<PAGE>
As filed with the Securities and Exchange Commission on September 27, 1996
Registration No. ____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. __ [_]
PIMCO Funds: Equity Advisors Series
(Exact name of Registrant as Specified in Charter)
840 Newport Center Drive, Newport Beach, California 92660
(Address of Principal Executive Offices)
(714) 640-3593
(Area Code and Telephone Number)
__________
R. Wesley Burns
Pacific Investment Management Company
840 Newport Center Drive
Newport Beach, California 92660
(Name and Address of Agent for Service)
Copies to:
Newton B. Schott, Jr., Esq. Jeffrey S. Puretz, Esq. Douglass N. Ellis, Jr.,
c/o PIMCO Advisors L.P. Dechert Price & Rhoads Esq.
2187 Atlantic Street 1500 K Street, N.W., Ropes & Gray
Stamford, CT 06902 Suite 500 One International Place
Washington, D.C. 20005 Boston, MA 02110
__________
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
__________
It is proposed that this filing will become effective on October 28, 1996
pursuant to Rule 488.
__________
An indefinite amount of the Registrant's securities has been registered
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. In reliance upon Rule 24f-2, no filing fee is being paid
at this time. A Rule 24f-2 notice for the Registrant for the fiscal year ended
June 30, 1996 was filed on August 28, 1996.
<PAGE>
PIMCO Funds: Equity Advisors Series
NFJ Diversified Low P/E Fund and
Cadence Mid Cap Growth Fund
Cross-Reference Sheet
as required by Rule 481(a)
Form N-14 Item Caption in Prospectus/Proxy Statement
1 Cross-Reference Sheet; Outside Front Cover of Prospectus
2 Outside Back Cover Page of Prospectus; Table of Contents
3 Overview; Risk Factors
4 Approval or Disapproval of Agreement and Plan of
Reorganization
5 Information about the Acquiring Funds
6 Information about the Acquired Funds
7 Voting Information
8,9 Not Applicable
Form N-14 Item Caption in Statement of Additional Information
10, 11 Cover Page; Table of Contents
12,13 Additional Information about the Acquiring and
Acquired Funds
14 Financial Statements
Form N-14 Item Caption in Part C
15 Indemnification
16 Exhibits
17 Undertakings
<PAGE>
PIMCO ADVISORS FUNDS
Value Fund
Discovery Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
December __, 1996
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of the Value
Fund and the Discovery Fund (each an "Acquired Fund") will be held on
__________, December __, 1996 at __________ Eastern time at the offices of PIMCO
Advisors Funds at 2187 Atlantic Street, Stamford, Connecticut, to consider the
following:
1. To approve or disapprove an Agreement and Plan of Reorganization
providing for the transfer of all of the assets of the Value Fund to
the NFJ Diversified Low P/E Fund (the "New Value Fund"), a series of
PIMCO Funds: Equity Advisors Series, in exchange for shares of the
New Value Fund and the assumption by the New Value Fund of all of
the liabilities of the Value Fund, and the distribution of such
shares to the shareholders of the Value Fund in complete liquidation
of the Value Fund. (This proposal will be voted upon by the
shareholders of the Value Fund only.)
2. To approve or disapprove an Agreement and Plan of Reorganization
providing for the transfer of all of the assets of the Discovery
Fund to the Cadence Mid Cap Growth Fund (the "Mid Cap Fund"), a
series of PIMCO Funds: Equity Advisors Series, in exchange for
shares of the Mid Cap Fund and the assumption by the Mid Cap Fund of
all of the liabilities of the Discovery Fund, and the distribution
of such shares to the shareholders of the Discovery Fund in complete
liquidation of the Discovery Fund. (This proposal will be voted upon
by the shareholders of the Discovery Fund only.)
3. To transact such other business as may properly come before the
meeting.
The Trustees have fixed the close of business on October __, 1996 as the
record date for determination of shareholders entitled to notice of, and to vote
at, the Special Meeting.
By order of the Board of Trustees
Newton B. Schott, Jr., Clerk
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED SO THAT YOU WILL BE REPRESENTED AT THE
SPECIAL MEETING.
October __, 1996
<PAGE>
PROSPECTUS/PROXY STATEMENT October __, 1996
<TABLE>
<CAPTION>
<S> <C>
Acquisition of the assets of: By and in exchange for shares of:
- ---------------------------- --------------------------------
Value Fund NFJ Diversified Low P/E Fund
Discovery Fund Cadence Mid Cap Growth Fund
each a series of: each a series of:
PIMCO Advisors Funds PIMCO Funds: Equity Advisors Series
2187 Atlantic Street 840 Newport Center Drive, Suite 360
Stamford, Connecticut 06902 Newport Beach, California 92660
1-800-426-0107 1-800-927-4648
</TABLE>
This Prospectus/Proxy Statement relates to the proposed mergers (the
"Mergers") of the Value Fund and the Discovery Fund (each an "Acquired Fund"),
series of PIMCO Advisors Funds (the "PAF Trust"), into, respectively, the NFJ
Diversified Low P/E Fund (to be renamed the "Value Fund") and the Cadence Mid
Cap Growth Fund (to be renamed the "Mid Cap Growth Fund") (each an "Acquiring
Fund"), series of PIMCO Funds: Equity Advisors Series (the "PFEAS Trust"). The
Acquired Funds and the Acquiring Funds are referred to in this Prospectus/Proxy
Statement as the "Funds." The Mergers are to be effected through the transfer
of all of the assets of each Acquired Fund to the corresponding Acquiring Fund
in exchange for shares of beneficial interest of the Acquiring Fund (the "Merger
Shares") and the assumption by the Acquiring Fund of all of the liabilities of
the Acquired Fund, followed by the distribution of the Merger Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund. As a
result of each proposed transaction, each shareholder of the Acquired Fund will
receive in exchange for his or her Acquired Fund shares a number of Acquiring
Fund shares of the same class equal in value at the date of the exchange to the
aggregate value of the shareholder's Acquired Fund shares.
Because shareholders of the Acquired Funds are being asked to approve
transactions which will result in their holding shares of the Acquiring Funds,
this Proxy Statement also serves as a Prospectus for the Merger Shares of each
Acquiring Fund. The investment objective of each Acquiring Fund is as follows:
(1) The NFJ Diversified Low P/E Fund seeks long-term growth of
capital and income. It invests primarily in common stocks with below-
average price to earnings ratios relative to their industry group.
(2) The Cadence Mid Cap Growth Fund seeks growth of capital. It
invests primarily in common stocks of companies with market capitalizations
in excess of $500 million that have improving fundamentals and whose stock
is reasonably valued by the market.
-1-
<PAGE>
The PFEAS Trust, formerly PIMCO Advisors Institutional Funds, is an open-
end series management investment company, organized as a Massachusetts business
trust in 1990, that currently offers shares of 14 separate funds. Each
Acquiring Fund is a diversified series of the PFEAS Trust.
Following the Mergers and similar transactions, it is anticipated that the
PFEAS Trust will be renamed "PIMCO Funds: Multi-Manager Series" to better
reflect its management structure; the NFJ Diversified Low P/E Fund will be
renamed the "Value Fund"; and the Cadence Mid Cap Growth Fund will be renamed
the "Mid Cap Growth Fund." Because of this, the NFJ Diversified Low P/E Fund
and the Cadence Mid Cap Growth Fund are sometimes referred to in this
Prospectus/Proxy Statement as the "New Value Fund" and the "Mid Cap Fund,"
respectively.
This Prospectus/Proxy Statement explains concisely what you should know
before investing in each Acquiring Fund. Please read it and keep it for future
reference.
The following documents have been filed with the Securities and Exchange
Commission (the "SEC") and are incorporated into this Prospectus/Proxy Statement
by reference: (i) the current Prospectus of the PAF Trust, dated February 1,
1996, as amended or supplemented from time to time (the "PAF Prospectus"); (ii)
the current Statement of Additional Information of the PAF Trust, dated July 12,
1996 (including the Report of Independent Accountants and financial statements
in respect of each Acquired Fund included therein), as amended or supplemented
from time to time (the "PAF Statement of Additional Information"); (iii) the
current Prospectus and Statement of Additional Information of the PFEAS Trust,
each dated September 15, 1996, as amended or supplemented from time to time (the
"PFEAS Prospectus" and the "PFEAS Statement of Additional Information,"
respectively; (iv) the financial statements in respect of each Acquired Fund
included in the PAF Trust's Semi-Annual Report to Shareholders for the six
months ended March 31, 1996 (the "PAF Semi-Annual Report"); (v) the Report of
Independent Accountants and financial statements in respect of each Acquiring
Fund included in the PFEAS Trust's Annual Report to Shareholders for the fiscal
year ended June 30, 1996 (the "PFEAS Annual Report"); and (vi) a Statement of
Additional Information dated October ___, 1996 relating to the transactions
described in this Prospectus/Proxy Statement (the "Merger Statement of
Additional Information").
For a free copy of any or all of the Prospectuses, Statements of Additional
Information, Annual Reports or Semi-Annual Reports referred to in the foregoing
paragraph, please call 1-800-927-4648 or write to the PFEAS Trust at the address
appearing above.
THE SECURITIES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES OF THE ACQUIRING FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
-2-
<PAGE>
OVERVIEW
Proposed Transactions
The transactions described on the first page of this Prospectus/Proxy
statement are part of an overall restructuring of three of the registered
investment companies (the "PIMCO Mutual Funds") advised by PIMCO Advisors L.P.
("PIMCO Advisors") and its affiliates. The restructuring involves, among other
components, several mergers between Funds in the PIMCO family which are
counterparts of each other in that they are managed by the same investment
adviser in accordance with substantially similar investment objectives and
policies. The result of the restructuring will be a single, more integrated
mutual fund complex, with most PIMCO Mutual Funds offered to both retail and
institutional investors, and with broader exchange privileges for shareholders.
As part of the restructuring, the Trustees of each of the PAF Trust and the
PFEAS Trust, both of which are open-end, series investment companies, have
unanimously approved the Merger of each Acquired Fund into the corresponding
Acquiring Fund. Each Merger is proposed to be accomplished pursuant to an
Agreement and Plan of Reorganization providing for the transfer of all of the
assets of the relevant Acquired Fund to the corresponding Acquiring Fund in
exchange for the assumption by the corresponding Acquiring Fund of all of the
liabilities of the Acquired Fund and for shares of the Acquiring Fund. The
completion of these transactions will result in the liquidation of each Acquired
Fund.
PIMCO Advisors is the investment adviser to both Acquired Funds and to both
Acquiring Funds. PIMCO Advisors has delegated responsibility for managing the
portfolio of (i) each of the Value Fund and the New Value Fund to NFJ Investment
Group ("NFJ"), a subsidiary partnership of PIMCO Advisors, which serves as sub-
adviser to both the Value Fund and the New Value Fund, and (ii) each of the
Discovery Fund and the Mid Cap Fund to Cadence Capital Management ("Cadence"), a
subsidiary partnership of PIMCO Advisors, which serves as sub-adviser to both
the Discovery Fund and the Mid Cap Fund. The day-to-day operations of the Value
Fund and the New Value Fund are handled by the same portfolio management team at
NFJ. Similarly, the day-to-day operations of the Discovery Fund and the Mid Cap
Fund are handled by the same portfolio management team at Cadence. Furthermore,
as explained further below under "Comparison of Investment Objectives, Policies
and Restrictions," each Acquiring Fund is managed in a substantially similar
manner to the corresponding Acquired Fund, except that the Discovery Fund tends
to place relatively greater emphasis on stocks of companies with smaller
capitalizations while the Mid Cap Fund tends to place relatively greater
emphasis on stocks of companies with larger capitalizations.
As a result of each proposed transaction, each Acquired Fund will receive a
number of Class A, Class B and Class C shares of the relevant Acquiring Fund
equal in value to the value of the net assets of the Acquired Fund being
transferred and attributable to the Class A, Class B and Class C shares,
respectively, of the Acquired Fund. Following the transfer, (i) each Class A,
Class B and Class C shareholder of the Acquired Fund will receive, on a tax-free
basis, a number of full and fractional Class A, Class B or Class C Merger Shares
of the
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<PAGE>
relevant Acquiring Fund equal in value to the aggregate value of the
shareholder's Class A, Class B or Class C Acquired Fund shares, as the case may
be, and (ii) the Acquired Funds shall be liquidated.
The Class A, Class B and Class C shares of each Acquiring Fund have
substantially identical characteristics to the corresponding classes of the
Acquired Fund. Class A shares are generally sold subject to a front-end sales
load and are subject to a servicing fee at an annual rate of 0.25% of assets
attributable to Class A shares. Class A shares are generally not subject to a
contingent deferred sales charge (a "CDSC"), except in the case of certain
purchases of Class A shares without a sales load which are redeemed within one
year after purchase. Class B shares are sold at net asset value, without an
initial sales charge but subject to a CDSC at declining rates if redeemed within
7 years of purchase. Class B shares are subject to servicing and distribution
fees at an aggregate annual rate of 1.00% of assets attributable to Class B
shares and convert automatically to Class A shares 7 years after purchase.
Class C shares are sold at net asset value, without an initial sales charge, are
subject to a 1.00% CDSC if redeemed within one year after purchase, are subject
to a servicing and distribution fee at an aggregate annual rate of 1.00% of
assets attributable to Class C shares and do not have a conversion feature. The
Acquiring Funds have not previously offered Class A, Class B or Class C shares,
but will begin offering such shares to the public at or before the time that the
Mergers are consummated. No sales charge will be charged to Acquired Fund
shareholders on the issuance of the Merger Shares. The Merger Shares will be
subject to a CDSC to the same extent that the Acquired Fund shares exchanged
were so subject. For the purposes of computing the CDSC, if any, payable on
redemption of Class A, Class B and Class C Merger Shares, and determining the
conversion date of Class B Merger Shares, the Merger Shares will be treated as
having been purchased as of the date that and for the price at which the
Acquired Fund shares exchanged for such Merger Shares were purchased.
The Trustees of the PAF Trust unanimously recommend that shareholders of
each Acquired Fund approve the Merger for such Fund because it offers
shareholders the opportunity to pursue a substantially similar investment
program in a larger fund, which should offer opportunities for greater
diversification of risk; because the Mergers and the general restructuring of
which they are a part will offer broader exchange privileges; and because the
Mergers will immediately result in more predictable Fund operating expenses,
under the Acquiring Funds' fee structure described below, at substantially lower
levels than have historically been experienced. See "Background and Reasons for
the Proposed Mergers."
Operating Expenses
The PFEAS Trust's "unified" fee structure differs from the fee and expense
structure of the PAF Trust. Both the Acquiring Funds and the Acquired Funds pay
a management or advisory fee, computed as a percentage of Fund net assets, to
their adviser, PIMCO Advisors. However, the management fee paid by each Acquired
Fund covers both portfolio management and administrative services, while the
advisory fee paid by each Acquiring Fund covers portfolio management only. Each
Acquired Fund directly bears the expenses associated with
-4-
<PAGE>
various third-party services, such as audit, custodial, legal, transfer agency
and printing costs. By contrast, each Acquiring Fund pays a single
administrative fee, computed as a percentage of Fund net assets, to its
administrator (currently Pacific Investment Management Company ("PIMCO"), a
subsidiary partnership of PIMCO Advisors, and expected to become PIMCO Advisors
at or about the time of the Mergers), which bears the costs of such services to
the Fund, as well as itself providing administrative services to the Fund, in
exchange for the administrative fee. The result is an expense level for each
Acquiring Fund that is precise and predictable under ordinary circumstances.
Furthermore, investors in the Acquiring Funds are insulated from price increases
in third-party services and from increased expense ratios arising from a decline
in net assets, because the administrator, rather than the Acquiring Fund, bears
these risks for a period of at least one year. Administrative fee arrangements
for the Acquired Funds and the Acquiring Funds are discussed further in the
"Administrative Arrangements" subsection on page [__].
For information about the expenses associated with the Mergers, see
"Background and Reasons for the Proposed Mergers."
As the following tables demonstrate, each Merger would result in Value
and Discovery Fund shareholders receiving an immediate and significant reduction
in the level of Fund expenses borne by such shareholders compared to historical
periods. These tables summarize, for Class A, Class B and Class C shares,
expenses (i) that each Acquired Fund incurred in its fiscal year ended September
30, 1995, (ii) that each Acquired Fund incurred during the first 11 months of
its fiscal year ending September 30, 1996 (i.e., through August 31, 1996), and
(iii) that each Acquired Fund would have incurred in its most recent fiscal year
after giving effect to the proposed Merger on a pro forma combined basis as if
the Merger had occurred as of the beginning of the Acquiring Fund's most recent
fiscal year. The tables are provided to help you understand an investor's share
of the operating expenses which each Fund incurs. The examples show the
estimated cumulative expenses attributable to a hypothetical $1,000 investment
in each Acquired Fund, and each Acquiring Fund on a pro forma basis, over
specified periods.
-5-
<PAGE>
<TABLE>
<CAPTION>
Historical Expenses Current Expenses
Value Fund Value Fund
(for fiscal (for period Pro Forma
year ended ended Expenses
Sept. 30, 1995) Aug. 31, 1996) New Value Fund
------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
Shareholder Transaction Expenses
Maximum initial sales charge imposed on
purchases (as a percentage of offering price
at the time of purchase)(1)(2)......... 5.50% 5.50% 5.50%
Maximum contingent deferred sales charge (as
a percentage of original purchase price)(2)...... 1.00%(3) 1.00%(3) 1.00%(3)(4)
Annual Fund Operating Expenses (as a percentage
of average net assets)
Advisory Fee...................................... 0.70% 0.70% 0.45%
Administrative Fee................................ 0.40%
12b-1 Fees........................................ 0.25% 0.25% 0.25%
Other Expenses.................................... 0.35% 0.41% -(6)
------------------------------------------------------------------
Total Fund Operating Expenses.................. 1.30% 1.36% 1.10%
CLASS B SHARES
Shareholder Transaction Expenses
Maximum initial sales charge imposed on
purchases (as a percentage of offering price).... None None None
Maximum contingent deferred sales charge (as a
percentage of original purchase price)(2)....... 5.00% 5.00% 5.00%(4)
Annual Fund Operating Expenses (as a
percentage of average net assets)
Advisory Fee...................................... 0.70% 0.70% 0.45%
Administrative Fee................................ 0.40%
12b-1 Fees........................................ 1.00%(5) 1.00%(5) 1.00%(5)
Other Expenses.................................... 0.35% 0.41% _(6)
------------------------------------------------------------------
Total Fund Operating
Expenses...................................... 2.05% 2.11% 1.85%
CLASS C SHARES
Shareholder Transaction Expenses
Maximum initial sales charge imposed on
purchases (as a percentage of offering price).... None None None
Maximum contingent deferred sales charge (as
a percentage of original purchase price)(2)...... 1.00% 1.00% 1.00%(4)
Annual Fund Operating Expenses (as a
percentage of average net assets)
Advisory Fee...................................... 0.70% 0.70% 0.45%
Administrative Fee................................ 0.40%
12b-1 Fees........................................ 1.00%(5) 1.00%(5) 1.00%(5)
Other Expenses.................................... 0.35% 0.41% -(6)
------------------------------------------------------------------
Total Fund Operating Expenses.................. 2.05% 2.11% 1.85%
</TABLE>
Footnotes appear on p. __.
-6-
<PAGE>
<TABLE>
<CAPTION>
Historical Current
Expenses Expenses
Discovery Discovery
Fund (for Fund (for
fiscal year period Pro Forma
ended Sept. ended Aug. Expenses
30, 1995) 31, 1996) Mid Cap Fund
---------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
Shareholder Transaction Expenses
Maximum initial sales charge imposed on
purchases (as a percentage of offering
price at the time of purchase)(1)(2)............. 5.50% 5.50% 5.50%
Maximum contingent deferred sales charge (as
a percentage of original purchase price)(2)...... 1.00%(3) 1.00%(3) 1.00%(3)(4)
Annual Fund Operating Expenses (as a percentage
of average net assets)
Advisory Fee...................................... 0.75% 0.75% 0.45%
Administrative Fee................................ 0.40%
12b-1 Fees........................................ 0.25% 0.25% 0.25%
Other Expenses.................................... 0.27% 0.25% -(6)
---------------------------------------------------------------
Total Fund Operating
Expenses................ 1.27% 1.25% 1.10%
CLASS B SHARES
Shareholder Transaction Expenses
Maximum initial sales charge imposed on purchases
(as a percentage of offering price).............. None None None
Maximum contingent deferred sales charge (as a
percentage of original purchase price)(2)........ 5.00% 5.00% 5.00%(4)
Annual Fund Operating Expenses (as a
percentage of average net assets)
Advisory Fee...................................... 0.75% 0.75% 0.45%
Administrative Fee................................ 0.40%
12b-1 Fees........................................ 1.00%(5) 1.00%(5) 1.00%(5)
Other Expenses.................................... 0.27% 0.25% -(6)
---------------------------------------------------------------
Total Fund Operating Expenses................... 2.02% 2.00% 1.85%
CLASS C SHARES
Shareholder Transaction Expenses
Maximum initial sales charge imposed on purchases
(as a percentage of offering price).............. None None None
Maximum contingent deferred sales charge (as a
percentage of original purchase price)(2)........ 1.00% 1.00% 1.00%(4)
Annual Fund Operating Expenses (as a
percentage of average net assets)
Advisory Fee...................................... 0.75% 0.75% 0.45%
Administrative Fee................................ 0.40%
12b-1 Fees........................................ 1.00%(5) 1.00%(5) 1.00%(5)
Other Expenses.................................... 0.27% 0.25% -(6)
---------------------------------------------------------------
Total Fund Operating
Expenses.............. 2.02% 2.00% 1.85%
</TABLE>
-7-
<PAGE>
(1) Not applicable to shares issued in connection with the proposed Merger.
(2) Not applicable to reinvested dividends.
(3) Imposed only in certain circumstances where Class A shares are purchased
without a sales charge. See "Alternative Purchase Arrangements" in
Appendix B.
(4) The CDSC on the Merger Shares will be based on the original purchase
price of the Acquired Fund shares exchanged in the Merger. See
"Description of Merger Shares" on page __ for additional information
regarding how the CDSC will be determined for Class A, Class B and Class
C Merger Shares.
(5) Class B and Class C shares are sold without a front-end sales charge, but
their higher 12b-1 fees may cause long-term shareholders to pay more than
the economic equivalent of the maximum front-end sales charge permitted
by the rules of the National Association of Securities Dealers, Inc.,
depending on the length of time during which they maintain their
investment.
(6) The Fund will incur certain expenses as identified in this
Prospectus/Proxy Statement in the section entitled "Administrative
Arrangements," but these expenses are not currently expected to exceed
.01%.
Examples
An investment of $1,000 would incur the following expenses, assuming (1)
5% annual return and (2) no redemption:
<TABLE>
<CAPTION>
1 3 5 10
year years years years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A shares:
Value Fund (Historical)....... $68 $94 $122 $203
Value Fund (Current)........ $68 $96 $125 $210
New Value Fund (Pro Forma).. $66 $88 $112 $182
Discovery Fund (Historical)... $67 $93 $121 $200
Discovery Fund (Current).... $67 $92 $120 $198
Mid Cap Fund (Pro Forma).... $66 $88 $112 $182
Class B shares:
Value Fund (Historical)....... $21 $64 $110 $209
Value Fund (Current)........ $21 $66 $113 $215
New Value Fund (Pro Forma).. $19 $58 $100 $188
Discovery Fund (Historical)... $21 $63 $109 $206
Discovery Fund (Current).... $20 $63 $108 $204
Mid Cap Fund (Pro Forma).... $19 $58 $100 $188
Class C shares:
Value Fund (Historical)....... $21 $64 $110 $238
Value Fund (Current)........ $21 $66 $113 $244
New Value Fund (Pro Forma).. $19 $58 $100 $217
Discovery Fund (Historical)... $21 $63 $109 $235
Discovery Fund (Current).... $20 $63 $108 $233
Mid Cap Fund (Pro Forma).... $19 $58 $100 $217
</TABLE>
An investment of $1,000 would incur the following expenses, assuming
(1) 5% annual return and (2) redemption at the end of each period:
-8-
<PAGE>
<TABLE>
<CAPTION>
1 3 5 10
year years years years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A shares:
Value Fund (Historical)....... $68 $94 $122 $203
Value Fund (Current)........ $68 $96 $125 $210
New Value Fund (Pro Forma).. $66 $88 $112 $182
Discovery Fund (Historical)... $67 $93 $121 $200
Discovery Fund (Current).... $67 $92 $120 $198
Mid Cap Fund (Pro Forma).... $66 $88 $112 $182
Class B shares:
Value Fund (Historical)....... $71 $94 $130 $209
Value Fund (Current)........ $71 $96 $133 $215
New Value Fund (Pro Forma).. $69 $88 $120 $188
Discovery Fund (Historical)... $71 $93 $129 $206
Discovery Fund (Current).... $70 $93 $128 $204
Mid Cap Fund (Pro Forma).... $69 $88 $120 $188
Class C shares:
Value Fund (Historical)....... $31 $64 $110 $238
Value Fund (Current)........ $31 $66 $113 $244
New Value Fund (Pro Forma).. $29 $58 $100 $217
Discovery Fund (Historical)... $31 $63 $109 $235
Discovery Fund (Current).... $30 $63 $108 $233
Mid Cap Fund (Pro Forma).... $29 $58 $100 $217
</TABLE>
The examples for Class A shares assume payment of the current maximum
applicable sales load.
The above examples should not be considered a representation of past
or future expenses or performance. Actual expenses may be greater or less than
those shown. Federal regulations require the examples to assume a 5% annual
return, but actual annual return will vary.
Federal Income Tax Consequences
For federal income tax purposes no gain or loss will be recognized by
an Acquired Fund or its shareholders as a result of the Merger, and the tax
basis of the Merger Shares received by each Acquired Fund shareholder will be
the same as the tax basis of the shareholder's Acquired Fund shares. See
"Information about the Mergers -- Federal Income Tax Consequences."
