<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/x/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Pacific Global Fund, Inc. d/b/a Pacific Advisors Fund Inc.
----------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy
pursuant to Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per
Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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PACIFIC ADVISORS FUND INC.
206 North Jackson Street, Suite 301
Glendale, California 91206
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE BALANCED FUND AND
THE INCOME AND EQUITY FUND
January 16, 2001
To the Shareholders of the above Funds:
The Special Meeting of Class A and Class C Shareholders ("Meeting") of the
Income and Equity Fund and the Balanced Fund of Pacific Global Fund, Inc. d/b/a
Pacific Advisors Fund Inc. (the "Corporation") will be held at the offices of
the Corporation, 206 North Jackson Street, Suite 301, Glendale, California
91206, on Monday, February 28, 2001, at 9:00 a.m., for the following purposes:
1. To approve or disapprove the Co-Management Agreement by and among the
Corporation, on behalf of the Income and Equity Fund, Pacific Global
Investment Management Company and Bache Capital Management, Inc.
(Income and Equity Fund shareholders only);
2. To approve or disapprove the Sub-Advisory Agreement by and among the
Corporation, on behalf of the Balanced Fund, Pacific Global Investment
Management Company and Bache Capital Management, Inc. (Balanced Fund
shareholders only); and
3. To transact any other business that may properly come before the
Meeting.
The Board of Directors has fixed the close of business on January 16, 2001
as the record date for the determination of Shareholders entitled to notice of
and to vote at the Meeting, and any adjournment thereof.
By Order of the Board of Directors
/s/ THOMAS H. HANSON
------------------------
Thomas H. Hanson
Secretary
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER WHO
DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING INSTRUCTIONS
ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE
PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID UNNECESSARY EXPENSE, WE ASK YOUR COOPERATION IN RESPONDING PROMPTLY, NO
MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
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PACIFIC ADVISORS FUND INC.
206 North Jackson Street
Suite 301
Glendale, California 91206
January 16, 2001
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF:
BALANCED FUND
INCOME AND EQUITY FUND
to be held on February 28, 2001
This Proxy Statement is furnished in connection with the solicitation of proxies
by and on behalf of the Board of Directors of Pacific Global Fund, Inc. d/b/a/
Pacific Advisors Fund Inc. ("Corporation") for use at the Special Meeting of
Class A and Class C Shareholders of the Income and Equity Fund and the Balanced
Fund (the "Funds") to be held at the offices of the Corporation, 206 North
Jackson Street, Suite 301, Glendale, California 91206, on February 28, 2001, at
9:00 a.m. ("Meeting"), and any adjournment or adjournments thereof. The purpose
of the Meeting is to hold a shareholder vote on the following proposals:
<TABLE>
<CAPTION>
Proposal Description Applicable Fund Page
No. No.
<S> <C> <C> <C>
1 To approve or disapprove the Co-Management Income and Equity Fund /3/
Agreement by and among the Corporation, on
behalf of the Income and Equity Fund, Pacific
Global Investment Management Company
("Pacific Global") and Bache Capital
Management, Inc. ("Bache Capital")
2 To approve or disapprove the Sub-Advisory Agreement by and Balanced Fund /9/
among the Corporation, on behalf of the Balanced Fund,
Pacific Global and Bache Capital
</TABLE>
This Proxy Statement is being first mailed to shareholders on or about January
17, 2001.
WHO MAY VOTE
The Funds' shareholders of record as of the close of business on January 16,
2000 ("Record Date"), are entitled to notice of and to vote at the Meeting. Each
shareholder of the Funds is entitled to one vote for each full share and an
appropriate fraction of a vote for each fractional share held. Each Fund's
shareholders may vote only on the proposal relating to their Fund, as shown in
the Table above. As of the Record Date, the Income and Equity Fund had
281,522.2290.
FOR A FREE COPY OF THE FUNDS' MOST RECENT ANNUAL REPORT, AND THE MOST RECENT
SEMI-ANNUAL REPORT SUCCEEDING SUCH ANNUAL REPORT, IF ANY, WRITE TO US AT PACIFIC
ADVISORS FUND INC., 206 NORTH JACKSON STREET, SUITE 301, GLENDALE, CALIFORNIA
91206, OR CALL, TOLL-FREE, 1-800-989-6693, DURING NORMAL BUSINESS HOURS.
<PAGE>
shares issued and outstanding, of which 210,583.7160 were Class A shares and
70,938.513 were Class C shares, and the Balanced Fund had 703,313.6370 shares
issued and outstanding, of which 388,256.6090 were Class A shares and
315,057.0280 were Class C shares.
VOTING PROCEDURE AND VOTE REQUIRED
You may vote on the proposal affecting your Fund by (i) completing the enclosed
proxy card, signing it and mailing it back to us in the envelope provided or by
(ii) attending the Meeting in person and voting. All proxy cards solicited by
the Board of Directors that are properly executed and received by the Secretary
prior to the Meeting, and are not revoked, will be voted at the Meeting. You may
revoke your proxy at any time prior to its exercise at the Meeting by written
notice to the Secretary of the Corporation, by executing a subsequent proxy, or
by voting in person at the Meeting.
Shares represented by proxy cards will be voted in accordance with the
instructions thereon. If you properly execute your proxy card and give no
instruction, your shares will be voted FOR the matters specified on the proxy
card. Only proxies that are voted will be counted towards establishing a quorum.
Shareholders should note that while votes to ABSTAIN will count toward
establishing a quorum, passage of any proposal being considered at the Meeting
will occur only if a sufficient number of votes are cast FOR the proposal.
Accordingly, votes to ABSTAIN and votes AGAINST will have the same effect in
determining whether the proposal is approved.
Under the Corporation's By-Laws, a quorum is constituted by the presence in
person or by proxy of a majority of the outstanding shares of common stock of
the Funds entitled to vote at the Meeting. The presence of a quorum will be
determined separately for each Fund. If a quorum is not present at the Meeting
or if a quorum is present at the Meeting but sufficient votes to approve one or
more proposals are not received, the persons named as proxy agents may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of those shares
represented at the Meeting in person or by proxy. If a quorum is present, the
persons named as proxies will vote those proxies that they are entitled to vote
FOR the proposal in favor of such an adjournment, and will vote those proxies
required to be voted AGAINST any such proposal against such adjournment. A
shareholder vote may be taken on one or more items in this proxy statement if
sufficient votes have been received and it is otherwise appropriate.
Broker non-votes are shares held in street name for which the broker indicates
that instructions have not been received from the beneficial owners or persons
entitled to vote and the broker does not have discretionary voting power.
Abstentions and broker non-votes will be counted as shares that are present for
purposes of determining whether a quorum is present but will not be voted for or
against any adjournment or proposal. Abstentions and broker non-votes will not
be counted, however, as votes cast for purposes of determining whether
sufficient votes have been received to approve the proposal. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment
or against the proposal, for which the required vote is a percentage of the
shares present.
VOTE REQUIRED: APPROVAL OF EACH PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A
"MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF THE APPROPRIATE FUND. UNDER
THE INVESTMENT COMPANY ACT OF 1940 (THE "1940 ACT"), THE VOTE OF A "MAJORITY OF
THE OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE VOTE OF THE LESSER OF
(a) 67% OR MORE OF THE VOTING SECURITIES PRESENT AT THE MEETING OR REPRESENTED
BY PROXY IF THE HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES
ARE PRESENT OR REPRESENTED BY PROXY OR (b) MORE THAN 50% OF THE OUTSTANDING
VOTING SECURITIES. CLASS A
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AND CLASS C SHARES OF EACH FUND WILL BE COUNTED TOGETHER IN DETERMINING THE VOTE
UNDER EACH PROPOSAL SET FORTH IN THIS PROXY STATEMENT.
DISCUSSION OF PROPOSALS 1 AND 2
INTRODUCTION
The purpose of this proxy solicitation is to seek shareholder approval for the
replacement of Hamilton & Bache Inc. ("Hamilton & Bache") by Bache Capital as
co-manager of the Income and Equity Fund and as sub-adviser to the Balanced
Fund. Hamilton & Bache resigned from these positions effective November 10,
2000, because Mary Hamilton and Stephen Bache, its two principals, are ending
their business relationship. Mr. Bache, who performed substantially all of the
portfolio management services provided by Hamilton & Bache to the Funds, has
formed his own investment advisory firm, Bache Capital. Your Board of Directors
believes that it would be appropriate to retain Bache Capital to act as
co-manager of the Income Equity Fund and as sub-adviser of the Balanced Fund in
order to provide continuity of management and for the other reasons set forth
below.
