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CO-MANAGEMENT AGREEMENT
CO-MANAGEMENT AGREEMENT, made as of the 1st day of August, 1997, by and among
PACIFIC GLOBAL FUND, INC., a Maryland corporation doing business as Pacific
Advisors Fund Inc. (the "Corporation"), PACIFIC GLOBAL INVESTMENT MANAGEMENT
COMPANY, a California corporation ("PGIMC") and XXXXXXXX & XXXXX, INC., a
California corporation ("H&B").
WITNESSETH
WHEREAS, the Corporation is engaged in business as an open-end investment
management company and is registered as such under the Investment Company Act
of 1940, as amended (the "1940 Act"); and
WHEREAS, the Corporation is a series type investment company currently
consisting of four series, the Balanced Fund, the Income Fund, the Government
Securities Fund, and the Small Cap Fund, each with its own investment
objectives, investment program, policies, and restrictions; and
WHEREAS, PGIMC is engaged principally in the business of rendering investment
management services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, H&B is engaged principally in the business of rendering investment
advisory services and is registered as an investment adviser under the Advisers
Act; and
WHEREAS, PGIMC and the Corporation on behalf of its separately designated
series, the Income Fund (the "Fund"), have entered into an Investment
Management Agreement dated as of October 16, 1992 (the "Investment Management
Agreement") pursuant to which PGIMC is authorized to act as sole investment
manager of the Corporation with respect to the Fund and, in its discretion, to
engage the services of a sub-adviser to provide investment advisory and other
services to the Fund; and
WHEREAS, PGIMC shall continue to provide investment management services to the
Fund pursuant to the Investment Management Agreement in addition to its duties
under this Agreement; and
WHEREAS, the Corporation proposes to engage H&B as co-manager ("Co-manager") of
the Fund's assets and to authorize PGIMC to serve as Co-manager along with H&B
of the Fund's assets; and
WHEREAS, H&B and PGIMC are willing to perform co-management services for the
Fund upon the terms and conditions and for the compensation hereinafter set
forth;
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NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. The Corporation hereby employs H&B to serve as Co-manager and
authorizes PGIMC to serve as Co-manager with respect to the assets of the Fund
and to perform the services hereinafter set forth. H&B and PGIMC hereby accept
such employment and authorization and agree for the compensation herein
provided to assume all obligations herein set forth and to bear all expenses of
their performance of such obligations (but no other expenses).
2. Subject to the supervision and control of the Corporation's Board
of Directors, H&B and PGIMC shall co-manage the investment and reinvestment of
the Fund's assets in accordance with applicable law, including the Internal
Revenue Code of 1986, as amended, and the investment objectives, investment
program, policies, and restrictions set forth in the then-current Prospectus
and then-current Statement of Additional Information relating to the Fund
contained in the Corporation's Registration Statement under the 1940 Act, and
the Securities Act of 1933, as amended from time to time, and subject to such
further limitations as the Corporation may from time to time impose by written
notice to H&B and PGIMC. H&B and PGIMC shall jointly establish the overall
investment program for the management of the Fund's assets. H&B and PGIMC,
shall amend and update such investment program from time to time as financial
and other economic conditions warrant.
3. Subject to the supervision and control of the Corporation's Board
of Directors, H&B and PGIMC shall jointly have the authority to make
determinations with respect to the investment and reinvestment of the assets of
the Fund and to take such steps as may be necessary to implement the same.
Consistent with their duties hereunder, H&B and PGIMC shall advise the
Corporation's Board of Directors of the manner in which voting rights, rights
to consent to corporate action, and any other non-investment decisions
pertaining to the Fund's portfolio securities should be exercised.
