<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 Section 240.14a-11(c) or Section 240.14a-12
Pacific Horizon Funds, Inc.
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 3
[PRELIMINARY COPY]
PACIFIC HORIZON FUNDS, INC.
------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE INTERNATIONAL EQUITY FUND
------------
November ____, 1996
To the Shareholders of the
International Equity Fund of
Pacific Horizon Funds, Inc.
A Special Meeting of Shareholders of the International Equity Fund (the
"Fund") of Pacific Horizon Funds, Inc. (the "Company") will be held on December
23, 1996, at the offices of the Company's transfer agent, BISYS Fund Services,
Inc., 3435 Stelzer Road, Columbus, Ohio 43219-3035, beginning at 10:00 a.m.
(Eastern time) for the following purposes:
(1) The approval or disapproval of an Amended and Restated
Investment Advisory Agreement between Pacific Horizon Funds, Inc. and
Bank of America National Trust and Savings Association with respect to
the Fund;
(2) The approval or disapproval of a Sub-Advisory Agreement
between Bank of America National Trust and Savings Association and
Wellington Management Company, LLP with respect to the Fund; and
(3) The transaction of such other business as may properly
come before the meeting or any adjournment thereof.
The proposals referred to above are discussed in the Proxy Statement
attached to this Notice. Each shareholder is invited to attend the Special
Meeting of Shareholders in person. Shareholders of record at the close of
business on November 15, 1996 have the right to vote at the meeting. If you
cannot be present at the meeting, we urge you to fill in, sign and promptly
return the enclosed proxy in order that the meeting can be held and a maximum
number of shares may be voted.
W. BRUCE McCONNEL, III
Secretary
<PAGE> 4
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY
LAW, THE SPECIAL MEETING OF SHAREHOLDERS OF THE COMPANY'S INTERNATIONAL EQUITY
FUND SCHEDULED FOR DECEMBER 23, 1996 WILL HAVE TO BE ADJOURNED WITHOUT
CONDUCTING ANY BUSINESS IF LESS THAN A MAJORITY OF THE SHARES ELIGIBLE TO VOTE
ARE REPRESENTED. IN THAT EVENT, THE COMPANY WOULD CONTINUE TO SOLICIT VOTES IN
AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE CRITICAL IN ALLOWING
THE COMPANY TO HOLD THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR PROXY CARD
IMMEDIATELY.
<PAGE> 5
[PRELIMINARY COPY]
PACIFIC HORIZON FUNDS, INC.
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Pacific Horizon Funds, Inc. (the
"Company") for use at a Special Meeting of Shareholders of the Company's
International Equity Fund (the "Fund") to be held at the offices of the
Company's transfer agent, BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219-3035 on December 23, 1996, beginning at 10:00 a.m. (Eastern
time) (such meeting and any adjournments thereof referred to as the "Meeting").
It is expected that the solicitation of proxies will be primarily by
mail. The Company's officers and service contractors may also solicit proxies by
telephone, facsimile or personal interview. Bank of America National Trust and
Savings Association ("Bank of America"), the Fund's investment adviser, will
bear all proxy solicitation costs.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to the Company a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and electing to vote in
person. This Proxy Statement and the enclosed Proxy are expected to be
distributed to shareholders on or about November 25, 1996.
A proxy is enclosed with respect to the shares you own in the Fund. If
the proxy is executed properly and returned, the shares represented by it will
be voted at the Meeting in accordance with the instructions thereon. Each full
share is entitled to one vote and each fractional share to a proportionate
fractional vote. If you do not expect to be present at the Meeting and wish your
shares to be voted, please complete the enclosed proxy and mail it in the
enclosed reply envelope.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF BOTH PROPOSALS DESCRIBED IN THIS PROXY STATEMENT.
<PAGE> 6
INTRODUCTION
At a regular meeting of the Board of Directors of the Company (the
"Board") held on October 29, 1996, Bank of America recommended that Wellington
Management Company, LLP ("Wellington Management") be retained as the Fund's
sub-adviser. Bank of America advised the Board that retaining Wellington
Management as sub-adviser to assist in managing the Fund's assets would enhance
the nature and quality of the advisory services currently provided to the Fund,
due to Wellington Management's experience, capabilities and resources in
international equity management.
Wellington Management is a limited liability partnership owned by 52
general partners, all of whom are full-time employees of the firm. As of
September 30, 1996, Wellington Management had approximately $123 billion of
assets under management for a variety of mutual fund sponsors, individuals and
tax-exempt investors.
At the October 29, 1996 Board meeting, a sub-advisory agreement for the
Fund between Bank of America and Wellington Management (the "Sub-Advisory
Agreement") was unanimously approved by the Board, as well as by a majority of
those members of the Board who were not "interested persons" (as that term is
defined in the Investment Company Act of 1940 (the "1940 Act")) of any party to
the Sub-Advisory Agreement, subject to shareholder approval at the Meeting. The
aggregate contractual advisory fees payable by shareholders of the Fund will not
increase as a result of approval of the Sub-Advisory Agreement, because the
sub-advisory fees payable to Wellington Management under such Agreement are the
responsibility of Bank of America, not the Fund or its shareholders.
In connection with its recommendation that Wellington Management be
approved as sub-adviser, Bank of America also recommended that the current
investment advisory agreement dated July 30, 1996 between Bank of America and
the Company with respect to the Fund (the "Current Advisory Agreement") be
amended to clarify the allocation of investment advisory and sub-advisory
responsibilities between Bank of America and any sub-adviser retained to assist
in the management of the Fund's assets. At the October 29, 1996 Board meeting,
an amended and restated investment advisory agreement for the Fund between Bank
of America and the Company (the "Amended Advisory Agreement") was unanimously
approved by the Board, as well as by a majority of those members of the Board
who were not "interested persons" (as that term is defined in the 1940 Act) of
any party to the Amended Advisory Agreement, subject to shareholder approval at
the Meeting.