In order to effectuate this replacement, it is necessary for the Corporation to
enter into a new Co-Management Agreement for the Income and Equity Fund and a
new Sub-Advisory Agreement for the Balanced Fund, and to obtain Board of
Director and shareholder approval of these agreements. As explained in more
detail below, the Board of Directors approved the new Agreements at its meeting
held on November 10, 2000. At that meeting, the Board of Directors also approved
temporary agreements to permit Bache Capital to manage the Funds on a temporary,
interim basis until a shareholder vote could be held. This proxy statement seeks
your vote to approve the Agreement for the Fund whose shares you own.
The following sections of this proxy statement set forth information you should
take into consideration in deciding whether or not to vote to approve the
Agreements. As part of that discussion, it describes the Board of Director's
reasons for approving the Agreements.
PROPOSAL 1: CONSIDERATION OF THE PROPOSED CO-MANAGEMENT AGREEMENT FOR THE INCOME
AND EQUITY FUND
BACKGROUND: Pacific Global serves as the investment manager of the Income and
Equity Fund pursuant to an investment management agreement with the Corporation,
on behalf of the Income and Equity Fund, dated October 16, 1992. The continuance
of that agreement was most recently approved by the Board of Directors on August
4, 2000.
Under that agreement, Pacific Global is authorized to act as sole investment
manager of the Corporation with respect to the Income and Equity Fund and, in
its discretion, to engage the services of a sub-adviser to provide investment
advisory and other services to the Income and Equity Fund. During the fiscal
year ended December 31, 2000, the Manager waived its management fees and
reimbursed expenses for the Income and Equity Fund pursuant to the Fund's
Expense Limitation Agreement. The Manager currently intends to continue its
practice of waiving its management fees and reimbursing expenses for the Fund.
From August 1, 1997 through November 10, 2000, Hamilton & Bache also provided
investment management services to the Income and Equity Fund pursuant to a
Co-Management Agreement by and among the Corporation, on behalf of the Fund,
Pacific Global, and Hamilton & Bache (the "H&B Co-Management Agreement"). The
H&B Co-Management Agreement was most recently approved by the Fund's
shareholders on April 25, 1997, and was approved annually thereafter by the
Board, most recently on August 4, 2000.
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Under the H&B Co-Management Agreement, Pacific Global and Hamilton & Bache,
subject to the supervision and control of the Board, co-managed the investment
and reinvestment of the Fund's assets and jointly established the overall
investment program for the management of the Fund's assets. Pacific Global
provided investment management services to the Fund pursuant to the investment
management agreement in addition to Pacific Global's duties under the H&B
Co-Management Agreement. As noted above, Hamilton & Bache resigned as co-manager
effective November 10, 2000. During the period from January 1, 2000 through
November 10, 2000, Hamilton & Bache waived receipt of its co-management fee due
under the H&B Co-Management Agreement, and received Pacific Global shares in
lieu of its co-management fee. The shares received by H&B, together with the
shares received in lieu of its sub-advisory fee with respect to the Balanced
Fund, constituted less than 1% of Pacific Global's issued and outstanding
shares.
At a meeting held on November 10, 2000, the Board of Directors, including a
majority of the directors who are not "interested persons" of the
Corporation, as defined in the 1940 Act, considered a recommendation by
Pacific Global that Bache Capital be appointed as co-manager for the Income
and Equity Fund under the proposed Co-Management Agreement. The proposed
Co-Management Agreement is identical to the H&B Co-Management Agreement in
all material respects, including advisory fees. After considering Pacific
Global's recommendation and other information presented at that meeting, the
Board of Directors approved the proposed Co-Management Agreement and its
submission to the Fund's shareholders, and determined to recommend that the
Fund's shareholders approve the proposed Co-Management Agreement.
At the November 10 Board meeting, the Board of Directors also authorized Bache
Capital to act as co-manager on a temporary, interim basis until the shareholder
vote is held. During this period, Bache Capital is subject to the same
contractual obligations as was Hamilton & Bache under the H&B Co-Management
Agreement. The Board of Directors based its approval of this interim agreement
on the information described below with respect to the proposed Co-Management
Agreement, and upon its finding that the services to be provided to the Fund
during the temporary agreement period would be at least equivalent to the scope
and quality of services provided under the H&B Co-Management Agreement.
During this interim period, Bache Capital is not entitled to any compensation
before January 1, 2001. Thereafter, compensation may accrue at the rate in the
proposed Co-Management Agreement, which is the same as the rate in the H&B
Co-Management Agreement. However, any compensation due Bache Capital will be
held in escrow until the shareholders vote on the proposed Co-Management
Agreement. If that agreement is approved, then the amount in the escrow account
(plus interest) will be paid to Bache Capital. If that agreement is not
approved, then Bache Capital will be paid the lesser of the amount in the escrow
account (including interest) or any costs incurred in performing the interim
agreement period (including interest on such amount). Moreover, any compensation
paid to Bache Capital will be subject to the Fund's Expense Limitation
Agreement, which caps Fund expenses at the existing levels described in the
Fund's prospectus. Given the Fund's current expense levels, we anticipate that
Bache Capital will waive all of its compensation with respect to the Fund during
the temporary agreement period.
THE PROPOSED CO-MANAGEMENT AGREEMENT
The parties to the proposed Co-Management Agreement are the Corporation, on
behalf of the Fund, Pacific Global and Bache Capital. Pacific Global will
continue to provide investment management services to the Fund pursuant to the
Fund's investment management agreement in addition to its duties under the
proposed Co-Management Agreement. The Co-Management Agreement provides
4
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that Pacific Global and Bache Capital, subject to the supervision and control of
the Board, shall co-manage the investment and reinvestment of the Fund's assets
and shall jointly establish the overall investment program for the management of
the Fund's assets. The proposed Co-Management Agreement is identical to the H&B
Co-Management Agreement in all material respects.
Under the Co-Management Agreement, Pacific Global and Bache Capital each will be
entitled to the following monthly fee from the Fund for their services:
<TABLE>
<CAPTION>
Name Fee, as a percentage of average daily net assets
---- ------------------------------------------------
<S> <C>
Pacific Global Annual rate of:
.40% on the first $100 million;
.37% of the next $100 million;
.34% of the next $100 million;
.31% of the next $100 million;
.28% of the next $100 million; and
.25% of average daily net assets in excess of $500 million.
Bache Capital Annual rate of
.35% on the first $100 million
.33% of the next $100 million;
.31% of the next $100 million;
.29% of the next $100 million;
.27% of the next $100 million; and
.25% of average daily net assets in excess of $500 million.
</TABLE>
The fees payable to Pacific Global and Bache Capital by the Income and Equity
Fund under the proposed Co-Management Agreement are the same as those that would
be payable under the H&B Co-Management Agreement. No additional management fee
is due to Pacific Global with respect to its services under the Fund's
investment management agreement.
Pursuant to an Expense Limitation Agreement, Pacific Global and Bache Capital
have voluntarily agreed to waive their management fees and absorb or reimburse
expenses of the Fund in order to keep total Fund operating expenses from rising
above 1.85%, for Class A shares, and 2.60%, for Class C shares, of average daily
net assets. This Agreement may be terminated with 90 days notice to the Fund.
The Fund previously had an Expense Limitation Agreement with Pacific Global and
Hamilton & Bache on the same terms.
If approved by the Fund shareholders at the Meeting, the Co-Management Agreement
will remain in effect for two years after its effective date and thereafter will
continue from year to year, provided that such continuance is approved annually
(i) by the Board of Directors of the Corporation, including a majority of the
directors who are not "interested persons" of the Corporation, or (ii) by the
vote of the holders of a majority of the outstanding voting securities of the
Income and Equity Fund. The Co-Management Agreement automatically terminates
upon its assignment or upon termination of the Fund's investment management
agreement with Pacific Global. In addition, the proposed Co-Management Agreement
may be terminated without penalty by the (i) Board of Directors, (ii) by the
vote of a majority of the outstanding voting securities of the Income and Equity
Fund, (iii) by Pacific Global on 60 days' prior written notice to the Income and
Equity Fund or (iv) by Bache Capital on 60 days' prior written notice to the
Income and Equity Fund. In the event the proposed Co-Management Agreement is
terminated, Pacific Global will reassume full responsibility for management of
the Income and Equity Fund unless otherwise
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determined by the Board, and Pacific Global will be entitled to receive the full
amount of fees.
