EXHIBIT 99.(d)(20)
FORM OF ASSET ALLOCATION SUB-ADVISORY AGREEMENT
PIMCO FUNDS
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
AGREEMENT made as of the ___ day of _________, 2002 by and between Pacific
Investment Management Company LLC, a Delaware limited liability company
(hereinafter the "Adviser"), investment adviser for the PIMCO All Asset Fund
(the "Fund"), a series of the PIMCO Funds: Pacific Investment Management Series
(the "Trust") and Research Affiliates, LLC, a California limited liability
company (the "Sub-Adviser");
WHEREAS, the Adviser has been retained by the Fund, an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), to provide investment advisory services to the Fund
pursuant to an investment advisory agreement dated June __, 2002 (the
"Investment Advisory Agreement");
WHEREAS, the Adviser wishes to retain the Sub-Adviser to assist the Adviser
in providing investment advisory and asset allocation services ("Advisory
Services") in connection with the Fund;
WHEREAS, the Sub-Adviser is willing to provide such services to the Adviser
upon the terms and conditions and for the compensation set forth below; and
WHEREAS, the Sub-Adviser is or will be registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act") prior to
performing its services for the Fund under this Agreement;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Adviser and the Sub-Adviser as follows:
1. The Trust is an open-end investment company which has separate
investment portfolios. Additional investment portfolios may be established in
the future. This Agreement shall pertain to the Fund and to such additional
investment portfolios as shall be designated in supplements to this Agreement,
as further agreed between the Adviser and Sub-Adviser. The Trust engages in the
business of investing and reinvesting the assets of the Fund in the manner and
in accordance with the investment objective and restrictions applicable to the
Fund as specified in the currently effective prospectus (the "Prospectus") for
the Trust included in the registration statement, as amended from time to time
(the "Registration Statement"), filed by the Trust under the 1940 Act and the
Securities Act of 1933 (the "1933 Act"). Copies of the documents referred to in
the preceding sentence have been furnished to the Sub-Adviser. Any amendments to
those documents shall be furnished to the Sub-Adviser promptly.
2. The Adviser hereby appoints the Sub-Adviser to provide Advisory Services
specified in this Agreement and the Sub-Adviser hereby accepts such appointment
and agrees to render the services herein set forth.
3. (a) The Sub-Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this Agreement and (ii) provide all services, equipment and
facilities necessary to perform its obligations under this Agreement. The
Sub-Adviser may from time to time seek research assistance and rely on
investment management resources available to it through its affiliated
companies, but in no case shall such reliance relieve the Sub-Adviser of any of
its obligations hereunder, nor shall the Fund be responsible for any additional
fees or expenses hereunder as a result. The Sub-Adviser shall not retain any
other person to serve as an investment adviser or sub-adviser to the Fund. The
Sub-Adviser shall not pay any fee, based on the assets of the Fund, to any
person providing research and/or investment advice to the Sub-Adviser without
the express written consent of the Adviser.
(b) The Sub-Adviser shall not be required to pay any expenses of the
Fund other than those specifically allocated to the Sub-Adviser in this
Agreement. In particular, but without limiting the generality of the foregoing,
the Sub-Adviser shall not be responsible, except to the extent of the reasonable
compensation of such of the Trust's employees (if any) as are officers or
employees of the Sub-Adviser whose services may be involved, for any of the
following expenses of the Fund: compensation of the Trustees who are not
affiliated with the Adviser or Sub-Adviser, the Fund's distributor or any of
their affiliates; taxes and governmental fees; interest charges; fees and
expenses of the Fund's independent accountants and legal counsel; trade
association membership dues; fees and expenses of any custodian (including
maintenance of books and accounts and calculation of the net asset value of
shares of the Fund), transfer agent, registrar and dividend disbursing agent of
the Fund; expenses of issuing, selling, redeeming, registering and qualifying
for sale shares of beneficial interest in the Fund; expenses of preparing and
printing share certificates, prospectuses and reports to shareholders, notices,
proxy statements and reports to regulatory agencies; the cost of office
supplies, including stationery; travel expenses of all officers, Trustees and
employees; insurance premiums; brokerage and other expenses of executing
portfolio transactions; expenses of shareholders' meetings; organizational
expenses; and extraordinary expenses. Notwithstanding the foregoing, the Fund
may enter into a separate agreement, which shall be controlling over this
Agreement, as amended, pursuant to which some or all of the foregoing expenses
of this Section 3(b) shall be the responsibility of the other party or parties
to that agreement.
