<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PACIFIC INNOVATIONS TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
PACIFIC LIFE INSURANCE COMPANY
November 23, 1998
Dear Variable Contract Owner:
We are pleased to enclose a Notice and Proxy Statement for the Special Meeting
of the Shareholders (the "Meeting") of the Managed Bond Fund (the "Fund") of
the Pacific Innovations Trust (the "Trust"), along with a voting
instruction/proxy card.
The Meeting is scheduled to be held at 9:00 a.m. Eastern Standard Time, on
December 29, 1998 at the offices of the Fund, 400 Bellevue Parkway, Wilmington,
Delaware. Please take the time to read the Proxy Statement and cast your vote,
since it covers matters that are important to the Fund and to you as owner of a
Pacific Innovations variable annuity contract ("Contract") having an interest
in the Fund. As all or part of your Contract value was allocated to the
Managed Bond Subaccount on the record date, November 4, 1998, you are entitled
to receive information and provide voting instructions to Pacific Life
Insurance Company ("Pacific Life") on issues placed before the shareholders of
the Fund. You can give voting instructions to Pacific Life based on the number
of Fund shares in which you had an interest on the record date, which are shown
on the enclosed voting instruction/proxy.
The purpose of the Meeting is to seek your approval of a new sub-advisory
agreement between Bank of America National Trust and Savings Association,
("Bank of America"), the Fund's adviser, and Scudder Kemper Investments,
Inc.("Scudder Kemper"). Zurich Insurance Company ("Zurich"), the majority
owner of Scudder Kemper, has combined its businesses with the financial
services businesses of B.A.T Industries plc. The resulting company, Zurich
Financial Services, has become the parent company of Zurich and the majority
owner of Scudder Kemper. The foregoing is referred to as the "Transaction".
Consummation of the Transaction constituted an "assignment," as that term is
defined in the Investment Company Act of 1940 (the "1940 Act") of the Fund's
former sub-advisory agreement with Scudder Kemper. As required by the 1940
Act, the former sub-advisory agreement, under its terms, automatically
terminated in the event of its assignment. A new sub-advisory agreement
between Bank of America and Scudder Kemper is being proposed for approval by
shareholders of the Fund. The new sub-advisory agreement for the Fund is on
the same terms in all material respects as the former sub-advisory agreement.
The only change is the effective date.
The Board of the Trust has voted unanimously to approve the new sub-advisory
agreement and to recommend its approval to shareholders. This proposal is
described in more detail in the enclosed Proxy Statement.
Pacific Life will vote shares of the Fund held by the Managed Bond Subaccount
according to instructions received from Contract owners having an interest in
the Fund. If you don't give voting instructions to Pacific Life, the shares in
which you have an interest will be voted in proportion to the responses
received from other Contract owners having an interest in the Fund. As
provided in the proxy statement, the Fund's shares owned by Pacific Life's
subsidiary will also be voted in proportion to the vote by Contract owners.
Please complete and return the voting instruction/proxy card in the enclosed
postage-paid envelope if you want to exercise your voting rights. You may also
give voting instructions in person at the Special Meeting of Shareholders. We
appreciate your participation and prompt response in this matter and thank you
for your continued support.
Sincerely,
Thomas C. Sutton
Chairman of the Board and Chief Executive Officer
<PAGE> 3
PACIFIC INNOVATIONS TRUST
MANAGED BOND FUND
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
DECEMBER 29, 1998
November 23, 1998
To the Shareholders:
You are invited to attend a Special Meeting (the "Meeting") of the shareholders
of the Managed Bond Fund (the "Fund") of the Pacific Innovations Trust, a
Delaware Business Trust. The meeting will be held at the offices of the Fund,
400 Bellevue Parkway, Wilmington, Delaware, on Tuesday, December 29, 1998, at
9:00 a.m., Eastern Standard Time, for the following purpose and to transact
such other business, if any, as may properly come before the Meeting:
1. To consider approval of a new sub-advisory agreement between
Bank of America National Trust and Savings Association, the Fund's
adviser, and Scudder Kemper Investments, Inc.
The Board of Trustees of the Fund has fixed the close of business on November
4, 1998 as the record date for determining the shareholders of the Fund
entitled to notice of and to vote at the Meeting. Shareholders are entitled to
one vote for each share held.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED VOTING
INSTRUCTION/PROXY CARD. SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
PLEASE MAIL YOUR VOTING INSTRUCTION/PROXY PROMPTLY.
