Exhibit 4(b)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, made as of the 16th day of October, 1992, by
and among PACIFIC GLOBAL FUND, INC., a Maryland corporation (the "Corporation"),
PACIFIC GLOBAL INVESTMENT MANAGEMENT COMPANY, a California corporation (PGIMC)
and SPECTRUM ASSET MANAGEMENT, INC., a California corporation (SAMI).
WITNESSETH:
WHEREAS, the Corporation proposes to engage 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 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, SAMI 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 Government Securities Fund (the "Fund"), have entered
into an Investment Management Agreement dated as of the date hereof (the
"Investment Management Agreement") pursuant to which PGIMC provides investment
advisory and administrative services to the Fund; and
WHEREAS, PGIMC proposed to engage the services of SAMI as subadviser
("Sub-Adviser") to the Fund as permitted by the Investment Management Agreement;
and
WHEREAS, SAMI 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 SAMI 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. SAMI 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, SAMI 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, and subject to such further limitations as
the Corporation may from time to time impose by written notice to PGIMC. PGIMC
shall promptly inform SAMI 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. SAMI
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, SAMI 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. SAMI 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: SAMI'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
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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) SAMI 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, SAMI shall use its best efforts to obtain the best available price and
most favorable execution for the Fund. SAMI 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.
SAMI shall advise the Corporation's Board of Directors of any fees or payments
of whatever type that may be possible for SAMI or any affiliate of SAMI 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 Corporation's Board
of Directors, SAMI may also effect individual securities transactions at
commission rates in excess of the minimum commission rates available, if SAMI
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
SAMI's overall responsibilities with respect to the Fund and SAMI'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) SAMI 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.
6. SAMI 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;
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(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 SAMI 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 SAMI, persons, who may be employees of PGIMC,
SAMI, 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.
SAMI may (at its cost except as contemplated by paragraphs 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 SAMI, 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 SAMI 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 SAMI's overall responsibilities
with respect to the other accounts which it serves as investment manager.
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7. SAMI shall cooperate with and make available to PGIMC, the
Corporation, and any agents engaged by the Corporation, SAMI'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 SAMI under this
Agreement, PGIMC shall have the sole responsibility to pay to SAMI a fee
calculated at the annual rate of .35% on the first $200 million of the average
daily net asset value of the Fund, .32% on the next $100 million, .29% of the
next $100 million, .26% of the next $100 million, .23% of the next $250 million
and .20% in excess of $1 billion of average daily net asset value.
The sub-advisory fee shall accrue on each calendar day, and the sum of the daily
fee accruals shall be paid monthly to SAMI 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.
SAMI shall promptly reduce its fee by the amount of any commissions, tender and
exchange offer solicitation fees, other fees, or similar payments received by
SAMI, or any affiliated person of SAMI, in connection with the Fund's portfolio
transactions, less the amount of any direct expenses incurred by SAMI, or any
affiliated persons of SAMI, 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 SAMI acting in the capacity of manager for any such offer.
(b) SAMI 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) SAMI 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, 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.
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9. SAMI 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 SAMI shall have acted in good faith and with due care; and, in any
event, SAMI 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 judgement 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 October 31, 1993. 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 SAMI, or (d) by SAMI on sixty (60) days' prior written
notice to the Fund, provided, that if SAMI 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 SAMI's written
objection to such change, the termination by SAMI 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, SAMI shall promptly
return to the Corporation all records maintained by SAMI with respect to the
Fund and SAMI shall be free from any claim or retention of rights therein. SAMI
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. SAMI 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.
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(e) Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid (a) if to SAMI, to Spectrum Asset
Management, Inc., 000 Xxx Xxxxxx, Xxxxx 000, 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 any
director, officer, or employee of SAMI 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 SAMI 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.
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.
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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
/s/ /s/ Xxxxxx X. Xxxxxxx
-------------------------------- --------------------------------
ATTEST: SPECTRUM ASSET MANAGEMENT, INC.
/s/ Xxxx Xxxxx /s/ Xxxxxx X. Xxxxx
-------------------------------- --------------------------------
ATTEST: PACIFIC GLOBAL FUND, INC. d/b/a
PACIFIC ADVISORS FUND INC.
/s/ /s/ Xxxxxx X. Xxxxxx
-------------------------------- --------------------------------
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