4. (a) Subject to the supervision of the Adviser, the Sub-Adviser shall
provide to the Fund Advisory Services, including investment guidance and policy
direction in connection with the management of the Fund, oral and written
research, analysis, advice, and statistical and economic data and information.
(b) Consistent with the investment objectives, policies and restrictions
applicable to the Fund and as stated in the Fund's Registration Statement, the
Sub-Adviser will determine the securities and other assets to be purchased or
sold by the Fund and will determine what portion of the Fund shall be invested
in securities or other assets, including other PIMCO funds, and what
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portion, if any, should be held uninvested. As part of its Advisory Services,
the Sub-Adviser will consult with PIMCO from time to time (initially no less
than monthly) regarding PIMCO's macroeconomic outlook and forecasts.
(c) The Fund will have the benefit of the investment analysis and
research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to investment
advisory clients of the Sub-Adviser. It is understood that the Sub-Adviser will
not use any inside information pertinent to investment decisions undertaken in
connection with this Agreement that may be in its possession or in the
possession of any of its affiliates, nor will the Sub-Adviser seek to obtain any
such information.
(d) The Sub-Adviser also shall provide to the Adviser, including the
officers of the Trust, administrative assistance in connection with the
operation of the Fund, which shall include (i) compliance with all reasonable
requests of the Adviser and Trust for information, including information
required in connection with the Trust's filings with the Securities and Exchange
Commission and state securities commissions, and (ii) such other services as the
Adviser and/or Sub-Adviser shall from time to time determine to be necessary or
useful to the administration of the Fund. The Sub-Adviser will keep the Adviser
informed of developments materially affecting the Fund.
(e) As asset allocation sub-adviser of the Fund, the Sub-Adviser shall
provide Advisory Services for the account of the Fund in accordance with the
Sub-Adviser's best judgment and within the investment objectives, policies, and
restrictions set forth in the Prospectus, the 1940 Act and the provisions of the
Internal Revenue Code relating to regulated investment companies, subject to
policy decisions adopted by the Trust's Board of Trustees.
(f) The Sub-Adviser shall furnish to the Adviser and the Trust's Board
of Trustees periodic and special reports (including any statistical information)
on the investment performance of the Fund and on the performance of its
obligations under this Agreement and shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
(g) The Sub-Adviser will communicate to the Adviser on each day that the
Sub-Adviser directs a purchase or sale of a security for the Fund: (i) the name
of the issuer; (ii) the amount of the purchase or sale; and (iii) such other
information as the Adviser may reasonably require for purposes of fulfilling its
obligations to the Fund under the Investment Advisory Agreement.
(h) The Sub-Adviser will promptly review all: (i) reports of current
security holdings in the Fund; (ii) summary reports of transactions pending
maturities (including the principal, cost and accrued interest on each portfolio
security in maturity date order); and (iii) current cash position reports
(including cash available from portfolio sales and maturities and sales of the
Fund's shares less cash needed for redemptions and settlement of portfolio
purchases), all within a reasonable time after receipt thereof from the Fund and
will report any errors or
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discrepancies in such reports to the Fund or its designee within three (3)
business days after discovery of such discrepancies.
(i) The Sub-Adviser will manage the Fund so that it will qualify, and
continue to qualify (except where extraordinary circumstances dictate
otherwise), as a regulated investment company under Subchapter M of the Internal
Revenue Code and regulations issued thereunder.
