<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
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
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PIMCO VARIABLE INSURANCE TRUST
(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.
[_] 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) Total 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:
- --------------------------------------------------------------------------------
<PAGE>
PACIFIC INVESTMENT MANAGEMENT COMPANY
PIMCO ADVISORS L.P.
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
January 12, 2000
Dear Contract Owner:
On behalf of the Board of Trustees of PIMCO Variable Insurance Trust (the
"Trust"), we are pleased to invite you to a special meeting of the shareholders
of the Trust to be held at 800 Newport Center Drive, 6th Floor, Newport Beach,
California 92660 on March 3, 2000 at 9:00 a.m., Pacific time.
As discussed in more detail in the enclosed proxy statement, Pacific
Investment Management Company ("PIMCO"), PIMCO Advisors L.P. ("PIMCO
Advisors"), Cadence Capital Management ("Cadence"), and NFJ Investment Group
("NFJ"), each an investment adviser or portfolio manager to portfolios of the
Trust ("Portfolios"), will undergo a "change in control" as a result of Allianz
of America, Inc. acquiring approximately 70% of the outstanding partnership
interests in PIMCO Advisors. PIMCO, Cadence and NFJ are each a subsidiary of
PIMCO Advisors. At the meeting, you will be asked to consider the following
proposals:
. Election of two Trustees to the Board of Trustees.
. Approval of new investment advisory contracts between the Trust and each
of PIMCO and PIMCO Advisors, and new portfolio management agreements
between PIMCO Advisors and each of Cadence and NFJ. Please see the
discussion of Proposal II for more details about the new advisory
arrangements.
. Approval of changes to each Portfolio's fundamental investment policies.
The changes are intended to simplify and modernize each Portfolio's
fundamental investment policies to enhance management's ability to manage
the Portfolio's assets efficiently in changing regulatory and investment
environments.
Your vote is important. After reviewing these proposals, your Board of
Trustees unanimously agreed that they are in the best interests of each
Portfolio's shareholders and voted to approve them, as more fully described in
the accompanying proxy statement. Now it is your turn to review the proposals
and vote. For more information about the issues requiring your vote, please
refer to the accompanying proxy statement.
No matter how many shares you own, your timely vote is important. If you are
not able to attend the meeting, then please complete, sign, date and mail the
enclosed proxy card(s) promptly.
Thank you in advance for your participation in this important event.
Sincerely,
/s/ WESLEY BURNS
R. Wesley Burns
Managing Director
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
For account information only call:
(888) 746-2688
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held March 3, 2000
----------------
To the Contract Owners of PIMCO Variable Insurance Trust:
Notice is hereby given that a special meeting of shareholders of the
currently operational portfolios (the "Portfolios") of the PIMCO Variable
Insurance Trust (the "Trust") will be held at 800 Newport Center Drive, 6th
Floor, Newport Beach, California 92660 on March 3, 2000 at 9:00 a.m., Pacific
time, or as adjourned from time to time (the "Meeting"), for the following
purposes:
I. To elect Trustees to the Board of Trustees of the Trust;
II. A. To approve a new investment advisory contract;
B. To approve a new portfolio management agreement (Equity Income,
Capital Appreciation, Mid-Cap Growth and Small-Cap Value Portfolios,
only);
III. To approve changes to fundamental investment policies; and
IV. To transact such other business as may properly come before the Meeting.
After careful consideration, the Trustees of the Trust unanimously approved
each of the proposals and recommend that shareholders vote "FOR" each
proposal.
The matters referred to above are discussed in detail in the proxy
statement attached to this notice. The Board of Trustees has fixed the close
of business on December 20, 1999 as the record date for determining
shareholders entitled to notice of and to vote at the Meeting. Each share of a
Portfolio is entitled to one vote with respect to proposals on which that
Portfolio's shareholders are entitled to vote, with fractional votes for
fractional shares. If you held shares of more than one Portfolio on the record
date, you will receive separate proxy cards for each Portfolio.
Regardless of whether you plan to attend the Meeting, PLEASE COMPLETE,
SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD(S) IN THE ENVELOPE
PROVIDED, SO THAT YOU WILL BE REPRESENTED AT THE MEETING. If you have returned
a proxy card and are present at the Meeting, you may change the vote specified
in the proxy at that time. However, attendance in person at the Meeting, by
itself, will not revoke a previously tendered proxy.
By Order of the Board of Trustees
Garlin G. Flynn, Secretary
Newport Beach, California
January 12, 2000
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY
BE. IN ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE
URGE YOU TO INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD(S).
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
For account information only call:
(888) 746-2688
----------------
PROXY STATEMENT
----------------
Special Meeting of Shareholders
To be held March 3, 2000
----------------
This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Trustees (the "Board" or "Trustees") of the PIMCO
Variable Insurance Trust (the "Trust") for use at a special meeting of
shareholders of the currently operational portfolios (the "Portfolios") of the
Trust to be held at 800 Newport Center Drive, 6th Floor, Newport Beach,
California 92660 on March 3, 2000 at 9:00 a.m., Pacific time, or as adjourned
from time to time (the "Meeting"), for the purposes set forth below. It is
anticipated that the first mailing of proxies and proxy statements to
shareholders will be on or about January 12, 2000.
Shareholder Reports. Shareholders can find important information about the
Portfolios in the annual report dated December 31, 1998 and the semi-annual
report dated June 30, 1999, each of which previously has been furnished to
shareholders. Shareholders may request another copy of these reports by
writing to the Trust at the above address, or by calling the telephone number
above.
The Board is soliciting proxies from shareholders of the Portfolios with
respect to the following proposals:
I. To elect Trustees to the Board of Trustees of the Trust;
II. A. To approve a new investment advisory contract;
B. To approve a new portfolio management agreement (Equity Income,
Capital Appreciation, Mid-Cap Growth and Small-Cap Value Portfolios,
only);
III. To approve changes to fundamental investment policies; and
IV. To transact such other business as may properly come before the Meeting.
<PAGE>
The following table shows the shareholders that are entitled to vote on each
proposal.
<TABLE>
<CAPTION>
Proposal
Proposal I II Proposal III
- ------------------------------------------------------------------------------
A B A B C D E
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
Short-Term Bond Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
Low Duration Bond Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
Real Return Bond Portfolio X X ^ X ^ X X X
- ------------------------------------------------------------------------------
Total Return Bond Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
Total Return Bond Portfolio II X X ^ X X X X X
- ------------------------------------------------------------------------------
High Yield Bond Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
Long-Term U.S. Government Bond
Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
Global Bond Portfolio X X ^ X ^ X X X
- ------------------------------------------------------------------------------
Foreign Bond Portfolio X X ^ X ^ X X X
- ------------------------------------------------------------------------------
Emerging Markets Bond Portfolio X X ^ X ^ X X X
- ------------------------------------------------------------------------------
Strategic Balanced Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
StocksPLUS Growth & Income Portfolio X X ^ X X X X X
- ------------------------------------------------------------------------------
Equity Income Portfolio X X X X X X X X
- ------------------------------------------------------------------------------
Capital Appreciation Portfolio X X X X X X X X
- ------------------------------------------------------------------------------
Mid-Cap Growth Portfolio X X X X X X X X
- ------------------------------------------------------------------------------
Small-Cap Value Portfolio X X X X X X X X
</TABLE>
2
<PAGE>
I. ELECTION OF TRUSTEES
Because of the transaction discussed below in Proposal II, the Board has
concluded that it is in the best interests of the Trust that at least 75% of
the Board members be Trustees who are not "interested persons," as that term
is defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
of the Trust or its investment advisers, Pacific Investment Management Company
("PIMCO") and PIMCO Advisors L.P. ("PIMCO Advisors"), or its portfolio
managers. To that end, at the Meeting, two Trustees who are not "interested
persons" of the Trust, the investment advisers, or the portfolio managers, and
who are recommended by the Board's Nominating Committee, are proposed for
election to the Trust's Board.
The Nominating Committee, composed of independent Trustees Messrs. Babcock,
Curtis, Kemp and Popejoy, is responsible for the selection and nomination of
candidates to serve as Trustees of the Trust. During the fiscal year ended
December 31, 1999 there was one meeting of the Nominating Committee, at which
there was 100% attendance.
The Nominating Committee, advised by special independent counsel, met on
December 1, 1999, to consider possible additional candidates to the Board. On
December 16, 1999, the Chairperson of the Nominating Committee reported to the
Board that the Nominating Committee approved the nominations of Mr. E. Philip
Cannon and Mr. J. Michael Hagan (the "Nominees") as Trustees, and recommended
to the Board that the Nominees be elected and that the nominations be
submitted to shareholders for approval.
In evaluating the Nominees, the Nominating Committee and the Board noted
that Mr. Cannon and Mr. Hagan have significant experience and the background
necessary to make them valuable additions to the Board as independent
Trustees. The Board also noted that Mr. Cannon currently serves on the board
of another investment company managed by PIMCO Advisors and its affiliates.
The Board currently includes six additional Trustees, none of whom are
standing for election at the Meeting. These six current Trustees, described
below, previously have been elected by shareholders and will continue to serve
on the Board following the Meeting. If the Nominees are elected at the
Meeting, there will be a total of eight Trustees on the Board, six of whom
will not be "interested persons" of the Trust or PIMCO.
The Nominees have indicated their willingness to serve as Trustees. The
Board knows of no reason why the Nominees would be unable to serve, but in the
event of any such unavailability, the proxies received will be voted for such
substituted nominee as the Board may recommend.
The persons named as proxies on the enclosed proxy card will vote your
shares for the election of the Nominees unless you withhold authority to vote
for the Nominees in your proxy. If elected by shareholders, the Nominees will
continue to serve as Trustees of the Trust until the next meeting of
shareholders, if any, called for the purpose of electing Trustees, unless
sooner succeeded as provided in the Trust's Trust Instrument. It is proposed,
and the Board recommends, that shareholders elect the Nominees.
3
<PAGE>
The following table sets forth certain information concerning the Nominees.
<TABLE>
<CAPTION>
Length of Principal Occupation(s)
Service Current Position During the Past Five
Name, Address and Age on the Board with the Trust Years
--------------------- ------------ ---------------- ------------------------
<C> <C> <C> <S>
E. Philip Cannon .............. Nominee None Proprietor, Cannon &
3838 Olympia Company, an affiliate of
Houston, Texas 77019 Inverness Management
Age 59 LLC, a private equity
investment firm; Trustee
of PIMCO Funds: Multi-
Manager Series.
Formerly, Headmaster,
St. John's School,
Houston, Texas; Trustee
of Cash Accumulation
Trust; General Partner,
J.B. Poindexter & Co.,
Houston, Texas, a
private equity
investment firm; and
Partner, Iberia
Petroleum Company, an
oil and gas production
company. Mr. Cannon was
a director of WNS Inc.,
a retailing company
which filed a petition
in bankruptcy within the
last five years.
J. Michael Hagan............... Nominee None Retired from Furon
6 Merced Company (manufacturing)
San Clemente, California 92673 where he served as
Age 60 Chairman and CEO from
June 1991 to November
1999, and in other
capacities since 1967.
He was previously
associated with Ross
Laboratories and
Standard Oil of
California. Mr. Hagan
serves on the Boards of
Directors for Ameron
International,
(manufacturing) Freedom
Communications, and
Remedy Temp (staffing).
He is also a member of
the Board of Regents at
Santa Clara University,
the Board of Taller San
Jose, and the Board of
Trustees of the South
Coast Repertory Theater.
The following table sets forth certain information concerning each of the
current Trustees.
<CAPTION>
Length of Principal Occupation(s)
Service Current Position During the Past Five
Name, Address and Age on the Board with the Trust Years
--------------------- ------------ ---------------- ------------------------
<C> <C> <C> <S>
Brent R. Harris*............... 8/97-Present Chairman of Managing Director,
840 Newport Center Drive the Board and PIMCO; Board of
Newport Beach, California 92660 Trustee Governors, Investment
Age 40 Company Institute;
Chairman and Director,
PIMCO Commercial
Mortgage Securities
Trust, Inc.; Chairman
and Trustee, PIMCO
Funds: Pacific
Investment Management
Series.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Length of Principal Occupation(s)
Service Current Position During the Past Five
Name, Address and Age on the Board with the Trust Years
--------------------- ------------ ---------------- ------------------------
<C> <C> <C> <S>
R. Wesley Burns*............... 8/97-Present President and Managing Director,
840 Newport Center Drive Trustee PIMCO; President and
Newport Beach, California 92660 Director, PIMCO
Age 40 Commercial Mortgage
Securities Trust, Inc.;
President and Trustee,
PIMCO Funds: Pacific
Investment Management
Series. Formerly
Executive Vice
President, PIMCO;
Executive Vice
President, PIMCO Funds:
Multi-Manager Series.
Guilford C. Babcock............ 8/97-Present Trustee Associate Professor of
1500 Park Place Finance, University of
San Marino, California 91108 Southern California;
Age 68 Director, PIMCO
Commercial Mortgage
Securities Trust, Inc.;
Trustee, PIMCO Funds:
Pacific Investment
Management Series;
Director, Growth Fund of
America and Fundamental
Investors Fund of the
American Funds;
Director, Good Hope
Medical Foundation.
Vern O. Curtis................. 8/97-Present Trustee Private Investor;
14158 N.W. Bronson Creek Drive Director, PIMCO
Portland, Oregon 97229 Commercial Mortgage
Age 65 Securities Trust, Inc.;
Trustee, PIMCO Funds:
Pacific Investment
Management Series;
Director, Public Storage
Business Parks, Inc., a
Real Estate Investment
Trust; Director, Fresh
Choice, Inc. (restaurant
company). Formerly,
charitable work, The
Church of Jesus Christ
of Latter-Day Saints.
Thomas P. Kemp................. 8/97-Present Trustee Private Investor;
1141 Marine Drive Director, PIMCO
Laguna Beach, California 92651 Commercial Mortgage
Age 69 Securities Trust, Inc.;
Trustee, PIMCO Funds:
Pacific Investment
Management Series;
Formerly Co-Chairman,
U.S. Committee to Assist
Russian Reform;
Director, Union
Financial Corp. (savings
and loan); Senior
Consultant, World Cup
1994 Organizing
Committee.
William J. Popejoy............. 8/97-Present Trustee President, Pacific
29 Chatham Court Capital Investors;
Newport Beach, California Chairman, PacPro (vinyl
92660 assembly products;
Age 61 formerly Western
Printing); Director,
PIMCO Commercial
Mortgage Securities
Trust, Inc.; Trustee,
PIMCO Funds: Pacific
Investment Management
Series. Formerly
Director, California
State Lottery; Chief
Executive Officer,
Orange County,
California.
</TABLE>
- --------
* Mr. Harris and Mr. Burns are "interested persons" of the Trust (as that term
is defined in the 1940 Act) because of their affiliation with PIMCO.
5
<PAGE>
During the fiscal year ended December 31, 1999, there were five meetings of
the Board. There was 100% attendance by Trustees at the meetings of the Board
throughout the period.
As of December 31, 1999, the Trustees and officers of the Trust, as a
group, owned less than one percent of the outstanding shares of each Portfolio
in the aggregate. Messrs. Curtis and Hagan formerly held units issued by PIMCO
Advisors.
Board of Trustees--Committees. In addition to the Nominating Committee, the
Trust has a standing Audit Committee that currently consists of all of the
independent Trustees (Messrs. Babcock, Curtis, Kemp and Popejoy). The Audit
Committee reviews both the audit and non-audit work of the Trust's independent
public accountant, submits a recommendation to the Board as to the selection
of an independent public accountant, and reviews generally the maintenance of
the Trust's records and the safekeeping arrangements of the Trust's custodian.
During the fiscal year ended December 31, 1999, the Audit Committee met three
times. Each member of the Audit Committee attended 100% of such meetings
during the period in which he was a member of the Audit Committee.
Remuneration of Trustees and Officers. The Trust pays each Trustee who is
not an "interested person" of the Trust an annual retainer of $4,000 and
$1,500 for each Board meeting attended in person and $250 for each meeting
attended telephonically, plus reimbursement of related expenses. In addition,
a Trustee serving as a Committee Chair, other than those affiliated with PIMCO
or its affiliates, receives an additional annual retainer of $500. For the
fiscal year ended December 31, 1999, the Trustees who are not "interested
persons" of the Trust, as a group received compensation in the amount of
$41,786.
The following table sets forth the compensation paid to each of the current
Trustees of the Trust for the fiscal year ended December 31, 1999. Trustees
who are "interested persons" of the Trust do not receive any compensation from
the Trust.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation from
Name from Trust Trust and Fund Complex*
---- ---------------------- -----------------------
<S> <C> <C>
Guilford C. Babcock........... $10,250 $78,750
Vern O. Curtis................ $11,036 $82,619
Thomas P. Kemp ............... $10,250 $78,750
William J. Popejoy............ $10,250 $78,750
</TABLE>
- --------
* Fund complex includes the Trust, PIMCO Funds: Pacific Investment Management
Series, a registered open-end management investment company, and PIMCO
Commercial Mortgage Securities Trust, Inc., a registered closed-end
management investment company. For their services as Trustees of the PIMCO
Funds: Pacific Investment Management Series, the Trustees listed above
receive an annual retainer of $45,000 plus $3,000 for each Board of Trustees
meeting attended in person ($500 for each such meeting attended
telephonically), an annual retainer of $1,500 for a Committee Chairmanship,
plus reimbursement of related expenses. For the fiscal year ended March 31,
1999, these Trustees, as a group, received compensation in the amount of
$234,297 from PIMCO Funds: Pacific Investment Management Series.
