<PAGE> 1
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
Harbor Fund
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) 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 offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------
3) Filing Party:
-------------------------------------------------------
4) Date Filed:
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-2-
<PAGE> 2
HARBOR BOND FUND
ONE SEAGATE
TOLEDO, OHIO 43666
(419) 247-1940
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SHAREHOLDER INFORMATION STATEMENT
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This Shareholder Information Statement is furnished by the Board of
Trustees of Harbor Fund (the "Trust") and on behalf of Harbor Bond Fund (the
"Fund"), a series of the Trust. The purpose of this information statement is to
inform shareholders of the Fund of the implementation of a new investment sub-
advisory agreement between Harbor Capital Advisors, Inc. (the "Adviser") and
Pacific Investment Management Company ("PIMCO"). This information statement is
provided in lieu of a proxy statement pursuant to the terms of an exemptive
order the Trust and the Adviser received from the Securities and Exchange
Commission. The exemptive order permits the Adviser to implement new investment
sub-advisory agreements and to make changes to existing investment sub-advisory
agreements with the approval of the Board of Trustees (the "Board"), but without
shareholder approval. It is anticipated that this information statement will be
mailed to all shareholders of the Fund on or about May 22, 2000.
WE ARE NOT ASKING YOU FOR A PROXY,
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
SHAREHOLDER REPORTS. Shareholders can find out more information about the
Fund in the Fund's most recent Annual Report (for the fiscal year ended October
31, 1999), which has been furnished to shareholders. Shareholders may request
another copy of this report by writing to Harbor Fund, One SeaGate, Toledo, Ohio
43666, by calling 1-800-422-1050 or by visiting our web site at
www.harborfund.com.
INTRODUCTION
Harbor Capital Advisors, Inc., located at One SeaGate, Toledo, Ohio 43666,
serves as investment adviser to the Fund. In addition, Harbor Transfer, Inc.,
located at One SeaGate, Toledo, Ohio 43666, serves as administrator of the Fund.
HCA Securities, Inc., located at One SeaGate, Toledo, Ohio 43666, serves as
distributor of the Fund.
PIMCO, located at 840 Newport Center Drive, Suite 300, Newport Beach,
California 92660, has served as sub-adviser to the Fund since its inception
(12/29/1987) pursuant to a sub-advisory agreement dated November 15, 1994 (the
"Sub-Advisory Agreement").
PIMCO recently underwent a "change of control" as a result of the
consummation of the transaction described below, resulting in the assignment (as
that term is defined in the Investment Company Act of 1940, as amended ("1940
Act")) and, therefore, automatic termination of the Sub-Advisory Agreement. In
light of this, the Board, at the request of the Adviser, was asked to consider a
new sub-advisory agreement between the Adviser and PIMCO with terms that are
substantially identical to the Sub-Advisory Agreement (the "New Sub-Advisory
Agreement"). There would be no change in the sub-advisory fee rate payable to
PIMCO under the New Sub-Advisory Agreement. The Board approved the New
Sub-Advisory Agreement at a meeting held on February 7, 2000, and the New
Sub-Advisory Agreement took effect on May 5, 2000.
As a matter of regulatory compliance, we send you this Shareholder
Information Statement, describing the recent PIMCO transaction and the terms of
the New Sub-Advisory Agreement that the Board of Trustees have approved.
<PAGE> 3
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INFORMATION ABOUT THE TRANSACTION
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DESCRIPTION OF THE TRANSACTION. On October 31, 1999, PIMCO Advisors L.P.
("PIMCO Advisors"), PIMCO Advisors Holdings L.P. ("PAH"), PIMCO Partners G.P.
("Partners G.P."), certain of their affiliates, Allianz of America, Inc.
("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 acquired majority ownership of PIMCO Advisors (the
"Transaction"). The Transaction closed on May 5, 2000. As a result of the
Transaction, Allianz of America controls 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 of the
partnership interests in PIMCO Advisors continue to be owned by Pacific Life
Insurance Company ("Pacific Life"). PIMCO is a subsidiary partnership of PIMCO
Advisors.