The proposed Co-Management Agreement provides that Pacific Global and Bache
Capital will 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
Pacific Global and Bache Capital shall have acted in good faith and with due
care. The proposed Co-Management Agreement also provides that Pacific Global and
Bache Capital shall, in any event, be liable for their willful misfeasance, bad
faith, or negligence in the performance of their investment management duties or
for failure to exercise due care in rendering other services under the proposed
Co-Management Agreement.
A copy of the proposed Co-Management Agreement is attached to this Proxy
Statement as Exhibit A.
INFORMATION ABOUT BACHE CAPITAL: Bache Capital is a California corporation,
which is wholly-owned by Stephen K. Bache. It is located at 3 Berkshire Place,
La Canada, CA 91011. Bache Capital is registered as an investment adviser with
the Securities and Exchange Commission ("SEC") and, as described in the
discussion of Proposal 2 below, currently serves on a temporary interim basis as
sub-adviser for the Balanced Fund, another series of the Corporation. As of
December 31, 2000, Bache Capital had approximately $30 million in assets under
management, not including the assets of the Funds (which together amount to
approximately $13.5 million). The chief executive officer of Bache Capital is
identified in the table below:
<TABLE>
<CAPTION>
Name Principal Occupation Address
---- -------------------- -------
<S> <C> <C>
Stephen Kenneth Bache Chief Investment Officer 3 Berkshire Place
La Canada, CA 91001
</TABLE>
The table below sets forth certain information with respect to the Balanced
Fund, a series of the Corporation for which Bache Capital currently acts as
sub-adviser on a temporary interim basis:
<TABLE>
<CAPTION>
Net Assets as of
Name December 31, 2000 Annual Rate of Investment Advisory Fees
---- ----------------- ---------------------------------------
<S> <C>
Balanced Fund $10,501,000 Any fee owed Bache Capital during the interim agreement
period is to be held in escrow. The fee arrangements are
described in "Proposal 2: Consideration of Proposed
Sub-Advisory Agreement with Bache Capital" on page 11 below.
</TABLE>
INFORMATION ABOUT PACIFIC GLOBAL: Pacific Global, a registered investment
adviser, was incorporated on December 17, 1991, under the laws of the State of
California and has served as the investment manager for each series of the
Corporation since its inception. The principal offices of Pacific Global are
located at 206 North Jackson Street, Suite 301, Glendale, CA 91206. George A.
Henning, the President of Pacific Global, owns a controlling interest in the
firm. Directors and officers of Pacific Global and outside investors, including
the chief executive officer of Bache Capital, also own common stock in the firm.
(See "Share Ownership: Pacific Global", below.) As of December 31, 2000, Pacific
Global had approximately $30.8 million in assets under management. The chief
executive officers and directors of Pacific Global are identified in the table
below:
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<TABLE>
<CAPTION>
Name/Position with Position with the
Pacific Global Fund Principal Occupation Address
-------------- ---- -------------------- -------
<S> <C> <C> <C>
George A. Henning Chairman, President Chairman, President and Director 206 North Jackson Street,
Chairman, President and and Director Pacific Global Suite 301
Director Glendale, CA 91206
Thomas H. Hanson Vice President and Owner, Chairman, President and P.O. Box 30
Executive Vice President and Secretary Chief Executive Officer Santa Barbara, CA 93102
Director TriVest Capital Management, Inc.
Paul W. Henning Treasurer Treasurer 206 North Jackson Street,
Treasurer Pacific Global Suite 301
Glendale, CA 91206
Joseph Brinker N/A Branch Manager One North Ormond Avenue
Director The Brinker Organization Havertown, PA 19083
General Agent
Transamerica Life Companies
Registered Principal,
Transamerica Financial
Resources, Inc.
Manabi Hirasaki N/A Owner 2292 E. Huenme Road
Director Manabi Farms Oxnard, CA 93033
Siegfred Kagawa N/A Retired Chairman 1163 S. Beretania
Occidental Underwriters Honolulu, HI 96814
of Hawaii
Barbara A. Kelley N/A Consultant 437 W. Walnut Street
Director Pasadena, CA 91103
William H. McCary N/A Agent, Representative, 21021 Ventura Blvd., Suite 400
Director Financial Planner Woodlands Hills, CA 91364
Capital Analysts, Inc.
Victoria Breen Assistant Secretary General Agent 206 North Jackson Street,
Assistant Secretary and and Director Transamerica Life Companies Suite 301
Director Registered Principal, Glendale, CA 91206
Transamerica Financial
Resources, Inc.
Branch Manager
Derby & Derby, Inc./Pacific
Asset Group, Inc./Financial
West Group
</TABLE>
INFORMATION ABOUT THE FUND'S INVESTMENT MANAGEMENT AGREEMENT. As previously
stated, Pacific Global will continue to provide management, investment and
administrative services to the Fund pursuant to the Investment Management
Agreement, after the shareholder approval of the proposed Co-Management
Agreement.
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The Investment Management Agreement provides that neither Pacific Global nor any
of its directors, officers, or employees performing services for the Corporation
at the direction or request of Pacific Global in connection with Pacific
Global's discharge of its obligations with respect to the Investment Management
Agreement, shall be liable for any error of judgment or mistake of law or for
any loss suffered by the Corporation, with respect to the Fund, in connection
with the matters to which the Investment Management Agreement relate. The
Investment Management Agreement also provides that nothing therein shall be
construed to protect Pacific Global or any such persons against any liability to
the Corporation or its shareholders to which Pacific Global or such persons
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its or their duties on behalf of the
Corporation or for failure by Pacific Global or any such persons to exercise due
care in rendering other services to the Corporation.
DIRECTORS' CONSIDERATIONS AND RECOMMENDATIONS: At the meeting held on November
10, 2000, the Board of Directors, including the directors who are not
"interested persons" of the Corporation, after a full evaluation of the matters
described above, approved the proposed Co-Management Agreement.
In connection with their meeting, the Board of Directors considered materials
specifically relating to the proposed Co-Management Agreement. These
materials included information on the investment performance of the Fund,
sales and redemption data for the Fund, and the economic outlook and the
general investment outlook in the markets in which the Fund invests. The
Board of Directors also periodically consider other material facts such as
information comparing the performance of the Fund with a peer group of funds
and an appropriate index or combination of indices, information concerning
Pacific Global's results and financial condition, the allocation of the
Fund's brokerage commissions, including any allocations to Pacific Global
Fund Distributors, Inc., the Fund's distributor and an affiliate of Pacific
Global, the Fund's record of compliance with its investment policies and
restrictions on personal securities transactions, and the nature, cost, and
character of non-investment management services provided by Pacific Global
and its affiliates.
During its deliberations, the Board of Directors did not identify any single
factor as all-important or controlling. The following summary does not detail
every matter considered. Matters considered by the Board of Directors include
the following:
Among the most significant factors was that Mr. Bache, the Chief Investment
Officer of Bache Capital, had been responsible for providing advisory
services to the Funds under the H&B Agreements for over five years. The Board
considered significant the quality of the advisory services provided to the
Funds by Hamilton & Bache during that relationship. In that regard, the Board
considered the information previously provided to it in August 2000 when it
approved the continuation of the H&B Co-Management Agreement and the H&B
Sub-Advisory Agreement, as well as the fact of its prior approval.
Specifically, the Board noted that the year-to-date performance of the
Balanced Fund in 2000 had been above average compared to the indices by which
Pacific Global measures performance and higher than the average of its peer
group in 1999. The Board also noted information indicating that the Income
and Equity Fund had performed well over the past year in a rising interest
rate market and that in 1999 the Income and Equity Fund had been recognized
as one of the top performing bond funds by Investment Adviser Magazine.
The Board also considered information previously provided to it with respect to
the fact that Pacific Global and Bache Capital, consistent with the interests of
the Fund and subject to the review of the Board, may cause the Fund to purchase
and sell portfolio securities through brokers who provide Pacific Global and
Bache Capital with brokerage and research services, including analysis, advice
and similar services. In return for such services, the Fund may pay to those
brokers a higher
8
<PAGE>
commission than may be charged by other brokers, provided that Pacific
Global and Bache Capital determine in good faith that such commission is
reasonable in relation to the services provided, viewed in light of that
particular transaction or of the overall responsibility of Pacific Global and
Bache Capital to the Fund and their other clients. Research services furnished
by brokers or dealers through which or with which the Fund effects securities
transactions may be used by Pacific Global and Bache Capital in advising other
funds or accounts they advise and, conversely, research services furnished to
Pacific Global and Bache Capital in connection with other funds or accounts they
advise may be used by Pacific Global and Bache Capital in advising the Fund.