Cathy G. O'Kelly
Secretary
<PAGE> 4
PACIFIC INNOVATIONS TRUST
MANAGED BOND FUND
400 BELLEVUE PARKWAY
WILMINGTON, DELAWARE 19809
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Trustees (the "Board") of the Managed Bond Fund (the "Fund") of the
Pacific Innovations Trust, a Delaware Business Trust (the "Trust"), of proxies
to be voted at the Special Meeting of Shareholders of the Fund to be held on
Tuesday, December 29, 1998, and any and all adjournments thereof (the
"Meeting"). The date of the first mailing of the Notice, Proxy Statement and
the accompanying voting instruction/proxy card will be on or about November 23,
1998.
PROPOSAL 1: APPROVAL OF A NEW SUB-ADVISORY AGREEMENT
INTRODUCTION
Since the inception of the Fund, Bank of America National Trust and Savings
Association ("Bank of America" and the "Manager") or an affiliate, has provided
investment advisory and administrative services to the Fund and acted as
manager and adviser to the Fund. Scudder Kemper Investments, Inc. ("Scudder
Kemper" and the "Sub-Adviser"), or its predecessor, has provided sub-investment
advisory services to the Fund pursuant to a sub-advisory agreement with Bank of
America. As described below, a transaction involving the majority owner of
Scudder Kemper may have resulted in a change of control of Scudder Kemper and,
therefore, a termination of the sub-advisory agreement. Accordingly,
shareholders of the Fund are being asked to approve a new sub-advisory
agreement.
The Zurich-B.A.T Transaction. On December 22, 1997, Zurich Insurance Company
("Zurich") and B.A.T Industries plc ("B.A.T") entered into a definitive
agreement (the "Merger Agreement") pursuant to which businesses of Zurich
(including Zurich's almost 70% ownership interest in Scudder Kemper) were to be
combined with the financial services businesses of B.A.T (the "Zurich-B.A.T
Transaction" or the "Transaction"). On October 12, 1997, Zurich and B.A.T
confirmed that they were engaged in discussions concerning a possible business
combination; on October 16, 1997, Zurich and B.A.T announced that they had
entered into an Agreement in Principle, dated as of October 15, 1997 (the
"Agreement in Principle"), to merge B.A.T's financial services businesses with
Zurich's businesses. The Merger Agreement superseded the Agreement in
Principle.
In order to effect this combination, Zurich and B.A.T first reorganized their
respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services
business from its tobacco-related businesses by spinning off to its
shareholders a new British company, Allied Zurich plc, which held B.A.T's
financial services businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich plc
contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. These transactions were
completed on September 7, 1998. As a result, upon the completion of the
Transaction, the former Zurich shareholders became the owners (through Zurich
Allied AG) of 57% of the voting stock of Zurich Financial Services, and former
B.A.T shareholders initially became the owners (through Allied Zurich plc) of
43% of the voting stock of Zurich Financial Services. Zurich Financial
Services now owns Zurich and the financial services businesses previously owned
by B.A.T.
Below is a simplified chart showing the corporate structure of Zurich Financial
Services after these transactions:
<PAGE> 5
[FLOW CHART APPEARS HERE]
Corporate Governance. At the closing of the Zurich-B.A.T Transaction, the
parties entered into a Governing Agreement that establishes the corporate
governance structure for Zurich Allied AG, Allied Zurich plc and Zurich
Financial Services.
The Board of Directors of Zurich Financial Services consists of ten members,
five of whom were initially selected by Zurich and five by B.A.T. Mr. Rolf
Hueppi, Zurich's Chairman and Chief Executive Officer, became Chairman and Chief
Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of his position on the Board of Directors, as Chairman, Mr. Hueppi will
have a tie-breaking vote on all matters except recommendations of the Audit
Committee, recommendations of the Remuneration Committee in respect of the
remuneration of the Chairman and the CEO, appointment and removal of the
Chairman and CEO, appointments to the Nominations, Audit and Remuneration
Committees and nominations to the Board of Directors not made through the
Nominations Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of Scudder
Kemper, who is responsible for Global Asset Management for Zurich Financial
Services), and three were B.A.T executives.
2
<PAGE> 6
The Board of Directors of Zurich Allied AG initially consists of 11 members,
eight of whom were Zurich directors and three of whom were proposed by B.A.T.
The Board of Directors of Allied Zurich plc also initially consists of 11
members, eight of whom were B.A.T directors and three of whom were proposed by
Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich plc
will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich plc shareholders in the event of a takeover bid for either
company.