4. H&B, shall regularly furnish such reports to PGIMC as it may
request for PGIMC's use in discharging its obligations under the Investment
Management Agreement, which reports may be distributed by PGIMC to the
Corporation at periodic meetings of the Corporation's Board of Directors and at
such other times as may be reasonably requested by the Corporation's Board of
Directors. Such reports shall include: H&B's economic outlook and investment
research and strategy of H&B; a discussion of the Fund's portfolio activity,
including a schedule of the Fund's investments and other assets and a statement
of all purchases and sales for the Fund during the period since the last
preceding report, and the Fund's performance since the last report and for such
other relevant periods as shall be mutually agreed upon; and any other
information about material developments affecting the Fund. Copies of all such
reports shall be furnished to PGIMC for examination and review within a
reasonable time prior to the presentation of such reports to the Corporation's
Board of Directors.
5. (a) H&B and PGIMC shall select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Fund and place,
in the name of the Fund or its nominee, all such orders. Such brokers or
dealers may include brokers or dealers affiliated
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with H&B, PGIMC and the Corporation ("affiliated brokers or dealers"). All
purchases and sales of portfolio securities for the Fund placed with affiliated
brokers or dealers shall be executed in compliance with procedures established
by the Corporation's Board of Directors. When placing all orders, H&B and PGIMC
shall use their best efforts to obtain the best available price and most
favorable execution for the Fund. H&B and PGIMC shall use their best efforts to
recapture all available tender and exchange offer solicitation fees and similar
payments in connection with tenders or exchanges of the securities of the Fund.
H&B or PGIMC shall send, by facsimile or comparable means, copies of all
portfolio transactions to the Corporation's custodian on the date such
portfolio transactions are executed. H&B and PGIMC shall advise the Board of
Directors of the Corporation of any fees or payments of whatever type that may
be possible for H&B or PGIMC or any of their affiliates to receive in
connection with the purchase or sale of investment securities for the Fund.
(b) Subject to the appropriate policies, procedures, and/or
guidelines established by the Corporation's Board of Directors, H&B and PGIMC
may also effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if H&B and PGIMC determine in
good faith that such amount of commission is reasonable in relation to the
value of the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of H&B and PGIMC with respect to the Fund and H&B's other
advisory clients. The execution of such transactions shall not be deemed to
represent an unlawful act or breach of any duty created by this Agreement or
otherwise.
(c) H&B and PGIMC shall promptly communicate to the Corporation's
Board of Directors such information relating to portfolio transactions as the
Board of Directors may reasonably request.
(d) The parties understand that the Fund shall bear all brokerage
commissions in connection with purchases and sales of portfolio securities for
the Fund and all ordinary and reasonable transaction costs in connection with
purchases of such securities in private placements and subsequent sales
thereof.
6. H&B and PGIMC shall:
(a) provide, without charge, persons to render such reasonable
clerical, administrative, and other services (other than services described in
any other sub-paragraphs of this paragraph 6) to the Fund as the Corporation's
Board of Directors may from time to time reasonably request;
(b) furnish the Corporation, for the Fund, without charge, such
reasonable administrative and management supervision and office facilities,
which may be their own offices, as shall be appropriate or as the Corporation's
Board of Directors may reasonably request, subject to the requirements of any
regulatory authority to which H&B or PGIMC may be subject;
(c) generally assist in all other aspects of the Fund's
operations as the Corporation's Board of Directors may reasonably request;
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(d) provide, as the Corporation's Board of Directors may
reasonably request and without charge, persons satisfactory to the Board of
Directors to serve as the Corporation's officers;
(e) provide, at a cost to the Fund to be agreed upon from time
to time by the Corporation, H&B and PGIMC, persons, who may be employees of
H&B, PGIMC or their respective affiliates, satisfactory to the Corporation's
Board of Directors, to provide other services for the Fund, and such facilities
and equipment as may be necessary for such persons to carry out their duties
hereunder, including without limitation office space and facilities, telephone
and CRT terminals and equipment (including telephone lines) necessary for
access to the Fund's records;
(f) provide data processing services, recordkeeping, and
clerical services, internal auditing and regulatory compliance services,
internal executive and administrative services, and stationery and office
supplies;
(g) provide information to the Corporation as necessary to
prepare reports to shareholders, tax returns, and reports to and filings with
the Securities and 2Exchange Commission and any other regulatory and
administrative bodies that have jurisdiction over the operations of the Fund
and shall submit to all such regulatory and administrative bodies such
information, reports, or other material as necessary to comply with applicable
laws or regulations; and
(h) maintain records relating to the services provided under
this Agreement, which records shall be the property of, and under control of,
the Corporation.