Information and research received from brokers and dealers will be in addition
to, and not in lieu of, the services required to be performed by Pacific Global
and Bache Capital under the proposed Co-Management Agreement.
The Board also noted that the management fee payable under the proposed
Co-Management Agreement would remain the same as under the H&B Co-Management
Agreement, and that the management fee was comparable to the fees charged other
mutual funds that are competitors of the Fund. The Board also noted that the
Expense Limitation Agreement would remain in effect with respect to the Fund.
The Board also received information that Mr. Bache would continue to have the
research and other resources available to him that he had used at Hamilton &
Bache in providing the Fund with portfolio management services, and that
adoption of the proposed Co-Management Agreement would not result in any change
in the level of services provided by Pacific Global. The Board also considered
that adoption of the proposed Co-Management Agreement would not cause the Fund
to incur additional administrative expenses. The Board noted that fund
accounting services would continue to be provided by Pacific Global.
CONCLUSION. Based on their evaluation of all material factors, the Board
concluded that adoption of the proposed Co-Management Agreement will benefit the
Fund and its shareholders. The Board of Directors, including the Independent
Directors, voted to approve the submission of the proposed Co-Management
Agreement to the shareholders of the Fund and recommends voting FOR the proposed
Co-Management Agreement. If approved, the proposed Co-Management Agreement will
take effect promptly after the Meeting.
If the Co-Management Agreement is not approved, Pacific Global will provide
portfolio management services to the Income and Equity Fund and the Board of
Directors will consider whether it should take any other action appropriate to
obtain an investment co-manager or sub-adviser for the Income and Equity Fund.
PROPOSAL 2: CONSIDERATION OF THE PROPOSED SUB-ADVISORY AGREEMENT FOR THE
BALANCED FUND
BACKGROUND: Pacific Global serves as the investment manager of the Balanced Fund
pursuant to an investment management agreement with the Corporation, on behalf
of the Balanced Fund, dated October 16, 1992. The continuance of that agreement
was most recently approved by the Board of Directors on August 4, 2000. Under
that agreement, Pacific Global is authorized to act as sole investment manager
of the Corporation with respect to the Balanced Fund and, in its discretion, to
engage the services of a sub-adviser to provide investment advisory and other
services to the Balanced Fund. During the fiscal year ending December 31, 2000,
Pacific Global received $34,907.37 in management fees, and waived the remaining
0.40% of its management fee from the Balanced Fund. Pacific Global discontinued
that waiver effective January 1, 2001.
9
<PAGE>
From September 1, 1994 through November 10, 2000, Hamilton & Bache also provided
investment management services to the Balanced Fund pursuant to a Sub-Advisory
Agreement by and among the Corporation, on behalf of the Fund, Pacific Global,
and Hamilton & Bache (the "H&B Sub-Advisory Agreement"). The H&B Sub-Advisory
Agreement was most recently approved by the Fund's shareholders on August 30,
1994, and was approved annually thereafter by the Board of Directors, most
recently on August 4, 2000.
Under the H&B Sub-Advisory Agreement, Hamilton & Bache, subject to the
supervision and control of the Board and of Pacific Global, managed the
investment and reinvestment of the Balanced Fund's assets and established the
overall investment program for the management of the Balanced Fund's assets.
As noted above, Hamilton & Bache resigned as sub-adviser effective November
10, 2000. For the period from January 1, 2000 through November 10, 2000,
Hamilton & Bache waived receipt in cash of its sub-advisory fee due under the
H&B Sub-Advisory Agreement, and received Pacific Global shares in lieu of its
cash sub-advisory fee. The shares so received by H&B, together with the
shares received in lieu of its co-management fee with respect to the Income
and Equity Fund, constituted less than 1% of Pacific Global's issued and
outstanding shares.
At a meeting held on November 10, 2000, the Board of Directors, including a
majority of directors who are not "interested persons" of the Corporation, as
defined in the 1940 Act, considered a recommendation by Pacific Global that
Bache Capital be appointed as sub-adviser for the Balanced Fund under the
proposed Sub-Advisory Agreement. The proposed Sub-Advisory Agreement is
identical to the H&B Sub-Advisory Agreement in all material respects, including
advisory fees. After considering Pacific Global's recommendation and other
information presented at that meeting, the Board of Directors approved the
proposed Sub-Advisory Agreement and its submission to the Fund's shareholders,
and determined to recommend that the Fund's shareholders approve the proposed
Sub-Advisory Agreement.
At the November 10 Board meeting, the Board of Directors also authorized Bache
Capital to act as sub-adviser on a temporary, interim basis until the
shareholder vote is held. During this period, Bache Capital is subject to the
same contractual obligations as was Hamilton & Bache under the H&B Sub-Advisory
Agreement. The Board of Directors based its approval of this interim agreement
on the information described below with respect to the proposed Sub-Advisory
Agreement, and upon its finding that the services to be provided to the Fund
during the temporary agreement period would be at least equivalent to the scope
and quality of services provided under the H&B Sub-Advisory Agreement.
During this interim period, Bache Capital is not entitled to any compensation
before January 1, 2001. Thereafter, compensation may accrue at the rate in the
proposed Sub-Advisory Agreement, which is the same as the rate in the H&B
Sub-Advisory Agreement. However, any compensation due Bache Capital will be held
in escrow until the shareholders vote on the proposed Sub-Advisory Agreement. If
that agreement is approved, then the amount in the escrow account (plus
interest) will be paid to Bache Capital. If that agreement is not approved, then
Bache Capital will be paid the lesser of the amount in the escrow account
(including interest) or any costs incurred in performing the interim period
agreement (including interest on such amount).
THE PROPOSED SUB-ADVISORY AGREEMENT
The parties to the Sub-Advisory Agreement are the Corporation, on behalf of the
Fund, Pacific Global and Bache Capital. The Sub-Advisory Agreement provides that
Bache Capital, subject to the supervision and control of the Board of Directors
and of Pacific Global, shall manage the investment and reinvestment of the
Balanced Fund's assets and shall establish the overall
10
<PAGE>
investment program for the management of the Balanced Fund's assets. The
proposed Sub-Advisory Agreement is identical to the H&B Sub-Advisory Agreement
in all material respects.
Under the Fund's investment management agreement Pacific Global is entitled to
the following annual fee:
<TABLE>
<CAPTION>
Management Fee as a percentage of average
Name daily net assets
---- ----------------
<S> <C>
Pacific Global Annual rate of:
.75% of the first $200 million;
.70% on the next $200 million;
.65of the next $200 million;
.60% of the next $200 million;
.55% of the next $200 million; and
.50% in excess of $1 billion
</TABLE>
Under the Sub-Advisory Agreement, Bache Capital will be entitled to the
following annual fee from Pacific Global for its services:
<TABLE>
<CAPTION>
Sub-Advisory Fee as a percentage of average
Name daily net assets
---- ----------------
<S> <C>
Bache Capital Annual rate of:
.40% of the first $200 million;
.37% on the next $200 million;
.34% of the next $200 million;
.31% of the next $200 million;
.28% of the next $200 million; and
.25% in excess of $1 billion
</TABLE>
The sub-advisory fees payable to Bache Capital are paid from the management fee
payable to Pacific Global solely pursuant to the Fund's investment management
agreement. Accordingly, the Balanced Fund will not be subject to the payment of
additional management fees if the Sub-Advisory Agreement is approved by the
Fund's shareholders.
If approved by the Fund shareholders at the Meeting, the Sub-Advisory Agreement
will remain in effect for two years after its effective date and thereafter will
continue from year to year, provided that such continuance is approved annually
(i) by the Board of Directors of the Corporation, including a majority of the
directors who are not "interested persons" of the Corporation, or (ii) by the
vote of the holders of a majority of the outstanding voting securities of the
Fund. The Sub-Advisory Agreement automatically terminates upon its assignment or
upon termination of the Fund's investment management agreement. In addition, the
Sub-Advisory Agreement may be terminated without penalty by the (i) Board of
Directors, (ii) by the vote of a majority of the outstanding voting securities
of the Fund, (iii) by Pacific Global on 60 days' prior written notice to Bache
Capital, or (iv) by Bache Capital on 60 days' prior written notice to the
Balanced Fund.
The Sub-Advisory Agreement provides that Bache Capital will 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 Bache Capital shall have acted in
good faith and with due care. The Sub-Advisory Agreement also provides that
Bache Capital shall, in any event, be liable for its willful misfeasance, bad
faith, or negligence in the performance of its investment management duties or
for failure to exercise due care in rendering other services under the
Sub-Advisory Agreement.