The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers
Group of Insurance companies; the Eagle Star Insurance business, primarily in
the U.K.; Allied-Dunbar, one of the leading U.K. unit-linked life insurance and
pensions companies; and Threadneedle Asset Management, which was formed
initially to manage the investment assets of Eagle Star and Allied-Dunbar, and
which, at December 31, 1997, had $58.8 billion under management. Overall, at
year-end 1997, the financial services businesses of B.A.T had $79 billion in
assets under management, including $18 billion in third party assets.
Zurich has informed the Fund that the financial services businesses of B.A.T do
not include any of B.A.T's tobacco businesses and that, after careful review,
Zurich has concluded that the tobacco-related liabilities connected with
B.A.T's tobacco business should not adversely affect Zurich or the present
Zurich subsidiaries, including Scudder Kemper.
Governance arrangements that were put in place at the time of the acquisition
of Zurich's 70% interest in Scudder Kemper (which are discussed below under
"Sub-Adviser") remain unaffected by the Transaction. These arrangements
preclude the making of certain major decisions affecting Scudder Kemper without
the approval of Scudder Kemper directors elected by the non-Zurich shareholders
of Scudder Kemper.
Consummation of the Transaction may be deemed to have constituted an
"assignment," as that term is defined in the Investment Company Act of 1940
(the "1940 Act"), of the sub-advisory agreement with Scudder Kemper dated
December 31, 1997 (the "Former Sub-Advisory Agreement"). As required by the
1940 Act, the Former Sub-Advisory Agreement provided for its automatic
termination in the event of its assignment. Accordingly, a new sub-advisory
agreement (the "New Sub-Advisory Agreement") between Bank of America and
Scudder Kemper was approved by the Board and is now being proposed for approval
by shareholders of the Fund. Scudder Kemper has received an exemptive order
from the Securities and Exchange Commission ("SEC" or the "Commission"),
permitting it to implement, without prior shareholder approval, the New
Sub-Advisory Agreement for a period up to 150 days after the consummation of
the Transaction. A copy of the form of the New Sub-Advisory Agreement is
attached hereto as Exhibit A. THE NEW SUB-ADVISORY AGREEMENT FOR THE FUND IS
ON THE SAME TERMS IN ALL MATERIAL RESPECTS AS THE FORMER SUB-ADVISORY
AGREEMENT. The material terms of the Former Sub-Advisory Agreement are
described under "Description of the Former Sub-Advisory Agreement" below.
Proposal 1 requires the affirmative vote of a "majority of the outstanding
voting securities" of the Fund. The term "majority of the outstanding voting
securities," as defined in the 1940 Act, and as used in this proxy statement,
means: the lesser of (1) 67% of the voting securities of the Fund present at
the Meeting if more than 50% of the outstanding shares of the Fund are present
in person or by proxy, or (2) more than 50% of the outstanding shares of the
Fund.
3
<PAGE> 7
BOARD OF TRUSTEES RECOMMENDATION
On September 2, 1998, the Board, including Trustees who are not parties to such
agreement or "interested persons" (as defined under the 1940 Act)
("Non-interested Trustees") of any such party, voted unanimously to approve the
New Sub-Advisory Agreement and to recommend its approval to shareholders.
For information about the Board's deliberations and the reasons for its
recommendations, please see "Board of Trustees Evaluation" below.
THE BOARD OF THE TRUST RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
BOARD OF TRUSTEES EVALUATION
On September 2, 1998, the Board convened in person to consider the Transaction
contemplated by the Zurich-B.A.T Transaction and the advisability of the New
Sub-Advisory Agreement with Scudder Kemper. At this time, Scudder Kemper
represented to the Board that: the Transaction will have no effect on the
operational management of the Fund; the Transaction will not result in any
significant changes in the management or operations of Scudder Kemper; the
Transaction will not result in any changes in the portfolio managers of the
Fund; there will not be any increases in the advisory fees or any change in any
other provision, other than the term, of the sub-advisory agreement as a result
of the Transaction; the Transaction will not adversely affect Scudder Kemper's
financial condition; and the Transaction should expand Scudder Kemper's global
asset management capabilities and enhance the Sub-Adviser's research
capabilities, particularly with respect to the United Kingdom and Europe. The
Board also noted Zurich's representation that any tobacco-related liability
connected with B.A.T's tobacco business should not adversely affect Zurich or
Scudder Kemper and the services Scudder Kemper provides to the Fund. (See
"Corporate Governance" above). Scudder Kemper also furnished the Board
additional information regarding the proposed Transaction, including
information regarding the terms of the proposed Transaction and the new Zurich
organization. In reviewing the terms of the New Sub-Advisory Agreement, the
Board was advised by the Fund's independent counsel.