In connection with the closing, Allianz of America entered into a put/call
arrangement for the possible disposition of Pacific Life's interest in PIMCO
Advisors. The put option held by Pacific Life allows 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 allows 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.
Pursuant to the Merger Agreement, PIMCO Advisors and PIMCO entered into
employment, retention and incentive arrangements with key employees of PIMCO
Advisors and PIMCO. These benefits included new employment agreements, retention
and incentive awards vesting over a term of years and restricted stock grants.
In addition, certain key employees of PIMCO Advisors' investment advisory
subsidiaries received payments in respect of previously existing non-competition
arrangements in connection with the acquisition by Allianz of America of the
PIMCO Advisors units on which such arrangements were based.
POST-TRANSACTION STRUCTURE AND OPERATIONS. PIMCO Advisors and its
subsidiaries, including PIMCO, are now 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 controls
PIMCO Advisors, and its subsidiaries, through its managing member interest in
Pacific-Allianz Partners LLC ("PacPartners LLC"), which is the sole general
partner of PIMCO Advisors following the Transaction. While Allianz of America
controls PacPartners LLC, Pacific Life holds a portion of its continuing
interest in PIMCO Advisors through an interest in PacPartners LLC. Allianz of
America, through subsidiaries, is managing member of PacPartners LLC and has the
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 remains independent and leads the global fixed income
investment efforts of Allianz AG. In this regard, PIMCO coordinates 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 Fund(s), 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 will continue
to operate in the United States under its existing name.
Both William S. Thompson Jr., the current Chief Executive Officer of PIMCO,
and William H. Gross, the current Chief Investment Officer of PIMCO, have roles
on the Executive Committee of AAM, with Mr. Thompson serving as the Executive
Committee's Deputy Chairman. Messrs. Thompson and Gross entered into employment
contracts with a term of seven years following the Transaction. Other key
employees,
2
<PAGE> 4
of PIMCO and PIMCO Advisors also contractually agreed to remain with PIMCO for
significant periods following the Transaction.
DESCRIPTION OF ALLIANZ AG 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, PIMCO and the Allianz group combined 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. 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 PIMCO. Absent an SEC
exemption or other relief, the Fund generally is precluded from effecting
principal transactions with the Affiliated Brokers, and its ability to purchase
securities being underwritten by an Affiliated Broker or to utilize the
Affiliated Brokers for agency transactions is subject to restrictions. PIMCO
does not believe that the applicable restrictions on transactions with the
Affiliated Brokers described above materially adversely affects its ability to
provide services to the Fund, the Fund's ability to take advantage of market
opportunities, or the Fund's overall performance. Other series of the Trust for
which PIMCO does not serve as investment adviser are not, in general, subject to
these same restrictions.
ANTICIPATED IMPACT OF THE TRANSACTION ON MANAGEMENT OF THE FUND. PIMCO
received structural and contractual protections as terms of the Transaction that
ensure PIMCO's operational autonomy and continuity of management. PIMCO is
confident that Allianz AG is committed to the people and process that have led
to PIMCO's success over the years. Accordingly, the Transaction should not have
an immediate impact, other than as already noted above, on the management of the
Fund or PIMCO's capacity to provide the type, quality, or quantity of services
that it has provided, and the Fund 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 services.
THE BENEFITS OF THE TRANSACTION. PIMCO anticipates that the Transaction
with Allianz AG benefits PIMCO and the Fund in a variety of ways, including the
following:
-- PIMCO's investment expertise is 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 is greatly enhanced by Allianz AG's experience
and relationships. The combined global resources of PIMCO and Allianz
AG 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 provides additional career opportunities for PIMCO
professionals, furthering PIMCO's ability to attract and retain the
best people.
3
<PAGE> 5
-- 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 is the sixth largest investment manager in the world.