For their services as Directors of PIMCO Commercial Mortgage Securities
Trust, Inc., the Trustees listed above received an annual retainer of $6,000
plus $1,000 for each Board of Directors meeting attended in person ($500 for
each such meeting attended telephonically), an annual retainer of $500 for a
Committee Chairmanship, plus reimbursement of related expenses. For the
fiscal year ended December 31, 1999, these Trustees, as a group, received
compensation in the amount of $42,786 from PIMCO Commercial Mortgage
Securities Trust, Inc.
Material Interest of Trustees. Messrs. Burns and Harris each has a direct
material interest in the transaction described below in Proposal II, pursuant
to which Allianz of America, Inc. ("Allianz of America") will acquire majority
ownership of PIMCO Advisors and certain of its affiliates. Messrs. Burns and
Harris, as managing directors of PIMCO, the investment adviser and
administrator of certain of the Portfolios, will receive employment-related
compensation and other benefits as a result of the transaction. For a complete
discussion of the transaction, see Proposal II.
6
<PAGE>
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE NOMINEES UNDER PROPOSAL I. UNMARKED PROXIES WILL BE SO VOTED.
II. APPROVAL OF NEW INVESTMENT
ADVISORY CONTRACTS AND PORTFOLIO MANAGEMENT AGREEMENTS
Introduction. PIMCO, located at 840 Newport Center Drive, Suite 300,
Newport Beach, California 92660, has served as investment adviser of the PIMCO
Money Market Portfolio, Short-Term Bond Portfolio, Low Duration Bond
Portfolio, Real Return Bond Portfolio, Total Return Bond Portfolio, Total
Return Bond Portfolio II, High Yield Bond Portfolio, Long-Term U.S. Government
Bond Portfolio, Global Bond Portfolio, Foreign Bond Portfolio, Emerging
Markets Bond Portfolio, Strategic Balanced Portfolio, and StocksPLUS Growth
and Income Portfolio since their respective inceptions. PIMCO currently serves
as adviser of these Portfolios pursuant to an investment advisory contract
dated December 31, 1997, as supplemented on May 26, 1998 and February 23,
1999, (the "PIMCO Contract").
PIMCO Advisors, located at 800 Newport Center Drive, 6th Floor, Newport
Beach, California 92660 has served as investment adviser to the PIMCO Equity
Income Portfolio, Capital Appreciation Portfolio, Mid-Cap Growth Portfolio and
Small-Cap Value Portfolio since their respective inceptions. PIMCO Advisors
currently serves as adviser to these Portfolios pursuant to an investment
advisory contract between PIMCO Advisors and the Trust dated May 26, 1998 (the
"PIMCO Advisors Contract"). For each of these Portfolios, PIMCO Advisors has
engaged subsidiary partnerships of PIMCO Advisors to serve as portfolio
managers ("Portfolio Managers"). Cadence Capital Management ("Cadence"),
located at Exchange Place, 53 State Street, Boston, Massachusetts 02109, under
the management and control of PIMCO Advisors, manages the PIMCO Capital
Appreciation and Mid-Cap Growth Portfolios pursuant to a portfolio management
agreement between PIMCO Advisors and Cadence dated May 26, 1998 (the "Cadence
Contract"). NFJ Investment Group ("NFJ"), located at 2121 San Jacinto, Suite
1840, Dallas, Texas, 75201, under the management and control of PIMCO
Advisors, manages the PIMCO Equity Income and Small-Cap Value Portfolios
pursuant to a portfolio management agreement between PIMCO Advisors and NFJ
dated May 26, 1998 (the "NFJ Contract").
In addition, PIMCO serves as the administrator of the Portfolios pursuant
to an administration agreement between PIMCO and the Trust, dated December 31,
1997, as supplemented on May 26, 1998 and February 23, 1999 (the
"Administration Agreement"). Pursuant to an agreement dated January 14, 1997,
as supplemented on June 18, 1997, April 1, 1998, October 26, 1998, April 1,
1999 and September 1, 1999, PIMCO has engaged PIMCO Advisors, as sub-
administrator, to provide certain administrative services to the PIMCO Equity
Income Portfolio, Capital Appreciation Portfolio, Mid-Cap Growth Portfolio and
Small-Cap Value Portfolio.
PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, Connecticut
06902, a wholly-owned subsidiary of PIMCO Advisors, serves as the distributor
of the Portfolios.
PIMCO is a subsidiary partnership of PIMCO Advisors. The general partners
of PIMCO Advisors are PIMCO Partners, G.P. ("Partners G.P.") and PIMCO
Advisors Holdings L.P. ("PAH"). Partners G.P. is a general partnership between
PIMCO Holding LLC, a Delaware limited liability company and an indirect
wholly-owned subsidiary of Pacific Life Insurance Company ("Pacific Life"),
and PIMCO Partners LLC ("Partners LLC"), a California limited liability
company controlled by the current managing directors and two former managing
directors of PIMCO (the "Managing Directors"). PAH is a publicly-traded
Delaware limited partnership and its primary source of income is its
proportionate share of the net income of PIMCO Advisors. Partners G.P. is the
sole general partner of PAH. The address of all of the above entities, with
the exception of Pacific Life, is 800 Newport Center Drive, Newport Beach,
California 92660. Pacific Life is located at 700 Newport Center Drive, Newport
Beach, California 92660.
7
<PAGE>
PIMCO, PIMCO Advisors, Cadence and NFJ (collectively, the "Advisers") will
undergo a "change in control" as a result of the consummation of the
transaction described below, resulting in the assignment, and therefore
automatic termination of the PIMCO Contract, the PIMCO Advisors Contract, the
Cadence Contract, and the NFJ Contract (collectively the "Advisory
Contracts"). It is proposed that the Advisers continue to serve as investment
advisers and portfolio managers of the Portfolios following completion of the
transaction. Therefore, in connection with the transaction and as required by
the 1940 Act, shareholders of each Portfolio are being asked in Proposal II to
approve new investment advisory and portfolio management contracts, on behalf
of each Portfolio which are substantially identical (except for certain
reduced advisory fees) to the corresponding Advisory Contracts (collectively,
the "New Advisory Contracts"). The Board recommends that shareholders approve
the New Advisory Contracts. If the New Advisory Contracts are approved, PIMCO
will continue to serve as administrator under a new Administration Agreement.
Forms of the New Advisory Contracts and Administration Agreement are attached
as Appendix A.
Information about the Advisers, their directors and principal executive
officer, the officers of the Trust, the Advisers' other investment company
clients, and the Advisers' brokerage policies is presented in Appendix B.
Description of the Transaction. On October 31, 1999, PIMCO Advisors, PAH,
Partners G.P., certain of their affiliates, Allianz of America, and certain
other parties named therein entered into an Implementation and Merger
Agreement (the "Merger Agreement") pursuant to which Allianz of America will
acquire majority ownership of PIMCO Advisors (the "Transaction").
The Merger Agreement provides for the acquisition of PAH by Allianz of
America through a merger of a subsidiary of Allianz of America with and into
PAH. In the merger, each of the outstanding limited partnership and general
partner units in PAH will be converted into the right to receive cash in an
amount per unit equal to $38.75, subject to a downward adjustment if the
aggregate annualized investment advisory and subadvisory fees for all accounts
managed by PIMCO Advisors and its subsidiaries, expressed as a "revenue run-
rate," declines (excluding market-based changes) below a specified level (the
"Unit Transaction Price"). In no event will the Unit Transaction Price be
reduced below $31.00 per unit. As a result of the merger, PAH will become an
indirect wholly-owned subsidiary of Allianz of America.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire for cash additional partnership interests in PIMCO
Advisors, bringing its ownership interest in PIMCO Advisors to approximately
70%, including the approximately 44% interest held through PAH. As part of the
Transaction, a subsidiary of Allianz of America will acquire Partners G.P.
through an acquisition of the managing general partner interest in Partners
G.P. from PIMCO Partners LLC (the managing general partner of Partners G.P.)
for approximately $5.5 million and of the member interests in Partners G.P.
that are indirectly owned by Pacific Life. Pacific Life, which through
subsidiaries owns approximately a 30% interest in PIMCO Advisors, will retain
an indirect interest in PIMCO Advisors following the closing. As a result of
the Transaction, Allianz of America will control PIMCO Advisors, having
acquired approximately 70% of the outstanding partnership interests in PIMCO
Advisors for a total consideration of approximately $3.3 billion, while the
remainder will continue to be indirectly owned by Pacific Life.
In connection with the closing, Allianz of America will enter into a
put/call arrangement for the possible disposition of Pacific Life's indirect
interest in PIMCO Advisors. The put option held by Pacific Life will allow it
to require Allianz of America, on the last business day of each calendar
quarter following the closing of the Transaction, to purchase at a formula-
based price all of the PIMCO Advisors units owned directly or indirectly by
Pacific Life. The call option held by Allianz of America will allow it,
beginning January 31, 2003 or upon a change in control of Pacific Life, to
require Pacific Life to sell or cause to be sold to Allianz of America, at the
same price, all of the PIMCO Advisors units owned directly or indirectly by
Pacific Life.
The Transaction is expected to be completed by the end of the first quarter
of 2000, although there is no assurance that the Transaction will be
completed. Completion of the Transaction is subject to a number of conditions,
including, among others, (i) the approval of the public unitholders of PAH,
(ii) the receipt of certain regulatory approvals, and (iii) PIMCO Advisors'
revenue run-rate (excluding market-based changes) for all
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accounts managed by PIMCO Advisors and its subsidiaries being at least 75% of
the September 30, 1999 revenue run-rate amount. Approval of the New Advisory
Contracts by the shareholders of the Portfolios will help satisfy condition
(iii) described in the preceding sentence by maintaining the Advisers'
advisory relationship with the Portfolios. If the Transaction is not completed
for any reason, the Advisory Contracts will remain in effect. In the event the
New Advisory Contracts are not approved by the Portfolios' shareholders and
the Transaction is completed, the Board will consider appropriate action.
Post-Transaction Structure and Operations. Upon completion of the
Transaction, PIMCO Advisors and its subsidiaries, including PIMCO, Cadence and
NFJ, will be controlled by Allianz of America. Allianz of America is a holding
company that owns several insurance and financial service companies and is a
subsidiary of Allianz AG. Allianz of America will control PIMCO Advisors, and
its subsidiaries, through its managing member interest in Pacific-Allianz
Partners LLC ("PacPartners LLC"), which will be the sole general partner of
PIMCO Advisors following the Transaction. While Allianz of America will
control PacPartners LLC, Pacific Life will hold a portion of its continuing
interest in PIMCO Advisors through an interest in PacPartners LLC. Allianz of
America, through subsidiaries, will be the managing member of PacPartners LLC
and will have full authority and control over all actions taken by PacPartners
LLC as the general partner of PIMCO Advisors, provided that Pacific Life's
consent is required for certain extraordinary actions.
Operationally, PIMCO is expected to remain independent and to lead the
global fixed income investment efforts of Allianz AG. In this regard, PIMCO
will coordinate its activities with Allianz Asset Management ("AAM"), a
subsidiary of Allianz AG that coordinates global Allianz asset management
activities. To permit the provision of advisory services to non-U.S. clients
of Allianz AG, PIMCO personnel, including personnel with portfolio management
responsibility for certain of the Portfolios, may become affiliated with AAM
or other Allianz-controlled advisory firms. PIMCO also may call upon the
research capabilities and resources of Allianz AG and its advisory affiliates
in connection with providing investment advice to its clients. PIMCO Advisors
is expected to become a unit of AAM. PIMCO Advisors and its subsidiaries,
including PIMCO, are currently expected to continue to operate in the United
States under their existing names.
Both William S. Thompson, Jr., the current Chief Executive Officer of
PIMCO, and William H. Gross, the current Chief Investment Officer of PIMCO,
will have roles on the Executive Committee of AAM, with Mr. Thompson serving
as the Executive Committee's Deputy Chairman. Messrs. Thompson and Gross will
enter into employment contracts with a term of seven years following the
Transaction. Other key employees of PIMCO and PIMCO Advisors, including the
Managing Directors, have also contractually agreed to remain with PIMCO and
PIMCO Advisors, for significant periods following the Transaction.
Description of Allianz and Its Affiliates. Allianz AG, the parent of
Allianz of America, is a publicly traded German Aktiengesellschaft (a German
publicly-traded company) which, together with its subsidiaries, comprises the
world's second largest insurance group as measured by premium income. Allianz
AG is a leading provider of financial services, particularly in Europe, and is
represented in 68 countries world-wide through subsidiaries, branch and
representative offices, and other affiliated entities. The Allianz group
currently has assets under management of more than $390 billion, and in its
last fiscal year wrote approximately $50 billion in gross insurance premiums.
After completion of the Transaction, the Advisers and the Allianz group
combined will have over $650 billion in assets under management. Allianz AG's
address is: Koniginstrasse 28, D-80802, Munich, Germany.
Significant institutional shareholders of Allianz AG currently include,
among others, Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and
HypoVereinsbank. Following completion of the Transaction, Dresdner Bank AG and
Deutsche Bank AG, as well as certain broker-dealers that might be deemed to be
affiliated with these entities, such as Bankers Trust Company, BT Alex Brown,
Inc., Deutsche Bank Securities, Inc. and Dresdner Kleinwort Benson North
America LLC (collectively, the "Affiliated Brokers"), may be considered to be
affiliated persons of the Advisers. Once the Transaction is completed, absent
an SEC
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exemption or other relief, the Portfolios generally would be precluded from
effecting principal transactions with the Affiliated Brokers, and their
ability to purchase securities being underwritten by an Affiliated Broker or
to utilize any Affiliated Brokers for agency transactions would be subject to
restrictions. The Advisers do not believe that applicable restrictions on
transactions with the Affiliated Brokers described above will materially
adversely affect their ability, post-closing, to provide services to the
Portfolios, the Portfolios' ability to take advantage of market opportunities,
or the Portfolios' overall performance.
Anticipated Impact of the Transaction on Management of the
Portfolios. PIMCO Advisors and PIMCO have received structural and contractual
protections as terms of the Transaction that ensure operational autonomy and
continuity of management. PIMCO Advisors and PIMCO are confident that Allianz
AG is committed to the people and process that have led to their success over
the years. Accordingly, the Transaction should have no immediate impact, other
than as already noted above, on the management of the Portfolios or the
Advisers' capacity to provide the type, quality, or quantity of services that
they currently provide, and the Portfolios should continue to receive the same
high quality of service after the Transaction. As discussed below, however,
PIMCO believes that the Transaction offers the potential to enhance
significantly its future ability to deliver quality investment advisory
services.
The Benefits of the Transaction. PIMCO anticipates that the Transaction
with Allianz AG will benefit PIMCO and the Portfolios in a variety of ways,
including the following:
. PIMCO's investment expertise will be enhanced because of the business
experience and relationships that Allianz AG has built around the globe,
particularly in Europe. PIMCO's access to European markets and business
opportunities will be greatly enhanced by Allianz AG's experience and
relationships. The combined global resources of PIMCO and Allianz AG will
allow PIMCO to take advantage of the growth in international markets and
the explosive potential for premier money managers in the global
marketplace.
. Allianz AG has a team of fixed income professionals in place that
currently manages more than $100 billion in assets. Integration of these
professionals and assets with PIMCO provides an excellent opportunity for
furthering PIMCO's global fixed income expertise.
. The rotation of many of PIMCO's key investment professionals through
international offices and overseas personnel through PIMCO's offices will
result in more seasoned professionals with global experience.
. The combination will provide additional career opportunities for PIMCO
professionals, furthering PIMCO's ability to attract and retain the best
people.
. Allianz AG has a stated growth strategy to be among the top five
providers of its services in the world's key markets, which is a key
factor in PIMCO's decision to proceed with the Transaction. The combined
entity will be the sixth largest investment manager in the world. The
Transaction will significantly increase assets under PIMCO's management,
and will offer the opportunity for continued growth in the future. Strong
relative investment results depend on a sound, disciplined investment
process and effective execution; size can be a benefit to both.
Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe
harbor for an investment adviser to an investment company or any affiliated
persons to receive any amount or benefit in connection with a "change in
control" of the investment adviser as long as two conditions are satisfied.
First, an "unfair burden" must not be imposed on investment company clients of
the adviser as a result of the transaction, or any express or implied terms,
conditions or understandings applicable to the transaction. The term "unfair
burden" (as defined in the 1940 Act) includes any arrangement during the two-
year period after the transaction whereby the investment adviser (or
predecessor or successor adviser), or any "interested person" (as defined in
the 1940 Act) of any such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from such an investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or from any other person in connection with the purchase or sale of
securities or other property to, from or on behalf of such investment company.
The Board has been advised that PIMCO Advisors and PIMCO are aware of no
circumstances arising from the Transaction that might result in an unfair
burden being imposed on the
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Trust. The second condition of Section 15(f) is that during the three-year
period after the transaction, at least 75% of each such investment company's
board of directors must not be "interested persons" (as defined in the 1940
Act) of the investment adviser (or predecessor or successor adviser). Allianz
of America and each of the other parties to the Agreement have agreed to use
their reasonable best efforts to ensure compliance with Section 15(f) as it
applies to the Transaction during the applicable time periods.
The Contracts. The Advisory Contracts. The Advisers have served as
investment advisers/portfolio managers to the Portfolios of the Trust since
each Portfolio's commencement of investment operations. Each Advisory Contract
has been submitted for approval by shareholders of the applicable Portfolio
prior to the Portfolio's commencement of operations. If the Transaction is not
consummated, PIMCO Advisors, Cadence, NFJ, and PIMCO will continue to serve as
advisers for all of the Portfolios under the current Advisory Contracts.
