Exhibit (h)(4)
EXPENSE LIMITATION AGREEMENT
THIS EXPENSE LIMITATION AGREEMENT (the "Agreement") is made as of June 13,
2001, by and between Pacific Funds (the "Trust"), a Delaware business trust, and
Pacific Life Insurance Company (the "Adviser"), an insurance company domiciled
in California.
WITNESSETH:
WHEREAS, the Trust is a Delaware business trust and is registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end management investment company;
and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each series representing interests in a separate portfolio
of securities and other assets (each a "Fund," and collectively, the "Funds"),
with the initially established twelve Funds designated in Schedule A hereto; and
WHEREAS, the Trust and the Adviser have entered into an Investment Advisory
Agreement dated June 13, 2001, as may be amended from time to time ("Advisory
Agreement"), pursuant to which the Adviser is authorized to provide investment
advisory services for the Trust and each of its Funds for compensation based on
the value of the average daily net assets of the Funds; and
WHEREAS, the Trust and the Adviser have determined that it is appropriate
and in the best interests of the Funds and their shareholders to maintain the
expenses of the Funds at levels agreeable to the Trust and the Adviser.
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed as follows:
I. Expense Limitation.
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A. Fund Operating Expenses. For purposes of this Agreement "Fund Operating
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Expenses" shall consist of the ordinary operating expenses incurred by a
Fund in any fiscal year, including organizational expenses and excluding
the following: investment advisory fees; distribution and/or service fees;
foreign taxes on dividends, interest, or gains; interest; taxes; brokerage
commissions and other transactional expenses; extraordinary expenses, such
as litigation; and other expenses not incurred in the ordinary course of
the Fund's business.
B. Operating Expense Limit. The maximum operating expense limit in any
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fiscal year with respect to a Fund shall be the amount specified in
Schedule A attached hereto (the "Operating Expense Limit") based on a
percentage of the average daily net assets of the Fund for the period
described in Section I.D.
C. Applicable Expense Limit. To the extent that the Fund Operating
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Expenses incurred by a Fund exceed the Operating Expense Limit, as defined
in Section I.B. above, the Adviser shall waive its fees under the Advisory
Agreement or otherwise reimburse the Fund for such excess amount (the
"Excess Amount").
D. Method of Computation. To determine the Adviser's obligation with
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respect to the Excess Amount, each day the Fund Operating Expenses for
each Fund shall be annualized. If the annualized Fund Operating Expenses
of a Fund at the end of any month during which this Agreement is in effect
exceed the Operating Expense Limit for that Fund, the Adviser shall waive
or reduce its fee under the Advisory Agreement or remit to that Fund an
amount that, together with the waived or reduced investment advisory fee,
is sufficient to pay the Excess Amount computed on the last day of the
month.
E. Year-End Adjustment. If necessary, on or before the last day of the
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first month of each fiscal year, an adjustment payment shall be made by
the appropriate party in order that the amount of the investment advisory
fees waived or reduced and other payments remitted by the Adviser to a
Fund with respect to the previous fiscal year shall equal the Excess
Amount.
F. Repayment. Each Fund agrees to repay the Adviser out of assets
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belonging to that Fund for any Fund Operating Expenses in excess of the
Operating Expense Limit paid, reimbursed or otherwise absorbed by the
Adviser during the term of this Agreement, provided that the Adviser will
not be entitled to repayment for any amount by which such repayment would
cause Fund Operating Expenses during the fiscal year of such repayment to
exceed the Operating Expense Limit. Except to the extent consistent with
generally accepted accounting principles and the position of the staff of
the SEC at the time, no amount will be repayed to the Adviser by a Fund
more than three fiscal years after the year in which the Excess Amount was
paid, reimbursed or otherwise absorbed by the Adviser.
II. Term and Termination of Agreement.
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This Agreement shall have a term through December 31, 2004, provided that
the repayment obligations described in Section I.F. shall survive for the
period indicated in that Section. This Agreement may be extended upon the
written consent of the Adviser.
III. Miscellaneous.
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A. Governing Law. This Agreement shall be governed by the laws of the
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State of Delaware, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act, the Investment Advisers Act of
1940, or any rules or order of the SEC thereunder.
B. Definitions. Any question of interpretation of any term or
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provision of this Agreement, including but not limited to the investment
advisory fee, the computations of net asset values, and the allocation of
expenses, having a counterpart in or otherwise
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derived from the terms and provisions of the Advisory Agreement or the
1940 Act, shall have the same meaning as and be resolved by reference to
such Advisory Agreement or the 1940 Act.
C. Captions. The captions in this Agreement are included for
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convenience of reference only and in no other way define or delineate any
of the provisions hereof or otherwise affect their construction or effect.
D. Limitation of Liability. The Adviser shall look only to the assets
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of the respective Fund for performance of this Agreement and repayment of
any claim hereunder that the Adviser may have with respect to a Fund, and
neither any of the other Funds of the Trust, nor any of the Trust's
trustees, officers, employees, agents or shareholders, shall be liable
therefore.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers designated below on the day and year first above
written.
PACIFIC FUNDS
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: President
PACIFIC LIFE INSURANCE COMPANY
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: President
By: /s/ Xxxxxx X. Milfs
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Name: Xxxxxx X. Milfs
Title: Vice President & Secretary
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SCHEDULE A
OPERATING EXPENSE LIMIT FOR PACIFIC FUNDS
Maximum Operating Expense Limit
(as a Percentage of average daily net assets)
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PF AIM Blue Chip Fund 0.45%
PF AIM Aggressive Growth Fund 0.45%
PF INVESCO Health Sciences Fund 0.45%
PF INVESCO Technology Fund 0.45%
XX Xxxxx Strategic Value Fund 0.45%
XX Xxxxx Growth LT Fund 0.45%
XX Xxxxxx International Value Fund 0.45%
PF MFS Mid-Cap Growth Fund 0.45%
PF MFS Global Growth Fund 0.45%
PF PIMCO Managed Bond Fund 0.45%
PF Pacific Life Money Market Fund 0.45%
XX Xxxxxxx Brothers Large-Cap Value Fund 0.45%
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