Exhibit 23(d)(13)
PREFERRED ASSET ALLOCATION FUND
SUBADVISER AGREEMENT
Subadviser Agreement executed as of January 31, 1998 between
CATERPILLAR INVESTMENT MANAGEMENT LTD., a Delaware corporation (the "Manager"),
and PANAGORA ASSET MANAGEMENT, INC., a Delaware corporation (the "Subadviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUBADVISER TO THE TRUST.
a. Subject always to the control of the trustees of The Preferred
Group of Mutual Funds (the "Trustees"), a Massachusetts
business trust (the "Trust"), the Subadviser, at its expense,
will furnish continuously an investment program for the
Preferred Asset Allocation Fund series of the Trust (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 Subadviser (i) will comply with
the provisions of the Trust's Agreement and Declaration of
Trust and By-laws, including any amendments thereto (upon
receipt of such amendments by the Subadviser), and the
investment objectives, 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 Subadviser upon filing with the Securities and Exchange
Commission), (ii) will use its best efforts to safeguard and
promote the welfare of the Fund, (iii) 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 Subadviser
in writing, and (iv) shall exercise the same care and
diligence expected of the Trustees. The Subadviser 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 the investment affairs of the Fund.
b. The Subadviser, 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
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of the investment affairs of the Fund, including oversight of
the pricing of the Fund's portfolio and assistance in
obtaining prices for portfolio securities (but excluding
determination of net asset value, shareholder accounting
services and fund accounting services).
c. In the selection of brokers, dealers or futures commissions
merchants (collectively, "brokers") and the placing of orders
for the purchase and sale of portfolio investments for the
Fund, the Subadviser shall seek 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 Subadviser,
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 involved and the quality of service
rendered by the broker in other transactions. Subject to such
policies as the Trustees may determine and communicate to the
Subadviser in writing, the Subadviser 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 that provides brokerage and
research services to the Subadviser or any affiliated person
of the Subadviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting
that transaction, if the Subadviser 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, viewed in terms of either that particular
transaction or the Subadviser's overall responsibilities with
respect to the Fund and to other clients of the Subadviser and
any affiliated person of the Subadviser as to which the
Subadviser or any affiliated person of the Subadviser
exercises investment discretion. The Trust agrees that any
entity or person associated with the Subadviser or any
affiliated person of the Subadviser which is a member of a
national securities exchange is 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, as amended (the "1934 Act"), and Rule 11a2-2(T)
thereunder, and the Trust hereby consents to the retention of
compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
d. The Subadviser shall not be obligated to pay any expenses of
or for the Trust or of or for the Fund not expressly assumed
by the Subadviser pursuant to this Section 1.
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2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Subadviser, and in any person
controlling, controlled by or under common control with the Subadviser, and that
the Subadviser and any person controlling, controlled by or under common control
with the Subadviser may have an interest in the Trust. It is also understood
that the Subadviser and persons controlling, controlled by or under common
control with the Subadviser have and may have advisory, management service,
distribution 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 SUBADVISER.
The Manager will pay to the Subadviser as compensation for the
Subadviser's services rendered, for the facilities furnished and for the
expenses borne by the Subadviser pursuant to Section 1, a fee in accordance with
Schedule A of this Agreement.
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 Management
Contract dated as of June __, 1992 between the Manager and the Trust, with
respect to the Fund, shall have terminated for any reason, and the Manager shall
provide notice of any such termination of the Management Contract to the
Subadviser; and this Agreement shall not be amended unless such amendment be
approved 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 who are not interested
persons of the Trust or of the Manager or of the Subadviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
a. The Trust may at any time terminate this Agreement by written
notice delivered or mailed by registered mail, postage
prepaid, to the Manager and the Subadviser, or
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b. If (i) the Trustees or the shareholders of the Trust by the
affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Trustees who are not
interested persons of the Trust or of the Manager or of the
Subadviser, 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 Subadviser may continue to
serve hereunder in a manner consistent with the Investment
Company Act of 1940, as amended (the "1940 Act"), and the
rules and regulations thereunder, 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 Subadviser, and the
Subadviser may at any time terminate this Agreement by not
less than 90 days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager.