The Amended Advisory Agreement is substantially the same as the Current
Advisory Agreement, except that it includes a
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provision specifying certain responsibilities which will be retained by Bank of
America, notwithstanding the appointment of a sub-adviser. The contractual
advisory fee that Bank of America is entitled to receive will not increase as a
result of approval of the Amended Advisory Agreement. Periodically, Bank of
America may voluntarily waive all or a portion of its advisory fee and/or may
assume certain Fund expenses. Such waivers and reimbursements currently are in
effect. However, Bank of America may decrease or eliminate such fee waivers
and/or expense reimbursements at any time, and expects to do so as the Fund's
assets increase. This decrease or elimination would have the effect of
increasing the advisory fees actually paid by the Fund, possibly up to the
maximum amount permitted under the Agreement.
Copies of the Amended Advisory Agreement and the Sub- Advisory
Agreement (each, a "New Agreement" and collectively, the "New Agreements") are
attached to this Proxy Statement as Exhibits A and B, respectively. The
Sub-Advisory Agreement is substantially the same as the Amended Advisory
Agreement, except as set forth below. Material provisions of the New Agreements
are summarized below; however, this summary is qualified in its entirety by
reference to Exhibits A and B.
If the Amended Advisory Agreement is approved by shareholders at the
Meeting, then the Current Advisory Agreement will terminate upon the execution
of the Amended Advisory Agreement. If the Amended Advisory Agreement is not
approved by shareholders at the Meeting, then the Current Advisory Agreement
will continue in effect. Bank of America will continue to serve as the Fund's
investment adviser if the Sub-Advisory Agreement is approved by shareholders at
the Meeting.
DESCRIPTION OF THE NEW AGREEMENTS
AMENDMENT TO CURRENT ADVISORY AGREEMENT RELATING TO EMPLOYMENT OF
SUB-ADVISER. The Amended Advisory Agreement, like the Current Advisory
Agreement, provides that Bank of America may from time to time employ or
associate itself with a sub-adviser. The Amended Advisory Agreement provides, in
addition, that notwithstanding the employment of any sub-adviser, Bank of
America will: (i) establish and monitor general investment criteria and policies
for the Fund; (ii) review and analyze on a periodic basis the Fund's portfolio
holdings and transactions in order to determine their appropriateness in light
of the Fund's shareholder base; and (iii) review and analyze on a periodic basis
the policies established by any sub-adviser for the Fund with respect to the
placement of orders for the purchase and sale of portfolio securities.
OTHER TERMS AND FEES. Each New Agreement provides that,
subject to the supervision of the Board (and Bank of America,
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<PAGE> 8
with respect to Wellington Management), Bank of America and Wellington
Management (each, an "Adviser" and collectively, the "Advisers"), respectively,
will provide a continuous investment program for the Fund, including investment
research and management with respect to all securities, investments, and cash
equivalents in the Fund. Each Adviser will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Fund. Each Adviser will provide the services rendered by it under its respective
New Agreement in accordance with the investment objective, policies and
restrictions as stated in the Company's currently effective Registration
Statement with respect to the Fund, resolutions of the Board, and, with respect
to Wellington Management, the investment criteria and policies established from
time to time for the Fund by Bank of America.
Bank of America agrees in the Amended Advisory Agreement to review,
monitor and report to the Board regarding the performance and investment
procedures of any sub-adviser employed by the Board. Wellington Management
agrees in the Sub-Advisory Agreement to use the same skill and care in providing
services under said Agreement as it uses in providing services to fiduciary
accounts for which it has investment responsibilities.
Pursuant to its respective New Agreement, each Adviser further agrees
that it will, among other things, (i) conform with all applicable rules and
regulations of the Securities and Exchange Commission and will conduct its
activities under its respective agreement in accordance with other applicable
law; (ii) place orders for the purchase and sale of portfolio securities for the
Fund with brokers or dealers selected by Bank of America (or, with respect to
Wellington Management, in accordance with the policy set forth in the Fund's
Registration Statement or as Bank of America or the Board may direct); and (iii)
not purchase any securities from or sell any securities to Bank of America,
Wellington Management, Concord Holding Corporation or any of their affiliates
acting as principal or broker, except as permitted by law. Each Adviser also
agrees to maintain such books and records regarding the securities transactions
with respect to the Fund as may be required or otherwise requested by the
Company and the Board, and to supply the Company and the Board with reports,
statistical data and economic information as requested. Wellington Management
further agrees to provide the Fund's Custodian on each business day information
relating to all transactions concerning the Fund's assets and to provide Bank of
America with such information upon request. In addition, Wellington Management
agrees to provide, on a monthly basis, information regarding investment strategy
to be employed by it on behalf of the Fund, information regarding the Fund's
performance against its benchmark and such other information as Bank of America
may reasonably request from time to time.
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Under the Amended Advisory Agreement, Bank of America agrees to
maintain a policy and practice of conducting its investment advisory operations
independently of its commercial banking operations.
Each Adviser agrees in its respective New Agreement to treat
confidentially and as proprietary information of the Company all records and
other information relative to the Company and prior or present Company
shareholders or those persons or entities who respond to inquires concerning
investment in the Company, and agrees not to use such records and information
for any purpose other than performance of its responsibilities and duties under
its respective New Agreement, except after prior notification to and approval in
writing by the Company.
The contractual advisory fee that Bank of America is entitled to
receive from the Fund would not change as a result of approval of the Amended
Advisory Agreement. For the services provided and expenses assumed pursuant to
the Amended Advisory Agreement, Bank of America is entitled to an advisory fee
computed daily and payable monthly (in arrears) at the annual rate of .75% of
the net assets of the Fund.
