<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:
[X] Preliminary Proxy Statement [ ] Confidential, for use of
the Commission Only (as
permitted by Rule 14a-6(e)
[ ] Definitive Proxy Statement (2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PIMCO FUNDS
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PACIFIC INVESTMENT MANAGEMENT COMPANY
840 Newport Center Drive
Newport Beach, California 92660
January __, 2000
Dear PIMCO Funds: Pacific Investment Management Shareholders:
On behalf of the Board of Trustees of PIMCO Funds: Pacific Investment
Management Series (the "Trust"), we are pleased to invite you to a special
meeting of the shareholders of the Trust to be held at 840 Newport Center Drive,
Suite 300, Newport Beach, California, 92660 on [March 3], 2000 at [time],
Pacific Time.
As discussed in more detail in the enclosed proxy statement, Pacific
Investment Management Company ("PIMCO"), the investment adviser for each series
of the Trust (the "Funds") and a subsidiary partnership of PIMCO Advisors, L.P.,
("PIMCO Advisors"), will undergo a "change in control" as a result of the
consummation of an agreement entered into by PIMCO Advisors, its two general
partners, PIMCO Advisors Holdings L.P. and PIMCO Partners, G.P., certain of
their affiliates, Allianz of America, Inc., and certain other parties named
pursuant to which Allianz of America will acquire approximately 70% of the
outstanding partnership interests in PIMCO Advisors in a series of transactions
(the "Transaction"). At the meeting, you will be asked to consider the following
proposals:
. Election of eight Trustees to the Board of Trustees.
. Approval of a new investment advisory agreement between the Trust and
PIMCO. The new investment advisory agreement provides that following the
Transaction, PIMCO will continue to provide investment advisory services
to each Fund on the same terms and with the same compensation structure
under which it currently operates.
. Approval of a new distribution and service plan for Class D Shares of
the Funds. The new distribution and service plan provides that following
the Transaction, PIMCO will continue to provide distribution-related
services to the Funds' Class D Shares on the same terms and with the
same compensation structure under which it currently operates.
. Approval of changes to each Fund's fundamental investment policies. The
changes are intended to simplify and modernize each Fund's fundamental
investment policies to enhance management's ability to manage the Fund's
assets efficiently in changing regulatory and investment environments.
. Approval of an Amended and Restated Declaration of Trust (the "Amended
Declaration"). The Amended Declaration would permit the Trust to respond
more
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quickly and favorably to changing markets without going to the expense
and delay of holding a shareholder's meeting, and also would clarify the
existing rights, privileges and powers of the Board of Trustees and
shareholders of the Trust.
Your vote is important. After reviewing these proposals, your Board of
Trustees unanimously agreed that they are in the best interests of each Fund'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 promptly in order to avoid the expense of additional mailing
or having our proxy solicitor, DF King & Co., Inc., telephone you.
Thank you in advance for your participation in this important event.
Sincerely,
[___________]
Executive Vice President
<PAGE>
PIMCO Funds
840 Newport Center Drive
Suite 300
Newport Beach, California 92660
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held
[March 3], 2000
To the Shareholders of PIMCO Funds:
Notice is hereby given that a special meeting of shareholders of the
currently operational series of the PIMCO Funds (the "Trust") will be held at
800 Newport Center Drive, 6th Floor, Newport Beach, California, 92660 on [March
3], 2000 at [time], Pacific Time, or as adjourned from time to time (the
"Meeting"), for the purposes listed below. This proxy statement relates to all
currently active series of the Trust, other than the PIMCO International Bond
Fund and the PIMCO Emerging Markets Bond Fund II (the "Funds"). Shares of the
PIMCO International Bond Fund and the PIMCO Emerging Markets Bond Fund II are
offered only to private account clients of Pacific Investment Management Company
("PIMCO"), and proxies for these series are being solicited separately. The
Meeting will be held:
I. To elect Trustees to the Board of Trustees of the Trust;
II. To approve a new investment advisory contract;
III. To approve a distribution and service plan (Class D shares, only
IV. To approve changes to fundamental investment policies;
V. To approve an Amended and Restated Declaration of Trust; and
VI. 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
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share of a Fund is entitled to one vote with respect to proposals on which that
Fund's shareholders are entitled to vote, with fractional votes for fractional
shares. If you held shares of more than one Fund on the record date, you will
receive separate proxy cards for each Fund.
Regardless of whether you plan to attend the Meeting, which you are
cordially invited to attend, PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD 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
_____, 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.
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<PAGE>
PRELIMINARY PROXY MATERIALS FOR SEC USE ONLY
PROXY STATEMENT
PIMCO Funds
840 Newport Center Drive
Suite 300
Newport Beach, California 92660
Special Meeting of Shareholders
To be held
[March 3], 2000
This proxy statement and enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Trustees (the
"Board" or "Trustees") of the PIMCO Funds (the "Trust") for use at a joint
special meeting of shareholders of the currently operational series of the Trust
to be held at 800 Newport Center Drive, 6th Floor, Newport Beach, California
92660 on [March 3], 2000 at [time], Pacific Time, or as adjourned from time to
time (the "Meeting"), for the purposes set forth below.
This proxy statement relates to all currently active series of the
Trust, other than the PIMCO International Bond Fund and the PIMCO Emerging
Markets Bond Fund II (the "Funds"). Shares of the PIMCO International Bond Fund
and the PIMCO Emerging Markets Bond Fund II are offered only to private account
clients of Pacific Investment Management Company ("PIMCO"), and proxies for
these series are being solicited separately. It is anticipated that the first
mailing of proxies and proxy statements to shareholders will be on or about
[January __], 2000.
Shareholder Reports. Shareholders can find important information
about the Funds in the annual report dated March 31, 1999 and the semi-annual
report dated September 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 Funds with
respect to the following proposals:
I. To elect Trustees to the Board of Trustees of the Trust;
II. To approve a new investment advisory contract;
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III. To approve a distribution and service plan (Class D shares,
only);
IV. To approve changes to fundamental investment policies;
V. To approve an Amended and Restated Declaration of Trust; and
VI. To transact such other business as may properly come before the
Meeting.
I. ELECTION OF TRUSTEES
Each of the current Trustees of the Trust is being proposed for re-
election to the Board. In addition, in connection with the transaction described
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 adviser,
PIMCO. To that end, at the Meeting, two new Trustees who are not "interested
persons" of the Trust are also proposed for election to the Board (together with
the current Trustees, the "Nominees").
The Nominating Committee, composed of independent Trustees Messrs.
Babcock, Curtis, Kemp and Popejoy, is responsible for the selection, nomination
for appointment, and election of candidates to serve as Trustees of the Trust.
The Nominating Committee did not meet during the fiscal year ended March 31,
1999.
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 had approved the nominations of Mr. E.
Philip Cannon and Mr. J. Michael Hagan; recommended to the Board that they be
elected; and that the nominations be submitted to shareholders for approval. The
Board also agreed that each of the current Trustees should stand for re-election
and that these nominations should be submitted to shareholders for approval.
In evaluating the Nominees, the Board noted that Messrs. Cannon and
Hagan have significant experience and the background necessary to make them
very valuable additions to the Board as independent Trustees. The Board also
noted that each of the current Trustees, except Mr. Burns, previously had been
elected to, and served on, the Board, and that Mr. Burns has served on the Board
since November 1997. The Board, therefore, concluded that each of the current
Trustees have the background, experience and working knowledge of the Funds, as
well as the professional experience to be effective members of the Board.
If the Nominees are elected at the Meeting, there will be a total of
eight Trustees on the Board, all of whom will have been elected by shareholders.
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.
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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 an
individual or individuals is sooner succeeded as provided in the Trust's
Declaration of Trust. It is proposed, and the Board recommends, that
shareholders elect the Nominees.
The following table sets forth certain information concerning the
Nominees.
<TABLE>
<CAPTION>
Name and Age Length of Current Principal Occupation(s)
Service on Position During the Past Five Years
the Board with the
Trust
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<S> <C> <C> <C>
Guilford C. Babcock 4/87 - Present Trustee Associate Professor of Finance,
1500 Park Place University of Southern California;
San Marino, California 91108 Director, PIMCO Commercial Mortgage
Age 68 Securities Trust, Inc.; Trustee, PIMCO
Variable Insurance Trust; Director,
Growth Fund of America and Fundamental
Investors Fund of the Capital Group;
Director, Good Hope Medical Foundation.
William J. Popejoy 7/93-2/95 and Trustee President, Pacific Capital
29 Chatham Court 8/95-Present Investors; Chairman, PacPro (vinyl
Newport Beach, California 92660 assembly products; formerly
Age 61 Western Printing); Director, PIMCO
Commercial Mortgage Securities
Trust, Inc.; Trustee, PIMCO
Variable Insurance Trust, Formerly
Director, California State
Lottery; Chief Executive Officer,
Orange County, California.
R. Wesley Burns* 11/97 - Present President and Managing Director, Pacific
840 Newport Center Drive Trustee Investment Management Company;
Newport Beach, California 92660 President and Director, PIMCO
Age 40 Commercial Mortgage Securities
Trust, Inc.; President and
Trustee, PIMCO Variable Insurance
Trust; Formerly Executive Vice
President, Pacific Investment
Management Company; Executive Vice
President, PIMCO Funds:
Multi-Manager Series.
Vern O. Curtis 4/87 - 3/93 and Trustee Private Investor; Director, PIMCO
14158 N.W. Bronson Creek Drive 2/95 - Present Commercial Mortgage Securities Trust,
Portland, Oregon 97229 Inc.; Trustee, PIMCO Variable Insurance
Age 65 Trust; 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.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Age Length of Current Principal Occupation(s)
Service on Position During the Past Five Years
the Board with the
Trust
<S> <C> <C> <C>
E. Philip Cannon Nominee Trustee Proprietor, Cannon & Company, an
3838 Olympia affiliate of Inverness Management L.L.C, a
Houston, Texas 77019 private equity investment firm; and Trustee
Age 59 of PIMCO Funds; Multi-Manager Series.
Formerly, Headmaster, Sts. John's Schol,
Houston, Texas; Trustee of Cash Accummulation
Trust ("CAT"); General Partner, J.B. Poindexter &
Co., Houston , Texas, a private partnership;
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 Trustee Retired from Furon Company where
6 Merced he served as Chairman and CEO from
San Clemente, California 92673 June 1991 to 1999, and in other
Age: 60 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, Freedom
Communications, Remedy Temp and
Saint-Gobain. 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.
</TABLE>
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<TABLE>
<CAPTION>
Name and Age Length of Current Principal Occupation(s)
Service on Position During the Past Five Years
Board with the Trust
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brent R. Harris* 2/92 - Present Chairman of the Managing Director, PIMCO; Board of
840 Newport Center Drive Board and Trustee Governors, Investment Company
Newport Beach, California 92660 Institute; Chairman and Director, PIMCO
Age 40 Commercial Mortgage Securities Trust,
Inc.; Chairman and Trustee, PIMCO
Variable Insurance Trust.
Thomas P. Kemp 4/87 - Present Trustee Private Investor; Director, PIMCO
1141 Marine Drive Commercial Mortgage Securities Trust,
Laguna Beach, California 92651 Inc.; Trustee, PIMCO Variable Insurance
Age 69 Trust; Formerly Co-Chairman, U.S.
Committee to Assist Russian Reform;
Director, Union Financial Corp.; Senior
Consultant, World Cup 1994 Organizing
Committee.
</TABLE>
___________________
*Mr. Burns and Mr. Harris are an "interested persons" of the Trust (as
that term is defined in the 1940 Act) because of their affiliations with PIMCO.
During the fiscal year ended March 31, 1999, there were six meetings
of the Board. There was 100% attendance by Trustees at the meetings of the
Board throughout the period.
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As of December 15, 1999, the Trustees and officers of the Trust, as a
group, owned less than one percent of the outstanding shares of each Fund in the
aggregate, or of any class of shares of any Fund.
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 accountants, submits a recommendation to the Board as to the
selection of independent public accountants, and reviews generally the
maintenance of the Trust's records and the safekeeping arrangements of the
Trust's custodian. During the fiscal year ended March 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 $45,000
plus $3,000 for each Board meeting attended in person and $500 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 $1,500. For the
fiscal year ended March 31, 1999, the Trustees who are not interested persons of
the Fund, as a group, received compensation in the amount of $233,500.
The following table sets forth the compensation paid to each of the
current Trustees of the Trust for the year ended March 31, 1999. Trustees who
are "interested persons" of the Trust do not receive any compensation from the
Funds.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name Aggregate Compensation from Trust Total Compensation from Trust
Trust and Fund Complex*
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Guilford C. Babcock $58,000 $78,500
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Vern O. Curtis $59,500 $81,000
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Thomas P. Kemp $58,000 $78,500
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William J. Popejoy $58,000 $78,500
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
___________________
* Fund complex includes the Trust, PIMCO Commercial Mortgage Securities
Trust, Inc., a registered closed-end management investment company, and
PIMCO Variable Insurance Trust, a registered open-end management investment
company. For their services to PIMCO Commercial Mortgage Securities Trust,
Inc., the Directors listed above received an annual retainer of $6,000 plus
$1,000 for each Board of Directors, committee, or special 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 one year period ended December 31, 1999, these
Directors, as a group, received compensation in the amount of $42,500 from
PIMCO Commercial Mortgage Securities Trust, Inc.
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The Trustees listed above, for their services as Trustees of PIMCO Variable
Insurance Trust, receive an annual retainer of $4,000 plus $1,500 for each
Board of Trustees, committee or special meeting attended in person ($500
for each meeting attended telephonically), an annual retainer of $500 for a
Committee Chairmanship, plus reimbursement of related expenses. For the one
year period ended December 31, 1999, these Trustees, as a group, received
compensation in the amount of $40,500 from PIMCO Variable Insurance Trust.
Material Interest of Trustees and Nominees. 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, L.P. ("PIMCO Advisors") and
certain of its affiliates. Messrs. Burns and Harris, as managing directors of
PIMCO, will receive employment related compensation and other benefits as a
result of the transaction. For a complete discussion of the transaction, see
Proposal II.
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 A NEW INVESTMENT
ADVISORY CONTRACT
Introduction. PIMCO, located at 840 Newport Center Drive, Suite 300,
Newport Beach, California, 92660, has served as investment adviser to the Funds
since their inception on February 19, 1987. PIMCO currently serves as adviser
to the Funds pursuant to an investment advisory contract dated November 22, 1994
(the "Advisory Contract"). In addition, PIMCO serves as the administrator of
the Funds pursuant to an amended and restated administration services agreement
adopted on February 24, 1998 (the "Administration Agreement").
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 (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.
PIMCO 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 Advisory Contract. It is proposed that PIMCO
continue to serve as investment adviser of the Funds following completion of the
transaction. Therefore, in connection with the transaction and
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as required by the 1940 Act, shareholders of each Fund are being asked in
Proposal II to approve a new Advisory Contract between the Trust, on behalf of
each Fund, and PIMCO which is substantially identical to the current Advisory
Contract (the "New Advisory Contract"). The Board recommends that shareholders
approve the New Advisory Contract. If the New Advisory Contract is approved,
PIMCO will continue to serve as administrator under the Administration
Agreement. Forms of the New Advisory Contract and Administration Agreement are
attached as Appendix A.
Information about PIMCO, its officers and directors, the executive officers
of the Trust, PIMCO's investment company clients, and PIMCO's 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 an indirect 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,
without interest, an amount in cash equal to $38.75 per unit, subject to a
potential downward adjustment if PIMCO Advisors' investment advisory revenue
base, 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.
Immediately following the merger, subsidiaries of Allianz of America will,
in a series of transactions, acquire approximately 70% of the outstanding
partnership interests in PIMCO Advisors, including the approximately 44%
interest held by PAH. As part of the Transaction, a subsidiary of Allianz of
America will acquire Partners GP through an acquisition of the managing general
partner interest in Partners GP from Partners LLC (the managing general partner
of Partners GP) for approximately $5.5 million. Pacific Life, which through
subsidiaries owns approximately a 30% interest in PIMCO Advisors, will retain an
indirect interest in PIMCO Advisors following the closing. 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 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 accounts
managed by PIMCO Advisors and its subsidiaries being at least 75% of the
September 30, 1999 amount. Approval of the New Advisory Contract by the
shareholders of the Funds will count toward satisfaction of condition (iii)
described in the preceding sentence. If the Transaction is not completed for
any reason, the Advisory Contract will remain in effect. In the event the New
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Advisory Contract is not approved by the Funds' 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, 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, which, together with its subsidiaries, comprise the world's second
largest insurance group as measured by premium income. Allianz of America will
control PIMCO Advisors through its managing member interest in 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.
Operationally, PIMCO is expected to become a unit of Allianz Asset
Management ("AAM"), the division of Allianz AG that coordinates global Allianz
AG asset management activities. PIMCO is expected to remain operationally
independent, and to become the global fixed income investment management
division of Allianz AG, and is currently expected to 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, will have
roles on the Executive Committee of AAM, with Mr. Thompson serving as the
Executive Committee's Deputy Chairman. In the Transaction, Messrs. Thompson and
Gross will enter into employment contracts with a term of seven years following
the Transaction. Other key employees, including the Managing Directors, have
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 and which,
together with its subsidiaries, comprise 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 will have over $650 billion in assets under
management. Allianz AG's address is: Allianz Aktiengesellschaft, Koniginstrasse
28, D-80802, Munich, Germany.
Significant institutional shareholders of Allianz currently include,
without limit, Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and
HypoVereinsbank. Dresdner Bank AG and Deutsche Bank AG, as well as certain
broker-dealers controlled by or affiliated with these entities, such as Bankers
Trust Company, BT Alex Brown, Inc., Morgan Grenfell and Kleinwort Benson
(collectively, the "Affiliated Brokers"), may be considered to be affiliated
persons of PIMCO. Once the Transaction is completed, absent an SEC exemption or
other relief, the Funds 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 the
Affiliated Brokers for agency transactions would be subject to restrictions.
PIMCO does not believe that applicable restrictions on transactions with the
Affiliated Brokers described above will
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materially adversely affect its ability, post-closing, to provide services to
the Funds, the Funds' ability to take advantage of market opportunities, or the
Funds' overall performance. Other series of the Trust for which PIMCO (or an
affiliate) does not serve as investment adviser would not, in general, be
subject to these same restrictions post-closing.
Anticipated Impact of the Transaction on Management of the Funds. PIMCO
has 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 have no
immediate impact, other than as already noted above, on the management of the
Funds or PIMCO's capacity to provide the type, quality, or quantity of services
that it currently provides, and the Funds 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 Funds 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
manage 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 go ahead 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.
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Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe
harbor for an investment adviser or any affiliated persons to receive any amount
or benefit in connection with a "change in control" of the investment adviser to
an investment company 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 on the 1940 Act) of the investment adviser (or
predecessor or successor adviser). Allianz AG 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 such two-
year period.
The Contracts. The Advisory Contract. PIMCO has served as investment
adviser to each Fund since each Fund's commencement of investment operations.
The Advisory Contract was last submitted for approval by shareholders of all
then-operational Funds at a meeting on October 17, 1994, for the purpose of
implementing the Fund's current service arrangements with respect to investment
advisory and administrative services.
Under the terms of the Advisory Contract, PIMCO is responsible for making
investment decisions and placing orders for the purchase and sale of each 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 Funds, periodic reports on
the investment performance of the Funds.
PIMCO is obligated to manage each Fund in accordance with applicable laws
and regulations. The investment advisory services of PIMCO to the Funds are not
exclusive under the terms of the Advisory Contract. PIMCO is free to, and does,
render investment advisory services to others.
Consistent with the requirements of the 1940 Act, the Advisory Contract
provides that PIMCO generally is not liable to the Funds 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 Advisory Contract.
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The Advisory Contract may be terminated by a Fund without penalty upon not
fewer than 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 not
fewer than 60 days' notice by PIMCO. As noted above, the Advisory Contract
terminates automatically in the event of its "assignment" (as defined in the
1940 Act).
Information about investment advisory fees and administrative fees paid to
PIMCO, including aggregate investment advisory fees and administrative fees paid
by each Fund during its last fiscal year, is set forth in Appendix C.
The New Advisory Contract. The New Advisory Contract is substantially
identical to the Advisory Contract. As noted previously, PIMCO does not
anticipate that the Transaction will cause any reduction in the quality or types
of services now provided to the Funds or have any adverse effect on PIMCO's
ability to fulfill its obligations to the Funds. No change is anticipated in
the investment philosophies and practices currently followed by the Funds.
There will be no change in advisory fees for the Funds.
At the December 1, 1999 meeting of the Board, the New Advisory Contract was
approved unanimously by the Board, including all of the Trustees who are not
parties to the New Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party (other than as Trustees of the Trust). The New
Advisory Contract, as approved by the Board, is submitted for approval by the
shareholders of the Funds.
If the New Advisory Contract is approved by shareholders, it will take
effect immediately after the closing of the Transaction. The New Advisory
Contract will remain in effect for two years from the date it takes effect, and,
unless earlier terminated, will continue from year to year thereafter, provided
that each such continuance is approved annually with respect to the contract and
Fund (i) by the Board or by the vote of a majority of the outstanding voting
securities of the particular Fund, and, in either case, (ii) by a majority of
the Trustees who are not parties to the New Advisory Contract or interested
persons of any such party (other than as Trustees of the Trust).