Comparison of Investment Objectives, Policies and Restrictions
Each Acquiring Fund has investment objectives, policies and
restrictions that are substantially similar to those of the corresponding
Acquired Fund except as otherwise noted. However, the
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<PAGE>
Discovery Fund has placed relatively greater emphasis on stocks of companies
with smaller capitalizations than has the Mid Cap Fund. The Mid Cap Fund has
historically placed greater emphasis on stocks of companies with larger
capitalizations than has the Discovery Fund. The investment objectives,
policies and restrictions of the Acquired Funds and the Acquiring Funds, and
certain differences between them, are summarized below.
Value Fund vs. New Value Fund
- -----------------------------
The investment objective of both Funds is long-term growth of capital
and current income. The Value Fund invests primarily in common stocks of
companies that are characterized by having below-average price to earnings
("P/E") ratios and/or higher dividend yields relative to their industry groups.
The Value Fund may also invest in convertible securities and, for temporary
defensive purposes, money market instruments.
The New Value Fund invests primarily (normally at least 65% of its
assets) in common stocks characterized by having below-average P/E ratios
relative to their industry group. The Fund may also invest in convertible
securities, preferred stock, warrants subject to certain limitations and
American Depositary Receipts ("ADRs").
The Value Fund may invest up to 15% of its assets in securities which
are traded principally in securities markets outside of the United States and
may also invest without limit in securities of foreign issuers that are traded
in U.S. securities markets. Conversely, the New Value Fund does not invest in
the securities of foreign issuers except to a limited extent through ADRs.
Both Funds may engage in repurchase agreements, reverse repurchase
agreements and other borrowings and can lend their portfolio securities to
brokers, dealers and other financial institutions to earn income. Unlike the
Value Fund, the New Value Fund does not engage in transactions involving options
and futures contracts, foreign currencies and forward foreign currency
contracts.
Both Funds may invest in illiquid securities. While the Value Fund
may invest up to 15% of its net assets in illiquid securities, the New Value
Fund may not invest more than 10% of its net assets in illiquid securities.
Discovery Fund vs. Mid Cap Fund
- -------------------------------
The investment objective of the Discovery Fund is capital
appreciation, with no consideration given to income. The Fund invests primarily
in common stocks of companies with equity capitalizations of $500 million to $1
billion which exhibit favorable growth characteristics and reasonable
valuations. The Fund may also invest in convertible securities and, for
temporary defensive purposes, money market instruments.
The investment objective of the Mid Cap Fund is growth of capital.
The Fund invests primarily in common stocks of middle capitalization companies
that have improving fundamentals (such as growth of earnings and dividends) and
whose stock is reasonably valued by the market. The Fund usually invests in
approximately 60 to 100 common stocks selected from a universe of stocks
-10-
<PAGE>
with market capitalizations in excess of $500 million at the time of investment,
excluding the 200 companies with the highest market capitalization. The Fund
may also invest in convertible securities, preferred stock, warrants subject to
certain limitations and ADRs.
While each of the Discovery and Mid Cap Funds emphasize companies with
capitalizations in excess of $500 million, the Discovery Fund has placed primary
emphasis on companies with capitalizations below $1 billion while the Mid Cap
Fund has placed relatively greater emphasis on companies with capitalizations
above $1 billion. Consequently, in connection with the proposed Merger, it is
expected that approximately one-third of the Discovery Fund's portfolio
(consisting of smaller capitalization companies) will be liquidated and that a
substantial portion of the proceeds will be used to purchase stocks of companies
with capitalizations ranging from approximately $1 billion upward.
The Discovery Fund may invest up to 15% of its assets in securities
which are traded principally in securities markets outside of the United States
and may also invest without limit in securities of foreign issuers that are
traded in U.S. securities markets. Conversely, the Mid Cap Fund does not invest
in the securities of foreign issuers except to a limited extent through ADRs.
Both Funds may engage in repurchase agreements, reverse repurchase
agreements and other borrowings. The two Funds may also lend their portfolio
securities to brokers, dealers and other financial institutions to earn income.
The Discovery Fund, unlike the Mid Cap Fund, may engage in transactions
involving options and futures contracts, foreign currencies and forward foreign
currency contracts for hedging purposes. The Discovery Fund may also purchase
and sell (write) put and call options and stock index options, purchase
warrants, and make short sales of securities.
Both Funds can invest to a limited degree in illiquid securities.
While the Discovery Fund may invest up to 15% of its net assets in illiquid
securities, the Mid Cap Fund may not invest more than 10% of its net assets in
these securities.
Comparison of Distribution Policies and Purchase, Exchange and Redemption
Procedures
Each Acquired Fund and each Acquiring Fund distributes any net income
at least annually. The Discovery Fund and Mid Cap Fund declare and pay dividends
annually and the Value Fund and the New Value Fund declare and pay dividends
quarterly. Each Fund distributes any net realized capital gains at least
annually.
The Acquired Funds and the Acquiring Funds have substantially the same
procedures for purchasing shares. The Funds offer three classes of shares,
Classes A, B and C, to the general public. These shares can be purchased at
their net asset value next determined, plus any applicable sales charges, from
PIMCO Advisors Distribution Company (the "Distributor"), the principal
underwriter of the PAF Trust, the PFEAS Trust and PIMCO Funds (a series
investment company affiliated with the PAF Trust and the PFEAS Trust that
currently offers 18, mostly fixed-income mutual funds) or through other broker-
dealers which have dealer agreements with the Distributor or have agreed to act
as introducing brokers for the Distributor.
-11-
<PAGE>
Shares of each Acquired Fund can be exchanged at net asset value for
shares of the same class of any other fund offered by the PAF Trust (other than
the Opportunity Fund, which is currently closed to new investors); similarly,
shares of the each Acquiring Fund can be exchanged at net asset value for shares
of the same class of any other fund offered by either the PFEAS Trust or by
PIMCO Funds. It is currently expected that, if the Mergers and similar
transactions are approved, shareholders of all classes will be able to exchange
into a broader range of funds within the PFEAS Trust and PIMCO Funds.
Redemption procedures for the Acquired Funds and the Acquiring Funds
are substantially identical. Shares of a Fund may be redeemed on any day the
New York Stock Exchange is open at their net asset value next determined after
receipt of the redemption request, less any applicable CDSC. Shares can be
redeemed through a participating broker by telephone, by submitting a written
redemption request directly to the Fund's transfer agent (for non-broker
accounts) or through an Automatic Withdrawal Plan or PIMCO Advisors Fund Link
(an automated system enabling electronic fund transfers to be made directly
between a shareholder's Fund account and bank account).
RISK FACTORS
Because each Acquiring Fund shares similar investment objectives and
policies with the corresponding Acquired Fund, the risks of an investment in the
Acquiring Fund are substantially similar to the risks of an investment in the
corresponding Acquired Fund. Certain risks associated with an investment in the
Acquiring Funds are summarized below. A more detailed description of certain of
the risks associated with an investment in the Acquiring Funds is contained in
Appendix B to this Prospectus/Proxy Statement under the caption "Characteristics
and Risks of Securities and Investment Techniques."
The values of all securities and other instruments held by the
Acquiring Funds vary from time to time in response to a wide variety of market
factors. Consequently, the net asset value per share of the Acquiring Funds
will vary. The net asset value per share of an Acquiring Fund may be less at
the time of redemption than it was at the time of investment. It is the policy
of the Acquiring Funds, which invest primarily in common stock, to be as fully
invested as practicable in such securities at all times. This policy precludes
the Acquiring Funds from investing in debt securities as a defensive investment
posture (unlike the Acquired Funds, which may invest defensively when conditions
warrant), although the Acquiring Funds may invest in such securities to provide
for payment of expenses and to meet redemption requests. Accordingly, investors
in the Acquiring Funds bear the risk of general declines in stock prices, and
bear any risk that the Acquiring Fund's exposure to such declines cannot be
lessened by investing defensively.
Derivative Instruments. The Acquiring Funds, like the Acquired Funds,
may use derivative instruments consisting of futures, options, options on
futures, and swap agreements, for hedging purposes or as a part of their
investment strategies. Use of these instruments may involve certain costs and
risks, including the risk that the Fund could not close out a position when it
would be most advantageous to do so due to an illiquid market, the risk of an
imperfect correlation between the value of the securities being hedged and the
value of the particular derivative instrument, the risk of bankruptcy or default
of counterparties, and the risk that unexpected changes in interest rates or
other
-12-
<PAGE>
market movements may adversely affect the value of the Fund's investments in
particular derivative instruments.
Foreign Securities. The Acquired Funds may invest in the securities of
foreign issuers, which may be subject to additional risk factors, including
foreign currency and political risks, not applicable to securities of U.S.
issuers. Some of the risks of investing in foreign securities include adverse
changes in foreign currency exchange rates and restrictions, liquidity risks,
tax liability, and risks of adverse political and economic developments. The New
Value and Mid Cap Funds, whose foreign investments are limited to ADRs, may be
exposed to less risk from foreign investments than the Value and Discovery
Funds, which have the flexibility to invest more significantly in foreign
securities.
Low Capitalization Stocks. The Acquiring Funds, like the Acquired
Funds, may invest in common stock of companies that are smaller and have lower
market capitalization than other publicly traded companies. The securities of
smaller, less seasoned companies may be subject to more abrupt or erratic market
movements than larger, more established companies. These companies may have
limited product lines, markets or financial resources, or may be dependent upon
a limited management group. As a result, the disposition of securities to meet
redemptions may require the Fund to sell these securities at a disadvantageous
time or at disadvantageous prices, or to make many small sales over a lengthy
period of time. As described above, the Discovery Fund has historically
invested to a greater extent in companies with smaller market capitalizations.
Repurchase Agreements. Investing in repurchase agreements subjects
the Acquiring Funds, like the Acquired Funds, to the risk that the default or
bankruptcy of the seller of the repurchase agreement could subject the Fund to
expenses, delays and risk of loss on the securities. The Acquiring Funds,
however, limit their investments in repurchase agreements maturing in more than
seven days and other illiquid securities to no more than 10% of net assets,
consistent with the Funds' policies on investments in illiquid securities.
Reverse Repurchase Agreements and Other Borrowings. Reverse
repurchase agreements and borrowings subject each of the Acquiring Funds, like
the Acquired Funds, to the risk that changes in the value of a Fund's portfolio
securities may amplify changes in the Fund's net asset value per share and also
may cause the Fund to liquidate portfolio positions when it would not be
advantageous to do so. Unlike the Acquired Funds, the Acquiring Funds subject
reverse repurchase agreements to the Acquiring Funds' overall borrowing limit of
33 1/3% of a Fund's total assets.
Loans of Portfolio Securities. The Acquired Funds and the Acquiring
Funds may incur similar risks from lending their securities to broker-dealers if
they exercise their right to lend securities. Those risks include the risk of
the loss of rights in the collateral or delay in recovery of the collateral if
the borrower fails financially.
Illiquid Securities. The Acquired Funds and the Acquiring Funds share
similar risks for investments in illiquid securities -- specifically, higher
transaction costs. The New Value Fund and the Mid Cap Fund may be exposed to
slightly less risk, however, since they limit their investments in illiquid
securities to no more than 10% of net asset value at the time of the investment,
whereas each Acquired Fund may invest up to 15% of its net asset value in
illiquid securities.
-13-
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
This Prospectus/Proxy Statement is furnished in connection with a
Special Meeting of Shareholders to be held on December __, 1996 or at such later
time made necessary by adjournment (the "Meeting") and the solicitation of
proxies by and on behalf of the Trustees of the PAF Trust for use at the
Meeting. The Meeting is being held to consider the proposed Mergers of each
Acquired Fund with the corresponding Acquiring Fund by the transfer of all of
the Acquired Fund's assets and liabilities to the Acquiring Fund. This
Prospectus/Proxy Statement and the enclosed form of proxy are being mailed to
shareholders on or about October __, 1996.
The Trustees of the PAF Trust know of no matters other than those set
forth herein to be brought before the Meeting. If, however, any other matters
properly come before the Meeting, it is the Trustees' intention that proxies
will be voted on such matters in accordance with the judgment of the persons
named in the enclosed form of proxy.
PROPOSALS 1 and 2:
APPROVAL OR DISAPPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
The shareholders of the Value Fund are being asked to approve or
disapprove a Merger between the Value Fund and the New Value Fund (Proposal 1)
and the shareholders of the Discovery Fund are being asked to approve or
disapprove a Merger between the Discovery Fund and the Mid Cap Fund (Proposal
2). Each Merger is proposed to take place pursuant to an Agreement and Plan of
Reorganization between the Acquired Fund and the Acquiring Fund, dated as of
November __, 1996 (the "Agreement"), each of which is in the form attached to
this Prospectus/Proxy Statement as Appendix A.
Each Agreement provides, among other things, for the transfer of all
of the assets of the Acquired Fund to the Acquiring Fund in exchange for (i) the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
and (ii) the issuance to the Acquired Fund of the Class A, Class B and Class C
Merger Shares, the number of which will be calculated based on the value of the
net assets attributable to the Class A, Class B and Class C shares,
respectively, of the Acquired Fund acquired by the Acquiring Fund and the net
asset value per Class A, Class B and Class C share of the Acquiring Fund, all as
more fully described below under "Information About the Reorganization."
After receipt of the Merger Shares, the Acquired Fund will cause the
Class A Merger Shares to be distributed to its Class A shareholders, the Class B
Merger Shares to be distributed to its Class B shareholders and the Class C
Merger Shares to be distributed to its Class C shareholders, in complete
liquidation of the Acquired Fund. Each shareholder of the Acquired Fund will
receive a number of full and fractional Class A, Class B or Class C Merger
Shares equal in value at the date of the exchange to the aggregate value of the
shareholder's Class A, Class B or Class C Acquired Fund shares, as the case may
be.
-14-
<PAGE>
Trustees' Recommendations. The Trustees of the PAF Trust have voted
unanimously to approve each proposed Merger and to recommend that shareholders
of each Acquired Fund also approve the Merger for such Fund.
Required Shareholder Vote. The affirmative vote of a plurality of the
quorum required for the transaction of business of an Acquired Fund is necessary
for the consummation of the proposed Merger for such Fund. At a meeting of
shareholders of the Acquired Fund, 30% of the Acquired Fund shareholders shall
constitute a quorum for purposes of transacting business.
A shareholder of an Acquired Fund objecting to the proposed Merger is
not entitled under either Massachusetts law or the PAF Trust's Agreement and
Declaration of Trust (the "PAF Declaration of Trust") to demand payment for and
an appraisal of his or her Acquired Fund shares if the Merger is consummated
over his or her objection. Shareholders may, however, redeem their shares at
any time prior to the Merger, and if the Merger is consummated, shareholders
will still be free at any time to redeem their Merger Shares, for cash at net
asset value (less any applicable CDSC) at the time of such redemption, or to
exchange their Merger Shares for shares of the same class of certain other funds
offered by the PFEAS Trust or PIMCO Funds, at net asset value at the time of
such exchange. See "Exchange Privilege" in Appendix B.
Each proposed Merger is subject to the approval of the shareholders of
both the relevant Acquired Fund and the corresponding Acquiring Fund. A meeting
of shareholders of each Acquiring Fund will be held on or about December __,
1996 to vote on the approval of the Mergers. In the event that any Merger is
not approved by the shareholders of both the Acquired Fund and the Acquiring
Fund, the Acquired Fund will continue to be managed as a separate series of the
PAF Trust in accordance with its current investment objective and policies, and
the PAF Trust's Trustees may consider such alternatives as may be in the best
interests of shareholders.
Background and Reasons for the Proposed Mergers
The Trustees of the PAF Trust, including the Trustees who are not
"interested persons" of the PAF Trust (the "Independent Trustees"), have
determined that each Merger would be in the best interests of the relevant
Acquired Fund, and that the interests of such shareholders would not be diluted
as a result of effecting the Merger. The Trustees have unanimously approved
each proposed Merger and have recommended its approval by shareholders. In
addition to the reasons for recommending the Mergers described below, the
Trustees took into account the fact that the Acquired Funds will be bearing a
portion of the expenses associated with the Mergers, including those described
under "Information about the Mergers." The Trustees also considered the
unrealized capital appreciation in each Acquiring Fund and the unrealized
capital appreciation in the corresponding Acquired Fund, in each case as a
percentage of the Fund's total net assets. Those percentages as of June 30,
1996 were as follows:
-15-
<PAGE>
Unrealized Capital Appreciation
(as a percentage of total net assets)
Name of Fund on June 30, 1996
- ------------ ----------------------------------------
New Value Fund 6.0%
Value Fund 7.0%
Mid Cap Growth Fund 13.4%
Discovery Fund 10.3%
The principal reasons why the Trustees are recommending the Mergers,
and the overall restructuring of the PIMCO Mutual Funds of which the Mergers are
a part, are as follows:
(i) Economies of Scale at Fund Level. The Trustees have determined
that it is in the best interests of each Acquired Fund's shareholders to combine
the Acquired Fund with the corresponding Acquiring Fund in order to increase the
asset base over which the Acquired Fund's expenses will be spread, which, in
part, has allowed the Trustees to approve agreements that provide total fees and
expenses at more favorable rates and allow Acquired Fund shareholders to benefit
from breakpoints in administrative fees. As described more fully in the
Overview under "Operating Expenses," total expenses for each Acquired Fund will
decline immediately following the Mergers.
(ii) Unified fee structure. Pursuant to the PFEAS Trust's unified
fee structure, Acquired Fund shareholders will gain the immediate benefits of a
level of Fund expenses that is, under ordinary circumstances, precise and
predictable. Acquired Fund shareholders will also be insulated from price
increases in third-party services and from associated increased expense ratios
arising from a decline in net assets. However, there can be no assurance that
the Mergers will continue to result in savings in operating expenses to
shareholders. Information on each Fund's operating expenses is set out above in
the Overview under "Expenses."
(iii) Appropriate investment objectives, diversification, etc. The
investment objective, policies, and restrictions of each Acquiring Fund are
similar to those of the corresponding Acquired Fund, and the Trustees believe
that an investment in shares of the Acquiring Fund will provide shareholders
with an investment opportunity comparable to that currently afforded by the
Acquired Fund, with the potential for reduced investment risk because of
opportunities for additional diversification of portfolio investments through
increased Fund assets.
(iv) Continued investment in a mutual fund without recognition of
gain or loss for federal income tax purposes. The proposed reorganization will
permit Acquired Fund shareholders to keep their investment in an open-end mutual
fund, without recognition of gain or loss for federal income tax purposes. If
the Acquired Funds were to liquidate and shareholders were to receive the net
asset value of their shares in liquidating distributions, gain or loss would be
recognized for federal income tax purposes.
-16-
<PAGE>
(v) Larger, more integrated fund complex. The restructuring of the
PIMCO Mutual Funds (which is subject to satisfaction of a number of conditions,
including shareholder approval of the Mergers) should reduce confusion for
shareholders between funds with similar names and/or investment objectives. It
will also give shareholders broader exchange privileges among funds. The
restructuring may also allow the expansion of institutional and retail
distribution channels.
Information About the Mergers
Agreement and Plan of Reorganization. Each proposed Agreement and
Plan of Reorganization provides that the relevant Acquiring Fund will acquire
all of the assets of the corresponding Acquired Fund in exchange for the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
and for the issuance of the Class A, Class B and Class C Merger Shares, all as
of the Exchange Date (defined in each Agreement to be January __, 1997 or such
other date as may be agreed upon by the Acquiring Fund and the Acquired Fund).
The following discussion of the Agreements is qualified in its entirety by the
full text of each Agreement, the form of which is attached as Appendix A to this
Prospectus/Proxy Statement.
Each Acquired Fund will sell all of its assets to the corresponding
Acquiring Fund, and, in exchange, the Acquiring Fund will assume all of the
liabilities of the Acquired Fund and deliver to the Acquired Fund (i) a number
of full and fractional Class A Merger Shares having an aggregate net asset value
equal to the value of the assets of the Acquired Fund attributable to its Class
A shares, less the value of the liabilities of the Acquired Fund assumed by the
Acquiring Fund attributable to the Class A shares of the Acquired Fund, (ii) a
number of full and fractional Class B Merger Shares having a net asset value
equal to the value of assets of the Acquired Fund attributable to its Class B
shares, less the value of the liabilities of the Acquired Fund assumed by the
Acquiring Fund attributable to the Class B shares of the Acquired Fund, and
(iii) a number of full and fractional Class C Merger Shares, having a net asset
value equal to the value of the assets of the Acquired Fund attributable to its
Class C shares, less the value of the liabilities of the Acquired Fund assumed
by the Acquiring Fund attributable to the Class C shares of the Acquired Fund.
Immediately following the Exchange Date, each Acquired Fund will
distribute pro rata to its shareholders of record as of the close of business on
the Exchange Date the full and fractional Merger Shares received by the Acquired
Fund, with Class A Merger Shares being distributed to holders of Class A shares
of the Acquired Fund, Class B Merger Shares being distributed to holders of
Class B shares of the Acquired Fund and Class C Merger Shares being distributed
to holders of Class C shares of the Acquired Fund. As a result of the proposed
transaction, each holder of Class A, Class B and Class C shares of the Acquired
Fund will receive a number of Class A, Class B and Class C Merger Shares equal
in aggregate value at the Exchange Date to the value of the Class A, Class B and
Class C shares, respectively, of the Acquired Fund held by the shareholder.
This distribution will be accomplished by the establishment of accounts on the
share records of the corresponding Acquiring Fund in the names of the Acquired
Fund shareholders, each account representing the respective number of full and
fractional Class A, Class B or Class C Merger Shares due such shareholder. New
certificates for Merger Shares will not be issued. Shareholders of the Acquired
Funds holding certificates for shares will be sent instructions on how they will
be able to exchange those certificates for certificates representing shares of
the Acquiring Funds.
-17-
<PAGE>
The consummation of each Merger is subject to the conditions set forth
in the Agreement (any of which may be waived), which conditions include, among
others, the approval of the PFEAS shareholders of (a) a Second Amended and
Restated Declaration of Trust, as described below in "Declaration of Trust", and
(b) the election of the Trustees of the PAF Trust to the Board of Trustees of
the PFEAS Trust. The Agreement may be terminated and the Merger abandoned at
any time, before or after approval by the shareholders of each Fund, prior to
the Exchange Date, by mutual consent of the relevant Funds or, if any condition
set forth in the Agreement has not been fulfilled and has not been waived by the
party entitled to its benefits, by such party.
All legal and accounting fees and expenses, printing and other fees
and expenses (other than portfolio transfer taxes (if any), brokerage and other
similar expenses, all of which will be borne by the relevant Fund) incurred in
connection with the consummation of the transactions contemplated by the
Agreement will be allocated in accordance with the following: First, the costs
of the overall restructuring of the PIMCO Mutual Funds referred to in the
Overview under "Proposed Transactions," including the costs of the Mergers and
this Prospectus/Proxy Statement, are being preliminarily allocated on a basis
approved by the Trustees, including the Independent Trustees, of the PAF Trust.
PIMCO Advisors will bear any and all expenses preliminarily allocated to the
Acquired Fund and the Acquiring Fund to the extent that they would otherwise
exceed the respective expense caps (the "Relevant Expense Caps") set forth
below. The Acquired Fund and the Acquiring Fund have agreed to pay the expenses
preliminarily allocated to them but not, however, in an amount exceeding the
Relevant Expense Caps. The Relevant Expense Caps represent a percentage
(approximately 50%) of the projected aggregate savings for shareholders of the
Acquired Funds for the first year following the Mergers. The currently
estimated expenses to be borne by the Funds and the Relevant Expense Caps are as
follows:
<TABLE>
<CAPTION>
Name of Fund Current Expense Estimates Relevant Expense Cap
------------ ------------------------- --------------------
<S> <C> <C>
New Value Fund $20,000 $20,000
Value Fund $55,000 $70,496
Mid Cap Fund $20,000 $20,000
Discovery Fund $46,355 $46,355
</TABLE>
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
any other party of such expenses would result in the disqualification of the
first party as a "regulated investment company" within the meaning of Section
851 of the Code.
In addition to the foregoing, as noted above, it is anticipated that
the Discovery Fund may restructure up to one third of its portfolio in
anticipation of its Merger with the Mid Cap Fund and that brokerage expenses
associated with such restructuring have been estimated by PIMCO Advisors at as
much as $75,000.
Description of the Merger Shares. Full and fractional Merger Shares
will be issued to each Acquired Fund's shareholders in accordance with the
procedure under the Agreement as described above. The Merger Shares are Class
A, Class B and Class C shares of the Acquiring Funds, which
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<PAGE>
have identical characteristics as the corresponding class of Acquired Fund
shares with respect to sales charges, CDSCs, conversion, and 12b-1 fees.
Investors purchasing Class A shares of the Acquiring Funds generally pay a sales
charge of up to 5.50% at the time of purchase, but Acquired Fund shareholders
receiving Class A Merger Shares in the Merger will not pay a sales charge on
such shares. Class A shares of the Acquiring Funds are generally not subject to
redemption fees, except that certain purchases of $1,000,000 or more of Class A
shares of the Acquiring Funds are not subject to a front-end sales load but are
subject to a 1% CDSC if redeemed within 18 months after purchase. Class A shares
of the Acquiring Funds are subject to a 12b-1 servicing fee at the annual rate
of 0.25% of the net assets attributable to the Acquiring Funds's Class A shares.
Class B shares of the Acquiring Funds are sold without a sales charge, but are
subject to a CDSC of up to 5.0% if redeemed within seven years of original
purchase. Class B shares are also subject to 12b-1 distribution and servicing
fees at the annual rates of 0.75% and 0.25%, respectively, of the Acquiring
Fund's average daily net assets attributable to Class B shares. Class B shares
of the Acquiring Funds convert automatically into Class A shares after they have
been held for seven years. Class C shares of the Acquiring Funds are sold
without a sales charge, but are subject to a CDSC of 1% if redeemed within one
year after purchase, and do not automatically convert into any other class of
shares. Class C shares of the Acquiring Funds are subject to 12b-1 distribution
and servicing fees at the annual rates of 0.75% and 0.25%, respectively, of the
average daily net assets attributable to the Acquiring Fund's Class C shares.