The Transaction significantly increases assets under PIMCO's
management, and offers 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 is aware of no circumstances arising from
the Transaction that might result in an unfair burden being imposed on the
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). The Board, as
currently constituted, complies with this requirement. Allianz of America and
each of the other parties to the Merger 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.
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THE AGREEMENT
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THE SUB-ADVISORY AGREEMENT. The Sub-Advisory Agreement was last submitted
for approval by shareholders on October 19, 1994, for the purpose of
implementing the Fund's current service arrangements with respect to
sub-advisory services. The Sub-Advisory Agreement was last approved by the
Board, including a majority of the Trustees who are not parties to the
Sub-Advisory Agreement or "interested persons" (as defined in the 1940 Act) of
any such party, at a meeting held on February 6, 2000.
Under the terms of the Sub-Advisory Agreement, PIMCO is responsible for
making investment decisions and placing orders for the purchase and sale of the
Fund's investments directly with the issuers or with brokers or dealers selected
by it at its discretion. PIMCO also furnishes to the Board, which has overall
responsibility for the business and affairs of the Fund, periodic reports on the
investment performance of the Fund.
PIMCO is obligated to manage the Fund in accordance with applicable laws
and regulations. The investment advisory services of PIMCO to the Fund are not
exclusive under the terms of the Sub-Advisory Agreement. PIMCO is free to, and
does, render investment advisory services to others.
Consistent with the requirements of the 1940 Act, the Sub-Advisory
Agreement provides that PIMCO generally is not liable to the Fund for any
mistake in judgment, or otherwise, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of PIMCO's duties or by reason of
its reckless disregard of its obligations and duties under the Sub-Advisory
Agreement.
The Sub-Advisory Agreement may be terminated with respect to the Fund
without penalty upon 60 days notice by the Board or by a vote of the holders of
a majority of the Fund's outstanding shares voting as a single class, or upon 60
days notice by PIMCO. As noted above, the Sub-Advisory Agreement terminates
automatically in the event of its "assignment" (as defined in the 1940 Act).
4
<PAGE> 6
PIMCO receives a quarterly fee from the Fund at an annual rate based on
average daily net assets of the Fund as set forth in the table below. The table
also sets forth the aggregate sub-advisory fees paid to PIMCO during the Fund's
fiscal year ended October 31, 1999.
<TABLE>
FEE RATE AGGREGATE SUB-ADVISORY FEES PAID
- ------------------------------------------------------------------------------------------------
<S> <C>
Annual rate of 0.50% of average 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 $3,973,351
million
</TABLE>
Information about PIMCO, its principal executive officer and directors,
PIMCO's other investment company clients, and PIMCO's brokerage policies is
presented in Appendix A.
THE NEW SUB-ADVISORY AGREEMENT. The New Sub-Advisory Agreement is
substantially identical to the Existing Sub-Advisory Agreement. As noted
previously, PIMCO believes that the Transaction will not cause any reduction in
the quality or types of services provided to the Fund or have an adverse effect
on PIMCO's ability to fulfill its obligations to the Fund. There is no change in
the investment philosophies and practices currently followed by the Fund. There
is no change in sub-advisory fees for the Fund. PIMCO advised the Fund that the
same persons responsible for management of the Fund under the Sub-Advisory
Agreement were expected to continue to be responsible for management of the Fund
under the New Sub-Advisory Agreement.
The New Sub-Advisory Agreement recognizes that PIMCO may, from time to
time, seek research assistance and rely on other investment management resources
of its affiliated companies, and the Fund will disclose that a portion of the
sub-advisory fees received by PIMCO from the Adviser may be paid to those
affiliates in return for such services provided. These arrangements have no
impact on PIMCO's continuing responsibility for the management of the Fund and
do not cause any increase in the overall fees or expenses borne by the Fund.
At the February 7, 2000 meeting of the Board, the New Sub-Advisory
Agreement was approved unanimously by the Board, including all of the Trustees
who are not parties to the New Sub-Advisory Agreement or "interested persons"
(as defined in the 1940 Act) of any such party (other than as Trustees of the
Trust).
