Exhibit (d)(5)
FUND MANAGEMENT AGREEMENT
AGREEMENT made effective this 1st day of July, 2001 among Pacific Life
Insurance Company, a California Company ("Pacific Life"), Pacific Investment
Management Company LLC ("PIMCO" or "Fund Manager"), a Delaware limited
liability company, and Pacific Funds, a Delaware Business Trust ("Pacific
Funds").
WHEREAS, Pacific Funds is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company and is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series having
its own investment objective, policies and limitations;
WHEREAS, the Pacific Funds has retained Pacific Life to render investment
management and administrative services to the Fund;
WHEREAS, Pacific Life represents and warrants that it is a duly registered
investment adviser under the Investment Advisers Act of 1940 ("Advisers Act"),
as amended;
WHEREAS, PIMCO represents and warrants that it is a duly registered
investment adviser under the Advisers Act, as amended; and
WHEREAS, Pacific Life and Pacific Funds desire to retain PIMCO to furnish
fund management services to the PF PIMCO Managed Bond Fund (the "Fund") in
connection with Pacific Life's investment management activities on behalf of the
Fund, and PIMCO is willing to furnish such services to Pacific Life and the
Pacific Funds;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between Pacific Life, PIMCO, and Pacific Funds as
follows:
1. Appointment. Pacific Life and Pacific Funds hereby appoint PIMCO to act
as Fund Manager to the Fund for the periods and on the terms set forth in this
Agreement. PIMCO accepts such appointment and agrees to furnish the services
herein set forth, for the compensation herein provided.
In the event Pacific Funds designates one or more series other than the Fund
with respect to which Pacific Life and Pacific Funds desire to retain PIMCO to
render fund management services hereunder, they shall notify PIMCO in writing.
If PIMCO is willing to render such services, it shall notify Pacific Life and
Pacific Funds in writing, whereupon such series shall become a Fund hereunder,
and be subject to this Agreement.
2. Fund Manager Duties. Subject to the supervision of Pacific Funds' Board
of Trustees and Pacific Life, the Fund Manager will provide a continuous
investment program for the Fund and determine the composition of the assets of
the Fund, including determination of the purchase, retention, or sale of the
securities, cash, and other investments, including futures
contracts and options thereon, for the Fund. The Fund Manager will provide
investment research and analysis, which may consist of computerized investment
methodology, and will conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Fund's assets by determining the securities and
other investments that shall be purchased, entered into, sold, closed, or
exchanged for the Fund, when these transactions should be executed, and what
portion of the assets of the Fund should be held in the various securities and
other investments in which it may invest, and the Fund Manager is hereby
authorized to execute and perform such services on behalf of the Fund. To the
extent permitted by the investment policies of the Fund, the Fund Manager shall
make decisions for the Fund as to foreign currency matters and make
determinations as to the retention or disposition of foreign currencies or
securities or other instruments denominated in foreign currencies, or derivative
instruments based upon foreign currencies, including forward foreign currency
contracts and options and futures on foreign currencies and shall execute and
perform the same on behalf of the Fund. The Fund Manager is authorized to
exercise tender offers, exchange offers and to vote proxies on behalf of Pacific
Funds, each as the Fund Manager determines is in the best interest of the
Pacific Funds. In performing these duties, the Fund Manager:
(a) Will manage the Fund in a manner that complies with requirements imposed
upon regulated investment companies under Subchapter M of the Internal Revenue
Code.
(b) Shall conform with (1) the 1940 Act and all rules and regulations
thereunder, and releases and interpretations related thereto (including any no-
action letters and exemptive orders which have been granted by the SEC to the
Pacific Funds, Pacific Life or the Fund Manager), (2) with all other applicable
federal and state laws and regulations pertaining to registered open-end
investment management companies, (3) with any applicable procedures, policies
and guidelines adopted by Pacific Funds' Board of Trustees, (4) with the Fund's
objectives, investment policies and investment restrictions as stated in Pacific
Funds' Prospectus and Statement of Additional Information, and (5) with the
provisions of Pacific Funds' Registration Statement filed on Form N-1A under the
Securities Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or
amended from time to time. Until Pacific Life delivers any supplements or
amendments to the Fund Manager, the Fund Manager shall be fully protected in
relying on Pacific Funds' Registration Statement previously furnished to the
Fund Manager by Pacific Life.