Under the terms of the Advisory Contracts, the applicable Adviser is
responsible for making investment decisions and placing orders for the
purchase and sale of a Portfolio's investments directly with the issuers or
with brokers or dealers selected by it at its discretion. The Advisers also
furnish to the Board, which has overall responsibility for the business and
affairs of the Portfolios, periodic reports on the investment performance of
the Portfolios.
The Advisers are obligated to manage the Portfolios in accordance with
applicable laws and regulations. The investment advisory services of the
Advisers to the Portfolios are not exclusive under the terms of the Advisory
Contracts. The Advisers are free to, and do, render investment advisory
services to others.
Consistent with the requirements of the 1940 Act, each Advisory Contract
provides that the applicable Adviser generally is not liable to the Portfolio
for any mistake in judgment, or otherwise, except by reason of willful
misfeasance, bad faith or gross negligence in the performance of the Advisor's
duties or by reason of its reckless disregard of its obligations and duties
under the Advisory Contract.
Each Advisory Contract may be terminated by the Portfolio without penalty
upon 60 days' notice by the Board or by a vote of the holders of a majority of
the Portfolio's outstanding shares, or upon 60 days' notice by the Adviser. As
noted above, the Advisory Contracts terminate automatically in the event of
their "assignment" (as defined in the 1940 Act).
Information about investment advisory fee rates paid to the Advisers and
the administrative fees paid to PIMCO, including aggregate investment advisory
fees and administrative fees, by each Portfolio during the fiscal year ended
December 31, 1999, is set forth in Appendix C.
The New Advisory Contracts. The New Advisory Contracts are substantially
similar to the Advisory Contracts, except for the level of fees paid under the
New Advisory Contracts. By the closing of the Transaction, the Trust intends
to adopt a multiple class structure under which it will offer both
Institutional and Administrative Class Shares. Under the New Advisory
Contracts, shareholders of the Portfolios will pay lower investment advisory
fees than the Portfolios currently pay under the Advisory Contracts. Each
Portfolio will also adopt an administrative services plan (the "Services
Plan"), under which shareholders of Administrative Class Shares will pay a
service fee for various administrative services provided or procured by PIMCO.
Following the adoption of the multiple class structure, current shareholders
will own Administrative Class shares of the Portfolios. Total Portfolio
operating expenses for Administrative Class shares of each Portfolio will be
no greater than the current operating expenses paid by the Portfolio. Current
Portfolio operating expenses, as well as the Portfolio operating expenses as
proposed under the multiple class structure, are set forth in Appendix C. The
Trust intends to implement the multiple class structure regardless of whether
the Transaction is consummated.
As noted previously, the Advisers do not anticipate that the Transaction
will cause any reduction in the quality or types of services now provided to
the Portfolios or have any adverse effect on the Advisers' ability to fulfill
their obligations to the Portfolios. No change is anticipated in the
investment philosophies and practices
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currently followed by the Portfolios. The New Advisory Contract between the
Trust and PIMCO recognizes that PIMCO may, from time to time, seek research
assistance and rely on other investment management resources of its affiliated
companies, and the Portfolios will disclose that a portion of the advisory or
administrative fees received by PIMCO from the Portfolios may be paid to those
affiliates in return for such services provided. These arrangements will have
no impact on PIMCO's continuing responsibility for the management of the
Portfolios and will not cause any increase in the overall fees or expenses
borne by the Portfolios.
At the December 1, 1999 meeting of the Board, the New Advisory Contracts
were approved unanimously by the Board, including all of the Trustees who are
not parties to the New Advisory Contracts or "interested persons" (as defined
in the 1940 Act) of any such party (other than as Trustees of the Trust). The
New Advisory Contracts, as approved by the Board, are submitted for approval
by the shareholders of the Portfolios.
If the New Advisory Contracts are approved by shareholders, they will take
effect immediately upon the closing of the Transaction. The New Advisory
Contracts will remain in effect for two years from the date they take effect,
and, unless earlier terminated, will continue from year to year with respect
to each Portfolio thereafter, provided that each such continuance is approved
annually with respect to each Contract and Portfolio (i) by the Board or by
the vote of a majority of the outstanding voting securities of the particular
Portfolio, and, in either case, (ii) by a majority of the Trustees who are not
parties to the New Advisory Contracts or "interested persons" of any such
party (other than as Trustees of the Trust).
The Administration Agreement. Under the terms of the Administration
Agreement, PIMCO provides administrative services to each Portfolio, including
administrative and clerical functions, certain shareholder servicing functions
and supervision of the services rendered to the Portfolios by other persons,
including the custodian and transfer agent. In approving the New Advisory
Contracts, the Board has considered that PIMCO receives fees for the services
it provides under the Administration Agreement, and may receive fees for
services provided to or procured for Administrative Class Shares under the
Services Plan.
The Administration Agreement may be terminated by a Portfolio without
penalty upon 60 days' notice by the Board or by a vote of the holders of a
majority of the Portfolio's outstanding shares, or upon 60 days' notice by
PIMCO. The Administration Agreement terminates automatically in the event of
its "assignment" (as defined in the 1940 Act). A new Administration Agreement,
substantially identical to the current Administration Agreement, will be
implemented upon completion of the Transaction.
Interests of Certain Persons in the Transaction. The Managing Directors,
each of whom is a member of Partners LLC, will receive new employment and
consulting agreements. The initial term of the employment agreements will be
five years from the closing of the Transaction (seven years for Messrs. Gross
and Thompson). Each Managing Director will receive an annual salary, and will
be entitled to participate in PIMCO's Non-Qualified Profit Sharing Plan and
Class B Unit Purchase Plan, as well as the PIMCO Advisors Retention Plan for
Executives of PIMCO.
Under PIMCO's current profit sharing plan, the Managing Directors and other
executive employees of PIMCO share in a pool equal to 45% of the adjusted net
profit of PIMCO. After the Transaction, the profit sharing plan will be
amended to reduce the profit sharing percentage from 45% to 30% of adjusted
net profit over a five-year period. Under the amended profit sharing plan, the
pool from which the profits are calculated will include profits from certain
other fixed income advisers owned by Allianz AG and its affiliates. For the
first two years after the Transaction, the profit sharing pool will be
guaranteed at least $10 million per year from PIMCO's management of insurance
assets from affiliates owned by Allianz AG.
Under the Class B Unit Purchase Plan, participants will be able to purchase
Class B Units of PIMCO, which, in the aggregate, will entitle the holders to
distributions equal to 15% of the adjusted net profit of PIMCO. The PIMCO
Advisors Retention Plan for Executives provides fixed and variable retention
arrangements for each of
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the Managing Directors and other key employees of PIMCO. The 14 Managing
Directors of PIMCO who were managing directors on the date of the Merger
Agreement will in the aggregate receive retention payments of $85.8 million
per year for each of the five years following the Transaction, subject to
continued employment.
In addition to the foregoing, pursuant to 1994 Employment Termination
Agreements, PIMCO Holding LLC must pay to the current and two former Managing
Directors who are parties to those contracts noncompete payments equal to
distributions on, or sales proceeds of, an aggregate of 17,402,107 Class A
units of limited partnership in PIMCO Advisors. Eight of the current Managing
Directors--Messrs. Gross, Hague, Harris, Meiling, Muzzy, Podlich, Powers and
Thompson--have agreed to amend their 1994 Employment Termination Agreements.
Under the amendments, these eight Managing Directors will receive payments in
satisfaction of the noncompete payments due under the 1994 Employment
Termination Agreements. Payments will be made 84% in cash and 16% in stock of
Allianz AG, the parent of Allianz of America, with an assumed value of
$273.99 per share, the average trading price for the stock of Allianz AG for
the 30 days prior to October 4, 1999, the date of public announcement of
discussions between Allianz AG and PIMCO Advisors. Two of the eight current
Managing Directors, who are not full-time employees of PIMCO but who will
continue as consultants, will receive their payments solely in cash. The
aggregate payment at the closing of the Transaction to the eight current
Managing Directors whose 1994 Employment Termination Agreements will be
amended will have a value of $603.6 million (based on 15,575,835 Advisors
Class A Units and a price of $38.75 per unit).
Upon completion of the Transaction, all outstanding unit options under the
1998 Unit Incentive Plan, whether exercisable or not, will be cancelled and
terminated and will represent the right to receive a cash payment equal to the
excess of the Unit Transaction Price over the exercise price per unit of the
option, together with interest on such amount at 8% per annum through the date
such payment is made. The Managing Directors hold unit option awards for an
aggregate of 2,080,000 Class A units of PIMCO Advisors, at an average exercise
price of $16.13 per unit, which will result in payments of approximately $47
million in the aggregate at the closing of the Transaction, based on a Unit
Transaction Price of $38.75. The Managing Directors, as well as certain
executive officers of PIMCO, will also participate in the Deferred
Compensation Plan, under which Class A units of PIMCO Advisors held in trust
under the plan will be exchanged by the plan's trustee for cash in an amount
per unit equal to the Unit Transaction Price. Any unvested account balances
reflecting discount
investment or reinvestment of deferred compensation will vest. At the closing
of the Transaction, 193,252 Class A units of PIMCO Advisors, having a value of
$7,488,515, based on a Unit Transaction price of $38.75, attributable to
invested subaccounts of the Managing Directors under the Deferred Compensation
Plan will vest.
Upon completion of the Transaction, Mr. Harris will enter into an
employment agreement with PIMCO for an initial term of five years, beginning
January 1, 2000, with automatic renewal for successive two-year periods. Mr.
Harris will receive an annual salary and bonus, and will be eligible to
participate in certain benefit plans and programs. In addition, pursuant to a
new PIMCO Advisors LP Transition and Retention Plan, Mr. Harris will receive a
retention payment of $6 million per year for five years, conditioned on
continued employment with PIMCO. Additionally, approximately 8,661 (as of
November 30, 1999) units of PIMCO Advisors ("PA Units") attributable to Mr.
Harris' unvested account balance with PIMCO Advisors Executive Deferred
Compensation Plan will fully vest and the PA Units owned by that Plan will be
exchanged for cash at the Unit Transaction Price (estimated to be $38.75) for
an aggregate payment of $335,614. Options for 230,000 PA Units previously
granted to Mr. Harris pursuant to PIMCO Advisors 1998 Unit Incentive Plan will
be converted into the right to receive cash for the difference between the
exercise price for these options (which is $13.53) and the Unit Transaction
Price (for an aggregate payment of approximately $5,800,600).
Upon completion of the Transaction, Mr. Burns will enter into an employment
agreement with PIMCO for an initial term of five years, beginning January 1,
2000, with automatic renewal for successive two-year periods. Mr. Burns will
receive an annual salary and bonus, and will be eligible to participate in
certain benefit plans and programs. In addition, pursuant to a new PIMCO
Advisors LP Transition and Retention Plan, Mr. Burns will receive a retention
payment of $700,000 per year for five years, conditioned on continued
employment with PIMCO. Additionally, approximately 4,474 (as of November 30,
1999) PA Units attributable to Mr. Burns' unvested account balance with PIMCO
Advisors Executive Deferred Compensation Plan will fully vest and the
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PA Units owned by that Plan will be exchanged for cash at the Unit Transaction
Price (estimated to be $38.75) for an aggregate payment of $173,368. Options
for 80,000 PA Units previously granted to Mr. Burns pursuant to PIMCO Advisors
1998 Unit Incentive Plan will be converted into the right to receive cash for
the difference between the exercise price for these options (which averages
$27.2338) and the Unit Transaction Price (for an aggregate payment of
$921,300).
Separately, Messrs. Harris and Burns each has an interest of less than 6%
and 1%, respectively, in PIMCO Partners LLC, which owns 142,480 PA Units
(which would have in the aggregate a value of approximately $5,521,100 at the
Unit Transaction Price).
Certain executive officers of PIMCO will also receive additional benefits
resulting from the Transaction. Any options for units of PIMCO Advisors held
by these persons will be converted to a right to receive the difference
between the exercise price for such options and the Unit Transaction Price,
together with interest on such amount at 8% per annum through the date such
payment is made. In addition, certain officers of the Trust who are executive
officers of PIMCO Advisors will be eligible to receive payments during the
five year period following the Transaction pursuant to employment retention
plans.
As a result of the direct and indirect interests in the Transaction and in
PIMCO and its affiliates, including any employment arrangements with PIMCO and
its affiliates, each of the Managing Directors and executive officers of PIMCO
identified in Appendix B may be deemed to have a substantial interest in
shareholder approval of the New Advisory Contract.
Evaluation by the Board of Trustees. The Board, advised by special
independent counsel, has determined that, in approving the New Advisory
Contracts on behalf of the Portfolios, the Trust can best assure itself that
the services currently provided to the Portfolios by the Advisers, their
officers, and employees will continue without interruption after the
Transaction. The Board believes that, like the Advisory Contracts, the New
Advisory Contracts will enable the Portfolios to obtain high quality services
at a cost that is appropriate, reasonable, and in the best interests of each
Portfolio and its shareholders.
In determining whether it was appropriate to approve the New Advisory
Contracts and to recommend approval to shareholders, the Board, including the
Trustees who are not parties to the New Advisory Contracts or interested
persons of such parties, considered various materials and representations
provided by the Advisers, including information concerning compensation and
employment arrangements to be implemented in connection with the Transaction,
and considered a report provided by Allianz AG, and was advised by independent
legal counsel with respect to these matters.
Information considered by the Trustees included, among other things, the
following: (1) the Advisers' representation that the same persons responsible
for management of the Portfolios currently are expected to continue to manage
the Portfolios under the New Advisory Contracts, thus helping to ensure
continuity of management; (2) the compensation to be received by the Advisers
under the New Advisory Contracts is lower than the compensation paid under the
Advisory Contracts, which the Board previously has determined to be fair and
reasonable; (3) the Advisers' representation that they will not seek to
increase the rate of advisory fees paid by the Portfolios for a period of at
least two years following the Transaction; (4) the commonality of the terms
and provisions of the New Advisory Contracts with the terms of the Advisory
Contracts; (5) representations made by PIMCO concerning the potential impact
of affiliated brokerage relationships on the Advisers' ability to provide
services to the Portfolios, and on the Portfolios' ability to engage in
portfolio transactions; (6) the representations by PIMCO and Allianz AG that
the integration of Allianz AG's and the Advisers' operations could produce
benefits to shareholders through economies of scale, expansion of PIMCO's
investment expertise through the addition of Allianz AG fixed income
investment business expertise and global relationships, the expansion of
PIMCO's investment research capabilities, and the ability to enhance the
quality of services provided to shareholders; (7) the nature and quality of
the services rendered by the Advisers under the Advisory Contracts; (8) the
fairness of the compensation payable to the Advisers under the Advisory
Contracts; (9) the results achieved by the Advisers for the Portfolios; and
(10) the high quality of the personnel, operations, financial condition,
investment management capabilities, methodologies, and performance of the
Advisers.
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Based upon its review, the Board determined that, by approving the New
Advisory Contracts, the Portfolios can best be assured that services from the
Advisers will be provided without interruption. The Board also determined that
the New Advisory Contracts are in the best interests of each Portfolio and its
shareholders. Accordingly, after consideration of the above factors, and such
other factors and information it considered relevant, the Board unanimously
approved the New Advisory Contracts and voted to recommend its approval by
each Portfolio's shareholders.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE NEW ADVISORY CONTRACTS AS PROVIDED UNDER PROPOSAL
II. UNMARKED PROXIES WILL BE SO VOTED.
III. APPROVAL OF CHANGES TO
FUNDAMENTAL INVESTMENT POLICIES
The 1940 Act requires an investment company to adopt certain fundamental
investment policies that can be changed only by a shareholder vote. In the
past, fundamental policies were adopted by the Trust on behalf of the
Portfolios in order to reflect regulatory, business or industry conditions
that were in effect at the time the particular action was taken. Because of
the opportunity afforded by this Meeting, the Board has reviewed each
Portfolio's fundamental policies with the goal of simplifying, modernizing and
making consistent to the extent possible the fundamental policies of the
Portfolios. This Proposal seeks shareholder approval of changes that are
intended to accomplish that goal.
The proposed changes to each Portfolio's fundamental policies are discussed
in detail below. Except for the policy on borrowing as discussed below, none
of the proposed policies materially differs from the respective Portfolio's
current comparable policy. Each Portfolio's proposed policies with respect to
the concentration of investments, borrowing, the issuance of senior
securities, and lending differ from the current policies of each Portfolio in
that the requirements of the 1940 Act are not described in detail. Therefore,
the new policies that govern each Portfolio would be determined by reference
to the provisions of the 1940 Act, the rules thereunder, and applicable
interpretations of the SEC or its staff, rather than the express terms of the
policies.
The Board believes that simplifying the Portfolios' fundamental
restrictions will enhance management's ability to manage the Portfolios'
assets efficiently in changing regulatory and investment environments, and
permit management and the Board to review and monitor investment policies more
easily. In addition, the proposed changes to the fundamental investment
restrictions of the Portfolios will assist the Portfolios in making required
regulatory filings in a more efficient and cost-effective manner. The proposed
changes in fundamental restrictions will allow each Portfolio greater
investment flexibility to respond to future investment opportunities. The
Board does not anticipate, however, that the changes, individually or in the
aggregate, will result in a material change in the level of investment risk
associated with an investment in each Portfolio.