The New Sub-Advisory Agreement will remain in effect for two years from the
date it took effect and, unless earlier terminated, continue from year to year
with respect to the Fund thereafter, provided that each such continuance is
approved annually, with respect to the agreement and the Fund (i) by the Board
or by the vote of a majority of the outstanding voting securities of the Fund,
and, in either case, (ii) by a majority of the Trustees who are not parties to
the New Sub-Advisory Contract or "interested persons" (as defined in the 1940
Act) of any such party (other than as Trustees of the Trust).
EVALUATION BY THE BOARD OF TRUSTEES. The Board determined that, in
approving the New Sub-Advisory Agreement on behalf of the Fund, the Trust could
best assure itself that services provided to the Fund by PIMCO, its officers and
employees, would continue without interruption after the Transaction. The Board
believed that, like the Sub-Advisory Agreement, the New Sub-Advisory Agreement
enables the Fund to obtain high quality services at a cost that is appropriate,
reasonable, and in the best interests of the Fund and its shareholders.
In determining whether it was appropriate to approve the New Sub-Advisory
Agreement, the Board, including the Trustees who are not parties to the New
Sub-Advisory Agreement or "interested persons" (as defined in the 1940 Act) of
such parties, considered various materials and representations provided by
PIMCO, including information concerning compensation and employment arrangements
to be implemented in connection with the Transaction, 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) PIMCO's representation that the same persons responsible for
management of the Fund currently are expected to continue to manage the Fund
under the New Sub-Advisory Agreement, thus helping to ensure continuity of
5
<PAGE> 7
management; (2) the compensation to be received by PIMCO under the New
Sub-Advisory Agreement is the same as the compensation paid under the Existing
Sub-Advisory Agreement, which the Board previously had determined to be fair and
reasonable; (3) PIMCO's representation that it will not seek to increase the
rate of sub-advisory fees paid by the Fund for a period of at least two years
following the Transaction; (4) the commonality of the terms and provisions of
the New Sub-Advisory Agreement with the terms of the Existing Sub-Advisory
Agreement; (5) representations made by PIMCO concerning the potential impact of
affiliated brokerage relationships on its ability to provide services to the
Fund and on the Fund's ability to engage in portfolio transactions; (6) the
representations by PIMCO and Allianz AG that integration of Allianz AG's and
PIMCO's operations could produce benefits to shareholders through economies of
scale, expansion of PIMCO's investment expertise through the addition of Allianz
AG's 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 PIMCO under the Sub-Advisory Agreement; (8)
the results achieved by PIMCO for the Fund; and (9) the high quality of the
personnel, operations, financial condition, investment management capabilities,
methodologies, and performance of PIMCO.
Based upon its review, the Board determined that, by approving the New
Sub-Advisory Agreement, the Fund can best be assured that services from PIMCO
will be provided without interruption. The Board also determined that the New
Sub-Advisory Agreement is in the best interests of the Fund 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 Sub-Advisory Agreement.
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SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
As of April 30, 2000, the persons owning of record or beneficially 5% or
more of the Fund are set forth in Appendix B. As of the same date, the Trustees
and officers of the Trust owned beneficially or of record, less than 1% of the
Fund's shares.
6
<PAGE> 8
APPENDIX A
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INFORMATION ABOUT PIMCO
The address of PIMCO is 840 Newport Center Drive, Suite 300, Newport Beach,
California 92660. PIMCO is registered as an investment adviser under the
Investment Advisers Act of 1940 and is registered as a commodity trading advisor
with the Commodity Futures Trading Commission.