The aggregate contractual advisory fees payable by the Fund will not
increase as a result of approval of the Sub-Advisory Agreement. The sub-advisory
fees payable by Bank of America to Wellington Management under the Sub-Advisory
Agreement are the responsibility of Bank of America and do not represent an
additional charge to the Fund. For the services provided and expenses assumed
pursuant to the Sub-Advisory Agreement, Wellington Management is entitled to a
sub-advisory fee, payable quarterly (in arrears), at the following annual rates
based on the average month-end net assets of the Fund:
<TABLE>
<CAPTION>
Fund Assets Rate of Sub-Advisory Fee
<S> <C>
First $50 million 0.40%
Next $100 million 0.30%
Next $350 million 0.25%
Over $500 million 0.20%
</TABLE>
Each New Agreement provides that the Adviser will pay all expenses
incurred by it in connection with its activities under its respective New
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased or sold with respect to the Fund.
Each New Agreement provides that in executing portfolio transactions
and selecting brokers or dealers, each Adviser will use its best efforts to seek
on behalf of the Fund the best
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overall terms available. In assessing the best overall terms available for any
transaction, each Adviser will 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 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, each
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, as amended)
provided with respect to the Fund, and/or other accounts over which such Adviser
or affiliates of such Adviser exercise investment discretion. Each Adviser is
authorized, subject to the prior approval of the Board (and Bank of America,
with respect Wellington Management), to pay to a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction with respect to the Fund that 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 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
Fund and to the Company. Neither Adviser, however, is required to seek prior
approval from the Board (and Bank of America, with respect to Wellington
Management), so long as the broker or dealer selected by the particular Adviser
obtains the best price and execution on a particular transaction.
In executing portfolio transactions with respect to the Fund, each
Adviser may, but is not obligated to, 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 Company's 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 most equitable and consistent
with its fiduciary obligations to the Fund and such other clients.
Each New Agreement provides that 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 the New Agreement, except a loss resulting
from a breach of fiduciary duty 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 Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under the New Agreement.
Wellington Management acknowledges and agrees in the Sub-Advisory Agreement that
the
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performance of the Sub-Advisory Agreement is for the benefit of the Company,
that Wellington Management is therefore directly liable and responsible to the
Company for the performance of its obligations under the Sub-Advisory Agreement,
and that the Company may enforce in its own name and for itself such liability
and responsibility.
If approved by a majority of the outstanding shares (as defined below)
of the Fund, the Amended Advisory Agreement will continue in effect until
October 31, 1997, and the Sub-Advisory Agreement will continue in effect until
October 31, 1998. Thereafter, if not terminated, each New Agreement shall
continue in effect for successive annual periods, provided such continuance is
approved at least annually (i) by the vote of a majority of those members of the
Board who are not "interested persons" of any party to the particular Agreement
(as that term is defined in the 1940 Act), cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of the Fund.
The Sub-Advisory Agreement provides that it is terminable at any time,
without the payment of any penalty, by Bank of America or by the Company (by
vote of the Board or by the vote of a majority of the outstanding voting
securities of the Fund) on sixty days' written notice to Wellington Management,
or by Wellington Management on sixty days' written notice to the Company,
provided that in each such case, notice shall be given simultaneously to Bank of
America. The Sub-Advisory Agreement will automatically terminate in the event of
its assignment or upon the termination of the Advisory Agreement between Bank of
America and the Company with respect to the Fund. The Amended Advisory Agreement
provides that it is terminable at any time, without the payment of a penalty, by
the Company (by vote of the Board or by vote of a majority of the outstanding
voting securities of the Fund), or by Bank of America, on sixty days' written
notice. The Amended Advisory Agreement will immediately terminate in the event
of its assignment.
EVALUATION BY THE BOARD OF DIRECTORS OF THE COMPANY. The New Agreements
were unanimously approved by the Board and by a majority of those members of the
Board who were not "interested persons" (as that term is defined in the 1940
Act) of any party to the New Agreements at a meeting held on October 29, 1996.
In reaching its decision, the Board considered Bank of America's belief that
approval of the New Agreements would enhance the nature and quality of the
advisory services currently provided to the Fund. The Board considered that the
Amended Advisory Agreement is substantially the same as the Fund's Current
Advisory Agreement (except as noted above), that the contractual advisory fee
rate payable by the Fund under the Amended Advisory Agreement would be identical
to that payable under the Current
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Advisory Agreement, and that the sub-advisory fee payable to Wellington
Management under the Sub-Advisory Agreement would be the responsibility of Bank
of America, not the Fund or its shareholders. The Board noted that pursuant to
the Amended Advisory Agreement, Bank of America would continue to be responsible
for certain duties, notwithstanding the employment of a sub-adviser. The Board
evaluated Wellington Management's experience, capabilities and resources in
international equity management as well as its style of investment management
and its research and investment practices. The Board also considered the
benefits which the Advisers may derive from the New Agreements, including the
receipt of investment research and information in return for allocating
portfolio brokerage. Based on its evaluation, the Board concluded that approval
of the New Agreements would be in the best interests of the Fund and its
shareholders.
VOTING PROCEDURES. The approval of each New Agreement requires the
affirmative vote of the holders of a "majority of the outstanding shares" of the
Fund (as defined by the 1940 Act), which means the lesser of (a) the holders of
67% or more of the shares of the Fund present at the Meeting if the holders of
more than 50% of the outstanding shares of the Fund are present in person or by
proxy or (b) more than 50% of the outstanding shares of the Fund.