(c) Will: (1) use its best efforts to identify each position in the Fund
that constitutes stock in a Passive Foreign Investment Company ("PFIC"), as
that term is defined in Section 1296 of the Internal Revenue Code, and (2) make
such determinations and inform Pacific Life at least annually, (or more often
and by such date(s) as Pacific Life shall request), of any stock in a PFIC.
(d) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments for
the Fund, for broker-dealer and futures commission merchant ("FCM") selection,
and for negotiation of commission rates. The Fund Manager's primary
consideration in effecting a security or other transaction will be to obtain the
best execution for the Fund, taking into account the factors specified in the
Prospectus and Statement of Additional Information for Pacific Funds, as they
may be amended or
supplemented from time to time. Subject to such policies as the Board of
Trustees may determine and consistent with Section 28(e) of the Securities
Exchange Act of 1934, the Fund Manager 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 or dealer, acting
as agent, for effecting a Fund transaction at a price in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Fund Manager 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 or dealer, viewed in terms of either that
particular transaction or the Fund Manager's (or its affiliates) overall
responsibilities with respect to the Fund and to its other clients as to which
it exercises investment discretion. To the extent consistent with these
standards, and in accordance with Section 11(a) of the Securities Exchange Act
of 1934 and Rule 11a2-2(T) thereunder, and subject to any other applicable laws
and regulations including Section 17(e) of the 1940 Act, the Fund Manager is
further authorized to place orders on behalf of the Fund through the Fund
Manager if the Fund Manager is registered as a broker or dealer with the SEC or
as a FCM with the Commodities Futures Trading Commission ("CFTC"), to any of its
affiliates that are brokers or dealers or FCMs or such other entities which
provide similar services in foreign countries, or to such brokers and dealers
that also provide research or statistical research and material, or other
services to the Fund or the Fund Manager. Such allocation shall be in such
amounts and proportions as the Fund Manager shall determine consistent with the
above standards, and, upon request, the Fund Manager will report on said
allocation to Pacific Life and Board of Trustees of Pacific Funds, indicating
the brokers, dealers or FCMs to which such allocations have been made and the
basis therefor.
(e) 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 Fund Manager of any of its obligations
hereunder, nor shall the Fund be responsible for any additional fees or expenses
hereunder as a result.
(f) May, on occasions when the purchase or sale of a security is deemed to
be in the best interest of a Fund as well as any other investment advisory
clients, to the extent permitted by applicable laws and regulations, but shall
not be obligated to, aggregate the securities to be so sold or purchased with
those of its other clients where such aggregation is not inconsistent with the
policies set forth in Pacific Funds' Registration Statement. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Fund Manager in a manner that
is fair and equitable in the judgment of the Fund Manager in the exercise of its
fiduciary obligations to Pacific Funds and to such other clients.
(g) Will, in connection with the purchase and sale of securities for the
Fund, together with Pacific Life, arrange for the transmission to the custodian
and recordkeeping agent for Pacific Funds, on a daily basis, such
confirmation(s), trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Fund, as may be reasonably necessary to
enable the custodian and recordkeeping agent to perform its administrative and
recordkeeping responsibilities with respect to the Fund, and with respect to
Fund securities to be purchased or
sold through the Depository Trust Company, will arrange for the automatic
transmission of the confirmation of such trades to Pacific Funds' custodian, and
recordkeeping agent, and, if required, Pacific Life.
(h) Will assist the custodian and recordkeeping agent for Pacific Funds in
determining or confirming, consistent with the procedures and policies stated in
the Registration Statement for Pacific Funds, the value of any Fund securities
or other assets of the Fund for which the custodian and recordkeeping agent
seeks assistance from the Fund Manager or identifies for review by the Fund
Manager.
(i) Will make available to Pacific Funds and Pacific Life promptly upon
request, any of the Fund's investment records and ledgers maintained by the Fund
Manager (which shall not include the records and ledgers maintained by the
custodian and recordkeeping agent for Pacific Funds), as are necessary to assist
Pacific Funds and Pacific Life to comply with requirements of the 1940 Act and
Advisers Act, as well as other applicable laws, and will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with such services which may be requested in order to ascertain
whether the operations of Pacific Funds are being conducted in a manner
consistent with applicable laws and regulations.