For purposes of determining the CDSC payable on redemption of Class A, Class B
or Class C Merger Shares received by holders of Class A, Class B or Class C
shares of the Acquired Fund, as well as the conversion date of Class B Merger
Shares, such shares will be treated as having been acquired as of the dates
that, and for the prices at which, such shareholders originally acquired their
Class A, Class B or Class C shares, as the case may be, of the Acquired Fund,
and the CDSC would be applied at the same rate as was in effect for the Acquired
Fund at the time the shares of the Acquired Fund were originally purchased. See
"Alternative Purchase Arrangements" in Appendix B for more information about the
characteristics of Class A, Class B and Class C shares of the Acquiring Funds.
Administrative Arrangements. PIMCO currently serves (and PIMCO
Advisors from and after the Mergers will serve) as administrator to the
Acquiring Funds pursuant to an administration agreement. The administrator
provides administrative services to the Acquiring Funds, which includes clerical
help and accounting, bookkeeping, internal audit services, and certain other
services required by the Acquiring Funds, preparation of reports to the
Acquiring Funds' shareholders and regulatory filings. In addition, pursuant to
the unified fee arrangement described above, the administrator, at its own
expense, arranges for the provision of legal, audit, custody, portfolio
accounting, transfer agency and other ordinary services for the Acquiring Funds,
and is responsible for the costs of registration of the Acquiring Funds' shares
and the printing of prospectuses and shareholder reports for current
shareholders. For such services, each Acquiring Fund pays the administrator an
administrative fee at the annual rate of 0.40% of the first $2.5 billion of the
average daily net assets attributable in the aggregate to each Fund's Class A,
Class B and Class C shares and 0.35% of such assets in excess of $2.5 billion.
Certain expenses of the Acquiring Funds are not borne by the
administrator. The Acquiring Funds are responsible for the following expenses:
(i) salaries and other compensation of any of the PFEAS Trust's executive
officers and employees who are not officers, directors, stockholders, or
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<PAGE>
employees of PIMCO Advisors, PIMCO, or their subsidiaries or affiliates; (ii)
taxes and governmental fees; (iii) brokerage fees and commissions and other
portfolio transaction expenses; (iv) the costs of borrowing money, including
interest expenses; (v) fees and expenses of the Trustees who are not "interested
persons" of the PFEAS Trust, the Adviser, PIMCO or the sub-advisers ("Portfolio
Managers") to the funds in the PFEAS Trust, and any counsel retained exclusively
for their benefit; (vi) extraordinary expenses, including costs of litigation
and indemnification expenses; (vii) expenses which are capitalized in accordance
with generally accepted accounting principles; and (viii) any expenses allocated
or allocable to a specific class of shares, which include distribution and/or
service fees payable with respect to Class A, B and C shares and may include
certain other expenses as permitted by the PFEAS Trust's Amended and Restated
Multi-Class Plan adopted pursuant to Rule 18f-3 under the Investment Company Act
of 1940, as amended (the "1940 Act") and subject to review and approval by the
Trustees.
Certain Payments by Distributor. In connection with the sale of Class
B and Class C shares of the Acquired Funds, the Distributor pays commissions to
broker-dealers from its own assets that it expects to recover over time through
the receipt of distribution fees in connection with the Funds' Class B and Class
C shares and the receipt of any CDSC on Class B and Class C shares. The total
amount of such commissions paid by the Distributor with respect to the Acquired
Funds before the consummation of the proposed Mergers will likely exceed the
amounts recovered by the Distributor by that time. Such unrecovered amounts do
not represent a liability of the Acquired Funds and, consequently, the Acquiring
Funds will not assume any such liability in connection with the consummation of
the Mergers. However, to the extent the Distributor has not fully recovered
such commissions before the consummation of the proposed Mergers, it is
anticipated that the PFEAS Trust's Trustees will consider such unrecovered
amounts, among other factors, in determining whether to continue payments of
distribution fees in the future with respect to Class B and Class C shares of
the Acquiring Funds.
Declaration of Trust. As part of the overall restructuring of the
PIMCO Mutual Funds (of which the proposed Mergers are a part), the PFEAS Trust's
Trustees have proposed to the PFEAS Trust's shareholders that they approve a
Second Amended and Restated Declaration of Trust (the "Proposed PFEAS
Declaration "), which would take the place of the current Agreement and
Declaration of Trust, as amended, of the PFEAS Trust (the "Current PFEAS
Declaration"). If the Proposed PFEAS Declaration is approved by the PFEAS
Trust's shareholders, it would become effective concurrently with the
effectiveness of the proposed Mergers. The PFEAS Trust's shareholders will vote
on the approval of the Proposed PFEAS Declaration on or about December __, 1996.
PAF Trust shareholders do not vote on the Proposed PFEAS Declaration.
The Proposed PFEAS Declaration is substantially identical to the
provisions of the PAF Declaration of Trust. Thus, if the Proposed PFEAS
Declaration is approved, the Mergers would result in each Acquired Fund's
shareholders receiving shares in an entity governed by substantially identical
provisions to the entity in which they now hold shares. As noted above, the
approval of the Proposed PFEAS Declaration is a condition to the consummation of
the Mergers. However, if the Proposed PFEAS Declaration is not approved by the
PFEAS Trust's shareholders and the PAF Trust nonetheless proceeds with the
Mergers, then the Merger Shares would be governed by the provisions of the
Current PFEAS Declaration. Regardless of whether the Proposed PFEAS Declaration
is
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<PAGE>
approved, the PFEAS Trust, like the PAF Trust, will be governed by Massachusetts
law, and the PFEAS Trust's operations, like those of the PAF Trust, will remain
subject to the provisions of the 1940 Act and the rules thereunder.
Each of the Merger Shares will be fully paid and nonassessable by the
PFEAS Trust when issued, will be transferable without restriction, and will have
no preemptive or conversion rights, except that Class B Merger Shares will have
the conversion rights specified above. The Current PFEAS Declaration permits
the Trust to divide its shares, without shareholder approval, into two or more
series of shares representing separate investment portfolios and to further
divide any such series, without shareholder approval, into two or more classes
of shares having such preferences and special or relative rights and privileges
as the Trustees may determine. The Acquiring Fund's shares are currently
divided into five classes, the Institutional Class, the Administrative Class,
Class A, Class B and Class C.
Under Massachusetts law, shareholders of a Massachusetts business
trust could, under certain circumstances, be held personally liable for the
obligations of the trust. However, the Current PFEAS Declaration disclaims
shareholder liability for acts or obligations of the PFEAS Trust and/or the
Acquiring Funds and requires that notice of such disclaimer be given in each
agreement, undertaking, or obligation entered into or executed by the PFEAS
Trust, the Acquiring Funds or the Trustees. The Current PFEAS Declaration
provides for indemnification out of Acquiring Fund property for all loss and
expense of any shareholder held personally liable for the obligations of the
Acquiring Fund as a result of holding shares of the Acquiring Fund. Thus, the
risk of a shareholder's incurring financial loss from shareholder liability is
limited to circumstances in which the Acquiring Fund would be unable to meet its
obligations. The likelihood of such a circumstance is considered remote. The
shareholders of the Acquired Fund are currently subject to this same risk of
shareholder liability, under Massachusetts law and similar provisions in the PAF
Declaration of Trust.
Certain differences between the Current PFEAS Declaration rules and
the Proposed PFEAS Declaration are summarized below:
Shareholder Voting Requirements - Generally. The Current PFEAS
-------------------------------------------
Declaration sets forth the specific matters on which shareholders are entitled
to vote, the size of the vote required for approval of each such matter (i.e.,
plurality, majority, supermajority), the circumstances in which shareholders may
call and hold meetings, and other information concerning shareholders' general
voting rights. The Proposed PFEAS Declaration states that shareholders shall
have power to vote as is provided for in, and may hold meetings and take actions
pursuant to, the provisions of the proposed Bylaws (the "Proposed Bylaws"),
which have been unanimously adopted by the PFEAS Trust's Trustees contingent
upon a favorable vote of the shareholders of the PFEAS Trust on the Proposed
PFEAS Declaration. The Proposed Bylaws, which are substantially identical to
the Bylaws currently in effect for PAF, in turn, provide all details regarding
(i) the matters on which shareholders are entitled to vote, (ii) the size of the
vote required for approval of each matter and (iii) the circumstances in which
shareholders may call and hold meetings. The Proposed Bylaws provide
shareholders with voting powers which, with certain exceptions as described in
greater detail below, are substantially similar to the powers provided for in
the Current PFEAS Declaration. Under both the Current PFEAS Declaration and the
Proposed Bylaws, shareholders have the power to vote (i) for
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<PAGE>
the election of Trustees, provided, however, that no meeting of shareholders is
required to be called for the purpose of electing Trustees unless and until such
time as fewer than a majority of the Trustees have been elected by the
shareholders; (ii) with respect to any manager or sub-adviser to the extent
required by the 1940 Act; (iii) with respect to the termination of the Trust by
any vote of shareholders; (iv) with respect to amendments to the Declaration of
Trust which may adversely affect the rights of shareholders; (v) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not an action should be brought derivatively or as a class action on behalf
of the PFEAS Trust or its shareholders; and (vi) with respect to such additional
matters relating to the PFEAS Trust as may be required by law, the Declaration,
Bylaws or any registration statement of the PFEAS Trust, or as the Trustees
consider necessary or desirable.
Both the Current PFEAS Declaration and the Proposed PFEAS Declaration
provide that any amendment thereto that adversely affects the rights of
shareholders may be adopted only by an instrument in writing signed by a
majority of the then Trustees when authorized to do so by the vote of a majority
of the shares entitled to vote. However, the Proposed PFEAS Declaration also
provides that if fewer than all shareholders are affected by an amendment, only
the vote of the shareholders of those series or classes affected by the
amendment shall be required to vote on the amendment. The Proposed Bylaws may
be amended or repealed, in whole or in part, by a majority of the Trustees then
in office at any meeting of the Trustees, or by one or more writings signed by
such a majority. Although no shareholder vote would be required to amend any
portion of the Bylaws, including portions setting forth shareholder voting
rights, the Trust would still be subject to shareholder rights required by the
1940 Act and the rules and regulations thereunder, the Securities and Exchange
Commission and any applicable state laws. Thus, under current law, (i) Trustees
must be elected by shareholders under certain circumstances, (ii) advisory
contracts must still be approved by a vote of at least a majority of the PFEAS
Trust's outstanding voting securities, (iii) distribution plans must still be
approved by a vote of at least a majority of the investment company's
outstanding voting securities pursuant to Rule 12b-1 under the 1940 Act, and
(iv) auditors must still be selected annually at an annual meeting of
shareholders if such a meeting is held.
Shareholder Voting Requirements - Reorganizations. The Current PFEAS
--------------------------------------------------
Declaration provides that shareholders shall have the power to vote with respect
to any proposed transaction whereby the Trust, or any one or more series
thereof, merges into or consolidates with, one or more trusts, partnerships or
associations. The term "merger" is in turn defined to include any purchase or
acquisition of any assets of another investment company. Under the Current
PFEAS Declaration, any such consolidation or merger requires a Majority
Shareholder Vote of each Series affected thereby. As used in the Current PFEAS
Declaration, the term "Majority Shareholder Vote" means, with respect to the
Trust or any series eligible to vote (as the case may be) the lesser of (A) 67%
or more of the voting securities present at a meeting, if the holders of more
than 50% of the outstanding voting securities of the Trust or such series as are
present or represented by proxy; or (B) more than 50% of the outstanding voting
securities of the Trust or such series. Neither the Proposed PFEAS Declaration
nor the Proposed Bylaws requires any shareholder vote with respect to any
proposed transaction whereby the Trust, or any one or more series thereof, as
successor, survivor, or non-survivor, consolidates with, merges into, or has
merged into it, one or more trust, partnerships or associations. Under the
Proposed PFEAS Declaration and Proposed Bylaws, the shareholders would be
entitled to vote if, and to the extent that, the Trustees consider such a vote
to be reasonable or
-22-
<PAGE>
necessary. Historically, the PAF Trust's Trustees have concluded that it would
be reasonable or necessary for shareholders of the funds in the PAF Trust to
approve or disapprove a merger where the PAF Trust fund was not the survivor.
There can be no assurance that the PFEAS Trust's Trustees would reach a similar
conclusion or that they would do so in all cases.
Multi-Class Structure - Permitted Differences. The Current PFEAS
---------------------------------------------
Declaration provides that all shares of the Trust or of any series shall be
identical to all other shares of the Trust or the same series, as the case may
be, except that there may be variations between different classes as to
allocation of expenses, right of redemption, special and relative rights as to
dividends, and on liquidation, conversion rights, and conditions under which the
several classes shall have separate voting rights. The Proposed PFEAS
Declaration does not enumerate the permitted ways in which two or more classes
of shares may differ but affords to the Trustees the right to assign them such
preferences and special or relative rights and privileges (including conversion
rights, if any) as the Trustees may determine or as shall be set forth in the
Proposed Bylaws.
Each fund of the PFEAS Trust currently offers two classes of shares,
Institutional Class and Administrative Class shares, the primary difference
between the two classes being whether or not a service fee is charged. The
PFEAS Trust also expects that, in connection with the overall reorganization of
the mutual funds advised by PIMCO Advisors, substantially all of its funds will
offer three additional classes of shares, Class A, Class B and Class C shares,
beginning on or about January __, 1997. The primary differences among such
additional classes are described above in the Overview under "Proposed
Transactions" and these include whether such shares are subject to a front-end
sales load or a contingent deferred sales charge, what the duration of the
application of any such contingent deferred sales charges, and whether such
shares are subject to a distribution fee. Under the Proposed PFEAS Declaration,
the Trust would still be subject to the multi-class requirements under the 1940
Act and the rules and regulations thereunder. In particular, Rule 18f-3 under
the 1940 Act currently provides, inter alia, that each class (i) shall have a
different arrangement for shareholder services or the distribution of securities
or both, and shall pay all of the expenses of that arrangement; (ii) may pay a
different share of other expenses, not including advisory or custodial fees or
other expenses related to the management of that company's assets, if these
expenses are actually incurred in a different amount by that class, or if the
class receives services of a different kind or to a different degree than other
classes; (iii) may pay a different advisory fee to the extent that any
difference in amount paid is the result of the application of the same
performance fee provisions in the advisory contract of the company to the
different investment performance of each class; and (iv) shall have exclusive
voting rights of any matter submitted to shareholders that relates solely to its
arrangement.
Standards in Respect of Advisory and Distribution Contracts. The
-----------------------------------------------------------
Current PFEAS Declaration provides that all advisory and distribution contracts
entered into with certain interested persons of the PFEAS Trust must, inter
alia, be "reasonable and fair" when entered into. It is unclear how this
contractual provision would be interpreted by a court of competent jurisdiction.
Under precedent dealing with Massachusetts corporations, a party defending the
fairness of an interested transaction has the burden of proof and the statute of
limitations on a contract is generally six years. While there is no comparable
provision in the Proposed PFEAS Declaration, if the Proposed PFEAS Declaration
were approved, all advisory and distribution contracts entered into by
-23-
<PAGE>
the PFEAS Trust would remain subject to the requirements of the 1940 Act and the
rules and regulations thereunder and any applicable state laws. For example,
Section 36 of the 1940 Act imposes a fiduciary duty on advisers and affiliated
distributors with respect to the compensation for services that they receive
from registered investment companies such as the Acquiring Funds. In a claim
for excessive advisory or distribution fees under Section 36 of the 1940 Act,
the plaintiff bears the burden of proof and the statute of limitations is one
year. Relevant appellate court precedent provides that the principal factor to
be considered in determining the reasonableness of an advisory fee is whether
the fee is "so disproportionately large that it bears no relationship to the
services rendered and would not have been the product of arms-length
bargaining."
Indemnification of Trustees and Officers. The Proposed PFEAS
----------------------------------------
Declaration clarifies the procedures for determining whether a trustee, officer,
or other person acting under his or her direction is entitled to indemnification
by the PFEAS Trust. The Proposed PFEAS Declaration provides in general that a
trustee, officer or other person acting under their direction is entitled to
indemnification except with respect to any matter as to which such person shall
have been finally adjudicated in any action, suit or other proceeding (a) not to
have acted in good faith in the reasonable belief that such person's action was
in or not opposed to the best interest of the Trust or (b) to be liable to the
Trust or its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office.
Federal income tax consequences. As a condition to each Acquired
Fund's obligation to consummate the Merger, the Fund will receive an opinion
from Ropes & Gray, counsel to the PAF Trust, to the effect that, on the basis of
the existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), current administrative rules and court decisions, for federal income
tax purposes: (i) under Section 361 of the Code, no gain or loss will be
recognized by the Acquired Fund as a result of the reorganization; (ii) under
Section 354 of the Code, no gain or loss will be recognized by shareholders of
the Acquired Fund on the distribution of Merger Shares to them in exchange for
their shares of the Acquired Fund; (iii) under Section 358 of the Code, the tax
basis of the Merger Shares that the Acquired Fund's shareholders receive in
place of their Acquired Fund shares will be the same as the basis of the
Acquired Fund shares; and (iv) under Section 1223(1) of the Code, a
shareholder's holding period for the Merger Shares received pursuant to the
Agreement will be determined by including the holding period for the Acquired
Fund shares exchanged for the Merger Shares, provided that the shareholder held
the Acquired Fund shares as a capital asset. The opinion will be based on
certain factual certifications made by officers of the PFEAS Trust and the PAF
Trust and will also be based on customary assumptions.
Prior to the Exchange Date, each Acquired Fund will declare a
distribution to shareholders which, together with all previous distributions,
will have the effect of distributing to shareholders all of its investment
company taxable income (computed without regard to the deduction for dividends
paid) and net realized capital gains, if any, through the Exchange Date.
Capitalization. The following tables show the capitalization of each
Acquired Fund and each Acquiring Fund as of June 30, 1996 and on a pro forma
basis as of that date, giving effect to the proposed acquisition of assets at
net asset value:
-24-
<PAGE>
CAPITALIZATION TABLE
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Value NFJ Diversified Pro Forma
Fund Low P/E Fund Combined*
---- ------------ ---------
<S> <C> <C> <C>
Net Assets (000's omitted)
Class A............................................................ $ 8,423 $ -- $ 8,414
Class B............................................................ 14,386 -- 14,370
Class C............................................................ 29,489 -- 29,457
Institutional Class................................................ -- 52,727 52,669
Administrative Class............................................... -- -- --
Shares outstanding (000's omitted)
Class A............................................................ 692 -- 692
Class B............................................................ 1,182 -- 1,182
Class C............................................................ 2,424 -- 2,424
Institutional Class................................................ -- 4,232 4,232
Administrative Class............................................... -- -- --
Net asset value per share
Class A............................................................ $ 12.17 $ -- $ 12.17
Class B............................................................ 12.17 -- 12.17
Class C............................................................ 12.17 -- 12.17
Institutional Class................................................ -- 12.46 12.46
Administrative Class............................................... -- -- --
</TABLE>
* Pro Forma net assets have been reduced by merger-related legal and accounting
costs and certain other costs.
-25-
<PAGE>
CAPITALIZATION TABLE
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Discovery Cadence Mid Cap Pro Forma
Fund Growth Fund Combined*
---- ----------- ---------
<S> <C> <C> <C>
Net Assets (000's omitted)
Class A................................................... $ 10,369 $ -- $ 10,365
Class B................................................... 19,075 -- 19,068
Class C................................................... 38,501 -- 38,487
Institutional Class....................................... -- 231,011 230,930
Administrative Class...................................... -- 1,071 1,071
Shares outstanding (000's omitted)
Class A................................................... 928 -- 928
Class B................................................... 1,721 -- 1,721
Class C................................................... 3,474 -- 3,474
Institutional Class....................................... -- 11,881 11,881
Administrative Class...................................... -- 55 55
Net asset value per share
Class A................................................... $ 11.17 $ -- $ 11.17
Class B................................................... 11.08 -- 11.08
Class C................................................... 11.08 -- 11.08
Institutional Class....................................... -- 19.44 19.44
Administrative Class...................................... -- 19.44 19.44
</TABLE>
* Pro Forma net assets have been reduced by merger-related legal and accounting
costs and certain other costs.
Pro forma financial statements of the Funds as of and for the fiscal year
ended June 30, 1996 are included in the Merger Statement of Additional
Information. Because each Agreement provides that the Acquiring Fund will be the
surviving Fund following the reorganization and because the Acquiring Fund's
investment objective and policies will remain unchanged, the pro forma financial
statements reflect the transfer of the assets and liabilities of the Acquired
Fund to the Acquiring Fund as contemplated by the Agreement.
-26-
<PAGE>
INFORMATION ABOUT THE ACQUIRING FUNDS
Other information relating to the Acquiring Funds, including
information with respect to their investment objectives, policies and
restrictions, may be found at Appendix B to this Proxy Statement/Prospectus.
Further information regarding the Acquiring Fund, including financial
information, may be found in the Merger Statement of Additional Information, the
PFEAS Prospectus, the PFEAS Statement of Additional Information and the PFEAS
Annual Report, which are available on request by calling 1-800-927-4648.
Certain information and commentary from the PFEAS Annual Report relating to the
Acquiring Funds' recent investment performance is set forth in Appendix C to
this Prospectus/Proxy Statement.
Proxy materials, reports, proxy and information statements and other
information filed by the PFEAS Trust with respect to the Acquiring Funds can be
inspected and copied at the Public Reference Facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can also be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549 at prescribed rates.
INFORMATION ABOUT THE ACQUIRED FUNDS
Other information relating to the Acquired Funds, including
information in respect of their investment objectives and policies and financial
history, may be found in the Merger Statement of Additional Information, the PAF
Prospectus, the PAF Statement of Additional Information and the PAF Semi-Annual
Report, which are available on request by calling 1-800-426-0107.
Proxy materials, reports, proxy and information statements and other
information filed by the PAF Trust with respect to the Acquired Funds can be
inspected and copied at the Public Reference Facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can also be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549 at prescribed rates.
VOTING INFORMATION
Record date and method of tabulation. Shareholders of record of each
Acquired Fund at the close of business on October __, 1996 (the "Record Date")
will be entitled to notice of and to vote at the Meeting or any adjournment
thereof. Shareholders are entitled to one vote for each share held, with
fractional shares voting proportionally. Shareholders of each Acquired Fund
will vote only on the approval or disapproval of that Fund's Merger.
Votes cast by proxy or in person at the Meeting will be counted by
persons appointed by the PAF Trust as tellers for the Meeting. The tellers will
count the total number of votes cast "for" approval of the proposal for purposes
of determining whether sufficient affirmative votes have been
-27-
<PAGE>
cast. The tellers will count shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners or
the persons entitled to vote and (ii) the broker or nominee does not have the
discretionary voting power on a particular matter) as shares that are present
and entitled to vote on the matter for purposes of determining the presence of a
quorum. So long as a quorum is present, abstentions and broker non-votes have
the effect of negative votes on the proposal.
The PFEAS Trust will use similar procedures to those described in the
foregoing paragraph at the meeting of shareholders of the Acquiring Funds to be
held on or about December __, 1996 to vote on the approval of disapproval of the
Mergers. Approval of the Merger with respect to each Acquiring Fund will
require the vote of the lesser of (i) 67% of the voting securities of the
Acquiring Fund present at such meeting, if the holders of more than 50% of the
outstanding voting shares of such Fund are present or represented by proxy, or
(ii) 50% of the outstanding voting securities of the Acquiring Fund.
As of the Record Date, as shown on the books of the PAF Trust, there
were issued and outstanding the following number of shares of beneficial
interest of each class of each Acquired Fund:
Class A Class B Class C
------- ------- -------
Value Fund
Discovery Fund
As of the Record Date, the officers and Trustees of the PFEAS Trust
and the PAF Trust as a group beneficially owned [less than 1%] of the
outstanding shares of each class of each Acquired Fund. As of the Record Date,
to the best of the knowledge of the PFEAS Trust, the following persons owned
beneficially 5% or more of the outstanding shares of the indicated classes of
the Acquired Funds:
[insert list of 5% shareholders and pro forma ownership of the 5%
shareholders following Mergers]
As of the Record Date, the officers and Trustees of the PFEAS Trust
and the PAF Trust as a group beneficially owned [less than 1%] of the
outstanding shares of each Acquiring Fund. As of the Record Date, to the best
of the knowledge of the PFEAS Trust, the following persons beneficially owned 5%
or more of the outstanding shares of the indicated classes of the Acquiring
Funds:
[insert list of 5% shareholders and pro forma ownership of the 5%
shareholders following Mergers]
Solicitation of proxies. Solicitation of proxies by personal
interview, mail, and telephone, may be made by officers and Trustees of the PAF
Trust and the PFEAS Trust and employees of the Distributor and its affiliates.
In addition, the firm of ____________ has been retained to assist in the
solicitation of proxies. The costs for solicitation of proxies, like the other
costs associated with the
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<PAGE>
general restructuring of the PIMCO Mutual Funds, will be borne only partially by
the Funds. See "Information about the Mergers."
Revocation of proxies. Any shareholder giving a proxy has the power
to revoke it by mail (addressed to the PAF Trust's Clerk at the principal office
of the PAF Trust at 2187 Atlantic Street, Stamford, Connecticut 06902) or in
person at the Meeting, by executing a superseding proxy, or by submitting a
notice of revocation to the Clerk of the PAF Trust. All properly executed
proxies received in time for the Meeting will be voted as specified in the
proxy, or, if no specification is made, FOR the proposal (set forth in Proposals
1 or 2 of the Notice of Meeting) to implement the Merger with respect to the
relevant Acquired Fund.
Adjournment. If sufficient votes in favor of either proposal are not
received by the time scheduled for the Meeting, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. Any adjournment will require the affirmative vote of a plurality of
the votes cast on the question in person or by proxy at the session of the
Meeting to be adjourned. If a meeting is adjourned with respect to a proposal,
any other proposal may still be acted upon by shareholders. The persons named
as proxies will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the proposal. They will vote against any such
adjournment those proxies required to be voted against the proposal. The
Acquired Funds will pay the costs of any additional solicitation and of any
adjourned session.