If the Amended Advisory Agreement is approved by the shareholders of
the Fund, then the Current Advisory Agreement will terminate with respect to the
Fund upon the execution of the Amended Advisory Agreement. If the Amended
Advisory Agreement is not approved, then the Current Advisory Agreement will
continue in effect. If the Sub-Advisory Agreement is approved by the
shareholders of the Fund, then the Sub-Advisory Agreement will become effective
upon its execution. If the Sub-Advisory Agreement is not approved by the
shareholders of the Fund, then Bank of America will consider other alternatives,
including the possible recommendation of another sub-adviser.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" BOTH THE AMENDED
ADVISORY AGREEMENT AND THE SUB-ADVISORY AGREEMENT
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VOTING INFORMATION
RECORD DATE. Only shareholders of record at the close of business on
November 15, 1996 will be entitled to vote at the Meeting. On that date, there
were _______________ Class T - Common Stock shares ("A" Shares) of the Fund
outstanding and entitled to be voted at the Meeting. As of the close of business
on November 15, 1996, there were no Class T - Special Series 3 Common Stock
shares ("B" Shares) or Class T - Special Series 5 Common Stock shares ("K"
Shares) offered to the public. All shares of the Fund will vote in the aggregate
and not by class at the Meeting.
QUORUM. A quorum is constituted with respect to the Fund by the
presence in person or by proxy of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at the Meeting. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owners or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power), will
be treated as shares that are present at the Meeting but which have not been
voted. Abstentions and broker "non-votes" will have the effect of a "no" vote
for purposes of obtaining the requisite approval of each New Agreement.
In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve a
proposal are not received, the persons named as proxies, or their substitutes,
may propose one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares that are represented at the Meeting in person or
by proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote FOR the proposal in favor of such
adjournments, and will vote those proxies required to be voted AGAINST the
proposal against any adjournment.
OTHER SHAREHOLDER INFORMATION. At the record date for the Meeting, Bank
of America and its affiliates held of record _____% of the outstanding shares of
the Fund in a fiduciary or other representative capacity for the benefit of
their customers. Bank of America has advised the Company that it and its
affiliates intend to vote the shares of the Fund over which they possess voting
power at the Meeting FOR the approval of the New Agreements. To the Company's
knowledge, at that date, no other person possessed sole or shared voting or
investment power with
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respect to more than 5% of the outstanding shares of the Fund's
share classes.
As of October 6, 1996, the directors and officers of the Company owned
in the aggregate less than 1% of the outstanding shares of the Fund.
ADDITIONAL INFORMATION
WELLINGTON MANAGEMENT. Wellington Management is a Massachusetts limited
liability partnership, with headquarters at 75 State Street, Boston,
Massachusetts 02109. Wellington Management is a professional investment
counseling firm which provides investment services to investment companies,
employee benefit plans, endowments, foundations and other institutions and
individuals. Wellington Management's predecessor organizations have provided
investment advisory services for over 60 years.
Wellington Management is managed by its active partners. The managing
partners of Wellington Management as of October 25, 1996 were Robert W. Doran,
Duncan M. McFarland and John R. Ryan. The following individuals were general
partners and Senior Vice Presidents of Wellington Management as of October 25,
1996, and may be reached at the principal offices of the firm: Kenneth L.
Abrams, Nicholas C. Adams, Rand L. Alexander, Deborah L. Allinson, Nancy T.
August, James H. Averill, Marie-Claude Bernal, William N. Booth, Paul Braverman,
William D. DiIanni, Pamela Dippel, Robert W. Doran, Charles T. Freeman, Laurie
A. Gabriel, Frank J. Gilday, John H. Gooch, Nicholas P. Greville, William C.S.
Hicks, Paul D. Kaplan, John C. Keogh, Christine S. Manfredi, Patrick J.
McCloskey, Earl E. McEvoy, Duncan M. McFarland, Paul M. Mecray, III, Matthew E.
Megargel, James N. Mordy, Diane C. Nordin, Edward P. Owens, Saul J. Pannell,
Thomas L. Pappas, David M. Parker, Jonathan M. Payson, Stephen M. Pazuk, Robert
D. Rands, Eugene E. Record, Jr., John R. Ryan, Arnold C. Schneider III, Joseph
H. Schwartz, David W. Scudder, Binkley C. Shorts, Trond Skramstad, Catherine A.
Smith, Stephen A. Soderberg, Ralph E. Stuart, Jr., Perry M. Traquina, Gene R.
Tremblay, Mary Ann Tynan, Ernst H. von Metzsch, James L. Walters, Kim Williams
and Frank V. Wisneski.
Wellington Management also serves as investment sub-adviser to the
following registered investment company portfolios, which have investment
objectives similar to the Fund. These portfolios, their approximate net assets
(as of September 30, 1996) and the annual sub-advisory fees payable by the
portfolios to Wellington Management are as follows:
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<TABLE>
<CAPTION>
====================================================================================
Approximate Net
Name of Assets Schedule of Fees
Fund as of 9/30/96 Net Assets/Annual Rate
- ------------------------------------------------------------------------------------
<S> <C> <C>
First Investors Global Fund, $253 million First $50 million/0.400%
Inc. Next $100 million/0.275%
Next $350 million/0.225%
Over $500 million/0.200%
- ------------------------------------------------------------------------------------
First Investors $52 million First $50 million/0.400%
International Securities Next $100 million/0.275%
Fund Next $350 million/0.225%
Over $500 million/0.200%
- ------------------------------------------------------------------------------------
Hartford International $918 million First $50 million/0.400%
Opportunities Fund, Inc. (a) Next $100 million/0.300%
Next $350 million/0.250%
Over $500 million/0.200%
- ------------------------------------------------------------------------------------
ITT Hartford International $3 million First $50 million/0.400%
Opportunities Fund, Inc. Next $100 million/0.300%
(b)* Next $350 million/0.250%
Next $500 million/0.200%
Over $1,000 million/0.175%
- ------------------------------------------------------------------------------------
Anchor Series Trust: Foreign $49 million First $50 million/0.400%
Securities Portfolio (c) Next $100 million/0.275%
Next $350 million/0.200%
Over $500 million/0.150%
====================================================================================
</TABLE>
(a) A mutual fund used as an investment vehicle for a variable annuity
product offered by ITT Hartford. Wellington Management serves as
investment sub-adviser for approximately $13 billion in assets for
mutual funds sponsored by ITT Hartford.