The text and a summary description of each proposed change to each
Portfolio's fundamental restrictions are set forth below. The current
fundamental investment policies for each Portfolio that correspond to the
proposed fundamental investment policies are set forth in Appendix D. If
approved by the Portfolios' shareholders at the Meeting, the proposed changes
to the Portfolios' fundamental restrictions will be adopted by each Portfolio.
The Portfolios' Statement of Additional Information will be revised to reflect
those changes as soon as practicable following the Meeting. If the
shareholders of a Portfolio fail to approve any proposed fundamental policy,
the current policy (if any) will remain in effect. Approval of the proposed
fundamental policies with respect to a Portfolio requires the affirmative vote
of a majority of the outstanding voting securities of the Portfolio.
Shareholders of each Portfolio will be asked to vote on each proposed
fundamental policy separately on the enclosed proxy card.
a. Concentration (All Portfolios). The Portfolios' current policy on
industry concentration prohibits the purchase of securities if it would result
in more than 25% of the market value of a Portfolio's total assets being
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invested in securities of one or more issuers having their principal business
activities in the same industry. The current policy does not apply to
investments in U.S. Government securities and, in the case of the Money Market
Portfolio, investments in securities or obligations of U.S. banks.
The Board recommends that shareholders vote to replace the current
fundamental policy on concentration with the following fundamental policy:
Each Portfolio may not concentrate its investments in a particular
industry, as that term is used in the Investment Company Act of 1940, as
amended, and as interpreted, modified, or otherwise permitted by regulatory
authority having jurisdiction, from time to time (except that the Money
Market Portfolio may concentrate its investments in securities or
obligations issued by U.S. banks).
While the 1940 Act does not define what constitutes "concentration" in an
industry, the staff of the SEC takes the position that investment of more than
25% of a Portfolio's assets in an industry constitutes concentration. If a
Portfolio's fundamental policy prohibits the Portfolio from concentrating in
an industry, the Portfolio may not invest more than 25% of its assets in the
applicable industry unless it discloses the specific conditions under which it
will change its concentration policy. Each Portfolio is permitted to adopt
reasonable definitions of what constitutes an industry, or it may use standard
classifications promulgated by the SEC, or some combination thereof. Because
each Portfolio may create its own reasonable industry classifications, the
Board believes that it is not necessary to include such matters in the
fundamental policy of a Portfolio. The proposed concentration policy will
retain the exception that excludes the Money Market Portfolio investment in
securities or obligations issued by U.S. banks, which is common among money
market funds.
b. Diversification (Only the following Portfolios: Money Market, Short-Term
Bond, Low Duration Bond, Total Return Bond, Total Return Bond II, High Yield
Bond, Long-Term U.S. Government Bond, Strategic Balanced, StocksPLUS Growth
and Income, Equity Income, Capital Appreciation, Mid-Cap Growth and Small-Cap
Value (each a "Diversified Portfolio")). Under the current diversification
policy, each Diversified Portfolio, with respect to 75% of the value of its
total assets, may not purchase more than 10% of the voting securities of any
one issuer or invest more than 5% of the value of its total assets in the
securities of any one issuer, with an exception for investments in U.S.
Government securities.
Currently, the restrictions pertaining to diversification are contained in
two separate fundamental policies. The Board recommends that the Diversified
Portfolios' current fundamental policies on diversification be consolidated
and replaced with the following fundamental investment restriction:
Each Portfolio may not, with respect to 75% of the Portfolio's total
assets, purchase the securities of any issuer, except securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, if, as a result, (i) more than 5% of the Portfolio's
total assets would be invested in the securities of that issuer, or (ii)
the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
The proposed diversification policy does not differ in substance from the
current diversification policies, but serves to simplify and combine the
Diversified Portfolio's current policies into a single, uniform fundamental
policy.
c. Borrowing and Senior Securities (All Portfolios). Under its current
fundamental policy on borrowing and senior securities, each Portfolio may not
borrow money, issue senior securities, or pledge, mortgage or hypothecate its
assets, except that the Portfolio may (i) borrow from banks or enter into
reverse repurchase agreements, provided that the Portfolio maintains asset
coverage of 300%, and (ii) enter into certain transactions on derivative
instruments, including options, futures, or options on futures.
To simplify and modernize each Portfolio's current fundamental policy on
borrowing and the issuance of senior securities, the Board recommends that the
shareholders vote to approve the following fundamental policy:
Each Portfolio may not borrow money or issue any senior security, except as
permitted under the Investment Company Act of 1940, as amended, and as
interpreted, modified, or otherwise permitted by regulatory authority
having jurisdiction, from time to time.
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The primary purpose of the proposed change is to standardize the
restrictions and conform them to the current regulatory requirements and the
evolving market environment. Reverse repurchase agreement transactions and
industry derivative instruments are now permitted, and would be permitted
under the proposed policy. The 1940 Act requires borrowings to have 300% asset
coverage, which requirement would, therefore, remain unchanged under the
proposed policy. Although each Portfolio would not be limited to borrowing for
temporary or emergency purposes, each Portfolio would nevertheless be subject
to the 1940 Act's coverage requirements. In addition, subject to the receipt
of any necessary regulatory approval and Board authorization, the Portfolios
may borrow money directly from certain of the other Portfolios.
The proposed policy will also allow each Portfolio to issue senior
securities to the full extent permitted under the 1940 Act. Although the
definition of a "senior security" involves complex statutory and regulatory
concepts, a senior security is generally an obligation of a Portfolio that has
a claim to the Portfolio's assets or earnings that takes precedence over the
claims of the Portfolio's shareholders. The 1940 Act generally prohibits
mutual funds from issuing any senior securities with limited exceptions;
however, under current SEC staff interpretations, mutual funds are permitted
to engage in certain types of transactions that might be considered "senior
securities" as long as certain conditions are satisfied. The Portfolios
currently engage, and would engage, in transactions that could be considered
to involve "senior securities" only in accordance with applicable regulatory
requirements under the 1940 Act.
Adoption of the proposed policy is not expected to affect materially the
operation of the Portfolios, and the Board does not anticipate that the
proposed fundamental policy will change the level of investment risk
associated with an investment in the Portfolios. However, adoption of the
proposed policies will allow the Portfolios to respond to legal, regulatory
and market developments that may make the use of permissible borrowings and
the issuance of senior securities advantageous to the Portfolios and their
shareholders.
d. Loans (All Portfolios). The current fundamental policy on loans for each
Portfolio prohibits the making of loans, except loans of portfolio securities,
entry into repurchase agreements, and the purchase of debt obligations, to the
extent these transactions are consistent with the Portfolio's investment
objectives and policies. The Board recommends that the shareholders vote to
replace the Portfolios' current fundamental policies with the following
fundamental investment policy:
Each Portfolio may not make loans, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted, modified, or otherwise
permitted by regulatory authority having jurisdiction, from time to time.
The proposed policy, unlike the current policy, does not specify the
particular types of lending in which each Portfolio is permitted to engage;
instead, the proposed policy permits each Portfolio to lend only in a manner
and to an extent in accordance with applicable law. Subject to the receipt of
any necessary regulatory approval and Board authorization, each Portfolio may
enter into certain lending arrangements that would benefit the Portfolio and
its shareholders, including interfund lending agreements under which certain
of the Portfolios could lend money directly to the other Portfolios. The
proposed policy would provide the Portfolios with greater flexibility and
maximize each Portfolio's lending capabilities, thereby allowing the
Portfolios to respond more effectively to regulatory, industry and market
developments.
e. Investments in Other Investment Companies (All Portfolios). The Board
recommends that shareholders vote to adopt the following fundamental
investment policy for each Portfolio:
Notwithstanding any other fundamental investment policy or limitation, it
is a fundamental policy of each Portfolio that it may elect to pursue its
investment objective by investing in one or more underlying investment
companies or vehicles that have substantially similar investment
objectives, policies and limitations as the Portfolio.
The proposed fundamental policy will permit each Portfolio to adopt a
"master/feeder" structure whereby one or more funds (the "feeder funds")
invest all of their assets in another fund (the "master fund"). While
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feeder funds incur their own expenses and bear their pro rata share of the
master fund's expenses, the master/feeder structure has the potential, under
certain circumstances, to minimize administration and investment costs through
achievement of economies of scale and lowered transaction costs, and to
maximize the possibility of gaining a broader investor base. Currently, none
of the Portfolios intend to establish a master/feeder structure; however, the
Board recommends that each Portfolio's shareholders adopt the proposed policy
that would permit this structure in the event the Board determines to approve
a master/feeder structure as being in the best interests of Portfolio
shareholders. The proposed fundamental policy would also give each Portfolio
flexibility to invest in other investment companies to the extent permitted by
the 1940 Act.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
OF EACH PORTFOLIO VOTE "FOR" EACH PROPOSED CHANGE TO THE PORTFOLIO'S
FUNDAMENTAL INVESTMENT POLICIES AS SET FORTH IN THIS PROPOSAL III. UNMARKED
PROXIES WILL BE SO VOTED.
IV. OTHER BUSINESS
The Trustees do not know of any matters to be presented at the Meeting
other than those set forth in this proxy statement. If other business should
properly come before the Meeting, proxies will be voted in accordance with the
judgment of the persons named in the accompanying proxy.
VOTING INFORMATION
Proxy Solicitation. The costs of the Meeting, including the solicitation of
proxies, will be paid by PIMCO Advisors and Allianz of America. The principal
solicitation will be by mail, but proxies also may be solicited by telephone,
telegraph, the Internet or personal interview by officers or agents of the
Trust. Management Information Services Corp. has been retained to assist with
proxy solicitation activities. The Trust will forward to record owners proxy
materials for any beneficial owners that such record owners may represent.
Shareholder Voting. Shareholders of record at the close of business on
December 20, 1999 (the "Record Date") are entitled to notice of, and to vote
at, the Meeting. Each shareholder is entitled to one vote for each full share
and an appropriate fraction of a vote for each fractional share held.
As of the Record Date, the following number of shares of the Portfolios
representing the corresponding number of votes, were outstanding:
<TABLE>
<CAPTION>
Number of Shares
Portfolio Outstanding (Votes)
--------- --------------------
<S> <C>
Money Market Portfolio.................................. 3,326,475
Short-Term Bond Portfolio............................... 302,423
Low Duration Bond Portfolio............................. 524,976
Real Return Bond Portfolio.............................. 304,222
Total Return Bond Portfolio............................. 346,312
Total Return Bond Portfolio II.......................... 519,484
High Yield Bond Portfolio............................... 16,089,409
Long-Term U.S. Government Bond Portfolio................ 763,454
Foreign Bond Portfolio.................................. 549,787
StocksPLUS Growth and Income Portfolio.................. 15,767,813
Capital Appreciation Portfolio.......................... 300,000
Mid-Cap Growth Portfolio................................ 300,000
Small-Cap Value Portfolio............................... 300,000
</TABLE>
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As of December 31, 1999, the persons owning of record or beneficially 5% or
more of the indicated Portfolios are set forth in Appendix E.
Insurance companies that use shares of the Portfolios as funding media for
their variable insurance contracts will vote shares of the Portfolios held by
each of their separate accounts in accordance with instructions received from
owners of the variable insurance contracts. An insurance company also will
vote shares of the Portfolios held in each such separate account for which it
has not received timely instructions in the same proportion as it votes shares
held by that separate account for which it has received instructions. An
insurance company whose separate account invests in the Portfolios will vote
shares held by its general account and its subsidiaries in the same proportion
as other votes cast by all of its separate accounts in the aggregate.
Shareholders and variable insurance contract owners permitted to give
instructions, and the number of shares for which such instruction may be given
to be voted at the Meeting will be determined as of the Record Date.
Timely, properly executed proxies will be voted as instructed by
shareholders. A shareholder may revoke his or her proxy at any time prior to
its exercise by written notice addressed to the Secretary of the PIMCO
Variable Insurance Trust at 840 Newport Center Drive, Suite 300, Newport
Beach, California 92660 or by voting in person at the Meeting. However,
attendance in person at the Meeting, by itself, will not revoke a previously
tendered proxy.
The presence in person or by proxy of the holders of one-third of the
outstanding shares of each Portfolio, or one-third of the outstanding shares
of the Trust, is required to constitute a quorum at the Meeting. Shares held
by shareholders present in person or represented by proxy at the Meeting will
be counted both for the purposes of determining the presence of a quorum and
for calculating the votes cast on the issues before the Meeting.
Proxies that reflect abstentions or broker "non-votes" (that is, shares
held by brokers or nominees as to which (a) instructions have not been
received from the beneficial owner or other persons entitled to vote and (b)
the brokers or nominees do not have discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. Assuming the presence of a
quorum, abstentions and broker non-votes have the effect of a negative vote on
each proposal. Pursuant to the rules and policies of the New York Stock
Exchange (the "Exchange"), members of the Exchange may vote on certain of the
proposals to be considered at the meeting without instructions from the
beneficial owners of the Portfolios' shares.
In the event that a quorum is present at the Meeting but sufficient votes
to approve any proposal are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies or to obtain the vote required for approval of one or more
proposals. Any such adjournment will require the affirmative vote of a
majority 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
which they are entitled to vote FOR the proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST the
proposal against any such adjournment. A shareholder vote may be taken prior
to any adjournment of the Meeting on any proposal for which there is
sufficient votes for approval, even though the Meeting is adjourned as to
other proposals.
Voting. To vote, shareholders may sign and mail the proxy card received
with the proxy statement or attend the Meeting in person.
Required Vote. Shareholders of the Portfolios vote together on Proposal I,
separately by Portfolio on Proposals II and III, and as necessary on the other
proposals. Approval of Proposal I requires the vote of shareholders owning of
record a plurality of the shares of the Trust present at the Meeting, if a
quorum is present. Approval of Proposals II and III each requires the vote of
a "majority of the outstanding voting securities" entitled to vote on the
proposal, as defined in the 1940 Act, which means the vote of 67% or more of
the voting securities entitled to vote on the proposal that are present at the
Meeting if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or the vote of more than 50% of the outstanding
voting securities entitled to vote on the proposal, whichever is less.
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<PAGE>
Shareholder Proposals. The Trust does not hold regular shareholders'
meetings. Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholders' meeting should send their written
proposals to the Secretary of the Trust at the address set forth on the cover
of this proxy statement. Proposals must be received a reasonable time prior to
the date of a meeting of shareholders to be considered for inclusion in the
proxy materials for a meeting. Timely submission of a proposal does not,
however, necessarily mean that the proposal will be included. Persons named as
proxies for any subsequent shareholders' meeting will vote in their discretion
with respect to proposals submitted on an untimely basis.
To ensure the presence of a quorum at the Meeting, prompt execution and
return of the enclosed proxy card(s) is requested. A self-addressed, postage-
paid envelope is enclosed for your convenience.
By Order of the Board of Trustees
Garlin G. Flynn, Secretary
January 12, 2000
Newport Beach, California
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<PAGE>
APPENDIX A
FORM OF
INVESTMENT ADVISORY CONTRACT
PIMCO Variable Insurance Trust
840 Newport Center Drive
Newport Beach, California 92260
, 2000
[Name]
840 Newport Center Drive
Newport Beach, California 92260
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
[ ] (the "Adviser") as follows:
1. The Trust is an open-end investment company which currently has 17
separate investment portfolios, [ ] of which are subject to this agreement:
[Names of Portfolios] (the "Portfolios"). Additional investment portfolios may
be established in the future. This Contract shall pertain to the Portfolios
and to such additional investment portfolios as shall be designated in
Supplements to this Contract, as further agreed between the Trust and the
Adviser. The Trust engages in the business of investing and reinvesting the
assets of each Portfolio in the manner and in accordance with the investment
objective and restrictions applicable to that Portfolio as specified in the
currently effective Prospectus (the "Prospectus") for the Trust included in
the registration statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"1940 Act") and the Securities Act of 1933 ("1933 Act"). Copies of the
documents referred to in the preceding sentence have been furnished to the
Adviser. Any amendments to those documents shall be furnished to the Adviser
promptly. Pursuant to a Distribution Contract, as amended (the "Distribution
Contract"), between the Trust and PIMCO Funds Distribution Company (the
"Distributor"), the Trust has employed the Distributor to serve as principal
underwriter for the shares of beneficial interest of the Trust. Pursuant to an
Administration Agreement ("Administration Agreement") between the Trust and
the Adviser, the Trust has also retained the Adviser to provide the Trust with
administrative and other services.
2. The Trust hereby appoints the Adviser to provide the investment advisory
services specified in this Contract and the Adviser hereby accepts such
appointment.
3. (a) The Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this contract and (ii) provide all services, equipment and
facilities necessary to perform its obligations under this Contract. The
Adviser may from time to time seek research assistance and rely on investment
management resources available to it through its affiliated companies, but in
no case shall such reliance relieve the Adviser of any of its obligations
hereunder, nor shall the Trust be responsible for any additional fees or
expenses hereunder as a result.
(b) The Trust shall be responsible for all of its expenses and
liabilities, including compensation of its Trustees who are not affiliated
with the Adviser, the Distributor or any of their affiliates; taxes and
governmental fees; interest charges; fees and expenses of the Trust's
independent accountants and legal counsel; trade association membership dues;
fees and expenses of any custodian (including maintenance of books and
accounts and calculation of the net asset value of shares of the Trust),
transfer agent, registrar and dividend disbursing agent of the Trust; expenses
of issuing, selling, redeeming, registering and qualifying for sale shares of
beneficial interest in the Trust; expenses of preparing and printing share
certificates, prospectuses and reports to shareholders or other appropriate
recipients, notices, proxy statements and reports to regulatory agencies; the
cost of office supplies, including stationery; travel expenses of all
officers, Trustees and employees; insurance
A-1
<PAGE>
premiums; brokerage and other expenses of executing portfolio transactions;
expenses of shareholders' or variable insurance contract holders' meetings;
organizational expenses; and extraordinary expenses. Notwithstanding the
foregoing, the Trust may enter into a separate agreement, which shall be
controlling over this contract, as amended, pursuant to which some or all of
the foregoing expenses of this Section 3(b) shall be the responsibility of the
other party or parties to that agreement.
