<PAGE> 1
This filing is made pursuant
to Rule 424(b)(5) under
the Securities Act of
1933 in connection with
Registration No. 333-53055
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 1, 1998)
PIMCO ADVISORS HOLDINGS L.P.
UP TO 1,519,742 UNITS OF LIMITED PARTNERSHIP INTEREST
------------------------
This prospectus supplement relates to the public offer and sale of up to
1,519,742 units of limited partnership interest (the "Units") in PIMCO Advisors
Holdings L.P., a Delaware limited partnership ("Holdings"), which may be offered
and sold by certain persons who received the Units from Holdings in exchange for
units of partner interest ("Advisors Units") in PIMCO Advisors L.P. ("PIMCO
Advisors") in a registered offer of exchange made by Holdings pursuant to a
prospectus dated June 1, 1998 and a supplement thereto also dated June 1, 1998.
Holdings will not receive any of the proceeds from the Units being sold by
the selling securityholder. See "Selling Securityholder." The Units are listed
on the New York Stock Exchange under the symbol "PA." On June 30, 1998, the last
reported sale price of the Units on the New York Stock Exchange was $34.125 per
unit.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JULY 1, 1998
<PAGE> 2
THE PARTNERSHIP
Holdings, a Delaware limited partnership, is a holding company which as its
sole business acts as a general partner of PIMCO Advisors and owns in excess of
46 million Advisors Units, an approximate 43% equity interest in PIMCO Advisors.
PIMCO Advisors is one of the largest investment management companies in the
United States, with approximately $222 billion under management at April 30,
1998. PIMCO Advisors' business provides high quality fixed income and equity
investment management to institutional and retail clients, offering the
investment management expertise, performance record and reputations of its
institutional investment managers, which include the fixed income oriented
Pacific Investment Management Company and the equity oriented Oppenheimer
Capital. Holdings owns one Advisors Unit for each Unit outstanding, as well as a
number of Advisors Units allocable to the general partner interest of Holdings.
Accordingly, each Unit represents an indirect economic interest in one Advisors
Unit.
Holdings' principal offices are located at 800 Newport Center Drive, Suite
100, Newport Beach, California 92660. Holdings' telephone number is (949)
717-7022.
USE OF PROCEEDS
All net proceeds from the sale of the Units will go to the selling
securityholder who offer and sell their Units. Holdings will not receive any of
the proceeds from the sale of the Units.
SELLING SECURITYHOLDER
The following table sets forth certain information as of the date of this
prospectus supplement with respect to the beneficial ownership of the Units by
the selling securityholder. The Units to be sold by the selling securityholder
were received by it in exchange for units of limited partner interest in PIMCO
Advisors pursuant to an offer of exchange made by PIMCO Holdings to the partners
of PIMCO Advisors. Holdings will not receive any of the proceeds from the sale
of the Units being sold by the selling securityholder.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF UNITS NUMBER OF UNITS OUTSTANDING
OWNED PRIOR UNITS OWNED UNITS
SELLING SECURITYHOLDER TO OFFERING(1) BEING OFFERED AFTER OFFERING AFTER OFFERING(2)
---------------------- --------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
CCM LLC (3)............................ 2,665,000 1,519,742 1,145,258 1.0
</TABLE>
- ---------------
(1) Based on information provided by the selling securityholder.
(2) Based on outstanding Units and Advisors Units which, under certain
circumstances, may be exchanged for Units.
(3) Includes 637,000 Advisors Units owned by Cadence Partners LP, of which CCM
LLC is the general partner and over which it has shared voting and
investment authority. CCM LLC is an indirect wholly owned subsidiary of
Pacific Life Insurance Company ("Pacific Life"). Pacific Life, through its
subsidiaries, including PIMCO Holding LLC, a general partner of PIMCO
Partners, G.P. ("PGP"), may be considered to beneficially own 58,905,813
Units. These securities may also deemed to be owned by Pacific LifeCorp and
Pacific Mutual Holding Company ("PMHC") because Pacific Life is a wholly-
owned subsidiary of Pacific LifeCorp, which, in turn, is a majority-owned
subsidiary of PMHC. The address of each of the above entities is: 700
Newport Center Drive, Newport Beach, California 92660.
PIMCO Holding LLC acts as a general partner of PGP, the general partner of
Holdings and a general partner of PIMCO Advisors. For a description of the
management of Holdings and PIMCO Advisors, including a discussion of executive
compensation and certain relationships and related transactions involving PGP,
see "Item 10: Directors and Executive Officers of the Registrant," "Item 11:
Executive Compensation" and "Item 13: Certain Relationships and Related
Transactions" in Holdings' Annual Report on Form 10-K for the year ended
December 31, 1997, which is incorporated herein by reference.
If necessary, Holdings will include other required information about the
selling securityholder in a further prospectus supplement.
S-2
<PAGE> 3
PLAN OF DISTRIBUTION
The Units covered by the prospectus and this prospectus supplement may be
offered and sold at various times by the selling securityholder. The selling
securityholder will act independently of Holdings in making decisions with
respect to the Units being offered hereby and may offer its Units in one or more
of the following transactions:
- on the New York Stock Exchange;
- in the over-the-counter market;
- in transactions other than on such exchange or in the over-the-counter
market;
- in brokerage transactions;
- in privately negotiated transactions (including, without limitation, in
satisfaction of certain exchange obligations arising under the PFAMCO
Stock Exchange Agreement effective as of November 15, 1994 among
affiliates of CCM LLC and certain holders of preferred stock of Thomson
Advisory Group Inc.);
- in connection with short sales of the Units;
- by pledge to secure debts and other obligations;
- in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or
- in a combination of any of the above transactions.
The selling securityholder may sell its Units at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling securityholder may use broker-dealers to sell their Units. If
this happens, broker-dealers will either receive discounts or commissions from
the selling securityholder, or they will receive commissions from purchasers of
Units for whom they acted as agents. The selling securityholder and any
broker-dealers, agents or underwriters that participate with the selling
securityholder in the distribution of the Units offered hereby may be deemed to
be "underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), in which case any commissions or discounts received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Units offered hereby and purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
S-3
<PAGE> 4
PROSPECTUS
PIMCO ADVISORS HOLDINGS L.P.
10,000,000 UNITS OF LIMITED PARTNERSHIP INTEREST
This prospectus covers the offer and sale of up to 10,000,000 units of
limited partner interest ("Holdings Units") in PIMCO Advisors Holdings L.P., a
Delaware limited partnership ("Holdings"), that may be offered and issued by
Holdings from time to time in connection with exchange offers made by Holdings
for Class A units of partnership interest ("Advisors Units") of PIMCO Advisors
L.P. ("PIMCO Advisors") in accordance with Rule 415(a)(1)(viii) under the
Securities Act of 1933, as amended (the "Securities Act"), or as otherwise
permitted under the Securities Act. This prospectus, as amended or supplemented,
if necessary, also relates to certain Holdings Units that may be resold or
reoffered by persons who acquired such units pursuant to this prospectus.
Holdings is a holding company which as its sole business acts as a general
partner of PIMCO Advisors and owns in excess of 46 million Advisors Units, an
approximate 43% equity interest in PIMCO Advisors. PIMCO Advisors is one of the
largest investment management companies in the United States. Holdings owns one
Advisors Unit for each Holdings Unit outstanding, as well as a number of
Advisors Units allocable to the general partner interest of Holdings.
Accordingly, each Holdings Unit represents an indirect economic interest in one
Advisors Unit. Holdings will make offers under this prospectus to exchange one
Holdings Unit for each Advisors Unit tendered.
Holdings anticipates making the exchange offers during the semiannual
periods, each comprising twenty business days, during which the PIMCO Advisors
Partnership Agreement (as hereafter defined) generally permits Advisors Units to
be transferred. At the time of each exchange offer, Holdings will by supplement
to this prospectus provide detailed information regarding the terms of the
offer, including the dates of commencement and expiration of the offer, the
number of Advisors Units being tendered for, the procedures for tendering
Advisors Units, any conditions to the offer, any ability of Holdings to modify
or extend the offer, the identity of any exchange agent for the offer and the
estimated fees and expenses of the offer.
Holdings intends to offer one Holdings Unit for each Advisors Unit properly
tendered in an exchange offer up to a maximum of 10,000,000 Holdings Units. If
in any exchange offer hereunder, Advisors Units have been tendered and not
properly withdrawn prior to the expiration date of that exchange offer in an
amount such that the total number Holdings Units to be issued in that exchange
offer, together with any prior exchange offers hereunder, exceeds the number of
Holdings Units offered hereby, subject to the terms and conditions of the
exchange offer, Holdings will accept the tendered Advisors Units on a pro rata
basis.
FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION
WITH THIS EXCHANGE OFFER, SEE "RISK FACTORS," ON PAGE 6.
The Holdings Units are listed and principally traded on the New York Stock
Exchange under the symbol "PA." On May 15, 1998, the last reported sale price
per unit for the Holdings Units on the New York Stock Exchange was $31.00. The
Holdings Units covered by this prospectus have been approved for listing,
subject to notice of issuance, on the New York Stock Exchange. No underwriter
will be used in connection with the exchange offers.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The exchange offers will not be made to, nor will Holdings accept
surrenders for exchange from, holders of Advisors Units in any jurisdiction in
which the exchange offer or its acceptance would not be in compliance with the
securities or blue sky laws of that jurisdiction. In jurisdictions where
securities, blue sky or other laws require the exchange offers to be made by a
licensed broker or dealer, the exchange offers shall be deemed to be made on
behalf of Holdings by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
The date of this prospectus is June 1, 1998
<PAGE> 5
AVAILABLE INFORMATION/INCORPORATION BY REFERENCE
Holdings files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). You
may read and copy any reports, statements or other information Holdings files at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. SEC filings for Holdings are also available to
the public from the SEC's Website at "http://www.sec.gov."
The SEC allows Holdings to "incorporate by reference" the information it
files with them, which means that Holdings can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information that
Holdings files later with the SEC will automatically update and supersede this
information.
Holdings incorporates by reference the documents listed below and any
future filings it will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"): Holdings'
Annual Report on Form 10-K for the year ended December 31, 1997; Holdings'
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; the initial
description of the Holdings Units contained in Holdings' Registration Statement
on Form 8-A filed with the SEC on June 24, 1987, including any amendment or
report filed for the purpose of updating such description; and Holdings'
Registration Statement on Form S-1 (No. 333-39585).
You may request a copy of these filings, at no cost, by writing or
telephoning Holdings at the following address:
PIMCO Advisors Holdings L.P.
800 Newport Center Drive
Newport Beach, California 92660
Attention: Secretary
Telephone number: (949) 717-7022
This prospectus is part of a registration statement Holdings filed with the
SEC. This prospectus, which forms a part of the registration statement, does not
contain all of the information contained in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits.
You should rely only on the information or representations provided in this
prospectus. Holdings has authorized no one to provide you with different
information.
Holdings is not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
FORWARD-LOOKING STATEMENTS
Certain information in this prospectus constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of results to differ materially from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: the ability of PIMCO Advisors to retain key
investment portfolio managers; the ability of PIMCO Advisors to earn performance
based fees; fluctuations in the capital markets; national and local economic
conditions and events, including interest rates and investor confidence;
competition; and other factors referenced in this prospectus.
2
<PAGE> 6
THE PARTNERSHIPS
Holdings, a Delaware limited partnership, is a holding company which as its
sole business acts as a general partner of PIMCO Advisors and owns in excess of
46 million Advisors Units, an approximate 43% equity interest in PIMCO Advisors.
Holdings owns one Advisors Unit for each Holdings Unit outstanding, as well as a
number of general partner Advisors Units. Accordingly, each Holdings Unit
represents an indirect economic interest in one Advisors Unit.
PIMCO Advisors is one of the largest investment management companies in the
United States, with approximately $222 billion under management at April 30,
1998. PIMCO Advisors' business provides high quality fixed income and equity
investment management to institutional and retail clients, offering the
investment management expertise, performance record and reputations of its
institutional investment managers, which include the fixed income oriented
Pacific Investment Management Company ("Pacific Investment Management") and the
equity oriented Oppenheimer Capital.
PIMCO Advisors' business focuses on:
Institutional Fixed Income. PIMCO Advisors provides fixed income investment
management to large and medium-sized foreign and domestic corporate and public
clients. Fixed income management is led by Pacific Investment Management, which
offers impressive long-term performance records across a diverse range of
product offerings such as total return, international and other duration and
sector specific strategies.
Institutional Equity. PIMCO Advisors provides equity investment management
to institutional clients offering the investment management expertise of six
equity management groups, including the highly regarded Oppenheimer Capital.
PIMCO Advisors offers investors a variety of management styles, including value,
growth, modified growth, quantitative and international management styles, as
well as an enhanced index based strategy.
Institutional clients invest through separate accounts and pooled vehicles
such as the institutional share classes of the PIMCO Funds, PIMCO Advisors'
family of 45 proprietary mutual funds. PIMCO Advisors offers its investment
management services to institutional clients through client service
representatives at its investment management companies.
Retail Distribution. PIMCO Advisors offers the investment expertise of its
institutional investment managers to retail investors through the retail share
classes of the PIMCO Funds, which are distributed primarily through
broker-dealers including PIMCO Funds Distributors LLC, a wholly-owned
broker-dealer which distributes and markets shares of the retail mutual funds of
PIMCO Advisors. In addition, PIMCO Advisors offers retail investors wrap fee
accounts, variable annuity products, 401(k) programs and various investment
products through sponsored trust companies.
PIMCO Advisors' strategy is to increase the amount and diversification of
its assets under management through (i) growth in the institutional market by
providing high levels of client service and entering new markets, (ii) growth in
the retail market by building brand awareness and direct marketing of the PIMCO
Funds through its broker-dealer network and through penetrating additional
distribution channels and (iii) new product offerings to institutions and retail
investors.