If the shareholders of any Fund should fail to approve the New Advisory
Contract pertaining to that Fund, the Transaction may not be consummated. If
the Transaction is not consummated, PIMCO will continue to serve as adviser and
administrator for all of the Funds under the current Advisory Contract.
The Administration Agreement and Payments to PIMCO Affiliates. Under the
terms of the Administration Agreement, PIMCO provides administrative services to
each Fund, including administrative and clerical functions, certain shareholder
servicing functions and supervision of the services rendered to the Funds by
other persons, including the custodian and transfer agent. In approving the New
Advisory Contract, the Trustees considered that PIMCO receives fees for the
services it provides under the Administration Agreement. In addition, affiliates
of PIMCO provide or procure shareholder servicing and distribution-related
services for the Funds and will receive compensation in connection with such
activities with respect to the Funds. Information about shareholder servicing
and distribution-related fees paid to PIMCO affiliates under the distribution
contracts, including aggregate distribution fees paid by each Fund during its
last fiscal year, is set forth in Appendix D.
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The Administration Agreement may be terminated by a Fund without penalty
upon not fewer than 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
not fewer than 60 days' notice by PIMCO. The Administration Agreement terminates
automatically in the event of its "assignment" (as defined in the 1940 Act) with
respect to the Class D shares of the Funds.
Interests of Certain Persons in the Transaction. The Managing Directors,
each of which 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 advisors 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 of
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 Retention
Plan provides fixed and variable retention arrangements for each of 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 former Managing
Directors who are parties to those contracts noncompete payments equal to
distribution 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
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<PAGE>
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 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. The Managing Directors, as
well as certain executive officers of PIMCO, will also participate in the
Deferred Compensation Plan, under which 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.
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 Contract
on behalf of the Funds, the Trust can best assure itself that the services
currently provided to the Funds by PIMCO, its officers, and employees, will
continue without interruption after the Transaction. The Board believes that,
like the Advisory Contract, the New Advisory Contract will enable the Funds to
obtain high quality services at a cost that is appropriate, reasonable, and in
the best interests of each Fund and its shareholders.
In determining whether or not it was appropriate to approve the New
Advisory Contract and to recommend approval to shareholders, the Board,
including the Trustees who are not parties to the New Advisory Contract or
interested persons of such parties, considered various materials and
representations provided by PIMCO 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) PIMCO's representation that the same persons responsible for
management of the Funds currently are expected to continue to manage the Funds
under the New Advisory Contract, thus helping to ensure continuity of
management; (2) that the compensation to be received by PIMCO
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under the New Advisory Contract is the same as the compensation paid under the
Advisory Contract, which the Board previously has determined to be fair and
reasonable; (3) PIMCO's representation that it will not seek to increase the
rate of advisory fees paid by the Funds for a period of at least two years
following the Transaction; (4) the commonality of the terms and provisions of
the New Advisory Contract with the terms of the Advisory Contract; (5)
representations made by PIMCO concerning the impact of affiliated brokerage
relationships on its ability to provide services to the Funds, and on the Funds'
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 Advisory Contract; (8) the fairness of the
compensation payable to PIMCO under the Advisory Contract; (9) the results
achieved by PIMCO for the Funds; and (10) 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
Advisory Contract, the Funds can best be assured that services from PIMCO will
be provided without interruption. The Board also determined that the New
Advisory Contract is in the best interests of each 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
Advisory Contract and voted to recommend their approval by each Fund's
shareholders.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT AS PROVIDED UNDER
PROPOSAL II. UNMARKED PROXIES WILL BE SO VOTED.
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III. APPROVAL OF THE CLASS D
DISTRIBUTION PLAN
Introduction. PIMCO serves as the administrator for each class of the
Funds' shares, including Class D shares, pursuant to the Administration
Agreement. The Administration Agreement includes a plan, adopted in conformity
with Rule 12b-1 under the 1940 Act, that provides for the payment of a fee
thereunder as reimbursement of expenses for services that may be deemed to
constitute distribution-related services with respect to Class D shares of the
Funds. The plan was approved with respect to the Funds' Class D shares as part
of the Administration Agreement on February 24, 1998, by the Trustees, including
those Trustees who are not "interested persons" of the Trust, and who have no
direct or indirect financial interest in the operation of the plan or any
related agreements (the "Plan Trustees").
As required by Rule 12b-1 and the terms of the Administration Agreement,
consummation of the Transaction will result in the termination of the
Administration Agreement with respect to Class D shares. The Board proposes
that holders of Class D shares of each Fund that has Class D shares issued and
outstanding approve a new plan (the "Plan"), to be included in the
Administration Agreement, to continue providing for reimbursement of expenses
for services under the Administration Agreement that may be deemed to constitute
distribution-related services with respect to Class D shares.
The Plan. At the December 1, 1999 meeting of the Board, the Plan was
approved unanimously by the Board, including the Plan Trustees. The Plan must
be voted upon by shareholders of Class D shares of each Fund that had Class D
shares issued and outstanding as of the record date.
The Plan, as part of the Administration Agreement, is substantially
identical to the current plan. There will be no change in the Plan's fees for
the Class D shares of the Funds. The Plan provides that a portion of the fees
under the Administration Agreement, up to 0.25% per annum of the average daily
net asset value of Class D shares, may represent reimbursement for expenses in
respect of activities that may be deemed to be primarily intended to result in
the sale of Class D shares.
Under the terms of the Plan, PIMCO shall provide with respect to Class D
shares, either directly or by procuring through other entities, including
various financial services firms such as broker-dealers and registered
investment advisers (each a "Service Organization"), some or all of the services
and facilities in connection with direct purchases of Class D shares by
shareholders or in connection with products, programs or accounts offered by
such Service Organizations. The services provided under the Plan may include:
(i) facilities for placing orders directly for the purchase of a Fund's shares
and tendering a Fund's Class D shares for redemption; (ii) advertising with
respect to a Fund's Class D shares; (iii) providing information about the Funds;
(iv) providing facilities to answer questions from prospective investors about
the Funds; (v) receiving and answering correspondence (including requests for
prospectuses and statements of additional information); (vi) preparing, printing
and delivering prospectuses and shareholder reports to prospective shareholders;
(vii) assisting investors in applying to purchase Class D shares and selecting
dividend and other account options; and (viii) shareholder services provided by
a Service Organization, which may include the following functions: receiving,
aggregating
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and processing shareholder orders, furnishing shareholder sub-accounting,
providing and maintaining elective shareholder services such as check writing
and wire transfer services, providing and maintaining pre-authorized investment
plans, communicating periodically with shareholders, acting as sole shareholder
of record and nominee for shareholders, maintaining accounting records for
shareholders, answering questions and handling correspondence from shareholders
about their accounts, issuing confirmations for transactions by shareholders,
performing similar account administrative services, providing such shareholder
communications and recordkeeping services as may be required for any program for
which the Service Organization is a sponsor that relies on Rule 3a-4 under the
1940 Act and providing such other similar services as may reasonably be
requested to the extent the Service Organization is permitted to do so under
applicable statutes, rules or regulations. The Plan requires the Trustees to
review, at least quarterly, a written report of expenditures under the Plan.
If the Plan is approved by shareholders, it will take effect immediately
after the closing of the Transaction. The Plan will remain in effect for a
period of one year from the date it takes effect, and, unless earlier
terminated, will continue from year to year thereafter, provided that each such
continuance is approved annually with respect to a Fund (i) by a majority of the
Board of Trustees, and (ii) by a majority of the Plan Trustees. In addition,
the Plan may not be amended to increase materially the amount of the
distribution fee thereunder with respect to Class D shares of a Fund without a
vote of a majority of the outstanding Class D shares of that Fund. In addition,
all material amendments to the Plan must be approved by a majority of the Plan
Trustees.
The Trust's principal underwriter is PIMCO Funds Distributors LLC (the
"Distributor"), 2187 Atlantic Street, Stamford, Connecticut 06902, a broker-
dealer registered with the Securities and Exchange Commission (the
"Commission"). The Distributor acts as the principal underwriter to the Trust
pursuant to a Distribution Contract with the Trust. PIMCO has entered into an
agreement with the Distributor under which the Distributor is compensated for
certain services contemplated by the Administration Agreement, including
shareholder and distribution-related services, at a rate of 0.25% per annum of
all assets attributable to Class D Shares sold through the Distributor. For the
fiscal year ended March 31, 1999, the Trust paid $48,375 under the Class D Plan,
of which the indicated amounts were attributable to the operational Funds as set
forth in Appendix D.
By virtue of their current positions with PIMCO, Messrs. Harris and Burns
may be deemed to have a material interest in the approval of the Plan.
If the Transaction is consummated, but the Class D shareholders of any Fund
should fail to approve the Plan, the Board will consider appropriate action,
including implementation of the Administration Agreement with respect to such
Fund without inclusion of the Plan in the agreement. If the Transaction is not
consummated, PIMCO will continue to serve as administrator under the current
Administration Agreement and provide or procure services, which may be deemed to
constitute distribution-related services, for all of the Funds that have Class D
shares.
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Evaluation by the Board of Trustees. The Trustees believe that the
continued use of financial intermediaries under the Plan will provide the Funds
with the opportunity to engage and compensate registered broker-dealers to aid
in the sale of Class D shares in a manner consistent with regulatory
requirements. Based on the information provided to the Trustees by the
Distributor and PIMCO, the Trustees believe that the Plan will benefit the Trust
by stimulating sales of Class D shares or by reducing redemptions of Class D
shares. Increased sales and/or reduced redemptions may allow PIMCO, as
investment adviser, to provide current and future shareholders with the
potential for greater diversification of their assets and for an increase in
investment opportunities for Class D shares. In addition, the Trustees believe
the Plan; (1) will improve Class D distribution through broader institutional
channels, (2) will enhance market presence and brand awareness and (3) will not
result in any expense to the Trust or Class D shares of the Trust in addition to
costs and expenses presently borne by Class D shareholders.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE PLAN AS PROVIDED UNDER PROPOSAL III. UNMARKED
PROXIES WILL BE SO VOTED.
IV. 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 Funds in
order to reflect regulatory, business or industry conditions that were in effect
at the time the particular action was taken. In addition, as certain Funds have
been created or acquired over the years, these Funds have adopted substantially
similar fundamental restrictions that often have been phrased in slightly
different ways, resulting in minor but unintended differences in effect or
potentially creating unintended differences in interpretation. Because of the
opportunity afforded by this Meeting, the Board has reviewed each Fund's
fundamental policies with the goal of simplifying, modernizing and making
consistent to the extent possible the fundamental policies of the Funds.
This Proposal seeks shareholder approval of changes that are intended to
accomplish that goal. The proposed changes to each Fund'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
Fund's current comparable policy. The formulation of each proposed policy
differs from the current policy in the interest of uniformity and simplicity.
Each Fund's policies with respect to the concentration of investments,
borrowing, the issuance of senior securities, and lending differ from the
current policies of each Fund in that the requirements of the 1940 Act are not
described in detail. Therefore, the new policies that govern each Fund would be
determined by reference to the provisions of the 1940 Act, the rules thereunder,
and applicable interpretations of the Commission or its staff, rather than the
express terms of the policies.
The Board believes that eliminating the differences among the Funds'
fundamental restrictions will enhance management's ability to manage the Funds'
assets efficiently in changing regulatory and investment environments, and
permit management and the Board to
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review and monitor investment policies more easily. In addition, standardizing
the fundamental investment restrictions of the Funds will assist the Funds in
making required regulatory filings in a more efficient and cost-effective
manner. The proposed changes in fundamental restrictions will allow each Fund
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 Fund.
The text and a summary description of each proposed change to each Fund's
fundamental restrictions are set forth below. The Funds current fundamental
investment policies are set forth in Appendix E. If approved by the Funds'
shareholders at the Meeting, the proposed changes to the Funds' fundamental
restrictions will be adopted by each Fund. The Funds' Statement of Additional
Information will be revised to reflect those changes as soon as practicable
following the Meeting. If the shareholders of a Fund fail to approve any
proposed fundamental policy, the current policy (if any) will remain in effect.
Shareholders of each Fund will be asked to vote on each proposed
fundamental policy separately on the enclosed proxy card.
a. Concentration (All Funds). The Funds' current policy on industry
concentration prohibits the purchase of securities if it would result in more
than 25% of the market value of a Fund's total assets being 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 Fund, investments in
securities or obligations of U.S. banks. With respect to the Global Bond Fund
II, the current policy notes the SEC staff's position that certain non-U.S.
government securities do not represent investments in a separate industry. In
addition, with respect to the Municipal Bond Funds and the Global Bond Fund II,
the current policy describes what constitutes an industry for the purposes of
the industry concentration restriction.
The Board recommends that shareholders vote to replace the current
fundamental policy on concentration with the following fundamental policy:
Each Fund 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 PIMCO Money Market
Fund 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 Commission takes the position that investment of more
than 25% of a Fund's assets in an industry constitutes concentration. If a
Fund's fundamental policy prohibits the Fund from concentrating in an industry,
the Fund 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 Fund is permitted to adopt reasonable definitions of
what constitutes an industry, or it may use standard classifications promulgated
by the Commission, or some combination thereof. Because each Fund may create
its own reasonable industry classifications,
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the Board believes that it is not necessary to include such matters in the
fundamental policy of a Fund. The proposed concentration policy will retain the
exception that excludes the Money Market Fund's investment in securities or
obligations issued by U.S. banks, which is common among money market funds.
b. Diversification (Only the following Funds: Money Market, Short-Term,
Low Duration, Low Duration II, Low Duration III, Low Duration Mortgage, Moderate
Duration, Total Return, Total Return II, Total Return III, Total Return
Mortgage, High Yield, Long-Term U.S. Government, Long Duration, Short-Duration
Municipal Income, Municipal Bond, Strategic Balanced, Convertible Bond and
StockPLUS (each a "Diversified Fund")). Under the current diversification
policy, each Diversified Fund, 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
Funds' current fundamental policies on diversification be consolidated and
replaced with the following fundamental investment restriction:
Each Fund may not, with respect to 75% of the Fund'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 Fund's total assets would be invested in
the securities of that issuer, or (ii) the Fund 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 Fund's current policies into a single uniform fundamental policy.
c. Investments in Real Estate (Global Bond Fund II only). Under its
----
current fundamental investment policy regarding investments in real estate, the
Global Bond Fund II may not purchase or sell real estate, except that it is
permitted to purchase securities of issuers that deal in real estate, including
securities of real estate investment trusts, and may purchase securities that
are secured by interests in real estate. The Board recommends that the current
fundamental policy of the Global Bond Fund II be replaced with the following
fundamental investment policy:
Each Fund may not purchase or sell real estate, although it may purchase
securities secured by real estate or interests therein, or securities
issued by companies which invest in real estate, or interests therein.
The proposed fundamental policy regarding investments in real estate is not
materially different from the current comparable policy except that the policy
has been reworded and clarified. The primary purpose of the Proposal is to
eliminate minor differences in the wording of the Global Bond Fund II's current
fundamental policy on investments in real estate to achieve
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<PAGE>
greater uniformity with the other Funds' fundamental policy investments in real
estate, and to avoid unintended limitations resulting from different
interpretations of the policy.
d. Margin (Total Return III, High Yield, and StocksPLUS Funds only).
----
Under its current fundamental policy on margin, each of the Total Return III,
High Yield, and StocksPLUS Funds is not permitted to purchase securities on
margin, except for use of short-term credit necessary for clearance of purchases
and sales of portfolio securities. In addition, each of these Funds is
permitted to make margin deposits in connection with transactions in options,
futures, and options on futures. Margin purchases involve the purchase of
securities with money borrowed from a broker. "Margin" is the cash or eligible
securities that the borrower places with a broker as collateral against the
loan.
The Board recommends that shareholders vote to eliminate this fundamental
policy because, under the 1940 Act, a Fund is not required to adopt restrictions
on margin as a fundamental policy. If the Proposal is approved by shareholders,
the Board will adopt the current fundamental policy as a non-fundamental
restriction for each of the Total Return III, High Yield, and StocksPLUS Funds.
Non-fundamental policies may be modified or eliminated by the Board at anytime
without shareholder approval. The Board does not anticipate that elimination of
the current fundamental policy will materially change the level of investment
risk associated with an investment in these Funds. The Board also believes that
elimination of the fundamental restriction and adoption of the non-fundamental
restriction will provide these Funds with greater investment flexibility and the
ability to respond more effectively to legal, regulatory and market
developments.
e. Borrowing and Senior Securities (All Funds). Under its current
fundamental policy on borrowing and senior securities, each Fund, except the
Global Bond Fund II, may not borrow money, issue senior securities, or pledge,
mortgage or hypothecate its assets, except that the Fund may (i) borrow from
banks or enter into reverse repurchase agreements, provided that the Fund
maintains asset coverage of 300%, and (ii) enter into certain transactions on
derivative instruments, including options, futures, or options on futures.
Under its fundamental policy on borrowing and senior securities, the Global Bond
Fund II may borrow money up to 10% of the value of its total assets, but only
from banks for temporary or emergency purposes. In addition, the Global Bond
Fund II may not pledge, hypothecate, or mortgage its securities in excess of 10%
of its total assets, and may do so only to secure permitted borrowings.
To simplify and modernize each Fund'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 Fund 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.
The primary purpose of the proposed change is to standardize the
restrictions and conform them to the current regulatory requirements and
evolving market environment. Reverse
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<PAGE>
repurchase agreement transactions and transactions including derivative
investments 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 Fund
would not be limited to borrowing for temporary or emergency purposes, each Fund
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 Funds may borrow money directly from certain of the other
Funds.
The proposed policy will also allow each Fund 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 Fund that has a claim to the Fund's
assets or earnings that takes precedence over the claims of the Fund'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 Funds 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.
The proposed fundamental policy would permit the Global Bond Fund II to
borrow and issue senior securities in excess of 10% of the value of its total
assets, and therefore is less restrictive than its current fundamental policy.
However, if the proposed policy is approved, the Board will adopt a non-
fundamental policy that is substantially similar to the Global Bond Fund II's
current fundamental policy.
Adoption of the proposed policy is not expected to materially affect the
operation of the Funds, and the Board does not anticipate that the proposed
fundamental policy will change the level of investment risk associated with an
investment in the Funds. However, adoption of the proposed policies will allow
the Funds 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 Funds and their shareholders.
f. Loans (All Funds). The current fundamental policy on loans for each
Fund prohibits the making of loans, except loans of portfolio securities, entry
into repurchase agreements, and the purchase of debts obligations, to the extent
these transactions are consistent with the Fund's investment objectives and
policies. The Global Bond Fund II does not presently have a fundamental policy
regarding loans, but it has adopted a similar policy as a non-fundamental
policy. The Board recommends that the shareholders vote to replace the Funds'
current fundamental policies with the following fundamental investment policy:
Each Fund 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 Board also recommends that shareholders approve the adoption of the
proposed fundamental policy on loans for the Global Bond Fund II.
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<PAGE>
The proposed policy, unlike the current policy, does not specify the
particular types of lending in which each Fund is permitted to engage; instead,
the proposed policy permits each Fund 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 Fund may enter into certain
lending arrangements that would benefit the Fund and its shareholders, including
interfund lending agreements under which the Funds could lend money directly to
the other Funds. The proposed policy would provide the Funds with greater
flexibility and maximize each Fund's lending capabilities, thereby allowing the
Funds to respond more effectively to regulatory, industry and market
developments.
g. Underwriting (Global Bond Fund II only). Under its current fundamental
policy on underwriting, the Global Bond Fund II may not underwrite securities
issued by other persons. The Global Bond Fund II, however, is not prohibited
from selling securities if, as a result of the sale, it would technically be
deemed to be an underwriter under federal securities laws.
The Board recommends that shareholders vote to replace the Global Bond Fund
II's current fundamental policy on underwriting with the following fundamental
policy:
Each Fund may not act as an underwriter of securities of other issuers,
except to the extent that in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under the federal
securities laws.
The primary purpose of the Proposal is to eliminate minor differences in
the wording of the Global Bond Fund II's current fundamental policy on
underwriting to achieve uniformity with the fundamental policy of other Funds
and to avoid unintended limitations or interpretations.
h. Short Positions (All Funds). Under its current fundamental policy on
short positions, each Fund may not maintain a short position, or purchase, write
or sell puts, calls, straddles, spreads or combinations thereof, except as
specified in the Prospectuses and Statement of Additional Information.
The Board recommends that shareholders vote to eliminate the current
fundamental policy. If the Proposal is approved by shareholders, the Board will
adopt a non-fundamental policy for each Fund that is substantially similar, if
not identical to, the current fundamental policy on short positions. Non-
fundamental policies may be modified or eliminated by the Board at anytime
without shareholder approval. The Board does not anticipate that elimination of
the current fundamental policy will materially change the level of investment
risk associated with an investment in the Funds. Because the proposed non-
fundamental policy can be changed without shareholder approval, the Board
believes that elimination of the fundamental policy and adoption of the non-
fundamental restriction will permit the Funds to respond more effectively to
legal, regulatory and market developments.
i. Investments in other Investment Companies. The Board recommends that
shareholders vote to adopt the following fundamental investment policy for each
Fund:
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<PAGE>
Notwithstanding any other fundamental investment policy or limitation, it
is a fundamental policy of each Fund that it may elect, in the future, 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 Fund.