(b) A mutual fund publicly offered by ITT Hartford. Wellington Management
manages approximately $13 billion in assets for mutual funds sponsored
by ITT Hartford.
(c) A mutual fund used as an investment vehicle for a variable annuity
product offered by SunAmerica. Wellington Management manages
approximately $1.8 billion in assets for mutual funds sponsored by
SunAmerica.
* Subject to certain fee waivers.
No officer or director of the Company is an officer, employee, general
partner or shareholder of Wellington Management.
BANK OF AMERICA. Bank of America, which has principal offices located
at 555 California Street, San Francisco, California 94104, serves as investment
adviser to the Fund pursuant to the Current Advisory Agreement with the Company
dated as of July 30, 1996. The Current Advisory Agreement was approved by the
Company's Board of Directors on July 23, 1996. Prior to September 1, 1996, the
Fund invested all of its assets in an investment portfolio of Master Investment
Trust, Series I (the "Master Portfolio"). The Master Portfolio received
investment advisory services pursuant to an investment advisory agreement
between Bank of America and Master Investment Trust, Series I dated as of
November 1, 1994 which was approved by the Master Portfolio's sole shareholder
on October 29, 1994. Effective September 1, 1996, the Fund withdrew its
investment in the Master Portfolio and began investing directly in portfolio
securities. In connection with the withdrawal of its investments in the
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<PAGE> 16
investment portfolio, the Company entered into the Current Advisory Agreement.
The terms of the Current Advisory Agreement were substantially the same as the
terms of the investment advisory agreement between the Master Portfolio and Bank
of America and provided for the same advisory fee payable to Bank of America.
Bank of America is a wholly-owned subsidiary of BankAmerica
Corporation, a registered bank holding company. Formed in 1904, Bank of America
is a national banking association that provides commercial banking and trust
business through an extensive system of branches across the western United
States. Bank of America's principal banking affiliates operate branches in ten
U.S. states as well as corporate banking, business credit and thrift offices in
major U.S. cities. In addition, it has branches, corporate offices and
representative offices in 36 foreign countries.
The name and principal occupation of the principal executive officer
and each director of Bank of America as of October 31, 1996 were as follows:
David A. Coulter (Chief Executive Officer and President of Bank of America and
BankAmerica Corporation); Joseph F. Alibrandi (Chairman of the Board of
Whittaker Corporation); Jill Elikann Barad (President and Chief Executive
Officer of Mattel, Inc.); Peter Bedford (Chairman and Chief Executive Officer of
Bedford Property Investors, Inc.); Andrew F. Brimmer (President of Brimmer &
Co.); Richard A. Clarke (Retired Chairman of the Board of Pacific Electric Gas &
Electric Company); Timm F. Crull (Retired Chairman of the Board of Nestle USA,
Inc.); Kathleen Feldstein (President of Economics Studies, Inc.); Donald E.
Guinn (Chairman Emeritus of Pacific Telesis Group); Frank L. Hope, Jr.
(Consulting Architect); Ignacio E. Lozano (Chairman of "La Opinion"); Walter E.
Massey, Ph.D. (President of Morehouse College); Richard M. Rosenberg (Director
and Retired Chairman of the Board of Bank of America and BankAmerica
Corporation); and A. Michael Spence (Dean of the Graduate School of Business of
Stanford University).
The above persons may be reached c/o Bank of America, 555 S. California
Street, San Francisco, CA 94104.
No officer or director of the Company is an officer, employee, director
or shareholder of Bank of America or BankAmerica Corporation.
AUTHORITY TO ACT AS INVESTMENT ADVISER. Banking laws and regulations
currently prohibit a bank holding company registered under the Federal Bank
Holding Company Act of 1956 or any affiliate thereof from sponsoring, organizing
or controlling a registered open-end investment company continuously engaged in
the issuance of its shares, and prohibit banks generally from underwriting,
selling or distributing securities, but in general do not prohibit such a
holding company or affiliate banks
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<PAGE> 17
generally from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of customers. Bank of America is subject to such laws and
regulations, but believes that it may perform the services contemplated by the
Amended Advisory Agreement without violating the Glass-Steagall Act or other
applicable banking laws or regulations. Future changes in legal requirements
relating to the permissible activities of banks and their affiliates, as well as
future interpretations of current requirements, could prevent Bank of America
from continuing to perform such services for the Fund. If it was prohibited from
acting as investment adviser to the Fund, it is expected that the Board would
recommend that shareholders approve a new investment advisory agreement with
another qualified firm.
ADMINISTRATOR AND DISTRIBUTOR. The BISYS Group, Inc. ("BISYS") and
Concord Financial Group, Inc. ("Concord") serve as the Fund's administrator and
distributor, respectively. Concord is an indirect, wholly-owned subsidiary of
BISYS. Their offices are located at 3435 Stelzer Road, Columbus, Ohio
43219-3035.
OTHER MATTERS
The Company does not intend to hold Annual Meetings of Shareholders
except to the extent that such meetings may be required under the 1940 Act or
state law. Shareholders who wish to submit proposals for inclusion in the Proxy
Statement for a subsequent shareholder meeting should send their written
proposals to the Company at its principal office within a reasonable time before
such meeting.
No business other than the matter described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment of the Meeting, the persons
named in the enclosed Proxy will vote thereon according to their best judgment
in the interests of the Fund.