October __, 1996
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<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
November __, 1996 in ______, ________, by and between PIMCO Advisors Funds, a
Massachusetts business trust (the "PAF Trust"), on behalf of its _________ Fund
series (the "Acquired Fund"), and PIMCO Funds: Equity Advisors Series, a
Massachusetts business trust (the "PFEAS Trust"), on behalf of its ____________
Fund series (the "Acquiring Fund").
PLAN OF REORGANIZATION
----------------------
(a) The Acquired Fund will sell, assign, convey, transfer and deliver to
the Acquiring Fund on the Exchange Date (as defined in Section 6) all of its
properties and assets. In consideration therefor, the Acquiring Fund shall, on
the Exchange Date, assume all of the liabilities of the Acquired Fund existing
at the Valuation Time and deliver to the Acquired Fund (i) a number of full and
fractional Class A shares of beneficial interest of the Acquiring Fund (the
"Class A Merger Shares") having an aggregate net asset value equal to the value
of the assets of the Acquired Fund attributable to Class A shares of the
Acquired Fund transferred to the Acquiring Fund on such date less the value of
the liabilities of the Acquired Fund attributable to Class A shares of the
Acquired Fund assumed by the Acquiring Fund on that date, (ii) a number of full
and fractional Class B shares of beneficial interest of the Acquiring Fund (the
"Class B Merger Shares") having an aggregate net asset value equal to the value
of the assets of the Acquired Fund attributable to Class B shares of the
Acquired Fund transferred to the Acquiring Fund on such date less the value of
the liabilities of the Acquired Fund attributable to Class B shares of the
Acquired Fund assumed by the Acquiring Fund on that date, and (iii) a number of
full and fractional Class C shares of beneficial interest of the Acquiring Fund
(the "Class C Merger Shares") having an aggregate net asset value equal to the
value of the assets of the Acquired Fund attributable to Class C shares of the
Acquired Fund transferred to the Acquiring Fund on such date less the value of
the liabilities of the Acquired Fund attributable to Class C shares of the
Acquired Fund assumed by the Acquiring Fund on that date. (The Class A Merger
Shares, the Class B Merger Shares and the Class C Merger Shares shall be
referred to collectively as the "Merger Shares.") It is intended that the
reorganization described in this Plan shall be a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) Upon consummation of the transactions described in paragraph (a) of
this Plan of Reorganization, the Acquired Fund shall distribute in complete
liquidation to its Class A, Class B and Class C shareholders of record as of the
Exchange Date Class A, Class B and Class C Merger Shares, each shareholder being
entitled to receive that proportion of such Class A, Class B and Class C Merger
Shares which the number of Class A, Class B or Class C shares of beneficial
interest of the Acquired Fund held by such shareholder bears to the number of
Class A, Class B and Class C shares of the Acquired Fund outstanding on such
date. Certificates representing the Merger Shares will not be issued. All issued
and outstanding shares of the Acquired Fund will simultaneously be cancelled on
the books of the Acquired Fund.
<PAGE>
(c) As promptly as practicable after the liquidation of the Acquired Fund
as aforesaid, the Acquired Fund shall be dissolved pursuant to the provisions of
the Declaration of Trust of the PAF Trust, as amended, and applicable law, and
its legal existence terminated. Any reporting responsibility of the Acquired
Fund is and shall remain the responsibility of the Acquired Fund up to and
including the Exchange Date and, if applicable, such later date on which the
Acquired Fund is liquidated.
AGREEMENT
---------
The Acquiring Fund and the Acquired Fund agree as follows:
1. Representations, Warranties and Agreements of the Acquiring Fund. The
----------------------------------------------------------------
Acquiring Fund represents and warrants to and agrees with the
Acquired Fund that:
a. The Acquiring Fund is a series of shares of the PFEAS Trust, a
Massachusetts business trust duly established and validly existing
under the laws of The Commonwealth of Massachusetts, and has power to
own all of its properties and assets and to carry out its obligations
under this Agreement. The PFEAS Trust is qualified as a foreign
association in every jurisdiction where required, except to the
extent that failure to so qualify would not have a material adverse
effect on the PFEAS Trust. Each of the PFEAS Trust and the Acquiring
Fund has all necessary federal, state and local authorizations to
carry on its business as now being conducted and to carry out this
Agreement.
b. The PFEAS Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management
investment company, and such registration has not been revoked or
rescinded and is in full force and effect.
c. A statement of assets and liabilities, statements of operations,
statements of changes in net assets and a schedule of investments
(indicating their market values) of the Acquiring Fund as of and for
the year ended June 30, 1996 have been furnished to the Acquired
Fund. Such statement of assets and liabilities and schedule fairly
present the financial position of the Acquiring Fund as of their date
and said statements of operations and changes in net assets fairly
reflect the results of its operations and changes in net assets for
the periods covered thereby in conformity with generally accepted
accounting principles.
d. The prospectus and statement of additional information of the PFEAS
Trust, each dated September 15, 1996 (collectively, the "PFEAS
Prospectus"), previously furnished to the Acquired Fund, did not as
of such date and does not contain, with respect to the PFEAS Trust or
the Acquiring Fund, any untrue statements of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
A-2
<PAGE>
e. There are no material legal, administrative or other proceedings
pending or, to the knowledge of the PFEAS Trust or the Acquiring
Fund, threatened against the PFEAS Trust or the Acquiring Fund, which
assert liability on the part of the PFEAS Trust or the Acquiring
Fund. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein
contemplated.
f. The Acquiring Fund has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on
its statement of assets and liabilities as of June 30, 1996 and those
incurred in the ordinary course of business as an investment company
since June 30, 1996. Prior to the Exchange Date, the Acquiring Fund
will endeavor to quantify and to reflect on its balance sheet all of
its material known liabilities and will advise the Acquired Fund of
all material liabilities, contingent or otherwise, incurred by it
subsequent to June 30, 1996, whether or not incurred in the ordinary
course of business.
g. As of the Exchange Date, the Acquiring Fund will have filed all
federal and other tax returns and reports which, to the knowledge of
the PFEAS Trust's officers, are required to be filed by the Acquiring
Fund and has paid or will pay all federal and other taxes shown to be
due on said returns or on any assessments received by the Acquiring
Fund. All tax liabilities of the Acquiring Fund have been adequately
provided for on its books, and no tax deficiency or liability of the
Acquiring Fund has been asserted, and no question with respect
thereto has been raised or is under audit, by the Internal Revenue
Service or by any state or local tax authority for taxes in excess of
those already paid.
h. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by this Agreement,
except such as may be required under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act and state securities or blue
sky laws (which term as used herein shall include the laws of the
District of Columbia and of Puerto Rico).
i. The registration statement (the "Registration Statement") filed with
the Securities and Exchange Commission (the "Commission") by the
PFEAS Trust on Form N-14 on behalf of the Acquiring Fund and relating
to the Merger Shares issuable hereunder, and the proxy statement of
the Acquired Fund relating to the meeting of the Acquired Fund's
shareholders referred to in Section 7(a) herein (together with the
documents incorporated therein by reference, the "Acquired Fund Proxy
Statement"), on [the effective date of the Registration Statement]
(i) will comply in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations
thereunder and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the
A-3
<PAGE>
statements therein not misleading; and at the time of the
shareholders meeting referred to in Section 7(a) and on the Exchange
Date, the prospectus which is contained in the Registration
Statement, as amended or supplemented by any amendments or
supplements filed with the Commission by the PFEAS Trust and the
Acquired Fund Proxy Statement will not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided, however, that none of the representations and
warranties in this subsection shall apply to statements in or
omissions from the Registration Statement or the Acquired Fund Proxy
Statement made in reliance upon and in conformity with information
furnished by the Acquired Fund for use in the Registration Statement
or the Acquired Fund Proxy Statement.
j. There are no material contracts outstanding to which the Acquiring
Fund is a party, other than as will be disclosed in the Registration
Statement, the PFEAS Prospectus or the Acquired Fund Proxy Statement.
k. To the best of its knowledge, all of the issued and outstanding
shares of beneficial interest of the Acquiring Fund have been offered
for sale and sold in conformity with all applicable federal and state
securities laws (including any applicable exemptions therefrom), or
the Acquiring Fund has taken any action necessary to remedy any prior
failure to have offered for sale and sold such shares in conformity
with such laws.
l. The Acquiring Fund qualifies and will at all times through the
Exchange Date qualify for taxation as a "regulated investment
company" under Sections 851 and 852 of the Code.
m. The issuance of the Merger Shares pursuant to this Agreement will be
in compliance with all applicable federal and state securities laws.
n. The Merger Shares to be issued to the Acquired Fund have been duly
authorized and, when issued and delivered pursuant to this Agreement,
will be legally and validly issued and will be fully paid and
nonassessable by the Acquiring Fund, and no shareholder of the
Acquiring Fund will have any preemptive right of subscription or
purchase in respect thereof.
o. All issued and outstanding shares of the Acquiring Fund are, and at
the Exchange Date will be, duly and validly issued and outstanding,
fully paid and non-assessable by the Acquiring Fund. The Acquiring
Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of the Acquiring Fund shares, nor is
there outstanding any security convertible into any of the Acquiring
Fund shares.
2. Representations, Warranties and Agreements of the Acquired Fund.
---------------------------------------------------------------
The Acquired Fund represents and warrants to and agrees with the
Acquiring Fund that:
A-4
<PAGE>
a. The Acquired Fund is a series of shares of the PAF Trust, a
Massachusetts business trust duly established and validly existing
under the laws of The Commonwealth of Massachusetts, and has power to
own all of its properties and assets and to carry out this Agreement.
The PAF Trust is qualified as a foreign association in every
jurisdiction where required, except to the extent that failure to so
qualify would not have a material adverse effect on the PAF Trust.
Each of the PAF Trust and the Acquired Fund has all necessary
federal, state and local authorizations to own all of its properties
and assets and to carry on its business as now being conducted and to
carry out this Agreement.
b. The PAF Trust is registered under the 1940 Act as an open-end
management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
c. A statement of assets and liabilities, statements of operations,
statements of changes in net assets and a schedule of investments
(indicating their market values) of the Acquired Fund as of and for
the fiscal year ended September 30, 1996 have been furnished to the
Acquiring Fund. Such statement of assets and liabilities and schedule
fairly present the financial position of the Acquired Fund as of
their date and said statements of operations and changes in net
assets fairly reflect the results of its operations and changes in
net assets for the periods covered thereby in conformity with
generally accepted accounting principles.
d. The prospectus and statement of additional information of the PAF
Trust dated February 1, 1996 and July 12, 1996, respectively
(collectively, the "PAF Prospectus"), which has been previously
furnished to the Acquiring Fund, did not contain as of such dates and
does not contain, with respect to the PAF Trust and the Acquired
Fund, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
e. There are no material legal, administrative or other proceedings
pending or, to the knowledge of the PAF Trust or the Acquired Fund,
threatened against the PAF Trust or the Acquired Fund, which assert
liability on the part of the PAF Trust or the Acquired Fund. The
Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated.
f. There are no material contracts outstanding to which the Acquired
Fund is a party, other than as will be disclosed in the Registration
Statement, the PAF Prospectus or the Acquired Fund Proxy Statement.
g. The Acquired Fund has no known liabilities of a material nature,
contingent or otherwise, other than those shown on the Acquired
Fund's statement of assets and
A-5
<PAGE>
liabilities as of September 30, 1996 referred to above and those
incurred in the ordinary course of its business as an investment
company since such date. Prior to the Exchange Date, the Acquired
Fund will endeavor to quantify and to reflect on its balance sheet
all of its material known liabilities and will advise the Acquiring
Fund of all material liabilities, contingent or otherwise, incurred
by it subsequent to September 30, 1996, whether or not incurred in
the ordinary course of business.
h. As of the Exchange Date, the Acquired Fund will have filed all
federal and other tax returns and reports which, to the knowledge of
the PAF Trust's officers, are required to be filed by the Acquired
Fund and has paid or will pay all federal and other taxes shown to be
due on said returns or on any assessments received by the Acquired
Fund. All tax liabilities of the Acquired Fund have been adequately
provided for on its books, and no tax deficiency or liability of the
Acquired Fund has been asserted, and no question with respect thereto
has been raised or is under audit, by the Internal Revenue Service or
by any state or local tax authority for taxes in excess of those
already paid.
i. At both the Valuation Time (as defined in Section 3(c)) and the
Exchange Date, the PAF Trust, on behalf of the Acquired Fund, will
have full right, power and authority to sell, assign, transfer and
deliver the Investments and any other assets and liabilities of the
Acquired Fund to be transferred to the Acquiring Fund pursuant to
this Agreement. At the Exchange Date, subject only to the delivery of
the Investments and any such other assets and liabilities as
contemplated by this Agreement, the Acquiring Fund will acquire the
Investments and any such other assets and liabilities subject to no
encumbrances, liens or security interests whatsoever and without any
restrictions upon the transfer thereof. As used in this Agreement,
the term "Investments" shall mean the Acquired Fund's investments
shown on the schedule of its investments as of September 30, 1996
referred to in Section 2(c) hereof, as supplemented with such changes
in the portfolio as the Acquired Fund shall make, and changes
resulting from stock dividends, stock split-ups, mergers and similar
corporate actions through the Exchange Date.
j. No registration under the 1933 Act of any of the Investments would be
required if they were, as of the time of such transfer, the subject
of a public distribution by either of the Acquiring Fund or the
Acquired Fund, except as previously disclosed to the Acquiring Fund
by the Acquired Fund.
k. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement,
except such as may be required under the 1933 Act, 1934 Act, the 1940
Act or state securities or blue sky laws.
l. The Registration Statement and the Acquired Fund Proxy Statement, on
the effective date of the Registration Statement, (i) will comply in
all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder and
(ii) will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the
A-6
<PAGE>
statements therein not misleading; and at the time of the shareholders
meetings referred to in Sections 7(a) and 7(c) and on the Exchange Date,
the Acquired Fund Proxy Statement and the Registration Statement will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that none of the representations
and warranties in this subsection shall apply to statements in or omissions
from the Registration Statement, the Acquired Fund Proxy Statement or the
Acquiring Fund Proxy Statement made in reliance upon and in conformity with
information furnished by the Acquiring Fund for use in the Registration
Statement, the Acquired Fund Proxy Statement or the Acquiring Fund Proxy
Statement.
m. The Acquired Fund qualifies and will at all times through the Exchange Date
qualify for taxation as a "regulated investment company" under Section 851
and 852 of the Code.
n. At the Exchange Date, the Acquired Fund will have sold such of its assets,
if any, as are necessary to assure that, after giving effect to the
acquisition of the assets of the Acquired Fund pursuant to this Agreement,
the Acquiring Fund will remain a "diversified company" within the meaning
of Section 5(b)(1) of the 1940 Act and in compliance with such other
mandatory investment restrictions as are set forth in the PFEAS Prospectus,
as amended through the Exchange Date.
o. To the best of its knowledge, all of the issued and outstanding shares of
beneficial interest of the Acquired Fund shall have been offered for sale
and sold in conformity with all applicable federal and state securities
laws (including any applicable exemptions therefrom), or the Acquired Fund
has taken any action necessary to remedy any prior failure to have offered
for sale and sold such shares in conformity with such laws.
p. All issued and outstanding shares of the Acquired Fund are, and at the
Exchange Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Acquired Fund. The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares, except that
Class B shares of the Acquired Fund are convertible into Class A shares of
the Acquired Fund in the manner and on the terms described in the PAF
Prospectus.
3. Reorganization.
--------------
a. Subject to the requisite approval of the shareholders of the Acquired Fund
and the shareholders of the Acquiring Fund and to the other terms and
conditions contained herein (including the Acquired Fund's obligation to
distribute to its shareholders all of its investment company taxable income
and net capital gain as described in Section 8(m) hereof), the Acquired
Fund agrees to sell, assign, convey, transfer and deliver to the Acquiring
Fund, and the Acquiring Fund agrees to acquire from the Acquired
A-7
<PAGE>
Fund, on the Exchange Date all of the Investments and all of the cash and
other properties and assets of the Acquired Fund, whether accrued or
contingent (including cash received by the Acquired Fund upon the
liquidation of the Acquired Fund of any investments purchased by the
Acquired Fund after September 30, 1996 and designated by the Acquiring Fund
as being unsuitable for it to acquire), in exchange for that number of
shares of beneficial interest of the Acquiring Fund provided for in Section
4 and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund, whether accrued or contingent, existing at the Valuation
Time except for the Acquired Fund's liabilities, if any, arising in
connection with this Agreement. Pursuant to this Agreement, the Acquired
Fund will, as soon as practicable after the Exchange Date, distribute all
of the Merger Shares received by it to the shareholders of the Acquired
Fund in exchange for their Class A, Class B and Class C shares of the
Acquired Fund.
b. The Acquired Fund will pay or cause to be paid to the Acquiring Fund any
interest, cash or such dividends, rights and other payments received by it
on or after the Exchange Date with respect to the Investments and other
properties and assets of the Acquired Fund, whether accrued or contingent,
received by it on or after the Exchange Date. Any such distribution shall
be deemed included in the assets transferred to the Acquiring Fund at the
Exchange Date and shall not be separately valued unless the securities in
respect of which such distribution is made shall have gone "ex" such
distribution prior to the Valuation Time, in which case any such
distribution which remains unpaid at the Exchange Date shall be included in
the determination of the value of the assets of the Acquired Fund acquired
by the Acquiring Fund.
c. The Valuation Time shall be 4:00 p.m. Eastern time on [the Exchange Date]
or such earlier or later day as may be mutually agreed upon in writing by
the parties hereto (the "Valuation Time").
4. Exchange Date: Valuation Time. On the Exchange Date, the Acquiring Fund
-----------------------------
will deliver to the Acquired Fund (i) a number of full and fractional Class
A Merger Shares having an aggregate net asset value equal to the value of
the assets of the Acquired Fund attributable to Class A shares of the
Acquired Fund transferred to the Acquiring Fund on such date less the value
of the liabilities of the Acquired Fund attributable to Class A shares of
the Acquired Fund assumed by the Acquiring Fund on that date, (ii) a number
of full and fractional Class B Merger Shares having an aggregate net asset
value equal to the value of the assets of the Acquired Fund attributable to
Class B shares of the Acquired Fund transferred to the Acquiring Fund on
such date less the value of the liabilities of the Acquired Fund
attributable to Class B shares of the Acquired Fund assumed by the
Acquiring Fund on that date, and (iii) a number of full and fractional
Class C Merger Shares having an aggregate net asset value equal to the
value of the assets of the Acquired Fund attributable to Class C shares of
the Acquired Fund transferred to the Acquiring Fund on such date less the
value of the liabilities of the Acquired Fund attributable to Class C
shares of the Acquired Fund assumed by the Acquiring Fund on that date,
determined as hereinafter provided in this Section 4.
A-8
<PAGE>
a. The net asset value of the Merger Shares to be delivered to the Acquired
Fund, the value of the assets attributable to the Class A, Class B and
Class C shares of the Acquired Fund, and the value of the liabilities
attributable to the Class A, Class B and Class C shares of the Acquired
Fund to be assumed by the Acquiring Fund, shall in each case be determined
as of the Valuation Time.
b. The net asset value of the Class A, Class B and Class C Merger Shares shall
be computed in the manner set forth in the PFEAS Prospectus. The value of
the assets and liabilities of the Class A, Class B and Class C shares of
the Acquired Fund shall be determined by the Acquiring Fund, in cooperation
with the Acquired Fund, pursuant to procedures which the Acquiring Fund
would use in determining the fair market value of the Acquiring Fund's
assets and liabilities.
c. No adjustment shall be made in the net asset value of either the Acquired
Fund or the Acquiring Fund to take into account differences in realized and
unrealized gains and losses.
d. The Acquiring Fund shall issue the Merger Shares to the Acquired Fund in
three certificates registered in the name of the Acquired Fund, one
representing Class A Merger Shares, one representing Class B Merger Shares
and one representing Class C Merger Shares. The Acquired Fund shall
distribute the Class A Merger Shares to the Class A shareholders of the
Acquired Fund by redelivering such certificate to the Acquiring Fund's
transfer agent, which will as soon as practicable set up open accounts for
each Class A Acquired Fund shareholder in accordance with written
instructions furnished by the Acquired Fund. The Acquired Fund shall
distribute the Class B Merger Shares to the Class B shareholders of the
Acquired Fund by redelivering such certificate to the Acquiring Fund's
transfer agent, which will as soon as practicable set up open accounts for
each Class B Acquired Fund shareholder in accordance with written
instructions furnished by the Acquired Fund. The Acquired Fund shall
distribute the Class C Merger shares to the Class C shareholders of the
Acquired Fund by redelivering such certificate to the Acquiring Fund's
transfer agent, which will as soon as practicable set up open accounts for
each Class C Acquired Fund shareholder in accordance with written
instructions furnished by the Acquired Fund. With respect to any Acquired
Fund shareholder holding share certificates as of the Exchange Date, such
certificates will from and after the Exchange Date be deemed to be
certificates for the Merger Shares issued to each shareholder in respect of
the Acquired Fund shares represented by such certificates; certificates
representing the Merger Shares will not be issued to Acquired Fund
shareholders.
e. The Acquiring Fund shall assume all liabilities of the Acquired Fund,
whether accrued or contingent, in connection with the acquisition of assets
and subsequent dissolution of the Acquired Fund or otherwise, except for
the Acquired Fund's liabilities, if any, pursuant to this Agreement.
5. Expenses, Fees, etc.
-------------------
A-9
<PAGE>
a. The parties hereto understand and agree that the transactions contemplated
by this Agreement are being undertaken contemporaneously with a general
restructuring and consolidation of certain of the registered investment
companies advised by PIMCO Advisors L.P. and its affiliates; and that in
connection therewith the costs of all such transactions are being
preliminarily allocated on a basis approved, inter alia, by the
----------
Trustees of both the PAF Trust and the PFEAS Trust. The Acquired Fund and
the Acquiring Fund agree to pay the expenses preliminarily allocated to
them but not, however, in an amount exceeding the Relevant Expense Caps.
PIMCO Advisors L.P., by countersigning this Agreement, agrees that PIMCO
Advisors L.P. will bear any and all expenses preliminarily allocated to the
Acquired Fund and the Acquiring Fund to the extent that they would
otherwise exceed the Relevant Expense Caps. For these purposes, the
"Relevant Expense Caps" shall be $20,000 for the Acquiring Fund and
[$70,496 - Value Fund] [$46,355 - Discovery Fund] for the Acquired Fund;
provided, however, that the Relevant Expense Caps for the Acquired Funds
-------- -------
will be reduced, pursuant to the conditions of the Trustee approval
referred to above, to the extent that expenses of the general restructuring
and consolidation preliminarily allocated to all the PAF Trust's funds
would otherwise exceed $500,000. Notwithstanding any of the foregoing,
expenses will in any event be paid by the party directly incurring such
expenses if and to the extent that the payment by the other party of such
expenses would result in the disqualification of such party as a "regulated
investment company" within the meaning of Section 851 of the Code.
b. In the event the transactions contemplated by this Agreement are not
consummated by reason of the Acquiring Fund's being either unwilling or
unable to go forward other than by reason of the nonfulfillment or failure
of any condition to the Acquiring Fund's obligations referred to in Section
7(a) or Section 8, the Acquiring Fund shall pay directly all reasonable
fees and expenses incurred by the Acquired Fund in connection with such
transactions, including, without limitation, legal, accounting and filing
fees.
c. In the event the transactions contemplated by this Agreement are not
consummated by reason of the Acquired Fund's being either unwilling or
unable to go forward other than by reason of the nonfulfillment or failure
of any condition to the Acquired Fund's obligations referred to in Section
7(a) or Section 9, the Acquired Fund shall pay directly all reasonable fees
and expenses incurred by the Acquiring Fund in connection with such
transactions, including, without limitation, legal, accounting and filings
fees.
d. In the event the transactions contemplated by this Agreement are not
consummated for any reason other than (i) the Acquiring Fund's or the
Acquired Fund's being either unwilling or unable to go forward or (ii) the
nonfulfillment or failure of any condition to the Acquiring Fund's or the
Acquired Fund's obligations referred to in Section 7(a), Section 8 or
Section 9 of this Agreement, then each of the Acquiring Fund and the
Acquired Fund shall bear all of its own expenses incurred in connection
with such transactions.
A-10
<PAGE>
e. Notwithstanding any other provisions of this Agreement, if for any reason
the transactions contemplated by this Agreement are not consummated, no
party shall be liable to the other party for any damages resulting
therefrom, including, without limitation, consequential damages, except as
specifically set forth above.
6. Exchange Date. Delivery of the assets of the Acquired Fund to be
-------------
transferred, assumption of the liabilities of the Acquired Fund to be
assumed, and the delivery of the Merger Shares to be issued shall be made
at [place] at [time] as of January __, 1997, or at such other time and date
agreed to by the Acquiring Fund and the Acquired Fund, the date and time
upon which such delivery is to take place being referred to herein as the
"Exchange Date."