The proposed fundamental policy will permit each Fund 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"). The master/feeder
structure has the potential, under certain circumstances, to minimize
administration costs and maximize the possibility of gaining a broader investor
base. Currently, none of the funds intend to establish a master/feeder
structure; however, the Board recommends that each Fund's shareholders adopt the
proposed policy that will permit this structure in the event the Board
determines to recommend the adoption of a master/feeder structure by a Fund.
The proposed fundamental policy would also give the each Fund 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 FUND VOTE "FOR" EACH PROPOSED CHANGE TO THE FUND'S FUNDAMENTAL INVESTMENT
POLICIES AS SET FORTH IN THIS PROPOSAL IV. UNMARKED PROXIES WILL BE SO VOTED.
V. APPROVAL OF AMENDED AND
RESTATED DECLARATION OF TRUST
The Trust is a Massachusetts business trust created by a Declaration of
Trust dated February 19, 1987, which, with the Trust's By-laws, govern how the
Trust and each of its Funds will operate. The current Declaration of Trust (the
"Current Declaration") was first prepared and approved by the Board in February
1987. Since then, the mutual fund industry and the laws and regulations
applicable to mutual funds have evolved. In response to these developments,
many mutual funds have adopted a declarations of trust that permit them to be
more flexible in their operations to respond quickly and effectively to changing
market conditions. Because of the opportunity afforded by this Special Meeting,
the Board reviewed the Current Declaration with the goal of modernizing its
provisions to allow the Trust to respond more quickly and favorably to changing
markets without going to the expense and delay of holding a shareholders'
meeting. To this end, the Board has approved, subject to shareholder approval,
an Amended and Restated Declaration of Trust (the "Amended Declaration"). In
addition to providing the Trust with greater flexibility, the Amended
Declaration will also clarify existing rights, privileges and powers of the
Board and shareholders.
A summary description of the proposed amendments to the Current Declaration
is set forth below. A form of the Amended Declaration, as approved by Board, is
set forth in Appendix F, and qualifies in its entirety the following summary.
a. Establishment and Designation of Multiple Classes. The Board proposes
to amend the Current Declaration to clarify that the Board has the authority to
(i) issue the shares of the Trust in multiple classes, and (ii) fix and
determine the relative rights and preferences of each class. The Current
Declaration includes a general provision under which the Board may
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<PAGE>
authorize the issuance of multiple classes, but it does not specifically set
forth the procedures for establishing and designating each class or the rights
and preferences of such classes. Specifically, the Amended Declaration shall
state the following:
The Trustees, in their discretion, may authorize the division of the Shares
of the Trust, or, if any Series be established, the Shares of any Series,
into two or more Classes, and the different Classes shall be established and
designated, and the variations in the relative rights and preferences as
between the different Classes shall be fixed and determined, by the
Trustees; provided, that all Shares of the Trust or of any Series shall be
identical to all other Shares of the Trust or the same Series, as the case
may be, except that there may be variations between different Classes as to
allocation of expenses, right of redemption, special and relative rights as
to dividends and on liquidation, conversion rights, and conditions under
which the several Classes shall have separate voting rights. All references
to Shares in this Declaration shall be deemed to be Shares of any or all
Classes as the context may require.
1. All provisions herein relating to the Trust, or any Series of the Trust,
shall apply equally to each Class of Shares of the Trust or of any Series of
the Trust, except as the context requires otherwise.
2. The number of Shares of each Class that may be issued shall be
unlimited. The Trustees may classify or reclassify any Shares or any Series
of any Shares into one or more Classes that may be established and
designated from time to time. The Trustees may hold as treasury Shares (of
the same or some other Class), reissue for such consideration and on such
terms as they may determine, or cancel any Shares of any Class reacquired by
the Trust at their discretion from time to time.
3. Liabilities, expenses, costs, charges and reserves related to the
distribution of, and other identified expenses that should properly be
allocated to, the Shares of a particular Class may be charged to and borne
solely by such Class and the bearing of expenses solely by a Class of Shares
may be appropriately reflected in a manner determined by the Trustees, and
cause differences in the net asset value attributable to, and the dividend,
redemption and liquidation rights of, the Shares of different Classes. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all
Classes for all purposes.
4. The establishment and designation of any Class of Shares shall be
effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Class, or as otherwise provided in such
instrument. The Trustees may, by an instrument executed by a majority of
their number, abolish any Class and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the status
of an amendment to this Declaration.
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<PAGE>
Because this amendment specifically sets forth the procedures for
establishing and designating each class of shares and the rights and preferences
of those classes, the Board believes that this amendment will better protect the
interests of all shareholders. This amendment will not affect the rights and
preferences of the shareholders of each existing class of the Funds.
b. Master/Feeder Arrangements. The Board proposes to amend the Current
Declaration to permit each Fund of the Trust to invest all or a portion of its
assets in one or more underlying investment companies or vehicles that have
substantially similar investment objectives, policies and limitations as the
Fund (i.e., to enter into a "master/feeder" structure). Specifically, the
Amended Declaration will state that the Board has the power to:
To invest, through a transfer of cash, securities and other assets or
otherwise, all or a portion of the Trust Property, or to sell all or a
portion of the Trust Property and invest the proceeds of such sales, in
another investment company that is registered under the 1940 Act.
The master/feeder structure has the potential, under certain circumstances,
to minimize administration costs and maximize the possibility of gaining a
broader investor base. Although none of the Funds currently intends to
establish a master/feeder structure, this amendment would permit establishment
of this structure without further shareholder approval in the event the Board
determines to recommend the adoption of a master/feeder structure by a Fund.
This amendment would also give the each Fund flexibility to invest in other
investment companies to the extent permitted by the 1940 Act. The addition of
this provision to the Amended Declaration is consistent with proposed changes to
the each Fund's fundamental investment policies that would permit each Fund to
operate within a master/feeder structure. See Proposal IV (i). The Current
Declaration does not contain a comparable provision.
c. Merger, Consolidation and Sale of Assets. The Board proposes to amend
the Current Declaration to permit a majority of the Board, by signed written
instrument, to reorganize the Trust or a Fund, or sell all or substantially all
of the assets of the Trust or a Fund, without submitting the reorganization or
sale to shareholder vote. Specifically, the Amended Declaration will state the
following:
The Trust or any Series thereof may merge or consolidate with any other
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property or the property of
any Series, including its good will, upon such terms and conditions and for
such consideration when and as authorized by an instrument in writing
signed by a majority of the Trustees.
The Current Declaration provides that a merger, consolidation or sale of
assets be approved by two-thirds of the shares outstanding and entitled to vote
(or a majority of shareholders if the transaction is recommended by the
Trustees), or by such other vote as may be established by the Trustees. The
Board believes that this amendment would provide the Trust and each Fund with
greater flexibility should circumstances indicate that a merger, consolidation
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or sale of assets is in the best interests of the Trust, each Fund, and the
shareholders, without having to incur the substantial delay and additional
expense of a shareholder meeting.
d. Shareholder Voting. The Board proposes to amend the Current
Declaration to provide that the Board may exercise all powers granted to them in
the Amended Declaration without shareholder approval, unless otherwise required
by the Amended Declaration or applicable federal and state laws. Specifically,
the Amended Declaration will state:
Except to the extent specifically provided to the contrary in this
Declaration, the Trustees may exercise each of the powers granted to them
in this Declaration without the vote, approval or agreement of the
Shareholders, unless such a vote, approval or agreement is required by the
1940 Act or applicable laws of the Commonwealth of Massachusetts.
This amendment does not affect the respective rights, preferences and
powers of either the shareholders or the Board, but rather clarifies those
circumstances under which the Board may act without shareholder vote. The
Current Declaration does not contain a comparable provision.
e. Notice and Reports. The Board proposes to amend the Current
Declaration to relieve the Trust of its obligation to deliver a notice of a
shareholder's meeting, a dividends check, an annual report or other shareholder
communication to a shareholder under certain conditions, as specified in the
Amended Declaration, when such prior communications have been returned to the
Trust as undeliverable. Specifically, the Amended Declaration will provide that
a notice need not be sent to a shareholder.
(i) if an annual report and a proxy statement for two consecutive
shareholder meetings have been mailed to such Shareholder's address and
have been returned as undeliverable, (ii) if all and at least two, checks
(if sent by first class mail) in payment of dividends on Shares during a
twelve-month period have been mailed to such Shareholder's address and have
been returned as undeliverable or (iii) in any other case in which a proxy
statement concerning a meeting of security holders is not required to be
given pursuant to the Commission's proxy rules as from time to time in
effect under the Securities and Exchange Act of 1934. However, delivery of
such proxy statements, annual reports and other communications shall resume
if and when such Shareholder delivers or causes to be delivered to the
Trust written notice setting forth such Shareholder's then current address.
The Board has determined that this amendment is in the best interests of
shareholders. The Board believes that this amendment will reduce the costs
incurred by each Fund in mailing the foregoing shareholder communications when
circumstances evidence that the shareholder has not provided the Fund with a
current address. The Current Declaration does not contain a comparable
provision.
f. Termination of Trust. The Board proposes to amend the Current
Declaration to permit the Trust or any Fund of the Trust to be terminated by a
majority of the Trustees, by
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signed written instrument, or (ii) an affirmative majority vote of the
shareholders of the Trust or Fund entitled to vote. Under the Current
Declaration, a Trust or Fund can only be terminated by an affirmative two-thirds
vote of the shares outstanding and entitled to vote, or by such other vote as
may be established by the Board.
The Board has determined that permitting a majority of Trustees to
terminate the Trust or a Fund is in the best interests of all of the Trust's
shareholders. By requiring the Trustees to solicit shareholder votes, through a
proxy solicitation and special meeting of shareholders, the Current Declaration
restricts the Board's ability to act on decisions about the continued viability
of the Trust or a Fund. If the Board determines that continuation of the Trust
or a Fund is no longer advisable, it may not be in the best interest of the
shareholders to incur substantial additional expense of a shareholder meeting
when it is more important to preserve the remaining assets. The Amended
Declaration also reduces the percentage of affirmative shareholder votes needed
to terminate the Trust or a Fund from a two-thirds vote to a majority vote, but
under the Current Declaration, the Board has the authority to reduce that
percentage. If the proposal is approved, the Board will have the authority to
terminate the Trust or a Fund without further shareholder vote. The Board has
no present intention of liquidating the Trust or any of the Funds.
g. Powers of the Board. The Board proposes to amend the Current
Declaration to clarify that the Board is authorized to engage in the following
activities, each of which is permissible under the Current Declaration: (i)
invest in, hold for investment, or reinvest in, shares of open-end investment
companies; (ii) enter into repurchase agreements and forward foreign currency
exchange contracts, and to purchase and sell futures and options contracts and
to engage in all types of hedging and risk management transactions; (iii)
guarantee or become surety on any or all obligations of corporations or other
entities in which the Trust has a direct or indirect interest; (iv) enter into a
plan of distribution or related agreement that is primarily intended to result
in the sale of shares; (v) purchase insurance policies insuring shareholders,
Trustees, officers, employees, and agents against claims arising from actions
taken or omitted by such persons, whether or not such actions or omission
constitute negligence, or whether or not the Trust would have the power to
indemnify such persons against such liability; and (vi) guarantee indebtedness
or contractual obligations of others.
Although the Current Declaration includes a general provision that empowers
the Board to conduct all the foregoing activities, its does not expressly list
each of those activities. The Board believes that this amendment will prevent
any misinterpretations of the Current Declaration regarding Board authority to
conduct these activities, each of which ultimately inures to the benefit of the
Trust and its shareholders.
h. Liabilities of Series. The Board recommends that shareholders vote to
amend the Current Declaration to clarify that the assets of a particular series
of the Trust may not be charged with the liabilities of any other series, and
that no shareholder or former shareholder of a particular series shall have a
claim against the assets belonging to any other series. Specifically, the
Amended Declaration will state that "The assets of a particular Series of the
Trust shall, under no circumstances, be charged with liabilities attributable to
any other Series of the Trust," and that "No Shareholder or former Shareholder
of any Series shall have any claim on or right to
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<PAGE>
any assets allocated or belonging to any other Series." The Board believes that
this amendment will protect each series of the Trust from having to pay any of
the costs incurred by other series of the Trust. The Current Declaration does
not contain comparable provisions.
i. Other Changes. The Board proposes to amend the Current Declaration to
effect such other changes as are necessary to make the remaining provisions
consistent with the proposed amendments, and to clarify the existing provisions
of the Current Declaration. The Board also proposes to add a provision that
would allow the Board to make any other changes in the Amended Declaration that
do not materially adversely affect the rights of shareholders. These amendments
will not materially adversely affect the current rights, preferences or powers
of the Board or the shareholders of the Trust.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
OF EACH FUND VOTE "FOR" THE AMENDED DECLARATION AS SET FORTH IN THIS PROPOSAL V.
UNMARKED PROXIES WILL BE SO VOTED.
VI. 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.
Litigation filed against the Trust. On October 12, 1999, a lawsuit was
filed by Trans Texas Holdings Corporation in the United States District Court
for the Western District of Texas alleging patent infringement. In the Trans
Texas Holdings Corporation suit, (Texas Civil Action Number A 99CA658SS) the
complaint names PIMCO Advisors, L.P. and PIMCO Funds as defendants. The
complaint alleges, among other things, infringement of United States Patent No.
5,832,461 ("461 Patent") by making, selling and/or offering for sale or use in
the United States mutual funds, including the PIMCO Real Return Bond, embodying
the claimed invention in the 461 Patent and contributing to and/or inducing
infringement of the 461 Patent. The complaint seeks judgment, injunctive
relief, compensatory and exemplary damages, interest, costs, attorney fees and
such other and further relief as the Court deems just and proper. While the
ultimate outcome of this matter is not presently determinable, the Trust intends
to defend vigorously against the suit.
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. [D.F. King] has been retained to assist with proxy solicitation
activities (including assembly and mailing of materials to shareholders). To
obtain the necessary representation at the Meeting, supplementary solicitations
may be made at a cost not expected to exceed $_____. The Trust will forward to
record owners proxy materials for any beneficial owners that such record owners
may represent.
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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 Funds,
including Class D shares, representing the corresponding number of votes, were
outstanding:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Number of Shares Number of Number of Class D Number of
Outstanding Votes Shares Outstanding Votes
<S> <C> <C> <C> <C>
Money Market Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Short-Term Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Low Duration Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Low Duration Fund II
- ----------------------------------------------------------------------------------------------------------------------------------
Low Duration Fund III
- ----------------------------------------------------------------------------------------------------------------------------------
Low Duration Mortgage Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Moderate Duration Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Real Return Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return Fund II
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return Fund III
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return Mortgage Fund
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Long-Term U.S. Government Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Long Duration Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Short Duration Municipal Income Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Municipal Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
California Intermediate Municipal Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
New York Intermediate Municipal Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Global Bond Fund II
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Number of Shares Number of Number of Class D Number of
Outstanding Votes Shares Outstanding Votes
<S> <C> <C> <C> <C>
Foreign Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Strategic Balanced Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Convertible Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
StocksPLUS Fund
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of December 15, 1999, the persons owning of record or beneficially 5% or
more of the indicated classes of shares of the Funds are set forth in Appendix
G.
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 Funds 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 a majority of the
outstanding shares of each Fund 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.
Abstentions will also be counted for quorum purposes.
Broker "non-votes" (that is, proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owner or
other persons entitled to vote shares on a particular matter with respect to
which the brokers or nominees do not have discretionary power) will have the
same effect as abstentions in determining whether an issue has received the
requisite approval. Where the broker or nominee has no discretion to vote the
shares as to a proposal before the Meeting, the non-voted shares will be
excluded from the pool of shares voted on the proposal. Thus, abstentions and
non-votes will have the same effect as a negative vote on issues requiring the
affirmative vote of a specified portion of the Trust's outstanding shares, but
will not be considered votes cast and thus will have no effect on matters
requiring approval of a specified percentage of votes cast.
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 are sufficient votes for approval, even
though the Meeting is adjourned as to other proposals.
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<PAGE>
Required Vote. Shareholders of the Funds vote together on Proposals I and
V, shareholders vote separately by Fund on Proposals II and IV, Class D
shareholders vote separately by Fund on Proposal III, and shareholders will vote
as necessary on any other Proposal. Approval of Proposal I requires the vote of
shareholders owning of record a plurality of the shares of the Funds voting at
the Meeting, if a quorum is present. Approval of Proposals II, III, and IV 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 that 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. Approval of Proposal V requires the vote of a majority of the shares
outstanding and entitled to vote.
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 is requested. A self-addressed, postage-paid
envelope is enclosed for your convenience.
By Order of the Board of Trustees
____________________________
Garlin G. Flynn, Secretary
Newport Beach, California
__________, 2000
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APPENDIX A
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FORM OF
INVESTMENT ADVISORY CONTRACT
PIMCO FUNDS
840 Newport Center Drive
Newport beach, California 92260
____________________, 2000
Pacific Investment Management Company
840 Newport Center Drive
Newport Beach, California 92260
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
Pacific Investment Management Company (the "Adviser") as follows:
1. The Trust is an open-end investment company which currently has forty-
one separate investment portfolios, all of which are subject to this agreement:
the Money Market Fund; the Short-Term Fund; the Low Duration Fund; the Low
Duration Fund II; the Low Duration Fund III; the Low Duration Mortgage Fund; the
Moderate Duration Fund; the Real Return Bond Fund; the Total Return Fund; the
Total Return Fund II; the Total Return Fund III; the Total Return Mortgage Fund;
the Commercial Mortgage Securities Fund; the High Yield Fund; the Long-Term U.S.
Government Fund; the Long Duration Fund; the Global Bond Fund; the Global Bond
Fund II; the Foreign Bond Fund; the International Bond Fund; the Emerging
Markets Bond Fund; the Emerging Markets Bond Fund II; the Short Duration
Municipal Income Fund; the Municipal Bond Fund; the California Intermediate
Municipal Bond Fund; the New York Intermediate Municipal Bond Fund; the
Strategic Balanced Fund; the Convertible Bond Fund; the StocksPLUS Fund; the
StocksPLUS Short Strategy Fund; the Short-Term Portfolio; the Short-Term
Portfolio II; the U.S. Government Sector Portfolio; the U.S. Government Sector
Portfolio II; the Mortgage Portfolio; the Mortgage Portfolio II; the Investment
Grade Corporate Portfolio; the High Yield Portfolio; the International
Portfolio; the Emerging Markets Portfolio; and the Real Return Bond Portfolio
(the "Funds"). Additional investment portfolios may be established in the
future. This Contract shall pertain to the Funds and to such additional
investment portfolios as shall be designated in Supplements to this Contract, as
further agreed between the Trust and the Adviser. Five separate classes of
shares of beneficial interest in the Trust are offered to investors in each
Fund. The Trust engages in the business of investing and reinvesting the assets
of each Fund in the manner and in accordance with the investment objective and
restrictions applicable to that Fund as specified in the currently effective
Prospectus (the "Prospectus") for the Trust included in the registration
statement, as amended from time to time (the "Registration Statement"), filed by
the
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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
Advisors Distribution Company (the "Distributor"), the Fund has employed the
Distributor to serve as principal underwriter for the shares of beneficial
interest of the Trust. Pursuant to an Administration Agreement ("Administration
Agreement") between the Trust and the Adviser, the Trust has also retained the
Adviser to provide the Fund with administrative and other services.
2. The Trust hereby appoints the Adviser to provide the investment
advisory services specified in this Contract and the Adviser hereby accepts such
appointment.
3. (a) The Adviser shall, at its expense, (i) employ or associate with
itself such persons as it believes appropriate to assist it in performing its
obligations under this contract and (ii) provide all services, equipment and
facilities necessary to perform its obligations under this Contract.
(b) The Trust shall be responsible for all of its expenses and
liabilities, including compensation of its Trustees who are not affiliated with
the Adviser, the Distributor or any of their affiliates; taxes and governmental
fees; interest charges; fees and expenses of the Trust's independent accountants
and legal counsel; trade association membership dues; fees and expenses of any
custodian (including maintenance of books and accounts and calculation of the
net asset value of shares of the Trust), transfer agent, registrar and dividend
disbursing agent of the Trust; expenses of issuing, selling, redeeming,
registering and qualifying for sale shares of beneficial interest in the Trust;
expenses of preparing and printing share certificates, prospectuses and reports
to shareholders, notices, proxy statements and reports to regulatory agencies;
the cost of office supplies, including stationery; travel expenses of all
officers, Trustees and employees; insurance premiums; brokerage and other
expenses of executing portfolio transactions; expenses of shareholders'
meetings; organizational expenses; and extraordinary expenses. 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 Funds, including oral
and written research, analysis, advice, and statistical and economic data and
information.
Consistent with the investment objectives, policies and restrictions
applicable to the Trust and its Fund, the Adviser will determine the securities
and other assets to be purchased or sold by each Fund of the Trust and will
determine what portion of each Fund shall be invested in securities or other
assets, and what portion, if any, should be held uninvested.
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40 The Trust will have the benefit of the investment analysis and
research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to investment
advisory clients of the Adviser. It is understood that the Adviser will not use
any inside information pertinent to investment decisions undertaken in
connection with this Contract that may be in its possession or in the possession
of any of its affiliates, nor will the Adviser seek to obtain any such
information.