H&B may (at its cost except as contemplated by paragraph 5 and 6(e) of this
Agreement) employ, retain, or otherwise avail itself of the services and
facilities of persons and entities within its own organization or any other
organization for the purpose of providing PGIMC, the Corporation or the Fund
with such information, advice or assistance, including but not limited to
advice regarding economic factors and trends and advice as to transactions in
specific securities, as H&B may deem necessary, appropriate, or convenient for
the discharge of its obligations hereunder or otherwise helpful to PGIMC, the
Corporation or the Fund, or in the discharge of H&B's overall responsibilities
with respect to the other accounts which it serves as investment manager.
7. H&B and PGIMC shall cooperate with and make available to the
Corporation and any agents engaged by the Corporation, their expertise relating
to matters affecting the Fund which involve markets, securities or individual
companies. Such matters shall include, but shall not be limited to, the pricing
of certain securities owned by the Fund for the purpose of pricing Fund shares
and the selection of agents engaged by the Corporation on behalf of the Fund.
8. (a) As compensation for all services under the Investment
Management Agreement and this Agreement PGIMC shall receive a fee calculated at
the annual rate of .40% on the first $100 million of the average daily net asset
value of the Fund, .37% of
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the next $100 million, .34% of the next $100 million, .31% of the next $100
million, .28% of the next $100 million, and .25% of average daily net asset
value in excess of $500 million.
(b) As compensation for all services rendered by H&B under this
Agreement, the Corporation shall pay to H&B a co-management fee calculated at
the annual rate of .35% on the first $100 million of the average daily net
asset value of the Fund, .33% of the next $100 million, .31% of the next $100
million, .29% of the next $100 million, .27% of the next $100 million, and .25%
of average daily net asses value in excess of $500 million.
The co-management fee shall accrue on each calendar day, and the sum of the
daily fee accruals shall be paid monthly to H&B on the first business day of
the next succeeding calendar month. The daily fee accruals shall be computed by
multiplying the fraction of one over the number of calendar days in the year by
the applicable annual co-management fee rate described above, and multiplying
this product by the net assets of the Fund as determined in accordance with the
Fund's then-current Prospectus as of the close of business on the previous
business day on which the Fund's net asset value was determined. The
co-management fee shall be payable through the date of termination of this
Agreement.
H&B shall promptly reduce its co-management fee by the amount of any
commissions, tender and exchange offer solicitation fees, other fees, or
similar payments received by H&B, or any affiliated person of H&B, in
connection with the Fund's portfolio transactions, less the amount of any
direct expenses incurred by H&B, or any affiliated persons of H&B, in obtaining
such commissions, fees, or payments. Such "commissions" or "other fees" shall
exclude those charged by brokers or dealers affiliated with H&B, PGIMC and the
Corporation as referred to in paragraph 5(a). Such "tender and exchange offer
solicitation fees" shall exclude those received by H&B acting in the capacity
of manager for any such offer.
(c) H&B and PGIMC shall bear all expenses in connection
with the performance of their services under this Agreement, except as
otherwise provided herein. Expenses incurred in connection with the investment
operations of the Fund, including brokers' commissions, transfer and capital
gains or other income taxes, and fees relating to purchases, sales, or loans of
investments, shall be paid out of the assets of the Fund. Other expenses
incurred in the operation of the Fund shall also be paid by the Fund, as
described in the then-current Prospectus and Statement of Additional
Information and as provided in the Investment Management Agreement between the
Corporation, on behalf of the Fund, and PGIMC.