7. Meetings of Shareholders; Dissolution.
-------------------------------------
a. The PAF Trust, on behalf of the Acquired Fund, agrees to call a meeting of
the Acquired Fund's shareholders as soon as is practicable after the
effective date of the Registration Statement for the purpose of considering
the sale of all of its assets to and the assumption of all of its
liabilities by the Acquiring Fund as herein provided, adopting this
Agreement, and authorizing the liquidation and dissolution of the Acquired
Fund.
b. The Acquired Fund agrees that the liquidation and dissolution of the
Acquired Fund will be effected in the manner provided in the PAF Trust's
Declaration of Trust in accordance with applicable law and that on and
after the Exchange Date, the Acquired Fund shall not conduct any business
except in connection with its liquidation and dissolution.
c. The PFEAS Trust, on behalf of the Acquiring Fund, agrees to call a meeting
of the Acquiring Fund's shareholders as soon as is practicable after the
effective date of the Registration Statement for the purpose of considering
the acquisition of all of the Acquired Fund's assets in exchange for the
assumption by the Acquiring Fund of all of the Acquired Fund's liabilities
and the issuance to the Acquired Fund of the Merger Shares as herein
provided, and adopting this Agreement.
d. The Acquiring Fund has, after the preparation and delivery to the Acquiring
Fund by the Acquired Fund of a preliminary version of the Acquired Fund
Proxy Statement which was satisfactory to the Acquiring Fund and to Dechert
Price & Rhoads for inclusion in the Registration Statement, filed the
Registration Statement with the Commission, and, after the preparation and
delivery to the Acquired Fund by the Acquiring Fund of a preliminary
version of the Acquiring Fund Proxy Statement which was satisfactory to the
Acquired Fund and to Ropes & Gray, filed the Acquiring Fund Proxy Statement
and related materials with the Commission in preliminary form. Each of the
Acquired Fund and the Acquiring Fund will cooperate with the other, and
each will furnish to the other the information relating to itself required
by the 1933 Act, the
A-11
<PAGE>
1934 Act and the 1940 Act and the rules and regulations thereunder to be
set forth in the Registration Statement and the Acquiring Fund Proxy
Statement.
8. Conditions to the Acquiring Fund's Obligations. The obligations of the
----------------------------------------------
Acquiring Fund hereunder shall be subject to the following conditions:
a. That this Agreement shall have been adopted and the transactions
contemplated hereby shall have been approved by the requisite votes of (i)
the holders of the outstanding shares of beneficial interest of the
Acquired Fund entitled to vote and (ii) the holders of the outstanding
shares of beneficial interest of the Acquiring Fund entitled to vote; and
that shareholders of the PFEAS Trust shall have approved all of the matters
submitted to them at the meeting referred to in Section 7(c) hereof.
b. That the Acquired Fund shall have furnished to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, with values
determined as provided in Section 4 of this Agreement, together with a list
of Investments with their respective tax costs, all as of the Valuation
Time, certified on the Acquired Fund's behalf by the PAF Trust's President
(or any Vice President) and Treasurer, and a certificate of both such
officers, dated the Exchange Date, that there has been no material adverse
change in the financial position of the Acquired Fund since September 30,
1996 other than changes in the Investments and other assets and properties
since that date or changes in the market value of the Investments and other
assets of the Acquired Fund, or changes due to dividends paid or losses
from operations.
c. That the Acquired Fund shall have furnished to the Acquiring Fund a
statement, dated the Exchange Date, signed by the PAF Trust's President (or
any Vice President) and Treasurer certifying that as of the Valuation Time
and as of the Exchange Date all representations and warranties as of the
Acquired Fund made in this Agreement are true and correct in all material
respects as if made at and as of such dates and the Acquired Fund has
complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to such dates.
d. That the Acquired Fund shall have delivered to the Acquiring Fund a letter
from Coopers & Lybrand L.L.P. dated the Exchange Date stating that such
firm has employed certain procedures whereby it has obtained schedules of
the tax provisions and qualifying tests for regulated investment companies
as prepared for the fiscal year ended September 30, 1996 and the period
October 1, 1996 to the Exchange Date (the latter period being based on
unaudited data) and that, in the course of such procedures, nothing came to
their attention which caused them to believe that the Acquired Fund (i)
would not qualify as a regulated investment company for federal, state, or
local income tax purposes or (ii) would owe any federal, state or local
income tax or excise tax, for the tax year ended September 30, 1996, and
for the period from October 1, 1996 to the Exchange Date.
A-12
<PAGE>
e. That there shall not be any material litigation pending with respect to the
matters contemplated by this Agreement.
f. That the Acquiring Fund shall have received an opinion of Ropes & Gray, in
form satisfactory to Dechert Price & Rhoads, counsel to the Acquiring Fund,
and dated the Exchange Date, to the effect that (i) the PAF Trust is a
Massachusetts business trust duly formed and is validly existing under the
laws of The Commonwealth of Massachusetts and has the power to own all its
properties and to carry on its business as presently conducted; (ii) this
Agreement has been duly authorized, executed and delivered by the PAF Trust
on behalf of the Acquired Fund and, assuming that the Registration
Statement, the PFEAS Prospectus, the Acquired Fund Proxy Statement and the
Acquiring Fund Proxy Statement comply with the 1933 Act, the 1934 Act and
the 1940 Act and assuming due authorization, execution and delivery of this
Agreement by the PFEAS Trust on behalf of the Acquiring Fund, is a valid
and binding obligation of the PAF Trust and the Acquired Fund; (iii) the
PAF Trust, on behalf of the Acquired Fund, has power to sell, assign,
convey, transfer and deliver the assets contemplated hereby and, upon
consummation of the transactions contemplated hereby in accordance with the
terms of this Agreement, the Acquired Fund will have duly sold, assigned,
conveyed, transferred and delivered such assets to the Acquiring Fund; (iv)
the execution and delivery of this Agreement did not, and the consummation
of the transactions contemplated hereby will not, violate the PAF Trust's
Declaration of Trust or By-Laws or any provision of any agreement known to
such counsel to which the PAF Trust or the Acquired Fund is a party or by
which it is bound, it being understood that with respect to investment
restrictions as contained in the PAF Trust's Declaration of Trust, By-Laws
or then-current prospectus or statement of additional information, such
counsel may rely upon a certificate of an officer of the PAF Trust whose
responsibility it is to advise the PAF Trust and the Acquired Fund with
respect to such matters; and (v) no consent, approval, authorization or
order of any court or governmental authority is required for the
consummation by the PAF Trust on behalf of the Acquired Fund of the
transactions contemplated hereby, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities or blue sky laws. In addition, such counsel shall
also state that they have participated in conferences with officers and
other representatives of the Acquired Fund at which the contents of the
Acquired Fund Proxy Statement and related matters were discussed, and,
although they are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Acquired Fund Proxy Statement, on the basis of the foregoing (relying as to
materiality to a large extent upon the opinions of officers and other
representatives of the Acquired Fund), no facts have come to their
attention that lead them to believe that the portions of the Acquired Fund
Proxy Statement relevant to the transfer of assets contemplated by this
Agreement as of its date, as of the date of the Acquired Fund shareholders'
meeting, or as of the Exchange Date, contained an untrue statement of a
material fact regarding the Acquired Fund or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein regarding the Acquired Fund, in light of the circumstances under
which they were made, not
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<PAGE>
misleading. Such opinion may state that such counsel does not express any
opinion or belief as to the financial statements or other financial data,
or as to the information relating to the Acquiring Fund, contained in the
Acquired Fund Proxy Statement or the Registration Statement, and that such
opinion is solely for the benefit of the Acquiring Fund, its Trustees and
its officers.
g. That the Acquiring Fund shall have received an opinion of Ropes & Gray, in
form satisfactory to Dechert Price & Rhoads, with respect to the matters
specified in Section 9(g) of this Agreement, and such other matters as the
Acquiring Fund may reasonably deem necessary or desirable.
h. That the Acquiring Fund shall have received an opinion of Ropes & Gray,
dated the Exchange Date, satisfactory to Dechert Price & Rhoads (which
opinion would be based upon certain factual representations and subject to
certain qualifications), to the effect that, on the basis of the existing
provisions of the Code, current administrative rules, and court decisions,
for federal income tax purposes (i) no gain or loss will be recognized by
the Acquiring Fund upon receipt of the Investments transferred to the
Acquiring Fund pursuant to this Agreement in exchange for the Merger
Shares; (ii) the basis to the Acquiring Fund of the Investments will be the
same as the basis of the Investments in the hands of the Acquired Fund
immediately prior to such exchange; and (iii) the Acquiring Fund's holding
periods with respect to the Investments will include the respective periods
for which the Investments were held by the Acquired Fund.
i. That the assets of the Acquired Fund to be acquired by the Acquiring Fund
will include no assets which the Acquiring Fund, by reason of charter
limitations or of investment restrictions disclosed in the Registration
Statement in effect on the Exchange Date, may not properly acquire.
j. That the Registration Statement shall have become effective under the 1933
Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of the PFEAS Trust or the Acquiring Fund,
threatened by the Commission.
k. That the PAF Trust and the PFEAS Trust shall have received from the
Commission and any relevant state securities administrator such order or
orders as are reasonably necessary or desirable under the 1933 Act, the
1934 Act, the 1940 Act, and any applicable state securities or blue sky
laws in connection with the transactions contemplated hereby, and that all
such orders shall be in full force and effect.
l. That all actions taken by the PAF Trust on behalf of the Acquired Fund in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to
the Acquiring Fund and Dechert Price & Rhoads.
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<PAGE>
m. That, prior to the Exchange Date, the Acquired Fund shall have declared a
dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to the shareholders of the Acquired
Fund (i) all of the excess of (x) the Acquired Fund's investment income
excludable from gross income under Section 103 of the Code over (y) the
Acquired Fund's deductions disallowed under Sections 265 and 171 of the
Code, (ii) all of the Acquired Fund's investment company taxable income (as
defined in Section 852 of the Code) for its taxable years ending on or
after September 30, 1996 and on or prior to the Exchange Date (computed in
each case without regard to any deduction for dividends paid), and (iii)
all of the Acquired Fund's net capital gain realized (after reduction for
any capital loss carryover), in each case for both the taxable year ending
on September 30, 1996 and the short taxable period beginning on October 1,
1996 and ending on the Exchange Date.
n. That the Acquired Fund shall have furnished to the Acquiring Fund a
certificate, signed by the President (or any Vice President) and the
Treasurer of the PAF Trust, as to the tax cost to the Acquired Fund of the
securities delivered to the Acquiring Fund pursuant to this Agreement,
together with any such other evidence as to such tax cost as the Acquiring
Fund may reasonably request.
o. That the Acquired Fund's custodian shall have delivered to the Acquiring
Fund a certificate identifying all of the assets of the Acquired Fund held
or maintained by such custodian as of the Valuation Time.
p. That the Acquired Fund's transfer agent shall have provided to the
Acquiring Fund (i) the originals or true copies of all of the records of
the Acquired Fund in the possession of such transfer agent as of the
Exchange Date, (ii) a certificate setting forth the number of shares of the
Acquired Fund outstanding as of the Valuation Time, and (iii) the name and
address of each holder of record of any shares and the number of shares
held of record by each such shareholder.
q. That all of the issued and outstanding shares of beneficial interest of the
Acquired Fund shall have been offered for sale and sold in conformity with
all applicable state securities or blue sky laws (including any applicable
exemptions therefrom) and, to the extent that any audit of the records of
the Acquired Fund or its transfer agent by the Acquiring Fund or its agents
shall have revealed otherwise, either (i) the Acquired Fund shall have
taken all actions that in the opinion of the Acquiring Fund or Dechert
Price & Rhoads are necessary to remedy any prior failure on the part of the
Acquired Fund to have offered for sale and sold such shares in conformity
with such laws or (ii) the Acquired Fund shall have furnished (or caused to
be furnished) surety, or deposited (or caused to be deposited) assets in
escrow, for the benefit of the Acquiring Fund in amounts sufficient and
upon terms satisfactory, in the opinion of the Acquiring Fund or Dechert
Price & Rhoads, to indemnify the Acquiring Fund against any expense, loss,
claim, damage or liability whatsoever that may be asserted or threatened by
reason of such failure on the part of the Acquired Fund to have offered and
sold such shares in conformity with such laws.
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<PAGE>
r. That the Acquiring Fund shall have received from Price Waterhouse LLP a
letter addressed to the Acquiring Fund dated as of the Exchange Date
satisfactory in form and substance to the Acquiring Fund to the effect
that, on the basis of limited procedures agreed upon by the Acquiring Fund
and described in such letter (but not an examination in accordance with
generally accepted auditing standards), as of the Valuation Time the value
of the assets and liabilities of the Acquired Fund to be exchanged for the
Merger Shares has been determined in accordance with the provisions of the
PFEAS Trust's Declaration of Trust, pursuant to the procedures customarily
utilized by the Acquiring Fund in valuing its assets and issuing its
shares.
9. Conditions to the Acquired Fund's Obligations. The obligations of the
---------------------------------------------
Acquired Fund hereunder shall be subject to the following conditions:
a. That this Agreement shall have been adopted and the transactions
contemplated hereby shall have been approved by the requisite votes of (i)
the holders of the outstanding shares of beneficial interest of the
Acquired Fund entitled to vote and (ii) the holders of the outstanding
shares of beneficial interest of the Acquiring Fund entitled to vote; and
that shareholders of the PFEAS Trust shall have approved all of the matters
submitted to them at the meeting referred to in Section 7(c) hereof.
b. That the Acquiring Fund shall have furnished to the Acquired Fund a
statement of the Acquiring Fund's net assets, together with a list of
portfolio holdings with values determined as provided in Section 4, all as
of the Valuation Time, certified on the Acquiring Fund's behalf by the
PFEAS Trust's President (or any Vice President) and Treasurer (or any
Assistant Treasurer), and a certificate of both such officers, dated the
Exchange Date, to the effect that as of the Valuation Time and as of the
Exchange Date there has been no material adverse change in the financial
position of the Acquiring Fund since June 30, 1996, other than changes in
its portfolio securities since that date, changes in the market value of
the portfolio securities, changes due to net redemptions, dividends paid or
losses from operations.
c. That the PFEAS Trust, on behalf of the Acquiring Fund, shall have executed
and delivered to the Acquired Fund an Assumption of Liabilities dated as of
the Exchange Date pursuant to which the Acquiring Fund will assume all of
the liabilities of the Acquired Fund existing at the Valuation Time in
connection with the transactions contemplated by this Agreement, other than
liabilities arising pursuant to this Agreement.
d. That the Acquiring Fund shall have furnished to the Acquired Fund a
statement, dated the Exchange Date, signed by the PFEAS Trust's President
(or any Vice President) and Treasurer (or any Assistant Treasurer)
certifying that as of the Valuation Time and as of the Exchange Date all
representations and warranties of the Acquiring Fund made in this Agreement
are true and correct in all material respects as if made at and as of such
dates, and that the Acquiring Fund has complied with all of the agreements
and
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<PAGE>
satisfied all of the conditions on its part to be performed or satisfied at
or prior to each of such dates.
e. That there shall not be any material litigation pending or threatened with
respect to the matters contemplated by this Agreement.
f. That the Acquired Fund shall have received an opinion of Dechert Price &
Rhoads, in form satisfactory to Ropes & Gray, counsel to the Acquired Fund
and dated the Exchange Date, to the effect that (i) the PFEAS Trust is a
Massachusetts business trust duly formed and is validly existing under the
laws of The Commonwealth of Massachusetts and has the power to own all its
properties and to carry on its business as presently conducted; (ii) the
Merger Shares to be delivered to the Acquired Fund as provided for by this
Agreement are duly authorized and upon such delivery will be validly issued
and will be fully paid and nonassessable by the PFEAS Trust and the
Acquiring Fund and no shareholder of the Acquiring Fund has any preemptive
right to subscription or purchase in respect thereof; (iii) this Agreement
has been duly authorized, executed and delivered by the PFEAS Trust on
behalf of the Acquiring Fund and, assuming that the PAF Prospectus, the
Registration Statement, the Acquired Fund Proxy Statement and the Acquiring
Fund Proxy Statement comply with the 1933 Act, the 1934 Act and the 1940
Act and assuming due authorization, execution and delivery of this
Agreement by the PAF Trust on behalf of the Acquired Fund, is a valid and
binding obligation of the PFEAS Trust and the Acquiring Fund; (iv) the
execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated hereby will not, violate the PFEAS Trust's
Declaration of Trust or By-Laws, or any provision of any agreement known to
such counsel to which the PFEAS Trust or the Acquiring Fund is a party or
by which it is bound, it being understood that with respect to investment
restrictions as contained in the PFEAS Trust's Declaration of Trust, By-
Laws or then-current prospectus or statement of additional information,
such counsel may rely upon a certificate of an officer of the PFEAS Trust
whose responsibility it is to advise the PFEAS Trust and the Acquiring Fund
with respect to such matters; (v) no consent, approval, authorization or
order of any court or governmental authority is required for the
consummation by the PFEAS Trust on behalf of the Acquiring Fund of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities or blue sky laws; and (vi) the Registration
Statement has become effective under the 1933 Act, and to best of the
knowledge of such counsel, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the 1933
Act. In addition, such counsel shall also state that they have participated
in conferences with officers and other representatives of the Acquiring
Fund at which the contents of the Acquired Fund Proxy Statement and related
matters were discussed, and, although they are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Acquired Fund Proxy Statement, on the basis of
the foregoing (relying as to materiality to a large extent upon the
opinions of officers and other
A-17
<PAGE>
representatives of the Acquiring Fund), no facts have come to their
attention that lead them to believe that the Acquired Fund Proxy Statement
as of its date, as of the date of the Acquired Fund shareholders' meeting,
or as of the Exchange Date, contained an untrue statement of a material
fact regarding the Acquiring Fund or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
regarding the Acquiring Fund, in light of the circumstances under which
they were made, not misleading. Such opinion may state that such counsel
does not express any opinion or belief as to the financial statements or
other financial data, or as to the information relating to the Acquired
Fund, contained in the Acquired Fund Proxy Statement or the Registration
Statement, and that such opinion is solely for the benefit of the Acquired
Fund, its Trustees and its officers.
g. That the Acquired Fund shall have received an opinion of Ropes & Gray,
dated the Exchange Date (which opinion would be based upon certain factual
representations and subject to certain qualifications), in form
satisfactory to the Acquired Fund, to the effect that, on the basis of the
existing provisions of the Code, current administrative rules, and court
decisions, for federal income tax purposes: (i) no gain or loss will be
recognized by the Acquired Fund as a result of the reorganization; (ii) no
gain or loss will be recognized by shareholders of the Acquired Fund on the
distribution of Merger Shares to them in exchange for their shares of the
Acquired Fund; (iii) the tax basis of the Merger Shares that the Acquired
Fund's shareholders receive in place of their Acquired Fund shares will be
the same as the basis of the Acquired Fund shares; and (iv) a shareholder's
holding period for the Merger Shares received pursuant to the Agreement
will be determined by including the holding period for the Acquired Fund
shares exchanged for the Merger Shares, provided that the shareholder held
the Acquired Fund shares as a capital asset.
h. That all actions taken by the PFEAS Trust on behalf of the Acquiring Fund
in connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to
the Acquired Fund and Ropes & Gray.
i. That the Registration Statement shall have become effective under the 1933
Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of the PFEAS Trust or the Acquiring Fund,
threatened by the Commission.
j. That the PAF Trust and PFEAS Trust shall have received from the Commission
and any relevant state securities administrator such order or orders as are
reasonably necessary or desirable under the 1933 Act, the 1934 Act, the
1940 Act, and any applicable state securities or blue sky laws in
connection with the transactions contemplated hereby, and that all such
orders shall be in full force and effect.
10. Indemnification.
---------------
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<PAGE>
a. The Acquired Fund will indemnify and hold harmless, out of the assets of
the Acquired Fund (which shall be deemed to include the assets of the
Acquiring Fund represented by the Merger Shares following the Exchange
Date) but no other assets, the trustees and officers of the PFEAS Trust
(for purposes of this subparagraph, the "Indemnified Parties") against any
and all expenses, losses, claims, damages and liabilities at any time
imposed upon or reasonably incurred by any one or more of the Indemnified
Parties in connection with, arising out of, or resulting from any claim,
action, suit or proceeding in which any one or more of the Indemnified
Parties may be involved or with which any one or more of the Indemnified
Parties may be threatened by reason of any untrue statement or alleged
untrue statement of a material fact relating to the PAF Trust or the
Acquired Fund contained in the Registration Statement, the PAF Prospectus,
the Acquired Fund Proxy Statement, the Acquiring Fund Proxy Statement or
any amendment or supplement to any of the foregoing, or arising out of or
based upon the omission or alleged omission to state in any of the
foregoing a material fact relating to the PAF Trust or the Acquired Fund
required to be stated therein or necessary to make the statements relating
to the PAF Trust or the Acquired Fund therein not misleading, including,
without limitation, any amounts paid by any one or more of the Indemnified
Parties in a reasonable compromise or settlement of any such claim, action,
suit or proceeding, or threatened claim, action, suit or proceeding made
with the consent of the PAF Trust or the Acquired Fund. The Indemnified
Parties will notify the PAF Trust and the Acquired Fund in writing within
ten days after the receipt by any one or more of the Indemnified Parties of
any notice of legal process or any suit brought against or claim made
against such Indemnified Party as to any matters covered by this Section
10(a). The Acquired Fund shall be entitled to participate at its own
expense in the defense of any claim, action, suit or proceeding covered by
this Section 10(a), or, if it so elects, to assume at its expense by
counsel satisfactory to the Indemnified Parties the defense of any such
claim, action, suit or proceeding, and if the Acquired Fund elects to
assume such defense, the Indemnified Parties shall be entitled to
participate in the defense of any such claim, action, suit or proceeding at
their expense. The Acquired Fund's obligation under Section 10(a) to
indemnify and hold harmless the Indemnified parties shall constitute a
guarantee of payment so that the Acquired Fund will pay in the first
instance any expenses, losses, claims, damages and liabilities required to
be paid by it under this Section 10(a) without the necessity of the
Indemnified Parties' first paying the same.
b. The Acquiring Fund will indemnify and hold harmless, out of the assets of
the Acquiring Fund but no other assets, the trustees and officers of the
PAF Trust (for purposes of this subparagraph, the "Indemnified Parties")
against any and all expenses, losses, claims, damages and liabilities at
any time imposed upon or reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of, or resulting from
any claim, action, suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any one or more of the
Indemnified Parties may be threatened by reason of any untrue statement or
alleged untrue statement of a material fact relating to the Acquiring Fund
contained in the Registration Statement, the PFEAS Prospectus, the Acquired
Fund Proxy Statement, the Acquiring
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<PAGE>
Fund Proxy Statement or any amendment or supplement to any thereof, or
arising out of, or based upon, the omission or alleged omission to state in
any of the foregoing a material fact relating to the PFEAS Trust or the
Acquiring Fund required to be stated therein or necessary to make the
statements relating to the PFEAS Trust or the Acquiring Fund therein not
misleading, including, without limitation, any amounts paid by any one or
more of the Indemnified Parties in a reasonable compromise or settlement of
any such claim, action, suit or proceeding, or threatened claim, action,
suit or proceeding made with the consent of the PFEAS Trust or the
Acquiring Fund. The Indemnified Parties will notify the PFEAS Trust and the
Acquiring Fund in writing within ten days after the receipt by any one or
more of the Indemnified parties of any notice of legal process or any suit
brought against or claim made against such Indemnified Party as to any
matters covered by this Section 10(b). The Acquiring Fund shall be entitled
to participate at its own expense in the defense of any claim, action, suit
or proceeding covered by this Section 10(b), or, if it so elects, to assume
at its expense by counsel satisfactory to the Indemnified Parties the
defense of any such clam, action, suit or proceeding, and, if the Acquiring
Fund elects to assume such defense, the Indemnified Parties shall be
entitled to participate in the defense of any such claim, action, suit or
proceeding at their own expense. The Acquiring Fund's obligation under this
Section 10(b) to indemnify and hold harmless the Indemnified Parties shall
constitute a guarantee of payment so that the Acquiring Fund will pay in
the first instance any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 10(b) without the necessity of
the Indemnified Parties' first paying the same.
11. No Broker, etc. Each of the Acquired Fund and the Acquiring Fund
--------------
represents that there is no person who has dealt with it, the PAF Trust or
the PFEAS Trust who by reason of such dealings is entitled to any broker's
or finder's or other similar fee or commission arising out of the
transactions contemplated by this Agreement.
12. Termination. The Acquired Fund and the Acquiring Fund may, by mutual
-----------
consent of the trustees on behalf of each Fund, terminate this Agreement,
and the Acquired Fund or the Acquiring Fund, after consultation with
counsel and by consent of their trustees or an officer authorized by such
trustees, may waive any condition to their respective obligations
hereunder. If the transactions contemplated by this Agreement have not been
substantially completed by February 28, 1997, this Agreement shall
automatically terminate on that date unless a later date is agreed to by
the Acquired Fund and the Acquiring Fund.
13. Rule 145. Pursuant to Rule 145 under the 1933 Act, the Acquiring Fund
--------
will, in connection with the issuance of any of any Merger Shares to any
person who at the time of the transaction contemplated hereby is deemed to
be an affiliate of a party to the transaction pursuant to Rule 145(c),
cause to be affixed upon the certificates issued to such person (if any) a
legend as follows:
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<PAGE>
"THESE SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO [Acquiring
Fund] OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (ii) IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE FUND SUCH
REGISTRATION IS NOT REQUIRED."
and, further, the Acquiring Fund will issue stop transfer instructions to
the Acquiring Fund's transfer agent with respect to such shares. The
Acquired Fund will provide the Acquiring Fund on the Exchange Date with the
name of any Acquired Fund shareholder who is to the knowledge of the
Acquired Fund an affiliate of the Acquired Fund on such date.
14. Covenants, etc. Deemed Material. All covenants, agreements,
-------------------------------
representations and warranties made under this Agreement and any
certificates delivered pursuant to this Agreement shall be deemed to have
been material and relied upon by each of the parties, notwithstanding an
investigation made by them or on their behalf.
15. Sole Agreement; Amendments. This Agreement supersedes all previous
--------------------------
correspondence and oral communications between the parties regarding the
subject matter hereof, constitutes the only understanding with respect to
such subject matter, may not be changed except by a letter of agreement
signed by each party hereto, and shall be construed in accordance with and
governed by the laws of The Commonwealth of Massachusetts.
16. Declaration of Trust.
--------------------
a. A copy of the Declaration of Trust of the PAF Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the trustees of
the PAF Trust on behalf of the Acquired Fund, as trustees and not
individually and that the obligations of this instrument are not binding
upon any of the trustees, officers or shareholders of the PAF Trust
individually but are binding only upon the assets and property of the
Acquired Fund.
b. A copy of the Declaration of Trust of the PFEAS Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the trustees of
the PFEAS Trust on behalf of the Acquiring Fund, as trustees and not
individually and that the obligations of this
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<PAGE>
instrument are not binding upon any of the trustees, officers or
shareholders of the PFEAS Trust individually but are binding only upon the
assets and property of the Acquiring Fund.