(b) The Adviser also shall provide to the officers of the Trust
administrative assistance in connection with the operation of the Trust and the
Funds, which shall include (i) compliance with all reasonable requests of the
Trust for information, including information required in connection with the
Trust's filings with the Securities and Exchange Commission and state securities
commissions, and (ii) such other services as the Adviser shall from time to time
determine to be necessary or useful to the administration of the Trust and the
Funds.
(c) As manager of the assets of the Funds, the Adviser shall make
investments for the account of the Funds in accordance with the Adviser's best
judgment and within the investment objectives, policies, and restrictions set
forth in the Prospectus, the 1940 Act and the provisions of the Internal Revenue
Code relating to regulated investment companies, subject to policy decisions
adopted by the Trust's Board of Trustees.
(d) The Adviser shall furnish to the Trust's Board of Trustees
periodic reports on the investment performance of the Trust and its Funds and on
the performance of its obligations under this Contract and shall supply such
additional reports and information as the Trust's officers or Board of Trustees
shall reasonably request.
(e) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as other of its clients,
the Adviser, to the extent permitted by applicable law, may aggregate the
securities to be so sold or purchased in order to obtain the best execution of
the order or lower brokerage commissions, if any. The Adviser may also on
occasion purchase or sell a particular security for one or more clients in
different amounts. On either occasion, and to the extent permitted by
applicable law and regulations, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Trust and to such other customers.
(f) The Adviser may cause a Fund to pay a broker which provides
brokerage and research services to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker might have
charged. Such higher commissions may not be paid unless the Adviser determines
in good faith that the amount paid is reasonable in relation to the services
received in terms of the particular transaction or the Adviser's overall
responsibilities to the Trust and any other of the Adviser's clients.
5. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this Contract. As an
inducement to the Adviser's undertaking to
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<PAGE>
render these services, the Trust agrees that the Adviser shall not be liable
under this Contract for any mistake in judgment or in any other event
whatsoever, provided that nothing in this Contract shall be deemed to protect
--------
or purport to protect the Adviser against any liability to the Trust or its
shareholders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties under this Contract or by reason of the Adviser's reckless
disregard of its obligations and duties hereunder.
6. In consideration of the services to be rendered by the Adviser under
this Contract, each Fund of the Trust shall pay the Adviser a monthly fee on the
first business day of each month, based upon the average daily value (as
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month, at the following annual rates: Money Market Fund - 0.15%;
Short Duration Municipal Income Fund - 0.20%; Commercial Mortgage Securities
Fund, Strategic Balanced Fund, Convertible Bond Fund, StocksPLUS Fund, and
StocksPLUS Short Strategy Fund - 0.40%; Emerging Markets Bond Fund and Emerging
Markets Bond II Fund - 0.45%; Short-Term Portfolio, Short-Term Portfolio II,
U.S. Government Sector Portfolio, U.S. Government Sector Portfolio, Mortgage
Portfolio, Mortgage Portfolio II, Investment Grade Corporate Portfolio, High
Yield Portfolio, International Portfolio, Emerging Markets Portfolio, and the
Real Return Bond Portfolio - 0.02%; and all other Funds - 0.25%.
If the fees payable to the Adviser pursuant to this paragraph 6 begin
to accrue before the end of any month or if this Contract terminates before the
end of any month, the fees for the period from that date to the end of that
month or from the beginning of that month to the date of termination, as the
case may be, shall be prorated according to the proportion which the period
bears to the full month in which the effectiveness or termination occurs. For
purposes of calculating the monthly fees, the value of the net assets of each
Fund shall be computed in the manner specified in the Prospectus for the
computation of net asset value. For purposes of this Contract, a "business day"
is any day the New York Stock Exchange is open for trading.
7. If the aggregate expenses of every character incurred by, or allocated
to, the Trust in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
any extraordinary expense (including, without limitation, litigation and
indemnification expense), but including the fees payable under this Contract
("includable expenses"), shall exceed the expense limitations applicable to the
Trust imposed by state securities laws or regulations thereunder, as these
limitations may be raised or lowered from time to time, the Adviser shall pay
the Trust an amount equal to that excess. With respect to portions of a fiscal
year in which this Contract shall be in effect, the foregoing limitations shall
be prorated according to the proportion which that portion of the fiscal year
bears to the full fiscal year. At the end of each month of the Trust's fiscal
year, the Adviser will review the includable expenses accrued during that fiscal
year to the end of the period and shall estimate the contemplated includable
expenses for the balance of that fiscal year. If, as a result of that review
and estimation, it appears likely that the includable expenses will exceed the
limitations referred to in this paragraph 7 for a fiscal year with respect to
the Trust, the monthly fees relating to the Trust payable to the Adviser
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<PAGE>
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 7. For purposes of the foregoing, the value of the net assets
of each Fund of the Trust shall be computed in the manner specified in paragraph
6, and any payments required to be made by the Adviser shall be made once a year
promptly after the end of the Trust's fiscal year.
8. (a) This Contract shall become effective with respect to the Funds on
________, 2000 (and, with respect to any amendment, or with respect to any
additional fund, the date of the amendment or Supplement hereto) and shall
continue in effect with respect to a Fund for a period of more than two years
from that date (or, with respect to any additional fund, the date of the
Supplement) only so long as the continuance is specifically approved at least
annually (i) by the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund or by the Trust's Board of Trustees and
(ii) by the vote, cast in person at a meeting called for the purpose, of a
majority of the Trust's trustees who are not parties to this Contract or
"interested persons" (as defined in the 1940 Act) of any such party.
(b) This Contract may be terminated with respect to a Fund (or any
additional fund) at any time, without the payment of any penalty, by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund or by a vote of a majority of the Trust's entire Board of Trustees on
60 days' written notice to the Adviser or by the Adviser on 60 days' written
notice to the Trust. This Contract (or any Supplement hereto) shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
9. Except to the extent necessary to perform the Adviser's obligations
under this Contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
10. The investment management services of the Adviser to the Trust under
this contract are not to be deemed exclusive as to the Adviser and the Adviser
will be free to render similar services to others.
11. This Contract shall be construed in accordance with the laws of the
State of California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act.
12. The Declaration of Trust establishing the Trust, dated _____________,
a copy of which, together with all amendments thereto (the "Declaration"), is on
file in the Office of the
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<PAGE>
Secretary of the Commonwealth of Massachusetts, provides that the name "PIMCO
Funds" refers to the trustees under the Declaration collectively as trustees and
not as individuals or personally, and that no shareholder, trustee, officer,
employee or agent of the Trust shall be subject to claims against or obligations
of the Trust to any extent whatsoever, but that the Trust estate only shall be
liable.
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO FUNDS
By: ____________________
Title:
ACCEPTED:
PACIFIC INVESTMENT MANAGEMENT COMPANY
By: ________________
Title:
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<PAGE>
FORM OF SECOND AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
SECOND AMENDED AND RESTATED ADMINISTRATION AGREEMENT, made this ____ day of
__________, 2000 amending and restating the Amended and Restated Administration
Agreement dated February 24, 1998, as amended to date, between PIMCO Funds (the
"Trust"), a Massachusetts business trust, and Pacific Investment Management
Company (the "Administrator" or "PIMCO").
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 each series of the Trust
issues its Shares in up to six classes: Class A, Class B, Class C, Class D, the
Institutional Class and the Administrative Class, with each such class
representing interests in the same portfolio of securities and other assets; and
WHEREAS, the Trust has established thirty series, which are designated as
the Money Market Fund; the Short-Term Fund; the Low Duration Fund; the Low
Duration Fund II; the Low Duration Fund III; the Low Duration Mortgage Fund; the
Moderate Duration Fund; the Real Return Bond Fund; the Total Return Fund; the
Total Return Fund II; the Total Return Fund III; the Total Return Mortgage Fund;
the Commercial Mortgage Securities Fund; the High Yield Fund; the Long-Term U.S.
Government Fund; the Long Duration Fund; the Global Bond Fund; the Global Bond
Fund II; the Foreign Bond Fund; the International Bond Fund; the Emerging
Markets Bond Fund; the Emerging Markets Bond Fund II; the Short Duration
Municipal Income Fund; the Municipal Bond Fund; the California Intermediate
Municipal Bond Fund; the New York Intermediate Municipal Bond Fund; the
Strategic Balanced Fund; the Convertible Bond Fund; the StocksPLUS Fund; and the
StocksPLUS Short Strategy Fund; 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 "Funds"; 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 Funds
in the manner and on the terms set forth therein; and
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<PAGE>
WHEREAS, the Trust wishes to retain PIMCO to provide or procure
administrative and other services to the Funds and their shareholders, including
services which may be deemed to constitute distribution-related services with
respect to Class D shares; and
WHEREAS, PIMCO is willing to furnish and/or to arrange for 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 the
-----------
Administrator to provide or procure the administrative and other services with
respect to the Funds 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 or
procure administrative and other services hereunder, it shall notify the
Administrator in writing. If the Administrator is willing to render or procure
such services it shall notify the Trust in writing, whereupon the portfolio
represented by such additional series shall become a Fund hereunder.
2. Duties. Subject to the general supervision of the Board of
------
Trustees, the Administrator shall provide or cause to be furnished all
administrative and other services reasonably necessary for the operation of the
Funds, including, in the case of Class D shares, certain shareholder and
distribution-related services, but not including the investment advisory
services provided pursuant to the Investment Advisory Contract with the Trust or
the distribution services provided by PIMCO Funds Distributors LLC ("PFD")
pursuant to its Distribution Contract with the Trust.
(a) Administrative Services. These services shall include the
-----------------------
following: (i) coordinating matters relating to the operation of the Funds,
including any necessary coordination among the adviser or advisers to the Funds,
the custodian, transfer agent, dividend disbursing agent, and recordkeeping
agent (including pricing and valuation of the Funds), accountants, attorneys,
and other parties performing services or operational functions for the Funds;
(ii) providing the Funds, 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 as well as other applicable laws and to provide effective administration of
the Funds; (iii) maintaining or supervising the maintenance by third parties of
such books and records of the Trust and the Funds 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 Funds required by applicable law; (v) preparing, filing, and
arranging for the distribution of proxy materials and periodic reports to
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<PAGE>
shareholders of the Funds 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 Funds and qualify the Trust to do
business or as otherwise required by applicable law; (vii) taking such other
action with respect to the Funds, as may be required by applicable law,
including without limitation the rules and regulations of the SEC and of state
securities commissions and other regulatory agencies; and (viii) providing the
Funds, at the Administrator's expense, with adequate personnel, office space,
communications facilities, and other facilities necessary for the Funds'
operations as contemplated in this Agreement.
(b) Other Services. The Administrator shall also procure on behalf of
--------------
the Trust and the Funds, and at the expense of the Administrator, the following
persons to provide services to the Funds: (i) a custodian or custodians for the
Funds to provide for the safekeeping of the Funds' assets; (ii) a recordkeeping
agent to maintain the portfolio accounting records for the Funds; (iii) a
transfer agent for the Funds; and (iv) a dividend disbursing agent for the
Funds. The Trust may be a party to any agreement with any of the persons
referred to in this Section 2(b).
(c) Retail Class Services. In addition to the Administrator's
---------------------
responsibilities as specified in Subsections (a) and (b) above, subject to the
approval or consent of the Board of Trustees, the Administrator, at its own
expense, also shall provide, directly or through persons selected by the
Administrator, to the Class A, Class B, Class C and Class D shares (the "Retail
Classes") of the Funds administrative, recordkeeping, and shareholder services
reasonably required by the Retail Classes of the Funds, which may include some
or all of the following services: (i) transfer agency services reasonably
necessary to meet the increased account activity associated with Retail Classes;
(ii) dividend disbursing services reasonably necessary to meet the increased
number of accounts associated with the Retail Classes; (iii) preparing and
arranging for the distribution of prospectuses, statements of additional
information, proxy materials, periodic reports to shareholders, and other
communications with Retail Class shareholders; and (iv) taking such other
actions and providing or procuring such other services with respect to the
Retail Classes as are reasonably necessary or desirable.
(d) Special Class D Services. The Administrator shall provide in
------------------------
respect of Class D shares (either directly or by procuring through other
entities, including various financial services firms such as broker-dealers and
registered investment advisors ("Service Organizations")) some or all of the
following services and facilities in connection with direct purchases by
shareholders or in connection with products, programs or accounts offered by
such Service Organizations: (i) facilities for placing orders directly for the
purchase of a Fund's shares and tendering a Fund's Class D shares for
redemption; (ii) advertising with respect to a Fund's Class D shares; (iii)
providing information about the Funds; (iv) providing facilities to answer
questions from prospective investors about the Funds; (v) receiving and
answering correspondence, including requests for prospectuses and statements of
additional information; (vi) preparing, printing and delivering prospectuses
and shareholder reports to prospective shareholders; (vii) assisting investors
in applying to purchase Class D shares and selecting
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dividend and other account options; and (viii) shareholder services provided by
a Service Organization that may include, but are not limited to, the following
functions: receiving, aggregating and processing shareholder orders; furnishing
shareholder sub-accounting; providing and maintaining elective shareholder
services such as check writing and wire transfer services; providing and
maintaining pre-authorized investment plans; communicating periodically with
shareholders; acting as the sole shareholder of record and nominee for
shareholders; maintaining accounting records for shareholders; answering
questions and handling correspondence from shareholders about their accounts;
issuing confirmations for transactions by shareholders; performing similar
account administrative services; providing such shareholder communications and
recordkeeping services as may be required for any program for which the Service
Organization is a sponsor that relies on Rule 3a-4 under the 1940 Act; and
providing such other similar services as may reasonably be requested to the
extent the Service Organization is permitted to do so under applicable statutes,
rules, or regulations.
The Administrator shall not be required to provide directly hereunder
any of the foregoing services which may cause the Administrator to be engaged in
the business of effecting transactions in securities for the account of others,
or to induce or attempt to induce the purchase or sale of any security, but may
procure such services on behalf of the Trust from certain Service Organizations.
The parties hereto acknowledge that the Administrator has entered into an
agreement with its affiliate, PFD, the Trust's principal underwriter, under
which PFD is compensated for certain services contemplated by this Agreement,
including shareholder and distribution-related services, at the rate of 0.25%
per annum of all assets attributable to Class D shares sold through PFD (the
"PFD Fees").
The Administrator and the Trust understand that some or all of the
services described in this subparagraph (d) may be deemed to represent services
primarily intended to result in the sale of Class D shares ("Special Class D
Services"). The Administrator agrees to present reports as to out-of-pocket
expenditures and internal expense allocations of the Administrator and PFD at
least quarterly and in a manner that permits the Qualified Trustees (hereinafter
defined) to determine that portion of the fees hereunder which represents
reimbursements in respect of Special Class D Services.
(e) Personnel. 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 Funds and
services provided to the Funds under this agreement.
(f) Standards; Reports. 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
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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 Funds' books and records as are maintained under this Agreement, and 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, in addition to reports required by Section 2(d),
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 Funds such periodic and special reports as the Trustees may reasonably
request.
3. Documentation. The Trust has delivered copies of each of the
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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 attorney, 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 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 Funds during the preceding month. The fee rates
applicable to each Class of a Fund shall be set forth in a schedule to this
Agreement. The fees payable to the Administrator for all of the Funds 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.
Any portion of the fees paid hereunder in respect of Class D shares representing
reimbursement for the Administrator's and PFD's out-of-pocket expenditures and
internally allocated expenses in respect of Special Class D Services of any Fund
(as reviewed quarterly by the Trustees based on the reports described in Section
2(d) above) shall not exceed the rate of 0.25% per annum of the average daily
net assets of such Fund attributable to Class D shares. To the extent such out-
of-pocket expenditures and internally allocated expenses exceed such rate, such
excess shall be paid by the Administrator and/or PFD from their own resources
(which may include legitimate profits from serving as investment
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adviser and/or administrator) and shall not be used as a basis for justifying or
evaluating fees paid hereunder to the Administrator in respect of services other
than the Special Class D Services.
6. Special Class D Services: Distribution Plan. To the extent that
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this Agreement relates to payments made in connection with the distribution of
the Funds' Class D shares (i.e., Special Class D Services), it shall also
----
constitute a "distribution plan" and a "related agreement" within the meaning of
Rule 12b-1 under the 1940 Act. As required by said Rule 12b-1 in respect of
distribution plans: (a) the term of this Agreement is as provided in Section 10
below; (b) the Administrator shall provide to the Trustees of the Trust, and all
such Trustees shall review, at least quarterly, a written report of the amounts
expended by the Trust for Special Class D Services and the purposes for which
such expenditures were made; and (c) this Agreement may be terminated as
provided in Section 10 (b) below. As required by said Rule 12b-1 in respect of
agreements related to distribution plans: (a) this Agreement may be terminated
as provided in Section 10 below; and (b) this Agreement may also terminate in
the circumstances described in Section 15(d) below. This Agreement may not be
amended to increase materially the maximum amount specified in Section 5 (i.e.,
the rate of 0.25% per annum) payable out of Class D assets for Special Class D
Services without approval by a majority of the outstanding Class D shares (as
defined in Section 2(a)(42) of the 1940 Act in respect of voting securities) of
a Fund. All material amendments to this Agreement (insofar as the relevant
provision constitutes a part of a distribution plan) must be approved by a
majority of the Qualified Trustees. Insofar as this Agreement constitutes a
distribution plan for Class D shares, its provisions are severable for that
Class.
It is acknowledged and agreed that classes of shares other than Class
D may have separately documented distribution plans and related agreements.
7. 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.
8. 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 Funds 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 Trust's independent public
accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
A-12
<PAGE>
(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 Fund's net assets;
(e) Expenses of obtaining Portfolio Activity Reports for each
Fund;
(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, the preparation, printing and mailings of
prospectuses, notices and proxy statements and reports of the Trust to its
shareholders, 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 authorities;
(h) The Trust's ordinary legal fees, including the legal fees
that arise in the ordinary course of business for a Massachusetts 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;
(k) Association membership dues; and
(l) Services of Service Organizations rendered in respect of
Class D shares, to the extent and subject to the conditions set forth in
Sections 2(d), 5 and 6 hereof.
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 Funds;
(c) Brokerage fees and commissions, and other portfolio
transaction expenses incurred for any of the Funds;
A-13
<PAGE>
(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
Funds, 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, including fees paid in respect of classes other than Class D pursuant to
a separate administrative service or distribution plan.
9. 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 Funds as described
in Section 2(b), (c) or (d) of this Agreement.
10. Term and Continuation. This Amended and Restated Agreement shall
---------------------
take effect as of the date indicated above, and shall remain in effect, unless
sooner terminated as provided herein, for one year from such date, and shall
continue thereafter on an annual basis with respect to each Fund 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, and (b) 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
the Administrator, and who have no direct or indirect financial interest in the
operation of this agreement or any agreement related to Special Class D Services
("Qualified Trustees"), cast in person at a meeting called for the
A-14
<PAGE>
purpose of voting on such approval. Failure of the Qualified Trustees to renew
this Agreement and/or its termination by shareholder vote, assignment, or
otherwise, shall not preclude the Board of Trustees from approving a substitute
agreement in the manner provided under applicable law.
(a) Except as provided in Section 10(b) below, this Agreement may
be terminated:
(i) by the Trust at any time with respect to the services
provided by the Administrator, without the payment of any penalty, 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
Fund or class, by vote of a majority of the outstanding voting shares of such
Fund or class, on 60 days' written notice to the Administrator;
(ii) at the expiration of the one-year period commencing on
the date of this Amended and Restated Agreement, by the Administrator at any
time, without the payment of any penalty, upon 60 days' written notice to the
Trust.
(b) insofar as it relates to Class D shares of any Fund(s), at any
time, without the payment of any penalty, by a majority of the Qualified
Trustees or by vote of a majority of the outstanding Class D shares.
11. 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 Funds to use such names (or derivatives or logos)
shall be governed by the Investment Advisory Contract.
12. 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.
13. Trust Obligation. A copy of the Trust's Declaration of Trust is
----------------
on file with the Secretary of the Commonwealth of Massachusetts and 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 each Fund and shall not be binding upon any trustee, officer, or
shareholder of the Trust individually.
14. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original.
A-15
<PAGE>
15. 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. This Agreement will
terminate with respect to the Class D shares in the event of its "assignment"
(as defined in the 1940 Act).
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 FUNDS
By:______________________
Title: President
PACIFIC INVESTMENT MANAGEMENT COMPANY
By:_______________________
Title: Managing Director
A-16
<PAGE>
APPENDIX B
----------
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 Position and Principal Occupation
Length of Service
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
William S. Thompson Managing Director, Chief Executive Officer and Management Committee
April 1993 to Present Member, PIMCO and PIMCO Management, Inc.; Member of Management Board
and Executive Committee, PIMCO Advisors L.P.; President and Chief
Executive Officer, PIMCO Partners G.P.; President, Chief Executive
Officer and Member, PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
William R. Benz, II Managing Director, PIMCO; Director and Managing Director, PIMCO
June 1986 to Present Management, Inc.; Member of PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
Robert Wesley Burns Managing Director and Management Committee Member, PIMCO. Managing
February 1987 to Present Director, PIMCO Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Chris P. Dialynas Managing Director, PIMCO and PIMCO Management, Inc.