The Board was advised that Scudder Kemper will use its commercially reasonable
efforts to ensure the satisfaction of the conditions set forth in Section 15(f)
of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined under the 1940 Act) to receive any amount or
benefit in connection with a change in control of the investment adviser so
long as two conditions are met. First, for a period of three years after the
transaction, at least 75% of the board members of the investment company must
not be "interested persons" of such investment adviser or its successor. The
Board is currently in compliance with this provision of Section 15(f). Second,
an "unfair burden" must not be imposed upon the investment company as a result
of such transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
transaction whereby the investment adviser, or any interested person of any
such adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its shareholders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from
or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). No such
compensation agreements are contemplated in connection with the Transaction.
Zurich has undertaken to pay the costs of preparing and distributing proxy
materials to, and of holding the meeting of, the Fund's shareholders as well as
other fees and expenses in connection with the Transaction, including the
reasonable fees and expenses of legal counsel to the Trust.
In evaluating the Transaction and its effect on the Fund, the Board considered
(i) the assurances of Scudder Kemper that the Transaction should not affect
Scudder Kemper's ability to deliver the level of services currently provided to
the Fund and its shareholders and fulfill its obligations under the New
Sub-Advisory Agreement consistent with current practices, (ii) the undertaking
by Scudder Kemper that no unfair burden would be imposed upon the Fund
4
<PAGE> 8
as a result of the Transaction, and (iii) that the New Sub-Advisory Agreement
for the Fund, including the terms relating to the services to be provided to,
and the fees and expenses payable by, the Fund, is on the same terms in all
material respects as the Former Sub-Advisory Agreement. The Board also took
into consideration the fact that it had within the past year considered the
Former Sub-Advisory Agreement and that the New Sub-Advisory Agreement would not
have an initial term extending beyond that of the Former Sub-Advisory
Agreement.
SUB-ADVISER
Scudder Kemper, which resulted from the combination (the "Scudder-Zurich
Transaction") of the businesses of Scudder, Stevens & Clark, Inc. ("Scudder")
and Zurich Kemper Investments, Inc. ("Kemper"), an indirect subsidiary of
Zurich, is one of the largest and most experienced investment counsel firms in
the United States. Scudder was established in 1919 as a partnership and was
restructured as a Delaware corporation in 1985. Scudder launched its first
fund in 1928. Kemper launched its first fund in 1948. Since December 31,
1997, Scudder Kemper has served as investment adviser to both Scudder and
Kemper funds. As of August 31, 1998, Scudder Kemper has more than $241.1
billion in assets under management. The principal source of Scudder Kemper's
income is professional fees received from providing continuing investment
advice. Scudder Kemper provides investment counsel for many individuals and
institutions, including insurance companies, endowments, industrial
corporations and financial and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized under
the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of Scudder Kemper, with the balance
owned by the Sub-Adviser's officers and employees.
As stated above, Scudder Kemper is a Delaware corporation. Rolf Hueppi* is the
Chairman of the Board and Director, Edmond D. Villani# is the President, Chief
Executive Officer and Director, Stephen R. Beckwith# is the Treasurer and Chief
Financial Officer, Kathryn L. Quirk# is the General Counsel, Chief Compliance
Officer and Secretary, Lynn S. Birdsong# is a Corporate Vice President and
Director, Cornelia M. Small# is a Corporate Vice President and Director,
Laurence Cheng* is a Director and, effective November 1, 1998, each of Gunther
Gose* and William H. Bolinder+ is a Director of the Sub-Adviser. The principal
occupation of each of Edmond D. Villani, Stephen R. Beckwith, Kathryn L. Quirk,
Lynn S. Birdsong and Cornelia M. Small is serving as a Managing Director of
Scudder Kemper, the principal occupation of Rolf Huppi is serving as an officer
of Zurich; the principal occupation of Laurence Cheng is serving as a senior
partner of Capital Z Partners, an investment fund. The principal occupations
of Gunther Gose is serving as the Chief Financial Officer of Zurich Financial
Services, the principal occupation of William H. Bolinder is serving as a
member of the Group Executive Board of Zurich Financial Services.