PIMCO's directors and principal executive officer, their principal
occupations and dates of service are shown below. The address of each director
and officer is 840 Newport Center Drive, Suite 300, Newport Beach, California
92660.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NAME
LENGTH OF SERVICE POSITION AND PRINCIPAL OCCUPATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William S. Thompson, Jr. Managing Director, Chief Executive Officer and Executive
April 1993 to Present 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 Director,
June 1986 to Present PIMCO Management, Inc.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
Robert Wesley Burns Managing Director and Executive Committee Member, PIMCO;
February 1987 to Present Managing Director and Director, PIMCO Management, Inc.;
Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
Chris P. Dialynas Managing Director, PIMCO; Managing Director and Director,
July 1983 to Present PIMCO Management, Inc.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
Mohamed A. El-Erian Managing Director, PIMCO; Managing Director and Director,
May 1999 to Present PIMCO Management, Inc.
- ----------------------------------------------------------------------------------------------------------
William H. Gross Managing Director, PIMCO; Managing Director and Director,
June 1971 to Present PIMCO Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of Management Board,
PIMCO Advisors L.P.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
John L. Hague Managing Director and Executive Committee Member, PIMCO;
September 1987 to Present Managing Director and Director, PIMCO Management, Inc.;
Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
Pasi M. Hamalainen Managing Director, PIMCO; Managing Director and Director,
January 1994 to Present PIMCO Management, Inc.
- ----------------------------------------------------------------------------------------------------------
Brent R. Harris Managing Director and Executive Committee Member, PIMCO;
June 1985 to Present Managing Director and Director, PIMCO Management, Inc.;
Director and Vice President, StocksPLUS Management, Inc.;
Member of Management Board and Executive Committee, PIMCO
Advisors L.P.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
Brent L. Holden Managing Director, PIMCO; Managing Director and Director,
December 1989 to Present PIMCO Management, Inc.
- ----------------------------------------------------------------------------------------------------------
Margaret E. Isberg Managing Director, PIMCO; Managing Director and Director,
August 1983 to Present PIMCO Management, Inc.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
John S. Loftus Managing Director, PIMCO; Managing Director and Director,
August 1986 to Present PIMCO Management, Inc.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 9
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NAME
LENGTH OF SERVICE POSITION AND PRINCIPAL OCCUPATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dean S. Meiling Managing Director, PIMCO; Managing Director and Director,
December 1976 to Present PIMCO Management, Inc.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
James F. Muzzy Managing Director and Executive Committee Member, PIMCO;
September 1971 to Present 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 Director,
June 1966 to Present 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 Director,
January 1991 to Present PIMCO Management, Inc.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
Ernest L. Schmider Managing Director and Secretary, PIMCO; Managing Director,
March 1994 to Present Director and Secretary, 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; Managing Director and Director,
April 1995 to Present PIMCO Management, Inc.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
Benjamin L. Trosky Managing Director, PIMCO; Managing Director and Director,
October 1990 to Present PIMCO Management, Inc.; Member of Management Board, PIMCO
Advisors L.P.; Member of PIMCO Partners LLC.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION ABOUT THE ADVISER
Harbor Capital Advisors, Inc. is a registered investment adviser and
Delaware corporation with its principal offices at One SeaGate, Toledo, Ohio
43666. The Adviser was incorporated on September 1, 1983. The Adviser is wholly
owned by Owens-Illinois, Inc. ("Owens-Illinois"). In addition to managing and
administering the assets of the Fund, the Adviser also manages separate accounts
for the Harbor Capital Group Trust for Defined Benefit Plans.
The address of the directors and officers of the Adviser is One SeaGate,
Toledo, Ohio 43666. The directors and officers and their principal occupations
are shown below.
<TABLE>
<CAPTION>
NAME POSITION AND PRINCIPAL OCCUPATION
---- ---------------------------------------------
<S> <C>
David G. Van Hooser Director and Chairman of the Board, the
Adviser
James M. Williams Director and President, the Adviser
Constance L. Souders Director, Senior Vice President, Secretary
and Treasurer, the Adviser
James W. Baehren Assistant Secretary, the Adviser
Karen B. Wasil Assistant Secretary, the Adviser
Marlene J. Snow Assistant Treasurer, the Adviser
</TABLE>
A-2
<PAGE> 10
OTHER INVESTMENT COMPANY CLIENTS OF PIMCO
As of September 30, 1999, PIMCO also served as investment adviser or
sub-adviser to the following investment companies, at the fee rates set forth
below, which had the indicated net assets as of that date.