3
<PAGE> 7
The revenues of PIMCO Advisors consist principally of management fees based
on the value of assets under management and in some cases the performance of the
advisor. The following table sets forth the composition of PIMCO Advisors'
assets under management and their growth since December 31, 1994 (as adjusted to
include the assets under management of Oppenheimer Capital):
<TABLE>
<CAPTION>
ASSETS UNDER MANAGEMENT
(IN BILLIONS)
------------------------------------
AS OF DECEMBER 31
------------------------------------ COMPOUND
1997 1996 1995 1994 ANNUAL GROWTH RATE
------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
SOURCE
Institutional Separate Accounts
Fixed Income.................... $ 87.1 $ 63.4 $ 55.4 $ 42.6 26.9%
Equity.......................... 55.0 44.1 38.0 28.7 24.2%
Retail Products and Mutual
Funds......................... 57.4 50.7 39.0 29.4 25.0%
------ ------ ------ ------
TOTAL......................... $199.5 $158.2 $132.4 $100.7 25.6%
====== ====== ====== ======
ASSET MIX
Fixed Income....................... $115.5 $ 86.3 $ 74.7 $ 57.0 26.5%
Equity............................. 81.2 69.0 54.9 41.2 25.4%
Money Market....................... 2.8 2.9 2.8 2.5 3.9%
------ ------ ------ ------
TOTAL......................... $199.5 $158.2 $132.4 $100.7 25.6%
====== ====== ====== ======
</TABLE>
The principal offices of Holdings and PIMCO Advisors are located at 800
Newport Center Drive, Newport Beach, California. The partnerships' telephone
number is (949) 717-7022.
THE EXCHANGE OFFERS
Holdings intends to make semiannual exchange offers in order to provide the
holders of Advisors Units with the opportunity to exchange their Advisors Units
for Holdings Units, although no assurance can be made that such exchange offers
will actually occur. Advisors Units are subject to restrictions on transfer, and
therefore are an illiquid investment. As described below, Advisors Units
generally may only be transferred during specified semiannual periods or to a
small group of persons qualified to hold Advisors Units. Holdings Units are
traded on the New York Stock Exchange and are therefore expected to provide a
more liquid investment than the Advisors Units.
Holdings is a holding company which owns one Advisors Unit for each
Holdings Unit outstanding, as well as a number of Advisors Units allocable to
the general partner interest of Holdings. Each Holdings Unit represents an
indirect economic interest in one Advisors Unit. Exchange offers under this
prospectus will offer to exchange one Holdings Unit for each Advisors Unit
tendered.
The PIMCO Advisors Amended and Restated Agreement of Limited Partnership
(the "PIMCO Advisors Partnership Agreement") provides that, except for certain
transfers of Advisors Units that are specified as being exempt, no Advisors
Units may be transferred except during two "Semiannual Transfer Periods" each
year. Within each Semiannual Transfer Period, there is a "Semiannual Exchange
Period" during which, subject to certain conditions, Holdings shall make
registered exchange offers for Advisors Units, pursuant to which the holders of
Advisors Units may exchange their units for Holdings Units. The first Semiannual
Exchange Period of a year, if any, begins following the issuance of the year end
financial statements but no earlier than March 15 and ends no later than July 31
of such year, and the second Semiannual Exchange Period, if any, begins
following the issuance of the financial statements for the first six months of
such year but no earlier than August 15 and ends no later than December 31 of
such year. A Semiannual Exchange Period lasts twenty business days or a greater
number of days if required by the Exchange Act. In addition, during the
Semiannual Transfer Periods, Advisors Units may be transferred to other persons
qualified under the PIMCO Advisors Partnership Agreement to hold Advisors Units.
4
<PAGE> 8
At the time of each exchange offer, Holdings will by supplement to this
prospectus provide detailed information regarding the terms of the offer,
including the dates of commencement and expiration of the offer, the number of
Advisors Units being tendered for, the procedures for tendering Advisors Units
and withdrawing those tenders if so desired, any conditions to the offer, any
ability of Holdings to modify or extend the offer, the identity of any exchange
agent for the offer and the estimated fees and expenses of the offer. There can
be no assurances, however, that any such offers will be made. In addition to the
exchange offers, Holdings may acquire additional Advisors Units from time to
time, in issuances from PIMCO Advisors or from holders of Advisors Units, in
privately negotiated transactions or otherwise. There can be no assurances that
these purchases would be on the same terms as the exchange offers.
Holdings intends to offer one Holdings Unit for each Advisors Unit properly
tendered in an exchange offer up to a maximum of 10,000,000 Holdings Units. If
in any exchange offer hereunder, Advisors Units have been tendered and not
properly withdrawn prior to the expiration date of that exchange offer in an
amount such that the total number of Holdings Units to be issued in that
exchange offer, together with any prior exchange offers hereunder, exceeds the
number of Holdings Units offered hereby, subject to the terms and conditions of
the exchange offer, Holdings will accept the tendered Advisors Units on a pro
rata basis.
Holders of the Advisors Units will not have any appraisal or dissenters'
rights under the PIMCO Advisors Partnership Agreement in connection with the
exchange offers. Holdings intends to conduct the exchange offers consistent with
the applicable provisions of the PIMCO Advisors Partnership Agreement and the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the SEC thereunder.
The PIMCO Advisors Partnership Agreement provides that if (a) the total
number of Advisors Units either tendered pursuant to a registered exchange offer
or proposed to be transferred in semiannual transfers during the Semiannual
Transfer Period, plus (b) the total number of Advisors Units transferred in
semiannual transfers during the preceding Semiannual Transfer Period, if any, in
the same year, exceeds 10% of the total number of outstanding Advisors Units,
the number of Advisors Units tendered pursuant to the registered exchange offer
and proposed to be transferred in semiannual transfers during that Semiannual
Transfer Period shall be reduced pro rata such that the 10% limit is not
exceeded. For purposes of this 10% test, Advisors Units transferred in exempt
transfers are not counted, and such transfers are permitted under the PIMCO
Advisors Partnership Agreement even if the 10% limit requires that other
proposed transfers be cut back.
Because Holdings may only accept Advisors Units that are permitted to be
transferred under the PIMCO Advisors Partnership Agreement, these transfer
restrictions may have the effect of limiting the number of Advisors Units that
Holdings may accept in any exchange offer. See "Comparison of
Securities -- Transfers of Limited Partnership Interests; Admission of Limited
Partners" for a more detailed description of these limitations. For accounting
purposes, Holdings will recognize no gain or loss as a result of the exchange
offers.
5
<PAGE> 9
RISK FACTORS
EFFECTS OF HOLDINGS -- LEVEL TAX ON DISTRIBUTIONS
Effective January 1, 1998, Holdings became subject to a 3.5% federal tax on
its gross revenue derived from active businesses. The tax is imposed on Holdings
because its units are publicly traded. Holdings may also become subject to
additional state taxes. PIMCO Advisors' units are not publicly traded and it is
not subject to these taxes. These taxes reduce the amount of cash available for
distribution to the holders of Holdings Units compared to that available to be
paid out by PIMCO Advisors. Accordingly, if you exchange your Advisors Units for
Holdings Units, your per-unit distribution is expected to decrease. Because each
Holdings Unit currently represents an indirect economic interest in one Advisors
Unit and PIMCO Advisors pays all of Holdings' operating expenses other than
taxes, the difference in distributions between PIMCO Advisors and Holdings is
generally equal to the per-unit amount of the tax, and any accruals or reserves.
Currently, the difference in distributions between Advisors Units and Holdings
Units is approximately 11-12% (currently $0.07 per unit per quarter). There can
be no assurance that this difference will not increase in the future.
CERTAIN DIFFERENCES BETWEEN ADVISORS UNITS AND HOLDINGS UNITS
If you tender your Advisors Units pursuant to an exchange offer, you will
receive Holdings Units. Although a Holdings Unit and Advisors Unit represent the
same economic interest in PIMCO Advisors, there are differences between the
securities. In particular, Holdings is subject to a partnership-level tax on its
gross revenue derived from active businesses. Prior to tendering your Advisors
Units pursuant to an exchange offer, you should carefully review the section of
this prospectus entitled "Comparison of Securities" which discusses the
differences between an Advisors Unit and a Holdings Unit.
Currently, each Holdings Unit represents an indirect investment in a single
Advisors Unit. Holdings and PIMCO Advisors are party to an operating agreement
which provides that Holdings will maintain one Advisors Unit held by Holdings or
one of its affiliates for each Holdings Unit outstanding. PIMCO Partners, G.P.
("PGP"), as the sole general partner of Holdings and the controlling general
partner of PIMCO Advisors, has the ability to modify the terms of this operating
agreement. There can be no assurance that Holdings will be able to maintain the
ratio of one Advisors Unit held by Holdings or an affiliate to one Holdings Unit
outstanding, or that the operating agreement will remain in effect. The failure
of Holdings to maintain this one to one ratio would dilute your indirect
investment in PIMCO Advisors represented by a Holdings Unit.
The tax effects of holding a Holdings Unit may vary from that of holding an
Advisors Unit. Prior to tendering your Advisors Units pursuant to an exchange
offer, you are urged to consult your own tax advisor and to carefully review the
section of this prospectus entitled "Certain United States Federal Tax
Considerations."
FAILURE TO EXCHANGE ADVISORS UNITS
Holdings will issue Holdings Units in exchange for your Advisors Units only
after timely receipt by the Exchange Agent of your Advisors Units, a properly
completed and duly executed letter of transmittal in the form specified in a
supplement to this prospectus and all other required documentation. Therefore,
if you desire to tender your Advisors Units for Holdings Units, you should allow
sufficient time to ensure timely delivery. Neither the Exchange Agent nor
Holdings is under any duty to give you any notification of defects or
irregularities with respect to tenders of your Advisors Units for exchange.
Advisors Units that are not tendered or are tendered but not accepted will,
following consummation of this exchange offer, continue to be subject to the
existing transfer restrictions, including the restrictions contained in the
PIMCO Advisors Partnership Agreement. As described in the section of this
prospectus entitled "Comparison of Securities -- Transfers of Limited
Partnership Interests; Admission of Limited Partners," Advisors Units generally
may only be transferred during the specified Semiannual Transfer Periods or to a
small group of persons qualified to hold Advisors Units. While Holdings
currently intends to make offers of exchange to the Advisors Unitholders twice
each year, during the periods when Advisors Units may be transferred under the
PIMCO Advisors Partnership Agreement, there can be no assurances that any future
exchange offers will be made. Accordingly, if you fail to participate in the
exchange offer, you may have limited opportunities for liquidity in the future.
6
<PAGE> 10
USE OF PROCEEDS
Holdings will not receive any proceeds from the exchange offers. The
Advisors Units received by Holdings in the exchange offers will, under the terms
of the PIMCO Advisors Partnership Agreement, automatically convert into an equal
number of units of general partner interest in PIMCO Advisors, and will ratably
increase Holdings' percentage interest in PIMCO Advisors.
SELECTED HISTORICAL FINANCIAL DATA
Holdings is a holding company which as its sole business acts as a general
partner of PIMCO Advisors and owns an approximate 43% equity interest in PIMCO
Advisors. The historical financial statements of Holdings and PIMCO Advisors are
included in Holdings' Annual Report on Form 10-K for the year ended December 31,
1997 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
each of which is incorporated herein by reference.
PRO FORMA FINANCIAL DATA
Holdings is a holding company which as its sole business acts as a general
partner of PIMCO Advisors and owns an approximate 43% equity interest in PIMCO
Advisors. The historical financial statements of Holdings and PIMCO Advisors are
included in Holdings' Annual Report on Form 10-K for the year ended December 31,
1997 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
each of which is incorporated herein by reference. Per unit financial
performance of Holdings is substantially identical to that of PIMCO Advisors,
with the exception that Holdings is subject to the tax on its gross income
described in "Certain United States Federal Income Tax Considerations -- Tax
Classification of Holdings." As and to the extent that Advisors Units are
exchanged for Holdings Units, Holdings' general partner interest in PIMCO
Advisors grows proportionately. If all 10,000,000 Holdings Units covered by this
Prospectus were exchanged for Advisors Units, Holdings' interest in PIMCO
Advisors would increase by approximately 22%, resulting in equal percentage
increases in Holdings' share of revenues, expenses and net income. Holdings' per
unit financial performance would, however, remain unchanged.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Holdings is a holding company which as its sole business acts as a general
partner of PIMCO Advisors and owns an approximate 43% equity interest in PIMCO
Advisors. Management's discussion and analysis of the business conducted by each
of Holdings and PIMCO Advisors is included in Holdings' Annual Report on Form
10-K for the year ended December 31, 1997 and its Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998, each of which is incorporated herein by
reference.
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COMPARISON OF SECURITIES
The following discussion is a summary of the material differences between
the PIMCO Advisors Partnership Agreement and the Holdings Amended and Restated
Agreement of Limited Partnership (the "Holdings Partnership Agreement" or the
"Current Holdings Partnership Agreement"). These agreements set forth the rights
of the holders of the Advisors Units and the Holdings Units. On June 30, 1998,
at a special meeting, the unitholders of Holdings will meet in order to
consider, among other items of business, the approval of an Amended and Restated
Partnership Agreement of Holdings (the "Proposed Holdings Partnership
Agreement"). The Proposed Partnership Agreement contains material differences
from the Current Holdings Partnership Agreement in an effort to eliminate
inconsistencies and ambiguities in the Current Holdings Partnership Agreement
which resulted in a large part from the change in Holdings' structure which
occurred when Oppenheimer Capital merged with a subsidiary of PIMCO Advisors.
The following discussion is qualified in its entirety by reference to the
complete text of the PIMCO Advisors Partnership Agreement, the Current Holdings
Partnership Agreement and the Proposed Holdings Partnership Agreement.
ORGANIZATION AND TERM
Both PIMCO Advisors and Holdings are Delaware limited partnerships
organized under the Delaware Revised Uniform Limited Partnership Act (the
"Delaware Act"). The PIMCO Advisors Partnership Agreement provides for PIMCO
Advisors to continue in existence until December 31, 2086, unless earlier
dissolved in accordance with the PIMCO Advisors Partnership Agreement. The
Proposed Holdings Partnership Agreement continues the partnership as a limited
partnership pursuant to the provisions of the Delaware Act. Both the Current and
Proposed Holdings Partnership Agreements provide for Holdings to continue in
existence until December 31, 2061, unless earlier dissolved in accordance with
the partnership agreement or the Delaware Act.