Action by the Trust under paragraph (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 Subadviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Subadviser shall fail to be
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Subadviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement or any other agreement concerning
the provision of investment advisory services to the Trust, (b) the Subadviser
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 Trust, (c) there is a change in
control of the Subadviser or any parent of the Subadviser within the meaning of
the 1940 Act or (d) there is a material adverse change in the business or
financial position of the Subadviser.
7. CERTAIN DEFINITIONS.
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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 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 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 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 and the rules and regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under 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; 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 SUBADVISER.
In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Subadviser, or reckless disregard of its obligations and duties
hereunder, the Subadviser shall not be subject to any liability to the Manager,
to the Trust, to the Fund, or to any shareholder, officer, director or Trustee
thereof, for any act or omission in the course of, or connected with, rendering
services hereunder.
9. EXERCISE OF VOTING RIGHTS.
Except with the agreement or on the specific instructions of the
Trustees or the Manager, the Subadviser shall exercise or procure the exercise
of any voting right attaching to investments of the Fund.
10. NOTICES.
All notices, requests and consents shall be in writing and shall be
personally delivered or mailed by registered mail, postage prepaid, to the other
party at such address as may be furnished in writing by such party.
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IN WITNESS WHEREOF, CATERPILLAR INVESTMENT MANAGEMENT LTD. and PANAGORA
ASSET MANAGEMENT, INC. have each caused this instrument to be signed in
duplicate on its behalf by its duly authorized representative, all as of the day
and year first above written.
CATERPILLAR INVESTMENT MANAGEMENT LTD.
By: _______________________________
Title:
PANAGORA ASSET MANAGEMENT, INC.
By: _______________________________
Title:
The foregoing is accepted by:
THE PREFERRED GROUP OF MUTUAL FUNDS
By: _______________________________
Title:
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SCHEDULE A-1
1. For purposes of calculating the fee to be paid to the Subadviser
under this Agreement:
"Fund Assets" shall mean the net assets of the Fund;
"Plan Assets" shall mean the net assets of the portion of
assets managed by the Subadviser, excluding the Fund, (i) of any
constituent fund of the Caterpillar Investment Management Ltd. Tax
Exempt Group Trust, (ii) and managed or advised by the Manager for
which the Subadviser has been appointed subadviser by the Manager,
(iii) of Caterpillar Inc. or any of its subsidiaries or (iv) of any
employee benefit plan sponsored by Caterpillar Inc. or any of its
subsidiaries;
"Combined Assets" shall mean the sum of Fund Assets
and Plan Assets; and
"Average Quarterly Net Assets" shall mean the average of the
net asset value of the Fund Assets, Plan Assets or Combined Assets, as
the case may be, as of the last business day of each month in the
calendar quarter.
2. The Subadviser fee shall be paid in arrears (within 10 days of
receipt by the Manager of an invoice from the Subadviser) based upon the Average
Quarterly Net Assets of the Combined Assets during the preceding calendar
quarter. The fee payable for the calendar quarter shall be calculated by
applying the annual rate, as set forth in the fee schedule below, to the Average
Quarterly Net Assets of the Combined Assets, and dividing by four. The portion
of the quarterly fee to be paid by the Manager shall be prorated based upon the
Average Quarterly Net Assets of the Fund Assets as compared to the Average
Quarterly Net Assets of the Combined Assets. For a calendar quarter in which
this Agreement becomes effective or terminates, the portion of the Subadviser
fee due hereunder shall be prorated on the basis of the number of days that the
Agreement is in effect during the calendar quarter.
3. The following fee schedule shall be used to calculate the fee to be
paid to the Subadviser under this Agreement:
First Next Next Over
$10 $40 $50 $100
Million Million Million Million
------- ------- ------- -------
0.50% 0.40% 0.20% 0.10%
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