(j) Will regularly report to Pacific Funds' Board of Trustees on the
investment program for the Fund and the issuers and securities represented in
the Fund, and will furnish Pacific Funds' Board of Trustees with respect to the
Fund such periodic and special reports as the Trustees and Pacific Life may
reasonably request, including, but not limited to, the monthly compliance
checklist, monthly tax compliance worksheet, reports regarding compliance with
Pacific Funds' procedures pursuant to Rules 17e-1, 17a-7, 10f-3 and 12d3-1 under
the 1940 Act, fundamental investment restrictions, procedures for opening
brokerage accounts and commodity trading accounts, liquidity determination of
securities purchased pursuant to Rule 144A and 4(2) commercial paper, and
compliance with the Fund Manager's Code of Ethics, and such other procedures or
requirements that Pacific Life may request from time to time.
(k) Will not disclose or use any records or information obtained pursuant to
this Agreement (excluding investment research and investment advice) in any
manner whatsoever except as expressly authorized in this Agreement or in the
ordinary course of business in connection with placing orders for the purchase
and sale of securities or obtaining investment licenses in various countries or
the opening of custody accounts and dealing with settlement agents in various
countries, and will keep confidential any information obtained pursuant to the
Agreement, and disclose such information only if the Board of Trustees of
Pacific Funds has authorized such disclosure, or if such disclosure is required
by applicable federal or state law or regulations or regulatory authorities
having the requisite authority. Pacific Funds and Pacific Life will not disclose
or use any records or information respecting the Fund Manager obtained pursuant
to this Agreement in any manner whatsoever except as expressly authorized in
this Agreement, and will keep confidential any information obtained pursuant to
this Agreement, and disclose such information only as expressly authorized in
this Agreement, if the Board of Trustees of Pacific Funds has authorized such
disclosure, or if such disclosure is required by
applicable federal or state law or regulations or regulatory authorities having
the requisite authority.
(l) Shall not permit any employee of the Fund Manager to have any material
connection with the handling of the Fund if such employee has:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising out of
such person's conduct as an underwriter, broker, dealer, investment adviser,
municipal securities dealer, government securities broker, government securities
dealer, transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman, or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent jurisdiction
from acting as an underwriter, broker, dealer, investment adviser, municipal
securities dealer, government securities broker, government securities dealer,
transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act, or from engaging in or continuing
any conduct or practice in connection with any such activity or in connection
with the purchase or sale of any security.
(m) Shall provide to Pacific Life a copy of its Form ADV as filed with the
Securities and Exchange Commission and a list of persons who the Fund Manager
wishes to have authorized to give written and/or oral instructions to Custodians
of Pacific Funds assets for the Funds.
3. Expenses. During the term of this Agreement, PIMCO will pay all
expenses incurred by it, its staff and their activities, in connection with its
Fund management services under this Agreement. This does not include costs
payable by Pacific Funds, the custodian or Pacific Life.
4. Compensation. For the services provided and the expenses borne by the
Fund Manager pursuant to this Agreement, Pacific Life will pay to the Fund
Manager a fee in accordance to the Fee Schedule attached hereto as Exhibit A.
This fee shall be computed and accrued daily and payable monthly. These fees
for services shall be prorated for any portion of a year in which the Agreement
is not effective.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, PIMCO hereby agrees that all records which it maintains for
the Fund are the property of Pacific Funds and further agrees to surrender
promptly to Pacific Funds any of such records upon Pacific Funds' request. PIMCO
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act
and to preserve the records required by Rule 204-2 under the Advisers Act for
the period specified in the Rule.