PIMCO ADVISORS FUNDS, on behalf of its
_____________________ Fund series
By:_________________________________
PIMCO FUNDS: EQUITY ADVISORS SERIES,
on behalf of its _______________ Fund series
By:_________________________________
Accepted and Agreed as to Section 5(a) only by PIMCO Advisors L.P.
By: ________________________________
Title: _______________________________
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<PAGE>
APPENDIX B
INFORMATION ABOUT THE ACQUIRING FUNDS
PIMCO Funds: Equity Advisors Series (the "Trust"), formerly PIMCO
Advisors Institutional Funds, is a no-load, open-end management investment
company ("mutual fund") which currently offers fourteen separate investment
portfolios two of which are the NFJ Diversified Low P/E Fund and the Cadence Mid
Cap Growth Fund (the "Funds"). Each Fund has its own investment objective and
policies. The Trust is designed to provide access to the professional investment
management services offered by PIMCO Advisors L.P. ("PIMCO Advisors" or the
"Adviser") and its investment management affiliates.
Each Fund offers its shares in five classes: Class A, Class B, Class C,
the Institutional Class and the Administrative Class. This Prospectus/Proxy
Statement describes only those classes of shares to be received by shareholders
of the Acquired Funds in the Mergers, i.e. Class A, Class B, and Class C.
Information regarding the Institutional Class and Administrative Class of each
Fund is contained in the current Prospectus and the Statement of Additional
Information of the Trust, which are available upon request to the Trust without
charge.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of each Fund are
described below. There can be no assurance that the investment objective of any
Fund will be achieved. Because the market value of each Fund's investments will
change, the net asset value per share of each Fund also will vary.
NFJ Diversified Low P/E Fund seeks long-term growth of capital and
income. In pursuing this objective, the Fund invests primarily in common stocks
characterized by having below-average price to earnings ("P/E") ratios relative
to their industry group. In selecting securities, the Portfolio Manager
classifies a universe of approximately 2,000 stocks by industry, each of which
has a minimum market capitalization of $200 million at the time of investment.
The universe is then screened to find the stocks with the lowest P/E ratios in
each industry, subject to application of quality and price momentum screens. The
stocks in each industry with the lowest P/E ratios that pass the quality and
price momentum screens are then selected for the Fund. The Fund usually invests
in approximately 50 stocks. Although quarterly rebalancing is a general rule,
replacements are made whenever an alternative stock within the same industry has
a significantly lower P/E ratio than the current Fund holdings. See
"Characteristics and Risks of Securities and Investment Techniques" below and
"Investment Objectives and Policies" in the current Statement of Additional
Information of the Trust (the "Statement of Additional Information") for more
details on investment practices.
Cadence Mid Cap Growth Fund seeks growth of capital. In pursuing this
objective, the Fund invests primarily in common stocks of middle capitalization
companies that have improving fundamentals (such as growth of earnings and
dividends) and whose stock is reasonably valued by the market. Stocks for the
Fund are selected from a universe of companies with market capitalizations in
excess of $500 million at the time of investment, excluding the 200 companies
with the highest market capitalization. The Fund usually invests in
approximately 60 to 100 common stocks. Each issue is screened and ranked using
five distinct computerized models, including: (i) a dividend growth screen, (ii)
an equity growth screen, (iii) an earnings growth screen, (iv) an earnings
momentum screen, and (v) an earnings surprise screen. The Portfolio Manager
believes that the models identify the stocks in the universe exhibiting growth
characteristics with reasonable valuations. Stocks are replaced when they score
worse-than-median screen ranks, have negative earnings surprises, or show poor
relative price performance. The universe is rescreened frequently to obtain a
favorable composition of growth and value characteristics for the entire Fund.
See "Characteristics and Risks of Securities and Investment Techniques" below
and "Investment Objectives and Policies" in the Statement of Additional
Information for more details on investment practices.
The Funds will each invest primarily (normally at least 65% of its
assets) in common stock. Each Fund may maintain a portion of its assets, which
will usually not exceed 10%, in U.S. Government securities, high-quality debt
securities (whose maturity or remaining maturity will not exceed five years),
money market obligations, and in cash to provide for payment of the Fund's
expenses and to meet redemption requests.
<PAGE>
Any of the Funds may temporarily not be invested primarily in equity
securities after the commencement of operations or after receipt of significant
new monies. Any of the Funds may temporarily not contain the number of stocks in
which the Fund normally invests if the Fund does not have sufficient assets to
be fully invested, or pending the Portfolio Manager's ability to prudently
invest new monies. It is the policy of all of the Funds to be as fully invested
in common stock as practicable at all times. This policy precludes the Funds
from investing in debt securities as a defensive investment posture (although
the Funds may invest in such securities to provide for payment of expenses and
to meet redemption requests). Accordingly, investors in these Funds bear the
risk of general declines in stock prices and the risk that a Fund's exposure to
such declines cannot be lessened by investment in debt securities.
The Funds may also invest in convertible securities, preferred stock,
warrants subject to certain limitations, and American Depository Receipts
("ADRs"). For more information on these investment practices, see
"Characteristics and Risks of Securities and Investment Techniques" below and
"Investment Objectives and Policies" in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
Each Fund's investment objective, as set forth above under "Investment
Objectives and Policies," and the investment restrictions set forth below are
fundamental policies of the Fund and may not be changed with respect to a Fund
without shareholder approval by vote of a majority of the outstanding shares of
that Fund (as defined in the Investment Company Act of 1940). Under these
restrictions, a Fund may not:
(1) invest in a security if, as a result of such investment, more than
25% of its total assets (taken at market value at the time of such investment)
would be invested in the securities of issuers in any particular industry,
except that this restriction does not apply to securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities (or repurchase
agreements with respect thereto);
(2) with respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at market
value at the time of such investment) would be invested in the securities of any
one issuer, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities;
(3) with respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the time of
such investment) of the outstanding voting securities of any one issuer, except
that this restriction does not apply to securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities;
(4) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
in the real estate industry or which invest in real estate or interests therein;
(5) purchase or sell commodities or commodities contracts (which, for the
purpose of this restriction, shall not include foreign currency or forward
foreign currency contracts), except that any Fund may engage in interest rate
futures contracts, stock index futures contracts, futures contracts based on
other financial instruments or one or more groups of instruments, and on options
on such futures contracts;
(6) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but it
may make margin deposits in connection with transactions in options, futures,
and options on futures, and except that effecting short sales will be deemed not
to constitute a margin purchase for purposes of this restriction;
(7) borrow money, or pledge, mortgage or hypothecate its assets, except
that a Fund may (i) borrow from banks or enter into reverse repurchase
agreements, or employ similar investment techniques, and pledge its assets in
connection therewith, but only if immediately after each borrowing and
continuing thereafter, there is asset coverage of 300% and (ii) enter into
reverse repurchase agreements and transactions in options, futures, options on
futures, and forward foreign currency contracts as described in this Prospectus
and in the Statement of Additional Information (the deposit of assets in escrow
in connection with the writing of covered put and call options and the purchase
of securities on a when-issued or delayed delivery basis, and collateral
arrangements with respect to initial or variation margin deposits for futures
contracts, options on futures contracts, and forward foreign currency contracts
will not be deemed to be pledges of a Fund's assets);
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(8) issue senior securities, except insofar as a Fund may be deemed to
have issued a senior security by reason of borrowing money in accordance with
the Fund's borrowing policies, and except for purposes of this investment
restriction, collateral, escrow, or margin or other deposits with respect to the
making of short sales, the purchase or sale of futures contracts or related
options, purchase or sale of forward foreign currency contracts, and the writing
of options on securities are not deemed to be an issuance of a senior security;
(9) lend any funds or other assets, except that a Fund may, consistent
with its investment objective and policies: (a) invest in debt obligations,
including bonds, debentures, or other debt securities, bankers' acceptances and
commercial paper, even though the purchase of such obligations may be deemed to
be the making of loans, (b) enter into repurchase agreements and reverse
repurchase agreements, and (c) lend its portfolio securities in an amount not to
exceed one-third of the value of its total assets, provided such loans are made
in accordance with applicable guidelines established by the Securities and
Exchange Commission ("SEC") and the Trustees of the Trust; or
(10) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under the federal securities laws.
Each Fund is also subject to the following non-fundamental restrictions
and policies (which may be changed without shareholder approval) relating to the
investment of its assets and activities. Unless otherwise indicated, a Fund may
not:
(A) invest for the purpose of exercising control or management;
(B) invest in securities of another open-end investment company;
(C) invest more than 10% of the net assets of a Fund (taken at market
value at the time of the investment) in "illiquid securities," illiquid
securities being defined to include repurchase agreements maturing in more than
seven days, certain loan participation interests, fixed time deposits which are
not subject to prepayment or provide withdrawal penalties upon prepayment (other
than overnight deposits), or other securities which legally or in the Adviser's
or Portfolio Manager's opinion may be deemed illiquid (other than securities
issued pursuant to Rule 144A under the Securities Act of 1933 and certain
commercial paper that the Adviser or Portfolio Manager has determined to be
liquid under procedures approved by the Board of Trustees); nor invest more than
5% of the net assets of a Fund in securities that are illiquid because they are
subject to legal or contractual restrictions on resale;
(D) purchase any security if, as a result, the Fund will then have more
than 5% of its total assets invested in securities of companies (including
predecessor companies) that have been in continuous operation for less than
three years;
(E) purchase or retain securities of any issuer if, to the knowledge of
the Fund, any of the Fund's officers or Trustees, or any officer or Director of
PIMCO Advisors or the Portfolio Manager of the Fund, individually owns more than
one-half of 1% of the outstanding securities of the issuer and together own
beneficially more than 5% of such issuer's securities;
(F) purchase securities for the Fund from, or sell portfolio securities
to, any of the officers and Directors or Trustees of the Trust or the Adviser;
(G) invest in a security if, with respect to 100% of the total assets,
the Fund would own more than 10% (taken at the time of such investment) of the
outstanding voting securities of any one issuer, except that this restriction
does not apply to securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities;
(H) invest more than 5% of the assets of a Fund (taken at market value at
the time of investment) in any combination of interest only, principal only, or
inverse floating rate securities;
(I) borrow money (excluding reverse repurchase agreements which are
subject to the Fund's fundamental borrowing restriction), except for temporary
administrative purposes;
(J) sell securities or property short, except short sales against the
box;
(K) purchase, write, or sell puts, calls, straddles, spreads, or
combinations thereof, except that this restriction does not apply to puts that
are a feature of floating rate securities or to puts that are a feature of other
corporate debt securities,
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and except that any Fund may engage in options on securities, options on
securities indexes, options on foreign currencies, options on futures contracts,
and options on other financial instruments or one or more groups of instruments;
(L) invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a result,
the investment in warrants (valued to the lower of cost or market) would exceed
5% of the value of the Fund's net assets, of which not more than 2% of the
Fund's net assets may be invested in warrants not listed on a recognized U.S. or
foreign stock exchange;
(M) invest in securities sold in foreign over-the-counter markets unless
the foreign dealers effecting such transactions have a minimum net worth of $20
million; or
(N) invest in oil, gas or other mineral exploration or development
programs (including oil, gas, or other mineral leases), except that a Fund may
invest in the securities of companies that invest in or sponsor those programs.
For purposes of fundamental investment restriction (5), swap agreements
are not deemed to be commodities contracts. Unless otherwise indicated, all
limitations applicable to Fund investments apply only at the time a transaction
is entered into. Any subsequent change in a rating assigned by any rating
service to a security (or, if unrated, deemed to be of comparable quality), or
change in the percentage of Fund assets invested in certain securities or other
instruments resulting from market fluctuations or other changes in a Fund's
total assets will not require a Fund to dispose of an investment until the
Adviser or Portfolio Manager determines that it is practicable to sell or close
out the investment without undue market or tax consequences to the Fund. In the
event that ratings services assign different ratings to the same security, the
Adviser or Portfolio Manager will determine which rating it believes best
reflects the security's quality and risk at that time, which may be the higher
of the several assigned ratings.
CHARACTERISTICS AND RISKS OF SECURITIES
AND INVESTMENT TECHNIQUES
The different types of securities and investment techniques used by the
individual Funds all have attendant risks of varying degrees. For example, with
respect to common stock, there can be no assurance of capital appreciation, and
there is a risk of market decline. With respect to debt securities, including
money market instruments, there is the risk that the issuer of a security may
not be able to meet its obligation to make scheduled interest or principal
payments. In addition, the value of debt securities generally rises and falls
inversely with interest rates, and the longer the maturity of the debt security,
the more volatile it may be in terms of changes in value. Because each Fund
seeks a different investment objective and has different investment policies,
each is subject to varying degrees of financial, market, and credit risks.
Therefore, investors should carefully consider the investment objective,
investment policies, and potential risks of any Fund or Funds before investing.
The following describes potential risks associated with different types
of investment techniques that may be used by the individual Funds. For more
detailed information on these investment techniques, as well as information on
the types of securities in which some or all of the Funds may invest, see the
Statement of Additional Information.
Low Capitalization Stocks
The Funds may invest in common stock of companies with market
capitalization that is low compared to other publicly traded companies.
Investments in larger companies present certain advantages in that such
companies generally have greater financial resources, more extensive research
and development, manufacturing, marketing and service capabilities, and more
stability and greater depth of management and technical personnel. Investments
in smaller, companies may present greater opportunities for growth but also may
involve greater risks than customarily are associated with more established
companies.
Repurchase Agreements
For the purposes of maintaining liquidity and achieving income, each Fund
may enter into repurchase agreements, which entail the purchase of a portfolio
eligible security from a bank or broker-dealer that agrees to repurchase the
security at the Fund's cost plus interest within a specified time (normally one
day). If the party agreeing to repurchase should
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default, as a result of bankruptcy or otherwise, the Fund will seek to sell the
securities which it holds, which action could involve procedural costs or delays
in addition to a loss on the securities if their value should fall below their
repurchase price. The Cadence Mid Cap Growth Fund, whose investment objectives
do not include the earning of income, will invest in repurchase agreements only
as a cash management technique with respect to that portion of the portfolio
maintained in cash. Each Fund will limit its investment in repurchase agreements
maturing in more than seven days consistent with the Fund's policy on investment
in illiquid securities.
Reverse Repurchase Agreements and Other Borrowings
A reverse repurchase agreement is a form of leverage that involves the
sale of a security by a Fund and its agreement to repurchase the instrument at a
specified time and price. The Fund will maintain a segregated account consisting
of liquid assets, as determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees, maturing not later than the
expiration of the reverse repurchase agreement, to cover its obligations under
reverse repurchase agreements.
Reverse repurchase agreements will be subject to the Funds' limitations
on borrowings, which will restrict the aggregate of such transactions (plus any
other borrowings) to 33 1/3% of a Fund's total assets. Apart from transactions
involving reverse repurchase agreements, a Fund will not borrow money, except
for temporary administrative purposes.
Loans of Portfolio Securities
For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions, provided: (i)
the loan is secured continuously by collateral consisting of U.S. Government
securities, cash or cash equivalents (negotiable certificates of deposit,
bankers' acceptances or letters of credit) maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (ii) the Fund may at any time call the loan and obtain the return of the
securities loaned; (iii) the Fund will receive any interest or dividends paid on
the loaned securities; and (iv) the aggregate market value of securities loaned
will not at any time exceed 33 1/3% of the total assets of the Fund.
Foreign Securities
The Funds may invest in ADRs. Investing in the securities of issuers in
any foreign country involves special risks and considerations not typically
associated with investing in U.S. companies. Shareholders should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations. These risks include: differences
in accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additional costs
associated with an investment in foreign securities may include higher custodial
fees than apply to domestic custodial arrangements and transaction costs of
foreign currency conversions. Changes in foreign exchange rates also will affect
the value of securities denominated or quoted in currencies other than the U.S.
dollar.
Illiquid Securities
The Funds may invest in securities that are illiquid, but will not
acquire such securities if they would compose more than 10% of the value of a
Fund's net assets (taken at market value at the time of investment), and will
not invest in securities that are illiquid because they are subject to legal or
contractual restrictions on resale if such securities would compose more than 5%
of the value of the Fund's net assets (taken at market value at the time of
investment). Certain illiquid securities may require pricing at fair value as
determined by in good faith under the supervision of the Trust's Board of
Trustees. A Portfolio Manager may be subject to significant delays in disposing
of illiquid securities, and
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transactions in illiquid securities may entail registration expenses and other
transaction costs that are higher than for transactions in liquid securities.
The term "illiquid securities" for this purpose means securities that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which a Fund has valued the securities. Illiquid
securities are considered to include, among other things, written over-the-
counter options, securities or other liquid assets being used as cover for such
options, repurchase agreements with maturities in excess of seven days, certain
loan participation interests, fixed time deposits which are not subject to
prepayment or provide for withdrawal penalties upon prepayment (other than
overnight deposits), securities that are subject to legal or contractual
restrictions on resale (such as privately placed debt securities), and other
securities whose disposition is restricted under the federal securities laws
(other than securities issued pursuant to Rule 144A under the Securities Act of
1933 and certain commercial paper that the Adviser or a Portfolio Manager has
determined to be liquid under procedures approved by the Board of Trustees).
MANAGEMENT OF THE TRUST
The business affairs of the Trust are managed under the direction of the
Board of Trustees. The Trustees are William D. Cvengros, Richard L. Nelson,
Lyman W. Porter, and Alan Richards. Additional information about the Trustees
and the Trust's executive officers may be found in the Statement of Additional
Information under the heading "Management--Trustees and Officers."
Investment Adviser
PIMCO Advisors serves as Investment Adviser to the Funds pursuant to an
investment advisory agreement with the Trust. PIMCO Advisors is a Delaware
limited partnership organized in 1987. PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. Total assets under management by PIMCO
Advisors and its subsidiary partnerships at July 31, 1996 were approximately
$99.4 billion. A portion of the units of the limited partner interest in PIMCO
Advisors is traded publicly on the New York Stock Exchange. The general partner
of PIMCO Advisors is PIMCO Partners, G.P. Pacific Mutual Life Insurance Company
and its affiliates hold a substantial interest in PIMCO Advisors through direct
or indirect ownership of units of PIMCO Advisors, and indirectly hold a majority
interest in PIMCO Partners, G.P., with the remainder held indirectly by a group
composed of the Managing Directors of PIMCO. PIMCO Advisors is governed by an
Operating Board and Equity Board, which exercise substantially all of the
governance powers of the general partner and serve as the functional equivalent
of a board of directors. PIMCO Advisors' address is 800 Newport Center Drive,
Newport Beach, California 92660. PIMCO Advisors is registered as an investment
adviser with the SEC. PIMCO Advisors currently has six subsidiary partnerships:
PIMCO, Parametric, Cadence, NFJ, Blairlogie, and Columbus Circle.
Under the investment advisory agreement, PIMCO Advisors, subject to the
supervision of the Board of Trustees, is responsible for providing advice and
guidance with respect to the Funds and for managing, either directly or through
others selected by the Adviser, the investment of the Funds. PIMCO Advisors also
furnishes to the Board of Trustees periodic reports on the investment
performance of each Fund.
Portfolio Managers
Pursuant to portfolio management agreements, PIMCO Advisors employs its
affiliates as Portfolio Managers for all of the Funds. PIMCO Advisors
compensates these Portfolio Managers from its advisory fee (not from the Trust).
Under these agreements, a Portfolio Manager has full investment discretion and
makes all determinations with respect to the investment of a Fund's assets, and
makes all determinations respecting the purchase and sale of a Fund's securities
and other investments.
NFJ manages the NFJ Diversified Low P/E Fund. NFJ is an investment
management firm organized as a general partnership. NFJ has two partners: PIMCO
Advisors as the supervisory partner, and NFJ Management, Inc. as the managing
partner. NFJ Investment Group, Inc., the predecessor investment adviser to NFJ,
commenced operations in 1989. Accounts managed by NFJ had combined assets as of
July 31, 1996 of approximately $1.6 billion. NFJ's address is 2121 San Jacinto,
Suite 1440, Dallas, Texas 75201. NFJ is registered as an investment adviser with
the SEC.
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Chris Najork is responsible for the day-to-day management of the NFJ
Diversified Low P/E Fund. Mr. Najork is a Managing Director and a founding
partner of NFJ and has 27 years' experience encompassing equity research and
portfolio management. He received his bachelor's degree and MBA from Southern
Methodist University. Mr. Najork is a Chartered Financial Analyst.
Cadence manages the Cadence Mid Cap Growth Fund. Cadence is an investment
management firm organized as a general partnership. Cadence has two partners:
PIMCO Advisors as the supervisory partner, and Cadence Capital Management, Inc.
as the managing partner. Cadence Capital Management Corporation, the predecessor
investment adviser to Cadence, commenced operations in 1988. Accounts managed by
Cadence had combined assets as of July 31, 1996 of approximately $2.7 billion.
Cadence's address is Exchange Place, 53 State Street, Boston, Massachusetts
02109. Cadence is registered as an investment adviser with the SEC.
David B. Breed, William B. Bannick, Katherine A. Burdon, Eric M.
Wetlaufer and Peter B. McManus are primarily responsible for the day-to-day
management of the Cadence Mid Cap Growth Fund. Mr. Breed is a Managing Director,
Chief Executive Officer, and founding partner of Cadence and has 23 years'
investment management experience. He has been the driving force in developing
the firm's growth-oriented stock screening and selection process and has been
with Cadence or its predecessor since its inception. Mr. Breed graduated from
the University of Massachusetts and received his MBA from the Wharton School of
Business. He is a Chartered Financial Analyst. Mr. Bannick is a Managing
Director and Executive Vice President of Cadence and has 11 years' investment
management experience. He had previously served as Executive Vice President of
George D. Bjurman & Associates and as Supervising Portfolio Manager of Trinity
Investment Management Corporation. Mr. Bannick joined Cadence's predecessor in
1992. He graduated from the University of Massachusetts and received his MBA
from Boston University. Mr. Bannick is a Chartered Financial Analyst. Ms. Burdon
is a Managing Director and Portfolio Manager of Cadence and has nine years'
investment management experience. She previously served as a Vice President and
Portfolio Manager of The Boston Company. Ms. Burdon joined Cadence in 1993. She
graduated from Stanford University and received a Master of Science degree from
Northeastern University. Ms. Burdon is a Chartered Financial Analyst and
Certified Public Accountant. Mr. Wetlaufer is a Managing Director and Portfolio
Manager of Cadence and has 11 years' investment management experience. He
previously served as Vice President of Northfield Information Services. Mr.
Wetlaufer joined Cadence in 1991. He graduated from Wesleyan University and is a
Chartered Financial Analyst. Mr. McManus is Director of Fund Management of
Cadence and has 19 years' investment management experience. He previously served
as a Vice President of Bank of Boston. Mr. McManus joined Cadence in 1994. He
graduated from the University of Massachusetts, and is certified as a Financial
Planner.
Registration as an investment adviser with the SEC does not involve
supervision by the SEC over investment advice, and registration with the CFTC as
a commodity trading adviser does not involve supervision by the CFTC over
commodities trading. The portfolio management agreements are not exclusive, and
NFJ and Cadence may provide, and currently are providing, investment management
services to other clients, including other investment companies.
Fund Administrator
Pacific Investment Management Company ("PIMCO"), 840 Newport Center
Drive, Suite 360, Newport Beach, CA 92660, serves as administrator to the Funds
pursuant to an administration agreement. PIMCO provides administrative services
to the Funds, which include clerical help and accounting, bookkeeping, internal
audit services, and certain other services required by the Funds, preparation of
reports to the Funds' shareholders and regulatory filings. In addition, PIMCO,
at its own expense, arranges for the provision of legal, audit, custody,
transfer agency and other services for the Funds, and is responsible for the
costs of registration of the Trust's shares and the printing of prospectuses and
shareholder reports for current shareholders.
The Trust is responsible for the following expenses: (i) salaries and
other compensation of any of the Trust's executive officers and employees who
are not officers, directors, stockholders, or employees of PIMCO Advisors,
PIMCO, or their subsidiaries or affiliates; (ii) taxes and governmental fees;
(iii) brokerage fees and commissions and other portfolio transaction expenses;
(iv) the costs of borrowing money, including interest expenses; (v) fees and
expenses of the Trustees who are not "interested persons" of the Adviser, PIMCO,
Portfolio Managers, or the Trust, and any counsel retained exclusively for their
benefit; (vi) extraordinary expenses, including costs of litigation and
indemnification expenses; (vii) expenses which are capitalized in accordance
with generally accepted accounting principles; and (viii) any expenses allocated
or allocable to a specific class of shares, which include fees payable pursuant
to a distribution or servicing plan and may include certain other expenses as
permitted by the Trust's Multi-Class Plan adopted pursuant to
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Rule 18f-3 under the Investment Company Act of 1940 (the "1940 Act") and subject
to review and approval by the Trustees.
It is expected that PIMCO Advisors will become the Funds' administrator,
replacing PIMCO, at or about the time that the Mergers are consummated, and that
PIMCO Advisors will provide substantially identical services to the Funds as
were provided by PIMCO in that role.
Advisory and Administrative Fees
The Funds feature fixed advisory and administrative fees. For providing
investment advisory services to the Funds, PIMCO Advisors receives monthly fees
from each Fund at the annual rate of 0.45% of the average daily net assets of
the Fund.
For providing administrative services to the Funds as described above,
PIMCO receives, and PIMCO Advisors will receive, monthly fees from each Fund at
an annual rate of 0.40% of the average daily net assets of the Fund attributable
to its Class A, Class B and Class C shares.
Both the investment advisory and administration agreements for the Funds
may be terminated by the Trustees, or by PIMCO Advisors, on 60 days' written
notice. Following their initial two-year terms, the agreements will continue
from year to year if approved by the Trustees.