BUSINESS PURPOSES
The PIMCO Advisors Partnership Agreement provides that PIMCO Advisors'
purpose is (i) to carry on an investment management and advisory business and
(ii) to carry on any other business which limited partnerships may carry on
under the Delaware Act. The Current Holdings Partnership Agreement provides that
the purpose of Holdings is (i) to, through an operating partnership, engage in
investment advisory services, and (ii) to engage in all other aspects of the
financial services business. The Proposed Holdings Partnership Agreement updates
the description of the purpose of the partnership to conform to the new
structure and provides that Holdings' purpose is (i) to acquire and hold
Advisors Units, act as a general partner of PIMCO Advisors, and carry on through
PIMCO Advisors an investment management and investment advisory business, and
(ii) to carry on any other business which limited partnerships may carry on
under the Delaware Act.
CAPITAL ACCOUNTS
The PIMCO Advisors Partnership Agreement and the Current and Proposed
Holdings Partnership Agreements provide for the maintenance of capital accounts
for all partners. The Proposed Holdings Partnership Agreement expands and
clarifies these provisions in the Current Holdings Partnership Agreement to
better conform them to current tax laws.
GENERAL PARTNER INTERESTS
PIMCO Advisors
The PIMCO Advisors Partnership Agreement provides for limited partner units
and general partner units. Only general partners may hold general partner units.
Class A general partner units and Class A limited partner units represent
equivalent economic rights. Upon transfer to a limited partner, general partner
units convert to limited partner units of the same class.
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Holdings
The Current Holdings Partnership Agreement provides that the general
partner interest represents a .01% interest in Holdings. Accordingly, the
general partner receives allocations of .01% of any net income and net loss of
the partnership, as well as a right to .01% of regular distributions. The
remainder is paid out to the limited partners pro rata according to their unit
holdings.
The Proposed Holdings Partnership Agreement provides for two classes of
units, limited partner units and general partner units. The general partner's
current .01% interest will be converted into 5,000 general partner units (its
per-unit economic equivalent) as of the effective date of the Proposed Holdings
Partnership Agreement. Because general partner units and limited partner units
carry equivalent economic rights, a general partner may convert its general
partner units into limited partner units and vice-versa, so long as the
outstanding general partner units continue to represent at least a .01% interest
in the partnership.
This change allows distributions to be paid out to all partners pro rata in
accordance with their units, rather than allocating a fixed percentage to the
general partner. Also, it facilitates maintenance of the one-for-one ratio
between Holdings Units and the underlying Advisors Units owned by Holdings,
since at all times the total number of limited partner units and general partner
units outstanding will equal the number of Advisors Units owned by Holdings.
ISSUANCES OF INTERESTS IN THE PARTNERSHIP
PIMCO Advisors
The PIMCO Advisors Partnership Agreement provides that the general partner
may issue additional classes or series of limited partner interests of PIMCO
Advisors in amounts, for consideration and on terms and conditions, including
the issuance of units or other equity securities with preferences, rights and
powers senior to existing classes of securities or the Advisors Units,
determined by the general partners, without the consent or approval of the
limited partners.
Holdings
The Current Holdings Partnership Agreement provides that the general
partner may issue additional Holdings Units, without the consent or approval of
the limited partners, for any purpose of Holdings so long as Holdings receives
the opinion of a nationally recognized independent investment banking firm that
the issuance is fair from a financial point of view to the limited partners who
are not affiliates of the general partner (a "fairness opinion"). A fairness
opinion is not required for issuances of Holdings Units to the general partner
in exchange for a pro rata portion of the general partner's interest in the
operating partnership or of its general partner interest in Holdings, or for
issuances pursuant to certain unit-based employee benefit plans.
The Proposed Holdings Partnership Agreement modifies these provisions to
reflect the new structure, where Holdings Units represent a flow-through
investment in PIMCO Advisors, each representing an indirect interest in a single
Advisors Unit. The Proposed Holdings Partnership Agreement provides that the
general partner may issue additional securities of Holdings in amounts, for
consideration and on terms and conditions determined by the general partner,
without the consent or approval of the limited partners, so long as the
consideration, if any, received for any Holdings Units issued is contributed to
PIMCO Advisors in exchange for a number of Advisors Units equal to the number of
Holdings Units issued. Any proposed issuance of Holdings Units in which an equal
number of Advisors Units is not to be received may be made only upon the receipt
of a fairness opinion.
The Proposed Holdings Partnership Agreement has the effect of permitting
issuances of Holdings Units in which the one-for-one relationship between
Holdings Units and Advisors Units is maintained. So long as the ratio between
Holdings Units and Advisors Units remains the same before and after the
issuance, unitholders experience no economic dilution as a result of the
issuance. However, under the PIMCO Advisors
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Partnership Agreement, the general partners of PIMCO Advisors are permitted in
their discretion to cause PIMCO Advisors to admit new limited partners and issue
additional units of partner interest, without the consent or approval of any
third party. The PIMCO Advisors Partnership Agreement permits, and Holdings
intends to effect, semi-annual offers to be made to holders of Advisors Units to
exchange such units for Holdings Units. Accordingly, the Proposed Holdings
Partnership Agreement will have the effect of permitting the general partners of
PIMCO Advisors to issue Advisors Units to persons who may then, subject to the
limitations on transfer set forth in the PIMCO Advisors Partnership Agreement,
exchange those Advisors Units for an equal number of Holdings Units, without the
requirement of a fairness opinion or unitholder consent, other than as may be
required by the New York Stock Exchange or other regulatory agencies.
In connection with the acquisition of Oppenheimer Capital by PIMCO Advisors
and in anticipation of the year-end combination of ownership of PIMCO Advisors
and Oppenheimer Capital, L.P., Holdings received a fairness opinion from an
independent investment bank as to the fairness from a financial point of view to
the limited partners of Holdings who were not affiliates of the general partner
of certain types of issuances of Holdings Units, including issuances in one for
one exchanges for Advisors Units and issuances pursuant to incentive
compensation plans upon the receipt of an equal number of Advisors Units.
Accordingly, Holdings is currently able to issue Holdings Units which fall
within the parameters of the opinion.
Both the Current Holdings Partnership Agreement and the Proposed Holdings
Partnership Agreement allow the creation of new classes or series of units, but
require, in addition to requirements described above, the consent of a majority
of a class or series of limited partner units not held by affiliates of the
general partner prior to the issuance of any securities senior to such class or
series. The Proposed Holdings Partnership Agreement clarifies that such consent
is required not only for units senior with respect to distributions, but also
with respect to rights to share in the profits or losses of the partnership or
upon liquidation or dissolution of the partnership.
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS; ADMISSION OF LIMITED PARTNERS
PIMCO Advisors
The PIMCO Advisors Partnership Agreement imposes transfer restrictions on
Advisors Units. The restrictions are complex, but are summarized below.
Exempt Transfers. A holder of Advisors Units may transfer them at an time
in an Exempt Transfer, provided that the proposed transferee, if not already a
partner of PIMCO Advisors or pursuant to a pledge of Advisors Units by PGP in a
Permitted Lien Transfer (as defined in the PIMCO Advisors Partnership
Agreement), executes and delivers to PIMCO Advisors a written application for
admittance as a limited partner of PIMCO Advisors. The PIMCO Advisors
Partnership Agreement defines an "Exempt Transfer" as the transfer of Advisors
Units (i) involving the issuance of limited partner interests in exchange for
cash, property or services as described in certain specified Treasury
Regulations, (ii) by a limited partner at his death to another partner of PIMCO
Advisors as described in certain specified Treasury Regulations, (iii) pursuant
to certain kinds of Block Transfers (as defined below), or (iv) in connection
with liens in respect of certain indebtedness of PGP. For these purposes, the
PIMCO Advisors Partnership Agreement generally defines a "Block Transfer" as the
transfer by a limited partner and any related persons of Advisors Units in one
or more transactions during any 30 day period which represents in the aggregate
more than 2% of the outstanding Advisors Units. The definition of a Block
Transfer is dictated by, and subject to, certain applicable Treasury
Regulations.
In addition, the general partners of PIMCO Advisors may adopt rules
consistent with applicable Treasury Regulations with regard to Block Transfers
including the establishment of the minimum number of Advisors Units qualifying
as a Block Transfer. Any holder of Advisors Units who proposes to effect a Block
Transfer must provide notice to PIMCO Advisors including the names of the
proposed transferees and the number of Advisors Units proposed to be
transferred.
Semiannual Transfers. The PIMCO Advisors Partnership Agreement provides
that there shall be, if practicable, two periods each year (each, a "Semiannual
Transfer Period") during which Advisors Units may
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be transferred or exchanged (either, a "Semiannual Transfer"). A Semiannual
Transfer Period is defined as beginning on the first day of a "Semiannual
Exchange Period" and ending ten business days following the end of the
Semiannual Exchange Period. The first Semiannual Exchange Period of a year
begins following the issuance of the year end financial statements but no
earlier than March 15 and ends no later than July 31 of such year, and the
second Semiannual Exchange Period begins following the issuance of the financial
statements for the first six months of such year but no earlier than August 15
and ends no later than December 31 of such year. A Semiannual Exchange Period
lasts twenty business days or a greater number of days if required by the
Exchange Act.
In addition, during the Semiannual Exchange Period, the holders of Advisors
Units may give notice of their intent to transfer units to "Qualified Persons".
The PIMCO Advisors Partnership Agreement generally defines a "Qualified Person"
as PIMCO Advisors, current partners of PIMCO Advisors, members of the PIMCO
Advisors Management Board, an executive officer of PIMCO Advisors or managing
director of one of PIMCO Advisors' investment management subsidiaries or
divisions or certain entities controlled by such persons and any person
designated as a Qualified Person by the general partners of PIMCO Advisors.
Subject to the limitations described below, these proposed transfers may be
effected during the ten business days following the end of the Semiannual
Exchange Period.
The PIMCO Advisors Partnership Agreement imposes limitations on the number
of Advisors Units which can be transferred pursuant to Semiannual Transfers in
any one year. The PIMCO Advisors Partnership Agreement provides that if (a) the
total number of Advisors Units either tendered pursuant to a registered exchange
offer or proposed to be transferred pursuant to a Semiannual Transfer during a
Semiannual Transfer Period, plus (b) the total number of Advisors Units
transferred during the preceding Semiannual Transfer Period, if any, in the same
year, exceeds 10% of the total number of outstanding Advisors Units, then the
total number of Advisors Units either tendered pursuant to a registered exchange
offer or proposed to be transferred pursuant to a Semiannual Transfer shall be
reduced pro rata such that the 10% limit is not exceeded. If the 10% limit is to
be exceeded during a Semiannual Transfer Period, PIMCO Advisors shall give
prompt notice of such pro rata reduction to the general partners and all limited
partners who tendered in the Semiannual Transfer. Exempt Transfers are not
counted against the 10% limitation.
The PIMCO Advisors Partnership Agreement provides that no holder of
Advisors Units shall have a cause of action against, or the right to receive
compensation from, Holdings for a failure to make a registered exchange offer
during a Semiannual Exchange Period or from a general partner for a failure to
provide two such Semiannual Exchange Periods in any one year, provided that the
Public General Partner or general partners so acted in good faith.
Transfer Pursuant to a Restructuring. The PIMCO Advisors Partnership
Agreement provides broad authority of the general partner in the event that
there is a substantial risk that the partnership will be treated as an
association taxable as a corporation for federal income tax purposes. In such an
event, the general partner is authorized to effect one or more restructurings
which may involve, among other things, the transfer of all or part of the
business of the partnership to one or more newly created business entities in
exchange for interests in those entities which may be subject to substantial
restrictions on transfer, the mandatory exchange of some or all Advisors Units
or Holdings Units, as applicable, for interests in one or more newly established
business entities holding the partnership's assets, or the imposition of
substantial restrictions on the transferability of Advisors Units coupled with
severe penalties for violations of such restrictions.
Admission of Limited Partners. Persons desiring to be limited partners of
PIMCO Advisors must execute and deliver an admission application to the
partnership. The person is admitted if it is eligible to be a limited partner
and its admission would not violate applicable securities laws or other rules
and regulations, cause an "Assignment Event" or "Adverse Partnership Event" (as
defined in the PIMCO Advisors Partnership Agreement) or affect PIMCO Advisors'
existence or qualification as a limited partnership under the Delaware Act.
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Holdings
Both the Current and Proposed Holdings Partnership Agreements provide that
a limited partner generally may transfer its units of limited partner interest;
provided, however, that no such transfer may occur if it would violate federal
or state securities laws or rules and regulations of the Securities and Exchange
Commission, any state securities commission or any other governmental
authorities with jurisdiction over such transfers, or affect Holdings' existence
or qualification as a limited partnership under the Delaware Act. Also, the
Proposed Holdings Partnership Agreement clarifies that any transfer which would
result in an Adverse Partnership Tax Event or an Assignment Event (as those
terms are defined in the Proposed Holdings Partnership Agreement) is prohibited.
Generally, the transferor ceases to be a limited partner upon the transferee's
admission as a substitute limited partner, as provided below. Until admission, a
transferee is an assignee of the partnership interest.
The Current Holdings Partnership Agreement distinguishes between two types
of persons seeking admission: substitute limited partners and additional limited
partners. Substitute limited partners are those persons who acquire limited
partner units by transfer from a previous holder and are admitted as a limited
partner. Such persons may apply for admission as substitute limited partners by
filing a transfer application, generally at the time of transfer, but do not
become a substitute limited partner until the general partner consents thereto,
which consent may be withheld in the general partner's sole discretion, and when
any such admission as a substitute limited partner is shown on the books and
records of Holdings. Additional limited partners are those persons who make
capital contributions to Holdings and are admitted as limited partners. Those
persons are admitted as additional limited partners upon furnishing to the
general partner acceptance of the terms and conditions of the Current Holdings
Partnership Agreement, and such other documents that the general partner may
require. Admission becomes effective when the general partner determines that
the conditions have been met.
The Proposed Holdings Partnership Agreement contains similar provisions,
providing that both transferees of Holdings Units and persons making a
contribution to the partnership in exchange for newly issued Holdings Units
become limited partners by executing and delivering a transfer application,
which application is subject to the approval of the general partner. The
Proposed Holdings Partnership Agreement clarifies that the application is deemed
to be approved if not rejected by the third business day following the transfer.
In addition, the Proposed Holdings Partnership Agreement has special provisions
governing admission of underwriters and their transferees as limited partners.
Underwriters are those persons who acquire units from Holdings or any general or
limited partner pursuant to an underwritten public offering. Upon executing and
delivering an admission application, such underwriter shall be admitted as a
limited partner. Each initial transferee of an underwriter shall be admitted as
a limited partner upon payments for the units of limited partner interest.
The Proposed Holdings Partnership Agreement provides that no person shall
be admitted as a limited partner if such admission would (i) violate federal or
state securities laws or rules and regulations of the Securities and Exchange
Commission, any state securities commission or any other governmental
authorities with jurisdiction over such transfers, (ii) result in an Adverse
Partnership Tax Event or an Assignment Event (as those terms are defined in the
Proposed Holdings Partnership Agreement), or (iii) affect Holdings' existence or
qualification as a limited partnership under the Delaware Act.
In both cases, the Current Holdings Partnership Agreement and the Proposed
Holdings Partnership Agreement provide that upon admission each limited partner
agrees to be bound by the terms of the applicable partnership agreement.
DISTRIBUTIONS AND ALLOCATIONS
PIMCO Advisors
The PIMCO Advisors Partnership Agreement provides for the payment of
quarterly distributions to unitholders of record as of the close of business on
the last day of such quarter, payable within 30 days of the end of such quarter.
The PIMCO Advisors Partnership Agreement provides for the distribution of
"Distribut-
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able Cash," defined as an amount equal to the Operating Profit Available for
Distribution (defined as the sum of net income plus non-cash charges from the
amortization of intangible assets, non-cash compensation expenses arising from
option and restricted unit plans, and losses of any subsidiary which is not a
flow-through entity for tax purposes) for such fiscal quarter less the amount,
if any, required for expenses, for capital expenditures, for future payments on
any indebtedness, as reserves, or otherwise in the business of PIMCO Advisors,
as determined by its general partners.
Holdings
Both the Current and Proposed Holdings Partnership Agreements provide for
the payment of quarterly distributions to unitholders of record as of the close
of business on the last day of such quarter, payable within 30 days of the end
of such quarter. The Proposed Holdings Partnership Agreement provides for the
distribution of "Distributable Cash," defined as an amount equal to the
distributions declared by PIMCO Advisors for such quarter on the Advisors Units
held by Holdings, less the amount, if any, required for taxes, for reimbursement
of expenses, as reserves, or otherwise in the business of Holdings, as
determined by the general partner. The Proposed Holdings Partnership Agreement
differs from the Current Holdings Partnership Agreement by reflecting the new
source of distributions (PIMCO Advisors), the repayment of the debt formerly
owed to Holdings by Oppenheimer Financial Corp., and the new tax on gross
revenues from active trades or businesses imposed on Holdings effective January
1, 1998. In addition, the Proposed Holdings Partnership Agreement clarifies that
no distribution may be made to any unitholder if such distribution would violate
Section 17-607 of the Delaware Act or other applicable law.
As noted above, by converting the general partner's interest into general
partner units, the Proposed Holdings Partnership Agreement allows distributions
and other allocations to be made pro rata among the partners based on the number
of units owned, rather than a fixed .01% to the general partner. The Proposed
Holdings Partnership Agreement also clarifies procedures for making allocations
of net income and net loss, as well as special capital account and tax
allocations, among the partners.
MANAGEMENT
PIMCO Advisors
The PIMCO Advisors Partnership Agreement provides that the business and
affairs of PIMCO Advisors are exclusively managed by its general partners. So
long as there is more than one general partner, each general partner has equal
right, power and authority in the management and control of the business and
affairs of PIMCO Advisors. Certain extraordinary actions, such as mergers, sales
of substantially all of the partnership's assets, the incurrence of certain
indebtedness or initiation of an insolvency, require the written consent of all
the general partners. All other matters are decided by the general partners
holding a majority of the outstanding general partner units.
The PIMCO Advisors Partnership Agreement permits the general partners to
delegate their power and authority. The general partners may, subject to certain
limitations, constitute one or more boards or committees, delegate any or all of
its rights and powers to manage and control the business and affairs of PIMCO
Advisors to one or more such boards or committees, and revise and revoke any
such constitution or delegation. However, the general partners may not delegate
rights and powers with respect to any of the following actions: (i) admission of
any successor or additional general partner, (ii) any amendment to the PIMCO
Advisors Partnership Agreement, (iii) any action which would require the
approval of the limited partners, or (iv) any action which, by reason of any
provision of the PIMCO Advisors Partnership Agreement, requires the written
consent of the general partners.
The general partners have delegated the day to day management of PIMCO
Advisors to a 16 member management board.
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Holdings
The Current Holdings Partnership Agreement provides that the business and
affairs of Holdings are exclusively managed by the general partner, which may
delegate management duties and authority to a duly appointed attorney or
attorney-in-fact. PGP, as the sole general partner of Holdings, has delegated
the day to day management of Holdings to a three person management board.
The Proposed Holdings Partnership Agreement similarly provides that the
general partner has exclusive right and full power and authority to manage and
control the business and affairs of Holdings and to take any action deemed
necessary or desirable by it in connection with the business of Holdings. The
Proposed Holdings Partnership Agreement further provides that, unless otherwise
provided by the Proposed Holdings Partnership Agreement, the general partner may
take any action in its management of Holdings, including amending the Proposed
Holdings Partnership Agreement, without the approval of the limited partners.
While the Current Holdings Partnership Agreement contemplates the admission
of more than one general partner of Holdings, it does not provide for management
by more than one general partner. The Proposed Holdings Partnership Agreement
also contemplates the admission of more than one general partner, and modifies
the provisions in the Current Holdings Partnership Agreement to provide for
management by two or more general partners. If there is more than one general
partner, each general partner has equal right, power and authority in the
management and control of the business and affairs of Holdings. Certain
extraordinary actions, such as mergers, sales of substantially all of the
partnership's assets, the incurrence of certain indebtedness or initiation of an
insolvency, require the written consent of all the general partners. All other
matters are decided by the general partners holding a majority of the
outstanding general partner units.
The Proposed Holdings Partnership Agreement also permits the general
partners to delegate their power and authority. The general partners may,
subject to certain limitations, constitute one or more boards or committees,
delegate any or all of its rights and powers to manage and control the business
and affairs of Holdings to one or more such boards or committees, and revise and
revoke any such constitution or delegation. However, where the Current Holdings
Partnership Agreement does not impose limits on delegation, the Proposed
Holdings Partnership Agreement limits the general partners' ability to delegate.
The general partners may not delegate rights and powers with respect to any of
the following actions: (i) admission of any successor or additional general
partner, (ii) any amendment to the Proposed Holdings Partnership Agreement,
(iii) any action which would require the approval of the limited partners, or
(iv) any action which, by reason of any provision of the Proposed Holdings
Partnership Agreement, requires the written consent of the general partners.
TRANSACTIONS INVOLVING GENERAL PARTNERS; CONFLICTS OF INTEREST
Transactions Between PIMCO Advisors and its general partners or their
affiliates
The PIMCO Advisors Partnership Agreement expressly permits specific types
of transactions between PIMCO Advisors and the general partners or their
affiliates and establishes a standard by which the "fairness" of the transaction
to PIMCO Advisors is judged. The PIMCO Advisors Partnership Agreement limits the
transactions between PIMCO Advisors and the general partners or their affiliates
to include, each on terms and conditions determined by the general partners: (i)
a loan to PIMCO Advisors by a general partner or its affiliates, (ii) a loan by
PIMCO Advisors to a general partner or its affiliates, (iii) services rendered
by a general partner or its affiliates to PIMCO Advisors, or (iv) the general
partner or its affiliates may sell, transfer or convey assets or property to, or
purchase PIMCO Advisors' assets from, PIMCO Advisors, or use or lease PIMCO
Advisors' assets.
The PIMCO Advisors Partnership Agreement also establishes the standard by
which to judge the "fairness" of the related transaction by instituting a
pre-approval process. The PIMCO Advisors Partnership Agreement requires that
before entering into any permitted transaction or agreement between PIMCO
Advisors and a general partner or its affiliates, such transaction shall be
determined to be fair to PIMCO Advisors by (i) a committee of members of the
management board to which the general partners have
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delegated management authority, appointed by that management board, who are
independent with respect to such transaction, or (ii) the general partners.
Transactions Between Holdings and its general partner or its affiliates
Both the Current and Proposed Holdings Partnership Agreements expressly
permit transactions between Holdings and the general partner or its affiliates.
The Proposed Holdings Partnership Agreement, however, clarifies the types of
transactions permitted between Holdings and the general partner or its
affiliates, and also clarifies the standard by which the "fairness" of the
transaction to Holdings is judged.
The Current Holdings Partnership Agreement does not limit the nature or
kind of transactions that Holdings is permitted to enter into with the general
partner or any of its affiliates. In contrast, the Proposed Holdings Partnership
Agreement limits the transactions between Holdings and the general partner or
its affiliates to include, each on terms and conditions determined by the
general partner: (i) a loan to Holdings by the general partner or its
affiliates, (ii) a loan by Holdings to the general partner or its affiliates,
(iii) services rendered by the general partner or its affiliates to Holdings,
(iv) the general partner or its affiliates may sell, transfer or convey assets
or property to, or purchase Holdings' assets from, Holdings, or use or lease
Holdings' assets, and (v) Holdings may enter into one or more agreements with
PIMCO Advisors governing their relationship.
The Proposed Holdings Partnership Agreement also clarifies the standard by
which to judge the "fairness" of the related transaction by instituting a
pre-approval process. Under the Current Holdings Partnership Agreement, the
terms of transactions between Holdings and the general partner or its affiliates
must be equivalent to terms obtainable by Holdings from a comparable
unaffiliated third party. The Proposed Holdings Partnership Agreement requires
that before entering into any permitted transaction or agreement between
Holdings and the general partner or its affiliates, (i) such transaction or
agreement shall be determined to be fair to Holdings by a committee of members
of a management board to which the general partners have delegated management
authority, appointed by that board, who are independent with respect to such
transaction, or the general partner, or (ii) Holdings shall receive a fairness
opinion.
Conflicts of Interest
The PIMCO Advisors Partnership Agreement provides that whenever a conflict
of interest exists or arises between a general partner or its affiliates, on the
one hand, and PIMCO Advisors or any other partner, on the other hand, other than
the transactions listed above which require pre-approval, such conflict of
interest shall be resolved by (i) a committee of members of the management board
to which the general partners have delegated management authority, appointed by
that management board, who are independent with respect to such conflict of
interest, or (ii) the general partners. A resolution determined by such a
committee or by the general partners in good faith, shall be conclusive and
binding on the partners and PIMCO Advisors.
The Current Holdings Partnership Agreement provides that whenever a
conflict of interest exists or arises between the general partner or its
affiliates, on the one hand, and the operating partnership or any unitholder, on
the other hand, the general partner shall resolve such conflict of interest,
taking into consideration the circumstances, the interests of the parties and
other matters. The Proposed Holdings Partnership Agreement, however, provides
that any conflict of interest between the general partner or its affiliates, on
the one hand, and Holdings, on the other hand, other than the transactions
listed above which require pre-approval, shall be resolved by (i) a committee of
members of a management board to which the general partners have delegated
management authority, appointed by that board, who are independent with respect
to such conflict of interest, or (ii) the general partners. A resolution
determined by such a committee or by the general partners in good faith, shall
be conclusive and binding on the partners and Holdings.
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VOTING RIGHTS
PIMCO Advisors
The management authority over PIMCO Advisors resides in its general
partners, and limited partners generally have very limited ability to influence
the affairs of the partnership. The PIMCO Advisors Partnership Agreement
provides the limited partners with certain limited voting rights. Under the
PIMCO Advisors Partnership Agreement (and the Delaware Act when applicable), the
limited partners have voting rights with respect to: (i) the withdrawal,
removal, transfer and replacement of a general partner other than as a result of
a transfer of the general partner's interest to an affiliate, (ii) certain
amendments to the partnership agreement (described more fully below under
"-- Amendments"), (iii) certain events of dissolution, and the reconstitution of
the partnership after a dissolution (described more fully below under
"-- Dissolution and Liquidation"), (iv) the election, compensation and approval
of a successor liquidating trustee, (v) a change in the state of organization of
PIMCO Advisors, (vi) the conversion or reorganization of PIMCO Advisors into
another type of legal entity (except in conjunction with a restructuring as
described below under "-- Restructuring Authority") and (vii) a merger or
consolidation of PIMCO Advisors with or into one or more Delaware limited
partnerships or other business entities.
The PIMCO Advisors Partnership Agreement provides that except as otherwise
provided in the partnership agreement, the general partners may take any action,
including the amendment of the partnership agreement, without the approval of
the limited partners. Accordingly, the PIMCO Advisors Partnership Agreement
generally supersedes the voting rights provisions of the Delaware Act.
Holdings
The management authority over Holdings resides in its general partner, and
limited partners generally have very limited ability to influence the affairs of
the partnership. Both the Current and Proposed Holdings Partnership Agreements
provide the limited partners with certain limited voting rights. Under both the
Current Holdings Partnership Agreement and the Proposed Holdings Partnership
Agreement (and the Delaware Act when applicable), the limited partners have
voting rights with respect to: (i) issuance of units which rank senior to
Holdings Units, (ii) the withdrawal, removal, transfer and replacement of a
general partner other than as a result of a transfer of the general partner's
interest to an affiliate, (iii) certain amendments to the partnership agreement
(described more fully below under "-- Amendments"), (iv) the approval of any
amendment to the PIMCO Advisors Partnership Agreement which would be directly
and materially adverse to the unitholders, (v) certain events of dissolution,
and the reconstitution of the partnership after a dissolution (described more
fully below under "-- Dissolution and Liquidation"), (vi) the election,
compensation and approval of a successor liquidating trustee, (vii) a change in
the state of organization of Holdings and (viii) the conversion or
reorganization of Holdings into another type of legal entity (except in
conjunction with a restructuring as described below under "-- Restructuring
Authority"). The Proposed Holdings Partnership Agreement also clarifies the
limited partners' voting rights with respect to mergers and other combinations
involving Holdings, providing that any merger or consolidation of Holdings with
or into any other business entity in which Holdings is not the surviving entity
requires approval by a majority of each class of the outstanding Holdings Units.
Other mergers or consolidations of Holdings would require consent only to the
extent that they required actions which otherwise required Unitholder consent,
such as certain types of partnership agreement amendments.
Under the Proposed Holdings Partnership Agreement, the unitholders will no
longer have specific voting rights with respect to distributions of publicly
traded securities or certain transactions between the general partner and the
operating partnership in connection with capital contributions by Holdings to
the operating partnership. The Proposed Holdings Partnership Agreement also
provides that except as otherwise provided in the partnership agreement, the
general partners may take any action, including the amendment of the partnership
agreement, without the approval of the limited partners. Accordingly, the
Proposed Holdings Partnership Agreement generally supersedes the voting rights
provisions of the Delaware Act.
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<PAGE> 20
PARTNERSHIP MEETINGS
The PIMCO Advisors Partnership Agreement and the Current and Proposed
Holdings Partnership Agreements provide that meetings of limited partners may be
called by general partner(s) or limited partners holding at least 10% of the
respective outstanding limited partner units. Within 60 days of receiving a
request for a meeting, or such greater period as may be necessary, the general
partner(s) will mail to each unitholder of record, at the address appearing on
the books of the transfer agent, a notice of meeting establishing a meeting date
not more than 60 days from the mailing date. Each of the agreements provide that
the record date for voting at the meeting shall be set no less than 10 and no
more than 60 days prior to the meeting date, and for a quorum of a majority of
the partnership units entitled to vote, present in person or by proxy.
The PIMCO Advisors Partnership Agreement and the Proposed Holdings
Partnership Agreement state that action at a meeting shall be taken by a
majority of the units present and entitled to vote with respect to a matter,
unless the respective partnership agreement requires a different or higher
percentage. In addition to the ability of the limited partners and the general
partner to call meetings of the limited partners, the PIMCO Advisors Partnership
Agreement and the Proposed Holdings Partnership Agreement allow a liquidating
trustee to call a meeting of the limited partners. The PIMCO Advisors
Partnership Agreement and the Proposed Holdings Partnership Agreement also
provide that no action shall be taken at a meeting which is opposed by the
general partners or the liquidating trustee unless the applicable partnership
has received certain opinions of counsel.
The PIMCO Advisors Partnership Agreement and the Current and Proposed
Holdings Partnership Agreements provide that action may be taken by the partners
without a meeting if written approvals setting forth the action so taken are
given by partners holding not less than the minimum number of units that would
be necessary to take such action at a meeting at which all of the partners were
present and voted.
AMENDMENTS TO THE PARTNERSHIP AGREEMENT
PIMCO Advisors
The PIMCO Advisors Partnership Agreement provides that the general partner
may amend the partnership agreement without the vote or consent of the limited
partners (i) to change the name or principal place of business of the
partnership, (ii) for the admission, substitution, termination or withdrawal of
partners, (iii) if necessary or advisable to preserve the limited liability of
the limited partners or prevent the partnership from being taxed as a
corporation for federal tax purposes, (iv) for any change which the general
partners determine does not adversely affect the holders of any class or series
of units in any material respect, in response to certain statutes and rulings or
to facilitate trading of the Advisors Units or is necessary to fulfill the
purposes of the agreement or to cure an ambiguity or inconsistency in the
agreement, (v) to reflect the designations, preferences and rights of any newly
created class or series of units, (vi) for changes that that the general
partners determine are appropriate in connection with the creation of any newly
created class or series of units or other equity security, or (vii) for changes
that the general partners determine are appropriate in connection with an action
taken pursuant to its restructuring authority (described more fully below in
"-- Restructuring Authority").
The PIMCO Advisors Partnership Agreement provides that any other amendment
must be proposed by the general partner and approved by the partners. The PIMCO
Advisors Partnership Agreement states that (i) any amendment which would
materially and adversely affect a particular class or series of units must be
approved by holders of a majority of such class or series and (ii) any amendment
that would change the vote required to take an action must be approved by
partners holding at least the percentage of units which would be changed by the
proposed amendment.
Holdings
The Current Holdings Partnership Agreement provides that the general
partner may amend the partnership agreement without the vote or consent of the
limited partners (i) to change the name or principal place of business of the
partnership, (ii) for the admission, substitution, termination or withdrawal of
partners,
17
<PAGE> 21
(iii) if necessary or advisable to preserve the limited liability of the limited
partners or prevent the partnership from being taxed as a corporation for
federal tax purposes, (iv) for changes inconsequential in nature and not
adversely affecting the limited partners in any material respect, to cure an
ambiguity or inconsistency in the agreement, in response to certain statutes and
rulings or to facilitate trading of Holdings Units, (v) in response to changes
in Delaware law, (vi) for certain tax purposes, (vii) to prevent the partnership
from being deemed an investment company or subject to certain other regulations,
or (viii) for other amendments similar to the foregoing. Other amendments
require the affirmative vote of a majority of the outstanding Holdings Units,
except for certain extraordinary amendments (such as one causing the limited
partners to lose limited liability) which require a unanimous vote.
The Proposed Holdings Partnership Agreement provides that the general
partner may amend the partnership agreement without the vote or consent of the
limited partners (i) to change the name or principal place of business of the
partnership, (ii) for the admission, substitution, termination or withdrawal of
partners, (iii) if necessary or advisable to preserve the limited liability of
the limited partners or prevent the partnership from being taxed as a
corporation for federal tax purposes, (iv) for any change which the general
partners determine does not adversely affect the holders of any class or series
of units in any material respect, in response to certain statutes and rulings or
to facilitate trading of the Holdings Units or is necessary to fulfill the
purposes of the agreement or to cure an ambiguity or inconsistency in the
agreement, (v) to reflect the designations, preferences and rights of any newly
created class or series of units, (vii) for changes that the general partners
determine are appropriate in connection with the creation of any newly created
class or series of units, or (viii) for changes that the general partners
determine are appropriate in connection with an action taken under Article XVI
(restructuring authority, described below).
Both the Current and Proposed Holdings Agreements provide that any other
amendment must be proposed by the general partner and approved by the
unitholders. The Proposed Holdings Partnership Agreement clarifies that (i) any
amendment which would materially and adversely affect a particular class or
series of units must be approved by holders of a majority of such class or
series, and (ii) any amendment that would change the vote required to take an
action must be approved by partners holding at least the percentage of units
which would be changed by the proposed amendment.
ADMISSION AND WITHDRAWAL OF GENERAL PARTNERS
PIMCO Advisors
The PIMCO Advisors Partnership Agreement requires the consent of a majority
of all of the units for the admission of new general partners unless the
admission is in connection with the transfer of all or a portion of a general
partner's interest to an affiliate of that general partner pursuant to an Exempt
Transfer or a Semiannual Transfer. Such transfer is permitted only if the
general partner obtains certain opinions regarding the proposed transfer and the
PIMCO Advisors Partnership Agreement is amended to reflect the admission of the
new general partner.
The PIMCO Advisors Partnership Agreement provides a procedure for the
withdrawal of a general partner. If a general partner transfers all of its
interest to an affiliate pursuant to an Exempt Transfer or a Semiannual
Transfer, a general partner may withdraw without consent of the partners. In the
event of any other proposed withdrawal, a general partner must give notice of
its intent to withdraw, supported by certain required opinions of counsel, and
the withdrawal must be approved by a majority of partners who are not affiliates
of such general partner. The general partners shall call a meeting to consider
the withdrawal no sooner than 60 days from the date of notice (180 days if there
is only one general partner at the time). The successor elected at the meeting
shall be admitted as a general partner immediately prior to the withdrawal of
the existing general partner or, if no successor is elected but the withdrawal
is approved, the general partner shall be entitled to withdraw, and the
partnership shall be dissolved.
The PIMCO Advisors Partnership Agreement provides that a general partner
may be removed by the vote of 80% of all of the units.
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<PAGE> 22
Holdings
The substance of the provisions regarding admission of general partners
generally remains unchanged in the Proposed Holdings Partnership Agreement,
requiring consent of a majority of the unitholders for the admission of new
general partners unless the admission is in connection with the transfer of all
or a portion of a general partner's interest to an affiliate of that general
partner. The Proposed Holdings Partnership Agreement does not include the
provisions for pledges and other hypothecation of the general partner's interest
that are included in the Current Holdings Partnership Agreement. In each case,
such transfer is permitted only if the general partner obtains certain opinions
regarding the proposed transfer.
The Proposed Holdings Partnership Agreement clarifies the procedure for a
withdrawal of a general partner. If a general partner transfers all of its
interest to an affiliate, the general partner may withdraw without consent of
the limited partners. In the event of any other proposed withdrawal, the general
partner must give notice of its intent to withdraw, supported by certain
required opinions of counsel, and the withdrawal must be approved by a majority
of the limited partner units not held by affiliates of the general partner. The
general partners shall call a meeting to consider the withdrawal no sooner than
60 days from the date of notice (180 days if there is only one general partner
at the time). The successor elected at the meeting shall be admitted as a
general partner immediately prior to the withdrawal of the existing general
partner or, if no successor is elected but the withdrawal is approved, the
general partner shall be entitled to withdraw, and the partnership shall be
dissolved.
Both the Current and Proposed Holdings Partnership Agreements provide that
a general partner may be removed by the vote of 80% of the outstanding Holdings
Units.
INDEMNIFICATION
PIMCO Advisors
The PIMCO Advisors Partnership Agreement provides that PIMCO Advisors shall
indemnify an indemnitee (generally, a general partner, its affiliates and
certain other parties serving at the request of PIMCO Advisors) if the
indemnitee acted or failed to act in good faith and in a manner it reasonably
believed to be in, or not opposed to, the best interests of PIMCO Advisors and,
with respect to any criminal proceeding, had no reasonable cause to believe its
conduct was unlawful. The termination of any proceeding shall not, of itself,
create a presumption that the indemnitee acted in contravention of the
applicable standard. In addition, the PIMCO Advisors Partnership Agreement
provides that PIMCO Advisors may enter into indemnification agreements with the
indemnitees and purchase indemnitee insurance for the benefit of an indemnitee.
Finally, the PIMCO Advisors Partnership Agreement provides for specific
indemnification procedures.
Holdings
The Current Holdings Partnership Agreement generally provides that Holdings
will indemnify and hold harmless the general partner, its affiliates and certain
other parties to the fullest extent permitted by law, unless the indemnitee has
been adjudged liable for actual fraud, willful misconduct or gross negligence,
unless and only to the extent that the court in which such action was brought,
or another court of competent jurisdiction, determines that, despite the
adjudication of liability, but in view of all the circumstances of the case, the
indemnitee is fairly and reasonably entitled to indemnification for such
liabilities and expenses as the court may deem proper. The Current Holdings
Partnership Agreement further provides that a negative disposition or any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendre shall not, of itself, create a presumption of its
violation of the applicable standard.
The Proposed Holdings Partnership Agreement alters the standard by which an
indemnitee is entitled to indemnification by Holdings. The Proposed Holdings
Partnership Agreement provides that Holdings shall indemnify an indemnitee if
the indemnitee acted or failed to act in good faith and in a manner it
reasonably believed to be in, or not opposed to, the best interests of Holdings
and, with respect to any criminal proceeding, had no reasonable cause to believe
its conduct was unlawful. Similar to the Current Holdings Partnership
19
<PAGE> 23
Agreement, the negative disposition of any proceeding shall not, of itself,
create a presumption that the indemnitee acted in contravention of the
applicable standard.
Both the Current Holdings Partnership Agreement and the Proposed Holdings
Partnership Agreement provide that Holdings may enter into indemnification
agreements with the indemnitees. The Proposed Holdings Partnership Agreement
provides sample provisions that may be included in such indemnity agreements.
Both the Current Holdings Partnership Agreement and the Proposed Holdings
Partnership Agreement also provide that Holdings may purchase indemnitee
insurance for the benefit of an indemnitee. The Current Holdings Partnership
Agreement permits Holdings to adopt indemnification procedures, while the
Proposed Holdings Partnership Agreement provides for indemnification procedures.
RESTRUCTURING AUTHORITY
The Current Holdings Partnership Agreement gives the general partner the
authority to adopt any amendments to the partnership agreement necessary, in the
opinion of the general partner, to ensure that Holdings will not be treated as
an association taxable as a corporation for federal income tax purposes.
Both the PIMCO Advisors Partnership Agreement and the Proposed Holdings
Partnership Agreement provide broad authority of the general partner(s) in the
event that there is a substantial risk that the respective partnership will be
treated as an association taxable as a corporation for federal income tax
purposes. In such an event, the general partner(s) is authorized to effect one
or more restructurings which may involve, among other things, the transfer of
some or all of the business of the partnership to one or more newly created
business entities in exchange for interests in those entities which may be
subject to substantial restrictions on transfer, the mandatory exchange of some
or all Advisors Units or Holdings Units, as applicable, for interests in one or
more newly established business entities holding the partnership's assets, or
the imposition of substantial restrictions on the transferability of Advisors
Units or Holdings Units, as applicable, coupled with severe penalties for
violations of such restrictions.
DISSOLUTION AND LIQUIDATION
PIMCO Advisors
The PIMCO Advisors Partnership Agreement provides for dissolution upon (i)
the expiration of the term of the partnership, (ii) the determination of the
general partners that projected future revenues of the partnership are
insufficient to enable payment of projected expenses or that the continued
operation is not in the best interests of the partners, (iii) the election of
the general partners after an event pursuant to which the partnership becomes
taxed as a corporation, (iv) the sale of all or substantially all of the
partnership's assets not in connection with a restructuring, (v) the written
consent of all of the partners, (vi) certain events of withdrawal of the general
partner, including insolvency, unless the remaining general partners elect to
continue the partnership or a majority of the partners agree to continue the
partnership within 90 days and, if necessary, approve a successor and PIMCO
Advisors receives certain tax opinions, or (vii) entry of a decree of
dissolution under the Delaware Act.
The PIMCO Advisors Partnership Agreement provides that the partnership may
be reconstituted within 180 days of its dissolution because of a withdrawal of a
general partner, provided that a majority of the remaining partners agree in
writing to reconstitute PIMCO Advisors and PIMCO Advisors receives certain tax
opinions. Upon a dissolution, if the partnership is not reconstituted, the PIMCO
Advisors Partnership Agreement provides for the appointment of a liquidator, who
shall wind up the business and distribute the partnership assets.
Holdings
Under the Current Holdings Partnership Agreement, the partnership is
dissolved upon (i) the expiration of the term of the partnership, (ii) a
bankruptcy or similar event with regard to the general partner, (iii) the
written determination of the general partner to dissolve the partnership, (iv) a
vote of 80% of the limited partners to dissolve, (v) the sale by the partnership
of all or substantially all of its assets, or (vi) the
20
<PAGE> 24
withdrawal of the general partner unless in connection with the admission of a
successor, unless all remaining partners agree in writing within 90 days to
continue the partnership and approve a successor general partner.
The Proposed Holdings Partnership Agreement modifies these conditions,
providing for dissolution upon (i) the expiration of the term of the
partnership, (ii) the written determination of the general partners that
projected future revenues of the partnership are insufficient to enable payment
of projected expenses or that the continued operation is not in the best
interests of the partnership, (iii) the written election of the general partners
after an event pursuant to which the partnership becomes taxed as a corporation,
(iv) the written election of the general partners approved by a majority of
Holdings Units held by persons not affiliated with the general partners, (v)
certain events of withdrawal of the general partner, including insolvency unless
the remaining general partners elect to continue the partnership or a majority
of the partners agree or vote to continue the partnership within 90 days and
approve a successor, or (vi) entry of a decree of dissolution under the Delaware
Act.
Both the Current and Proposed Holdings Partnership Agreements provide that
the partnership may be reconstituted within 180 days of its dissolution because
of a withdrawal of a general partner. Upon a dissolution, if the partnership is
not reconstituted, both the Current and Proposed Holdings Partnership Agreements
provide for the appointment of a liquidator, who shall wind up the business and
distribute partnership assets.
GENERAL PARTNER'S RIGHT TO PURCHASE
PIMCO Advisors
Under the terms of the PIMCO Advisors Partnership Agreement, upon the
occurrence of certain events that would result in PIMCO Advisors being taxed as
a corporation, the general partners have the authority to exchange some or all
of the outstanding limited partner units for publicly traded equity securities
of a general partner or to redeem some or all of the outstanding limited partner
units for cash. In addition, the PIMCO Advisors Partnership Agreement allows the
general partners to either exchange or redeem the units of a limited partner if
such limited partner was an "eligible person" at December 31, 1997 and is no
longer an "eligible person." The PIMCO Advisors Partnership Agreement generally
defines an "eligible person" as any member of the Management Board of PIMCO
Advisors, any executive officer of PIMCO Advisors or any managing director of an
investment management subsidiary of PIMCO Advisors. This authority of the
general partners to exchange and redeem units is in addition to the broad powers
of the general partners to effect certain restructurings (as discussed above in
"-- Restructuring Authority").
Holdings
Under the Current Holdings Partnership Agreement, the general partner has
the right to purchase all of the outstanding limited partner units if less than
ten percent of the outstanding Holdings Units is held by persons not affiliated
with the general partner. Under the Proposed Holdings Partnership Agreement, the
general partner no longer has this right to purchase.
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<PAGE> 25
MANAGEMENT
For a description of the management of Holdings and PIMCO Advisors,
including a discussion of executive compensation and certain relationships and
related transactions, see "Item 10: Directors and Executive Officers of the
Registrant," "Item 11: Executive Compensation" and "Item 13: Certain
Relationships and Related Transactions" in Holdings' Annual Report on Form 10-K
for the year ended December 31, 1997, which is incorporated herein by reference.
PIMCO ADVISORS MARKET AND DISTRIBUTION INFORMATION
The Advisors Units are not publicly traded and there is no established
trading market for the Advisors Units. As of May 15, 1998, there were
approximately 50 holders of record of the Advisors Units. PIMCO Advisors
distributes on an annual basis cash in an amount equal to Operating Profit
Available for Distribution (as defined in the PIMCO Advisors Partnership
Agreement) less any amount deemed required for capital expenditures, future
payments of indebtedness, as reserves or otherwise in the business of PIMCO
Advisors. In general, the Management Board of PIMCO Advisors evaluates
distribution levels late in the fourth quarter of each year based on expected
year end earnings and the anticipated earnings for the ensuing year.
PIMCO Advisors paid distributions equal to $0.47 per Class A unit per
quarter for each quarter in the years ended December 31, 1996 and 1997, except
the third and fourth quarters of 1997, for which it paid $0.58 per unit. The
Management Board of PIMCO Advisors has set a quarterly distribution rate of
$0.60 per PIMCO Advisors unit for the first three calendar quarters of 1998,
which equates to a distribution rate at Holdings (after taxes at Holdings) of
$0.53 per unit.
Actual distribution levels will depend on the financial performance of
PIMCO Advisors, and there can be no assurance that the stated distribution rates
will be achieved. Distributions made by PIMCO Advisors will depend on the
profitability of the investment management business of PIMCO Advisors, which is
affected in part by overall economic conditions and other factors affecting
capital markets generally, which are beyond the control of PIMCO Advisors. In
addition, the general partners of PIMCO Advisors may, in determining the amount
of distributions, deduct any amount from Operating Profit Available for
Distribution the general partners deem may be required for capital expenditures,
reserves or otherwise in the business of PIMCO Advisors. To the extent PIMCO
Advisors retains profits in any year, unitholders may have taxable income that
exceeds their cash distributions.
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<PAGE> 26
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of Holdings Units and Advisors Units as of April 1, 1998 by each person who, to
Holdings' knowledge, is the beneficial owner of more than 5% of Holdings Units
or Advisors Units and its executive officers. Except as indicated, the address
of each person or entity listed below is 800 Newport Center Drive, Suite 100,
Newport Beach, California 92660.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
HOLDINGS UNITS HOLDINGS ADVISORS UNITS HOLDINGS
BENEFICIALLY UNITS BENEFICIALLY UNITS
OWNED(1)(2) OUTSTANDING OWNED(1)(3) OUTSTANDING(4)
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
FIVE PERCENT HOLDERS
PIMCO Partners, G.P. ("PGP")(5)....... 0 -- 53,790,538 53.8%
Pacific Life Insurance Company
("Pacific Life)(6).................. 0 -- 58,905,813 56.0
Pacific LifeCorp ("LifeCorp")(6)...... 0 -- 58,905,813 56.0
Pacific Mutual Holding Company
("PMHC")(6)......................... 0 -- 58,905,813 56.0
Pacific Asset Management LLC
("PAM")(6).......................... 0 -- 58,905,813 56.0
PIMCO Holding LLC ("PIMCO LLC")(7).... 0 -- 54,143,742 54.0
PIMCO Partners, LLC ("PPLLC")(8)...... 0 -- 53,933,018 53.9
Thomson Advisory Group, Inc. ("TAG").. 0 -- 14,380,217 23.7
William R. Benz, II(9)................ 66,000 * 53,933,018 53.9
David H. Edington(9).................. 184,000 * 53,933,018 53.9
William H. Gross(9)(10)............... 404,356 * 53,953,018 54.1
John L. Hague(9)...................... 184,000 * 53,933,018 53.9
Brent R. Harris(9).................... 184,000 * 53,933,018 53.9
Dean S. Meiling(9).................... 184,000 * 53,933,018 53.9
James F. Muzzy(9)..................... 184,000 * 53,933,018 53.9
William F. Podlich, III(9)............ 64,000 * 53,933,018 53.9
William C. Powers(9).................. 184,000 * 53,933,018 53.9
Lee R. Thomas(9)...................... 21,006 * 53,933,018 53.9
William S. Thompson, Jr.(9)(11)....... 190,000 * 53,933,018 53.9
Benjamin L. Trosky(9)................. 73,000 * 53,933,018 53.9
EXECUTIVE OFFICERS NOT INCLUDED ABOVE
William D. Cvengros................... 120,000 * 400,000 1.1
Robert M. Fitzgerald.................. 10,564 * 0 *
Kenneth M. Poovey..................... 7,000 * 116,459 *
Stephen J. Treadway................... 17,797 * 5,000 *
Richard M. Weil....................... 10,800 * 0 *
All directors and executive officers
as a group (6 persons).............. 171,848 * 521,459 1.8
</TABLE>
- ---------------
* Less than 1%
(1) Each of the persons and entities listed disclaims beneficial ownership of
any units except to the extent that it has a pecuniary interest in such
units.
(2) Includes options exercisable within 60 days of April 1, 1998.
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<PAGE> 27
(3) Does not include units underlying options which may be exercised for either
units of limited partner interest in PIMCO Advisors or Holdings Units,
which are reflected in the column titled "Holdings Units Beneficially
Owned."
(4) Assumes exchange of all units of limited partner interest in PIMCO Advisors
for Holdings Units.
(5) Includes 39,410,321 Advisors Units held of record by PGP and 14,380,217
Advisors Units held by TAG over which PGP may be deemed to have voting
control. Does not include non-unitized 0.01% general partner interest in
Holdings.
(6) Includes (i) 53,790,538 Advisors Units which may be deemed to be
beneficially owned by PGP, which may be deemed to be beneficially owned by
Pacific Life and PAM, because PIMCO LLC is a general partner of PGP and is
a wholly-owned subsidiary of PAM, which is a wholly-owned subsidiary of
Pacific Life and (ii) an aggregate of 5,115,275 Advisors Units issued as
follows: PIMCO LLC (353,204 units), Cadence Partners LP (2,665,000 units),
NFJ Partners L.P. (1,057,211 units), and Parametric Partners L.P.
(1,039,860 units), which may be deemed beneficially owned by PAM because
PIMCO LLC, CCM LLC, NFJ LLC, and PPA LLC, are wholly-owned subsidiaries of
PAM and CCM LLC, NFJ LLC, PPA LLC, in turn are the general partners of
Cadence Partners L.P., NFJ Partners L.P., and Parametric Partners L.P.,
respectively. As general partners, CCM LLC, NFJ LLC and PPA LLC have shared
investment and disposition powers with respect to units held by Cadence
Partners L.P., NFJ Partners L.P., and Parametric Partners L.P.,
respectively. Also reflects all of the above for LifeCorp and PMHC because
Pacific Life is a wholly-owned subsidiary of LifeCorp, which, in turn, is a
majority-owned subsidiary of PMHC. The address of each of the above
entities is: 700 Newport Center Drive, Newport Beach, California 92660.
(7) Includes (i) 353,204 Advisors Units held of record by PIMCO LLC and (ii)
53,790,538 Advisors Units which may be viewed to be beneficially owned by
PGP, which may be deemed to be owned by PIMCO LLC because PIMCO LLC is a
general partner of PGP.
(8) Includes (i) 142,480 Advisors Units held of record by PPLLC and (ii)
53,790,538 Advisors Units which may be considered to be beneficially owned
by PGP and which may be deemed to be beneficially owned by PPLLC, which is
a general partner of PGP.
(9) Includes the following which may be deemed to be beneficially owned by the
individual as a member of PPLLC: (i) 142,480 Advisors Units held of record
by PPLLC and (ii) 53,790,538 Advisors Units which may be considered to be
beneficially owned by PGP, and which may be deemed to be beneficially owned
by PPLLC as a general partner of PGP.
(10) Includes 68,900 Advisors Units held in the Gross Family Foundation of which
the individual is director and as to which he has shared voting and
disposition power, 18,000 Advisors Units held by him and his spouse, of
which he has shared voting and investment power, 500 Advisors Units held by
his spouse of which he has no voting or investment power, and 1,850 held by
his children of which he has voting and investment power.
(11) Includes 6,000 Advisors Units held in trusts of which the individual is
trustee and as to which he has sole voting and disposition power.
CHANGE IN CONTROL OF HOLDINGS
On November 4, 1997, the general partner of Holdings obtained a controlling
interest in Holdings by acquiring from PIMCO Advisors a .01 percent (.01%)
interest in Holdings as a general partner of Holdings in exchange for the
payment by the general partner to PIMCO Advisors of $80,000.
PIMCO Advisors acquired, among other things, the general partner interest
in Holdings through the acquisition of the investment advisory assets of
Oppenheimer Group Inc. ("Opgroup") on November 4, 1997. As consideration for the
assets acquired, the Opgroup stockholders received 2,119,608 Advisors Units,
rights to acquire up to 6,900,000 additional Advisors Units (which, after
December 31, 1997, became rights to acquire an equivalent number of Holdings
Units) at $33 1/3 per unit upon exchange of 6% Senior Notes due December 1, 2037
of Opgroup and rights, subject to certain conditions, to require PIMCO Advisors
to re-purchase some or all of these units for $25.50 per unit.
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<PAGE> 28
PLAN OF DISTRIBUTION
This prospectus covers the offer and sale of up to 10,000,000 Holdings
Units that may be offered and issued by Holdings from time to time in connection
with offers of exchange made by Holdings for Advisors Units. Holdings
anticipates that the offers under this prospectus will offer to exchange one
Holdings Unit for each Advisors Unit tendered. Holdings anticipates making the
exchange offers during the semiannual periods during which the PIMCO Advisors
Partnership Agreement permits Advisors Units to be transferred. At the time of
each exchange offer, Holdings will by supplement to this prospectus provide
detailed information regarding the terms of the offer, including the dates of
commencement and expiration of the offer, the number of Advisors Units being
tendered for, the procedures for tendering Advisors Units and withdrawing those
tenders if so desired, any conditions to the offer, any ability of Holdings to
modify or extend the offer, the identity of any exchange agent for the offer and
the estimated fees and expenses of the offer. The Holdings Units covered by this
prospectus have been approved for listing, subject to notice of issuance, on the
New York Stock Exchange. No underwriter will be used in connection with the
exchange offers.
Holdings Units received in exchange for Advisors Units by persons who are
not affiliates of Holdings may be sold or transferred by such persons without
further registration under the Securities Act. However, Holdings Units received
in exchange for Advisors Units by persons who are affiliates are subject to
restrictions under the Securities Act. This prospectus, as amended or
supplemented, if necessary, also relates to certain Holdings Units that may be
resold or reoffered by persons who acquired such units pursuant to this
prospectus. With the permission of Holdings, this prospectus, as amended or
supplemented, if necessary, may be used by affiliates of Holdings for the offer
and sale at various times of the Holdings Units received by them in an exchange
offer. The selling securityholders will act independently of Holdings in making
decisions with respect to the Holdings Units being offered hereby and may offer
their Units in one or more of the following transactions:
- on the New York Stock Exchange;
- in the over-the-counter market;
- in transactions other than on such exchange or in the over-the-counter
market;
- in brokerage transactions;
- in privately negotiated transactions;
- in connection with short sales of the Holdings Units;
- by pledge to secure debts and other obligations;
- in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or
- in a combination of any of the above transactions.
The selling securityholders may sell their Holdings Units at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices.
The selling securityholders may use broker-dealers to sell their Holdings
Units. If this happens, broker-dealers will either receive discounts or
commissions from the selling securityholders, or they will receive commissions
from purchasers of Holdings Units for whom they acted as agents. The selling
securityholders and any broker-dealers, agents or underwriters that participate
with the selling securityholders in the distribution of the Units offered hereby
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which case any commissions or discounts received by such broker-dealers, agents
or underwriters and any profit on the resale of the Holdings Units offered
hereby and purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
To the extent required under the Securities Act, a supplemental prospectus
will be filed, disclosing (a) the name of any selling securityholders, (b) the
name of any such broker-dealers, (c) the number of units involved, (d) the price
at which such units are to be sold, (e) the commissions paid or discounts or
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concessions allowed to such broker-dealer, where applicable, (f) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, as supplemented, and (g)
other facts material to the transaction.
There is no assurance that any of the selling securityholders will sell any
or all of the Holdings Units offered hereby.
PIMCO Advisors may agree to pay certain costs and expenses incurred in
connection with the registration of the Holdings Units offered hereby, except
that the selling securityholders shall be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of such units.
Holdings may agree to keep the registration statement relating to the offer
and sale by the selling securityholders of the Holdings Units continuously
effective until a fixed date or such earlier date as such Holdings Units may be
resold without registration under the provisions of the Securities Act.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a discussion of certain federal income tax consequences of
the exchange offer and the receipt, retention, and disposition of Holdings
Units. This discussion is based on the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), the Treasury Regulations thereunder and
rulings and court decisions as of the date hereof, all of which are subject to
change, possibly retroactively. Neither Holdings nor PIMCO Advisors has
requested a ruling from the Internal Revenue Service ("IRS") in connection with
the exchange offer.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION AND DOES NOT ADDRESS
ALL FEDERAL INCOME TAX CONSEQUENCES THAT MAY AFFECT THE RECEIPT, OWNERSHIP OR
DISPOSITION OF HOLDINGS UNITS, NOR DOES THE DISCUSSION SPECIFICALLY ADDRESS THE
EFFECT OF ANY APPLICABLE STATE, LOCAL, OR FOREIGN TAX LAWS. ACCORDINGLY, EACH
PROSPECTIVE HOLDER OF HOLDINGS UNITS IS URGED TO CONSULT HIS OR HER TAX ADVISOR
WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX AND REPORTING
CONSEQUENCES ARISING FROM THE RECEIPT, OWNERSHIP AND DISPOSITION OF HOLDINGS
UNITS AS THEY MAY RELATE TO HIS OR HER TAX SITUATION.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of Advisors Units for Holdings Units is intended to be treated
for federal income tax purposes as a contribution of property to a partnership
in exchange for an interest in Holdings. As such, under Section 721 of the Code,
no gain or loss will be recognized by the exchanging party or Holdings on the
exchange. The exchanging party will have a tax basis in its Holdings Units equal
to the tax basis such party had in the surrendered Advisors Units and will have
a holding period for the Holdings Units that includes the holding period that it
had for the surrendered Advisors Units. Furthermore, Holdings will have a tax
basis in the contributed Advisors Units equal to the tax basis of such Advisors
Units in the hands of the exchanging party and will have a holding period for
the Advisors Units that includes the holding period for such Advisors Units in
the hands of the exchanging party.
TAX CLASSIFICATION OF HOLDINGS
Tax Classification of Holdings Generally. At present Holdings is classified
as a partnership for federal income tax purposes, and, as discussed below under
"Publicly Traded Partnership Status," Holdings has elected to continue to be
treated as such. In general, entities classified as partnerships under the Code
are not subject to federal income tax (however, as discussed below in "Publicly
Traded Partnership Status," commencing with the 1998 taxable year Holdings will
be subject to a 3.5% federal tax on its gross income from the conduct of active
trades or businesses, including its share of such gross income derived through
PIMCO Advisors). Instead, all holders of partnership interests are taxable on
their allocable share of partnership income or gain, whether or not such income
or gain is distributed. If an entity formed as a partnership under state law
were classified for federal income tax purposes as a corporation, income would
be taxed at the entity level at the then applicable corporate rate of tax
(currently a maximum federal marginal rate of 35%), and distributions to the
partners of such partnership would constitute taxable dividends to the extent of
current or accumulated earnings and profits of the entity.
Publicly Traded Partnership Status. As a result of amendments to the Code
made by the Revenue Act of 1987, pursuant to Code Section 7704(a) "publicly
traded partnerships" are generally treated as corporations under the Code. The
Holdings Units are publicly traded and thus Holdings constitutes a "publicly
traded partnership" for purposes of Code Section 7704. As discussed below, since
1987 Holdings qualified for a temporary exception to the application of Code
Section 7704(a), and Holdings believes that under new tax legislation it
qualifies and will continue to qualify for an indefinite exception that is
available for the 1998 and subsequent tax years. However, if Holdings were
determined at any time to be subject to Section 7704(a) of the Code, Holdings
would be taxable as a corporation. In this event, the income, gain, loss,
deductions and credits of Holdings would be reflected only on its tax return and
would not be passed through to the holders of Holdings Units. If Holdings had
positive taxable income for any period, it would be required to pay tax on
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such income at applicable corporate rates. The imposition of such tax would
reduce the amount of distributions that would ultimately be made to holders of
Holdings Units. In addition, the amount of any distributions to holders of
Holdings Units would be taxable to them as ordinary dividend income to the
extent of Holdings' current or accumulated earnings and profits, regardless of
the source from which they were generated. Distributions in excess of Holdings'
current or accumulated earnings and profits would be treated as a nontaxable
return of capital to the extent of the holder's tax basis in its Holdings Units
and thereafter treated as gain from the sale of such holder's Holdings Units.
Because Holdings was publicly traded prior to the effective date of the
amendments made by the Revenue Act of 1987, Holdings believes that from 1987
through December 31, 1997 it qualified for a temporary (10-year) exception to
tax treatment as a corporation under Code Section 7704(a) (the "temporary
exception"). This temporary exception permitted Holdings to continue to enjoy
partnership status (and not be treated as a corporation) until December 31,
1997, so long as Holdings did not otherwise cease to be taxed as a partnership
without regard to the publicly traded partnership rules before then.
Pursuant to legislation enacted as part of the Taxpayer Relief Act of 1997,
for tax years beginning after December 31, 1997, publicly traded partnerships
that were covered by the temporary exception are eligible to elect (an "electing
1987 partnership") to be covered by another exception to tax treatment as a
corporation (the "elective exception"). Subject to the discussion below, an
"electing 1987 partnership" is exempt from the application of Code Section
7704(a) and therefore will continue to be taxed as a partnership and not a
corporation. An "electing 1987 partnership" is subject to a 3.5% annual tax on
its gross income from the active conduct of any trades or businesses (the "3.5%
PTP tax"). For an "electing 1987 partnership" holding interests in another
partnership, gross income includes such electing 1987 partnership's distributive
share of any gross income from the other partnership's active conduct of a trade
or business. The 3.5% PTP tax cannot be offset by any tax credits and will not
be deductible for federal or state income tax purposes. An "electing 1987
partnership" is a publicly traded partnership that meets certain eligibility
requirements specified in Code Section 7704(g), properly elects to be subject to
Code Section 7704(g), and consents to the application of the 3.5% PTP tax for
its first taxable year beginning after December 31, 1997. The election, once
made, applies to the tax year for which it has been made and for all subsequent
tax years, until revoked by the partnership. Consent of the IRS is not needed to
revoke the election, and, once revoked, the election cannot be reinstated.
Notwithstanding its election, an "electing 1987 partnership" will lose its
partnership status as of the first day after December 31, 1997 on which it adds
a substantial new line of business (within the meaning of Code Section 7704(g)).
As discussed above, Holdings believes that it qualified through December
31, 1997, for the temporary exception to corporate tax treatment, and Holdings
has taken all necessary action to elect to be covered by the elective exception
commencing with its taxable year that began on January 1, 1998. Furthermore,
Holdings does not anticipate either revoking the election or adding a
substantial new line of business. However, because ongoing qualification for the
elective exception will depend in large part upon facts existing in the future,
there can be no assurances that Holdings will continue to qualify for the
elective exception and could thereafter be subject to tax as a corporation.
Flow-Through of Partnership Income. Except for the 3.5% PTP tax discussed
above, no federal income tax will be paid by Holdings itself. Instead, holders
of Holdings Units will be required to report on their federal income tax returns
their allocable share of income, gains, losses, deductions and credits of
Holdings. Holdings uses the calendar year for its tax year, and, under the
Current Holdings Partnership Agreement, Holdings' income, gains and other tax
items are calculated on a monthly basis and allocated for tax purposes to the
holders of Holdings Units as of the last day of each month. The characterization
of any item of profit or loss (e.g., as capital gain or loss rather than
ordinary income or loss) will generally be the same for a holder of Holdings
Units as it is for Holdings. Tax allocations are discussed further below.
Because a holder of Holdings Units will be required to include Holdings' income
or gain in gross income for tax purposes, without regard to whether there are
any distributions from Holdings, a holder may become liable for taxes on
Holdings' income or gain in excess of the cash distributions received by such
holder. In this regard, because the 3.5% PTP tax will not be deductible for
purposes of calculating Holdings' net taxable income, the imposition of such tax
will
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reduce Holdings' ability to make distributions equal to its net taxable income
(in other words, Holdings' net income used to pay the 3.5% PTP tax will be
taxable to Holdings' partners but not available for distribution.)
Because the activities of Holdings are expected to consist of holding PIMCO
Advisors units, and the activities of PIMCO Advisors are expected to consist
primarily of holding interests in the Investment Management Firms, the types of
income that Holdings may realize is expected to be principally operating income
from the operations of the Investment Management Firms, which will be
characterized for tax purposes as if such income were realized directly by the
holders of Holdings Units.
Tax Classification of PIMCO Advisors. The Class A LP Units of PIMCO
Advisors are no longer publicly traded. As in the case of Holdings, PIMCO
Advisors qualified for the temporary exception to tax treatment as a corporation
under Section 7704(a), and PIMCO Advisors believes that under the temporary
exception it continued to enjoy partnership status (and not be taxed as a
corporation) through December 31, 1997. However, unlike Holdings, PIMCO Advisors
has not elected and is no longer eligible to elect to be covered by the
"elective exception" to corporate tax treatment in 1998 and subsequent years.
Instead, effective as of January 1, 1998, partnership interests of PIMCO
Advisors have not been listed or traded on any securities exchange and PIMCO
Advisors has imposed significant restrictions on the private transfer of such
interests. Such cessation of public trading and transfer restrictions were
intended to cause PIMCO Advisors to cease, as of December 31, 1997, to be a
publicly traded partnership for purposes of Section 7704, with the result that
it will continue to be classified as a partnership (and not a corporation) for
federal tax purposes. If PIMCO Advisors continues to qualify as a partnership
for tax purposes, it will not pay federal tax on its income, it will not be
subject to the 3.5% PTP tax, and its income, gains and other tax items will be
allocated to its partners, including Holdings, in the manner described above
under "Flow-Through of Partnership Income." Since PIMCO Advisors is not eligible
to elect to be covered by the elective exception, it will lose its
classification as a partnership for tax purposes (and thus be taxable as a
corporation) if at any time after January 1, 1998, its partnership interests are
deemed to be "publicly traded" for purposes of Code Section 7704. Because the
tax characterization of PIMCO Advisors partnership interests will depend upon
facts existing in the future, there can be no assurance that in the future the
IRS will not attempt to treat PIMCO Advisors partnership interests as publicly
traded and PIMCO Advisors as a publicly traded partnership taxable as a
corporation. Because substantially all of Holdings' income is derived from PIMCO
Advisors, if the IRS were to successfully assert that PIMCO Advisors should be
classified as a publicly traded partnership taxable as a corporation, PIMCO
Advisors would be taxed on its income and its after-tax distributions to
Holdings would be taxed as dividends. See "Tax Classification of Holdings
Generally." Such corporate tax treatment of PIMCO Advisors would have a material
adverse effect on Holdings' income and thus on its distributions to the holders
of Holdings Units.
Calculation of Adjusted Tax Basis and Treatment of Partnership
Distributions. In general, a holder's tax basis in his Holdings Units will be
equal to the tax basis such holder had in the Advisors Units that were exchanged
by such holder for Holdings Units in the exchange offer), increased by the
amount of any other contributions made by the holder to Holdings and by the
holder's allocable share of any income of Holdings, and decreased by the amount
of any distributions received by the holder from Holdings and by the holder's
allocable share of any losses of Holdings. Increases in a holder's share of
liabilities of Holdings (if any) are treated as contributions to Holdings by
such holder and decreases in a holder's share of such liabilities (if any) are
treated as distributions of cash by Holdings to such holder.
As described above, holders of Holdings Units are subject to tax on their
allocable share of Holdings' income whether or not distributed. Generally, the
receipt of cash distributions from a partnership are not taxable to the
recipient partner except to the extent that such distributions exceed the
partner's tax basis in his interest in the partnership. Cash distributions
(including deemed distributions resulting from a decrease in a partner's share
of liabilities of the partnership) in excess of a partner's tax basis in his
partnership interest are treated as gain realized from the sale or other taxable
disposition of the partnership interest. Distributions of assets in kind to a
partner from a partnership generally are not taxable to either the partnership
or the recipient partner, although certain exceptions apply.
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Under the Proposed Holdings Partnership Agreement, items of partnership
income, gain, loss, deduction and credit are determined on an annual basis and
allocated ratably to holders who hold Holdings Units as of the last day of each
month. Distributions are made to holders who hold Holdings Units on record dates
determined by the General Partner. As a result, holders who sell Holdings Units
at any time during Holdings' taxable year may be allocated taxable income of
Holdings without receiving a distribution in respect of such income. Such an
allocation would increase a holder's basis in his or her Holdings Units,
however, and thus to such extent would decrease any gain or increase any loss
recognized on a sale of such Holdings Units.
TAX ALLOCATIONS
Overview. As indicated above, each holder of Holdings Units must include in
taxable income his or her share of the taxable income of Holdings. Although the
applicable tax rules are complex, it is anticipated that the reported income of
each holder of Holdings Units will generally consist of two parts:
- first, a share of the taxable income of Holdings calculated at the
Holdings level (using Holdings' basis in its assets and without the
benefit of any deductions for goodwill and certain other intangible
assets that are eligible for amortization pursuant to Section 197 of the
Code ("Section 197 Intangibles")), and
- second, a deduction taken ratably over 15 years for the amortization of
the portion of the original purchase price of the Advisors Units
contributed to Holdings in the exchange offer allocable to Section 197
Intangibles, or, for holders who purchase Holdings Units, the portion of
the original purchase price for such Holdings Units allocable to Section
197 Intangibles.
The treatment of Section 197 Intangibles is discussed further under
"Certain Additional Tax Considerations for Holders of Holdings Units." Set forth
below is a discussion of three of the principal tax rules that are relevant in
determining the taxable income allocable to any holder of Holdings Units:
Code Section 704(b). Under Code Section 704(b), taxable income of Holdings
must be allocated among Holdings Units in a manner that reflects the allocation
of economic income. Thus, the basic allocation rule generally followed by
Holdings is that its taxable income will be allocated pro rata among Holdings
Units.
Section 704(c). If a partner acquires an interest in Holdings in exchange
for a contribution of property to Holdings, Holdings' initial tax basis in the
contributed property may differ from the property's fair market value at the
time of the contribution. In that event, the taxable income earned by Holdings
from such property would differ from Holdings' "book income" from the property
(which would be calculated under tax accounting principles using as the
property's initial book value the property's fair market value at the time it
was acquired by Holdings). Under Code Section 704(c), the taxable income and
deductions of a partnership generally must be allocated to partnership interests
that were issued in exchange for property in a way that eliminates the
difference between the partnership's book value and tax basis for the property
for which such interest was exchanged. Regulations allow a partnership to use
any one of a number of reasonable methods for making this adjustment. A similar
principle applies when the capital accounts for outstanding partnership
interests are adjusted to fair market value. The book/tax differences stemming
from the capital account adjustments must be allocated to partnership interests
for which the adjustments are made. Special allocations of taxable income and
deductions made to a partnership interest under Code Section 704(c) continue to
be made even after the partnership interest is transferred to a new owner. The
foregoing rules would apply to holders of Advisors Units contributing such Units
to Holdings in exchange for Holdings Units in connection with the exchange
offer, as well as to other persons contributing property to Holdings in exchange
for Holdings Units.
Code Section 754. Finally, Holdings and PIMCO Advisors each has in effect,
and each Investment Management Firm has made, Code Section 754 elections. As a
result, each purchaser of a Holdings Unit will be allowed to adjust the basis of
Holdings' assets, solely for purposes of computing the taxable income of such
purchaser, in an amount equal to the difference between the price paid for the
Unit and the share of Holdings' basis in its assets allocable to that Unit.
Substantially all of this adjustment is expected to be allocated to
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Section 197 Intangibles, with the result that purchasers generally can deduct
the amount of the adjustment ratably over 15 years. See "Certain Additional Tax
Considerations for Holders of Holdings Units" below.
CERTAIN OF HOLDINGS' ALLOCATION METHODS AND ASSUMPTIONS ARE DESIGNED TO
DEAL WITH SOME OF THE PRACTICAL ISSUES THAT ARISE FROM OPERATING IN THE FORM OF
A PUBLIC PARTNERSHIP. WHILE THESE METHODS AND ASSUMPTIONS HAVE NOT BEEN
SPECIFICALLY APPROVED BY THE IRS, AND MAY NOT BE IN TECHNICAL COMPLIANCE WITH
CODE SECTIONS 704(C) AND 754, HOLDINGS BELIEVES THAT THEY ARE CONSISTENT WITH
THE PURPOSES OF THOSE PROVISIONS. HOWEVER, THE IRS COULD CHALLENGE THE
ALLOCATION METHODS AND ASSUMPTIONS USED BY HOLDINGS, AND IF SUCH CHALLENGE WERE
SUCCESSFUL, THE TAXABLE INCOME OF SOME HOLDERS OF HOLDINGS UNITS MIGHT BE
INCREASED WITHOUT ANY CORRESPONDING INCREASE IN CASH DISTRIBUTIONS.
CERTAIN LIMITATIONS ON LOSSES AND DEDUCTIONS.
Holders of Holdings Units are not expected to be allocated losses in excess
of income. However, if this occurs, federal tax law provides for certain
limitations (such as the "passive activity" and "at risk" rules) on a holder's
ability to deduct such losses against income from other sources. The deduction
of interest on debt used to purchase or carry Holdings Units may also be
limited. Holders of Holdings Units should consult their tax advisors with regard
to the possible application of such rules related to limitations on the
deductibility of Holdings' losses and investment interest.
DISPOSITION OF HOLDINGS UNITS
Gain or loss from a sale or other disposition of a Holdings Unit will
generally be based on the difference between the amount realized and the
holder's adjusted tax basis for such Holdings Unit. The amount realized will
include the holder's share of partnership liabilities. Any such gain or loss
will generally be taxable as either midterm or long-term capital gain or loss if
the holder has held the Holdings Unit for more than one year but not more than
eighteen months (in the case of mid-term capital gain or loss) or more than
eighteen months (in the case of long-term capital gain or loss). However, a
holder of Holdings Units may recognize ordinary income from sale proceeds
attributable to unrealized receivables and inventory of Holdings ("Section 751
Assets"). Such ordinary income may exceed net gain realized upon the sale of
Units and may be recognized even if there is a net loss on the sale of Units.
Because amortization deductions with respect to Section 197 Intangibles will be
treated as Section 751 Assets, if such Section 197 Intangibles maintain their
value, sellers of Holdings Units who have been allocated amortization deductions
attributable to such Section 197 Intangibles will recognize ordinary income on
the sale equal to the amount of amortization deductions previously taken. If,
however, there is a loss on the sale of Holdings Units and such loss is
attributable to the decline in the value of the Section 197 Intangibles, the
loss in some circumstances might be deferred until a holder disposes of all of
his or her Holdings Units.
The IRS has ruled that a partner acquiring multiple interests in a
partnership in separate transactions at different prices must maintain an
aggregate adjusted tax basis in a single partnership interest consisting of the
combined interests in the partnership. Upon a disposition of a portion of such
single interest, the partner would, under the ruling, be required to apportion
equitably his or her aggregate tax basis between the interest sold and the
interest retained. Under this ruling, a holder of Holdings Units that had
acquired Advisors Units at different prices would in effect be precluded from
selecting which Holdings Units to sell, and thereby from selectively controlling
the recognition of gain or loss.
Certain Reporting Requirements. In order to comply with Code requirements
and avoid imposition of potentially significant penalties, holders of Holdings
Units transferring any such Units, other than through a broker subject to the
provisions of Code Section 6045, must report such transfer to Holdings. In
addition, under Code Sections 1060, 755 and related provisions, transferors and
transferees of Holdings Units must report the amount of any basis adjustment
allocated to Section 197 Intangibles.
Any person who holds Holdings Units as a nominee for another person is
required to furnish to Holdings: (i) the name, address and taxpayer
identification number of the beneficial owner and the nominee; (ii) certain
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information relating to the status of the beneficial owner; (iii) the amount and
description of the Holdings Units held, acquired or transferred for the
beneficial owner, and (iv) certain other information including the dates of
acquisitions and transfers, means of acquisitions and transfers and the
acquisition cost of any Holdings Units, as well as the amount of net proceeds
from sales of Holdings Units. Brokers and financial institutions are required to
furnish certain additional information on Holdings Units they acquire, hold or
transfer for their own accounts including the amount of net proceeds from sale.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments to
noncorporate holders of the proceeds of a sale of Holdings Units and "backup
withholding" at a rate of 31% will apply to such payments if the holder fails to
provide an accurate taxpayer identification number. In addition, distributions
made to or on behalf of a noncorporate holder whose Holdings Units are held by a
broker may be subject to a backup withholding tax unless the holder complies
with certain reporting requirements.
CERTAIN ADDITIONAL TAX CONSIDERATIONS FOR HOLDERS OF HOLDINGS UNITS
Section 197 of the Code added by the Revenue Reconciliation Act of 1993,
generally allows an amortization deduction with respect to any Section 197
Intangible acquired by the taxpayer after August 10, 1993 and held in connection
with the conduct of a trade or business. The amount of such deduction is
determined by amortizing the taxpayer's adjusted tax basis in such intangible
ratably over 15 years. Section 197 Intangibles generally include goodwill and
going concern value, among other items.
The portion of the purchase price of an interest in a partnership that is
allocable to Section 197 Intangibles will generally equal the excess of the
purchase price over a partner's proportionate share of the fair market value of
the partnership's assets that are not Section 197 Intangibles, as determined
based on the allocation methods employed by the partnership. In the present
case, the per-Holdings Unit value of such other assets could be affected by a
number of factors, including the issuance of new Holdings Units by Holdings. The
amount allocated to Section 197 Intangibles by any holder of Holdings Units
could be reduced if the IRS were to challenge the allocation methods used by
Holdings. See "--Tax Allocations." Deductions from amortization of Section 197
Intangibles will decrease the holder's tax basis in his Holdings Units, and such
deductions will be recaptured as ordinary income upon a taxable disposition of
the Holdings Units to the extent that amortization deductions are not matched by
a decline in the fair market value of the relevant intangible assets. See
"--Disposition of Units."
SPECIAL STATUS TAXPAYERS
The foregoing is a general discussion of federal tax laws related to the
exchange offer and the ownership and disposition of Holdings Units that apply in
the case of most United States taxpayers. Under federal tax laws, however,
additional or different tax rules may apply to persons or entities having a
special status for tax purposes, such as tax-exempt entities, foreign
individuals and entities, regulated investment companies and real estate
investment trusts. A prospective holder of Holdings Units that is such a special
status person or entity should consult his, her or its tax advisor with regard
to the tax consequences to such holder of the exchange offer and the ownership
and disposition of Holdings Units.
STATE AND LOCAL TAXES
The above discussion does not address the tax consequences, under
applicable state and local income tax laws, of the exchange offer and the
ownership or disposition of Holdings Units. In this regard, holders of Holdings
Units should note that California has enacted legislation that will impose a 1%
tax on the gross income from active trades and businesses derived from
California sources by electing 1987 partnerships, with such 1% tax to remain
applicable to an electing 1987 partnership so long as it is subject to the 3.5%
PTP tax. It is possible that other states may at some time impose similar taxes
on income derived from such states by an electing 1987 partnership such as
Holdings. Holders of Advisors Units are urged to consult their tax advisors
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with regard to the tax consequences, under state and local income tax laws, of
the exchange offer and the ownership and disposition of Holdings Units.
EXPERTS
The consolidated financial statements of PIMCO Advisors as of December 31,
1997 and 1996 and for the years then ended and the financial statements of
Holdings as of December 31, 1997, April 30, 1997 and 1996 and for the eight
month period ended December 31, 1997 and two years ended April 30, 1997 have
been so included in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of PIMCO Advisors as of December 31,
1995 and for the year then ended have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report which is incorporated herein by
reference, and have been so incorporated in reliance on the report of such firm
given on their authority as experts in auditing and accounting.
LEGAL OPINIONS
For the purpose of this offering, Kenneth M. Poovey, Holdings' Chief
Operating Officer and General Counsel, is giving his opinion on the validity of
the Holdings Units. Mr. Poovey, individually and with members of his family
owns, has options to purchase or has other interests in, Holdings Units.
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=========================================================
PROSPECTIVE INVESTORS MAY ONLY RELY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. NO PERSON HAS BEEN AUTHORIZED TO
PROVIDE ANY INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOLDINGS. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR OFFER TO BUY IN ANY
JURISDICTION IN WHICH THE OFFER OR SALE IS NOT PERMITTED. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF HOLDINGS SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
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PAGE
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Prospectus Supplement
The Partnership........................... S-2
Use of Proceeds........................... S-2
Selling Securityholder.................... S-2
Plan of Distribution...................... S-3
Prospectus
Available Information/Incorporation by
Reference............................... 2
Forward-Looking Statements................ 2
The Partnerships.......................... 3
The Exchange Offers....................... 4
Risk Factors.............................. 6
Use of Proceeds........................... 7
Selected Historical Financial Data........ 7
Pro Forma Financial Data.................. 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 7
Comparison of Securities.................. 8
Management................................ 22
PIMCO Advisors Market and Distribution
Information............................. 22
Voting Securities and Principal Holders
Thereof................................. 23
Plan of Distribution...................... 24
Certain United States Federal Tax
Considerations.......................... 27
Experts................................... 33
Legal Opinions............................ 33
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10,000,000 UNITS
OF LIMITED
PARTNERSHIP INTEREST IN
PIMCO ADVISORS HOLDINGS L.P.
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PROSPECTUS SUPPLEMENT
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JULY 1, 1998
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