4. (a) The Adviser shall provide to the Trust investment guidance and
policy direction in connection with the management of the Portfolios,
including oral and written research, analysis, advice, and statistical and
economic data and information.
Consistent with the investment objectives, policies and restrictions
applicable to the Trust and the Portfolios, the Adviser will determine the
securities and other assets to be purchased or sold by each Portfolio and will
determine what portion of each Portfolio shall be invested in securities or
other assets, and what portion, if any, should be held uninvested.
The Trust will have the benefit of the investment analysis and research,
the review of current economic conditions and trends and the consideration of
long-range investment policy generally available to investment advisory
clients of the Adviser. It is understood that the Adviser will not use any
inside information pertinent to investment decisions undertaken in connection
with this Contract that may be in its possession or in the possession of any
of its affiliates, nor will the Adviser seek to obtain any such information.
(b) The Adviser also shall provide to the officers of the Trust
administrative assistance in connection with the operation of the Trust and
the Portfolios, which shall include (i) compliance with all reasonable
requests of the Trust for information, including information required in
connection with the Trust's filings with the Securities and Exchange
Commission and state securities commissions, and (ii) such other services as
the Adviser shall from time to time determine to be necessary or useful to the
administration of the Trust and the Portfolios.
(c) As manager of the assets of the Portfolios, the Adviser shall make
investments for the account of the Portfolios in accordance with the Adviser's
best judgment and within the investment objectives, policies, and restrictions
set forth in the Prospectus, the 1940 Act and the provisions of the Internal
Revenue Code relating to regulated investment companies that serve as
underlying investment media of variable insurance contracts, subject to policy
decisions adopted by the Trust's Board of Trustees.
(d) The Adviser shall furnish to the Trust's Board of Trustees periodic
reports on the investment performance of the Trust and the Portfolios and on
the performance of its obligations under this Contract and shall supply such
additional reports and information as the Trust's officers or Board of
Trustees shall reasonably request.
(e) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of a Portfolio as well as other of its
clients, the Adviser, to the extent permitted by applicable law, may aggregate
the securities to be so sold or purchased in order to obtain the best
execution of the order or lower brokerage commissions, if any. The Adviser may
also on occasion purchase or sell a particular security for one or more
clients in different amounts. On either occasion, and to the extent permitted
by applicable law and regulations, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Adviser in the manner it considers to be the most equitable and consistent
with its fiduciary obligations to the Trust and to such other customers.
(f) The Adviser may cause a Portfolio to pay a broker which provides
brokerage and research services to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker might have
charged. Such higher commissions may not be paid unless the Adviser determines
in good faith that the amount paid is reasonable in relation to the services
received in terms of the particular transaction or the Adviser's overall
responsibilities to the Trust and any other of the Adviser's clients.
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5. (a) The Adviser shall immediately notify the Trust in the event (1) that
the Securities and Exchange Commission has censured the Adviser; placed
limitations upon its activities, functions or operations; suspended or revoked
its registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that any Portfolio has ceased to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
or (3) upon having a reasonable basis for believing that any Portfolio has
ceased to comply with the diversification provisions of Section 817(h) of the
Internal Revenue Code or the Regulations thereunder. The Adviser further
agrees to notify the Trust immediately of any material fact known to the
Adviser respecting or relating to the Adviser that is not contained in the
Registration Statement or Prospectus for the Trust, or any amendment or
supplement thereto, or of any statement contained therein that becomes untrue.
(b) The Adviser shall be responsible for making inquiries and for
reasonably ensuring that any employee of the Adviser, any person or firm that
the Adviser has employed or with which it has associated, or any employee has
not, to the best of the Adviser's knowledge, in any material connection with
the handling of Trust assets: (i) been convicted, in the last ten (10) years,
of any felony or misdemeanor arising out of conduct involving embezzlement,
fraudulent conversion, or misappropriation of funds or securities, or
involving violations of Sections 1341, 1342, or 1343 of Title 18, United
States Code; or (ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit or knowing
misrepresentation; or (iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provisions of federal or state securities laws
involving fraud, deceit or knowing misrepresentation.
6. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this Contract. As an
inducement to the Adviser's undertaking to render these services, the Trust
agrees that the Adviser shall not be liable under this Contract for any
mistake in judgment or in any other event whatsoever, provided that nothing in
this Contract shall be deemed to protect or purport to protect the Adviser
against any liability to the Trust or its shareholders to which the Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of the Adviser's duties under this
Contract or by reason of the Adviser's reckless disregard of its obligations
and duties hereunder.
7. In consideration of the services to be rendered by the Adviser under
this Contract, each Portfolio shall pay the Adviser a monthly fee on the first
business day of each month, based upon the average daily value (as determined
on each business day at the time set forth in the Prospectus for determining
net asset value per share) of the net assets of the Portfolio during the
preceding month, at the following annual rates: [ %].
If the fees payable to the Adviser pursuant to this paragraph 7 begin to
accrue before the end of any month or if this Contract terminates before the
end of any month, the fees for the period from that date to the end of that
month or from the beginning of that month to the date of termination, as the
case may be, shall be prorated according to the proportion which the period
bears to the full month in which the effectiveness or termination occurs. For
purposes of calculating the monthly fees, the value of the net assets of each
Portfolio shall be computed in the manner specified in the Prospectus for the
computation of net asset value. For purposes of this Contract, a "business
day" is any day the New York Stock Exchange is open for trading or as
otherwise provided in the Trust's prospectus.
8. If the aggregate expenses of every character incurred by, or allocated
to, the Trust in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles
and any extraordinary expense (including, without limitation, litigation and
indemnification expense), but including the fees payable under this Contract
("includable expenses"), shall exceed any expense limitations applicable to
the Trust, the Adviser shall pay the Trust an amount equal to that excess.
With respect to portions of a fiscal year in which this Contract shall be in
effect, the foregoing limitations shall be prorated according to the
proportion which that portion of the fiscal year bears to the full fiscal
year. At the end of each month of the Trust's fiscal year, the Adviser will
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review the includable expenses accrued during that fiscal year to the end of
the period and shall estimate the contemplated includable expenses for the
balance of that fiscal year. If, as a result of that review and estimation, it
appears likely that the includable expenses will exceed the limitations
referred to in this paragraph 8 for a fiscal year with respect to the Trust,
the monthly fees relating to the Trust payable to the Adviser under this
Contract and under the Administration Agreement for such month shall be
reduced, subject to a later reimbursement to reflect actual expenses, by an
amount equal to a pro rata portion (prorated on the basis of the remaining
months of the fiscal year, including the month just ended) of the amount by
which the includable expenses for the fiscal year (less an amount equal to the
aggregate of actual reductions made pursuant to this provision with respect to
prior months of the fiscal year) are expected to exceed the limitations
provided in this paragraph 8. For purposes of the foregoing, the value of the
net assets of each Portfolio of the Trust shall be computed in the manner
specified in paragraph 6, and any payments required to be made by the Adviser
shall be made once a year promptly after the end of the Trust's fiscal year.
9. The Trust and the Adviser acknowledge that the Trust will offer its
shares so that it may serve as an investment vehicle for variable annuity
contracts and variable life insurance policies issued by insurance companies,
as well as to qualified pension and retirement plans and other appropriate
investors. Shares of the Portfolios may be offered only to separate accounts
and general accounts of insurance companies that are approved in writing by
the Adviser. The Adviser shall be under no obligation to investigate insurance
companies to which the Trust offers or proposes to offer its shares.
10. (a) This Contract shall become effective with respect to the Portfolios
on , 2000 (and, with respect to any amendment, or with
respect to any additional portfolio, the date of the amendment or Supplement
hereto) and shall continue in effect with respect to a Portfolio for a period
of more than two years from that date (or, with respect to any additional
portfolio, the date of the Supplement) only so long as the continuance is
specifically approved at least annually (i) by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Portfolio or
by the Trust's Board of Trustees and (ii) by the vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Contract or "interested persons" (as defined in the 1940
Act) of any such party.
(b) This Contract may be terminated with respect to a Portfolio (or any
additional portfolio) at any time, without the payment of any penalty, by a
vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Portfolio or by a vote of a majority of the Trust's entire
Board of Trustees on 60 days' written notice to the Adviser or by the Adviser
on 60 days' written notice to the Trust. This Contract (or any Supplement
hereto) shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
11. Except to the extent necessary to perform the Adviser's obligations
under this Contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business or to devote time and attention to
the management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
12. The investment management services of the Adviser to the Trust under
this contract are not to be deemed exclusive as to the Adviser and the Adviser
will be free to render similar services to others.
13. This Contract shall be construed in accordance with the laws of the
State of California, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act.
14. The Declaration of Trust establishing the Trust, dated ,
provides that the name "PIMCO Variable Insurance Trust" refers to the trustees
under the Declaration collectively as trustees and not as individuals or
personally, and that no shareholder, trustee, officer, employee or agent of
the Trust shall be subject to claims against or obligations of the Trust to
any extent whatsoever, but that the Trust estate only shall be liable.
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<PAGE>
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO VARIABLE INSURANCE TRUST
By:________________________________
_________________________________
Title
ACCEPTED:
[ ]
By:_____________________________________
______________________________________
Title
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<PAGE>
FORM OF
PORTFOLIO MANAGEMENT AGREEMENT
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, California 92260
, 2000
[Name]
[Address]
Dear Sirs:
This will confirm the agreement between the undersigned (the "Adviser") and
[ ] (the "Portfolio Manager") as follows:
1. PIMCO Variable Insurance Trust (the "Trust") is an open-end investment
company which currently has multiple separate investment portfolios, two of
which are subject to this agreement: [Names of Portfolios] (the "Portfolios").
The Adviser serves as investment adviser to the Portfolios pursuant to an
Investment Advisory Contract dated the date hereof. Additional investment
portfolios may be established in the future. This agreement shall pertain to
the Portfolios and to such additional investment portfolios as shall be
designated in supplements to this agreement, as further agreed between the
Adviser and the Portfolio Manager. The Trust engages in the business of
investing and reinvesting the assets of each Portfolio in the manner and in
accordance with the investment objective and restrictions applicable to that
Portfolio as specified in the currently effective Prospectuses (the
"Prospectus") for the Trust included in the registration statement, as amended
from time to time (the "Registration Statement"), filed by the Trust under the
Investment Company Act of 1940 (the "1940 Act") and the Securities Act of 1933
(the "1933 Act"). Copies of the documents referred to in the preceding
sentence have been furnished to the Portfolio Manager. Any amendments to those
documents shall be furnished to the Portfolio Manager promptly.
2. The Adviser hereby appoints the Portfolio Manager to provide the
portfolio management services specified in this agreement and the Portfolio
Manager hereby accepts such appointment.
3. (a) The Portfolio Manager shall, at its expense, (i) employ or associate
with itself such persons as it believes appropriate to assist it in performing
its obligations under this agreement, and (ii) provide all services, equipment
and facilities necessary to perform its obligations under this agreement.
(b) Under the terms of the Investment Advisory Contract, the Trust shall
be responsible for all of its expenses and liabilities, including compensation
of its Trustees who are not affiliated with the Adviser, the distributor of
its shares or any of their affiliates; taxes and governmental fees; interest
charges; fees and expenses of the Trust's independent accountants and legal
counsel; trade association membership dues; fees and expenses of any custodian
(including maintenance of books and accounts and calculation of the net asset
value of shares of the Trust), transfer agent, registrar and dividend
disbursing agent of the Trust; expenses of issuing, selling, redeeming,
registering and qualifying for sale shares of beneficial interest in the
Trust; expenses of preparing and printing share certificates, Prospectuses and
reports to shareholders or other appropriate recipients, notices, proxy
statements and reports to regulatory agencies; the cost of office supplies,
including stationery; travel expenses of all officers, Trustees and employees;
insurance premiums; brokerage and other expenses of executing portfolio
transactions; expenses of shareholders' or variable insurance contract
holders' meetings; organizational expenses; and extraordinary expenses.
Notwithstanding the foregoing, the Trust may enter into a separate agreement,
which shall be controlling over this agreement, as amended, pursuant to which
some or all of the foregoing expenses of this Section 3(b) shall be the
responsibility of the other party or parties to that agreement.
4. (a) The Portfolio Manager shall provide to the Trust investment guidance
and policy direction in connection with the management of the Portfolios,
including oral and written research, analysis, advice, and statistical and
economic data and information.
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Consistent with the investment objectives, policies and restrictions
applicable to the Trust and the Portfolios, the Portfolio Manager will
determine the securities and other assets to be purchased or sold by each
Portfolio and will determine what portion of each Portfolio shall be invested
in securities or other assets, and what portion, if any, should be held
uninvested.
The Trust will have the benefit of the investment analysis and research, the
review of current economic conditions and trends and the consideration of
long-range investment policy generally available to investment advisory
clients of the Portfolio Manager. It is understood that the Portfolio Manager
will not use any inside information pertinent to investment decisions
undertaken in connection with this agreement that may be in its possession or
in the possession of any of its affiliates, nor will the Portfolio Manager
seek to obtain any such information.
(b) The Portfolio Manager also shall provide to the officers of the Trust
and to the Adviser administrative assistance in connection with the operation
of the Trust and the Portfolios, which shall include (i) compliance with all
reasonable requests of the Trust and the Adviser for information, including
information required in connection with the Trust's filings with the
Securities and Exchange Commission and state securities commissions, and (ii)
such other services as the Portfolio Manager shall from time to time determine
to be necessary or useful to the administration of the Trust and the
Portfolios.
(c) As manager of the assets of the Portfolios, the Portfolio Manager
shall make investments for the account of the Portfolios in accordance with
the Portfolio Manager's best judgment and within the investment objectives,
policies, and restrictions set forth in the Prospectus, the 1940 Act and the
provisions of the Internal Revenue Code relating to regulated investment
companies that serve as underlying investment media of variable insurance
contracts, subject to policy decisions adopted by the Trust's Board of
Trustees and to the supervision of the Adviser.
(d) The Portfolio Manager shall furnish to the Trust's Board of Trustees
periodic reports on the investment performance of the Trust and the Portfolios
and on the performance of its obligations under this Contract and shall supply
such additional reports and information as the Trust's officers or Board of
Trustees or the Adviser shall reasonably request.
(e) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of a Portfolio as well as other of its
clients, the Portfolio Manager, to the extent permitted by applicable law, may
aggregate the securities to be so sold or purchased in order to obtain the
best execution of the order or lower brokerage commissions, if any. The
Portfolio Manager may also on occasion purchase or sell a particular security
for one or more clients in different amounts. On either occasion, and to the
extent permitted by applicable law and regulations, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Portfolio Manager in the manner it considers
to be the most equitable and consistent with its fiduciary obligations to the
Trust and to such other customers.
(f) The Portfolio Manager may cause a Portfolio to pay a broker that
provides brokerage and research services to the Portfolio Manager a commission
for effecting a securities transaction in excess of the amount another broker
might have charged. Such higher commissions may not be paid unless the
Portfolio Manager determines in good faith that the amount paid is reasonable
in relation to the services received in terms of the particular transaction or
the Portfolio Manager's overall responsibilities to the Trust and any other of
the Portfolio Manager's clients.
5. (a) The Portfolio Manager shall immediately notify the Trust and the
Adviser in the event (1) that the Securities and Exchange Commission has
censured the Portfolio Manager; placed limitations upon its activities,
functions or operations; suspended or revoked its registration as an
investment adviser; or has commenced proceedings or an investigation that may
result in any of these actions, (2) upon having a reasonable basis for
believing that any Portfolio has ceased to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, or (3) upon having a
reasonable basis for believing that any Portfolio has ceased to
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<PAGE>
comply with the diversification provisions of Section 817(h) of the Internal
Revenue Code or the Regulations thereunder. The Portfolio Manager further
agrees to notify the Trust and the Adviser immediately of any material fact
known to the Portfolio Manager respecting or relating to the Portfolio Manager
that is not contained in the Registration Statement or Prospectus for the
Trust, or any amendment or supplement thereto, or of any statement contained
therein that becomes untrue.
(b) The Portfolio Manager shall be responsible for making inquiries and
for reasonably ensuring that any employee of the Portfolio Manager, any person
or firm that the Portfolio Manager has employed or with which it has
associated, or any employee has not, to the best of the Portfolio Manager's
knowledge, in any material connection with the handling of Trust assets: (i)
been convicted, in the last ten (10) years, of any felony or misdemeanor
arising out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of Sections
1341, 1342, or 1343 of Title 18, United States Code; or (ii) been found by any
state regulatory authority, within the last ten (10) years, to have violated
or to have acknowledged violation of any provision of any state insurance law
involving fraud, deceit or knowing misrepresentation; or (iii) been found by
any federal or state regulatory authorities, within the last ten (10) years,
to have violated or to have acknowledged violation of any provisions of
federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
6. The Portfolio Manager shall give the Trust the benefit of the Portfolio
Manager's best judgment and efforts in rendering services under this
agreement. As an inducement to the Portfolio Manager's undertaking to render
these services, the Adviser agrees that the Portfolio Manager shall not be
liable under this agreement for any mistake in judgment or in any other event
whatsoever, provided that nothing in this agreement shall be deemed to protect
or purport to protect the Portfolio Manager against any liability to the
Adviser or to the Trust or its shareholders to which the Portfolio Manager
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of the Portfolio Manager's duties under
this agreement or by reason of the Portfolio Manager's reckless disregard of
its obligations and duties hereunder.
7. In consideration of the services to be rendered by the Portfolio Manager
under this agreement, the Adviser shall pay the Portfolio Manager a monthly
fee on the first business day of each month, based upon the average daily
value (as determined on each business day at the time set forth in the
Prospectus for determining net asset value per share) of the net assets of the
Portfolio during the preceding month, at the following annual rates: [ ]
If the fees payable to the Portfolio Manager pursuant to this paragraph 7
begin to accrue before the end of any month or if this agreement terminates
before the end of any month, the fees for the period from that date to the end
of that month or from the beginning of that month to the date of termination,
as the case may be, shall be prorated according to the proportion which the
period bears to the full month in which the effectiveness or termination
occurs. For purposes of calculating the monthly fees, the value of the net
assets of each Portfolio shall be computed in the manner specified in the
Prospectus for the computation of net asset value. For purposes of this
agreement, a "business day" is any day the New York Stock Exchange is open for
trading or as otherwise provided in the Prospectus.
8. The Portfolio Manager acknowledges that the Trust will offer its shares
so that it may serve as an investment vehicle for variable annuity contracts
and variable life insurance policies issued by insurance companies, as well as
to qualified pension and retirement plans and other appropriate investors.
Shares of the Portfolios may be offered only to separate accounts and general
accounts of insurance companies that are approved in writing by the Adviser.
The Portfolio Manager shall be under no obligation to investigate insurance
companies to which the Trust offers or proposes to offer its shares.
9. (a) This Contract shall become effective with respect to the Portfolios
on , 2000 (and, with respect to any amendment, or with
respect to any additional portfolio, the date of the amendment or supplement
hereto) and shall continue in effect with respect to a Portfolio for a period
of more than two years from that date (or, with respect to any additional
portfolio, the date of the supplement) only so long as the
A-8
<PAGE>
continuance is specifically approved at least annually (i) by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Portfolio or by the Trust's Board of Trustees and (ii) by the vote, cast
in person at a meeting called for the purpose, of a majority of the Trust's
trustees who are not parties to this agreement or "interested persons" (as
defined in the 1940 Act) of any such party.
(b) This agreement may be terminated with respect to a Portfolio (or any
additional portfolio) at any time, without the payment of any penalty, by the
Adviser, by a vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Portfolio or by a vote of a majority of the
Trust's entire Board of Trustees on 60 days' written notice to the Portfolio
Manager or by the Portfolio Manager on 60 days' written notice to the Trust
and the Adviser. This agreement (or any supplement hereto) shall terminate
automatically in the event of its assignment (as defined in the 1940 Act) or
in the event of the termination of the Investment Advisory Contract.
10. Except to the extent necessary to perform the Portfolio Manager's
obligations under this agreement, nothing herein shall be deemed to limit or
restrict the right of the Portfolio Manager, or any affiliate of the Portfolio
Manager, or any employee of the Portfolio Manager, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or
association.
11. The portfolio management services of the Portfolio Manager to the Trust
under this agreement are not to be deemed exclusive as to the Portfolio
Manager, and the Portfolio Manager will be free to render similar services to
others.
12. This agreement shall be construed in accordance with the laws of the
State of California, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act.
If the foregoing correctly sets forth the agreement between the Adviser and
the Portfolio Manager, please so indicate by signing and returning to the
Adviser the enclosed copy hereof.
Very truly yours,
PIMCO ADVISORS L.P.
By:________________________________
_________________________________
Title
ACCEPTED:
[ ]
By:____________________________________
_____________________________________
Title
A-9
<PAGE>
FORM OF
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made this day of , 2000 between
PIMCO Variable Insurance Trust (the "Trust"), a Delaware business trust, and
Pacific Investment Management Company (the "Administrator" or "PIMCO"), a
general partnership organized under the laws of California.
WHEREAS, the Trust is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in separate series with each such series representing interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Trust has established seventeen series, which are designated
as the Money Market Portfolio; the Short-Term Bond Portfolio; the Low Duration
Bond Portfolio; the Real Return Bond Portfolio; the High Yield Bond Portfolio;
the Total Return Bond Portfolio; the Total Return Bond Portfolio II; the Long-
Term U.S. Government Bond Portfolio; the Equity Income Portfolio; the Capital
Appreciation Portfolio; the Mid-Cap Growth Portfolio; the Small-Cap Value
Portfolio; the Global Bond Portfolio; the Emerging Markets Bond Portfolio; the
Foreign Bond Portfolio; the StocksPLUS Growth and Income Portfolio; and the
Strategic Balanced Portfolio; such series, together with any other series
subsequently established by the Trust, with respect to which the Trust desires
to retain the Administrator to render administrative services hereunder, and
with respect to which the Administrator is willing to do so, being herein
collectively referred to also as the "Portfolios"; and
WHEREAS, pursuant to an Investment Advisory Contract dated ,
2000, between the Trust and PIMCO ("Investment Advisory Contract"), the Trust
has retained PIMCO to provide investment advisory services with respect to the
Portfolios in the manner and on the terms set forth therein; and
WHEREAS, the Trust wishes to retain PIMCO to provide administrative and
other services to the Trust with respect to the Portfolios in the manner and
on the terms hereinafter set forth; and
WHEREAS, PIMCO is willing to furnish such services in the manner and on the
terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. The Trust hereby appoints PIMCO as its Administrator, to
provide the administrative and other services with respect to the Portfolios
for the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees during such period to render the services
herein set forth for the compensation herein provided.
In the event the Trust establishes and designates additional series with
respect to which it desires to retain the Administrator to render
administrative and other services hereunder, it shall notify the Administrator
in writing. If the Administrator is willing to render such services it shall
notify the Trust in writing, whereupon such additional series shall become a
Portfolio hereunder.
2. Duties. Subject to the general supervision of the Board of Trustees, the
Administrator shall provide all administrative and other services reasonably
necessary for the operation of the Portfolios other than the investment
advisory services provided pursuant to the Investment Advisory Contract.
(a) Administrative Services. These services shall include the following:
(i) coordinating matters relating to the operation of the Portfolios
including any necessary coordination among the adviser or advisers to the
Portfolios, the custodian, transfer agent (if any), dividend disbursing
agent, and recordkeeping agent (including pricing and valuation of the
Portfolios), insurance companies, accountants, attorneys, and other parties
performing services or operational functions for the Portfolios; (ii)
providing
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<PAGE>
the Portfolios, at the Administrator's expense, with the services of a
sufficient number of persons competent to perform such administrative and
clerical functions as are necessary to ensure compliance with federal
securities laws and state insurance laws as well as other applicable laws,
and to provide effective administration of the Portfolios; (iii)
maintaining or supervising the maintenance by third parties of such books
and records of the Trust and the Portfolios as may be required by
applicable federal or state law other than the records and ledgers
maintained under the Investment Advisory Contract; (iv) preparing or
supervising the preparation by third parties of all federal, state, and
local tax returns and reports of the Portfolios required by applicable law;
(v) preparing, filing, and arranging for the distribution of proxy
materials and periodic reports to shareholders of the Portfolios or other
appropriate parties as required by applicable law; (vi) preparing and
arranging for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory authorities
as may be required to register the shares of the Trust and qualify the
Trust to do business or as otherwise required by applicable law;
(vii) taking such other action with respect to the Portfolios, as may be
required by applicable law, including without limitation the rules and
regulations of the SEC and of state securities and insurance commissions
and other regulatory agencies; and (viii) providing the Portfolios, at the
Administrator's expense, with adequate personnel, office space,
communications facilities, and other facilities necessary for the
Portfolios' operations as contemplated in this Agreement.
(b) Other Services. The Administrator shall also procure on behalf of the
Trust and the Portfolios, and at the expense of the Administrator, the
following persons to provide services to the Portfolios, to the extent
necessary: (i) a custodian or custodians for the Portfolios to provide for
the safekeeping of the Portfolios' assets; (ii) a recordkeeping agent to
maintain the portfolio accounting records for the Portfolios; (iii) a
transfer agent for the Portfolios; and (iv) a dividend disbursing agent for
the Portfolios. The Trust may be a party to any agreement with any of the
persons referred to in this Section 3(b).
(c) The Administrator shall also make its officers and employees
available to the Board of Trustees and officers of the Trust for
consultation and discussions regarding the administration of the Portfolios
and services provided to the Portfolios under this Agreement.
(d) In performing these services, the Administrator:
(i) Shall conform with the 1940 Act and all rules and regulations
thereunder, all other applicable federal and state laws and regulations,
with any applicable procedures adopted by the Trust's Board of Trustees,
and with the provisions of the Trust's Registration Statement filed an
Form N-1A as supplemented or amended from time to time.
(ii) Will make available to the Trust, promptly upon request, any of
the Portfolios' books and records as are maintained under this
Agreement, and, upon request by the Trust, will furnish to regulatory
authorities having the requisite authority any such books and records
and any information or reports in connection with the Administrator's
services under this Agreement that may be requested in order to
ascertain whether the operations of the Trust are being conducted in a
manner consistent with applicable laws and regulations.
(iii) Will regularly report to the Trust's Board of Trustees on the
services provided under this Agreement and will furnish the Trust's
Board of Trustees with respect to the Portfolios such periodic and
special reports as the Trustees may reasonably request.
3. Documentation. The Trust has delivered copies of each of the following
documents to the Administrator and will deliver to it all future amendments
and supplements thereto, if any:
(a) the Trust's Registration Statement as filed with the SEC and any
amendments thereto; and
(b) exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration
Statement described above.
4. Independent Contractor. The Administrator shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of
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Trustees of the Trust from time to time, have no authority to act for or
represent the Trust in any way or otherwise be deemed its agent.
5. Compensation. As compensation for the services rendered under this
Agreement, the Trust shall pay to the Administrator a monthly fee, calculated
as a percentage (on an annual basis) of the average daily value of the net
assets of each of the Portfolios during the preceding month. The fee rates
applicable to each Portfolio shall be set forth in a schedule to this
Agreement. The fees payable to the Administrator for all of the Portfolios
shall be computed and accrued daily and paid monthly. If the Administrator
shall serve for less than any whole month, the foregoing compensation shall be
prorated.
6. Non-Exclusivity. It is understood that the services of the Administrator
hereunder are not exclusive, and the Administrator shall be free to render
similar services to other investment companies and other clients.
7. Expenses. During the term of this Agreement, the Administrator will pay
all expenses incurred by it in connection with its obligations under this
Agreement, except such expenses as are assumed by the Portfolios under this
Agreement, and any expenses that are paid under the terms of the Investment
Advisory Contract. The Administrator assumes and shall pay for maintaining its
staff and personnel and shall, at its own expense provide the equipment,
office space, office supplies (including stationery), and facilities necessary
to perform its obligations under this Agreement. In addition, the
Administrator shall bear the following expenses under this Agreement:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Trust's custodial services including any
recordkeeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of each
Portfolio's net assets;
(e) Expenses of obtaining Portfolio Activity Reports for each Portfolio;
(f) Expenses of maintaining the Trust's tax records;
(g) Costs and/or fees, including legal fees, incident to meetings of the
Trust's shareholders or of any contract owners with contract value
allocated to the Trust, the preparation, printing and mailings of
prospectuses, notices and proxy statements and reports of the Trust to its
shareholders or other appropriate recipients, the filing of reports with
regulatory bodies, the maintenance of the Trust's existence and
qualification to do business, and the expense of issuing, redeeming,
registering and qualifying for sale, shares with federal and state
securities and/or insurance authorities;
(h) The Trust's ordinary legal fees, including the legal fees that arise
in the ordinary course of business for a Delaware business trust registered
as an open-end management investment company;
(i) Costs of printing certificates representing shares of the Trust;
(j) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums; and
(k) Association membership dues.
The Trust shall bear the following expenses:
(a) Salaries and other compensation or expenses, including travel
expenses, of any of the Trust's executive officers and employees, if any,
who are not officers, directors, stockholders, partners or employees of the
Administrator or its subsidiaries or affiliates;
(b) Taxes and governmental fees, if any, levied against the Trust or any
of its Portfolios;
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(c) Brokerage fees and commissions, and other portfolio transaction
expenses incurred for any of the Portfolios;
(d) Costs, including the interest expenses, of borrowing money;
(e) Fees and expenses, including travel expenses, and fees and expenses
of legal counsel retained for their benefit, of trustees who are not
officers, employees, partners or shareholders of PIMCO or its subsidiaries
or affiliates;
(f) Extraordinary expenses, including extraordinary legal expenses, as
may arise, including expenses incurred in connection with litigation,
proceedings, other claims and the legal obligations of the Trust to
indemnify its trustees, officers, employees, shareholders, distributors,
and agents with respect thereto;
(g) Organizational and offering expenses of the Trust and the Portfolios,
and any other expenses which are capitalized in accordance with generally
accepted accounting principles; and
(h) Any expenses allocated or allocable to a specific class of shares.
8. Liability. The Administrator shall give the Trust the benefit of the
Administrator's best efforts in rendering services under this Agreement. The
Administrator may rely on information reasonably believed by it to be accurate
and reliable. As an inducement for the Administrator's undertaking to render
services under this Agreement, the Trust agrees that neither the Administrator
nor its stockholders, officers, directors, or employees shall be subject to
any liability for, or any damages, expenses or losses incurred in connection
with, any act or omission or mistake in judgment connected with or arising out
of any services rendered under this Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in performance of the
Administrator's duties, or by reason of reckless disregard of the
Administrator's obligations and duties under this Agreement. This provision
shall govern only the liability to the Trust of the Administrator and that of
its stockholders, officers, directors, and employees, and shall in no way
govern the liability to the Trust or the Administrator or provide a defense
for any other person including persons that provide services for the
Portfolios as described in Section 2(b) of this Agreement.
9. Term and Continuation. This Agreement shall take effect as of the date
indicated above, and shall remain in effect, unless sooner terminated as
provided herein, for two years from such date, and shall continue thereafter
on an annual basis with respect to each Portfolio provided that such
continuance is specifically approved at least annually (a) by the vote of a
majority of the Board of Trustees of the Trust, or (b) by vote of a majority
of the outstanding voting shares of the Portfolios, and provided continuance
is also approved by the vote of a majority of the Board of Trustees of the
Trust who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of the Trust, or PIMCO, cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated:
(a) by the Trust at any time with respect to the services provided by the
Administrator, by vote of a majority of the entire Board of Trustees of the
Trust or by a vote of a majority of the outstanding voting shares of the
Trust or, with respect to a particular Portfolio, by vote of a majority of
the outstanding voting shares of such Portfolio, on 60 days' written notice
to the Administrator;
(b) at or after the expiration of the two-year period commencing the date
of its effectiveness, by the Administrator at any time, without the payment
of any penalty, upon 60 days' written notice to the Trust.
10. Use of Name. It is understood that the name "Pacific Investment
Management Company" or "PIMCO" or any derivative thereof or logo associated
with those names are the valuable property of PIMCO and its affiliates, and
that the right of the Trust and/or the Portfolios to use such names (or
derivatives or logos) shall be governed by the Investment Advisory Contract.
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11. Notices. Notices of any kind to be given to the Administrator by the
Trust shall be in writing and shall be duly given if mailed or delivered to
the Administrator at 840 Newport Center Drive, Newport Beach, California
92660, or to such other address or to such individual as shall be specified by
the Administrator. Notices of any kind to be given to the Trust by the
Administrator shall be in writing and shall be duly given if mailed or
delivered to 840 Newport Center Drive, Newport Beach, California 92660, or to
such other address or to such individual as shall be specified by the Trust.
12. Trust Obligation. Notice is hereby given that the Agreement has been
executed on behalf of the Trust by a trustee of the Trust in his or her
capacity as trustee and not individually. The obligations of this Agreement
shall only be binding upon the assets and property of the Trust and shall not
be binding upon any trustee, officer, or shareholder of the Trust
individually.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
14. Miscellaneous. (a) This Agreement shall be governed by the laws of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rule or order of the SEC thereunder.
(b) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision
of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise with regard to any party, hereunder, such
provisions with respect to other parties hereto shall not be affected
thereby.
(c) the captions in this Agreement are included for convenience only and
in no way define any of the provisions hereof or otherwise affect their
construction or effect.
(d) This Agreement may not be assigned by the Trust or the Administrator
without the consent of the other party.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
PIMCO VARIABLE INSURANCE TRUST
<TABLE>
<S> <C>
Attest:______________________________________ By:________________________________________
_____________________________________________ ___________________________________________
Title Title
PACIFIC INVESTMENT MANAGEMENT COMPANY
Attest:______________________________________ By:________________________________________
_____________________________________________ ___________________________________________
Title Title
</TABLE>
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APPENDIX B
INFORMATION ABOUT THE INVESTMENT ADVISERS
PIMCO, PIMCO Advisors, Cadence, and NFJ
The address of PIMCO is 840 Newport Center Drive, Suite 300, Newport Beach,
California 92660. The address of PIMCO Advisors is 800 Newport Center Drive,
Newport Beach, California 92660. The address of Cadence is Exchange Place, 53
State Street, Boston, Massachusetts 02109. The address of NFJ is
2121 San Jacinto, Suite 1840, Dallas, Texas 75201. PIMCO, PIMCO Advisors,
Cadence, and NFJ are registered as investment advisers under the Investment
Advisers Act of 1940, as amended, and are registered as commodity trading
advisors with the Commodity Futures Trading Commission.
PIMCO
The directors and principal executive officer of PIMCO, their principal
occupations and dates of service are shown below. Unless otherwise indicated,
the business address of each director and officer is 840 Newport Center Drive,
Suite 300, Newport Beach, California 92660.
<TABLE>
<CAPTION>
Name
Length of Service with
PIMCO Position and Principal Occupation
---------------------- ---------------------------------
<C> <S>
William S. Thompson, Jr... Managing Director, Chief Executive Officer and
April 1993 to Present Executive Committee Member, PIMCO; Managing
Director, Chief Executive Officer and Director,
PIMCO Management, Inc.; Member of Management Board
and Executive Committee, PIMCO Advisors L.P.;
President, Chief Executive Officer and Member,
PIMCO Partners LLC.
William R. Benz, II....... Managing Director, PIMCO; Managing Director and
June 1986 to Present Director PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Robert Wesley Burns....... Managing Director and Executive Committee Member,
February 1987 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc.; Member of PIMCO Partners LLC.
Chris P. Dialynas......... Managing Director, PIMCO; Managing Director and
July 1983 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Mohamed A. El-Erian....... Managing Director, PIMCO; Managing Director and
May 1999 to Present Director, PIMCO Management, Inc.
William H. Gross.......... Managing Director, PIMCO; Managing Director and
June 1971 to Present Director, PIMCO Management, Inc.; Director and Vice
President, StocksPLUS Management, Inc.; Member of
Management Board, PIMCO Advisors; Member of PIMCO
Partners LLC.
John L. Hague............. Managing Director and Executive Committee Member,
September 1987 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc.; Member of PIMCO Partners LLC.
Pasi M. Hamalainen........ Managing Director, PIMCO; Managing Director and
January 1994 to Present Director, PIMCO Management, Inc.
Brent R. Harris........... Managing Director and Executive Committee Member,
June 1985 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of Management
Board and Executive Committee, PIMCO Advisors;
Member of PIMCO Partners LLC.
Brent L. Holden........... Managing Director, PIMCO; Managing Director and
December 1989 to Present Director, PIMCO Management, Inc.
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
Name
Length of Service with
PIMCO Position and Principal Occupation
---------------------- ---------------------------------
<C> <S>
Margaret E. Isberg........ Managing Director, PIMCO; Managing Director and
August 1983 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
John S. Loftus............ Managing Director, PIMCO; Managing Director and
August 1986 to Present Director, PIMCO Management, Inc.
Dean S. Meiling........... Managing Director, PIMCO; Managing Director and
December 1976 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
James F. Muzzy............ Managing Director and Executive Committee Member,
September 1971 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of PIMCO
Partners LLC.
William F. Podlich, III... Managing Director, PIMCO; Managing Director and
June 1966 to Present Director, PIMCO Management, Inc.; Member of
Management Board, PIMCO Advisors L.P.; Member of
PIMCO Partners LLC.
William C. Powers......... Managing Director, PIMCO; Managing Director and
January 1991 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Ernest L. Schmider........ Managing Director and Secretary, PIMCO; Managing
March 1994 to Present Director and Director, PIMCO Management, Inc.;
Director and Assistant Secretary, StocksPLUS
Management, Inc.; Senior Vice President, PIMCO
Advisors L.P.; Secretary, PIMCO Partners LLC.
Lee R. Thomas............. Managing Director, PIMCO and PIMCO Management,
April 1995 to Present Inc.; Member of PIMCO Partners LLC.
Benjamin L. Trosky........ Managing Director, PIMCO; Managing Director and
October 1990 to Present Director, PIMCO Management, Inc.; Member of
Management Board, PIMCO Advisors L.P.; Member of
PIMCO Partners LLC.
</TABLE>
PIMCO Advisors
The directors and principal executive officer of PIMCO Advisors, their
principal occupations and dates of service are shown below. Unless otherwise
indicated, the business address of each director and officer is 800 Newport
Center Drive, Newport Beach, California 92660.
<TABLE>
<CAPTION>
Name
Length of Service
with PIMCO Advisors Position and Principal Occupation
------------------- ---------------------------------
<C> <S>
William D. Cvengros...... Chief Executive Officer, President, Member of the
November 1994 to Present Management Board and Executive Committee Member,
PIMCO Advisors L.P.
Stephen J. Treadway...... Executive Vice President of PIMCO Advisors L.P.;
May 1996 to Present Chairman, President and Chief Executive Officer,
PIMCO Funds Distributors LLC.
Kenneth M. Poovey........ Chief Operating Officer and Executive Vice
January 1998 to Present President, PIMCO Advisors L.P.
Robert M. Fitzgerald..... Senior Vice President and Chief Financial Officer,
February 1995 to Present PIMCO Advisors L.P.; Chief Financial Officer and
Treasurer, PIMCO, PIMCO Management, Inc., StocksPLUS
Management LLC, Cadence Capital Management, Inc.,
NFJ Investment Group and NFJ Management Inc.
Richard M. Weil.......... General Counsel and Senior Vice President, PIMCO
March 1996 to Present Advisors L.P.; Assistant Secretary, PIMCO, PIMCO
Management, Inc., Cadence Capital Management, and
PIMCO Funds Distributors LLC; Secretary, Cadence
Capital Management, Inc., NFJ Management, Inc.,
Parametric Management, Inc., NFJ Investment Group,
Parametric Portfolio Associates, and StocksPLUS
Management, Inc.
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
Name
Length of Service
with PIMCO Advisors Position and Principal Occupation
------------------- ---------------------------------
<C> <S>
Vinh T. Nguyen........ Controller, PIMCO; Vice President and Controller, PIMCO
April 1995 to Present Advisors, Cadence Capital Management, Inc., NFJ
Management, Inc., Parametric Management, Inc.,
StocksPLUS Management, Inc., PIMCO Funds Distributors
LLC, and PIMCO Management, Inc.
</TABLE>
Cadence Capital Management
Cadence's directors and principal executive officer, their principal
occupations and dates of service are shown below. Unless otherwise indicated,
the business address of each director and officer is Exchange Place, 53 State
Street, Boston, Massachusetts 02109.
<TABLE>
<CAPTION>
Name
Length of Service
with Cadence Position and Principal Occupation
----------------- ---------------------------------
<C> <S>
David B. Breed............ Managing Director and Chief Executive Officer,
March 1988 to Present Cadence; Director, Managing Director and Chief
Executive Officer, Cadence Capital Management,
Inc.; Member of Management Board of PIMCO Advisors
L.P.
William B. Bannick Managing Director and Executive Vice President,
October 1992 to Present.. Cadence; Director Managing Director, Cadence
Capital Management, Inc.
Mike Skillman............. Managing Director and Director, Cadence Capital
March 1994 to Present Management, Inc.
Katherine A. Burdon....... Managing Director and Director, Cadence Capital
January 1993 to Present Management, Inc.
</TABLE>
NFJ Investment Group
NFJ's directors and principal executive officer, their principal
occupations and dates of service are shown below. Unless otherwise indicated,
the business address of each director and officer is 2121 San Jacinto,
Suite 1840, Dallas, Texas 75201.
<TABLE>
<CAPTION>
Name
Length of Service
with NFJ Position and Principal Occupation
----------------- ---------------------------------
<C> <S>
Chris Najork............. Managing Director, NFJ; Director, Managing Director
February 1989 to Present and Co-Chairman, NFJ Management, Inc.
Ben J. Fischer........... Managing Director, NFJ; Director, Managing Director,
February 1989 to Present and Co-Chairman, NFJ Management, Inc.
John L. Johnson.......... Managing Director, NFJ; Director, Managing Director,
February 1989 to Present and Co-Chairman, NFJ Management, Inc.
</TABLE>
B-3
<PAGE>
Officers of the Trust
The following are the executive officers of the Portfolios who are not
Trustees, their ages, positions with the Trust and principal occupations
during the past five years. The address of all officers is 840 Newport Center
Drive, Suite 300, Newport Beach, California 92660.
<TABLE>
<CAPTION>
Length of Principal Occupation(s)
Service with Position with During the Past Five
Name and Age the Trust the Trust Years
------------ ------------ --------------------- ------------------------
<C> <C> <C> <S>
William H. Gross.......... 8/97-Present Senior Vice President Managing Director,
Age 55 PIMCO; Senior Vice
President, PIMCO Funds:
Pacific Investment
Management Series.
James F. Muzzy............ 8/97-Present Senior Vice President Managing Director,
Age 60 PIMCO; Vice President,
PIMCO Funds: Pacific
Investment Management
Series.
Jeffrey M. Sargent........ 8/97-Present Senior Vice President Vice President and
Age 36 Manager of Investment
Operations Shareholder
Services, PIMCO; Senior
Vice President, PIMCO
Commercial Mortgage
Securities Trust, Inc.,
PIMCO Funds: Pacific
Investment Management
Series; Vice President,
PIMCO Funds: Multi-
Manager Series.
William S. Thompson, Jr... 8/97-Present Senior Vice President Chief Executive Officer
Age 54 and Managing Director,
PIMCO; Vice President,
PIMCO Funds: Pacific
Investment Management
Series; Vice President,
PIMCO Commercial
Mortgage Securities
Trust, Inc.
Steven P. Kirkbaumer...... 2/98-Present Vice President Vice President, PIMCO.
Age 43 Previously associated
with Prime Advisors and
Conseco Capital
Management as Director
of Marketing.
Henrik P. Larsen.......... 2/99-Present Vice President Manager, Fund
Age 29 Administration, PIMCO;
Vice President, PIMCO
Commercial Mortgage
Securities Trust, Inc.
and PIMCO Funds: Pacific
Investment Management
Series. Formerly
Supervisor, PIMCO.
John P. Hardaway.......... 8/97-Present Treasurer Senior Vice President
Age 42 and Manager of
Investment Operations
Accounting, PIMCO;
Treasurer, PIMCO
Commercial Mortgage
Securities Trust, Inc.,
PIMCO Funds: Multi-
Manager Series and PIMCO
Funds: Pacific
Investment Management
Series. Formerly Vice
President, PIMCO.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
Length of Principal Occupation(s)
Service with Position with During the Past Five
Name and Age the Trust the Trust Years
------------ ------------ ------------------- ------------------------
<C> <C> <C> <S>
Garlin G. Flynn....... 8/97-Present Secretary Specialist, PIMCO;
Age 53 Secretary, PIMCO
Commercial Mortgage
Securities Trust, Inc.
and PIMCO Funds: Pacific
Investment Management
Series; Assistant
Secretary, PIMCO Funds:
Multi-Manager Series.
Formerly Senior Fund
Administrator, PIMCO;
Senior Mutual Fund
Analyst, PIMCO Advisors
Institutional Services.
Joseph D. Hattesohl... 8/97-Present Assistant Treasurer Vice President and
Age 35 Manager of Financial
Reporting and Taxation,
PIMCO; Assistant
Treasurer, PIMCO Funds:
Multi-Manager Series,
PIMCO Commercial
Mortgage Securities
Trust, Inc. and PIMCO
Funds: Pacific
Investment Management
Series. Formerly,
Manager of Fund
Taxation, PIMCO;
Director of Financial
Reporting, Carl I. Brown
& Co.
Michael J. Willemsen.. 8/97-Present Assistant Secretary Manager, PIMCO;
Age 39 Assistant Secretary,
PIMCO Commercial
Mortgage Securities
Trust, Inc. and PIMCO
Funds: Pacific
Investment Management
Series. Formerly Project
Lead, PIMCO.
</TABLE>
B-5
<PAGE>
Other Investment Company Clients
PIMCO, PIMCO Advisors, Cadence, and NFJ
PIMCO also serves as investment adviser or subadviser to the following
investment companies, at the fee rates set forth below, which had the following
net assets at September 30, 1999.
<TABLE>
<CAPTION>
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
PIMCO FUNDS:
PACIFIC INVESTMENT
MANAGEMENT SERIES
<C> <S> <C>
Money Market Fund........... Annual rate of 0.15% of average
daily net assets $ 560,587,313
Short-Term Fund............. Annual rate of 0.25% of average
daily net assets 633,444,433
Low Duration Fund........... Annual rate of 0.25% of average
daily net assets 4,612,199,034
Low Duration Fund II........ Annual rate of 0.25% of average
daily net assets 465,267,930
Low Duration Fund III....... Annual rate of 0.25% of average
daily net assets 25,361,958
Low Duration Mortgage Fund.. Annual rate of 0.25% of average
daily net assets 4,157,459
Moderate Duration Fund...... Annual rate of 0.25% of average
daily net assets 331,884,959
Real Return Bond Fund....... Annual rate of 0.25% of average
daily net assets 117,197,203
Total Return Fund........... Annual rate of 0.25% of average
daily net assets 29,253,953,837
Total Return Fund II........ Annual rate of 0.25% of average
daily net assets 1,196,259,061
Total Return Fund III....... Annual rate of 0.25% of average
daily net assets 593,041,215
Total Return Mortgage Fund.. Annual rate of 0.25% of average
daily net assets 4,011,699
High Yield Fund............. Annual rate of 0.25% of average
daily net assets 3,547,311,498
Long-Term US Government Annual rate of 0.25% of average
Fund....................... daily net assets 367,846,155
Short Duration Municipal Annual rate of 0.20% of average
Income Fund................ daily net assets 10,504,759
Municipal Bond Fund......... Annual rate of 0.25% of average
daily net assets 55,389,116
California Intermediate Annual rate of 0.25% of average
Municipal Bond Fund........ daily net assets 3,123,929
New York Intermediate Annual rate of 0.25% of average
Municipal Bond Fund........ daily net assets 3,011,706
Global Bond Fund............ Annual rate of 0.25% of average
daily net assets 289,770,362
Global Bond Fund II......... Annual rate of 0.25% of average
daily net assets 42,715,021
Foreign Bond Fund........... Annual rate of 0.25% of average
daily net assets 577,679,632
International Bond Fund..... Annual rate of 0.25% of average
daily net assets 980,127,949
Emerging Markets Bond Fund.. Annual rate of 0.45% of average
daily net assets 17,340,723
Emerging Markets Bond Annual rate of 0.45% of average
Fund II.................... daily net assets 217,093,611
Strategic Balanced Fund..... Annual rate of 0.40% of average
daily net assets 167,190,375
Convertible Bond Fund....... Annual rate of 0.40% of average
daily net assets 38,753,114
StocksPLUS Fund............. Annual rate of 0.40% of average
daily net assets 1,385,857,599
FRANK RUSSELL
INVESTMENT
MANAGEMENT COMPANY
Fixed Income I Fund......... Annual rate of 0.25% of net $ 158,880,504
assets based on the average of
ending monthly market values
over 3 months, paid in arrears
Diversified Bond Fund....... Annual rate of 0.25% of net 121,645,371
assets based on the average of
ending monthly market values
over 3 months, paid in arrears
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
<C> <S> <C>
Fixed Income III Fund..... Annual rate of 0.25% of net assets 158,140,598
based on the average of ending
monthly market values over 3
months, paid in arrears
Multistrategy Bond Fund... Annual rate of 0.25% of net assets 193,102,561
based on the average of ending
monthly market values over 3
months, paid in arrears
RUSSELL INSURANCE
FUNDS
Core Bond Fund............ Annual rate of 0.25% of net assets $ 33,478,757
based on the average of ending
monthly market values over 3
months, paid in arrears
THE HARBOR GROUP
Harbor Bond Fund.......... Annual rate of 0.50% of average $ 622,475,175
daily net assets on first
$25 million; 0.375% of average
daily net assets on next
$25 million; 0.25% of average
daily net assets over $50 million
PACIFIC SELECT FUND
Managed Bond Series....... Annual rate of 0.50% of average $1,053,024,408
daily net assets on first
$25 million; 0.375% on next $ 25
million; 0.25% on remaining assets
Government Securities Annual rate of 0.50% of average 397,265,729
Series................... daily net assets on first
$25 million; 0.375% on next $25
million; 0.25% on remaining assets
PRUDENTIAL SECURITIES
TARGET PORTFOLIO
TRUST
Intermediate Term Bond Annual rate of 0.25% of average
Portfolio................ daily net assets $ 113,010,679
Total Return Bond Annual rate of 0.25% of average 66,889,600
Portfolio................ daily net assets
Total Return Bond Fund.... Annual rate of 0.25% of average Not Open As
daily net assets of 9/30/99
PIMCO COMMERCIAL
MORTGAGE SECURITIES
TRUST, INC.
PIMCO Commercial Mortgage
Trust Inc. .............. Annual rate of 0.725% of average $ 148,074,899
weekly net assets paid quarterly
AMERICAN SKANDIA
TRUST
Total Return Bond Annual rate of 0.30% of average $1,035,861,299
Portfolio................ daily net assets on first $150
million; 0.25% of average daily
net assets on assets over $150
million paid monthly
Limited Maturity Bond
Portfolio................ Annual rate of 0.30% of average 421,807,622
daily net assets on first $150
million; 0.25% of average daily
net assets on assets over $150
million paid monthly
Master Trust Total Annual rate of 0.25% of average
Return................... daily net assets 170,012,653
FREMONT MUTUAL
FUNDS, INC.