Pursuant to the portfolio management agreements between the Adviser and
each of the Portfolio Managers, PIMCO Advisors (not the Trust) pays each
Portfolio Manager a fee based on a percentage of the average daily net assets of
a Fund as follows: NFJ - .45% annually for the NFJ Diversified Low P/E Fund;
Cadence --.45% annually for the Cadence Mid Cap Growth Fund. The Trust's Board
of Trustees has approved a reduction in these fees payable by the Adviser to NFJ
and Cadence to .35% annually. Such reductions are subject to the approval of the
existing shareholders of each Fund and, if approved by shareholders, would take
effect on or about the date that the Mergers are consummated.
Distributor and Distribution and Servicing Plans
PIMCO Advisors Distribution Company (the "Distributor"), an indirect
wholly-owned subsidiary of PIMCO Advisors, is the principal underwriter of the
Trust's shares and in that connection makes distribution and servicing payments
to participating brokers and servicing payments to certain banks and other
financial intermediaries in connection with the sale of Class B or Class C
shares and servicing payments to participating brokers, certain banks and other
financial intermediaries in connection with the sale of Class A shares. In the
case of Class A shares, these parties are compensated based on the amount of the
front-end sales charge reallowed by the Distributor, except in cases where Class
A shares are sold without a front-end sales charge. In the case of Class B
shares, participating brokers are compensated by an advance of a sales
commission by the Distributor. In the case of Class C shares, part or all of the
first year's distribution and servicing fee is generally paid at the time of
sale. Pursuant to a Distribution Contract with the Trust with respect to each
Fund's Class A, Class B and Class C shares, the Distributor bears various other
promotional and sales related expenses, including the cost of printing and
mailing prospectuses to persons other than shareholders.
Class A Servicing Fees: As compensation for services rendered and
expenses borne by the Distributor in connection with personal services rendered
to Class A shareholders of the Trust and the maintenance of Class A shareholder
accounts, the Trust pays the Distributor the servicing fees up to the annual
rates of .25% (calculated as a percentage of each Fund's average daily net
assets attributable to Class A shares).
Class B Distribution and Servicing Fees: As compensation for services
rendered and expenses borne by the Distributor in connection with the
distribution of Class B shares of each Fund of the Trust and in connection with
personal services rendered to Class B shareholder accounts, the Trust pays the
Distributor distribution fees and servicing fees up to the annual rate of .75%
and .25%, respectively (calculated as a percentage of each Fund's average daily
net assets attributable to Class B shares).
Class C Distribution and Servicing Fees: As compensation for services
rendered and expenses borne by the Distributor in connection with the
distribution of Class C shares of the Trust and in connection with personal
services
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rendered to Class C shareholders of the Trust and the maintenance of Class C
shareholder accounts, the Trust pays the Distributor distribution and servicing
fees up to the annual rates of .75% and .25%, respectively (calculated as a
percentage of each Fund's average daily net assets attributable to Class C
shares).
The Class A servicing fee and Class B and C distribution and servicing
fees paid to the Distributor are made under Distribution and Servicing Plans
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 and are
of the type known as "compensation" plans. This means that, although the
Trustees of the Trust are expected to take into account the expenses of the
Distributor and its predecessors in their periodic review of the Distribution
and Servicing Plans, the fees are payable to compensate the Distributor for
services rendered even if the amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class B and C shares may be spent by
the Distributor on any activities or expenses primarily intended to result in
the sale of Class B or C shares, respectively, including compensation to, and
expenses (including overhead and telephone expenses) of, financial consultants
or other employees of the Distributor or of participating or introducing brokers
who engage in distribution of Class B or C shares, printing of prospectuses and
reports for other than existing Class B or C shareholders, advertising and
preparation, printing and distribution of sales literature. The servicing fee,
applicable to Class A, B and C shares of the Trust, may be spent by the
Distributor on personal services rendered to shareholders of those classes and
the maintenance of shareholder accounts, including compensation to, and expenses
(including telephone and overhead expenses) of, financial consultants or other
employees of the Distributor or participating or introducing brokers, certain
banks and other financial intermediaries who aid in the processing of purchase
or redemption requests or the processing of dividend payments, who provide
information periodically to shareholder showing their positions in a Fund's
shares, who forward communications from the Trust to shareholders, who render
ongoing advice concerning the suitability of particular investment opportunities
offered by the Trust in light of the shareholders' needs, who respond to
inquiries from shareholders relating to such services, or who train personnel in
the provision of such services. Distribution and servicing fees may also be
spent on interest relating to unreimbursed distribution or servicing expenses
from prior years.
Many of the Distributor's sales and servicing efforts involve the Trust
as a whole, so that fees paid by any class of shares of any Fund may indirectly
support sales and servicing efforts relating to the other Funds' shares of the
same class. In reporting its expenses to the Trustees, the Distributor itemizes
expenses that relate to the distribution and/or servicing of a single Fund's
shares, and allocates other expenses among the Funds based on their relative net
assets. Expenses allocated to each Fund are further allocated among its classes
of shares annually based on the relative sales of each class, except for any
expenses that relate only to the sale or servicing of a single class. The
Distributor may make payments to brokers (and with respect to servicing fees
only, to certain banks and other financial intermediaries) of up to the
following percentages annually of the average daily net assets attributable to
shares in the accounts of their customers or clients:
Class A Shares
Servicing
Fee
---
All Funds..................................... 0.25%
Class B Shares
(Payable only with respect to shares outstanding for one year or more)
Servicing
Fee
---
All Funds..................................... 0.25%
Class C Shares -- purchased on or after July 1, 1991
(Payable only with respect to shares outstanding for one year
or more except in the case of shares for which no payment
is made to the party at the time of sale)
B-9
<PAGE>
Servicing Distribution
Fee Fee
--- ---
All Funds......................... 0.25% 0.65%
Class C Shares -- purchased before July 1, 1991
Servicing
Fee
---
All Funds......................... 0.25%
The Distributor may from time to time pay additional cash bonuses or
other incentives to selected participating brokers in connection with the sale
or servicing of the Class A, B and C shares of the Funds. On some occasions,
such bonuses or incentives may be conditioned upon the sale of a specified
minimum dollar amount of the shares of a Fund and/or all of the Funds together
or a particular class of shares, during a specific period of time. The
Distributor currently expects that such additional bonuses or incentives will
not exceed .50% of the amount of any sale.
If in any year the Distributor's expenses incurred in connection with
the distribution of Class B and C shares and, for Class A, B and C shares, in
connection with the servicing of shareholders and the maintenance of shareholder
accounts exceed the distribution and/or servicing fees paid by the Trust, the
Distributor would recover such excess only if the Distribution and Servicing
Plan with respect to such class of shares continues to be in effect in some
later year when the distribution and/or servicing fees exceed the Distributor's
expenses. The Trust is not obligated to repay any unreimbursed expenses that
may exist at such time, if any, as the relevant Distribution and Servicing Plan
terminates.
Custodian and Transfer Agent
[Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as Custodian to the Trust. Shareholder Services, Inc.,
P.O. Box 5866, Denver, Colorado 80217, serves as Transfer Agent for the Funds'
Class A, B and C shares.]
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
How to Buy Shares
Class A, B and C shares of each Fund of the Trust are continuously
offered through the Trust's principal underwriter, PIMCO Advisors Distribution
Company (the "Distributor"), and through other firms which have dealer
agreements with the Distributor ("participating brokers") or which have agreed
to act as introducing brokers for the Distributor ("introducing brokers").
There are two ways to purchase Class A, B and C shares: either 1)
through your dealer or broker which has a dealer agreement or 2) directly by
mailing an Account Application with payment, as described below under the
heading Direct Investment, to the Distributor (if no dealer is named in the
application, the Distributor may act as dealer).
Class A, B and C shares may be purchased at a price equal to their net
asset value per share next determined after receipt of an order, plus a sales
charge which, at the election of the purchaser, may be imposed either (i) at the
time of the purchase in the case of Class A shares (the "initial sales charge
alternative"), (ii) on a contingent deferred basis in the case of Class B shares
(the "deferred sales charge alternative") or (iii) by the deduction of an
ongoing asset based sales charge in the case of Class C shares (the "asset based
sales charge alternative"). In certain circumstances Class A and Class C shares
are also subject to a contingent deferred sales charge. See "Alternative
Purchase Arrangements." Purchase payments for Class B and Class C shares are
fully invested at the net asset value next determined after acceptance of the
B-10
<PAGE>
trade. Purchase payments for Class A shares, less the applicable sales charge,
are invested at the net asset value next determined after acceptance of the
trade.
All purchase orders received by the Distributor prior to the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time), on a regular business day, are processed at that day's offering price.
However, orders received by the Distributor from dealers or brokers after the
offering price is determined that day will receive such offering price if the
orders were received by the dealer or broker from its customer prior to such
determination and were transmitted to and received by the Distributor prior to
its close of business that day (normally 5:00 p.m. Eastern time) or, in the case
of certain retirement plans, received by the Distributor prior to 10:00 a.m.
Eastern time on the next business day. Purchase orders received on other than a
regular business day will be executed on the next succeeding regular business
day. The Distributor, in its sole discretion, may accept or reject any order
for purchase of Fund shares. The sale of shares will be suspended during any
period in which the New York Stock Exchange is closed for other than weekends or
holidays, or if permitted by the rules of the SEC when trading on the Exchange
is restricted or during an emergency which makes it impracticable for the Funds
to dispose of their securities or to determine fairly the value of their net
assets, or during any other period permitted by the SEC for the protection of
investors.
Except for purchases through the PIMCO Advisors Auto Invest plan, the
PIMCO Advisors Auto Exchange plan and tax-qualified programs referred to below,
the minimum initial investment in Class A, B or C shares of the Trust is $1,000
and in any Fund is $250, and the minimum additional investment is $100 per Fund.
For information about dealer commissions, see "Alternative Purchase
Arrangements" below. Persons selling Fund shares may receive different
compensation for selling Class A, Class B or Class C shares. Normally Trust
shares purchased through participating brokers are held in the investor's
account with that broker. No share certificates will be issued [unless
specifically requested in writing by an investor or broker-dealer].
Direct Investment. Investors who wish to invest in the Trust directly,
rather than through a participating broker, may do so by opening an account with
the Distributor. All shareholders who open direct accounts with the Distributor
will receive from the Distributor individual confirmations of each purchase,
redemption, dividend reinvestment, exchange or transfer of Trust shares,
including the total number of Trust shares owned as of the confirmation date
except that purchases which result from the reinvestment of daily-accrued
dividends and/or distributions will be confirmed once each calendar quarter. See
"Distributions" below. Information regarding direct investment or any other
features or plans offered by the Trust may be obtained by calling the
Distributor at [800-426-0107] or by calling your broker.
Purchase by Mail. Investors who wish to invest directly may send a
check payable to PIMCO Advisors Distribution Company, along with a completed
application form to:
PIMCO Advisors Distribution Company
[P.O. Box 5866
Denver, CO 80217-5866]
Purchased are accepted subject to collection of checks at full value
and conversion into federal funds. Payment by a check drawn on any member of
the Federal Reserve System can normally be converted into federal funds within
two business days after receipt of the check. Checks drawn on a non-member bank
may take up to 15 days to convert into federal funds. In all cases, the
purchase price is based on the net asset value next determined after the
purchase order and check are accepted, even though the check may not yet have
been converted into federal funds.
Subsequent Purchases of Shares. Subsequent purchases can be made as
indicated above by mailing a check with a letter describing the investment or
with the additional investment portion of a confirmation statement. Except for
subsequent purchases through the PIMCO Advisors Auto Invest plan, the PIMCO
Advisors Auto Exchange plan, tax-qualified programs and PIMCO Advisors Fund Link
referred to below, and except during periods when an Automatic Withdrawal plan
is in effect, the minimum subsequent purchase is $100 in Class A, B or C shares
of any Fund. All payments should be made payable to PIMCO Advisors Distribution
Company and should clearly indicate the shareholder's account number. Checks
should be mailed to the address above under "Purchase by Mail."
Tax-Qualified Retirement Plans. The Distributor makes available
retirement plan services and documents for Individual Retirement Accounts
(IRAs), for which First National Bank of Boston serves as trustee. These
accounts include Simplified Employee Pension Plan (SEP) and Salary Reduction
Simplified Employee Pension Plan (SAR/SEP) IRA accounts and prototype documents.
In addition, prototype documents are available for establishing 403(b)(7)
Custodial
B-11
<PAGE>
Accounts with First National Bank of Boston as custodian. This type of plan is
available to employees of certain non-profit organizations.
The Distributor also makes available prototype documents for esta-
blishing Money Purchase and/or Profit Sharing Plans and 401(k) Retirement
Savings Plans.
Investors should call the Distributor at [800-426-0107] for further
information about these plans and should consult with their own tax advisers
before establishing any retirement plan. Investors who maintain their accounts
with participating brokers should consult their broker about similar types of
accounts that may be offered through the broker. The minimum initial and
subsequent investment in Class A, B or C shares of any Fund for tax-qualified
plans is $25.
PIMCO Advisors Auto Invest. The PIMCO Advisors Auto Invest plan
provides for periodic investments into the shareholder's account with the Trust
by means of automatic transfers of a designated amount from the shareholder's
bank account. Investments may be made monthly or quarterly, and may be in any
amount subject to a minimum of $50 per month for each Fund in which shares are
purchased through the plan. Further information regarding the PIMCO Advisors
Auto Invest plan is available from the Distributor or participating brokers.
You may enroll by obtaining an Auto-Invest Application by calling the
Distributor or your broker.
PIMCO Advisors Auto Exchange. PIMCO Advisors Auto Exchange plan
establishes regular, periodic exchanges from one Fund to another. The plan
provides for regular investments into a shareholder's account in a specific Fund
by means of automatic exchanges of a designated amount from another Fund account
of the same class of shares and with identical account registration.
Exchanges may be made monthly or quarterly, and may be in any amount
subject to a minimum of $50 for each Fund whose shares are purchased through the
plan. Further information regarding the PIMCO Advisors Auto Exchange plan is
available from the Distributor at [800-426-0107] or participating brokers. You
may enroll by completing an application which may be obtained from the
Distributor or by telephone request at [800-426-0107]. For more information on
exchanges, see "Exchange Privilege".
PIMCO Advisors Fund Link. (Does not apply to shares held in broker
"street name" accounts.) PIMCO Advisors Fund Link ("Fund Link") connects your
Fund account with a bank account. Fund Link may be used for subsequent
purchases and for redemptions and other transactions described under "How to
Redeem". Purchase transactions are effected by electronic funds transfers from
the shareholder's account at a U.S. bank or other financial institution that is
an Automated Clearing House ("ACH") member. Investors may use Fund Link to make
subsequent purchases of shares in amounts from $50 to $10,000. To initiate such
purchases, call 800-852-8457. All such calls will be recorded. Fund Link is
normally established within 45 days of receipt of an Application by the Transfer
Agent. The minimum investment by Fund Link is $50 per Fund. Shares will be
purchased on the regular business day the Distributor receives the funds through
the ACH system, provided the funds are received before the close of regular
trading on the New York Stock Exchange. If the funds are received after the
close of regular trading, the shares will be purchased on the next regular
business day. Fund Link privileges must be requested on the PIMCO Advisors
Funds Account Application. To establish Fund Link on an existing account,
complete a Fund Link Application, which is available from the Distributor or
your broker, with signatures guaranteed from all shareholders of record for the
account. See "Signature Guarantee" under "General" below. Such privileges
apply to each shareholder of record for the account unless and until the
Distributor receives written instructions from a shareholder of record
cancelling such privileges. Changes of bank account information must be made by
completing a new Fund Link Application signed by all owners of record of the
account, with all signatures guaranteed. The Distributor, the Transfer Agent
and the Fund may rely on any telephone instructions believes to be genuine and
will not be responsible to shareholders for any damage, loss or expenses arising
out of such instructions. The Fund reserves the right to amend, suspend or
discontinue Fund Link privileges at any time without prior notice.
General
Changes in registration or account privileges may be made in writing
to the transfer agent (the "Transfer Agent"). Signature guarantees may be
required. See "Signature Guarantee" below.
All correspondence must include the account number and must be sent to:
B-12
<PAGE>
PIMCO Advisors Distribution Company
[P.O. Box 5866
Denver, CO 80217-5866]
Signature Guarantee. When a signature guarantee is called for, the
shareholder should have "Signature Guaranteed" stamped under his signature and
guaranteed by any of the following entities: U.S. banks, foreign banks having a
U.S. correspondent bank, credit unions, savings associations, U.S. registered
dealers and brokers, municipal securities dealers and brokers, government
securities dealers and brokers, national securities exchanges, registered
securities associations and clearing agencies (each an "Eligible Guarantor
Institution"). The Distributor reserves the right to reject any signature
guarantee pursuant to its written signature guarantee standards or procedures,
which may be revised in the future to permit it to reject signature guarantees
from Eligible Guarantor Institutions that do not, based on credit guidelines,
satisfy such written standards or procedures. The Trust may change the
signature guarantee requirements from time to time upon notice to shareholders,
which may be given by means of a new or supplemental Prospectus.
Alternative Purchase Arrangements
Class A, Class B and Class C shares bear sales charges in different
forms and amounts and bear different levels of expenses. The alternative
purchase arrangements are designed to enable the investor to choose the method
of purchasing Fund shares that is most beneficial to the investor based on all
factors to be considered, which include: the amount and intended length of the
investment, the type of Fund and whether the investor intends to exchange shares
for shares of other Funds. Generally, when making an investment decision,
investors should at least consider the anticipated life of an intended
investment in the Funds, the accumulated distribution and servicing fees plus
contingent deferred sales charges on Class B or Class C shares, the initial
sales charge plus accumulated servicing fees on Class A shares (plus a
contingent deferred sales charge in certain circumstances), the possibility that
the anticipated higher return on Class A shares due to the lower ongoing charges
will offset the initial sales charge paid on such shares, the automatic
conversion of Class B shares to Class A shares and the difference in the
contingent deferred sales charges applicable to Class A, B and C shares.
Class A: The initial sales charge alternative (Class A) might be
preferred by investors purchasing shares of sufficient aggregate value to
qualify for reductions in the initial sales charge applicable to such shares.
Similar reductions are not available on the contingent deferred sales charge
alternative (Class B) or the asset based sales charge alternative (Class C).
Class A shares are subject to a servicing fee but are not subject to a
distribution fee and, accordingly, such shares are expected to pay
correspondingly higher dividends on a per share basis. However, because initial
sales charges are deducted at the time of purchase, not all of the purchase
payment for Class A shares is invested initially. Class B and Class C shares
might be preferable to investors who wish to have all purchase payments invested
initially, although remaining subject to higher distribution and servicing fees
and, for certain periods, being subject to a contingent deferred sales charge.
An investor who qualifies for an elimination of the Class A initial sales charge
should also consider whether he or she anticipates redeeming shares in a time
period which will subject such shares to a contingent deferred sales charge as
described below. See "Initial Sales Charge Alternative -- Class A Shares --
Class A Deferred Sales Charge" below.
Class B: Class B shares might be preferred by investors who intend to
invest in the Funds for longer periods and who do not intend to purchase shares
of sufficient aggregate value to qualify for sales charge reductions applicable
to Class A shares. Both Class B and Class C shares can be purchased at net
asset value without an initial sales charge. However, unlike Class C shares,
Class B shares convert into Class A shares after the shares have been held for
seven years. After the conversion takes place, the shares will no longer be
subject to a contingent deferred sales charge, and will be subject to the
servicing fees charged for Class A shares which are lower than the distribution
and servicing fees charged on either Class B or Class C shares. See "Deferred
Sales Charge Alternative -- Class B Shares" below.
Class C: Class C shares might be preferred by investors who intend to
purchase shares which are not of sufficient aggregate value to qualify for Class
A sales charges of 1% or less and who wish to have all purchase payments
invested initially. Class C shares are preferable to Class B shares for
investors who intend to maintain their investment for intermediate periods and
therefore may also be preferable for investors who are unsure of the intended
length of their investment. Unlike Class B shares, Class C shares are not
subject to a contingent deferred sales charge after they have been held for one
year and are subject to only a 1% contingent deferred sales charge during the
first year. However, because Class C shares do not convert into Class A shares,
Class B shares are preferable to Class C shares for investors who intend to
maintain their investment in the Funds for long periods. See "Asset Based Sales
Charge Alternative -- Class C Shares" below.
B-13
<PAGE>
In determining which class of shares to purchase, an investor should
always consider whether any waiver or reduction of a sales charge or a
contingent deferred sales charge is available. See generally "Initial Sales
Charge Alternative -- Class A Shares" and "Waiver of Contingent Deferred Sales
Charges" below.
There is no size limit on purchased of Class A shares. The maximum
single purchase of Class B shares accepted is $249,999. The maximum single
purchase of Class C shares accepted is $999,999. The Funds may refuse any order
to purchase shares.
For a description of the Distribution and Servicing Plans and
distribution and servicing fees payable thereunder with respect to Class A,
Class B and Class C shares, see "Distributor and Distribution and Servicing
Plans" above.
Waiver of Contingent Deferred Sales Charges. The contingent deferred
sales charges applicable to Class A and C shares is currently waived for (i) any
partial or complete redemption in connection with a distribution without penalty
under Section 72(t) of the Internal Revenue Code of 1986, as amended (the
"Code") from a retirement plan, including a 403(b)(7) plan or an IRA (a) upon
attaining age 59 1/2, (b) as part of a series of substantially equal periodic
payments, or (c) in the case of an employer sponsored retirement plan, upon
separation from service and attaining age 55; (ii) any partial or complete
redemption in connection with a qualifying loan or hardship withdrawal from an
employer sponsored retirement plan; (iii) any complete redemption in connection
with a distribution from a qualified employer retirement plan in connection with
termination of employment or termination of the employer's plan and the transfer
to another employer's plan or to an IRA; (iv) any partial or complete redemption
following death or disability (as defined in the Code) of a shareholder
(including one who owns the shares as joint tenant with his or her spouse) from
an account in which the deceased or disabled is named, provided the redemption
is requested within one year of the death or initial determination of
disability; (v) any redemption resulting from a return of an excess contribution
to a qualified employer retirement plan or an IRA; or (vi) certain periodic
redemptions under an Automatic Withdrawal Plan from an account meeting certain
minimum balance requirements, in amounts meeting certain maximums established
from time to time by Distributor; (vii) redemptions by Trustees, officers and
employees of the Distributor and the Adviser; (viii) redemptions effected
pursuant to a Fund's right to involuntarily redeem a shareholder's account if
the aggregate net asset value of shares held in such shareholder's account is
less than a minimum account size specified in such Fund's prospectus; (ix)
involuntary redemptions caused by operation of law; (x) redemption of shares of
any Fund that is combined with another Fund, investment company, or personal
holding company by virtue of a merger, acquisition or other similar
reorganization transaction; (xi) redemptions by a shareholder who is a
participant making periodic purchases of not less than $50 through certain
employer sponsored savings plans that are clients of a broker-dealer with which
the Distributor has an agreement with respect to such purchases; or (xii)
redemptions effected by trustees or other fiduciaries who have purchased shares
for employer sponsored plans, the administrator for which has an agreement with
the Distributor with respect to such purchases.
The contingent deferred sales charge applicable to Class B shares is
currently waived for any partial or complete redemption (a) in connection with a
distribution without penalty under Section 72(t) of the Code from a 403(b)(7)
plan or an IRA upon attaining age 59 1/2 and (b) following death or disability
(as defined in the Code) of a shareholder (including one who owns the shares as
joint tenant with his or her spouse) from an account in which the deceased or
disabled is named, provided the redemption is requested within one year of the
death or initial determination of disability.
The Distributor may require documentation prior to waiver of the
contingent deferred sales charge for any class including distribution letters,
certification by plan administrators, applicable tax forms, death certificates,
physicians certificates, etc.
Initial Sales Charge Alternative -- Class A Shares. Class A shares
are sold at a public offering price equal to their net asset value per share
plus a sales charge, as set forth below. As indicated below under "Class A
Deferred Sales Charge," certain investors that purchase $1,000,000 or more of
any Fund's Class A shares (and thus pay no initial sales charge) may be subject
to a 1% contingent deferred sales charge if they redeem such shares during the
first 18 months after their purchase.
B-14
<PAGE>
<TABLE>
<CAPTION>
Discount or
Commission
Sales Charge Sales Charge to Dealers
As % of As % of As % of
Amount of Net Amount the Public Public
Purchase Invested Offering Price Offering Price
--------- ------------ -------------- ---------------
<S> <C> <C> <C>
$0-$49,999 5.82% 5.50% 4.75%
$50,000-$99,999 4.71% 4.50% 3.75%
$100,000-$249,999 3.90% 3.75% 3.00%
$250,000-$499,999 2.56% 2.50% 2.00%
$500,000-$999,999 1.78% 1.75% 1.50%
$1,000,000+ 0.00%/1/ 0.00%/1/ 0.50%
</TABLE>
Each Fund receives the entire net asset value of its Class A shares
purchased by investors. The Distributor receives the sales charge shown above
less any applicable discount or commission "reallowed" to participating brokers
in the amounts indicated in the table above. The Distributor may, however,
elect to reallow the entire sales charge to participating brokers for all sales
with respect to which orders are placed with the Distributor for any particular
Fund during a particular period. A participating broker who receives a
reallowance of 90% or more of the sales charge may be deemed to be an
"underwriter" under the Securities Act of 1933. During such periods as may from
time to time be designated by the Distributor, the Distributor will pay an
additional amount of up to 0.50% of the purchase price on sales of Class A
shares of all or selected Funds purchased to each participating broker which
obtains purchase orders in amounts exceeding thresholds established from time to
time by the Distributor.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are issued at net asset value and are
not subject to any sales charges.
Under the circumstances described below, investors may be entitled to pay
reduced sales charges for Class A shares.