6. Indemnification. PIMCO agrees to indemnify and hold harmless, Pacific
Life, any affiliated person within the meaning of Section 2(a)(3) of the 1940
Act ("affiliated person") of Pacific Life and each person, if any who, within
the meaning of Section 15 of the Securities Act of 1933 (the "1933 Act"),
controls ("controlling person") Pacific Life against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses),
to which Pacific Life or such affiliated person or controlling person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, under any other statute,
at common law or otherwise, arising out of PIMCO's responsibilities as Fund
Manager of Pacific Funds which (1) may be based upon any misfeasance,
malfeasance, or nonfeasance by PIMCO, any of its employees or representatives or
any affiliate of or any person acting on behalf of PIMCO, or (2) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering the shares of
Pacific Funds or any Funds or any amendment thereof or any supplement thereto or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon written information
furnished to Pacific Life, Pacific Funds or any affiliated person of Pacific
Funds by PIMCO or any affiliated person of PIMCO; provided, however, that in no
case is PIMCO's indemnity in favor of Pacific Life or any affiliated person or
controlling person of Pacific Life deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of his
duties or by reason of his reckless disregard of obligation and duties under
this Agreement.
Pacific Life agrees to indemnify and hold harmless PIMCO, any affiliated
person within the meaning of Section 2(a)(3) of the 1940 Act ("affiliated
person") of PIMCO and each person, if any, who, within the meaning of Section
15 of the 1933 Act controls ("controlling person") PIMCO against any and all
losses, claims, damages, liabilities or litigation (including legal and other
expenses) to which PIMCO or such affiliated person or controlling person may
become subject under the 1933 Act, the 1940 Act, the Advisers Act, under any
other statute, at common law or otherwise, arising out of Pacific Life's
responsibilities as investment adviser of Pacific Funds which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by Pacific Life, any of its
employees or representatives or any affiliate of or any person acting on behalf
of Pacific Life or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering shares of Pacific Funds or any Funds or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was made in reliance
upon written information furnished to Pacific Life or any affiliated person of
Pacific Life by PIMCO or any affiliated person of PIMCO; provided however, that
in no case is the indemnity of Pacific Life in favor of PIMCO, or any affiliated
person or controlling person of PIMCO deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of obligations and duties under
this Agreement.
Except as may otherwise be required by the 1940 Act or the rules thereunder,
Pacific Funds agrees that PIMCO, any affiliated person within the meaning of
Section 2(a)(3) of the 1940 Act of PIMCO and each person, if any, who, within
the meaning of Section 15 of the 1933 Act controls PIMCO shall not be liable, or
subject to any damages, expenses or losses, in connection with any act or
omission connected with or arising out of any investment advisory services
rendered under this Agreement, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of PIMCO's duties or by reason of
reckless disregard of PIMCO's obligations and duties under this Agreement.
7. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that Pacific Funds shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve or disapprove any action
hereunder taken on its behalf by PIMCO.
8. Services Not Exclusive. It is understood that the services of PIMCO are
not exclusive, and nothing in this Agreement shall prevent PIMCO from providing
similar services to other clients, including investment companies (whether or
not their investment objectives and policies are similar to those of the Fund)
or from engaging in other activities.
9. Duration and Termination. This Agreement shall become effective as of
the date of execution first written above, and shall continue in effect until
December 31, 2002 and continue thereafter on an annual basis with respect to
each Fund; unless terminated in accordance with the following sentence; provided
that such annual continuance is specifically approved each year by (a) the vote
of a majority of the entire Board of Trustees of Pacific Funds, or by the vote
of a majority of the outstanding voting securities of each Fund (as defined in
the 1940 Act), and (b) the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons (as such term is defined in the
0000 Xxx) of any such party to this Agreement cast in person at a meeting called
for the purpose of voting on such approval. In the event this Agreement is not
approved in the manner described in the preceding sentence, the paragraph
numbered six (6), of this Agreement shall remain in effect as well as any
applicable provision of this paragraph numbered nine (9) and PIMCO shall not
provide any services for such Fund or receive any fees on account of such Fund
that fail to so approve of this Agreement. Notwithstanding the foregoing, this
Agreement may be terminated: (a) by Pacific Life at any time without penalty,
upon sixty (60) days prior written notice to PIMCO and Pacific Funds (b) at any
time without payment of any penalty by Pacific Funds, upon the vote of a
majority of Pacific Funds' Board of Trustees or a majority of the outstanding
voting securities of each Fund, upon sixty (60) days prior written notice to
PIMCO, or (c) by PIMCO at any time without penalty by PIMCO, upon sixty (60)
days prior written notice to Pacific Life and Pacific Funds. In the event of
termination for any reason, all records of each Fund for which the Agreement is
terminated shall promptly be returned to Pacific Life or Pacific Funds, free
from any claim or retention of rights by PIMCO: the Agreement shall
automatically terminate in the event of its assignment (as such term is defined
in the 1940 Act).
10. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
11. Use of Name. It is understood that the name "Pacific Life Insurance
Company"and "Pacific Life" and "Pacific Funds" and any derivative thereof or
logo associated with that name are the valuable property of Pacific Life and its
affiliates. Fund Manager shall not use such name (or derivatives or logos)
without the prior written approval of Pacific Life and only for so long as
Pacific Life is an investment adviser to Pacific Funds and/or the Funds. Upon
termination of the Investment Advisory Agreement between Pacific Funds and
Pacific Life, the Fund Manager shall forthwith cease to use such name (or
derivative or logo).
It is understood that the name PIMCO, Pacific Investment Management Company
LLC, or any derivative thereof or logo associated with that name is the valuable
property of PIMCO and its affiliates and that Pacific Funds and/or the Funds
have the right to use such name (or derivative or logo) in offering materials of
Pacific Funds with the approval of PIMCO and for so long as PIMCO is Fund
Manager to the Fund and/or other funds of Pacific Funds. Upon termination of
this Agreement between Pacific Funds, Pacific Life, and PIMCO, Pacific Funds (or
Funds) shall forthwith cease to use such name (or derivative or logo).
12. Notices. All notices and other communications hereunder shall be in
writing sent by facsimile first, if practicable, but shall only be deemed given
if delivered in person or by messenger, cable, certified mail with return
receipt, or by a reputable overnight delivery service which provides evidence of
receipt to the parties at the following addresses (or at such other address or
number for a party as shall be specified by like notice):
A. if to the Fund Manager, to:
Pacific Investment Management Company LLC
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Facsimile transmission number: 000-000-0000
Attention: Chief Legal Officer
B. if to Pacific Life, to:
Pacific Life Insurance Company
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile transmission number: (000) 000-0000
Attention: Xxxxx X. Xxxxx
C. if to the Fund, to:
Pacific Funds
Pacific Life Insurance Company
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile transmission number: (000) 000-0000
Attention: Xxxxx X. Xxxxx
13. Miscellaneous.
a. This Agreement shall be governed by 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.
b. The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
c. To the extent permitted under Section 9 of the Agreement, this Agreement
may not be assigned by any party without the prior written consent of the other
parties.
d. 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, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
e. Nothing herein shall be construed as constituting PIMCO as an agent of
Pacific Funds or Pacific Life.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
PACIFIC LIFE
INSURANCE COMPANY
Attest: /s/ Xxxxxx X. Milfs By /s/ Xxxxx X. Xxxxxxx
-------------------------------- ---------------------------------
Name: Xxxxxx X. Milfs Name: Xxxxx X. Xxxxxxx
Title: Vice President Secretary Title: President
PACIFIC INVESTMENT
MANAGEMENT COMPANY LLC
Attest: /s/ Xxxxxx X. Xxxxxx By /s/ Xxxxxxx X. Benz, II
-------------------------------- ---------------------------------
Name: Xxxxxx X. Xxxxxx Name: Xxxxxxx X. Benz, II
Title: Senior Vice President Title: Managing Director
PACIFIC FUNDS
Attest: /s/ Xxxxxx X. Milfs By /s/ Xxxxx X. Xxxxxxx
-------------------------------- ---------------------------------
Name: Xxxxxx X. Milfs Name: Xxxxx X. Xxxxxxx
Title: Secretary Title: President
Exhibit A
PACIFIC FUNDS
FEE SCHEDULE
Fund: PF PIMCO Managed Bond Fund
Pacific Life will pay to the Fund Manager a monthly fee of .25%
based on an annual percentage of the combined average daily net
assets of the PF PIMCO Managed Bond Fund and the Inflation
Managed and Managed Bond Portfolios of the Pacific Select Fund.
These fees for services shall be prorated for any portion of a
year in which the Agreement is not effective.