11
<PAGE>
A copy of the proposed Sub-Advisory Agreement is attached to this Proxy
Statement as Exhibit B.
INFORMATION ABOUT BACHE CAPITAL: Information about Bache Capital is provided in
the discussion of Proposal 1, at page 6 of this proxy statement.
The table below sets forth certain information with respect to the Income and
Equity Fund, a series of the Corporation for which Bache Capital currently acts
as co-manager on a temporary interim basis:
<TABLE>
<CAPTION>
Net Assets as of
Name December 31, 2000 Annual Rate of Investment Advisory Fees
---- ----------------- ---------------------------------------
<S> <C> <C>
Income and Equity Fund $3,031,000 Any fee owed Bache Capital during the interim agreement
period is to be held in escrow. The fee arrangements are
described in "Proposal 1: Consideration of Proposed
Co-Management Agreement with Bache Capital and Pacific
Global" on page 5 above. Payment of these fees is subject to
the Expense Limitation Agreement described on page 5 above.
</TABLE>
DIRECTORS' CONSIDERATIONS AND RECOMMENDATIONS: At the meeting held on November
10, 2000, the Board of Directors, including the directors who are not
"interested persons" of the Corporation, after a full evaluation of the matters
described above, approved the proposed Sub-Advisory Agreement.
In connection with their meeting, the Board of Directors considered materials
specifically relating to the proposed Sub-Advisory Agreement. These materials
included information on the investment performance of the Fund, sales and
redemption data for the Fund, and the economic outlook and the general
investment outlook in the markets in which the Fund invests. The Board of
Directors also periodically consider other material facts such as information
comparing the performance of the Fund with a peer group of funds and an
appropriate index or combination of indices, information concerning Pacific
Global's results and financial condition, the allocation of the Fund's
brokerage commissions, including any allocations to Pacific Global Fund
Distributors, Inc., the Fund's distributor and an affiliate of Pacific
Global, the Fund's record of compliance with its investment policies and
restrictions on personal securities transactions, and the nature, cost, and
character of non-investment management services provided by Pacific Global
and its affiliates.
During its deliberations, the Board of Directors did not identify any single
factor as all-important or controlling. The following summary does not detail
every matter considered. Matters considered by the Board of Directors include
the following:
Among the most significant factors was that Mr. Bache, the Chief Investment
Officer of Bache Capital, had been responsible for providing advisory
services to the Funds under the H&B Agreements for over five years. The Board
considered significant the quality of the advisory services provided to the
Funds by Hamilton & Bache during that relationship. In that regard, the Board
considered the information previously provided to it in August 2000 when it
approved the continuation of the H&B Co-Management Agreement and the H&B
Sub-Advisory Agreement, as well as the fact of its prior approval.
Specifically, the Board noted that the year-to-date performance of the
Balanced Fund in 2000 had been above average compared to the indices by which
Pacific Global measures performance and higher than the average of its peer
group in 1999. The Board also noted information indicating that the Income
and Equity Fund had performed well over the past year in a rising interest
rate market and that in 1999 the Income and Equity Fund had been recognized
as one of the top performing bond funds by Investment Adviser Magazine.
12
<PAGE>
The Board also considered information previously provided to it with respect to
the fact that Pacific Global and Bache Capital, consistent with the interests of
the Fund and subject to the review of the Board, may cause the Fund to purchase
and sell portfolio securities through brokers who provide Pacific Global and
Bache Capital with brokerage and research services, including analysis, advice
and similar services. In return for such services, the Fund may pay to those
brokers a higher commission than may be charged by other brokers, provided that
Pacific Global and Bache Capital determine in good faith that such
commission is reasonable in relation to the services provided, viewed in light
of that particular transaction or of the overall responsibility of Pacific
Global and Bache Capital to the Fund and their other clients. Research services
furnished by brokers or dealers through which or with which the Fund effects
securities transactions may be used by Pacific Global and Bache Capital in
advising other funds or accounts they advise and, conversely, research services
furnished to Pacific Global and Bache Capital in connection with other funds or
accounts they advise may be used by Pacific Global and Bache Capital in advising
the Fund. Information and research received from brokers and dealers will be in
addition to, and not in lieu of, the services required to be performed by
Pacific Global and Bache Capital under the proposed Sub-Advisory Agreement.
The Board also noted that the management fee payable under the proposed
Sub-Advisory Agreement would remain the same as under the H&B Sub-Advisory
Agreement, and that the management fee was comparable to the fees charged other
mutual funds that are competitors of the Fund.
The Board also received information that Mr. Bache would continue to have the
research and other resources available to him that he had used at Hamilton &
Bache in providing the Fund with portfolio management services, and that
adoption of the proposed Sub-Advisory Agreement would not result in any change
in the level of services provided by Pacific Global. The Board also considered
that adoption of the proposed Sub-Advisory Agreement would not cause the Fund to
incur additional administrative expenses. The Board noted that fund accounting
services would continue to be provided by Pacific Global.
CONCLUSION. Based on their evaluation of all material factors, the Board
concluded that adoption of the proposed Sub-Advisory Agreement will benefit the
Fund and its shareholders. The Board of Directors, including the Independent
Directors, voted to approve the submission of the proposed Sub-Advisory
Agreement to the shareholders of the Fund and recommends voting FOR the proposed
Sub-Advisory Agreement. If approved, the proposed Sub-Advisory Agreement will
take effect promptly after the Meeting.
If the Sub-Advisory Agreement is not approved, Pacific Global will provide
portfolio management services to the Balanced Fund and the Board of Directors
will consider whether it should take any other action appropriate to obtain an
investment co-manager or sub-adviser for the Balanced Fund.
GENERAL INFORMATION
BROKERAGE COMMISSIONS
Mr. George Henning, Chairman of the Board of the Corporation, and the principal
stockholder, Chairman, President and Director of Pacific Global, also serves as
Chairman of Pacific Global Fund Distributors, Inc. ("PGFD"), the Corporation's
and the Funds' Distributor. Mr. Hanson, Vice President and Secretary of the
Corporation, and an Executive Vice President and Director of Pacific Global,
also serves as President and Director of PGFD. Mr. Paul Henning, also Treasurer
of the Corporation and Pacific Global, serves as Treasurer and Director of PGFD.
PGFD is a wholly-owned subsidiary of Pacific Global. Pacific Global and PGFD are
affiliates of the Corporation and
13
<PAGE>
of each other. Mr. George Henning, Mr. Paul Henning and Mr. Hanson are
affiliates of the Corporation, Pacific Global, and PGFD. PGFD is located at 206
North Jackson Street, Suite 301, Glendale, California 91206.
For the fiscal year ended December 31, 2000, the Income and Equity Fund and
the Balanced Fund paid brokerage commissions in the amount of $10 and $1,143,
respectively, to PGFD. These amounts represented 28.57% and 12.90%,
respectively, of each Fund's aggregate brokerage commissions paid during the
most recent fiscal year. For the fiscal year ended December 31, 2000, the
Income and Equity Fund and the Balanced Fund paid underwriting commissions in
the amount of $363.57 and $4,737.95, respectively, to PGFD. These amounts
represented 2.40% and 38.31%, respectively, of the underwriting commissions
paid during the most recent fiscal year.
OTHER FEES PAYABLE BY THE FUNDS
Pacific Global Investor Services, Inc. ("PGIS") is the Corporation's transfer
agent, dividend disbursing agent, and administrative services agent pursuant to
a Transfer Agency, Dividend Disbursing Agency and Administrative Service
Agreement. Mr. George A. Henning serves as Chairman and Director of PGIS. Mr.
Hanson serves as President, Secretary and Director of PGIS. Ms. Victoria Breen,
Assistant Secretary and Director of Pacific Global, serves as Assistant
Secretary and Director of PGIS. Mr. Paul Henning serves as Treasurer of PGIS.
PGIS is a wholly owned subsidiary of Pacific Global. The Corporation, Mr.
Henning, Mr. Hanson, Ms. Breen, Pacific Global and PGFD are affiliates of PGIS.
PGIS is located at 206 North Jackson Street, Suite 301, Glendale, California
91206.
The services provided pursuant to the Transfer Agent, Dividend Disbursing Agent
and Administrative Service Agent Agreement will continue to be provided if the
proposed Co-Management Agreement and Sub-Advisory Agreement are approved. For
the fiscal year ended December 31, 2000, the Income and Equity Fund and the
Balanced Fund paid fees in the amount of $17,034.76 and $67,482.99,
respectively, to PGIS.
