EXHIBIT g.2
PORTFOLIO MANAGEMENT AGREEMENT
XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II
This Portfolio Management Agreement is executed as of July 16, 2003 by and
between PIMCO ADVISORS FUND MANAGEMENT LLC, a Delaware limited liability company
(the "Manager"), and XXXXXXXX-XXXXXXXXX CAPITAL MANAGEMENT LLC, a Delaware
limited liability company (the "Portfolio Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE PORTFOLIO MANAGER TO THE FUND.
(a) Subject always to the direction and oversight of the Trustees of
Xxxxxxxx-Xxxxxxxxx Convertible & Income Fund II (the "Fund"), a
Massachusetts business trust, the Portfolio Manager, at its expense,
will furnish continuously an investment program for the Fund and will
make investment decisions on behalf of the Fund and place all orders
for the purchase and sale of portfolio securities and all other
investments. In the performance of its duties, the Portfolio Manager
(1) will comply with the provisions of the Fund's Agreement and
Declaration of Trust and Bylaws, including any amendments thereto
(upon receipt of such amendments by the Portfolio Manager), and the
investment objective, policies and restrictions of the Fund as set
forth in its current Prospectus and Statement of Additional
Information (copies of which will be supplied to the Portfolio Manager
upon filing with the Securities and Exchange Commission (the "SEC")),
(2) will use its best efforts to safeguard and promote the welfare of
the Fund and (3) will comply with other policies which the Trustees or
the Manager, as the case may be, may from time to time determine as
promptly as practicable after such policies have been communicated to
the Portfolio Manager in writing. The Portfolio Manager and the
Manager shall each make its officers and employees available to the
other from time to time at reasonable times to review investment
policies of the Fund and to consult with each other regarding
investment affairs of the Fund.
(b) The Portfolio Manager shall be responsible for daily monitoring of the
Fund's investment activities and portfolio holdings to ensure the
Fund's compliance with the Investment Company Act of 1940, as amended
from time to time, and the rules and regulations thereunder (the "1940
Act"), the Fund's compliance with the investment objective, policies
and restrictions of the Fund as set forth in its current Prospectus
and Statement of Additional Information and the Fund's satisfaction of
quarterly diversification requirements for qualification as a
regulated investment company under the Internal Revenue Code of 1986,
as
amended from time to time, and the rules and regulations thereunder,
and shall provide the Manager with written month-end compliance
reports as to the foregoing.
(c) The Portfolio Manager, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel,
required for it to execute its duties hereunder faithfully and (ii)
administrative facilities, including bookkeeping, clerical personnel
and equipment necessary for the efficient conduct of the investment
affairs of the Fund, including verification and oversight of the
pricing of the Fund's portfolio (but excluding determination of net
asset value and shareholder accounting services).
(d) In the selection of brokers or dealers and the placing of orders for
the purchase and sale of portfolio investments for the Fund, the
Portfolio Manager shall use its best efforts to obtain for the Fund
the most favorable price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage
and research services as described below. In using its best efforts to
obtain for the Fund the most favorable price and execution available,
the Portfolio Manager, bearing in mind the Fund's best interests at
all times, shall consider all factors it deems relevant, including, by
way of illustration, price, the size of the transaction, the nature of
the market for the security, the amount of the commission, the timing
of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or dealer
involved and the quality of service rendered by the broker or dealer
in other transactions. Subject to such policies as the Trustees of the
Fund may determine and communicate to the Portfolio Manager in
writing, the Portfolio Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Fund to pay a
broker or dealer that provides brokerage and research services to the
Portfolio Manager or its affiliates an amount of commission for
effecting a portfolio investment transaction in excess of the amount
of commission another broker or dealer would have charged for
effecting that transaction, if the Portfolio Manager determines in
good faith that such amount of commission was reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's overall responsibilities with
respect to the Fund and to other clients of the Portfolio Manager and
its affiliates as to which the Portfolio Manager and its affiliates
exercise investment discretion. The Fund agrees that any entity or
person associated with the Portfolio Manager or its affiliates which
is a member of a national securities exchange is expressly authorized
to effect any transaction on such exchange for the account of the Fund
which is permitted by Section 11(a) of the Securities Exchange Act of
1934 (the "1934 Act").
(e) The Portfolio Manager shall not be obligated to pay any expenses of or
for the Fund not expressly assumed by the Portfolio Manager pursuant
to this Section 1.
-2-
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Fund may be a shareholder, member, director, officer or
employee of, or be otherwise interested in, the Portfolio Manager, and in
any person controlled by or under common control with the Portfolio
Manager, and that the Portfolio Manager and any person controlled by or
under common control with the Portfolio Manager may have an interest in the
Fund. It is also understood that the Portfolio Manager and persons
controlled by or under common control with the Portfolio Manager have and
may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE PORTFOLIO MANAGER.
The Manager will pay the Portfolio Manager as compensation for the
Portfolio Manager's services rendered and for the expenses borne by the
Portfolio Manager pursuant to Section 1, a fee computed and paid monthly at
the annual rate of 0.420% of the Fund's average daily total managed assets;
provided, however, that the fees payable by the Manager hereunder for any
period shall be reduced by an amount equal to sixty percent (60%) of any
Service or Incentive Fees payable by the Manager for such period.
As used in this Section 3, "Service or Incentive Fees" for a period equals
the sum of (x) any fees payable by the Manager to UBS Securities LLC for
such period pursuant to the Shareholder Services Agreement between such
parties with respect to the Fund and (y) any incentive fees payable by the
Manager to underwriters meeting certain requirements (based on the Fund's
average daily total managed assets attributable to the Fund's common shares
of beneficial interest sold by each such underwriter) as described under
"Underwriting" in the Fund's definitive prospectus for the initial public
offering of its common shares of beneficial interest.
For purposes of this Section 3, "total managed assets" means the total
assets of the Fund (including any assets attributable to any preferred
shares or other forms of leverage of the Fund that may be outstanding)
minus accrued liabilities (other than liabilities representing leverage).
The average daily total managed assets of the Fund shall be determined by
taking an average of all of the determinations of such amount during such
month at the close of business on each business day during such month while
this Agreement is in effect. Such fee from the Manager to the Portfolio
Manager shall be payable for each month within 10 business days after the
end of the month.
In the event that the Portfolio Manager has agreed to a fee waiver
arrangement with the Manager, subject to such terms and conditions as the
Manager and the Portfolio Manager may set forth in such agreement, the
compensation due the Portfolio Manager hereunder shall be reduced to the
extent required by such fee waiver arrangement.
-3-
If the Portfolio Manager shall serve for less than the whole of a month,
the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment or in the event that the Investment
Management Agreement between the Manager and the Fund shall have terminated
for any reason; and this Agreement shall not be amended unless such
amendment is approved at a meeting by the affirmative vote of a majority of
the outstanding shares of the Fund, and by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Fund who are not interested persons of the Fund or of
the Manager or the Portfolio Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall remain
in full force and effect as to the Fund continuously thereafter (unless
terminated automatically as set forth in Section 4) until terminated as
follows:
(a) The Fund may at any time terminate this Agreement by written notice
delivered or mailed by registered mail, postage prepaid, to the
Manager and the Portfolio Manager, or
(b) If (i) the Trustees of the Fund or the shareholders by the affirmative
vote of a majority of the outstanding shares of the Fund, and (ii) a
majority of the Trustees of the Fund who are not interested persons of
the Fund or of the Manager or of the Portfolio Manager, by vote cast
in person at a meeting called for the purpose of voting on such
approval, do not specifically approve at least annually the
continuance of this Agreement, then this Agreement shall automatically
terminate at the close of business on the second anniversary of its
execution, or upon the expiration of one year from the effective date
of the last such continuance, whichever is later; provided, however,
that if the continuance of this Agreement is submitted to the
shareholders of the Fund for their approval and such shareholders fail
to approve such continuance of this Agreement as provided herein, the
Portfolio Manager may continue to serve hereunder in a manner
consistent with the 1940 Act, or
(c) The Manager may at any time terminate this Agreement by not less than
60 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Portfolio Manager, and the Portfolio Manager
may at any time terminate this Agreement by not less than 60 days'
written notice delivered or mailed by registered mail, postage
prepaid, to the Manager.
-4-
Action by the Fund under (a) above may be taken either (i) by vote of
a majority of the Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Portfolio Manager shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Portfolio Manager shall
fail to be registered as an investment adviser under the Investment
Advisers Act of 1940, as amended from time to time, (b) the Portfolio
Manager shall have been served or otherwise have notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before or
by any court, public board or body, involving the affairs of the Fund, (c)
there is a change in control of the Portfolio Manager or any parent of the
Portfolio Manager within the meaning of the 1940 Act, or (d) there is a
material adverse change in the business or financial position of the
Portfolio Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding shares" means the affirmative vote, at a duly called and
held meeting of shareholders, (a) of the holders of 67% or more of the
shares of the Fund, as the case may be, present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Fund, as the case may be, entitled to vote at
such meeting are present in person or by proxy, or (b) of the holders of
more than 50% of the outstanding shares of the Fund, as the case may be,
entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the 1940 Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder, subject, however, to such exemptions
as may be granted by the SEC under the 1940 Act and the rules and
regulations thereunder; and the term "brokerage and research services"
shall have the meaning given in the 1934 Act and the rules and regulations
thereunder.
8. NONLIABILITY OF PORTFOLIO MANAGER.
Notwithstanding any other provisions of this Agreement, in the absence of
willful misfeasance, bad faith or gross negligence on the part of the
Portfolio Manager, or reckless disregard of its obligations and duties
hereunder, the Portfolio Manager, including its officers, directors and
members, shall not be subject to any liability to the Manager, to the Fund,
or to any shareholder, officer, director, partner or Trustee thereof, for
any act or omission in the course of, or connected with, rendering services
hereunder.
-5-
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund is on file
with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Fund as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property
of the Fund.
10. EXERCISE OF VOTING RIGHTS.
Except with the agreement (which may be evidenced by resolution) or on the
specific instructions of the Trustees of the Fund or the Manager, the
Portfolio Manager shall not exercise or procure the exercise of any voting
right attaching to investments of the Fund.
11. COUNTERPARTS.
This Agreement may be signed in one or more counterparts, each of which
shall be deemed to be an original.
-6-
IN WITNESS WHEREOF, PIMCO ADVISORS FUND MANAGEMENT LLC and
XXXXXXXX-XXXXXXXXX CAPITAL MANAGEMENT LLC have each caused this instrument to be
signed on its behalf by its duly authorized representative, all as of the day
and year first above written.
PIMCO ADVISORS FUND XXXXXXXX-XXXXXXXXX CAPITAL
MANAGEMENT LLC MANAGEMENT LLC
By: /s/ Xxxxxx X. Xxxxxx, Xx. By: /s/ Xxxxxxx X. Field
--------------------------------- -----------------------------
Name: Xxxxxx X. Xxxxxx, Xx. Name: Xxxxxxx X. Field
Title: Managing Director Title: Deputy General Counsel
Accepted and agreed to as of the day and year first above written:
XXXXXXXX-XXXXXXXXX CONVERTIBLE & INCOME FUND II
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
-7-