The outstanding voting securities of Scudder Kemper are held of record 36.63%
by Zurich Holding Company of America ("ZHCA"), a subsidiary of Zurich; 32.85%
by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by Stephen R.
Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and Edmond D.
Villani, in their capacity as representatives (the "Management
Representatives") of the Sub-Adviser's management holders and retiree holders
pursuant to a Second Amended and Restated Security Holders Agreement (the
"Security Holders Agreement") among the Sub-Adviser, Zurich, ZHCA, ZKIH, the
Management Representatives, the management holders, the retiree holders and
Edmond D. Villani, as trustee of Scudder Kemper Investments, Inc. Executive
Defined Contribution
______________________
(*)Mythenquai 2, Zurich Switzerland.
(#)345 Park Avenue, New York, New York.
(+)1400 American Lane, Schaumburg, Illinois
5
<PAGE> 9
Plan Trust (the "Plan Trust"); and 9.66% by the Plan Trust. There are no
outstanding non-voting securities of the Sub-Adviser.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
Sub-Adviser consists of four directors designated by ZHCA and ZKIH and three
directors designated by Management Representatives.
The Security Holders Agreement require the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating
Scudder Kemper, or entering into certain affiliated transactions with Zurich.
The Security Holders Agreement also provides for various put and call rights
with respect to Scudder Kemper stock held by persons who were employees of
Scudder at the time of the Scudder-Zurich Transaction, limitations on Zurich's
ability to purchase other asset management companies outside of Scudder Kemper,
rights of Zurich to repurchase Scudder Kemper stock upon termination of
employment of Scudder Kemper personnel, and registration rights for stock held
by stockholders of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper, from time to time, may
enter into transactions with various banks, including the Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
Exhibit B sets forth the fees and other information regarding investment
companies advised by Scudder Kemper that have similar investment objectives to
the Fund.
DESCRIPTION OF THE FORMER SUB-ADVISORY AGREEMENT
Under the Former Sub-Advisory Agreement, Scudder provides the Fund with a
continuous investment program. The Former Sub-Advisory Agreement provides that
the Sub-Adviser, subject to the control of the Manager and the Board, provides
research and management with respect to all securities, investments, cash and
cash equivalents in the portfolio of the Fund. The Sub-Adviser also
determines, from time to time, what securities and other investments will be
purchased, retained or sold by the Fund in accordance with the investment
criteria and policies of the Fund.
In return for the services provided by the Sub-Adviser under the Former
Sub-Advisory Agreement, the Sub-Adviser is entitled to receive fees from the
Manager equal on an annual basis to .20% of the Fund's average daily net assets
for the first $25 million, .15% of the next $25 million, and .10% of the
average daily net assets in excess of $50 million. The Former Sub-Advisory
Agreement specifically provides that the Sub-Adviser's sole recourse for
payment of the Sub-Adviser's fees shall be to the Manager. For its services to
the Fund, the Manager receives a monthly fee which is equal, on an annual
basis, to .37% of the average daily net assets of the Fund.
Bank of America and Pacific Life Insurance Company ("Pacific Life"), which
provides support services to the Fund and acts as the Fund's transfer agent,
have voluntarily agreed to waive fees and reimburse Fund operating expenses to
ensure that the operating expenses for the Fund (other than interest, taxes,
brokerage commissions and other portfolio transaction expenses, capital
expenditures and extraordinary expenses) will not exceed .75% of the average
net assets of the Fund on an annual basis, as more fully described in the
Fund's prospectus. The Former Sub-Advisory Agreement provides that the
Sub-Adviser agrees to waive or reduce any sub-advisory fees in the event that
the Manager reduces or waives all or a part of the management fee to the
Manager under the Management Agreement, in order to permit the Fund to meet its
initial target expense ratio of .75%.
The Former Sub-Advisory Agreement may be terminated on 60 days' written notice,
without penalty, by a majority vote of the Board, by the Manager or by the
Sub-Adviser, and automatically terminates in the event of its assignment or in
the event that the Management Agreement is terminated.
6
<PAGE> 10
The Former Sub-Advisory Agreement provides that 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 the Sub-Advisory Agreement,
except that the Sub-Adviser is 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 the
Sub-Advisory Agreement.
Scudder Kemper or its predecessor has acted as the Sub-Adviser for the Fund
since its inception. The Former Sub-Advisory Agreement is dated December 31,
1997, and was last approved by the Board on July 21, 1997 and by the
shareholders of the Fund on November 24, 1997.
