SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, made as of the ____ day of ____________, 2002,
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 XXXXXX CAPITAL
MANAGEMENT, LLC, a California limited liability company.
WITNESSETH:
WHEREAS, the Corporation is engaged in business as an open-end
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 six series, the Balanced Fund, the Income and Equity Fund, the
Government Securities Fund, the Growth Fund, the Multi-Cap Value 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, Xxxxxx Capital Management, LLC 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 Multi-Cap Value Fund (the "Fund"), have entered into an
Investment Management Agreement dated as of __________________, 2002 (the
"Investment Management Agreement") pursuant to which PGIMC provides investment
advisory and administrative services to the Fund; and
WHEREAS, PGIMC proposes to engage the services of Xxxxxx Capital
Management, LLC as sub-adviser ("Sub-Adviser") to the Fund as permitted by the
Investment Management Agreement; and
WHEREAS, Sub-Adviser is willing to perform sub-advisory services for
the Fund upon the terms and conditions and for the compensation hereinafter set
forth;
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. PGIMC hereby employs Xxxxxx Capital Management, LLC to serve as
Sub-Adviser with respect to the assets of the Fund under management of PGIMC
and to perform the services hereinafter set forth. Xxxxxx Capital Management,
LLC hereby accepts such employment and agrees for the compensation herein
provided to assume all obligations herein set forth and to bear all expenses of
its performance of such obligations (but no other expenses).
2. Subject to the supervision and control of the Corporation's
Board of Directors and of PGIMC, Sub-Adviser shall 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 PGIMC. PGIMC shall promptly inform Sub-Adviser of such further
limitations imposed by the Corporation. PGIMC shall assist in the formulation
and implementation of a continuing investment program for the management of the
Fund's assets. Sub-Adviser 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 and PGIMC, Sub-Adviser shall make all determinations with
respect to the investment and reinvestment of the assets of the Fund and the
purchase or sale of portfolio securities, and shall take such steps as may be
necessary to implement the same. Such determinations and services shall include
advising PGIMC and 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. (a) Sub-Adviser shall regularly furnish reports to PGIMC 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: Sub-Adviser's economic outlook and investment research and
strategy; 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.
(b) PGIMC agrees to furnish to the Sub-Adviser, prior to use, all
prospectuses, reports to shareholders or sales literature that refer to the
Sub-Adviser or its Fund clients. PGIMC agrees not use any such sales literature
if the Sub-Adviser reasonably objects in writing within five business days after
receipt.
5. (a) Sub-Adviser 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 with PGIMC and the Corporation. When
placing such orders, Sub-Adviser shall use its best efforts to obtain the best
available price and most favorable execution for the Fund. Sub-Adviser shall use
its 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. Sub-Adviser shall advise the Board of Directors
of the Corporation of any fees or payments of whatever type that it may be
possible for Sub-Adviser or any affiliate of Sub-Adviser to receive in
connection with the purchase or sale of investment securities for the Fund.
(b) Subject to prior authorization by PGIMC and to the appropriate
policies, procedures, and/or guidelines established by the Board of Directors,
Sub-Adviser may also effect individual securities transactions at commission
rates in excess of the minimum commission rates available, if Sub-Adviser
determines 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
Sub-Adviser's overall responsibilities with respect to the Fund and
Sub-Adviser'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) When the Sub-Adviser deems the purchase or sale of a security to
be in the best interest of the Fund as well as for other clients of the
Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, the Sub-Adviser will exercise its discretion under
this provision consistent with its fiduciary obligations to the Fund and its
other clients.
(c) Sub-Adviser shall promptly communicate to PGIMC and the
Corporation's Board of Directors such information relating to portfolio
transactions as PGIMC or 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.
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6. Sub-Adviser 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 PGIMC or Sub-Adviser 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;
(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, PGIMC, and Sub-Adviser, persons, who may be employees
of PGIMC, Sub-Adviser, 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 or PGIMC as necessary to
prepare reports to shareholders, tax returns, and reports to and filings with
the Securities and Exchange 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.
Sub-Adviser may (at its cost except as contemplated by paragraph 5 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 Sub-Adviser, 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
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Sub-Adviser 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 Sub-Adviser's overall responsibilities with respect
to the other accounts which it serves as investment manager. Sub-Adviser shall
not be obligated to pay any expenses of the Trust or the Fund not expressly
assumed by the Sub-Adviser pursuant to this Agreement.
7. Sub-Adviser shall cooperate with and make available to PGIMC,
the Corporation, and any agents engaged by the Corporation, Sub-Adviser's
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 rendered by Sub-Adviser under
this Agreement, PGIMC shall have the sole responsibility to pay to Sub-Adviser a
fee calculated at the annual rate of 0.40% of the average daily net asset value
of the Fund.
The sub-advisory fee shall accrue on each calendar day, and the sum of the daily
fee accruals shall be paid monthly to Sub-Adviser 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 sub-advisory 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.
Sub-Adviser shall promptly reduce its fee by the amount of any commissions,
tender and exchange offer solicitation fees, other fees, or similar payments
received by Sub-Adviser, or any affiliated person of Sub-Adviser, in connection
with the Fund's portfolio transactions, less the amount of any direct expenses
incurred by Sub-Adviser, or any affiliated persons of Sub-Adviser, in obtaining
such commissions, fees, or payments. Such "commissions" or "other fees" shall
exclude those charged by brokers or dealers affiliated with PGIMC and the
Corporation as referred to in paragraph 5(a). Such "tender and exchange offer
solicitation fees" shall exclude those received by Sub-Adviser acting in the
capacity of manager for any such offer.
(b) Sub-Adviser shall not be entitled to receive any payment for the
performance of its services hereunder from the Fund and shall look solely and
exclusively to PGIMC for payment of all fees for such services.
(c) Sub-Adviser shall bear all expenses in connection with the
performance of its 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,
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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. Neither Sub-Adviser nor any or its officers, members or
employees shall 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
Sub-Adviser shall have acted in good faith and with due care; and, in any event,
Sub-Adviser shall be liable for its willful misfeasance, bad faith, or
negligence in the performance of its investment advisory 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 through December 31, 2003. 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 Sub-Adviser, or (d) by Sub-Adviser on sixty (60) days'
prior written notice to the Fund, provided, that if Sub-Adviser terminates this
Agreement for any reason other than the Corporation's decision to make a change
in fundamental investment policies or restrictions applicable to the Fund over
Sub-Adviser's written objection to such change, the termination by Sub-Adviser
will not be effective until PGIMC shall have contracted with one or more persons
to serve as a successor sub-adviser for the Fund and such person or persons
shall have assumed such position but in no event will the termination be delayed
more than one hundred eighty (180) days after the end of the notice period. 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, Sub-Adviser shall
promptly return to the Corporation all records maintained by Sub-Adviser with
respect to the Fund and Sub-Adviser shall be free from any claim or retention of
rights therein. Sub-Adviser and
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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. Sub-Adviser 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.
(e) Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid (a) if to Sub-Adviser, to Xxxxxx
Capital Management, LLC, 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxx Xxxxx, 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
the Sub-Adviser or any director, officer, member or employee of Sub-Adviser to
engage in any 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 Sub-Adviser 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 enforced in accordance with, the laws of the State of California.
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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
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ATTEST: XXXXXX CAPITAL MANAGEMENT, LLC
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ATTEST: PACIFIC GLOBAL FUND, INC. d/b/a
PACIFIC ADVISORS FUND INC.
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