Dated: _____________, 1996
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<PAGE> 18
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO
WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO COMPLETE THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, COPIES OF THE COMPANY'S
SEMI-ANNUAL REPORT TO SHAREHOLDERS DATED AUGUST 31, 1996, AND, WHEN AVAILABLE,
ITS ANNUAL REPORT TO BE DATED FEBRUARY 28, 1997, TO ANY SHAREHOLDER UPON
REQUEST. THE COMPANY'S ANNUAL REPORTS TO SHAREHOLDERS (WHEN AVAILABLE) AND
SEMI-ANNUAL REPORTS TO SHAREHOLDERS MAY BE OBTAINED FROM THE COMPANY BY WRITING
TO THE COMPANY AT 3435 STELZER ROAD, COLUMBUS, OHIO 43219-3035 OR BY CALLING
1-800-332-3863.
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<PAGE> 19
EXHIBIT A
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
(INTERNATIONAL EQUITY FUND)
THIS AGREEMENT is made as of _______, 1997 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, the Company desires to retain the Adviser to furnish
investment advisory services to the Company's International Equity Fund (the
"Fund");
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 Fund 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. The Adviser may,
in its discretion, provide such services through its own employees or the
employees of one or more affiliated companies that are qualified to act as
investment adviser 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,
and (ii) that such organized group of persons is managed at all times by
authorized officers of the Adviser.
(b) In the event that the Company establishes one or more
investment portfolios other than the Fund 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 so 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 Fund except to the extent that said
provisions (including those relating to the compensation payable by the Fund to
the Adviser) are modified with respect to such Fund in writing by the Company
and the Adviser at the time. The Fund and any additional investment portfolios
established hereunder in accordance with this paragraph are sometimes
collectively referred to herein as the "Funds" and individually as a "Fund."
<PAGE> 20
2. SERVICES. Subject to the supervision of the Company's Board of
Directors (the "Board"), the Adviser, in consultation with any Sub-Adviser
appointed pursuant to Section 3 hereof with respect to a particular Fund, 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 registration
statement, as from time to time amended, and resolutions of the Board. 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 is
activities under this Agreement in accordance with other applicable law,
including but not limited to banking law.
(b) Will review, monitor and report to the Board of Directors
regarding the performance and investment procedures of any Sub-Adviser (as
defined in Section 3 of this Agreement).
(c) Will assist and consult with any Sub-Adviser appointed
with respect to a particular Fund in connection with that Fund's continuous
investment program (as defined in Section 3 of this Agreement).
(d) 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, as amended) 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 Board, 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
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<PAGE> 21
of the amount of commission another broker or dealer would have charged for
effecting that transaction if, but only if, the Adviser 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. No prior approval by the
Board, however, shall be required so long as the broker or dealer selected by
the Adviser obtains best price and execution on a particular transaction. In no
instance will portfolio securities be purchased from or sold to the Adviser, any
Sub-Adviser or Concord Holding Corporation, the Company's administrator (the
"Administrator"), or an affiliated person of any of them acting as principal or
as broker, except as permitted by law. In executing portfolio transactions for
any Fund, the Adviser may, but shall not be obligated to, to the extent
permitted by applicable laws and regulations, 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 Company's
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.
In performing the investment advisory services hereunder, the Adviser
is authorized to purchase, sell or otherwise deal with securities or other
instruments for which (a) Bank of America National Trust and Savings
Association, (b) any affiliate of Bank of America National Trust and Savings
Association, (c) an entity in which Bank of America National Trust and Savings
Association has a direct or indirect interest, or (d) another member of a
syndicate or other intermediary (where an entity referred to in (a), (b) or (c)
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 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 Adviser, to the extent its actions are
authorized under this paragraph.
(e) Will maintain all books and records with respect to the
securities transactions for the Funds, keep books of account with respect to
such Funds and furnish the Board such periodic special reports as the Board may
request.
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<PAGE> 22
(f) 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.
(g) Will treat confidentially and as proprietary information
of the Company all records and other information relative to the Company and
prior or present Company shareholders or those persons or entities who respond
to inquires 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 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 regarding the Company.
3. SUB-ADVISER. It is understood that the Adviser may from time to time
employ or associate with itself such person or persons as the Adviser believes
to be fitted to assist it in the performance of this Agreement (each a
"Sub-Adviser"); provided, however, that the compensation of such person or
persons shall be paid by the Adviser and that the Adviser shall be as fully
responsible to the Company for the acts and omissions of any such person as it
is for its own acts and omissions; and provided further, that the retention of
any Sub-Adviser shall be approved as may be required by the 1940 Act.
Notwithstanding any such employment or association, the Adviser shall itself (a)
establish and monitor general investment criteria and policies for the Fund, (b)
review and analyze on a periodic basis the Fund's portfolio holdings and
transactions in order to determine their appropriateness in light of the Fund's
shareholder base, and (c) review and analyze on a periodic basis the policies
established by any Sub-Adviser for the Fund with respect to the placement of
orders for the purchase and sale of portfolio securities. In the event that any
Sub-Adviser appointed hereunder is terminated, the
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<PAGE> 23
Adviser may provide investment advisory services pursuant to this Agreement to
the Funds without further shareholder approval.
4. 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 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.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-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 31a-2
under the 1940 Act the records required to be maintained by Rule 31-1 under the
1940 Act.
6. EXPENSES. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under the
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the Company.
7. 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 .75% of the net assets of the International
Equity Fund. Such fee as is attributable to a 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 the Fund)
exceed the expense limitations of any such state, the Adviser will reimburse the
Fund to the extent necessary to reduce such Fund's expenses below such expense
limitation. 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 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.