Total Return Fund......... Annual rate of 0.25% of average
daily net assets paid quarterly $ 187,068,687
Global Bond Fund.......... Annual rate of 0.30% of average
daily net assets paid quarterly 24,283,647
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
<C> <S> <C>
PAINEWEBBER MANAGED
INVESTMENTS TRUST
Low Duration US Government Annual rate of 0.25% of average
Income Fund.............. daily net assets $122,967,595
PAINEWEBBER SERIES
TRUST
Strategic Fixed Income.... Annual rate of 0.25% of average $ 7,298,286
daily net assets
PAINEWEBBER MANAGED
ACCOUNTS SERVICES
PORTFOLIO TRUST
PACE Government Securities Annual rate of 0.25% of average
Fixed Income............. daily net assets $197,767,164
PACE Strategic Fixed Annual rate of 0.25% of average
Income Investments....... daily net assets 230,222,525
JACKSON NATIONAL LIFE
SERIES TRUST
JNL/PIMCO Total Return
Bond Series.............. Annual rate of 0.25% of average $ 9,753,810
daily net assets excluding the value
of client contributed capital
FORWARD GLOBAL FUND
Forward Global Fund....... Annual rate of 0.35% of average $ 30,263,618
daily net assets on amounts under
$200 million and 0.30% on amounts
over $200 million
PRUDENTIAL
INVESTMENTS FUND
MANAGEMENT LLC
Prudential Diversified
Moderate Growth.......... Annual rate of 0.25% of average $ 23,259,990
daily net assets computed daily and
paid monthly
Prudential Diversified
Conservative Growth...... Annual rate of 0.25% of average 28,956,072
daily net assets computed daily and
paid monthly
Prudential Diversified
Conservative Portfolio... Annual rate of 0.25% of average 30,034,833
daily net assets computed daily and
paid monthly
MANULIFE
Manulife Global Bond Annual rate of 0.375% on first $50 $161,197,318
Trust.................... million; 0.35% on $50-200 million;
0.30% on $200-500 million; 0.25%
excess over $500 million of daily
net assets computed daily and paid
monthly
Manulife Total Return Annual rate of 0.30% on first $50 190,550,262
Trust.................... million; 0.30% on $50-150 million;
0.25% on $150-200 million; 0.25% on
$200-500 million and over of daily
net assets computed daily and paid
monthly
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
<C> <S> <C>
SALOMON SMITH
BARNEY/CONSULTING
GROUPS CAPITAL
MARKET FUND
Intermediate Fixed Income
Investment Portfolio .... Annual rate of 0.25%, multiplied by $ 270,423,858
a fraction, the numerator of which
is the average daily value of
allocated assets and the
denominator of which is the average
daily value of the Portfolio's
total assets computed daily
</TABLE>
PIMCO Advisors also serves as investment adviser or subadviser to the
following investment companies, at the fee rates set forth below, which had
the following net assets at September 30, 1999.
<TABLE>
<CAPTION>
Advisory Approximate
Name of Fund Fee Rate Assets
------------ -------- -------------
<S> <C> <C>
PIMCO FUNDS: MULTI-MANAGER SERIES
Equity Income Fund...................................... 0.45% $ 181,688,725
Value Fund.............................................. 0.45% 218,525,374
Value 25 Fund........................................... 0.50% 3,245,783
Renaissance Fund........................................ 0.60% 576,860,114
Tax-Efficient Equity Fund............................... 0.45% 44,560,317
Enhanced Equity Fund.................................... 0.45% 63,556,851
Growth Fund............................................. 0.50% 2,213,010,487
Mid-Cap Growth Fund..................................... 0.45% 931,022,968
Capital Appreciation Fund............................... 0.45% 935,938,326
Target Fund............................................. 0.55% 1,086,278,358
Small-Cap Value Fund.................................... 0.60% 365,806,035
Small-Cap Growth Fund................................... 1.00% 66,889,732
Opportunity Fund........................................ 0.65% 406,321,494
Micro-Cap Growth Fund................................... 1.25% 207,085,148
Innovation Fund......................................... 0.65% 1,520,154,222
International Fund...................................... 0.55% 128,099,379
International Growth Fund............................... 0.85% 10,134,178
Tax-Efficient Structured Emerging Markets Fund.......... 0.45% 75,088,069
Structured Emerging Markets Fund........................ 0.45% 44,454,893
Mega-Cap Fund........................................... 0.45% 2,974,643
Core Equity Fund........................................ 0.57% 1,252,857
Mid-Cap Equity Fund..................................... 0.63% 5,077,568
PIMCO Funds Asset Allocation Series 90/10 Portfolio..... N/A 12,082,117
PIMCO Funds Asset Allocation Series 60/40 Portfolio..... N/A 16,418,374
PIMCO Funds Asset Allocation Series 30/70 Portfolio..... N/A 7,519,400
Precious Metals Fund.................................... 0.60% 24,710,230
</TABLE>
B-9
<PAGE>
Cadence also serves as investment adviser or subadviser to the following
investment companies, at the fee rates set forth below, which had the
following net assets at September 30, 1999.
<TABLE>
<CAPTION>
Advisory Approximate
Name of Fund Fee Rate Assets
------------ -------- ------------
<S> <C> <C>
PIMCO FUNDS: MULTI-MANAGER SERIES
Capital Appreciation Fund................................ 0.35% $935,938,326
Mega-Cap Fund............................................ 0.35% 2,974,643
Mid-Cap Growth Fund...................................... 0.35% 931,022,968
Small-Cap Growth Fund.................................... 0.90% 66,889,732
Micro-Cap Growth Fund.................................... 1.15% 207,085,148
</TABLE>
NFJ also serves as investment adviser or subadviser to the following
investment companies, at the fee rates set forth below, which had the
following net assets at September 30, 1999.
<TABLE>
<CAPTION>
Advisory Approximate
Name of Fund Fee Rate Assets
------------ -------- ------------
<S> <C> <C>
PIMCO FUNDS: MULTI-MANAGER SERIES
Equity Income Fund........................................ 0.35% $181,688,725
Value Fund................................................ 0.35% 218,525,374
Value 25 Fund............................................. 0.40% 3,245,783
Small Cap Value Fund...................................... 0.50% 365,806,035
</TABLE>
Brokerage Policies
PIMCO and PIMCO Advisors receive research services from many broker-dealers
with which they place portfolio transactions. Consistent with applicable law,
PIMCO and PIMCO Advisors may cause the Portfolios to pay a broker-dealer which
provides brokerage and research services to PIMCO and PIMCO Advisors an amount
of disclosed commission for effecting a securities transaction for the
Portfolios in excess of the commission which another broker-dealer would have
charged for effecting that transaction. These research services, which in some
cases also may be purchased for cash, include such items as general economic
and securities market reviews, industry and company reviews, evaluations of
securities and recommendations as to the purchase and sale of securities. Some
of these services are of value to PIMCO and PIMCO Advisors in advising various
of their clients (including the Portfolios), although not all of these
services are necessarily of value in managing the Portfolios. The management
fees paid by the Portfolios are not reduced because PIMCO and PIMCO Advisors
and their affiliates receive such services.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, PIMCO and
PIMCO Advisors may also consider sales of shares of the Portfolios as a factor
in the selection of broker-dealers to execute portfolio transactions for the
Portfolios.
B-10
<PAGE>
APPENDIX C
The table below shows the investment advisory and administrative fees paid
by the Portfolios for the fiscal year ended December 31, 1999, as well as the
aggregate amount of advisory and administrative fees paid by each then-
operational Portfolio for that period. The table also shows the proposed
advisory, administrative, and service fees that will be adopted pursuant to
the multiple-class structure.
<TABLE>
<CAPTION>
Proposed
Advisory Proposed Proposed
Aggregate Current Aggregate Current Fee Rate Administrative Service Fee
Advisory Advisory Administrative Administrative (All Fee Rate (All (Administrative
Portfolio Fees* Fee Rate Fees* Fee Rate Classes) Classes) Class only)
--------- --------- -------- -------------- -------------- -------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market............ $ 2,444 0.30% $ 1,629 0.20% 0.15% 0.20% 0.15%
Short-Term Bond......... 2,715 0.35% 1,939 0.25% 0.25% 0.20% 0.15%
Low Duration Bond....... 17,747 0.40% 11,092 0.25% 0.25% 0.25% 0.15%
Real Return Bond........ 3,091 0.40% 1,932 0.25% 0.25% 0.25% 0.15%
Total Return Bond....... 12,917 0.40% 8,073 0.25% 0.25% 0.25% 0.15%
Total Return Bond II.... 12,153 0.40% 7,596 0.25% 0.25% 0.25% 0.15%
High Yield Bond......... 520,523 0.50% 260,261 0.25% 0.25% 0.35% 0.15%
Long-Term U.S.
Government Bond........ 17,655 0.40% 11,034 0.25% 0.25% 0.25% 0.15%
Global Bond............. N/A 0.60% N/A 0.30% 0.25% 0.50% 0.15%
Foreign Bond............ 26,461 0.60% 13,231 0.30% 0.25% 0.50% 0.15%
Emerging Markets Bond... N/A 0.65% N/A 0.35% 0.45% 0.40% 0.15%
Strategic Balanced...... N/A 0.50% N/A 0.25% 0.40% 0.20% 0.15%
StocksPLUS Growth &
Income................. 563,001 0.40% 351,876 0.25% 0.40% 0.10% 0.15%
Equity Income........... N/A 0.60% N/A 0.25% 0.45% 0.25% 0.15%
Capital Appreciation.... 11,161 0.60% 4,650 0.25% 0.45% 0.25% 0.15%
Mid-Cap Growth.......... 5,064 0.60% 2,110 0.25% 0.45% 0.25% 0.15%
Small-Cap Value......... 5,249 0.70% 1,875 0.25% 0.60% 0.20% 0.15%
</TABLE>
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* Unaudited
C-1
<PAGE>
APPENDIX D
CURRENT FUNDAMENTAL INVESTMENT POLICIES
As a matter of fundamental policy, the Portfolio may not:
Concentration
(1) invest in a security if, as a result of such investment, more than 25% of
its total assets (taken at market value at the time of such investment)
would be invested in the securities of issuers in any particular industry,
except that this restriction does not apply (a) to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities (or
repurchase agreements with respect thereto) and (b) with respect to the
Money Market Portfolio, to securities or obligations issued by U.S. banks;
Diversification
(2) with respect to 75% of its assets, invest in a security if, as a result of
such investment, more than 5% of its total assets (taken at market value
at the time of such investment) would be invested in the securities of any
one issuer, except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (This investment restriction is not applicable to the
Real Return Bond, Foreign Bond, Global Bond, or Emerging Markets Bond
Portfolios.);
(3) with respect to 75% of its assets, invest in a security if, as a result of
such investment, it would hold more than 10% (taken at the time of such
investment) of the outstanding voting securities of any one issuer (This
restriction is not applicable to the Real Return Bond, Foreign Bond,
Global Bond or the Emerging Markets Bond Portfolios.);
Borrowing and Issuance of Senior Securities
(6) borrow money, issue senior securities, or pledge, mortgage or hypothecate
its assets, except that a Portfolio may (i) borrow from banks or enter
into reverse repurchase agreements, or employ similar investment
techniques, but only if immediately after each borrowing there is asset
coverage of 300% and (ii) enter into transactions in options, futures,
options on futures, and other derivative instruments as described in the
Prospectus and in the Statement of Additional Information (the deposit of
assets in escrow in connection with the writing of covered put and call
options and the purchase of securities on a when-issued or delayed
delivery basis, collateral arrangements with respect to initial or
variation margin deposits for futures contracts and commitments entered
into under swap agreements or other derivative instruments, will not be
deemed to be pledges of a Portfolio's assets);
Loans
(7) lend any funds or other assets, except that a Portfolio may, consistent
with its investment objective and policies:
(a) invest in debt obligations, including bonds, debentures, or other debt
securities, bankers' acceptances and commercial paper, even though the
purchase of such obligations may be deemed to be the making of loans,
(b) enter into repurchase agreements, and
(c) lend its portfolio securities in an amount not to exceed one-third of
the value of its total assets, provided such loans are made in
accordance with applicable guidelines established by the Securities and
Exchange Commission and the Trustees of the Trust.
D-1
<PAGE>
APPENDIX E
As of December 31, 1999, the following persons owned of record or
beneficially 5% or more of the shares of the following Portfolios:
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Owned Fund
-------------- ----------
<S> <C> <C>
Money Market Portfolio
Pacific Investment Management Company............ 3,039,061.640 84.31% *
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Lincoln Benefit Life............................. 565,598.880 15.69%
206 South 13th Street, Suite 100
Lincoln, Nebraska 68508
Short-Term Bond Portfolio
PFL Life Insurance Company....................... 303,970.918 100.00%*
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
Low Duration Bond Portfolio
Pacific Investment Management Company............ 526,479.954 99.57% *
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Real Return Bond Portfolio
Pacific Investment Management Company............ 306,021.090 100.00% *
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Total Return Bond Portfolio
Pacific Investment Management Company............ 342,783.966 84.26%*
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Lincoln Benefit Life............................. 58,431.388 14.36%
206 South 13th Street, Suite 100
Lincoln, Nebraska 68508
Total Return Bond II Portfolio
Pacific Investment Management Company............ 342,783.966 65.64%*
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Security Equity Life Insurance................... 202,471.267 38.77%*
84 Business Park Drive, Suite 303
Armonk, New York 10504
High Yield Bond Portfolio
Golden American Life Insurance Company........... 15,766,644.139 96.66% *
1001 Jefferson Street, Suite 400
Wilmington, Delaware 19801
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Owned Fund
-------------- -------------
<S> <C> <C>
Long-Term U.S. Government Bond Portfolio
Pacific Investment Management Company............ 296,514.267 38.10% *
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Western-Southern Life Assurance Company.......... 271,078.044 34.83% *
400 Broadway
Cincinnati, Ohio 45202
Security Equity Life Insurance................... 210,275.741 27.02% *
84 Business Park Drive, Suite 303
Armonk, New York 10504
Foreign Bond Portfolio
Pacific Investment Management Company............ 507,549.514 91.68% *
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
StocksPLUS Growth & Income Portfolio
Golden American Life Insurance Company........... 16,139,513.684 95.99%*
1001 Jefferson Street, Suite 400
Wilmington, Delaware 19801
Capital Appreciation Portfolio
PIMCO Advisors L.P............................... 300,741.960 100.00%*
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Mid-Cap Growth Portfolio
PFL Life Insurance Company....................... 300,261.985 100.00% *
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
Small-Cap Value Portfolio
PFL Life Insurance Company....................... 302,184.735 100.00%*
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
</TABLE>
- --------
* Entity owned 25% or more of the outstanding shares of beneficial interest of
the Portfolio, and therefore may be presumed to "control" the Portfolio, as
that term is defined in the 1940 Act.
E-2
<PAGE>
PVIT
<PAGE>
PLEASE VOTE THIS PROXY CARD TODAY!
SIGN AND DATE THIS PROXY AND RETURN
IT IN THE ENCLOSED POSTAGE PAID ENVELOPE
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED BELOW.
-------------------------------------------------------
Please fold and detach card at perforation before mailing.
PIMCO VARIABLE INSURANCE TRUST SPECIAL MEETING OF SHAREHOLDERS
PORTFOLIO NAME PRINTS HERE on March 3, 2000
The undersigned hereby appoints R. Wesley Burns, Jeffrey M. Sargent, Henrik P.
Larsen and Garlin G. Flynn and each of them, as his/her attorneys and proxies
with full power of substitution to vote and act with respect to all shares of
the above named Portfolio held by the undersigned at the Special Meeting of
Shareholders of the Trust to be held at 800 Newport Center Drive, 6th Floor,
Newport Beach, California, 92660, on March 3, 2000 at 8:00 am, Pacific time or
as adjourned from time to time, (the "Meeting"), and instructs them to vote as
indicated on the matters referred to in the Proxy Statement for the Meeting,
receipt of which is hereby acknowledged, with discretionary power to vote upon
such other business as may properly come before the Meeting.
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Dated ________________, 2000
_____________________________________________
_____________________________________________
(Signature(s) of Shareholder(s)
This proxy must be signed by the beneficial
owner of Portfolio shares. If signing as
attorney, executor, guardian or in some
representative capacity or as an officer of a
corporation, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND
RETURN IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
PVIT
<PAGE>
<TABLE>
<CAPTION>
Please fold and detach card at perforation before mailing
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE TRUST. The Board of Trustees recommends that you vote FOR each of the
Nominees and FOR each of the following proposals:
Please vote by filling in the appropriate boxes below.
<S> <C> <C> <C>
FOR WITHHOLD FOR ALL
I. To elect trustees to the Board of Trustees of the Trust. ALL AUTHORITY EXCEPT
(see page 2 of the proxy statement) [_] [_] [_]
(01) E. Phillip Cannon (02) J. Michael Hagan
To withhold authority to vote for any individual nominee, mark the "For All Except"
and print the name of the Nominee on the line below.
_________________________________________________________________________________________ FOR AGAINST ABSTAIN
II. A. To approve a new investment advisory contract (see page 2 of the proxy statement) [_] [_] [_]
B. To approve a new portfolio management agreement. (see page 2 of the proxy statement) [_] [_] [_]
III. To approve changes to fundamental investment policies: (see page 2 of the proxy statement) FOR AGAINST ABSTAIN
ALL ALL ALL
a. Concentration d. Loans [_] [_] [_]
b. Diversification e. Investments in other
c. Borrowing and Senior Investment Companies
Securities
If you do not wish to approve a particular Investment policy change applicable to your
portfolio.
Write the letter(s) of the sub-proposal on the line below.
_________________________________________________________________________________________
IV. To transact such other business as may properly come before the Meeting.
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE NOMINEES AND FOR ALL OF
THE PROPOSALS.
</TABLE>