March 1983 to Present
- -----------------------------------------------------------------------------------------------------------------------------------
Mohamed A. El-Erian Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -----------------------------------------------------------------------------------------------------------------------------------
William H. Gross Managing Director, PIMCO; Director and Managing Director, PIMCO
June 1971 to Present 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 Management Committee Member, PIMCO. Director and
September 1987 to Present Managing Director, PIMCO Management, Inc. Member of PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
Pasi M. Hamalainen Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -----------------------------------------------------------------------------------------------------------------------------------
Brent R. Harris Managing Director and Management Committee Member, PIMCO.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Name Position and Principal Occupation
Length of Service
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
June 1985 to Present Director and Managing 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 and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -----------------------------------------------------------------------------------------------------------------------------------
Margaret E. Isberg Managing Director, PIMCO and PIMCO Management, Inc.
August 1983 to Present
- -----------------------------------------------------------------------------------------------------------------------------------
John S. Loftus Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -----------------------------------------------------------------------------------------------------------------------------------
Dean S. Meiling Managing Director, PIMCO. Director and Managing Director, PIMCO
December 1976 to Present Management, Inc.; Member of PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
James F. Muzzy Managing Director and Management Committee Member, PIMCO; Director and
September 1971 to Present Managing Director, PIMCO Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
William F. Podlich, III Managing Director, PIMCO; Director and Managing Director, PIMCO
June 1966 to Present Management, Inc.; Member of Management Board, PIMCO Advisors; Member of
PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
William C. Powers Managing Director, PIMCO; Director and Managing Director, PIMCO
January 1991 to Present Management, Inc.; Member of PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
Ernest L. Schmider Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -----------------------------------------------------------------------------------------------------------------------------------
Lee R. Thomas Director and Managing Director, PIMCO and PIMCO Management, Inc.;
April 1995 to Present Member of PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
Benjamin L. Trosky Managing Director and Management Board Member, PIMCO; Director and
October 1990 to Present Managing Director, PIMCO Management, Inc.; Member of Management Board,
PIMCO Advisors; Member of PIMCO Partners LLC.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following are the executive officers of the Funds 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.
B-2
<PAGE>
<TABLE>
<CAPTION>
Length of Position with Principal Occupation(s)
Name and Age Service the Trust During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael G. Dow 8/95 - Present Senior Vice Senior Vice President, PIMCO. Formerly
Age 36 President Fixed Income Specialist, Salomon
Brothers, Inc.; Vice President
Operations, Citibank NA Global Consumer
Banking Group.
William H. Gross 4/87 - Present Senior Vice Managing Director, PIMCO; Senior Vice
Age 55 President President, PIMCO Variable Insurance
Trust.
Margaret Isberg 4/87 - Present Senior Vice Managing Director, PIMCO.
Age 43 President
Jeffrey M. Sargent 2/93 - Present Senior Vice Vice President and Manager of Investment
Age 36 President Operations Shareholder Services, PIMCO;
Senior Vice President, PIMCO Commercial
Mortgage Securities Trust, Inc. and
PIMCO Variable Insurance Trust; Vice
President, PIMCO Funds: Multi-Manager
Series.
Leland T. Scholey 2/96 - Present Senior Vice Senior Vice President, PIMCO. Formerly
Age 47 President Vice President, PIMCO.
Raymond C. Hayes 2/95 - Present Vice President Vice President, PIMCO. Formerly
Age 54 Marketing Director, Pacific Financial
Asset Management Corporation.
Thomas J. Kelleher, III 3/96 - Present Vice President Vice President, PIMCO. Previously
Age 49 associated with Delaware Trust, Mellon
Bank and Girard Trust (bank trust
departments).
Henrik P. Larsen 2/99 - Present Vice President Manager, Fund Administration, PIMCO;
Age 29 Vice President, PIMCO Commercial
Mortgage Securities Trust, Inc. and
PIMCO Variable Insurance Trust. Formerly
Supervisor, PIMCO.
Daniel T. Ludwig 2/99 - Present Vice President Account Manager, PIMCO. Formerly Vice
Age 41 President, Fidelity Investments;
Institutional Sales Representative, CS
First Boston.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
Length of Position with Principal Occupation(s)
Name and Age Service the Trust During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Andre Mallegol 3/97 - Present Vice President Vice President, PIMCO. Formerly
Age 33 associated with Fidelity Investments
Institutional Services Company.
James F. Muzzy 4/87 - Present Vice President Managing Director, PIMCO; Senior Vice
Age 60 President, PIMCO Variable Insurance
Trust.
Douglas J. Ongaro 8/95 - Present Vice President Vice President, PIMCO. Formerly
Age 38 Regional Marketing Manager, Charles
Schwab & Co., Inc.
David J. Pittman 7/97 - Present Vice President Vice President, PIMCO. Formerly a
Age 51 senior executive with Bank of America,
the Northern Trust Co. and NationsBank.
Mark A. Romano 11/97 - Present Vice President Vice President, PIMCO. Previously
Age 41 associated with Wells Fargo's
institutional money management group and
First Interstate's Pacifica family of
mutual funds.
William S. Thompson, Jr. 11/93 - Present Vice President Chief Executive Officer and Managing
Age 54 Director, PIMCO; Senior Vice President,
PIMCO Variable Insurance Trust; Vice
President, PIMCO Commercial Mortgage
Securities Trust, Inc. Formerly Managing
Director, Salomon Brothers, Inc.
John P. Hardaway 8/90 - Present Treasurer Senior Vice President and Manager of
Age 42 Investment Operations Accounting, PIMCO;
Treasurer, PIMCO Commercial Mortgage
Securities Trust, Inc., PIMCO Funds:
Multi-Manager Series and PIMCO Variable
Insurance Trust. Formerly Vice
President, PIMCO.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
Length of Position with Principal Occupation(s)
Name and Age Service the Trust During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Garlin G. Flynn 8/95 - Present Secretary Specialist, PIMCO; Secretary, PIMCO
Age 53 Commercial Mortgage Securities Trust,
Inc. and PIMCO Variable Insurance Trust;
Assistant Secretary, PIMCO Funds:
Multi-Manager Series. Formerly Senior
Fund Administrator, PIMCO; Senior Mutual
Fund Analyst, PIMCO Advisors
Institutional Services.
Joseph D. Hattesohl 2/95 - Present Assistant Treasurer Vice President and Manager of Financial
Age 35 Reporting and Taxation, PIMCO; Assistant
Treasurer, PIMCO Funds: Multi-Manager
Series, PIMCO Commercial Mortgage
Securities Trust, Inc. and PIMCO
Variable Insurance Trust. Formerly,
Manager of Fund Taxation, PIMCO;
Director of Financial Reporting, Carl J.
Brown & Co.; Tax Manager, Price
Waterhouse LLP.
Michael J. Willemsen 11/88 - Present Assistant Secretary Manager, PIMCO; Assistant Secretary,
Age 39 PIMCO Commercial Mortgage Securities
Trust, Inc. and PIMCO Variable Insurance
Trust. Formerly Project Lead, PIMCO.
</TABLE>
Other Investment Company Clients
PIMCO also serves as investment adviser or subadviser to the following
investment companies, at the fee rates set forth below, which had the indicated
net assets at September 30, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
APPROXIMATE
NAME OF FUND ADVISORY FEE RATE ASSETS
- ------------ ----------------- ------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
PIMCO FUNDS
- -------------------------------------------------------------------------------------------------
International Bond Fund Annual rate of 0.25% of average daily $ 980,741,511
net assets
- -------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund II Annual rate of 0.45% of average daily 218,383,188
net assets
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
APPROXIMATE
NAME OF FUND ADVISORY FEE RATE ASSETS
- ------------ ----------------- ------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- -------------------------------------------------------------------------------------------------
Money Market Portfolio Annual rate of 0.30% of average daily $ 3,000,000
net assets
- -------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio Annual rate of 0.35% of average daily 3,000,000
net assets
- -------------------------------------------------------------------------------------------------
Low Duration Bond Portfolio Annual rate of 0.40% of average daily $ 5,137,780
net assets
- -------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.40% of average daily 3,222,967
net assets
- -------------------------------------------------------------------------------------------------
High Yield Bond Portfolio Annual rate of 0.50% of average daily 132,357,083
net assets
- -------------------------------------------------------------------------------------------------
Global Bond Portfolio Annual rate of 0.60% of average daily Not Open As of
net assets 9/30/99
- -------------------------------------------------------------------------------------------------
Foreign Bond Portfolio Annual rate of 0.60% of average daily 5,140,340
net assets
- -------------------------------------------------------------------------------------------------
Emerging Markets Bond Portfolio Annual rate of 0.65% of average daily Not Open As of
net assets 9/30/99
- -------------------------------------------------------------------------------------------------
StocksPLUS Growth & Income Annual rate of 0.40% of average daily 169,722,102
Portfolio net assets
- -------------------------------------------------------------------------------------------------
Strategic Balanced Portfolio Annual rate of 0.50% of average daily Not Open As of
net assets 9/30/99
- -------------------------------------------------------------------------------------------------
Long-Term US Government. Bond Annual rate of 0.40% of average daily 6,940,674
Portfolio net assets
- -------------------------------------------------------------------------------------------------
Total Return II Portfolio Annual rate of 0.40% of average daily 5,117,235
net assets
- -------------------------------------------------------------------------------------------------
Real Return Portfolio Annual rate of 0.40% of average daily 3,000,000
net assets
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
FRANK RUSSELL
INVESTMENT
MANAGEMENT
COMPANY
- -------------------------------------------------------------------------------------------------
Fixed Income I Fund Annual rate of 0.25% of net assets $ 158,880,504
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 assets 121,645,371
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
- ------------ ----------------- ------
<S> <C> <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 daily $ 622,475,175
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 SERIES TRUST
- -------------------------------------------------------------------------------------------------
Managed Bond Series Annual rate of 0.50% of average daily $1,053,024,408
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 average daily 397,265,729
net assets on first $25 million;
0.375% on next $25 million; 0.25% on
remaining assets
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
APPROXIMATE
NAME OF FUND ADVISORY FEE RATE ASSETS
- ------------ ----------------- ------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
PRUDENTIAL SECURITIES
TARGET PORTFOLIO
TRUST
- -------------------------------------------------------------------------------------------------
Intermediate Term Bond Portfolio Annual Rate of 0.25% of average daily $ 113,010,679
net assets
- -------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.25% of average daily 66,889,600
net assets
- -------------------------------------------------------------------------------------------------
PIMCO COMMERCIAL MORTGAGE
SECURITIES TRUST, INC.
- -------------------------------------------------------------------------------------------------
PIMCO Commercial Mortgage Trust Annual rate of 0.725% of average $ 148,074,899
weekly net assets paid quarterly
- -------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
- -------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.30% of average daily $1,035,861,299
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 daily 421,807,622
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 average daily 170,012,653
net assets
- -------------------------------------------------------------------------------------------------
FREMONT MUTUAL FUNDS, INC.
- -------------------------------------------------------------------------------------------------
Total Return Fund Annual rate of 0.25% of average daily $ 187,068,687
net assets paid quarterly
- -------------------------------------------------------------------------------------------------
Global Bond Fund Annual rate of 0.30% of average daily 24,283,647
net assets paid quarterly
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
APPROXIMATE
NAME OF FUND ADVISORY FEE RATE ASSETS
- ------------ ----------------- ------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
PAINEWEBBER
MANAGED INVESTMENTS
TRUST
- -------------------------------------------------------------------------------------------------
Low Duration US Government Annual rate of 0.25% of average daily $ 122,967,595
Income Fund net assets
- -------------------------------------------------------------------------------------------------
PAINEWEBBER SERIES
TRUST
- -------------------------------------------------------------------------------------------------
Strategic Fixed Income Annual rate of 0.25% of average daily $ 7,298,286
net assets
- -------------------------------------------------------------------------------------------------
PAINEWEBBER
MANAGED ACCOUNTS
SERVICES PORTFOLIO
TRUST
- -------------------------------------------------------------------------------------------------
PACE Government Securities Fixed Annual rate of 0.25% of average daily $ 197,767,164
Income net assets
- -------------------------------------------------------------------------------------------------
PACE Strategic Fixed Income Annual rate of 0.25% of average daily 230,222,525
Investments net assets
- -------------------------------------------------------------------------------------------------
JACKSON NATIONAL LIFE SERIES
TRUST
- -------------------------------------------------------------------------------------------------
JNL/PIMCO Total Return Bond Annual rate of 0.25% of average daily $ 9,753,810
Series net assets excluding the value of
client contributed capital
- -------------------------------------------------------------------------------------------------
FORWARD GLOBAL FUND
- -------------------------------------------------------------------------------------------------
Forward Global Fund Annual rate of 0.35% of average daily $ 30,263,618
net assets on amounts under $200
million and 0.30% on amounts over
$200 million
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
B-9
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
APPROXIMATE
NAME OF FUND ADVISORY FEE RATE ASSETS
- ------------ ----------------- ------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
PRUDENTIAL
INVESTMENTS FUND
MANAGEMENT LLC
- -------------------------------------------------------------------------------------------------
Prudential Diversified Moderate 0.25% of 1% of average daily net $ 23,259,990
Growth assets computed daily and paid monthly
- -------------------------------------------------------------------------------------------------
Prudential Diversified 0.25% of 1% of average daily net 28,956,072
Conservative Growth assets computed daily and paid monthly
- -------------------------------------------------------------------------------------------------
Prudential Diversified 0.25% of 1% of average daily net 29,627,910
Conservative Portfolio assets computed daily and paid monthly
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
MANULIFE
- -------------------------------------------------------------------------------------------------
Manulife Global Bond Trust Annual rate of 0.375% on first $50 $ 161,197,318
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 $50 190,550,262
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 Annual rate of 0.25%, multiplied by a $ 270,423,858
Investment Portfolio 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>
B-10
<PAGE>
Brokerage Policies
PIMCO receives research services from many broker-dealers with which it
places portfolio transactions. Consistent with applicable law, PIMCO may cause
the Funds 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 Funds 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 Funds), although not all of these services are
necessarily of value in managing the Funds. The management fees paid by the
Funds 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 Funds as a factor in the selection of broker-
dealers to execute portfolio transactions for the Funds.
B-11
<PAGE>
APPENDIX C
----------
PIMCO currently receives a monthly investment advisory fee from each Fund
at an annual rate based on average daily net assets of the Fund, as set forth
below. For the fiscal year ended March 31, 1999, the aggregate amount of
advisory and administration fees paid by each then-operational Fund was as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Aggregate Aggregate
Fund Investment Investment Administration
Advisory Fee Rate Advisory Fees Fees
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 0.15% $ 364,480 $ 731,013
- -----------------------------------------------------------------------------------------------------------------------
Short-Term Fund 0.25% 1,163,042 1,024,794
- -----------------------------------------------------------------------------------------------------------------------
Low Duration Fund 0.25% 8,636,635 6,841,437
- -----------------------------------------------------------------------------------------------------------------------
Low Duration Fund II 0.25% 1,060,930 1,060,930
- -----------------------------------------------------------------------------------------------------------------------
Low Duration Fund III 0.25% 61,917 61,917
- -----------------------------------------------------------------------------------------------------------------------
Low Duration Mortgage Fund 0.25% 9,728 9,728
- -----------------------------------------------------------------------------------------------------------------------
Moderate Duration Fund 0.25% 685,876 548,701
- -----------------------------------------------------------------------------------------------------------------------
Real Return Bond Fund 0.25% 37,011 48,397
- -----------------------------------------------------------------------------------------------------------------------
Total Return Fund 0.25% 55,229,968 43,425,035
- -----------------------------------------------------------------------------------------------------------------------
Total Return Fund II 0.25% 2,107,392 2,107,391
- -----------------------------------------------------------------------------------------------------------------------
Total Return Fund III 0.25% 1,045,573 1,045,572
- -----------------------------------------------------------------------------------------------------------------------
Total Return Mortgage Fund 0.25% 9,766 9,937
- -----------------------------------------------------------------------------------------------------------------------
High Yield Fund 0.25% 6,323,956 7,243,110
- -----------------------------------------------------------------------------------------------------------------------
Long-Term 0.25% 419,981 508,159
- -----------------------------------------------------------------------------------------------------------------------
U.S. Government Fund
- -----------------------------------------------------------------------------------------------------------------------
Long Duration Fund 0.25% N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Short Duration 0.20% N/A N/A
Municipal Income Fund
- -----------------------------------------------------------------------------------------------------------------------
Municipal Bond Fund 0.25% 107,083 145,118
- -----------------------------------------------------------------------------------------------------------------------
California Intermediate 0.25% N/A N/A
Municipal Bond Fund
- -----------------------------------------------------------------------------------------------------------------------
New York Intermediate Municipal 0.25% N/A N/A
Bond Fund
- -----------------------------------------------------------------------------------------------------------------------
Global Bond Fund 0.25% 666,901 800,281
- -----------------------------------------------------------------------------------------------------------------------
Global Bond Fund II 0.25% 106,821 151,390
- -----------------------------------------------------------------------------------------------------------------------
Foreign Bond Fund 0.25% 1,325,590 1,454,801
- -----------------------------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund 0.45% 19,121 18,034
- -----------------------------------------------------------------------------------------------------------------------
Strategic Balanced Fund 0.40% 201,742 126,263
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Aggregate Aggregate
Fund Investment Investment Administration
Advisory Fee Rate Advisory Fees Fees
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Convertible Bond Fund 0.40% N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
StocksPLUS Fund 0.40% 3,432,600 2,757,948
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
C-2
<PAGE>
APPENDIX D
----------
Class A Shares. Class A Shares of the Funds are sold subject to a front-
end sales charge ranging from 0.00% to 4.71% (expressed as a percentage of the
net amount invested), depending upon the Fund and the amount of purchase. PIMCO
Funds Distributors LLC (the "Distributor"), who is an affiliate of PIMCO,
receives the sales charge less any applicable discount or commissions
"reallowed" to participating brokers, which range from 0.25% to 4.00%, also
depending on the Fund and amount of purchase. During the fiscal year ended
March 31, 1999, the Distributor received $6,227,864 in initial sales charges
paid by Class A shareholders of the Trust and retained $750,751 of that amount.
In addition, the Funds have adopted a Distribution and Servicing Plan for Class
A Shares under which, for the fiscal year ended March 31, 1999, the Distributor
received the following fees:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Distribution and Service Fees
(as a percentage of average Distribution and
Fund daily net assets) Service Fees
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund 0.10% $ 79,137
- -----------------------------------------------------------------------------------------------------------
Short-Term Fund 0.25% 123,595
- -----------------------------------------------------------------------------------------------------------
Low Duration Fund 0.25% 382,868
- -----------------------------------------------------------------------------------------------------------
Real Return Fund 0.25% 6,053
- -----------------------------------------------------------------------------------------------------------
Total Return Fund 0.25% 1,980,636
- -----------------------------------------------------------------------------------------------------------
High Yield Fund 0.25% 234,956
- -----------------------------------------------------------------------------------------------------------
Long-Term U.S. Government Fund 0.25% 39,481
- -----------------------------------------------------------------------------------------------------------
Global Bond Fund II 0.25% 12,179
- -----------------------------------------------------------------------------------------------------------
Foreign Bond Fund 0.25% 52,053
- -----------------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund 0.25% 498
- -----------------------------------------------------------------------------------------------------------
Municipal Bond Fund 0.25% 14,101
- -----------------------------------------------------------------------------------------------------------
StocksPLUS Fund 0.25% 233,380
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Class A Shares of the Funds, except the PIMCO Money Market, California
Intermediate Municipal Bond, and New York Intermediate Municipal Bond Funds, are
subject to a 1% contingent deferred sales charge ("CDSC") if such shares are
redeemed within 18 months of their purchase. The CDSC does not apply to
investors purchasing 1,000,000 or more ($250,000 in the case of the PIMCO Short-
Term Fund). During the fiscal year ended March 31, 1999, the Distributor
received in aggregate $37,142 in CDSCs on Class A Shares.