5. The Sub-Adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Adviser, the Trust or the Fund in connection with the matters to which this
Agreement relates, except that the Sub-Adviser shall be liable to the Adviser
for a loss resulting from a breach of fiduciary duty by the Sub-Adviser under
the 1940 Act with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Sub-Adviser in the performance of its duties or from reckless disregard by
it of its obligations or duties under this Agreement. In no case shall the
Sub-Adviser be liable for actions taken or non-actions with respect to the
performance of services under this Agreement based upon specific information,
instructions or requests given or made to the Sub-Adviser by the Adviser. As
used in this Section, the term "Sub-Adviser" shall include any officers,
directors, employees or other affiliates of the Sub-Adviser performing services
with respect to the Fund.
6. (a) The Sub-Adviser agrees that it will comply with all applicable laws,
rules and regulations of all federal and state regulatory agencies having
jurisdictions over the Sub-Adviser in performance of its duties hereunder. The
Sub-Adviser will treat as confidential and proprietary information of the Fund
all records and information relative to the Fund and prior, present or potential
shareholders, and will not use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Fund, which approval
shall not 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 Fund.
(b) The Sub-Adviser will notify the Fund in the event that the
Sub-Adviser or any of its affiliates (i) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as
investment adviser pursuant to this Agreement, or (ii) becomes aware that it is
the subject of an administrative proceeding or enforcement action by the SEC or
other regulatory authority. The Sub-Adviser further agrees to notify the Fund
immediately of any material fact known to the Sub-Adviser relating to the
Sub-Adviser that is not contained in the Fund's Registration Statement regarding
the Fund, or any amendment or supplement thereto, but that is required to be
disclosed thereon, and of any statement contained therein that becomes untrue in
any material respect.
7. 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 computed daily and paid monthly in arrears
on the first business day of each month, based upon the average daily value (as
determined on each business day at the time set forth in the
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Prospectus for determining net asset value per share) of the net assets of the
Fund, equal to the lesser of (i) a fee at the rate of 0.20% or (ii) such fee as
may from time to time be agreed upon in writing by the Adviser and the
Sub-Adviser. If the fee payable to the Sub-Adviser pursuant to this paragraph
begins to accrue after the beginning of any month or if this Agreement
terminates before the end of any month, the fee for the period from such date to
the end of such month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the proportion
which such period bears to the full month in which such effectiveness or
termination occurs. For purposes of calculating fees, the value of the Fund's
net assets shall be computed in the manner specified in the Prospectus and the
Trust's governing instruments for the computation of the value of the Fund's net
assets in connection with the determination of the net asset value of the Fund's
shares. Payment of said compensation shall be the sole responsibility of the
Adviser and shall in no way be an obligation of the Fund or of the Trust.
8. (a) This Agreement shall become effective with respect to the Fund as of
the date hereof (and, with respect to any amendment, or with respect to any
additional fund, the date of the amendment or supplement hereto) and shall
continue in effect with respect to the Fund for a period of more than two years
from that date (or, with respect to any additional fund, the date of the
supplement) only so long as the continuance is specifically approved at least
annually (i) by the vote of a majority of the outstanding voting securities (as
defined in the 0000 Xxx) of the Fund or by the Trust's Board of Trustees and
(ii) by the vote, cast in person at a meeting called for the purpose, of a
majority of the Trust's Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 0000 Xxx) of any such party.
(b) This Agreement may be terminated with respect to the Fund (or any
additional fund) at any time, without the payment of any penalty, by: (i) a vote
of a majority of the outstanding voting securities (as defined in the 0000 Xxx)
of the Fund; (ii) a vote of a majority of the Trust's entire Board of Trustees
on 60 days' written notice to the Sub-Adviser; (iii) the Adviser on 60 days'
written notice to the Sub-Adviser; or (iv) the Sub-Adviser on 60 days' written
notice to the Trust. This Agreement (or any supplement hereto) shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
9. (a) The Sub-Adviser shall indemnify and hold harmless the Adviser and
its officers, directors, trustees, employees and agents from and against any and
all liabilities, losses, claims, damages and expenses, including reasonable
attorneys' fees and expenses, of any kind or nature directly or indirectly
resulting solely from or solely out of: (i) any material misrepresentation,
breach of any material representation or failure to comply with any provision,
warranty or obligation made by the Sub-Adviser in connection with this Agreement
or any applicable laws and regulations; (ii) any actions or failure to act by
the Sub-Adviser in connection with this Agreement that results in a violation of
any law; or (iii) any gross negligence, willful misfeasance, bad faith or
reckless disregard in fulfilling its obligations under this Agreement.