For the fiscal year ending December 31, 2000, the aggregate fees paid by the
Funds to Pacific Global and its affiliates for all of the services provided by
them were $17,044.76 with respect to the Income and Equity Fund and $103,596.36
with respect to the Balanced Fund.
SHARE OWNERSHIP
INCOME AND EQUITY FUND: The name, address, amount and percentage of ownership of
each person who owns of record or beneficially five percent or more of the
Income and Equity Fund's outstanding Class A and Class C shares as of December
31, 2000 are listed below:
<TABLE>
<CAPTION>
NAME ADDRESS AMOUNT PERCENTAGE
<S> <C> <C> <C>
INCOME AND EQUITY FUND(A)
Donaldson, Lufkin & Jenrette P.O. Box 2052
Jersey City, NJ 07303 67,902.4100 31.94%
Wedbush Morgan Securities P.O. Box 30014
Los Angeles, CA 90030 16,260.1870 7.65%
14
<PAGE>
INCOME AND EQUITY FUND(C)
Mun Charn Wong 1163 South Beretania St.
Honolulu, HI 96814 18,418.2350 23.20%
Derald D. Hay & 140 Bellevue Avenue
Renee A. Hay Springfield, PA 19064 8,195.1870 10.32%
Elizabeth T. Donohue 125 Bonnie Lark
Chalfont, PA 18914 4,330.0650 5.45%
Joseph Meyers III & 4333 S. Kinzer Avenue
Lois W. Myers New Holland, PA 17557 4,083.6300 5.14%
</TABLE>
The Corporation believes that the shares held by the financial institutions
listed above were held by the persons indicated in accounts for their fiduciary,
agency, or custodial clients.
The name, address, amount and percentage of ownership of each officer and
director of the Corporation who owns more than 1% of the Income and Equity
Fund's outstanding Class A or Class C shares, and of all officers and directors
as a group, as of December 31, 2000, is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS AMOUNT PERCENTAGE
<S> <C> <C> <C>
INCOME AND EQUITY FUND(A)
L. Michael Haller 5924 Colodny Drive 4,304.1270 2.02%
Agoura Hills, CA 91301
Officers and Directors as a Group N/A 5,126.3070 2.41%
INCOME AND EQUITY FUND(C)
Officers and Directors as a Group N/A None None
</TABLE>
BALANCED FUND. The name, address, amount and percentage of ownership of each
person who owns of record or beneficially five percent or more of the Balanced
Fund's outstanding Class A and Class C shares as of December 31, 2000 are listed
below:
<TABLE>
<CAPTION>
NAME ADDRESS AMOUNT PERCENTAGE
<S> <C> <C> <C>
BALANCED FUND (A)
Donaldson, Lufkin & Jenrette P.O. Box 2052
Jersey City, NJ 07303 58,782.8140 15.06%
Charles Schwab Investment Account 101 Montgomery St.
San Francisco, CA 94104 141,621.4540 36.28%
BALANCED FUND (C)
15
<PAGE>
Samuel P. Axe Riddle Village 19,457.2210 6.40%
414 Hampton House
Media, PA 19063
</TABLE>
The Corporation believes that the shares held by the financial institutions
listed above were held by the persons indicated in accounts for their fiduciary,
agency, or custodial clients.
The name, address, amount and percentage of ownership of each officer and
director of the Corporation who owns more than 1% of the Balanced Fund's
outstanding Class A or Class C shares, and of all officers and directors as a
group, as of December 31, 2000, is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS AMOUNT PERCENTAGE
<S> <C> <C> <C>
BALANCED FUND (A)
Officers and Directors as a Group N/A Less than 1%
BALANCED FUND (C)
Thomas Brinker 115 Locust Avenue 3,339.1590 1.10%
Springfield, PA 19064
Officers and Directors as a Group N/A 3,339.1590 1.10%
</TABLE>
BACHE CAPITAL MANAGEMENT. The name, address and percentage of ownership of (i)
each director and officer of the Fund who owns of record or beneficially
securities of Bache Capital and (ii) each other person who owns of record or
beneficially ten percent or more of Bache Capital's securities are listed below:
<TABLE>
<CAPTION>
Name Address Percentage
---- ------- ----------
<S> <C> <C>
Stephen K. Bache 3 Berkshire Place 100%
La Canada, CA 91011
</TABLE>
Neither the Corporation, nor Pacific Global nor any officer or director of
either owns any shares of or have any other financial interest in Bache Capital.
PACIFIC GLOBAL. The name, address and percentage of ownership of (i) each
director and officer of the Fund who owns of record or beneficially securities
of Pacific Global and (ii) each other person who owns of record or beneficially
ten percent or more of Pacific Global's securities are listed below:
<TABLE>
<CAPTION>
Name Address Percentage
---- ------- ----------
<S> <C> <C>
Victoria Breen 603 West Ojai Avenue 3.48%
Ojai, CA 93023
Thomas Brinker One North Ormond Avenue 0.65%
Havertown, PA 19083
Thomas Hanson P.O. Box 30 8.71%
Santa Barbara, CA 93102
16
<PAGE>
George Henning 206 North Jackson St., Suite 301 39.12%
Glendale, CA 91206
Paul Henning 3521 Washington Street 0.17%
Columbus, IN 47203
Manabi Hirasaki P.O. Box 1447 12.31%
Camarillo, CA 93011
</TABLE>
Pursuant to private offerings in 1994 and 1996, Mr. Bache invested small amounts
in Pacific Global. Mr. Bache also owns shares of Pacific Global stock paid in
lieu of management fees waived by Hamilton & Bache in 1998, 1999 and 2000. Mr.
Bache owns 1.50% of the issued and outstanding shares of Pacific Global.
COSTS OF THE MEETING AND SOLICITATION
All costs associated with the Meeting, including the preparation of this Proxy
Statement and the solicitation of proxies, will be borne by the Funds.
Solicitation will be made primarily by mail, but also may be made by telephone,
facsimile, telegraph and/or personal contact of regular employees of the
Corporation or Pacific Global. The Funds will also reimburse brokers and other
nominees for their reasonable out-of-pocket expenses in communicating with the
person(s) for whom they hold shares of the Funds.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board does not know of any other matters to be presented at the Meeting
other than those described in this Proxy Statement. If other business should
properly come before the Meeting, it is the intention of the persons named in
the proxy to vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
As a general matter, the Corporation does not hold regular annual or other
meetings of shareholders. Any shareholder who wishes to submit proposals to be
considered at a special meeting of the Corporation's shareholders should send
such proposals to the Corporation at 206 North Jackson Street, Suite 301,
Glendale, California 91206, so as to be received a reasonable time before the
proxy solicitation for that meeting is made. Shareholder proposals that are
submitted in a timely fashion will not necessarily be included in the
Corporation's proxy materials. Inclusion of such proposals is subject to
limitations under the federal securities laws.
/s/ THOMAS H. HANSON
------------------------
Thomas H. Hanson
Secretary
Dated: January 16, 2001
IMPORTANT: SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO
WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT TO PACIFIC ADVISORS FUND INC. IMMEDIATELY.
17
<PAGE>
EXHIBIT A
FORM OF
CO-MANAGEMENT AGREEMENT
CO-MANAGEMENT AGREEMENT, made as of the __ day of ______, 2000, 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 BACHE CAPITAL MANAGEMENT, INC.,
a California corporation ("BCM").
WITNESSETH
----------
WHEREAS, the Corporation is engaged in business as an open-end investment
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 five series, the Balanced Fund, the Income and Equity Fund, the
Government Securities Fund, the Growth 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, BCM 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 Income and Equity Fund (the "Fund"), have entered into an Investment
Management Agreement dated as of October 16, 1992 (the "Investment Management
Agreement") pursuant to which PGIMC is authorized to act as sole investment
manager of the Corporation with respect to the Fund and, in its discretion, to
engage the services of a sub-adviser to provide investment advisory and other
services to the Fund; and
WHEREAS, PGIMC shall continue to provide investment management services to
the Fund pursuant to the Investment Management Agreement in addition to its
duties under this Agreement; and
WHEREAS, the Corporation proposes to engage BCM as co-manager
("Co-manager") of the Fund's assets and to authorize PGIMC to serve as
Co-manager along with BCM of the Fund's assets; and
WHEREAS, BCM and PGIMC are willing to perform co-management services for
the Fund upon the terms and conditions and for the compensation hereinafter set
forth;
18
<PAGE>
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. The Corporation hereby employs BCM to serve as Co-manager and
authorizes PGIMC to serve as Co-manager with respect to the assets of the Fund
and to perform the services hereinafter set forth. BCM and PGIMC hereby accept
such employment and authorization and agree for the compensation herein provided
to assume all obligations herein set forth and to bear all expenses of their
performance of such obligations (but no other expenses).