Class B Shares. Class B Shares of the Funds are sold subject to a CDSC
ranging from 0.00% to 5.00% (expressed as a percentage of the net amount
invested), depending upon the length of time the shares are held. During the
fiscal year ended March 31, 1999, the Distributor received in aggregate
$1,653,443 in CDSCs on Class B Shares. In addition, the Funds have adopted a
Distribution and Servicing Plan for Class B Shares under which, for the fiscal
year ended March 31, 1999, the Distributor received the following fees:
D-1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Distribution and Service
Fees (as a percentage of Distribution and
Fund average daily net assets) Service Fees
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund 0.25% $ 86,809
- ----------------------------------------------------------------------------------------------------
Short-Term Fund 0.25% 21,254
- ----------------------------------------------------------------------------------------------------
Low Duration Fund 0.25% 433,206
- ----------------------------------------------------------------------------------------------------
Real Return Fund 0.25% 28,545
- ----------------------------------------------------------------------------------------------------
Total Return Fund 0.25% 3,372,168
- ----------------------------------------------------------------------------------------------------
High Yield Fund 0.25% 2,065,488
- ----------------------------------------------------------------------------------------------------
Long-Term U.S. Government Fund 0.25% 229,521
- ----------------------------------------------------------------------------------------------------
Global Bond Fund II 0.25% 45,566
- ----------------------------------------------------------------------------------------------------
Foreign Bond Fund 0.25% 164,040
- ----------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund 0.25% 2,953
- ----------------------------------------------------------------------------------------------------
Municipal Bond Fund 0.25% 40,680
- ----------------------------------------------------------------------------------------------------
StocksPLUS Fund 0.25% 1,679,748
- ----------------------------------------------------------------------------------------------------
</TABLE>
Class C Shares. Class C Shares of the Funds are sold subject to a CDSC
ranging from 0.00% to 1.00% (expressed as a percentage of the net amount
invested), depending upon the length of time the shares are held. During the
fiscal year ended March 31, 1999, the Distributor received in aggregate $543,223
in CDSCs on Class C Shares. In addition, the Funds have adopted a Distribution
and Servicing Plan for Class C Shares under which, for the fiscal year ended
March 31, 1999, the Distributor received the following fees:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Distribution and Service Distribution and Service
Fees (as a percentage of Fees (as a percentage of
average daily net assets) average daily net assets)
on shares purchased on or on shares purchased Distribution and
Fund after 7/1/91 before 7/1/91 Service Fees
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 0.10% 0.10% $ 75,541
- ----------------------------------------------------------------------------------------------------
Short-Term Fund 0.50% 0.25% 61,224
- ----------------------------------------------------------------------------------------------------
Low Duration Fund 0.70% 0.25% 645,396
- ----------------------------------------------------------------------------------------------------
Real Return Fund 0.70% 0.25% 16,396
- ----------------------------------------------------------------------------------------------------
Total Return Fund 0.90% 0.25% 5,309,578
- ----------------------------------------------------------------------------------------------------
High Yield Fund 0.90% 0.25% 3,098,891
- ----------------------------------------------------------------------------------------------------
Long-Term U.S. 0.90% 0.25% 200,406
- ----------------------------------------------------------------------------------------------------
Government Fund
- ----------------------------------------------------------------------------------------------------
Global Bond Fund II 0.90% 0.25% 60,419
- ----------------------------------------------------------------------------------------------------
Foreign Bond Fund 0.90% 0.25% 237,914
- ----------------------------------------------------------------------------------------------------
Emerging Markets Bond 0.90% 0.25% 1,972
Fund
- ----------------------------------------------------------------------------------------------------
Municipal Bond Fund 0.90% 0.25% 211,019
- ----------------------------------------------------------------------------------------------------
StocksPLUS Fund 0.70% 0.25% 1,097,998
- ----------------------------------------------------------------------------------------------------
</TABLE>
D-2
<PAGE>
Class D Shares. Certain Funds have adopted a Distribution and Servicing
Plan for Class D Shares under which, for the fiscal year ended March 31, 1999,
the Distributor received the following fees:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Distribution and Service
Fees (as a percentage of Distribution and
Fund average daily net assets) Service Fees
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Fund 0.25% $ 1,589
- ----------------------------------------------------------------------------------------------------
Low Duration Fund 0.25% 5,733
- ----------------------------------------------------------------------------------------------------
Real Return Fund 0.25% 323
- ----------------------------------------------------------------------------------------------------
Total Return Fund 0.25% 23,268
- ----------------------------------------------------------------------------------------------------
Total Return Mortgage Fund 0.25% 283
- ----------------------------------------------------------------------------------------------------
High Yield Fund 0.25% 5,873
- ----------------------------------------------------------------------------------------------------
Foreign Bond Fund 0.25% 8,973
- ----------------------------------------------------------------------------------------------------
Municipal Bond 0.25% 402
- ----------------------------------------------------------------------------------------------------
Strategic Balanced 0.25% 291
- ----------------------------------------------------------------------------------------------------
StocksPLUS Fund 0.25% 1,640
- ----------------------------------------------------------------------------------------------------
</TABLE>
Administrative Class Shares. The Funds have adopted a Administrative
Services Plan and Administrative Distribution Plan for Administrative Class
Shares under which, for the fiscal year ended March 31, 1999, the Distributor
received the following fees:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Distribution and Service
Fees (as a percentage of Distribution and
Fund average daily net assets Service Fees
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund 0.25% $ 10,213
- ----------------------------------------------------------------------------------------------------
Short-Term Fund 0.25% 16,719
- ----------------------------------------------------------------------------------------------------
Low Duration Fund 0.25% 297,918
- ----------------------------------------------------------------------------------------------------
Low Duration Fund II 0.25% 28,257
- ----------------------------------------------------------------------------------------------------
Total Return Fund 0.25% 2,826,235
- ----------------------------------------------------------------------------------------------------
Total Return Fund II 0.25% 135,827
- ----------------------------------------------------------------------------------------------------
Total Return Fund III 0.25% 3,586
- ----------------------------------------------------------------------------------------------------
High Yield Fund 0.25% 336,744
- ----------------------------------------------------------------------------------------------------
Long-Term U.S. Government Fund 0.25% 15,870
- ----------------------------------------------------------------------------------------------------
Global Bond Fund 0.25% 2,995
- ----------------------------------------------------------------------------------------------------
Foreign Bond Fund 0.25% 3,134
- ----------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund 0.25% 135
- ----------------------------------------------------------------------------------------------------
Municipal Bond Fund 0.25% 447
- ----------------------------------------------------------------------------------------------------
StocksPLUS Fund 0.25% 13,003
- ----------------------------------------------------------------------------------------------------
</TABLE>
D-3
<PAGE>
APPENDIX E
----------
CURRENT FUNDAMENTAL INVESTMENT POLICIES
As a matter of fundamental policy, the Fund may not:
Concentration
- -------------
(1) (a) 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, or, in the case of the Municipal Funds, in
industrial development revenue bonds based, directly or indirectly, on
the credit of private entities in any one 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 Fund, to securities or obligations issued by U.S.
banks. Investments of the Municipal Funds in utilities, gas,
electric, water and telephone companies will be considered as being in
separate industries;
(b) for the Global Bond Fund II, concentrate more than 25% of the
value of its total assets in any one industry (The SEC staff takes the
position that investments in government securities of a single foreign
country (including agencies and instrumentalities of such government,
to the extent such obligations are backed by the assets and revenues
of such government) represent investments in a separate industry for
these purposes.);
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, Commercial Mortgage Securities,
Global Bond, Global Bond II, Foreign Bond, Emerging Markets Bond,
California Intermediate Municipal Bond and New York Intermediate
Municipal Bond Funds.). For the purpose of this restriction, each
state and each separate political subdivision, agency, authority or
instrumentality of such state, each multi-state agency or authority,
and each guarantor, if any, are treated as separate issuers of
Municipal Bonds;
(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, Commercial Mortgage Securities, Global Bond, Global
E-1
<PAGE>
Bond II, Foreign Bond, Emerging Markets Bond, California Intermediate
Municipal Bond and New York Intermediate Municipal Bond Funds.);
Investments in Real Estate
- --------------------------
(4) (a) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies which invest in real estate, or interests therein;
(b) for the Global Bond Fund II, purchase or sell real estate,
although it may purchase securities of issuers which deal in real
estate, including securities of real estate investment trusts, and may
purchase securities which are secured by interests in real estate;
Margin
- ------
(5) for the Total Return III, High Yield, and StocksPLUS Funds: purchase
securities on margin, except for use of short-term credit necessary
for clearance of purchases and sales of portfolio securities, but it
may make margin deposits in connection with transactions in options,
futures, and options on futures;
Borrowing and Senior Securities
- -------------------------------
(6) (a) borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that a Fund may (i) borrow from banks
or enter into reverse repurchase agreements, or employ similar
investment techniques, and pledge its assets in connection therewith,
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
Prospectuses and in this 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 Fund's assets);
(b) for the Global Bond Fund II, borrow money in excess of 10% of the
value (taken at the lower of cost or current value) of the Fund's
total assets (not including the amount borrowed) at the time the
borrowing is made, and then only from banks as a temporary measure to
facilitate the meeting of redemption requests (not for leverage) which
might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes (Such
borrowings will be repaid before any additional investments are
purchased.); or pledge, hypothecate, mortgage or otherwise encumber
its assets in excess of 10% of the Fund's total assets (taken at cost)
and then only to secure borrowings permitted above (The deposit of
securities or cash or cash equivalents in escrow in connection with
the writing of covered call or put options, respectively, is not
deemed to be pledges or
E-2
<PAGE>
other encumbrances. For the purpose of this restriction, collateral
arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral arrangements
with respect to initial and variation margin are not deemed to be a
pledge of assets and neither such arrangements nor the purchase or
sale of futures or related options are deemed to be the issuance of a
senior security.);
Loans
-----
(7) lend any funds or other assets, except that a Fund 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 (This restriction is not applicable to the Global Bond
Fund II, but see non-fundamental restriction "G".);
Underwriting
- ------------
(8) (a) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under the federal
securities laws;
(b) for the Global Bond Fund II, underwrite securities issued by other
persons except to the extent that, in connection with the disposition
of its portfolio investments, it may be deemed to be an underwriter
under federal securities laws; or
Short Positions
---------------
(9) (a) for the Total Return III, High Yield, and StocksPLUS Funds: maintain
a short position, or purchase, write or sell puts, calls, straddles,
spreads or combinations thereof, except as set forth in the
Prospectuses and in this Statement of Additional Information for
transactions in options, futures, options on futures, and transactions
arising under swap agreements or other derivative instruments;
(b) for the Money Market, Short-Term, Low Duration, Low Duration II,
Low Duration III, Low Duration Mortgage, Moderate Duration, Total
Return, Total Return II, Total Return Mortgage, Commercial Mortgage
Securities, Long-Term U.S. Government, Long Duration, Global Bond,
Foreign Bond, Emerging Markets Bond, Strategic Balanced, Convertible
Bond and StocksPLUS Short Strategy Funds: maintain a short position,
or purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except on such conditions as may be set forth in
the Prospectuses and in this Statement of Additional Information.
E-3
<PAGE>
APPENDIX E
----------
PIMCO FUNDS
-----------
FORM OF
-------
AMENDED AND RESTATED DECLARATION OF TRUST
--------------------
DATED ___________________, 2000
E-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I........................................................................................................... 2
Section 1.1. Name.............................................................................................. 2
-----------------
Section 1.2. Definitions....................................................................................... 2
------------------------
ARTICLE II.......................................................................................................... 4
- ----------
Section 2.1. General Powers.................................................................................... 4
---------------------------
Section 2.2. Investments....................................................................................... 4
------------------------
Section 2.3. Legal Title....................................................................................... 6
------------------------
Section 2.4. Issuance and Repurchase of Shares................................................................. 6
----------------------------------------------
Section 2.5. Delegation; Committees............................................................................ 6
-----------------------------------
Section 2.6. Collection and Payment............................................................................ 6
-----------------------------------
Section 2.7. Expenses.......................................................................................... 7
---------------------
Section 2.8. Manner of Acting; By-laws......................................................................... 7
--------------------------------------
Section 2.9. Miscellaneous Powers.............................................................................. 7
---------------------------------
Section 2.10. Principal Transactions........................................................................... 8
------------------------------------
Section 2.11. Number of Trustees............................................................................... 8
--------------------------------
Section 2.12. Election and Term................................................................................ 8
-------------------------------
Section 2.13. Resignation and Removal.......................................................................... 8
-------------------------------------
Section 2.14. Vacancies........................................................................................ 9
-----------------------
Section 2.15. Delegation of Power to Other Trustees............................................................ 9
---------------------------------------------------
Section 2.16. Shareholder Vote, etc............................................................................ 9
-----------------------------------
ARTICLE III......................................................................................................... 9
- -----------
Section 3.1. Distribution Contract............................................................................. 10
----------------------------------
Section 3.2. Advisory or Management Contract................................................................... 10
--------------------------------------------
Section 3.3. Affiliations of Trustees or Officers, Etc......................................................... 10
------------------------------------------------------
Section 3.4. Compliance with 1940 Act.......................................................................... 11
-------------------------------------
ARTICLE IV.......................................................................................................... 11
- ----------
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.............................................. 11
-----------------------------------------------------------------
Section 4.2. Non-Liability of Trustees, Etc.................................................................... 11
-------------------------------------------
Section 4.3. Mandatory Indemnification......................................................................... 12
--------------------------------------
Section 4.4. No Bond Required of Trustees...................................................................... 13
-----------------------------------------
Section 4.5. No Duty of Investigation; Notice in Trust Instruments, Etc........................................ 13
-----------------------------------------------------------------------
Section 4.6. Reliance on Experts, Etc.......................................................................... 14
-------------------------------------
ARTICLE V........................................................................................................... 14
- ---------
Section 5.1. Beneficial Interest............................................................................... 14
--------------------------------
Section 5.2. Rights of Shareholders............................................................................ 14
-----------------------------------
Section 5.3. Trust Only........................................................................................ 14
-----------------------
Section 5.4. Issuance of Shares................................................................................ 15
-------------------------------
Section 5.5. Register of Shares................................................................................ 15
-------------------------------
Section 5.6. Transfer of Shares................................................................................ 15
-------------------------------
Section 5.7. Notices, Reports.................................................................................. 16
-----------------------------
Section 5.8. Treasury Shares................................................................................... 16
----------------------------
Section 5.9. Voting Powers..................................................................................... 16
--------------------------
</TABLE>
E-i
<PAGE>
<TABLE>
<S> <C>
Section 5.10. Meetings of Shareholders......................................................................... 17
--------------------------------------
Section 5.11. Series Designation............................................................................... 17
--------------------------------
Section 5.12. Assent to Declaration of Trust................................................................... 19
--------------------------------------------
Section 5.13. Class Designation................................................................................ 19
-------------------------------
ARTICLE VI.......................................................................................................... 20
- -----------
Section 6.1. Redemption of Shares.............................................................................. 20
---------------------------------
Section 6.2. Price............................................................................................. 20
------------------
Section 6.3. Payment........................................................................................... 20
--------------------
Section 6.4. Effect of Suspension of Determination of Net Asset Value.......................................... 20
---------------------------------------------------------------------
Section 6.5. Repurchase by Agreement........................................................................... 21
------------------------------------
Section 6.6. Redemption of Shareholder's Interest.............................................................. 21
-------------------------------------------------
Section 6.7. Redemption of Shares in Order to Qualify as Regulated Investment Company; Disclosure of Holding... 21
------------------------------------------------------------------------------------------------------------
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net Asset Value Formula.................... 21
-------------------------------------------------------------------------------------------
Section 6.9. Suspension of Right of Redemption................................................................. 22
----------------------------------------------
ARTICLE VII......................................................................................................... 22
- -----------
Section 7.1. Net Asset Value................................................................................... 22
----------------------------
Section 7.2. Distributions to Shareholders..................................................................... 23
------------------------------------------
Section 7.3. Determination of Net Income; Constant Net Asset Value; Reduction of Outstanding Shares............ 23
---------------------------------------------------------------------------------------------------
Section 7.4. Allocation Between Principal and Income........................................................... 24
----------------------------------------------------
Section 7.5. Power to Modify Foregoing Procedures.............................................................. 24
-------------------------------------------------
ARTICLE VIII........................................................................................................ 24
- ------------
Section 8.1. Duration.......................................................................................... 24
---------------------
Section 8.2. Termination of Trust.............................................................................. 24
---------------------------------
Section 8.3. Amendment Procedure............................................................................... 25
--------------------------------
Section 8.4. Merger, Consolidation and Sale of Assets.......................................................... 26
-----------------------------------------------------
Section 8.5. Incorporation..................................................................................... 26
--------------------------
ARTICLE IX.......................................................................................................... 27
- -----------
ARTICLE X........................................................................................................... 27
- ---------
Section 10.1. Filing........................................................................................... 27
--------------------
Section 10.2. Governing Law.................................................................................... 27
---------------------------
Section 10.3. Counterparts..................................................................................... 27
--------------------------
Section 10.4. Reliance by Third Parties........................................................................ 28
---------------------------------------
Section 10.5. Provisions in Conflict with Law or Regulations................................................... 28
------------------------------------------------------------
</TABLE>
E-ii
<PAGE>
FORM OF
-------
AMENDED AND RESTATED DECLARATION OF TRUST OF
--------------------------------------------
PIMCO FUNDS
-----------
DATED ____________, 2000
AMENDED AND RESTATED DECLARATION OF TRUST made __________ ____, 2000, by
the undersigned Trustees;
WHEREAS, pursuant to a Declaration of Trust dated February 19, 1987, the
Trustees established a Massachusetts business trust for the investment and
reinvestment of funds contributed thereto, the beneficial interest in which is
divided into transferable shares;
WHEREAS, the Trustees desire to amend and restate said Declaration of Trust
in its entirety;
NOW, THEREFORE, the Trustees restate the Declaration of Trust as follows:
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
I.
A. Name.
The name of the Trust created hereby, until and unless changed by the
Trustees as provided in Section 8.,3(a) hereof, is "PIMCO Funds".
B. Section 1.2. Definitions.
Wherever they are used herein, the following terms have the following
respective meanings:
1. (a) "By-laws" means the By-laws referred to in Section 2.8
------- -----------
hereof, as from time to time amended.
2. (b) "Class" means the two or more Classes as may be established
-----
and designated from time to time by the Trustees pursuant to
Section 5.13 hereof.
3. (c) The term "Commission" has the meaning given it in the
1940 Act. The term "Interested Person" has the meaning
given it in the 1940 Act, as modified by any applicable
order or orders of the Commission. Except as otherwise
defined by the Trustees in conjunction with the
establishment of any series of Shares, the term "vote of a
majority of the Shares outstanding and entitled to vote"
shall have the same meaning as the term "vote of a majority
of the outstanding voting securities" given it in the
1940 Act.
4. (d) "Custodian" means any Person other than the Trust who has
---------
custody of any Trust Property as required by Section 17(f)
of the 1940
E-2
<PAGE>
Act, but does not include a system for the central handling
of securities described in said Section 17(f).
5. (e) "Declaration" means this Amended and Restated Declaration
-----------
of Trust as further amended from time to time. Reference in
-------
this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this
Declaration rather than exclusively to the article or
section in which such words appear.
6. (f) "Distributor" means the party, other than the Trust, to the
-----------
contract described in Section 3.1 hereof.
7. (g) "His" shall include the feminine and neuter, as well as the
---
masculine genders.
8. (h) "Investment Adviser" means the party, other than the Trust,
------------------
as the to the contract described in Section 3.2 hereof.
9. (i) "Municipal Bonds" means obligations issued by or on
---------------
behalf of states, territories of the United States and the
District of Columbia and their political subdivisions,
agencies and instrumentalities, or other issuers, the
interest from which is exempt from regular Federal income
tax.
10. (j) The "1940 Act" means the Investment Company Act of 1940, as
--------
amended from time to time.
11. (k) "Person" means and includes individuals, corporations,
------
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
12. (l) "Series" individually or collectively means the two or more
------
Series as may be established and designated from time to
time by the Trustees pursuant to Section 5.11 hereof. Unless
the context otherwise requires, the term "Series" shall
include Classes into which shares of the Trust, or of a
Series, may be divided from time to time.
13. (m) "Shareholder" means a record owner of Outstanding Shares.
-----------
14. (n) "Shares" means the equal proportionate units of interest
------
into which the beneficial interest in the Trust shall be
divided from time to time, including the Shares of any and
all Series and Classes which may be established by the
Trustees and includes fractions of Shares as well as
whole Shares. "Outstanding Shares" means those Shares
shown as of a time and from time to time on the books of the
Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in
the Treasury of the Trust.
15. (o) "Transfer Agent" means any one or more Persons other than
--------------
the Trust who maintains the Shareholder records of the
Trust, such as the list of Shareholders, the number of
Shares credited to each account, and the like.
16. (p) The "Trust" means Scudder Cash Investment Trust.
-----
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17. (q) The "Trust Property" means any and all property, real or
--------------
personal, tangible or intangible, which is owned or held by
or for the account of the Trust or the Trustees.
18. (r) The "Trustees" means the person or persons who has or have
--------
signed this Declaration, so long as he or they shall
continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the
provisions of Article II hereof, and reference herein to a
Trustee or the Trustees shall refer to such person or
persons in this capacity or their capacities as trustees
hereunder.
ARTICLE II
----------
TRUSTEES
--------
II.
A. General Powers.
The Trustees shall have exclusive and absolute control over the Trust
Property and over the business of the Trust to the same extent as if the
Trustees were the sole owners of the Trust Property and business in their own
right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees shall have power to conduct the business of the Trust
and carry on its operations in any and all of its branches and maintain offices
both within and without the Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination
as to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
B. Section 2.2. Investments.
The Trustees shall have the power:
1. (a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to
the conduct of such operations.
2. (b) To invest in, hold for investment, or reinvest in,
securities, including shares of open-end investment
companies; common and preferred stocks; warrants; bonds,
debentures, bills, time notes and all other evidences of
indebtedness; negotiable or non-negotiable instruments;
government securities, including securities of any state,
municipality or other political subdivision thereof, or any
governmental or quasi-
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governmental agency or instrumentality; and money market
instruments including bank certificates of deposit, finance
paper, commercial paper, bankers acceptances and all kinds
of repurchase agreements, of any corporation, company,
trust, association, firm or other business organization
however established, and of any country, state, municipality
or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality.
3. (c) To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or
options to purchase or sell, to sell or otherwise dispose
of, to lend, and to pledge any such securities and to enter
into repurchase agreements and forward foreign currency
exchange contracts, to purchase and sell futures contracts
on securities, securities indices and foreign currencies, to
purchase or sell options on such contracts, foreign currency
contracts, and foreign currencies and to engage in all types
of hedging and risk management transactions.