<TABLE>
<CAPTION>
NAME OF FUND ADVISORY FEE RATE APPROXIMATE ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
PIMCO FUNDS:
PACIFIC INVESTMENT
MANAGEMENT SERIES
- --------------------------------------------------------------------------------------------------
Money Market Fund Annual rate of 0.15% of $ 560,587,313
average daily net assets
- --------------------------------------------------------------------------------------------------
Short-Term Fund Annual rate of 0.25% of 633,444,433
average daily net assets
- --------------------------------------------------------------------------------------------------
Low Duration Fund Annual rate of 0.25% of 4,612,199,034
average daily net assets
- --------------------------------------------------------------------------------------------------
Low Duration Fund II Annual rate of 0.25% of 465,267,930
average daily net assets
- --------------------------------------------------------------------------------------------------
Low Duration Fund III Annual rate of 0.25% of 25,361,958
average daily net assets
- --------------------------------------------------------------------------------------------------
Low Duration Mortgage Fund Annual rate of 0.25% of 4,157,459
average daily net assets
- --------------------------------------------------------------------------------------------------
Moderate Duration Fund Annual rate of 0.25% of 331,884,959
average daily net assets
- --------------------------------------------------------------------------------------------------
Real Return Bond Fund Annual rate of 0.25% of 117,197,203
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Fund Annual rate of 0.25% of 29,253,953,837
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Fund II Annual rate of 0.25% of 1,196,259,061
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Fund III Annual rate of 0.25% of 593,041,215
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Mortgage Fund Annual rate of 0.25% of 4,011,699
average daily net assets
- --------------------------------------------------------------------------------------------------
High Yield Fund Annual rate of 0.25% of 3,547,311,498
average daily net assets
- --------------------------------------------------------------------------------------------------
Long-Term US Government Fund Annual rate of 0.25% of 367,846,155
average daily net assets
- --------------------------------------------------------------------------------------------------
Short Duration Municipal Annual rate of 0.20% of 10,504,759
Income Fund average daily net assets
- --------------------------------------------------------------------------------------------------
Municipal Bond Fund Annual rate of 0.25% of 55,389,116
average daily net assets
- --------------------------------------------------------------------------------------------------
California Intermediate Municipal Bond Annual rate of 0.25% of 3,123,929
Fund average daily net assets
- --------------------------------------------------------------------------------------------------
New York Intermediate Municipal Bond Annual rate of 0.25% of 3,011,706
Fund average daily net assets
- --------------------------------------------------------------------------------------------------
Global Bond Fund Annual rate of 0.25% of 289,770,362
average daily net assets
- --------------------------------------------------------------------------------------------------
</TABLE>
A-3
<PAGE> 11
<TABLE>
<CAPTION>
NAME OF FUND ADVISORY FEE RATE APPROXIMATE ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Global Bond Fund II Annual rate of 0.25% of $ 42,715,021
average daily net assets
- --------------------------------------------------------------------------------------------------
Foreign Bond Fund Annual rate of 0.25% of 577,679,632
average daily net assets
- --------------------------------------------------------------------------------------------------
International Bond Fund Annual rate of 0.25% of 980,127,949
average daily net assets
- --------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund Annual rate of 0.45% of 17,340,723
average daily net assets
- --------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund II Annual rate of 0.45% of 217,093,611
average daily net assets
- --------------------------------------------------------------------------------------------------
Strategic Balanced Fund Annual rate of 0.40% of 167,190,375
average daily net assets
- --------------------------------------------------------------------------------------------------
Convertible Bond Fund Annual rate of 0.40% of 38,753,114
average daily net assets