THE NEW SUB-ADVISORY AGREEMENT
The New Sub-Advisory Agreement is dated September 7, 1998. Under its terms,
the New Sub-Advisory Agreement will continue in effect until February 27, 1999,
and may continue thereafter from year to year only if specifically approved at
least annually by the vote of a "majority of the outstanding voting securities"
of the Fund, or by the Board and, in either event, the vote of a majority of
the non-interested Trustees, cast in person at a meeting called for such
purpose. The New Sub-Advisory Agreement was approved by the Board on September
2, 1998 and became effective, contingent upon shareholder approval, as of
September 7, 1998. Subsequently, the merger between Bank of America and
NationsBank Corporation was closed, which caused the sub-advisory agreement
with Scudder Kemper to automatically terminate. At a meeting on June 26, 1998,
shareholders had previously approved a sub-advisory agreement with Scudder
Kemper to become effective upon the merger between Bank of America and
NationsBank Corporation. This current sub-advisory agreement became effective
October 1, 1998. Finally, at a meeting held on October 27, 1998, the Board
approved the continuation of the current sub-advisory agreement until October
31, 1999. In the event that shareholders of the Fund do not approve the New
Sub-Advisory Agreement, the current sub-advisory agreement will terminate. In
such event, the Board will take such action as it deems to be in the best
interest of the Fund and its shareholders.
DIFFERENCES BETWEEN THE CURRENT AND NEW SUB-ADVISORY AGREEMENTS
The New Sub-Advisory Agreement is the same as the Former Sub-Advisory Agreement
in all material respects. The only change that has been made is to modify the
effective date.
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder Kemper, places orders for portfolio
transactions through Scudder Investor Services, Inc. ("SIS"), Two International
Place, Boston, Massachusetts 02110, which in turn places orders on behalf of
the Fund with issuers, underwriters or other brokers and dealers. SIS is a
corporation registered as a broker/dealer and a subsidiary of Scudder Kemper.
When it can be done consistently with the policy of obtaining the most
favorable net results, Scudder Kemper may place such orders with brokers and
dealers who supply research, market and statistical information to a Fund or to
Scudder Kemper. SIS does not receive any commissions, fees or other
remuneration from the Funds for this service. Allocation of portfolio
transactions is supervised by Scudder Kemper.
GENERAL
The cost of preparing, printing and mailing the enclosed voting
instruction/proxy, accompanying notice and proxy statement and all other costs
incurred in connection with the solicitation of voting instructions/proxies,
including any additional solicitation made by letter, telephone or telegraph,
will be paid by Zurich. In addition to solicitation by mail, certain officers
and representatives of the Fund, officers, employees or agents of Scudder
Kemper, Bank of America and Pacific Life and certain financial service firms
and their representatives, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegram or personally.
7
<PAGE> 11
Should shareholders require additional information regarding the voting
instruction/proxy or replacement voting instruction/proxy, they may contact
Pacific Life toll-free at 1-800-772-5558. Any voting instruction/proxy given
by a shareholder is revocable as described above.
THE FUND PROVIDES PERIODIC REPORTS TO ALL OF ITS SHAREHOLDERS WHICH HIGHLIGHT
RELEVANT INFORMATION INCLUDING INVESTMENT RESULTS. YOU MAY RECEIVE AN
ADDITIONAL COPY OF THE MOST RECENT SEMI- ANNUAL REPORT FOR THE FUND WITHOUT
CHARGE BY CALLING 1-800-722-5558 OR BY WRITING THE FUND, C/O PACIFIC LIFE, P.O.
BOX 7187, PASADENA, CALIFORNIA, 91109-7187.
VOTING INFORMATION
Voting instructions/proxies are being solicited by the Board for use at the
Meeting. The shares of the Fund are offered as an investment medium for
variable annuity contracts offered by Pacific Life. For contract owners having
account values invested in the Fund, Separate Account B of Pacific Life is the
owner of the shares, but is soliciting voting instructions from contract owners
as to how such shares should be voted. All properly executed voting
instructions/proxies received in time for the Meeting will be voted by Pacific
Life as specified in the voting instruction/proxy or, if no specification is
made, in favor of the proposal referred to in the proxy statement. Consistent
with interpretations of voting requirements by the staff of the Securities and
Exchange Commission, Pacific Life will vote shares held by its general account,
its separate account and any of its subsidiaries on the proposal to be
considered at the Meeting in proportion to the timely voting instructions it
receives from contract owners. Voting instructions/proxies may be revoked at
any time by (a) submitting a subsequently dated voting instruction/proxy or (b)
by revoking in person at the time of the Meeting. Only a shareholder may
execute or revoke a proxy. Therefore, a contract owner who has given voting
instructions may revoke them only through Pacific Life.