4. (d) To exercise all rights, powers and privileges of
ownership or interest in all securities, repurchase
agreements, futures contracts and options and other assets
included in the Trust Property, including the right to vote
thereon and otherwise act with respect thereto and to do all
acts for the preservation, protection, improvement and
enhancement in value of all such assets.
5. (e) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop and dispose of (by sale or
otherwise) any property, real or personal, including cash,
and any interest therein.
6. (f) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by
mortgaging, pledging or otherwise subjecting as security the
Trust Property; to endorse, guarantee, or undertake the
performance of any obligation or engagement of any other
Person and to lend Trust Property.
7. (g) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in
which is included in the Trust Property or in the affairs of
which the Trustees have any direct or indirect interest; to
do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest,
and to guarantee or become surety on any or all of the
contracts, stocks, bonds, notes, debentures and other
obligations of any such corporation, company, trust,
association or firm.
8. (h) To enter into a plan of distribution and any related
agreements whereby the Trust may finance directly or
indirectly any activity which is primarily intended to
result in the sale of Shares.
9. (i) To invest, through a transfer of cash, securities and
other assets or otherwise, all or a portion of the Trust
Property, or to sell all or a portion of the Trust Property
and invest the proceeds of such sales, in another investment
company that is registered under the 1940 Act.
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10. (j) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do
everything necessary, suitable or proper for the
accomplishment of any purpose or the attainment of any
object or the furtherance of any power hereinbefore set
forth, either alone or in association with others, and to do
every other act or thing incidental or appurtenant to or
growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
C. Section 2.3. Legal Title.
Legal title to all the Trust Property, including the property of any Series
of the Trust, shall be vested in the Trustees as joint tenants except that the
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the Trust,
or in the name of any other Person as nominee, on such terms as the Trustees may
determine, provided that the interest of the Trust therein is deemed
appropriately protected. The right, title and interest of the Trustees in the
Trust Property and the property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office, resignation, removal or death of a Trustee he
shall automatically cease to have any right, title or interest in any of the
Trust Property or the property of any Series of the Trust, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
D. Section 2.4. Issuance and Repurchase of Shares.
The Trustees shall have the power to issue, sell, repurchase, redeem,
retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and
otherwise deal in Shares and, subject to the provisions set forth in Articles VI
and VII and Section 5.11 hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
particular Series of the Trust with respect to which such Shares are issued,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
E. Section 2.5. Delegation; Committees.
The Trustees shall have power to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient, to
the same extent as such delegation is permitted by the 1940 Act.
F. Section 2.6. Collection and Payment.
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The Trustees shall have power to collect all property due to the Trust; to
pay all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and
other instruments.
G. Section 2.7. Expenses.
The Trustees shall have the power to incur and pay any expenses which in
the opinion of the Trustees are necessary or incidental to carry out any of the
purposes of this Declaration, and to pay reasonable compensation from the funds
of the Trust to themselves as Trustees. The Trustees shall fix the compensation
of all officers, employees and Trustees.
H. Section 2.8. Manner of Acting; By-laws.
Except as otherwise provided herein or in the By-laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment by
means of which all persons participating in the meeting can hear each other, or
by written consents of the entire number of Trustees then in office. The
Trustees may adopt By-laws not inconsistent with this Declaration to provide for
the conduct of the business of the Trust and may amend or repeal such By-laws to
the extent such power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of
less than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
I. Section 2.9. Miscellaneous Powers.
Subject to Section 5.11 hereof, the Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations ; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in
such capacity , whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law,
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indemnify any person with whom the Trust has dealings, including the Investment
Adviser, Distributor, Transfer Agent and selected dealers , to such extent as
the Trustees shall determine; (g) guarantee indebtedness or contractual
obligations of others; (h) determine and change the fiscal year of the Trust and
the method by which its accounts shall be kept; and (i) adopt a seal for the
Trust, but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
J. Section 2.10. Principal Transactions.
Except in transactions not permitted by the 1940 Act or rules and
regulations adopted by the Commission, the Trustees may, on behalf of the Trust,
buy any securities from or sell any securities to, or lend any assets of the
Trust to, any Trustee or officer of the Trust or any firm of which any such
Trustee or officer is a member acting as principal, or have any such dealings
with the Investment Adviser, Distributor or Transfer Agent or with any
Interested Person of such Person; and the Trust may employ any such Person, or
firm or company in which such Person is an Interested Person, as broker, dealer,
legal counsel, registrar, Transfer Agent, dividend disbursing agent or Custodian
upon customary terms.
K. Section 2.11. Number of Trustees.
The number of Trustees shall initially be one (1), and thereafter shall be
such number as shall be fixed from time to time by a written instrument signed
by a majority of the Trustees, provided, however, that the number of Trustees
shall in no event be more than fifteen (15).
L. Section 2.12. Election and Term.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 2.14 hereof, the Trustees shall be elected by the
Shareholders owning of record a plurality of the Shares voting at a meeting of
Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
Except in the event of resignation or removals pursuant to Section 2.13 hereof,
each Trustee shall hold office until such time as less than a majority of the
Trustees holding office have been elected by Shareholders, and thereafter until
the holding of a Shareholders' meeting as required by the next following
sentence. In such event the Trustees then in office will call a Shareholders'
meeting for the election of Trustees. Except for the foregoing circumstances,
the Trustees shall continue to hold office and may appoint successor Trustees.
M. Section 2.13. Resignation and Removal.
Any Trustee may resign his trust (without the need for any prior or
subsequent accounting) by an instrument in writing signed by him and delivered
to the other Trustees and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the instrument. Any of
the Trustees may be removed (provided the aggregate number of Trustees after
such removal shall not be less than one) with cause, by the action of two-thirds
of the remaining Trustees. Any Trustee may be removed at any meeting of
Shareholders by vote of two-thirds of the Outstanding Shares. The Trustees shall
promptly call a meeting of the Shareholders for the purpose of voting upon the
question of removal of any such Trustee or Trustees when requested in writing so
to do by the holders of not less than ten percent of the Outstanding Shares and,
in that connection, the Trustees will assist shareholder communications to the
extent provided for in Section 16(c) under the 1940 Act. Upon the resignation or
removal of a Trustee, or his
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otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property or property of any Series of
the Trust held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
N. Section 2.14. Vacancies.
The term of office of a Trustee shall terminate and a vacancy shall occur
in the event of the death, resignation, removal, bankruptcy, adjudicated
incompetence or other incapacity to perform the duties of the office of a
Trustee. No such vacancy shall operate to annul the Declaration or to revoke any
existing agency created pursuant to the terms of the Declaration. In the case of
an existing vacancy, including a vacancy existing by reason of an increase in
the number of Trustees , subject to the provisions of Section 16(a) of the 1940
Act, the remaining Trustees shall fill such vacancy by the appointment of such
other person as they in their discretion shall see fit, made by a written
instrument signed by a majority of the Trustees then in office. Any such
appointment shall not become effective, however, until the person named in the
written instrument of appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of the Declaration.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become effective prior to
such retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.14, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees in office shall be conclusive evidence of the existence of such
vacancy.
O. Section 2.15. Delegation of Power to Other Trustees.
Any Trustee may, by power of attorney, delegate his power for a period not
exceeding six (6) months at any one time to any other Trustee or Trustees;
provided that in no case shall less than two (2) Trustees personally exercise
the powers granted to the Trustees under this Declaration except as herein
otherwise expressly provided.
P. Section 2.16. Shareholder Vote, etc.
Not Required. Except to the extent specifically provided to the contrary in
this Declaration, the Trustees may exercise each of the powers granted to them
in this Declaration without the vote, approval or agreement of the Shareholders,
unless such a vote, approval or agreement is required by the 1940 Act or
applicable laws of the Commonwealth of Massachusetts.
ARTICLE III
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CONTRACTS
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III.
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A. Distribution Contract.
The Trustees may in their discretion from time to time enter into an
exclusive or non-exclusive underwriting contract or contracts providing for the
sale of the Shares at a price based on the net asset value of a Share, whereby
the Trustees may either agree to sell the Shares to the other party to the
contract or appoint such other party their sales agent for the Shares, and in
either case on such terms and conditions, if any, as may be prescribed in the
By-laws, and such further terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article III or
of the By-laws; and such contract may also provide for the repurchase of the
Shares by such other party as agent of the Trustees.
B. Section 3.2. Advisory or Management Contract.
The Trustees may in their discretion from time to time enter into an
investment advisory or management contract or separate advisory contracts with
respect to one or more Series whereby the other party to such contract shall
undertake to furnish to the Trust such management, investment advisory,
statistical and research facilities and services and such other facilities and
services, if any, and all upon such terms and conditions as the Trustees may in
their discretion determine, including the grant of authority to such other party
to determine what securities shall be purchased or sold by the Trust and what
portion of its assets shall be uninvested, which authority shall include the
power to make changes in the investments of the Trust or any Series.
The Trustees may also employ, or authorize the Investment Adviser to
employ, one or more sub-advisers from time to time to perform such of the acts
and services of the Investment Adviser and upon such terms and conditions as may
be agreed upon between the Investment Adviser and such sub-advisers and approved
by the Trustees. Any reference in this Declaration to the Investment Adviser
shall be deemed to include such sub-advisers unless the context otherwise
requires.
C. Section 3.3. Affiliations of Trustees or Officers, Etc.
The fact that:
a. (i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser or distributor of or for any
partnership, corporation, trust, association or other
organization or of or for any parent or affiliate of any
organization, with which a contract of the character
described in Sections 3.1 or 3.2 above or for services as
Custodian, Transfer Agent, accounting agent or disbursing
agent or for related services may have been or may hereafter
be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder of or has an interest in
the Trust, or that
b. (ii) any partnership, corporation, trust, association or
other organization with which a contract of the character
described in Sections 3.1 or 3.2 above or for services as
Custodian, Transfer Agent, accounting agent or disbursing
agent or for related services may have been or may hereafter
be made also has
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any one or more of such contracts with one or more other
partnerships, corporations, trusts, associations or other
organizations, or has other business or interests, shall not
affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting
upon or executing the same or create any liability or
accountability to the Trust or its Shareholders.
D. Section 3.4. Compliance with 1940 Act.
Any contract entered into pursuant to Sections 3.1 or 3.2 shall be
consistent with and subject to the requirements of Section 15 of the 1940 Act
(including any amendment thereof or other applicable act of Congress hereafter
enacted), as modified by any applicable order or orders of the Commission, with
respect to its continuance in effect, its termination and the method of
authorization and approval of such contract or renewal thereof.
ARTICLE IV
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LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
-----------------------------------------
TRUSTEES AND OTHERS
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IV.
A. No Personal Liability of Shareholders, Trustees, Etc.
No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than to the Trust or
its Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability . The indemnification and reimbursement required by
the preceding sentence shall be made only out of the assets of the one or more
Series of which the Shareholder who is entitled to indemnification or
reimbursement was a Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
B. Section 4.2. Non-Liability of Trustees, Etc.
No Trustee, officer, employee or agent of the Trust shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any
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action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
C. Section 4.3. Mandatory Indemnification.
1. (a) Subject to the exceptions and limitations contained in
paragraph (b) below:
a. (i) every person who is, or has been, a Trustee or officer
of the Trust shall be indemnified by the Trust to the
fullest extent permitted by law against all liability and
against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue
of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
b. (ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings
(civil, criminal, administrative or other, including
appeals), actual or threatened; and the words "liability"
and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
2. (b) No indemnification shall be provided hereunder to a
Trustee or officer:
a. (i) against any liability to the Trust, a Series thereof,
or the Shareholders by reason of a final adjudication by a
court or other body before which a proceeding was brought
that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of his office;
b. (ii) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best
interest of the Trust;
c. (iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph
(b)(i) or (b)(ii) resulting in a payment by a Trustee or
officer, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(1) (A) by the court or other body approving the
settlement or other disposition; or
(2) (B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote of a
majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested
Trustees then
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in office act on the matter) or (y) written opinion of
independent legal counsel.
3. (c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not affect any other rights to which any Trustee or officer
may now or hereafter be entitled, shall continue as to a person
who has ceased to be such Trustee or officer and shall inure to
the benefit of the heirs, executors, administrators and assigns
of such a person. Nothing contained herein shall affect any
rights to indemnification to which personnel of the Trust other
than Trustees and officers may be entitled by contract or
otherwise under law.
4. (d) Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 4.3 may be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification
under this Section 4.3, provided that either:
a. (i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the
Trust shall be insured against losses arising out of any
such advances; or
b. (ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested
Trustees act on the matter) or an independent legal counsel
in a written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an Interested Person of the Trust (including anyone who has been
exempted from being an Interested Person by any rule, regulation or order
of the Commission), or (ii) involved in the claim, action, suit or
proceeding.
D. Section 4.4. No Bond Required of Trustees.
No Trustee shall be obligated to give any bond or other security for the
performance of any of his duties hereunder.
E. Section 4.5. No Duty of Investigation; Notice in Trust Instruments,
Etc.
No purchaser, lender, Transfer Agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned or delivered to or on the order of
the Trustees or of said officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking
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made or issued by the Trustees may recite that the same is executed or made by
them not individually, but as Trustees under the Declaration, and that the
obligations of the Trust under any such instrument are not binding upon any of
the Trustees or Shareholders individually, but bind only the trust estate, and
may contain any further recital which they or he may deem appropriate, but the
omission of such recital shall not operate to bind the Trustees individually.
The Trustees shall at all times maintain insurance for the protection of the
Trust Property, its Shareholders, Trustees, officers, employees and agents in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
F. Section 4.6. Reliance on Experts, Etc.
Each Trustee and officer or employee of the Trust shall, in the performance
of his duties, be fully and completely justified and protected with regard to
any act or any failure to act resulting from reliance in good faith upon the
books of account or other records of the Trust, upon an opinion of counsel, or
upon reports made to the Trust by any of its officers or employees or by the
Investment Adviser, the Distributor, Transfer Agent, selected dealers,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
ARTICLE V
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SHARES OF BENEFICIAL INTEREST
-----------------------------
V.
A. Beneficial Interest.
The interest of the beneficiaries hereunder shall be divided into
transferable Shares of beneficial interest , all of one class, except as
provided in Section 5.11 and Section 5.13 hereof, par value $.01 per share. The
number of Shares of beneficial interest authorized hereunder is unlimited. All
Shares issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and non-assessable.
B. Section 5.2. Rights of Shareholders.
The ownership of the Trust Property and the property of each Series of the
Trust of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to share or assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration . The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any Series of Shares.
C. Section 5.3. Trust Only.
It is the intention of the Trustees to create only the relationship of
Trustee and beneficiary between the Trustees and each Shareholder from time to
time. It is not the intention
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of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in this Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
D. Section 5.4. Issuance of Shares.
The Trustees in their discretion may, from time to time without vote of the
Shareholders, issue Shares, in addition to the then issued and outstanding
Shares and Shares held in the treasury, to such party or parties and for such
amount and type of consideration, including cash or property, at such time or
times and on such terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and Shares
held in the treasury . The Trustees may from time to time divide or combine
the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust . Contributions to the Trust
may be accepted for, and Shares shall be redeemed as, whole Shares and/or
1/1,000ths of a Share or integral multiples thereof.
E. Section 5.5. Register of Shares.
A register shall be kept at the principal office of the Trust or an
office of the Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a record of
all transfers thereof. Such register shall be conclusive as to who are the
holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-laws
provided, until he has given his address to the Transfer Agent or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of share certificates and promulgate appropriate rules and regulations as to
their use.
F. Section 5.6. Transfer of Shares.
Except as otherwise provided by the Trustees, Shares shall be transferable
---------------------------------------------
on the records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized , upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such
Shares upon production of the proper evidence thereof to the Trustees or
the Transfer Agent, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder
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<PAGE>
and neither the Trustees nor any Transfer Agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
G. Section 5.7. Notices, Reports.
Any and all notices to which any Shareholder may be entitled and any and
all communications shall be deemed duly served or given if mailed, postage
prepaid, addressed to any Shareholder of record at his last known address as
recorded on the register of the Trust. A notice of a meeting, an annual report
and any other communication to Shareholders need not be sent to a Shareholder
(i) if an annual report and a proxy statement for two consecutive shareholder
meetings have been mailed to such Shareholder's address and have been returned
as undeliverable, (ii) if all, and at least two, checks (if sent by first class
mail) in payment of dividends on Shares during a twelve-month period have been
mailed to such Shareholder's address and have been returned as undeliverable or
(iii) in any other case in which a proxy statement concerning a meeting of
security holders is not required to be given pursuant to the Commission's proxy
rules as from time to time in effect under the Securities Exchange Act of 1934.
However, delivery of such proxy statements, annual reports and other
communications shall resume if and when such Shareholder delivers or causes to
be delivered to the Trust written notice setting forth such Shareholder's then
current address.
H. Section 5.8. Treasury Shares.
Shares held in the treasury shall, until reissued pursuant to Section
5.4, not confer any voting rights on the Trustees, nor shall such Shares be
entitled to any dividends or other distributions declared with respect to the
Shares.
I. Section 5.9. Voting Powers.
The Shareholders shall have power to vote only (i) for the election of
Trustees as provided in Section 2.12; (ii) for the removal of Trustees as
provided in Section 2.13; (iii) with respect to termination of the Trust as
provided in Section 8.2; (iv) with respect to any amendment of this Declaration
to the extent and as provided in Section 8.3; (v) to the same extent as the
stockholders of Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any Series or Class
thereof or the Shareholders (provided, however, that a Shareholder of a
particular Series or Class shall not be entitled to bring a derivative or class
action on behalf of any other Series or Class (or Shareholder of any other
Series or Class) of the Trust); and (vi) with respect to such additional matters
relating to the Trust as may be required by this Declaration, the By-laws or any
registration of the Trust as an investment company under the 1940 Act with the
Commission (or any successor agency) or as the Trustees may consider necessary
or desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote, except that the Trustees may, in conjunction with
the establishment of any Series or Class of Shares, establish or reserve the
right to establish conditions under which the several Series or Classes shall
have separate voting rights or, if a Series or Class would not, in the sole
judgment of the Trustees, be materially affected by a proposal, no voting
rights. There shall be no cumulative voting in the election of Trustees. Until
Shares are issued, the Trustees may exercise all rights of
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Shareholders and may take any action required by law, this Declaration or the
By-laws to be taken by Shareholders. The By-laws may include further provisions
for Shareholders' votes and meetings and related matters.
J. Section 5.10. Meetings of Shareholders.
A meeting of the Shareholders shall be called by the President and
Secretary at the request and in writing or by resolution of a majority of
Trustees and shall be held at such times, on such day and at such hour as the
Trustees may from time to time determine, either at the principal office of the
Trust, or at such other place as may be designated by the Trustees, for the
purposes specified in Section 2.12 or 2.13 and for such other purposes as may be
specified by the Trustees.
K. Section 5.11. Series Designation.
The Trustees, in their discretion, may authorize the division of Shares
into two or more Series, and the different Series shall be established and
designated, and the variations in the relative rights and preferences as between
the different Series shall be fixed and determined, by the Trustees; provided,
that all Shares shall be identical except that there may be variations so fixed
and determined between different Series as to investment objective, purchase
price, allocation of expenses, right of preferences special and relative rights
as to dividends and on liquidation, conversion rights, and conditions under
which the several Series shall have separate voting rights. All references to
Shares in this Declaration shall be deemed to be Shares of any or all Series as
the context may require.
1. (a) All provisions herein relating to the Trust shall apply
equally to each Series of the Trust except as the context
requires otherwise.
2. (b) The number of authorized Shares and the number of Shares of
each Series that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued Shares or any Shares
previously issued and reacquired of any Series into one or more
Series that may be established and designated from time to time.
The Trustees may hold as treasury Shares (of the same or some
other Series), reissue for such consideration and on such terms
as they may determine, or cancel any Shares of any Series
reacquired by the Trust at their discretion from time to time.
3. (c) All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only
to the rights of creditors of such Series and except as may
otherwise be required by applicable laws, and shall be so
recorded upon the books of account of the Trust. In the event
that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series, the Trustees
shall allocate them among any one or more of the Series
established
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<PAGE>
and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series
for all purposes.
4. (d) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that
Series and with all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and
among any one or more of the Series established and
designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and
equitable . Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Series for all
purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine
which items are capital; and each such determination and
allocation shall be conclusive and binding upon the
Shareholders. The assets of a particular Series of the Trust
shall, under no circumstances, be charged with liabilities
attributable to any other Series of the Trust. All persons
extending credit to, or contracting with or having any claim
against a particular Series of the Trust shall look only to
the assets of that particular Series for payment of such
credit, contract or claim. No Shareholder or former
Shareholder of any Series shall have any claim on or right
to any assets allocated or belonging to any other Series.
5. (e) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each
holder of Shares of a Series shall be entitled to receive
his pro rata share of distributions of income and capital
gains made with respect to such Series, except as provided
in Section 5.13 hereof. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his
being or having been a Shareholder of a Series, such
Shareholder shall be paid solely out of the funds and
property of such Series of the Trust. Upon liquidation or
termination of a Series of the Trust, Shareholders of such
Series shall be entitled to receive a pro rata share of the
net assets of such Series, except as provided in Section
5.13 hereof. A Shareholder of a particular Series of the
Trust shall not be entitled to participate in a derivative
or class action on behalf of any other Series or the
Shareholders of any other Series of the Trust.