A-5
<PAGE> 24
8. LIMITATION OF LIABILITY. Subject to the provisions of Section 3
hereof concerning the Adviser's responsibility for the acts and omissions of
persons employed by or associated with the Adviser, 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.
9. DURATION AND TERMINATION. This Agreement will become effective with
respect to the International Equity Fund as of the date first above written,
provided that the shareholders of such 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 shareholders of such 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, 1997. 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 Board 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 Board 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
Board or by vote of a majority of the outstanding voting securities of such
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" shall have the same meaning as the meaning
of such terms in the 1940 Act.)
10. 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
A-6
<PAGE> 25
effective as to a particular Fund until approved by vote of a majority of the
outstanding voting securities of such Fund.
11. 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 555 South Flower Street, 5th Floor, Los Angeles, California
90071, Attention: Sandra C. Brown, or at such other address or to such
individuals 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 3435 Stelzer
Road, Columbus, Ohio 43219, Attention: J. David Huber (with a copy to
Association of American Universities, One DuPont Circle, Suite 730, Washington,
DC 20036, Attention: Cornelius J. Pings, President), or at such other address or
to such individual as will be so specified by the Company to the Adviser.
12. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit 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 the
internal laws, and not the law of conflicts, of the State of Maryland; provided
that nothing herein will be construed in a manner inconsistent with the 1940
Act, the Investment Advisers Act of 1940, as amended, or any rule or regulation
of the Securities and Exchange Commission thereunder. This Agreement may be
executed in two or more parts which together shall constitute a single
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PACIFIC HORIZON FUNDS, INC.
By: ___________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: ___________________________
Name:
Title:
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<PAGE> 26
EXHIBIT B
SUB-ADVISORY AGREEMENT
AGREEMENT made as of ____________, 1997 between Bank of America
National Trust and Savings Association, a national banking association (herein
called the "Adviser"), and Wellington Management Company, LLP, a Massachusetts
limited liability partnership (herein called the "Sub-Adviser").
WHEREAS, Pacific Horizon Funds, Inc., a Maryland corporation
(hereinafter called the "Company"), is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, pursuant to an Investment Advisory Agreement dated as of July
30, 1996 (hereinafter called the "Investment Advisory Agreement"), by and
between the Company and the Adviser, the Adviser has agreed to furnish
investment advisory services to the Company with respect to its International
Equity Fund (the "Fund"); and
WHEREAS, the Investment Advisory Agreement specifically authorizes the
Adviser to sub-contract investment advisory services on behalf of the Fund to a
sub-adviser pursuant to a sub-advisory agreement agreeable to the Company and
approved in accordance with the provisions of the 1940 Act; and
WHEREAS, the Board of Directors of the Company and the shareholders of
the Fund 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 and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT.
The Adviser hereby appoints the Sub-Adviser to act as sub- investment
adviser with respect to the Fund, for the period and on the terms set forth in
this Agreement. 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 Adviser and the
Company's Board of Directors, the Sub-Adviser will provide a continuous
investment program for the Fund, including investment research and management
with respect to all securities and investments and cash equivalents in the Fund.
The Sub-Adviser will determine from time to time what securities and other
<PAGE> 27
investments will be purchased, retained or sold by the Fund. The Sub-Adviser
will provide the services rendered by it under this Agreement in accordance with
the investment criteria and policies established from time to time for the Fund
by the Adviser, the investment objective, policies and restrictions as stated in
the Company's currently effective Registration Statement with respect to the
Fund, and resolutions of the Company's Board of Directors. Without limiting the
generality of the foregoing, the Sub-Adviser further agrees that it will
maintain such books and records regarding the securities transactions with
respect to the Fund as may be required or otherwise requested by the Company and
its Board of Directors and the Sub-Adviser will also supply the Company and its
Board of Directors with reports, statistical data and economic information as
requested.
3. OTHER COVENANTS.
The Sub-Adviser 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;
(b) will use the same skill and care in providing services
under this Agreement as it uses in providing services to fiduciary accounts for
which it has investment responsibilities;
(c) will place orders pursuant to its investment
determinations with respect to the Fund with brokers or dealers in accordance
with the policy set forth in the Fund's Registration Statement or as the Adviser
or Board of Directors may direct from time to time. In executing portfolio
transactions and selecting brokers or dealers, the Sub-Adviser will use its best
efforts to seek on behalf of the Fund the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-Adviser
shall consider all factors that it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for specific transactions 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 Securities Exchange Act of 1934, as amended) provided with respect to the
Fund, other investment portfolios 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 Adviser and the
Company's Board of Directors, to pay to a broker or dealer who provides such
brokerage and research
B-2
<PAGE> 28
services a commission for executing a portfolio transaction with respect to the
Fund that is in excess of the amount of commission 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 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 and to the Company.
No prior approval by the Adviser or the Company's Board of Directors, however,
shall be required so long as the broker or dealer selected by the Sub-Adviser
obtains best price and execution on a particular transaction. In no instance
will portfolio securities be purchased from or sold to the Adviser, the
Sub-Adviser, or Concord Holding Corporation, or any affiliated person of the
Adviser, the Sub-Adviser, or Concord Holding Corporation acting as principal or
broker, except as permitted by law. In executing portfolio transactions with
respect to the Fund, the Sub-Adviser may, but is not obligated to, 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 Company's currently effective
Registration Statement. In such event the Sub-Adviser will allocate the
securities so purchased or sold, and the expenses incurred in the transaction,
in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Fund, such other portfolios and such other clients.
(d) will treat confidentially and as proprietary information
of the Company all records and other information relative to the Company and
prior or present Company shareholders ("Investors") or those persons or entities
who respond to 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 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 Company. Nothing
contained herein, however, shall prohibit the Sub-Adviser from advertising to or
soliciting the public generally with respect to other procedures 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 Company.