9. H&B and PGIMC shall not be liable for any loss or losses sustained
by reason of any investment including the purchase, holding or sale of any
security as long as H&B and PGIMC shall have acted in good faith and with due
care; and, in any event, H&B and PGIMC shall be liable for their willful
misfeasance, bad faith, or negligence in the performance of their investment
management duties or for failure to exercise due care in rendering other
services under this Agreement. A good faith mistake in judgment shall not be
deemed to be the absence of due care.
10. (a) This Agreement shall become effective on the day and year
first above written and unless sooner terminated as hereinafter provided, shall
continue in effect
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through July 31, 1998. Thereafter, this Agreement shall continue in effect from
year to year, so long as its continuance is approved in the manner required by
the 1940 Act.
(b) This Agreement may be terminated at any time without the
payment of any penalty, (a) by the Board of Directors of the Corporation,
including the vote or written consent of a majority of the directors of the
Corporation who are not parties to this Agreement or the Investment Management
Agreement or interested persons of any such party, (b) by the vote of a
majority of the outstanding voting securities of the Fund, (c) by PGIMC on
sixty (60) days' prior written notice to the Fund, or (d) by H&B on sixty (60)
days' prior written notice to the Fund. This Agreement shall terminate
automatically in the event of its assignment, or upon termination of the
Investment Management Agreement between the Corporation and PGIMC.
(c) As used in this Agreement, the terms "assignment", "interested
person", and "vote of a majority of the outstanding voting securities" of the
Fund shall have the meanings set forth for such terms in the 1940 Act.
(d) In the event of termination of this Agreement, H&B shall
promptly return to the Corporation all records maintained by H&B with respect
to the Fund and H&B shall be free from any claim or retention of rights
therein. H&B may retain copies of such records that it maintains pursuant to
the requirements of the 1940 Act. H&B and PGIMC shall not disclose or use any
records or information obtained pursuant to this Agreement in any manner
whatsoever except as expressly authorized by this Agreement and applicable law.
H&B and PGIMC shall keep confidential any information obtained in connection
with their duties hereunder and shall disclose such information only if the
Corporation, on behalf of the Fund, has authorized such disclosure or if such
disclosure is expressly required by applicable law or federal or state
regulatory authorities. H&B, PGIMC, and the Corporation shall furnish to the
other parties any documents and other materials prepared for distribution which
refer to the other party prior to use, and each party shall have the right to
limit use of such documents to which it reasonably objects.
(e) Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid (a) if to H&B, to Xxxxxxxx & Xxxxx,
Inc., 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000; (b) if to PGIMC,
to Pacific Global Investment Management Company, 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxx, XX 00000; and (c) if to the Corporation, at the foregoing office
of PGIMC.
11. Nothing in this Agreement shall limit or restrict the right of
any director, officer, or employee of H&B to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar nature or a dissimilar nature, nor
to limit or restrict the right of H&B to engage in any other business or to
render services of any kind to any other corporation, firm, individual, or
association.
12. 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.
13. Except insofar as the 1940 Act or other federal laws and
regulations may be controlling, this Agreement shall be governed by, and
construed and enforce in accordance with, the laws of the State of California.
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14. This Agreement contains the entire agreement among the parties
hereto, and shall, as of the effective date hereof, supersede all prior
agreements, oral or written, among the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and Year first above written.
PACIFIC GLOBAL
ATTEST: INVESTMENT MANAGEMENT COMPANY
/s/ Xxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxx
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ATTEST: XXXXXXXX & BACHE, INC.
/s/ Xxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxx
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PACIFIC GLOBAL FUND, INC. d/b/a
ATTEST: PACIFIC ADVISORS FUND INC. ON
BEHALF OF THE INCOME FUND
/s/ Xxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxx
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