- --------------------------------------------------------------------------------------------------
StocksPLUS Fund Annual rate of 0.40% of 1,385,857,599
average daily net assets
- --------------------------------------------------------------------------------------------------
PIMCO VARIABLE
INSURANCE TRUST
- --------------------------------------------------------------------------------------------------
Money Market Portfolio Annual rate of 0.30% of N/A
average daily net assets
- --------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio Annual rate of 0.35% of N/A
average daily net assets
- --------------------------------------------------------------------------------------------------
Low Duration Bond Portfolio Annual rate of 0.40% of 5,098,362
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.40% of 3,208,009
average daily net assets
- --------------------------------------------------------------------------------------------------
High Yield Bond Portfolio Annual rate of 0.50% of 131,180,580
average daily net assets
- --------------------------------------------------------------------------------------------------
Foreign Bond Portfolio Annual rate of 0.60% of 5,031,932
average daily net assets
- --------------------------------------------------------------------------------------------------
StocksPLUS Growth & Income Portfolio Annual rate of 0.40% of 169,524,872
average daily net assets
- --------------------------------------------------------------------------------------------------
Long-Term US Government Bond Portfolio Annual rate of 0.40% of 6,906,274
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Bond Portfolio II Annual rate of 0.40% of 5,099,211
average daily net assets
- --------------------------------------------------------------------------------------------------
Real Return Portfolio Annual rate of 0.40% of N/A
average daily net assets
- --------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 12
<TABLE>
<CAPTION>
NAME OF FUND ADVISORY FEE RATE APPROXIMATE ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- --------------------------------------------------------------------------------------------------
Fixed Income III Fund Annual rate of 0.25% of net 158,140,598
assets 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 193,102,561
assets 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 33,478,757
assets 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 622,475,175
average 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 1,053,024,408
average daily net assets on
first $25 million; 0.375% on
next $25 million; 0.25% on
remaining assets
- --------------------------------------------------------------------------------------------------
Government Securities Series Annual rate of 0.50% of 397,265,729
average daily net assets on
first $25 million; 0.375% on
next $25 million; 0.25% on
remaining assets
- --------------------------------------------------------------------------------------------------
</TABLE>
A-5
<PAGE> 13
<TABLE>
<CAPTION>
NAME OF FUND ADVISORY FEE RATE APPROXIMATE ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
PRUDENTIAL SECURITIES
TARGET PORTFOLIO TRUST
- --------------------------------------------------------------------------------------------------
Intermediate Term Bond Portfolio Annual rate of 0.25% of $ 113,010,679
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.25% of 66,889,600
average daily net assets
- --------------------------------------------------------------------------------------------------
Total Return Bond Fund Annual rate of 0.25% of Not open as of
average daily net assets 9/30/99
- --------------------------------------------------------------------------------------------------
PIMCO COMMERCIAL
MORTGAGE SECURITIES
TRUST, INC.
- --------------------------------------------------------------------------------------------------
PIMCO Commercial Mortgage Securities Annual rate of 0.725% of 148,074,899
Trust, Inc. average weekly net assets paid
quarterly
- --------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
- --------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.30% of 1,035,861,299
average 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 421,807,622
average daily net assets on
first $150 million; 0.25% of
average daily net assets on
assets over $150 million paid
monthly
- --------------------------------------------------------------------------------------------------
Master Trust Total Return Annual rate of 0.25% of 170,012,653
average daily net assets
- --------------------------------------------------------------------------------------------------
FREMONT MUTUAL
FUNDS, INC.
