INVESTMENT ADVISORY CONTRACT
PIMCO Funds
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
November ___, 1994
Pacific Investment Management Company
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and Pacific Investment Management Company (the "Adviser") as follows:
1. The Trust is an open-end investment company which currently has nineteen
separate investment portfolios, all of which are subject to this agreement: the
Short-Term Fund; the Low Duration Fund; the Low Duration Fund II; the Low
Duration Fund III; the Moderate Duration Fund; the Total Return Fund; the Total
Return Fund II; the Total Return Fund III; the Long-Term U.S. Government Fund;
the Commercial Mortgage Securities Fund; the High Yield Fund; the Global Fund;
the Foreign Fund; the International Fund; the Income and Capital Preservation
Fund; the Income and Capital Preservation Fund II; the StocksPLUS Fund; the
Growth Stock Fund; and the VersaSTYLE Equity Fund (the "Funds"). Additional
investment portfolios may be established in the future. This Contract shall
pertain to the Funds and to such additional investment portfolios as shall be
designated in Supplements to this Contract, as further agreed between the Trust
and the Adviser. A separate class of shares of beneficial interest in the Trust
is offered to investors in each Fund. The Trust engages in the business of
investing and reinvesting the assets of each Fund in the manner and in
accordance with the investment objective and restrictions applicable to that
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 Investment Company
Act of 1940 (the "1940 Act") and the Securities Act of 1933 ("1933 Act"). Copies
of the documents referred to in the preceding sentence have been furnished to
the Adviser. Any amendments to those documents shall be furnished to the Adviser
promptly. Pursuant to a Distribution Contract (the "Distribution Contract")
between the Trust and PIMCO Advisors Distribution Company (the "Distributor"),
the Fund has employed the Distributor to serve as principal underwriter for the
shares of beneficial interest of the Trust. Pursuant to an Administrative
Services Contract ("Administrative Services Contract") between the Trust and the
Adviser, the Trust has also retained the Adviser to provide the Fund with
administrative and other services.
2. The Trust hereby appoints the Adviser to provide the investment advisory
services specified in this Contract and the Adviser hereby accepts such
appointment.
3. (a) The 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 contract and (ii) provide all services, equipment and
facilities necessary to perform its obligations under this Contract.
(b) The Trust shall be responsible for all of its expenses and
liabilities, including compensation of its Trustees who are not affiliated with
the Adviser, the Distributor or any of their affiliates; taxes and governmental
fees; interest charges; fees and expenses of the Trust'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 Trust), transfer agent, registrar and dividend
disbursing agent of the Trust; expenses of issuing, selling, redeeming,
registering and qualifying for sale shares of beneficial interest in the Trust;
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.
4. (a) The Adviser shall provide to the Trust investment guidance and
policy direction in connection with the management of the Funds, including oral
and written research, analysis, advice, and statistical and economic data and
information.
Consistent with the investment objectives, policies and restrictions
applicable to the Trust and its Funds, the Adviser will determine the securities
and other assets to be purchased or sold by each Fund of the Trust and will
determine what portion of each Fund shall be invested in securities or other
assets, and what portion, if any, should be held uninvested.
The Trust 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 Adviser. It is understood that the Adviser will not use any inside
information pertinent to investment decisions undertaken in connection with this
Contract that may be in its possession or in the possession of any of its
affiliates, nor will the Adviser seek to obtain any such information.
(b) The Adviser also shall provide to the officers of the Trust
administrative assistance in connection with the operation of the Trust and the
Funds, which shall include (i) compliance with all reasonable requests of the
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 shall from time to time
determine to be necessary or useful to the administration of the Trust and the
Funds.
(c) As manager of the assets of the Funds, the Adviser shall make
investments for the account of the Funds in accordance with the 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.
(d) The Adviser shall furnish to the Trust's Board of Trustees periodic
reports on the investment performance of the Trust and its Funds and on the
performance of its obligations under this Contract and shall supply such
additional reports and information as the Trust's officers or Board of Trustees
shall reasonably request.
(e) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as other of its clients,
the Adviser, to the extent permitted by applicable law, may aggregate the
securities to be so sold or purchased in order to obtain the best execution of
the order or lower brokerage commissions, if any. The Adviser may also on
occasion purchase or sell a particular security for one or more clients in
different amounts. On either occasion, and to the extent permitted by applicable
law and regulations, allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by the Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Trust and to such other customers.
(f) The Adviser may cause a Fund to pay a broker which provides brokerage
and research services to the Adviser a commission for effecting a securities
transaction in excess of the amount another broker might have charged. Such
higher commissions may not be paid unless the Adviser determines in good faith
that the amount paid is reasonable in relation to the services received in terms
of the particular transaction or the Adviser's overall responsibilities to the
Trust and any other of the Adviser's clients.
5. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this Contract. As an inducement
to the Adviser's undertaking to render these services, the Trust agrees that the
Adviser shall not be liable under this Contract for any mistake in judgment or
in any other event whatsoever, provided that nothing in this Contract shall be
deemed to protect or purport to protect the Adviser against any liability to the
Trust or its shareholders to which the Adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of the Adviser's duties under this Contract or by reason of the Adviser's
reckless disregard of its obligations and duties hereunder.
6. In consideration of the services to be rendered by the Adviser under
this Contract, each Fund of the Trust shall pay the Adviser a monthly fee 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 Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month, at the following annual rates:
Fee Rate on Average Daily
Net Assets
Fund Up to $150 million Over $150 million
Commercial Mortgage Securities,
StocksPLUS and
VersaSTYLE Equity Funds....... 0.45% 0.40%
All Other Funds.......... 0.30% 0.25%
If the fees payable to the Adviser pursuant to this paragraph 6 begin to
accrue before the end of any month or if this Contract terminates before the end
of any month, the fees for the period from that date to the end of that month or
from the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion which the period bears to the full
month in which the effectiveness or termination occurs. For purposes of
calculating the monthly fees, the value of the net assets of each Fund shall be
computed in the manner specified in the Prospectus for the computation of net
asset value. For purposes of this Contract, a "business day" is any day the New
York Stock Exchange is open for trading.
7. If the aggregate expenses of every character incurred by, or allocated
to, the Trust in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
any extraordinary expense (including, without limitation, litigation and
indemnification expense), but including the fees payable under this Contract
("includable expenses"), shall exceed the expense limitations applicable to the
Trust imposed by state securities laws or regulations thereunder, as these
limitations may be raised or lowered from time to time, the Adviser shall pay
the Trust an amount equal to that excess. With respect to portions of a fiscal
year in which this Contract shall be in effect, the foregoing limitations shall
be prorated according to the proportion which that portion of the fiscal year
bears to the full fiscal year. At the end of each month of the Trust's fiscal
year, the Adviser will review the includable expenses accrued during that fiscal
year to the end of the period and shall estimate the contemplated includable
expenses for the balance of that fiscal year. If, as a result of that review and
estimation, it appears likely that the includable expenses will exceed the
limitations referred to in this paragraph 7 for a fiscal year with respect to
the Trust, the monthly fees relating to the Trust payable to the Adviser under
this Contract and under the Administrative Services Contract for such month
shall be reduced, subject to a later reimbursement to reflect actual expenses,
by an amount equal to a pro rata portion (prorated on the basis of the remaining
months of the fiscal year, including the month just ended) of the amount by
which the includable expenses for the fiscal year (less an amount equal to the
aggregate of actual reductions made pursuant to this provision with respect to
prior months of the fiscal year) are expected to exceed the limitations provided
in this paragraph 7. For purposes of the foregoing, the value of the net assets
of each Fund of the Trust shall be computed in the manner specified in paragraph
6, and any payments required to be made by the Adviser shall be made once a year
promptly after the end of the Trust's fiscal year.
8. (a) This Contract shall become effective with respect to the Funds on
November __, 1994 (and, with respect to any additional fund, the date of a
Supplement hereto) and shall continue in effect with respect to a 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 1940 Act) 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 Contract or "interested persons" (as defined in the 1940 Act) of
any such party.
(b) This Contract may be terminated with respect to a Fund (or any
additional fund) at any time, without the payment of any penalty, by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Adviser or by the Adviser on 60 days' written
notice to the Trust. This Contract (or any Supplement hereto) shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
9. Except to the extent necessary to perform the Adviser's obligations
under this Contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
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.
10. The investment management services of the Adviser to the Trust under
this contract are not to be deemed exclusive as to the Adviser and the Adviser
will be free to render similar services to others.
11. This Contract 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.
12. The Declaration of Trust establishing the Trust, dated February 19,
1987, a copy of which, together with all amendments thereto (the "Declaration"),
is on file in the Office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "PIMCO Funds" refers to the trustees under the
Declaration collectively as trustees and not as individuals or personally, and
that no shareholder, trustee, officer, employee or agent of the Trust shall be
subject to claims against or obligations of the Trust to any extent whatsoever,
but that the Trust estate only shall be liable.
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO FUNDS
By:_________________
Title:
ACCEPTED:
PACIFIC INVESTMENT MANAGEMENT COMPANY
By:___________________
Title:
