of conflicts of law);
provided, however, that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or regulation of the 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 INNOVATIONS TRUST, A
DELAWARE BUSINESS TRUST
By: ________________________________
________________________________
President
Attest: ________________________________
________________________________
Secretary
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: ________________________________
________________________________
(title) ________________________
Attest: ________________________________
________________________________
(title) _________________________
-11-