B-3
<PAGE> 29
(e) will not purchase any securities from or sell any
securities to the Adviser, the Company's administrator or either of their
affiliates on behalf of the Fund except as permitted by law. 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 Adviser or any of its affiliates on behalf of
any other accounts managed by the Sub-Adviser.
(f) will provide the Fund's Custodian on each business day
with information relating to all transactions concerning the Fund's assets and
shall provide the Adviser with such information upon request.
(g) on a monthly basis, will provide information regarding
investment strategy to be employed by the Sub-Adviser on behalf of the Fund and
information regarding the Fund's performance against its benchmark and will
provide such other information as the Adviser may reasonably request from time
to time.
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 by the Board from
time to time, have no authority to act for or represent the Company or the
Adviser in any way or otherwise be deemed their agent.
5. BOOKS AND RECORDS.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records that it maintains with respect to
the Fund are the property of the Company and further agrees to surrender
promptly to the Company any of such records upon the Company's request; provided
however that the Sub-Adviser may retain a copy of such records. The Sub- Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
6. EXPENSES.
During the term of this Agreement, 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 and other
transaction costs, if any) purchased or sold with respect to the Fund.
B-4
<PAGE> 30
7. COMPENSATION.
For the services provided and the expenses assumed pursuant to this
Agreement, the Adviser will pay the Sub-Adviser, and the Sub-Adviser will accept
as full compensation therefor, a fee, payable quarterly (in arrears), at the
following annual rates based on the average month-end net assets of the Fund as
follows:
<TABLE>
<CAPTION>
Fund Assets Rate of Sub-Advisory Fee
<S> <C>
First $50 million 0.40%
Next $100 million 0.30%
Next $350 million 0.25%
Over $500 million 0.20%
</TABLE>
The Sub-Adviser acknowledges that it shall not be entitled to any further
compensation from the Adviser in respect of the services provided and expenses
assumed by it under this Agreement. The Sub-Adviser understands and agrees that
the Company and the Fund shall have no liability for payment of the
Sub-Adviser's fees hereunder, and that the Sub-Adviser's sole recourse for
payment of such fees shall be to the Adviser.
8. 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 Company in connection with the
performance of this Agreement, except that the Sub-Adviser shall be liable to
the Company and the Adviser for any loss resulting from a breach of fiduciary
duty 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
Company, that the Sub-Adviser is therefore directly liable and responsible to
the Company for the performance of its obligations hereunder, and that the
Company may enforce in its own name and for itself such liability and
responsibility.
9. 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 October 31,
1998. Thereafter, if not terminated, this Agreement shall continue in effect for
successive annual periods ending on October 31, 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
B-5
<PAGE> 31
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 the Fund. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by the Adviser or by
the Company (in the case of the Company, by vote of the Company's Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund) on sixty days' written notice to the Sub-Adviser, or by the Sub-Adviser,
on sixty days' written notice to the Company, provided that in each such case,
notice shall be given simultaneously to the Adviser. In addition,
notwithstanding anything herein to the contrary, in the event of the termination
of the Investment Advisory Agreement with respect to the Fund for any reason
(whether by the Company, by the Adviser or by operation of law) this Agreement
shall terminate upon the effective date of such termination of the Investment
Advisory Agreement. 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.)
10. 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 shall be effective until approved by vote
of a majority of the outstanding voting securities of the Fund.
11. MISCELLANEOUS.
The captions in the Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by the internal laws, and not the
law of conflicts, of the State of Maryland; provided that nothing herein will be
construed in a manner inconsistent with the 1940 Act, the Investment Advisers
Act of 1940, as amended, or any rule or regulation of the Securities and
Exchange Commission thereunder.
This Agreement may be executed in two or more parts which together
shall constitute a single Agreement.
B-6
<PAGE> 32
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
By: ______________________________
Name:
Title:
WELLINGTON MANAGEMENT COMPANY, LLP
By: ______________________________
Name:
Title:
B-7
<PAGE> 33
[PRELIMINARY COPY]
PROXY
PACIFIC HORIZON FUNDS, INC.
INTERNATIONAL EQUITY FUND
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of Pacific Horizon
Funds, Inc. (the "Company") for use at a Special Meeting of Shareholders of the
International Equity Fund to be held at the offices of the Company's transfer
agent, BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219-3035
on December 23, 1996 at 10:00 a.m., (Eastern time).
The undersigned hereby appoints Bryan Haft, Susan Walters and Lisa
Ling, and each of them, with full power of substitution, as proxies of the
undersigned to vote at the above-stated Special Meeting, and at all adjournments
or postponements thereof, all Class T - Common Stock shares ("A Shares") and
Class T - Special Series 5 Common Stock shares ("K Shares") (evidencing
interests in the International Equity Fund) held of record by the undersigned on
November 15, 1996, the record date for the meeting, upon the matters described
on the reverse side AND UPON ANY OTHER MATTER WHICH MAY COME BEFORE THE MEETING,
IN THEIR DISCRETION:
1. Proposal to approve an Amended and Restated Investment
Advisory Agreement between Pacific Horizon Funds, Inc.
and Bank of America National Trust and Savings
Association with respect to the International Equity
Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to approve a Sub-Advisory Agreement between
Bank of America National Trust and Savings Association
and Wellington Management Company, LLP with respect to
the International Equity Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before
the meeting.
<PAGE> 34
Every properly signed proxy will be voted in the manner specified
hereon and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING
AUTHORITY TO VOTE FOR PROPOSALS 1 AND 2.
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares
are held by joint tenants,
both should sign. When
signing as attorney or as
executor, administrator,
trustee or guardian, please
give full title as such. If
a corporation, please sign
in full corporate name by
president or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
Dated:
----------------------------
X
-----------------------------------
Signature
X
-----------------------------------
Signature, if held jointly
-2-