2. Subject to the supervision and control of the Corporation's Board of
Directors, BCM and PGIMC shall co-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 BCM and PGIMC. BCM and PGIMC shall jointly establish the overall
investment program for the management of the Fund's assets. BCM and PGIMC, 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, BCM and PGIMC shall jointly have the authority to make determinations
with respect to the investment and reinvestment of the assets of the Fund and to
take such steps as may be necessary to implement the same. Consistent with their
duties hereunder, BCM and PGIMC shall advise 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. BCM, shall regularly furnish such reports to PGIMC as it may request
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: BCM's economic outlook and investment research and
strategy of BCM; 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.
5. (a) BCM and PGIMC 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 BCM, PGIMC and the Corporation
("affiliated brokers or dealers"). All purchases and sales of portfolio
securities for the Fund placed with affiliated brokers or dealers shall be
executed in
19
<PAGE>
compliance with procedures established by the Corporation's Board of Directors.
When placing all orders, BCM and PGIMC shall use their best efforts to obtain
the best available price and most favorable execution for the Fund. BCM and
PGIMC shall use their 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. BCM or PGIMC shall send, by
facsimile or comparable means, copies of all portfolio transactions to the
Corporation's custodian on the date such portfolio transactions are executed.
BCM and PGIMC shall advise the Board of Directors of the Corporation of any fees
or payments of whatever type that may be possible for BCM or PGIMC or any of
their affiliates to receive in connection with the purchase or sale of
investment securities for the Fund.
(b) Subject to the appropriate policies, procedures, and/or
guidelines established by the Corporation's Board of Directors, BCM and PGIMC
may also effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if BCM and PGIMC determine
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 the overall
responsibilities of BCM and PGIMC with respect to the Fund and BCM'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) BCM and PGIMC shall promptly communicate to the Corporation's
Board of Directors such information relating to portfolio transactions as 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. BCM and PGIMC 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 BCM or PGIMC 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;
20
<PAGE>
(e) provide, at a cost to the Fund to be agreed upon from time to
time by the Corporation, BCM and PGIMC, persons, who may be employees of BCM,
PGIMC 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 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.
BCM may (at its cost except as contemplated by paragraph 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 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 BCM 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 BCM's overall responsibilities
with respect to the other accounts which it serves as investment manager.
7. BCM and PGIMC shall cooperate with and make available to the
Corporation and any agents engaged by the Corporation, their 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 under the Investment Management
Agreement and this Agreement PGIMC shall receive a fee calculated at the annual
rate of .40% on the first $100 million of the average daily net asset value of
the Fund, .37% of the next $100 million, .34% of the next $100 million, .31% of
the next $100 million, .28% of the next $100 million, and .25% of average daily
net asset value in excess of $500 million.
(b) As compensation for all services rendered by BCM under this
Agreement, the Corporation shall pay to BCM a co-management fee calculated at
the annual rate of .35% on the first $100 million of the average daily net asset
value of the Fund, .33% of the next $100 million, .31% of the next $100 million,
.29% of the next $100 million, .27% of the next $100 million, and .25% of
average daily net assess value in excess of $500 million.
21
<PAGE>
The co-management fee shall accrue on each calendar day, and the sum of the
daily fee accruals shall be paid monthly to BCM 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 co-management 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. The
co-management fee shall be payable through the date of termination of this
Agreement. BCM shall promptly reduce its co-management fee by the amount of any
commissions, tender and exchange offer solicitation fees, other fees, or similar
payments received by BCM, or any affiliated person of BCM, in connection with
the Fund's portfolio transactions, less the amount of any direct expenses
incurred by BCM, or any affiliated persons of BCM, in obtaining such
commissions, fees, or payments. Such "commissions" or "other fees" shall exclude
those charged by brokers or dealers affiliated with BCM, PGIMC and the
Corporation as referred to in paragraph 5(a). Such "tender and exchange offer
solicitation fees" shall exclude those received by BCM acting in the capacity of
manager for any such offer.
(c) BCM and PGIMC shall bear all expenses in connection with the
performance of their 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.
9. BCM and PGIMC 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 BCM and PGIMC shall have acted in good faith and with due care; and,
in any event, BCM and PGIMC shall be liable for their willful misfeasance, bad
faith, or negligence in the performance of their investment management 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 when it shall have been
approved by vote of the Fund's shareholders in accordance with the provision of
Section 15 of the 1940 Act and applicable state law. Unless sooner terminated as
hereinafter provided, this Agreement shall continue in effect through December
31, 2002. 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 shall be effective on a temporary interim basis
from the day and year first written above until the earlier of 150 days after
such date or until it shall have been approved or rejected by the Fund's
shareholders in accordance with the provisions of Section 15 of the 1940 Act and
applicable state law (the "temporary agreement period"). During the temporary
agreement period, BCM shall not be entitled to any compensation under this
Agreement prior to January 1, 2001. From and including January 1, 2001until the
end of the temporary agreement period, any compensation earned by BCM shall be
held in an interest bearing escrow account by the Fund's custodian. If this
Agreement is approved by the Fund's shareholders as provided above before the
end of the interim agreement period, then the amount in the escrow account
including interest shall be paid to BCM. Otherwise, this Agreement shall
terminate and BCM shall be paid
22
<PAGE>
the lesser of the amount in the escrow account including interest or any costs
incurred in performing the interim agreement plus interest earned on that amount
while in escrow.
(c) 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 the Fund, or (d) by BCM on sixty (60) days' prior
written notice to the Fund. This Agreement shall terminate automatically in the
event of its assignment, or upon termination of the Investment Management
Agreement between the Corporation and PGIMC.
(d) 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.
(e) In the event of termination of this Agreement, BCM shall promptly
return to the Corporation all records maintained by BCM with respect to the Fund
and BCM shall be free from any claim or retention of rights therein. BCM may
retain copies of such records that it maintains pursuant to the requirements of
the 1940 Act. BCM 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. BCM 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. BCM, PGIMC, and
the Corporation shall furnish to the other parties any documents and other
materials prepared for distribution which refer to the other party prior to use,
and each party shall have the right to limit use of such documents to which it
reasonably objects.
(f) Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid (a) if to BCM, to Bache Capital
Management, Inc., 3 Berkshire Place, La Canada, CA 91011; (b) if to PGIMC, to
Pacific Global Investment Management Company, 206 North Jackson Street, Suite
301, Glendale, CA 91206; 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 BCM 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 BCM 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
enforce in accordance with, the laws of the State of California.
23
<PAGE>
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.
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
------------------------------- -----------------------------------
ATTEST: BACHE CAPITAL MANAGEMENT, INC.
------------------------------- -----------------------------------
PACIFIC GLOBAL FUND, INC. d/b/a
ATTEST: PACIFIC ADVISORS FUND INC. ON BEHALF OF
THE INCOME AND EQUITY FUND
------------------------------- -----------------------------------
24
<PAGE>
EXHIBIT B
FORM OF
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, made as of the __ day of _________, 2000, 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 BACHE CAPITAL
MANAGEMENT, INC., a California corporation ("BCM ").
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 five series, the Balanced Fund, the Income and Equity Fund, the
Government Securities Fund, the Growth 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, BCM 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 Balanced Fund (the "Fund"), have entered into an Investment
Management Agreement dated as of October 16, 1992 (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 BCM as sub-adviser
("Sub-Adviser") to manage the Fund as permitted by the Investment Management
Agreement; and
WHEREAS, BCM 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:
25
<PAGE>
1. PGIMC hereby employs BCM 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. BCM 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, BCM 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 BCM of such further limitations
imposed by the Corporation. BCM shall establish the overall investment program
for the management of the Fund's assets. PGIMC shall assist in the formulation
and implementation of a continuing investment program for the management of the
Fund's assets. BCM 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, BCM shall each have the authority to make all
determinations with respect to the investment and reinvestment of the assets of
the Fund and to take such steps as may be necessary to implement the same. As an
initial matter, BCM shall make all determinations with respect to the purchase
or sale of investments of the Fund; provided, however, that PGIMC may from time
to time, upon five (5) days written notice to BCM, reassign or reallocate the
duties, as PGIMC deems necessary, appropriate, or desirable. Consistent with its
duties hereunder, BCM shall advise 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. BCM 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: BCM's economic outlook and investment research and strategy of BCM; 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.