The presence at the Meeting, in person or by proxy, of the holders of one-third
of the shares entitled to be cast shall be necessary and sufficient to
constitute a quorum for the transaction of business. In the event that the
necessary quorum to transact business or the vote required to approve or reject
the proposal is not obtained at the Meeting, the persons named as proxies may
propose one or more adjournments of the Meeting in accordance with applicable
law, to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of the Fund's shares present in
person or by proxy at the Meeting. The persons named as proxies will vote in
favor of such adjournment if they determine that such adjournment and
additional solicitation are reasonable and in the interest of the Fund's
shareholders.
The Board of the Trust has fixed the close of business on November 4, 1998 as
the record date for determination of shareholders entitled to notice of and to
vote at the Meeting. As of November 4, 1998, ___________ shares of the Fund
were issued and outstanding.
As of November 4, 1998, the trustees and officers of the Trust did not
beneficially own any shares of the Fund. The following table sets forth the
holding of the shares of the Fund as of November 4, 1998, of each person known
to own, control, or hold with power to vote 5 percent or more of the Fund's
outstanding voting securities:
<TABLE>
<CAPTION>
% of Shares
Name Shares Owned Outstanding
---- ------------ -----------
<S> <C> <C>
Pacific Financial Asset
Management LLP (a subsidiary
of Pacific Life)
Pacific Managed Bond Subaccount
</TABLE>
Pacific Life is located at 700 Newport Center Drive, Newport Beach, California,
92660. Bank of America, the Fund's adviser, is located at 555 California
Street, San Francisco, California, 94104. Scudder Kemper, the Fund's
8
<PAGE> 12
sub-adviser, is headquartered at 345 Park Avenue, New York, New York, 10154.
The Fund's distributor, Provident Distributors, Inc., is located at Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania, 19428. The
Fund's sub-administrator, PFPC, Inc. is located at 400 Bellevue Parkway,
Wilmington, Delaware, 19809.
PROPOSALS OF SHAREHOLDERS
As a Delaware business trust, the Fund is not required to hold annual
shareholder meetings, but will hold special meetings as required or deemed
desirable. Since the Fund does not hold regular meetings of shareholders, the
anticipated date of the next special shareholders meeting can not be provided.
A shareholder wishing to submit a proposal for inclusion in the proxy
solicitation for a special meeting pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934 should send such written proposal to the Secretary of the
Fund within a reasonable time before the solicitation of proxies for such
meeting. A shareholder wishing to provide notice in the manner prescribed by
Rule 14a-4(c)(1) to the Fund of a proposal submitted outside the process of
Rule 14a-8 must submit such notice to the Secretary of the Fund within a
reasonable time before the solicitation of proxies for such meeting. The
timely submission of any proposal, however, does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board is not aware of any matters that will be presented for action at the
Meeting other than the matter set forth herein. Should any other matters
requiring a vote of shareholders arise, the voting instruction/proxy in the
accompanying form will confer upon the person or persons entitled to vote the
shares represented by such proxy the discretionary authority to vote the shares
as to any such other matters in accordance with their best judgment of the best
interests of shareholders.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED VOTING INSTRUCTIONS/PROXY
PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees
Cathy G. O'Kelly
Secretary
9
<PAGE> 13
Exhibit A
FORM OF SUB-ADVISORY AGREEMENT
Pacific Innovations Managed Bond Fund
AGREEMENT, made as of September 7, 1998 between Bank of America National
Trust and Savings Association, a national banking association (hereinafter
called the "Manager"), and Scudder Kemper Investments, Inc., a New York
Corporation (hereinafter called the "Sub-Adviser").
WHEREAS, the Pacific Innovations Managed Bond Fund (hereinafter called the
"Fund"), is a series of Pacific Innovations Trust, a Delaware business trust
(the "Trust"), in an open-end, management investment company organized as a
business trust under the laws of the State of Delaware; and
WHEREAS, pursuant to Management Agreement of even date herewith
(hereinafter called 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 and
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 form time to
time for the Fund by the Manager, the investment objective, 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.
10
<PAGE> 14
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 Scudder Investor Services,
Inc. 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 to 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 the 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 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 Provident Distributors, Inc. (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 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 the 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,
11
<PAGE> 15
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.
(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.
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 upon the total net assets of
the Fund as follows:
<TABLE>
<CAPTION>
Fund Assets Rate of Sub-Advisory Fee
----------- ------------------------
<S> <C>
0 -- $25 million 0.20%
in excess of $25
million up to and
including $50 million 0.15%
in excess of $50 million .10%
</TABLE>
12
<PAGE> 16
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 sold recourse for payment of such fees shall be to the Manager.
8. REDUCTION OF FEES.
The Manager and 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 0.75 of 1%. To the
extent 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 by the Sub-Adviser of the notice provision in any further
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 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 February
27, 1999. Thereafter, if not terminated, this Agreement shall automatically
continue in effect for successive annual periods ending on February 27,
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 TO 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
13
<PAGE> 17
is sought. No amendment of this Agreement shall be effective until approved by
vote of a majority of the Trust's Trustees.
12. MISCELLANEOUS.
The captions of this Agreement are included for convenience of reference
only and in no may 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 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, 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 instrument 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 AND
SAVINGS ASSOCIATION SCUDDER KEMPER INVESTMENTS, INC.
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
14
<PAGE> 18
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.
15
<PAGE> 19
Exhibit B
COMPARABLE INVESTMENT COMPANIES
ADVISED BY THE SUB-ADVISER
As of ____________ ___, 1998 the Sub-Adviser or an affiliate managed in
excess of $_____ billion in assets for individuals, funds and other
organizations. The following are open- and closed-end funds with investment
objectives similar to the Fund, for whom the Sub-Adviser provided advisory
services:
<TABLE>
<CAPTION>
TOTAL NET
ASSETS AS OF ADVISORY COMPENSATION
___________ ___, 1998 ON AN ANNUAL BASIS BASED ON THE
NAME (000 OMITTED) VALUE OF AVERAGE DAILY NET ASSETS
---- --------------------- ---------------------------------
<S> <C> <C>
AARP High Quality .35% up to $2 billion
Bond Fund .33% on next $2 billion
</TABLE>
16
<PAGE> 20
VOTING INSTRUCTION/PROXY
PACIFIC INNOVATIONS TRUST
MANAGED BOND FUND
The undersigned owner of a variable annuity contract ("Variable Contract")
issued by Pacific Life Insurance Company ("Pacific Life") and funded by a
separate account of Pacific Life, hereby instructs Pacific Life, on behalf of
the separate account to vote the shares of the Managed Bond Fund of the Pacific
Innovations Trust (the "Fund") attributable to his or her Variable Contract at
the meeting of shareholders of the Fund to be held at 9:00 a.m., Eastern
Standard Time, on December 29, 1998, at the offices of the Fund, 400 Bellevue
Parkway, Wilmington Delaware and at any adjournment thereof, in the manner
directed below with respect to the matters referred to in the proxy statement
for the meeting, receipt of which is hereby acknowledged, and in the discretion
of Pacific Life upon any such matters as may properly come before the meeting
or any adjournment thereof.
THIS VOTING INSTRUCTIONS IS SOLICITED BY THE BOARD OF TRUSTEES OF THE FUND. The
Board of Trustees recommends a vote FOR the following proposal. Please vote by
checking your response.
1. To approve a new subadvisory agreement between Bank of America National
Trust and Savings Association, the Fund's adviser and Scudder Kemper
Investments, Inc.
FOR AGAINST ABSTAIN
----------- ----------- -----------
This voting instruction will be voted as specified. IF NO SPECIFICATION IS
MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR THE PROPOSAL. If this voting
instruction is not returned or is not returned properly executed, such votes
will be cast by Pacific Life on behalf of the separate account in the same
proportion as it votes shares held by that separate account for which it has
received instructions from Variable Contract owners.
Contract Shares Receipt of the Notice of Meeting
and Proxy Statement is hereby
acknowledged:
Dated: ,1998
----------------------
----------------------------------
----------------------------------
Signature(s) of Contract owners(s)
All designated owners of the Variable Contract(s) shown on this voting
instruction must sign hereon. If as an attorney, executor, trustee, guardian or
in some representative capacity or as an officer of a corporation or
partnership, please add title as such.
PLEASE VOTE, SIGN, AND DATE THIS VOTING INSTRUCTION AND RETURN IN THE ENCLOSED
ENVELOPE PROMPTLY.