(b) The Adviser shall indemnify and hold harmless the Sub-Adviser and
its officers, directors, trustees, employees and agents from and against any and
all liabilities, losses, claims, damages and expenses, including reasonable
attorneys' fees and expenses, of any kind or nature directly or indirectly
resulting solely from or solely out of: (i) any material misrepresentation,
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breach of any material representation or failure to comply with any provision,
warranty or obligation made by the Adviser in connection with this Agreement or
any applicable laws and regulations; (ii) any actions or failure to act by the
Adviser in connection with this Agreement that results in a violation of any
law; or (iii) any gross negligence, willful misfeasance, bad faith or reckless
disregard in fulfilling its obligations under this Agreement.
10. Except to the extent necessary to perform the Sub-Adviser's obligations
under this Agreement and/or as otherwise agreed to by the parties, nothing
herein shall be deemed to limit or restrict the right of the Sub-Adviser, or any
affiliate of the Sub-Adviser, or any employee of the Sub-Adviser, to engage in
any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm, individual or
association, provided such other services and activities do not, during the term
of this Agreement, interfere in a material manner with the Sub-Adviser's ability
to meet its obligations to the Fund hereunder.
11. It is understood that the names "PIMCO" or "PIMCO Funds" or any
derivative thereof or logo associated therewith are the valuable property of the
Adviser and its affiliates. The Sub-Adviser (or any of its affiliates) agrees
that it shall not use any such names (or derivative or logo) without the prior
consent of the Adviser. In addition, the Sub-Adviser hereby consents to the use
of its name and the names of its business affiliates which are First Quadrant,
LP and Xx. Xxxxxx X. Xxxxxx in the Fund's Registration Statement, other
disclosure documents, shareholder communications, advertising, sales literature
and similar communications.
12. Any recommendations concerning the Fund's investment program proposed
by the Sub-Adviser to the Fund and the Adviser pursuant to this Agreement, as
well as any other activities undertaken by the Sub-Adviser on behalf of the Fund
pursuant thereto shall at all times be subject to any applicable directives of
the Board of Trustees of the Trust.
13. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
and any other applicable federal or state rule, the Sub-Adviser hereby agrees
that all records which it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any such records upon the
Trust's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act and any other applicable Rule, the
records required to be maintained by the Sub-Adviser hereunder pursuant to Rule
31a-1 of the 1940 Act and any other applicable federal or state rule. The
Sub-Adviser further agrees that it will furnish to regulatory authorities having
the requisite authority any information or reports in connection with its
services hereunder which may be requested in order to determine whether the
operations of the Fund are being conducted in accordance with applicable law and
regulations.
14. This Agreement shall be construed in accordance with the laws of the
State of California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
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15. No provision of this Agreement may be changed, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the change, discharge or termination is sought.
16. The Sub-Adviser shall maintain the strictest confidence regarding the
business affairs of the Fund. Written reports furnished by the Sub-Adviser to
the Fund or the Adviser shall be treated by such entities as confidential and
for the exclusive use and benefit of the Trust except as disclosure may be
required by applicable law.
17. 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 hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
18. Any notice or other communication required or permitted to be given
hereunder shall be given in writing and mailed, faxed or delivered to the other
party at the addresses set forth in the Fund's Registration Statement.
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 INVESTMENT MANAGEMENT COMPANY LLC
By: __________________ Date: ________________
Title:
ACCEPTED:
RESEARCH AFFILIATES, LLC
By: ________________ Date: ___________________
Title:
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