26
<PAGE>
5. (a) BCM 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 BCM, PGIMC and the Corporation ("affiliated
brokers or dealers "). All purchases and sales of portfolio securities for the
Fund placed with affiliated brokers or dealers shall be placed in compliance
with procedures established by the Corporation's Board of Directors. When
placing such orders, BCM shall use its best efforts to obtain the best available
price and most favorable execution for the Fund. BCM 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. BCM shall send, by facsimile or comparable means, copies of all
portfolio transactions to the Corporation's custodian on the date such portfolio
transactions are executed. BCM shall advise the Board of Directors of the
Corporation of any fees or payments of whatever type that it may be possible for
BCM or any affiliate of BCM 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,
BCM may also effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if BCM 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 BCM's overall responsibilities
with respect to the Fund and BCM'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) BCM 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. BCM 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 BCM 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;
27
<PAGE>
(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 BCM, persons, who may be employees of PGIMC, BCM, 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.
BCM may (at its cost except as contemplated by paragraph 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 BCM, 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 BCM 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 BCM's overall responsibilities
with respect to the other accounts which it serves as investment manager.
7. BCM shall cooperate with and make available to PGIMC, the Corporation,
and any agents engaged by the Corporation, BCM'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 BCM under this
Agreement, PGIMC shall have the sole responsibility to pay to BCM a fee
calculated at the annual rate of .40% on the first $200 million of the average
daily net asset value of the Fund, .37% on the next $200 million, .34% of the
next $200 million, .31% of the next $200 million, .28% of the next $200 million
and .25% in excess of $1 billion of average daily net asset value.
28
<PAGE>
The sub-advisory fee shall accrue on each calendar day, and the sum of the daily
fee accruals shall be paid monthly to BCM 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. The
sub-advisory fee shall be payable through the date of termination.
BCM shall promptly reduce its fee by the amount of any commissions, tender and
exchange offer solicitation fees, other fees, or similar payments received by
BCM, or any affiliated person of BCM, in connection with the Fund's portfolio
transactions, less the amount of any direct expenses incurred by BCM, or any
affiliated persons of BCM, in obtaining such commissions, fees, or payments.
Such "commissions" or "other fees" shall exclude those charged by brokers or
dealers affiliated with BCM, PGIMC and the Corporation as referred to in
paragraph 5(a). Such "tender and exchange offer solicitation fees" shall exclude
those received by BCM acting in the capacity of manager for any such offer.
(b) BCM 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) BCM 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.
9. BCM 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 BCM shall have acted in good faith and with due care; and, in any event, BCM
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 affective when it shall have been
approved by vote of the Fund's shareholders in accordance with the provision of
Section 15 of the 1940 Act and applicable state law. Unless sooner terminated as
hereinafter provided, this Agreement shall continue in effect through December
31, 2002. 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 shall be effective on a temporary interim basis from the
day and year first written above until the earlier of 150 days after such date
or until it shall have been approved or rejected by the Fund's shareholders in
accordance with the provisions of Section 15 of the 1940
29
<PAGE>
Act and applicable state law (the "temporary agreement period"). During the
temporary agreement period, BCM shall not be entitled to any compensation under
this Agreement prior to January 1, 2001. From and including January 1, 2001until
the end of the temporary agreement period, any compensation earned by BCM shall
be held in an interest bearing escrow account by the Fund's custodian. If this
Agreement is approved by the Fund's shareholders as provided above before the
end of the interim agreement period, then the amount in the escrow account
including interest shall be paid to BCM. Otherwise, this Agreement shall
terminate and BCM shall be paid the lesser of the amount in the escrow account
including interest or any costs incurred in performing the interim agreement
plus interest earned on that amount while in escrow.
(c) 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 BCM, or (d) by BCM on sixty (60) days' prior written
notice to the Fund, provided, that if BCM 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 BCM's written
objection to such change, the termination by BCM 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.
(d) 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.
(e) In the event of termination of this Agreement, BCM shall promptly
return to the Corporation all records maintained by BCM with respect to the Fund
and BCM shall be free from any claim or retention of rights therein. BCM may
retain copies of such records that it maintains pursuant to the requirements of
the 1940 Act. BCM 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. BCM 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. BCM, PGIMC and the
Corporation shall furnish to the other parties any documents and other materials
prepared for distribution which refer to the other party prior to use and each
party shall have the right to limit use of such documents to which it reasonably
objects.
(f) Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid (a) if to BCM, to Bache Capital Management,
Inc., 3 Berkshire Place, La Canada, CA 91011, (b) if to PGIMC, to Pacific Global
Investment Management Company, 206 North Jackson Street, Glendale, CA 91206; and
(c) if to the Corporation, at the foregoing office of PGIMC.
30
<PAGE>
11. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of BCM 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 BCM 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.
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
------------------------------- -----------------------------------
President
ATTEST: BACHE CAPITAL MANAGEMENT, INC.
------------------------------- -----------------------------------
President
ATTEST: PACIFIC GLOBAL FUND, INC. d/b/a
PACIFIC ADVISORS FUND INC.
------------------------------- -----------------------------------
President
31
<PAGE>
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking previous proxies, hereby appoint(s) George A.
Henning and Thomas H. Hanson, or any one or more of them, attorney(s) with full
power of substitution in each, to vote all the shares of the Income and Equity
Fund, a separate series of Pacific Global Fund, Inc., d/b/a Pacific Advisors
Fund Inc. (the "Corporation"), which the undersigned is (are) entitled to vote
at the Special Meeting of Shareholders of the Income and Equity Fund to be
held at the offices of the Corporation, 206 North Jackson Street, Glendale,
California 91206, on February 28, 2001, at 9:00 a.m., and at any adjournment
thereof. All powers may be exercised by a majority of said proxy holders or
substitutes voting or acting, or, if only one votes and acts, then by that
one. Receipt of the Proxy Statement, dated __________________, is hereby
acknowledged. If not revoked, this proxy shall be voted to:
Approve the Co-Management Agreement by and among the Corporation, on behalf
of the Income and Equity Fund, Pacific Global Investment Management Company
and Bache Capital Management, Inc.;
For [ ] Against [ ] Abstain [ ]
THIS PROXY SHALL BE VOTED IN FAVOR OF (FOR) THE PROPOSAL IF NO SPECIFICATION IS
MADE ABOVE. AS TO ANY OTHER MATTER, SAID ATTORNEY(S) SHALL VOTE IN ACCORDANCE
WITH THEIR BEST JUDGMENT.
--------------- -----------------------------
Date Signature(s)
[Information regarding Acct. No. and Name to be provided by the Fund Company.]
--------------- -----------------------------
Account No. Name
NOTE: Signature(s) should agree with name(s) as printed
herein. Executors, Administrators, Trustees, etc.,
should so indicate.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
32
<PAGE>
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking previous proxies, hereby appoint(s) George A.
Henning and Thomas H. Hanson, or any one or more of them, attorney(s) with full
power of substitution in each, to vote all the shares of the Balanced Fund, a
separate series of Pacific Global Fund, Inc., d/b/a Pacific Advisors Fund
Inc. (the "Corporation"), which the undersigned is (are) entitled to vote at
the Special Meeting of Shareholders of the Balanced Fund to be held at the
offices of the Corporation, 206 North Jackson Street, Glendale, California
91206, on February 28, 2001, at 9:00 a.m., and at any adjournment thereof.
All powers may be exercised by a majority of said proxy holders or
substitutes voting or acting, or, if only one votes and acts, then by that
one. Receipt of the Proxy Statement, dated __________________, is hereby
acknowledged. If not revoked, this proxy shall be voted to:
Approve the Sub-Advisory Agreement by and among the Corporation, on behalf
of the Balanced Fund, Pacific Global Investment Management Company and
Bache Capital Management, Inc.;
For [ ] Against [ ] Abstain [ ]
THIS PROXY SHALL BE VOTED IN FAVOR OF (FOR) THE PROPOSAL IF NO SPECIFICATION IS
MADE ABOVE. AS TO ANY OTHER MATTER, SAID ATTORNEY(S) SHALL VOTE IN ACCORDANCE
WITH THEIR BEST JUDGMENT.
--------------- -----------------------------
Date Signature(s)
[Information regarding Acct. No. and Name to be provided by the Fund Company.]
--------------- -----------------------------
Account No. Name
NOTE: Signature(s) should agree with name(s) as printed
herein. Executors, Administrators, Trustees, etc.,
should so indicate.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
33