- --------------------------------------------------------------------------------------------------
Total Return Fund Annual rate of 0.25% of 187,068,687
average daily net assets paid
quarterly
- --------------------------------------------------------------------------------------------------
Global Bond Fund Annual rate of 0.30% of 24,283,647
average daily net assets paid
quarterly
- --------------------------------------------------------------------------------------------------
PAINEWEBBER MANAGED
INVESTMENTS TRUST
- --------------------------------------------------------------------------------------------------
Low Duration US Government Income Fund Annual rate of 0.25% of 122,967,595
average daily net assets
- --------------------------------------------------------------------------------------------------
PAINEWEBBER SERIES TRUST
- --------------------------------------------------------------------------------------------------
Strategic Fixed Income Annual rate of 0.25% of 7,298,286
average daily net assets
- --------------------------------------------------------------------------------------------------
PAINEWEBBER MANAGED
ACCOUNTS SERVICES
PORTFOLIO TRUST
- --------------------------------------------------------------------------------------------------
PACE Government Securities Fixed Income Annual rate of 0.25% of 197,767,164
average daily net assets
- --------------------------------------------------------------------------------------------------
PACE Strategic Fixed Income Investments Annual rate of 0.25% of 230,222,525
average daily net assets
- --------------------------------------------------------------------------------------------------
</TABLE>
A-6
<PAGE> 14
<TABLE>
<CAPTION>
NAME OF FUND ADVISORY FEE RATE APPROXIMATE ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
JACKSON NATIONAL LIFE
SERIES TRUST
- --------------------------------------------------------------------------------------------------
JNL/PIMCO Total Return Bond Series Annual rate of 0.25% of $ 9,753,810
average daily net assets
excluding the value of client
contributed capital
- --------------------------------------------------------------------------------------------------
FORWARD GLOBAL FUND
- --------------------------------------------------------------------------------------------------
Forward Global Fund Annual rate of 0.35% of 30,263,618
average 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 23,259,990
average daily net assets
computed daily and paid
monthly
- --------------------------------------------------------------------------------------------------
Prudential Diversified Conservative Annual rate of 0.25% of 28,956,072
Growth average daily net assets
computed daily and paid
monthly
- --------------------------------------------------------------------------------------------------
Prudential Diversified Conservative Annual rate of 0.25% of 30,034,833
Portfolio average daily net assets
computed daily and paid
monthly
- --------------------------------------------------------------------------------------------------
MANULIFE
- --------------------------------------------------------------------------------------------------
Manulife Global Bond Trust Annual rate of 0.375% on first 161,197,318
$50 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 Trust Annual rate of 0.30% on first 190,550,262
$50 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
- --------------------------------------------------------------------------------------------------
SALOMON SMITH BARNEY/ CONSULTING GROUPS
CAPITAL MARKET FUND
- --------------------------------------------------------------------------------------------------
Intermediate Fixed Income Investment Annual rate of 0.25%, 270,423,858
Portfolio multiplied by 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>
A-7
<PAGE> 15
BROKERAGE POLICIES
PIMCO receives research services from many broker-dealers with which it
places portfolio transactions. Consistent with applicable law, PIMCO may cause
the Fund to pay a broker-dealer which provides brokerage and research services
to PIMCO an amount of disclosed commission for effecting a securities
transaction for the Fund 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 in advising various of
its clients (including the Fund), although not all of these services are
necessarily of value in managing the Fund. The management fees paid by the Fund
are not reduced because PIMCO and its 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 may also
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
A-8
<PAGE> 16
APPENDIX B
- --------------------------------------------------------------------------------
To the knowledge of the Fund, as of April 30, 2000, the following persons
owned of record or beneficially 5% or more of the outstanding shares of Harbor
Bond Fund.
<TABLE>
<CAPTION>
NAME OF OWNER % OF OWNERSHIP
- ------------------------------------------------------------ --------------
<S> <C>
Charles Schwab & Co., Inc.
Omnibus Account
101 Montgomery Street
San Francisco, CA 94101-4122 22%
Donaldson Lufkin Jenrette
SEC Corp. Inc. Reinvest Account
c/o Transfer Dept. -- 7th Floor
P.O. Box 2052
Jersey City, NJ 07303-2052 8%
National Financial
c/o Mutual Funds
P.O. Box 3908
Church Street Station
New York, NY 10008-3908 11%
</TABLE>
B-1
<PAGE> 17
[HARBOR FUND LOGO]
One SeaGate
Toledo, Ohio 43666
1-800-422-1050
www.harborfund.com