6. (f) The establishment and designation of any Series of
Shares shall be effective upon the execution by a majority
of the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such
instrument. The Trustees may by an instrument executed by a
majority of their number abolish any Series and the
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establishment and designation thereof. Except as otherwise
provided in this Article V, the Trustees shall have the
power to determine the designations, preferences,
privileges, limitations and rights, of each class and Series
of Shares. Each instrument referred to in this paragraph
shall have the status of an amendment to this Declaration.
L. Section 5.12. Assent to Declaration of Trust.
Every Shareholder, by virtue of having become a shareholder, shall be held
to have expressly assented and agreed to the terms hereof and to have become a
party hereto.
M. Section 5.13. Class Designation.
The Trustees, in their discretion, may authorize the division of the Shares
of the Trust, or, if any Series be established, the Shares of any Series, into
two or more Classes, and the different Classes shall be established and
designated, and the variations in the relative rights and preferences as between
the different Classes shall be fixed and determined, by the Trustees; provided,
that all Shares of the Trust or of any Series shall be identical to all other
Shares of the Trust or the same Series, as the case may be, except that there
may be variations between different Classes as to allocation of expenses, right
of redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Classes shall have
separate voting rights. All references to Shares in this Declaration shall be
deemed to be Shares of any or all Classes as the context may require.
1. (a) All provisions herein relating to the Trust, or any
Series of the Trust, shall apply equally to each Class of Shares
of the Trust or of any Series of the Trust, except as the context
requires otherwise.
2. (b) The number of Shares of each Class that may be issued shall
be unlimited. The Trustees may classify or reclassify any Shares
or any Series of any Shares into one or more Classes that may be
established and designated from time to time. The Trustees may
hold as treasury Shares (of the same or some other Class),
reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Class reacquired by the
Trust at their discretion from time to time.
3. (c) Liabilities, expenses, costs, charges and reserves related
to the distribution of, and other identified expenses that should
properly be allocated to, the Shares of a particular Class may be
charged to and borne solely by such Class and the bearing of
expenses solely by a Class of Shares may be appropriately
reflected (in a manner determined by the Trustees) and cause
differences in the net asset value attributable to, and the
dividend, redemption and liquidation rights of, the Shares of
different Classes. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive
and binding upon the Shareholders of all Classes for all
purposes.
4. (d) The establishment and designation of any Class of Shares
shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and
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<PAGE>
the relative rights and preferences of such Class, or as
otherwise provided in such instrument. The Trustees may, by
an instrument executed by a majority of their number,
abolish any Class and the establishment and designation
thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
ARTICLE VI
----------
REDEMPTION AND REPURCHASE OF SHARES
-----------------------------------
VI.
A. Redemption of Shares.
All Shares of the Trust shall be redeemable, at the redemption price
determined in the manner set out in this Declaration. Redeemed or repurchased
Shares may be resold by the Trust.
The Trust shall redeem the Shares upon the appropriately verified written
application of the record holder thereof (or upon such other form of request as
the Trustees may determine) at such office or agency as may be designated from
time to time for that purpose in the Trust's then effective registration
statement under the Securities Act of 1933. The Trustees may from time to time
specify additional conditions, not inconsistent with the 1940 Act, regarding the
redemption of Shares in the Trust's then effective registration statement under
the Securities Act of 1933.
B. Section 6.2. Price.
Shares shall be redeemed at their net asset value, determined as set forth
in Section 7.1 hereof as of such time as the Trustees shall have theretofore
prescribed by resolution. In the absence of such resolution, the redemption
price of Shares deposited shall be the net asset value of such Shares next
determined as set forth in Section 7.1 hereof after receipt of such application.
C. Section 6.3. Payment.
Payment for such Shares shall be made in cash or in property out of the
assets of the relevant Series of the Trust to the Shareholder of record at such
time and in the manner, not inconsistent with the 1940 Act or other applicable
laws, as may be specified from time to time in the Trust's then effective
registration statement under the Securities Act of 1933, subject to the
provisions of Section 6.4 hereof.
D. Section 6.4. Effect of Suspension of Determination of Net Asset
Value.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension
of the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 6.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on deposit.
The redemption price of Shares for which redemption applications have not been
revoked shall be the net asset value of such Shares next determined as set forth
in Section 7.1 after the termination of such suspension,
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<PAGE>
and payment shall be made within seven (7) days after the date upon which the
application was made plus the period after such application during which the
determination of net asset value was suspended.
E. Section 6.5. Repurchase by Agreement.
The Trust may repurchase Shares directly, or through the Distributor or
another agent designated for the purpose, by agreement with the owner thereof at
a price not exceeding the net asset value per Share determined as of the time
when the purchase or contract of purchase is made or the net asset value as of
any time which may be later determined pursuant to Section 7.1 hereof, provided
payment is not made for the Shares prior to the time as of which such net asset
value is determined.
F. Section 6.6. Redemption of Shareholder's Interest.
1. (a) The Trust shall have the right at any time without prior
notice to the Shareholder to redeem Shares of any Shareholder for
their then current net asset value per Share if at such time the
Shareholder owns Shares having an aggregate net asset value of
less than an amount set from time to time by the Trustees subject
to such terms and conditions as the Trustees may approve, and
subject to the Trust's giving general notice to all Shareholders
of its intention to avail itself of such right, either by
publication in the Trust's registration statement, if any, or by
such other means as the Trustees may determine.
G. Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding.
If the Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares or other securities of the Trust has
or may become concentrated in any Person to an extent which would disqualify any
Series of the Trust as a regulated investment company under the Internal Revenue
Code, then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number, or
principal amount, of Shares or other securities of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust into conformity with the requirements for such qualification and
(ii) to refuse to transfer or issue Shares or other securities of the Trust to
any Person whose acquisition of the Shares or other securities of the Trust in
question would result in such disqualification. The redemption shall be effected
at the redemption price and in the manner provided in Section 6.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
H. Section 6.8. Reductions in Number of Outstanding Shares Pursuant to
Net Asset Value Formula.
The Trust may also reduce the number of Outstanding Shares pursuant to the
provisions of Section 7.3.
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<PAGE>
I. Section 6.9. Suspension of Right of Redemption.
The Trust may declare a suspension of the right of redemption or postpone
the date of payment or redemption for the whole or any part of any period (i)
during which the New York Stock Exchange is closed other than customary week-end
and holiday closings, (ii) during which trading on the New York Stock Exchange
is restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Trust fairly to determine the value of
its net assets, or (iv) during any other period when the Commission may for the
protection of Shareholders of the Trust by order permit suspension of the right
of redemption or postponement of the date of payment or redemption; provided
that applicable rules and regulations of the Commission shall govern as to
whether the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension
shall take effect at such time as the Trust shall specify but not later than the
close of business on the business day next following the declaration of
suspension, and thereafter there shall be no right of redemption or payment on
redemption until the Trust shall declare the suspension at an end, except that
the suspension shall terminate in any event on the first day on which said stock
exchange shall have reopened or the period specified in (ii) or (iii) shall have
expired (as to which in the absence of an official ruling by the Commission, the
determination of the Trust shall be conclusive). In the case of a suspension of
the right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing after the
termination of the suspension.
ARTICLE VII
-----------
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
----------------------------
VII.
A. Net Asset Value.
The value of the assets of the Trust or any Series of the Trust shall be
determined by appraisal of the securities of the Trust or allocated to such
Series, such appraisal to be on the basis of such method as shall be deemed to
reflect the fair value thereof, determined in good faith by or under the
direction of the Trustees. From the total value of said assets, there shall be
deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities attributable to
the Trust or such Series or Class thereof which shall be deemed appropriate.
The net asset value of a Share shall be determined by dividing the net asset
value of the Class, or, if no Class has been established, of the Series, or, if
no Series has been established, of the Trust, by the number of Shares of that
Class, or Series, or of the Trust, as applicable, outstanding. The net asset
value of Shares of the Trust or any Class or Series of the Trust shall be
determined pursuant to the procedure and methods prescribed or approved by the
Trustees in their discretion and as set forth in the most recent Registration
Statement of the Trust as filed with the Securities and Exchange Commission
pursuant to the requirements of the Securities Act of 1933, as amended, the 1940
Act, as amended, and the Rules thereunder. The net asset value of the Shares
shall be determined at least once on each business day, as of the close of
trading on the New York
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Stock Exchange or as of such other time or times as the Trustees shall
determine. The power and duty to make the daily calculations may be delegated by
the Trustees to the Investment Adviser, the Custodian, the Transfer Agent or
such other Person as the Trustees may determine by resolution or by approving a
contract which delegates such duty to another Person. The Trustees may suspend
the daily determination of net asset value to the extent permitted by the 1940
Act.
B. Section 7.2. Distributions to Shareholders.
The Trustees shall from time to time distribute ratably among the
Shareholders of the Trust or a Series such proportion of the net profits,
surplus (including paid-in surplus), capital, or assets of the Trust or such
Series held by the Trustees as they may deem proper. Such distributions may be
made in cash or property (including without limitation any type of obligations
of the Trust or such Series or any assets thereof), and the Trustees may
distribute ratably among the Shareholders additional Shares of the Trust or such
Series issuable hereunder in such manner, at such times, and on such terms as
the Trustees may deem proper. Such distributions may be among the Shareholders
of record at the time of declaring a distribution or among the Shareholders of
record at such other date or time or dates or times as the Trustees shall
determine. The Trustees may in their discretion determine that, solely for the
purposes of such distributions, Outstanding Shares shall exclude Shares for
which orders have been placed subsequent to a specified time on the date the
distribution is declared or on the next preceding day if the distribution is
declared as of a day on which Boston banks are not open for business, all as
described in the registration statement under the Securities Act of 1933. The
Trustees may always retain from the net profits such amount as they may deem
necessary to pay the debts or expenses of the Trust or the Series or to meet
obligations of the Trust or the Series, or as they may deem desirable to use in
the conduct of its affairs or to retain for future requirements or extensions of
the business. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate. The above provisions may be modified to the extent
required by a plan adopted by the Trustees to establish Classes of Shares of the
Trust or of a Series.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the Series to avoid or reduce liability for taxes.
C. Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares.
Subject to Section 5.11 and Section 5.13 hereof, the net income of the Trust or
any Series shall be determined in such manner as the Trustees shall provide by
resolution. Expenses of the Trust or a Series, including the advisory or
management fee, shall be accrued each day. Such net income may be determined by
or under the direction of the Trustees as of the close of trading on the New
York Stock Exchange on each day on which such Exchange is open or as of such
other time or times as the Trustees shall determine, and, except as provided
herein, all the net income of the Trust or any Series, as so determined, may be
declared as a dividend on the Outstanding Shares of the Trust or such Series.
If, for any
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reason, the net income of the Trust or any Series, determined at any time is a
negative amount, the Trustees shall have the power with respect to the Trust or
such Series (i) to offset each Shareholder's pro rata share of such negative
amount from the accrued dividend account of such Shareholder, or (ii) to reduce
the number of Outstanding Shares of the Trust or such Series by reducing the
number of Shares in the account of such Shareholder by that number of full and
fractional Shares which represents the amount of such excess negative net
income, or (iii) to cause to be recorded on the books of the Trust or such
Series an asset account in the amount of such negative net income, which account
may be reduced by the amount, provided that the same shall thereupon become the
property of the Trust or such Series with respect to the Trust or such Series
and shall not be paid to any Shareholder, of dividends declared thereafter upon
the Outstanding Shares of the Trust or such Series on the day such negative net
income is experienced, until such asset account is reduced to zero; or (iv) to
combine the methods described in clauses (i) and (ii) and (iii) of this
sentence, in order to cause the net asset value per Share of the Trust or such
Series to remain at a constant amount per Outstanding Share immediately after
each such determination and declaration. The Trustees shall also have the power
to fail to declare a dividend out of net income for the purpose of causing the
net asset value per Share to be increased to a constant amount. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the practice of maintaining the net asset value per Share of the Trust or a
Series at a constant amount.
D. Section 7.4. Allocation Between Principal and Income.
The Trustees shall have full discretion to determine whether any cash or
property received shall be treated as income or as principal and whether any
item of expense shall be charged to the income or the principal account, and
their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much if any of the value thereof shall be treated as income, the balance, if
any, to be treated as principal.
E. Section 7.5. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article VII, the
Trustees may prescribe, in their absolute discretion, such other bases and times
for determining the per Share net asset value or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable.
ARTICLE VIII
------------
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
------------------------
VIII.
A. Duration.
The Trust shall continue without limitation of time but subject to the
provisions of this Article VIII.
B. Section 8.2. Termination of Trust.
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1. (a) The Trust or any Series of the Trust may be terminated by an
instrument in writing signed by a majority of the Trustees, or by
the affirmative vote of the holders of a majority of the Shares
of the Trust or Series outstanding and entitled to vote at any
meeting of Shareholders. Upon the termination of the Trust or
any Series,
a. (i) the Trust or any Series shall carry on no business
except for the purpose of winding up its affairs;
b. (ii) the Trustees shall proceed to wind up the affairs of
the Trust or Series and all of the powers of the Trustees
under this Declaration shall continue until the affairs of
the Trust or Series shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust or
Series, collect its assets, sell, convey, assign, exchange,
transfer or otherwise dispose of all or any part of the
remaining Trust Property or property of the Series to one or
more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate
its business; and
c. (iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary
for their protection, the Trustees may distribute the
remaining Trust Property or property of the Series, in cash
or in kind or partly each, among the Shareholders of the
Trust or Series according to their respective rights.
2. (b) After termination of the Trust or any Series and
distribution to the Shareholders as herein provided, a majority
of the Trustees shall execute and lodge among the records of the
Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and
interests of all Shareholders of the Trust or Series shall
thereupon cease.
C. Section 8.3. Amendment Procedure.
1. (a) This Declaration may be amended by a vote of the holders of
a majority of the Shares outstanding and entitled to vote.
Amendments shall be effective upon the taking of action as
provided in this section or at such later time as shall be
specified in the applicable vote or instrument. The Trustees may
also amend this Declaration without the vote or consent of
Shareholders if they deem it necessary to conform this
Declaration to the requirements of applicable federal or state
laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code
(including those provisions of such Code relating to the
retention of the exemption from federal income tax with respect
to dividends paid by the Trust out of interest income received on
Municipal Bonds), but the Trustees
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<PAGE>
shall not be liable for failing so to do. The Trustees may also
amend this Declaration without the vote or consent of
Shareholders if they deem it necessary or desirable to change the
name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision
hereof, or to make any other changes in the Declaration which do
not materially adversely affect the rights of Shareholders
hereunder.
2. (b) No amendment may be made under this Section 8.3 which would
change any rights with respect to any Shares of the Trust or
Series by reducing the amount payable thereon upon liquidation of
the Trust or Series or by diminishing or eliminating any voting
rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares of the Trust or Series
outstanding and entitled to vote. Nothing contained in this
Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
3. (c) A certificate signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the
Declaration, as amended, and executed by a majority of the
Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
D. Section 8.4. Merger, Consolidation and Sale of Assets.
The Trust or any Series thereof may merge or consolidate with any other
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property or the property of any
Series, including its good will, upon such terms and conditions and for such
consideration when and as authorized by an instrument in writing signed by a
majority of the Trustees.
E. Section 8.5. Incorporation.
When authorized by an instrument in writing signed by a majority of the
Trustees, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or the property of any Series or to carry on any business in
which the Trust or the Series shall directly or indirectly have any interest,
and to sell, convey and transfer the Trust Property or the property of any
Series to any such corporation, trust, association or organization in exchange
for the Shares or securities thereof or otherwise, and to lend money to,
subscribe for the Shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
or the Series holds or is about to acquire shares or any other interest. The
Trustees may also cause a merger or
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<PAGE>
consolidation between the Trust or any Series or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organization or entities.
ARTICLE IX
----------
REPORTS TO SHAREHOLDERS
-----------------------
IX.
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report, which may be included in the Trust's prospectus or
statement of additional information, of the transactions of the Trust, including
financial statements which shall at least annually be certified by independent
public accountants.
ARTICLE X
---------
MISCELLANEOUS
-------------
X.
A. Filing.
This Declaration and any amendment hereto shall be filed in the office of
the Secretary of the Commonwealth of Massachusetts and in such other places as
may be required under the laws of the Commonwealth of Massachusetts and may also
be filed or recorded in such other places as the Trustees deem appropriate.
Unless the amendment is embodied in an instrument signed by a majority of the
Trustees, each amendment filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and operative,
may be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may hereafter be referred to in
lieu of the original Declaration and the various amendments thereto. The
restated Declaration may include any amendment which the Trustees are empowered
to adopt, whether or not such amendment has been adopted prior to the execution
of the restated Declaration.
B. Section 10.2. Governing Law.
This Declaration is executed by the Trustees and delivered in the
Commonwealth of Massachusetts and with reference to the internal laws thereof,
and the rights of all parties and the validity and construction of every
provision hereof shall be subject to and construed according to the internal
laws of said State without regard to the choice of law rules thereof.
C. Section 10.3. Counterparts.
This Declaration may be simultaneously executed in several counterparts,
each of which shall be deemed to be an original, and such counterparts,
together, shall constitute one and the same instrument, which shall be
sufficiently evidenced by any such original counterpart.
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<PAGE>
D. Section 10.4. Reliance by Third Parties.
Any certificate executed by an individual who, according to the records of
the Trust appears to be a Trustee hereunder, certifying to: (a) the number or
identity of Trustees or Shareholders, (b) the due authorization of the execution
of any instrument or writing, (c) the form of any vote passed at a meeting of
Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees and their successors.
E. Section 10.5. Provisions in Conflict with Law or Regulations.
The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
If any provision of this Declaration shall be held invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall attach only to
such provision in such jurisdiction and shall not in any manner affect such
provisions in any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
_______ day of _______________, 2000.
____________________________________
as Trustee and not Individually
____________________________________
as Trustee and not Individually
____________________________________
as Trustee and not Individually
____________________________________
as Trustee and not Individually
____________________________________
as Trustee and not Individually
____________________________________
as Trustee and not Individually
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<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
---------------------------------
County of Suffolk _____________ ____, 2000
Then personally appeared the above-named ___________________ who
acknowledged the foregoing instrument to be his/her free act and deed.
Before me,
______________________________
Notary Public
My commission expires: __________
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<PAGE>
APPENDIX G
----------
As of December 15, 1999, the following persons owned of record or
beneficially 5% or more of the shares of the noted class of shares of the
following Funds:
<TABLE>
<CAPTION>
Name Fund Shares Beneficially Percent of Fund Percent of Class D
Owned Shares
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
* Entity owned 25% or more of the outstanding shares of beneficial interest of
the Fund, and therefore may be presumed to "control" the Fund, as that term is
defined in the 1940 Act.
** Shares are believed to be held only as nominee.
G-1
<PAGE>
PIMCO FUNDS
[Name of Fund]
SPECIAL MEETING OF SHAREHOLDERS
[March 3], 2000
The undersigned hereby appoints ____________ and ___________ 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 ________ Fund held by the undersigned
at the Special Meeting of Shareholders of the Fund to be held at 800 Newport
Center Drive, 6th Floor, Newport Beach, California, 92660, on [March 3], 2000 at
[time], 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.
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:
<TABLE>
<S> <C>
I. To elect Trustees to the Board of Trustees of the Trust
[ ] FOR ALL [ ] AGAINST ALL [ ] ABSTAIN
[ ] FOR ALL EXCEPT _______________________________________
(Only use to withhold authority to vote on individual Nominees)
II. To approve a new investment advisory contract
[ ] FOR [ ] AGAINST [ ] ABSTAIN
III. To approve a distribution and service plan (Class D shares, only)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. To approve changes to fundamental investment policies:
a. Concentration
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
1
<PAGE>
b. Diversification [Money Market, Short-Term, Low Duration, Low
Duration II, Low Duration III, Low Duration Mortgage,
Moderate Duration, Total Return, Total Return II, Total
Return III, Total Return Mortgage, High Yield, Long-Term
U.S. Government, Long Duration, Short-Duration Municipal
Income, Municipal Bond, Strategic Balanced, Convertible Bond
and StockPLUS]
[ ] FOR [ ] AGAINST [ ] ABSTAIN
c. Investments in Real Estate [Global Bond Fund II]
[ ] FOR [ ] AGAINST [ ] ABSTAIN
d. Margin [Total Return III, High Yield, and StocksPLUS Funds]
[ ] FOR [ ] AGAINST [ ] ABSTAIN
e. Borrowing and Senior Securities
[ ] FOR [ ] AGAINST [ ] ABSTAIN
f. Loans
[ ] FOR [ ] AGAINST [ ] ABSTAIN
g. Underwriting [Global Bond Fund II]
[ ] FOR [ ] AGAINST [ ] ABSTAIN
h. Short Positions
[ ] FOR [ ] AGAINST [ ] ABSTAIN
i. Investments in other Investment Companies
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] FOR ALL EXCEPT __________________
V. To approve an Amended and Restated Declaration of Trusta
[ ] FOR [ ] AGAINST [ ] ABSTAIN
VI. To transact such other business as may properly come before the
Meeting
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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.
-2-
<PAGE>
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Dated _________________________, 2000
_____________________________________
Name of Shareholder(s) -- Please print or type
_____________________________________
Signature(s) of Shareholder(s)
_____________________________________
Signature(s) of Shareholder(s)
This proxy must be signed by the beneficial owner of Fund 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.
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