Combined Purchase Privilege. Investors may qualify for a reduced
sales charge by combining purchases of the Class A shares of one or more Funds
or other series of the Trust or PIMCO Funds: Pacific Investment Management
Series ("PIMS") (other than the Money Market Fund) into a "single purchase," if
the resulting purchase totals at least $50,000. The term single purchase refers
to: (i) a single purchase by an individual, or concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an individual,
his spouse and their children under the age of 21 years purchasing Class A
shares of the Funds for his, her or their own account; (ii) a single purchase by
a trustee or other
- -------------------------
/1/ As shown, investors that purchase more than $1,000,000 of any Fund's
Class A shares will not pay any initial sales charge on such purchase. However,
purchasers of $1,000,000 or more of Class A shares (other than those purchasers
described below under "Sales at Net Asset Value" where no commission is paid)
will be subject to a contingent deferred sales charge of 1% if such shares are
redeemed during the first 18 months after such shares are purchased unless such
purchaser is eligible for a waiver of the contingent deferred sales charge as
described under "Waiver of Contingent Deferred Sales Charge" above. See "Class A
Deferred Sales Charge" below.
The Distributor will pay a commission to dealers who sell amounts of
$1,000,000 or more of Class A shares (or who sell Class A shares at net asset
value to certain employer-sponsored plans as outlined in "Sales at Net Asset
Value" below) according to the following schedule: 0.75% of the first
$2,000,000; 0.50% of amounts from $2,000,001 to $5,000,000 and 0.25% of amounts
over $5,000,000.
B-15
<PAGE>
fiduciary purchasing shares for a single trust, estate or fiduciary account
although more than one beneficiary is involved; or (iii) a single purchase for
the employee benefit plans of a single employer. For further information, call
the Distributor at [800-426-0107] or your broker.
Cumulative Quantity Discount (Right of Accumulation). A purchase of
additional Class A shares of any Fund may qualify for a Cumulative Quantity
Discount at the rate applicable to the discount bracket obtained by adding:
(i) the investor's current purchase;
(ii) the value (at the close of business on the day of
the current purchase) of all Class A shares of any
Fund or other series of the Trust or PIMS (other
than the Money Market Fund) held by the investor
computed at the maximum offering price; and
(iii) the value of all shares described in paragraph (ii)
owned by another shareholder eligible to be
combined with the investor's purchase into a
"single purchase" as defined above under "Combined
Purchase Privilege."
For example, if you owned Class A shares of the Discovery Fund worth
$25,000 at the current maximum offering price and wished to purchase Class A
shares of the Value Fund worth an additional $30,000, the sales charge for the
$30,000 purchase would be at the 4.50% rate applicable to a single $55,000
purchase of shares of the Value Fund, rather than the 5.50% rate.
An investor or participating broker must notify the Distributor
whenever a quantity discount or reduced sales charge is applicable to a purchase
and must provide the Distributor with sufficient information at the time of
purchase to verify that each purchase qualifies for the privilege or discount.
Upon such notification, the investor will receive the lowest applicable sales
charge. The quantity discounts described above may be modified or terminated at
any time.
Letter of Intent. An investor may also obtain a reduced sales charge
by means of a written Letter of Intent, which expresses an intention to invest
not less than $50,000 within a period of 13 months in Class A shares of any
Fund(s) of the Trust (other than the Money Market Fund). Each purchase of
shares under a Letter of Intent will be made at the public offering price or
prices applicable at the time of such purchase to a single transaction of the
dollar amount indicated in the Letter. At the investor's option, a Letter of
Intent may include purchases of Class A shares of any Fund (other than the Money
Market Fund) made not more than 90 days prior to the date the Letter of Intent
is signed; however, the 13-month period during which the Letter is in effect
will begin on the date of the earliest purchase to be included and the sales
charge on any purchases prior to the Letter will not be adjusted.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Funds under a single Letter of Intent. For
example, if at the time you sign a Letter of Intent to invest at least $100,000
in Class A shares of any Fund of the Trust, you and your spouse each purchase
Class A shares of the Value Fund worth $30,000 (for a total of $60,000), it will
only be necessary to invest a total of $40,000 during the following 13 months in
Class A shares of any of the Funds of the Trust to qualify for the 3.75% sales
charge on the total amount being invested (the sales charge applicable to an
investment of $100,000 in any of the Funds of the Trust).
A Letter of Intent is not a binding obligation to purchase the full
amount indicated. The minimum initial investment under a Letter of Intent is 5%
of such amount. Shares purchased with the first 5% of such amount will be held
in escrow (while remaining registered in your name) to secure payment of the
higher sales charge applicable to the shares actually purchased in the event the
full intended amount is not purchased. If the full amount indicated is not
purchased, a sufficient amount of such escrowed shares will be involuntarily
redeemed to pay the additional sales charge applicable to the amount actually
purchased, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released.
If you are a current Class A shareholder desiring to enter into a
Letter of Intent, you can obtain a form of Letter of Intent by contacting the
Distributor at [800-426-0107] or any broker participating in this program.
B-16
<PAGE>
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his shares to be redeemed may reinvest all or any portion of the
redemption proceeds in Class A shares of any Fund at net asset value without any
sales charge, provided that such reinvestment is made within 90 calendar days
after the redemption or repurchase date. Shares are sold to a reinvesting
shareholder at the net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the redemption
transaction and, consequently, any gain or loss so realized may be recognized
for federal tax purposes except that no loss may be recognized to the extent
that the proceeds are reinvested in shares of the same Fund within 30 days. The
reinstatement privilege may be utilized by a shareholder only once, irrespective
of the number of shares redeemed, except that the privilege may be utilized
without limit in connection with transactions whose sole purpose is to transfer
a shareholder's interest in a Fund to his Individual Retirement Account or other
qualified retirement plan account. An investor may exercise the reinstatement
privilege by written request sent to the Distributor or to the investor's
broker.
Sales at Net Asset Value. Each Fund may sell its Class A shares at
net asset value without a sales charge to a) current or retired officers,
trustees, directors or employees of the Trust, the Adviser or the Distributor,
to a spouse or child of such person or to any trust, profitsharing or pension
plan for the benefit of any such person, b) current or retired trustees of Cash
Accumulation Trust, a registered investment company for which PIMCO Advisors
acts as investment adviser, c) current registered representatives and other
full-time employees of participating brokers or such persons' spouses, d)
trustees or other fiduciaries purchasing shares for certain employer sponsored
plans that have at least 100 eligible participants or at least $1 million in
total plan assets, e) trustees or other fiduciaries purchasing shares for
certain employer-sponsored plans, the trustee, fiduciary or administrator for
which has an agreement with the Distributor with respect to such purchases, f)
participants investing through accounts known as "wrap accounts" established
with brokers or dealers are paid a single, inclusive fee for brokerage and
investment management services, g) broker-dealers or registered investment
advisers affiliated with such broker-dealers with which the Distributor has an
agreement for the use of the PIMCO Mutual Funds in particular investment
products for which a fee is charged, and h) trust accounts for which trust
companies affiliated with the Trust or the Adviser serve as trustee. As
described above, the Distributor will not pay any initial commission to dealers
upon the sale of Class A shares to the purchasers described in this paragraph
except for sales to purchasers described under either d) or e) in this
paragraph.
Class A Deferred Sales Charge. Investors who purchase $1,000,000 or
more of Class A shares (and, thus, purchase such shares without any initial
sales charge) may be subject to a 1% contingent deferred sales charge (the
"Class A CDSC") if such shares are redeemed within 18 months of their purchase.
The Class A CDSC does not apply to investors purchasing $1,000,000 or more of
any Fund's Class A shares if such investors are otherwise eligible to purchase
Class A shares without any sales charge because they are described under "Sales
at Net Asset Value" above.
For purchases subject to the Class A CDSC, a 1% CDSC will apply for
any redemption of such Class A shares that occurs within 18 months of their
purchase. No CDSC will be imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of the account above the
amount of purchase payments subject to the CDSC. In determining whether a CDSC
is payable, it is assumed that Class A shares acquired through the reinvestment
of dividends and distributions are redeemed first, and thereafter that Class A
shares that have been held by an investor for the longest period of time are
redeemed first.
The Class A CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Arrangements --
Waiver of Contingent Deferred Sales Charges."
For more information about the Class A CDSC, call the Distributor at
[800-426-0107].
Participating Brokers. Investment dealers and other firms provide
varying arrangements for their clients to purchase and redeem Fund shares. Some
may establish higher minimum investment requirements than set forth above. Firms
may arrange with their clients for other investment or administrative services.
Such firms may independently establish and charge additional amounts to their
clients for such services, which charges would reduce clients' return. Firms
also may hold Fund shares in nominee or street name as agent for and on behalf
of their customers. In such instances, the Trust's transfer agent will have no
information with respect to or control over accounts of specific shareholders.
Such shareholders may obtain access to their accounts and information about
their accounts only from their broker. In addition, certain privileges with
respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate
in a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may
B-17
<PAGE>
perform functions such as generation of confirmation statements and disbursement
of cash dividends. This Prospectus/Proxy Statement should be read in connection
with such firms' material regarding their fees and services.
Deferred Sales Charge Alternative -- Class B Shares. Class B shares
are sold at their current net asset value without any initial sales charge. The
full amount of an investor's purchase payment will be invested in shares of the
Fund(s) selected. A contingent deferred sales charge ("CDSC") will be imposed
on Class B shares if an investor redeems an amount which causes the current
value of the investor's account for a Fund to fall below the total dollar amount
of purchase payments subject to the CDSC, except that no CDSC is imposed if the
shares redeemed have been acquired through the reinvestment of dividends or
capital gains distributions or if the amount redeemed is derived from increases
in the value of the account above the amount of purchase payments subject to the
CDSC.
Class B shares are not available for purchase by employer sponsored
retirement plans.
Whether a CDSC is imposed and the amount of the CDSC will depend on
the number of years since the investor made a purchase payment from which an
amount is being redeemed. Purchased are subject to the CDSC according to the
following schedule:
<TABLE>
<CAPTION>
Year Since Purchase Percentage Contingent
Payment Was Made Deferred Sales Charge
---------------- ---------------------
<S> <C>
First............................... 5
Second.............................. 4
Third............................... 3
Fourth.............................. 3
Fifth............................... 2
Sixth............................... 1
Seventh............................. 0
Eighth.............................. *
</TABLE>
* Class B shares convert into Class A shares as described below.
In determining whether a CDSC is payable, it is assumed that the
purchase payment from which a redemption is made is the earliest purchase
payment from which a redemption or exchange has not already been fully effected.
In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all Class B shares in the
shareholder's account with the particular Fund are aggregated, and the current
value of all such shares is aggregated. Any CDSC imposed on a redemption of
Class B shares is paid to the Distributor.
Class B shares are subject to higher distribution fees than Class A
shares for a fixed period after their purchase, after which they automatically
convert to Class A shares and are no longer subject to such higher distribution
fees. Class B shares of each Fund automatically convert into Class A shares
after they have been held for seven years.
For sales of Class B shares made and services rendered to Class B
shareholders, the Distributor intends to make payments to participating brokers,
at the time a shareholder purchases Class B shares, of 4% of the purchase amount
for each of the Funds. During such periods as may from time to time be
designated by the Distributor, the Distributor will pay selected participating
brokers an additional amount of up to 0.50% of the purchase price on sales of
Class B shares of all or selected Funds purchased to each participating broker
which obtains purchase orders in amounts exceeding thresholds established from
time to time by the Distributor.
The Class B CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Arrangements --
Waiver of Contingent Deferred Sales Charges."
For more information about the Class B CDSC, call the Distributor at
[800-426-0107].
Asset Based Sales Charge Alternative -- Class C Shares. Class C shares
are sold at their current net asset value without any initial sales charge. A
CDSC is imposed on Class C shares if an investor redeems an amount which causes
the current value of the investor's account for a Fund to fall below the total
dollar amount of purchase payments subject to the
B-18
<PAGE>
CDSC, except that no CDSC is imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of the account above the
amount of purchase payments subject to the CDSC. All of an investor's purchase
payments are invested in shares of the Fund(s) selected.
Whether a CDSC is imposed and the amount of the CDSC will depend on
the number of years since the investor made a purchase payment from which an
amount is being redeemed and the date such purchase payment was made. Purchases
are subject to the CDSC according to the following schedule:
Year Since Purchase Percentage Contingent
Payment Was Made Deferred Sales Charge
---------------- ---------------------
First............................... 1
Thereafter.......................... 0
In determining whether a CDSC is payable, it is assumed that the
purchase payment from which the redemption is made is the earliest purchase
payment (from which a redemption or exchange has not already been effected).
The following example will illustrate the operation of the CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class C shares of a Fund and that six months later the
value of the investor's account for that Fund has grown through investment
performance and reinvestment of distributions of $11,000. The investor then may
redeem up to $1,000 from that Fund ($11,000 minus $10,000) without incurring a
CDSC. If the investor should redeem $3,000, a CDSC would be imposed on $2,000
of the redemption (the amount by which the investor's account for the Fund was
reduced below the amount of the purchase payment). At the rate of 1%, the CDSC
would be $20.
In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all Class C shares in the
shareholder's account with the particular Fund are aggregated, and the current
value of all such shares is aggregated. Any CDSC imposed on a redemption of
Class C shares is paid to the Distributor.
Unlike Class B shares, Class C shares do not automatically convert to
any other class of shares of the Funds.
Except as described below, for sales of Class C shares made and
services rendered to Class C shareholders, the Distributor expects to make
payments to participating brokers, at the time the shareholder purchases Class C
shares, of 1.00% (representing 0.75% distribution fees and 0.25% servicing fees)
of the purchase amount for all Funds. For sales of Class C shares made to
participants making periodic purchases of not less than $50 through certain
employer sponsored savings plans which are clients of a broker-dealer with which
the Distributor has an agreement which respect to such purchases, no payments
are made at the time of purchase. [At the time shares of the Money Market Fund
series of PIMS on which no commission has been paid are exchanged for shares of
a Fund, the Distributor intends to make the payments to participating brokers
that are described above applicable to that Fund.] During such periods as may
from time to time be designated by the Distributor, the Distributor will pay an
additional amount of up to 0.50% of the purchase price on sales of Class C
shares of all or selected Funds purchased to each participating broker which
obtains purchase orders in amounts exceeding thresholds established from time to
time by the Distributor.
The Class C CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Arrangements -
Waiver of Contingent Deferred Sales Charges."
For more information about the Class C CDSC, contact the Distributor at
[800-426-0107.]
EXCHANGE PRIVILEGE
A shareholder may exchange Class A, Class B and Class C shares of any
Fund or other series of the Trust or PIMS for the same class of shares of any
other series in an account with identical registration on the basis of their
respective net asset values (except that a sales charge will apply on exchanges
of Class A shares of the Money Market
B-19
<PAGE>
Fund series of PIMS on which no sales load was paid at the time of purchase).
Exchanges may be made only with respect to funds or classes registered in the
state of residence of the investor or which an exemption from registration is
available. Shareholders interested in such an exchange may request a prospectus
for these funds by contacting the Distributor. There are currently no exchange
fees or charges. Except with respect to tax-qualified programs and exchanges
effected through the PIMCO Advisors Auto Exchange plan, exchanges are subject to
the $250 minimum initial purchase requirement for each Fund. An exchange will
constitute a taxable sale for federal income tax purposes.
Investors who maintain their account with the Distributor may exchange
shares by a written exchange request sent to PIMCO Advisors Distribution
Company, [P.O. Box 5866, Denver, CO 80217-5866] or, unless the investor has
specifically declined telephone exchange privileges on the Account Application
or elected in writing not to utilize telephone exchanges, by a telephone request
to the Transfer Agent at [800-852-8457.] The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
and may be liable for any losses due to unauthorized to fraudulent instructions
if it fails to employ such procedures. The Trust will require a form of
personal identification prior to acting on a caller's telephone instructions,
will provide written confirmations of such transactions and will record
telephone instructions. Exchange forms are available from the Distributor at
[800-426-0107] and may be used if there will be no change in the registered name
of address of the shareholder. Changes in registration information or account
privileges may be made in writing to the Transfer Agent [Shareholder Services,
Inc., P.O. Box 5866, Denver, Colorado 80217-5866,] or by use of forms which are
available from the Distributor. A signature guarantee is required. See
"Signature Guarantee" under "General." Telephone exchanges may be made between
9:00 a.m. and the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on any day the Exchange is open (generally
weekdays other than normal holidays). The Trust reserves the right to refuse
exchange purchases if, in the judgment of the Adviser, the purchase would
adversely affect the Fund and its shareholders. In particular, a pattern of
exchanges characteristic of "market-timing" strategies may be deemed by the
Adviser to be detrimental to the Fund. Although the Trust has no current
intention of terminating or modifying the exchange privilege, it reserves the
right to do so at any time. Except as otherwise permitted by SEC regulations,
the Trust will give 60 days' advance notice to shareholders of any termination
or material modification of the exchange privilege. For further information
about exchange privileges, contact your participating broker or call the
Transfer Agent at [800-426-0107.]
With respect to Class B and Class C shares, or Class A shares subject
to a CDSC, if less than all of an investment is exchanged out of a Fund, any
portion of the investment attributable to capital appreciation and/or reinvested
dividends or capital gains distributions will be changed first, and thereafter
any potions exchanged will be from the earliest investment made in the Fund from
which the exchange was made. Shareholders should take into account the effect
of any exchange on the applicability of any CDSC that may be imposed upon any
subsequent redemption. See "Initial Sales Charge Alternative -- Class A Shares
- -- Class A Deferred Sales Charge" above.
Auto Exchange Investors may also select the PIMCO Advisors Auto Exchange plan
which establishes automatic periodic exchanges. For further information on
automatic exchanges see "PIMCO Advisors Auto Exchange" under "How to Buy
Shares."
HOW TO REDEEM
Shares may be redeemed through a participating broker, by telephone,
by submitting a written redemption request directly to the Transfer Agent (for
non-broker accounts) or through an Automatic Withdrawal Plan or PIMCO Advisors
Fund Link.
A CDSC may apply to a redemption of Class A, Class B or Class C shares.
See "Alternative Purchase Arrangements" above. Shares are redeemed at their net
asset value next determined after a proper redemption request has been received,
less any applicable CDSC. There is no charge by the Distributor (other than an
applicable CDSC) with respect to a redemption; however, a participating broker
who processes a redemption for an investor may charge customary commissions for
its services. Dealers and other financial services firms are obligated to
transmit orders promptly. Requests for redemption received by dealers or other
firms prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on a regular business day and received by the
Distributors prior to the close of the Distributor's business day will be
confirmed at the net asset value effective as of the closing of the Exchange on
that day, less an applicable CDSC.
Direct Redemption A shareholder's original Account Application permits the
shareholder to redeem by written request and by telephone (unless the
shareholder specifically elects not to utilize telephone redemptions) and to
elect one or more
B-20
<PAGE>
of the additional redemption procedures described below. A shareholder may
change the instructions indicated on his original Account Application, or may
request additional redemption options, only by transmitting a written direction
to the Transfer Agent. Requests to institute or change any of the additional
redemption procedures will require a signature guarantee.
Redemption proceeds will normally be mailed to the redeeming shareholder
within seven days or, in the case of wire transfer of Fund Link redemptions,
sent to the designated bank account within one business day. Fund Link
redemptions may be received by the bank on the second or third business day. In
cases where shares have recently been purchased by personal check, redemption
proceeds may be withheld until the check has been collected, which may take up
to 15 days. To avoid such withholding, investors should purchase shares by
certified or bank check or by wire transfer.
Written Requests (Does not apply to shares held in broker "street name"
accounts.) To redeem shares in writing (whether or not represented by
certificates), a shareholder must send the following items to the Fund's
Transfer Agent, [Shareholder Services, Inc., P.O. Box 5866, Denver, Colorado
80217]: (1) a written request for redemption signed by all registered owners
exactly as the account is registered on the Transfer Agent's records, including
fiduciary titles, if any, and specifying the account number and the dollar
amount of number of shares to be redeemed; (2) for certain redemptions described
below, a guarantee of all signatures on the written request [or on the share
certificate] or accompanying stock power, if required, as described under
"Signature Guarantee"; (3) [any share certificates issued for any of the shares
to be redeemed (see "Certificated Shares" below)]; and (4) any additional
documents which may be required by the Transfer Agent for redemption by
corporations, partnerships or other organizations, executors, administrators,
trustees, custodians or guardians, or if the redemption is requested by anyone
other than the shareholder(s) of record. Transfers of shares are subject to the
same requirements. A signature guarantee is not required for redemptions of
$50,000 or less, requested by and payable to all shareholders of record for the
account, to be sent to the address of record for that account. To avoid delay
in redemption or transfer, shareholders having any questions about these
requirements should contact the Transfer Agent in writing or by calling [800-
426-0107] before submitting a request. Redemption or transfer requests will not
be honored until all required documents in the proper form have been received by
the Transfer Agent.
If the proceeds of the redemption (i) exceed $50,000, (ii) are to be
paid to a person other than the record owner, (iii) are to be sent to an address
other than the address of the account on the Transfer Agent's records, or (iv)
are to be paid to a corporation, partnership, trust or fiduciary, the
signature(s) on the redemption request and on the certificates, if any, or stock
power must be guaranteed as described above, except that the Distributor may
waive the signature guarantee requirement for redemptions up to $2,500 by a
trustee of a qualified retirement plan, the administrator for which has an
agreement with the Distributor.
Telephone Redemptions (Does not apply to shares held in broker "street name"
accounts.) The Trust accepts telephone requests for redemption of
[uncertificated] shares for amounts up to $50,000 within any 7 calendar day
period, except for investors who have specifically declined telephone redemption
privileges on the Account Application or elected in writing not to utilize
telephone redemptions. The proceeds of a telephone redemption will be sent to
the record shareholder at his record address. Changes in account information
must be made in written authorization with a signature guarantee. See
"Signature Guarantee" under "General." Telephone redemptions will not be
accepted during the 30-day period following any change in an account's record
address.
By completing an Account Application, an investor agrees that the
Trust, the Distributor and the Transfer Agent shall not be liable for any loss
incurred by the investor by reason of the Trust accepting unauthorized telephone
redemption requests for his account if the Trust reasonably believes the
instructions to be genuine. Thus, shareholders risk possible losses in the
event of a telephone redemption not authorized by them. The Trust may accept
telephone redemption instructions from any person identifying himself as the
owner of an account or the owner's broker where the owner has not declined in
writing to utilize this service. The Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and may be
liable for any losses due to unauthorized or fraudulent instructions if it fails
to employ such procedures. The Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmation of such transactions and will record telephone
instructions.
A shareholder making a telephone redemption should call the Transfer
Agent at [800-852-8457] and state (i) the name of the shareholder as it appears
on the Transfer Agent's records, (ii) his account number with the Trust, (iii)
the amount to be withdrawn and (iv) the name of the person requesting the
redemption. Usually the proceeds are sent to the investor on the next Trust
business day after the redemption is effected, provided the redemption request
is received prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) that day. If the
B-21
<PAGE>
redemption request is received after the closing of the Exchange, the redemption
is effected on the following Trust business day at that day's net asset value
and the proceeds are usually sent to the investor on the second following Trust
business day. The Trust reserves the right to terminate or modify the telephone
redemption service at any time. During times of severe disruptions in the
securities markets, the value of calls may make it difficult to redeem by
telephone, in which case a shareholder may wish to send a written request for
redemption as described under "Written Requests" above. Telephone
communications may be recorded by the Distributor of the Transfer Agent.
Fund Link Redemptions (Does not apply to shares held in broker "street name"
accounts.) If a shareholder has established Fund Link, the shareholder may
redeem shares by telephone and have the redemption proceeds sent to a designated
account at a financial institution. Fund Link is normally established within 45
days of receipt of the Application by the Transfer Agent. To use Fund Link for
redemptions, call the Transfer Agent at [800-852-8457.] Subject to the
limitations set forth above under "Telephone Redemptions," the Distributor, the
Trust and the Transfer Agent may rely on instructions by any registered owner
believed to be genuine and will not be responsible to any shareholder for any
loss, damage or expense arising out of such instructions. Requests received by
the Transfer Agent prior to the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on a business day will be processed
at the net asset value on that day and the proceeds (less any CDSC) will
normally be sent to the designated bank account on the following business day
and received by the bank on the second or third business day. If the redemption
request is received after the close of regular trading on the Exchange, the
redemption is effected on the following business day. Shares purchased by check
may not be redeemed through Fund Link until such shares have been owned (i.e.,
paid for) for at least 15 days. [Fund Link may not be used to redeem shares
held in certificated form.] Changes in bank account information must be made by
completing a new Fund Link Application, signed by all owners of record of the
account, with all signatures guaranteed. See "Signature Guarantee" under
"General." See "PIMCO Advisors Fund Link" under "How to Buy Shares" for
information on establishing the Fund Link privilege. The trust may terminate
the Fund Link program at any time without notice to shareholders.
Expedited Wire Transfer Redemptions (Does not apply to shares held in broker
"street name" accounts.) If a shareholder has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by federal wire
transfer to a single previously designated bank account. Requests received by
the Trust prior to the close of the Exchange will result in shares being
redeemed that day at the next determined net asset value (less any CDSC) and
normally the proceeds being sent to the designated bank account the following
business day. The bank must be a member of the Federal Reserve wire system.
Delivery of the proceeds of a wire redemption request may be delayed by the
Trust for up to 7 days if the Distributor deems it appropriate under then
current market conditions. Once authorization is on file, the Trust will honor
requests by any person identifying himself as the owner of an account or the
owner's broker by telephone at [800-0852-8457] or by written instructions. The
Trust cannot be responsible for the efficiency of the Federal Reserve wire
system or the shareholder's bank. The Trust does not currently charge for wire
transfers. The shareholder is responsible for any charges imposed by the
shareholder's bank. The minimum amount that may be wired is $2,500. The Trust
reserves the right to change this minimum or to terminate the wire redemption
privilege. Shares purchased by check may not be redeemed by wire transfer until
such shares have been owned (i.e., paid for) for at least 15 days. Expedited
wire transfer redemptions may be authorized by completing a form available from
the Distributor. Wire redemptions may not be used to redeem shares in
certificated form. To change the name of the single bank account designated to
receive wire redemption proceeds, it is necessary to send a written request with
signatures guaranteed to PIMCO Advisors Distribution Company, [P.O. Box 5866,
Denver, CO 80217-5866.] See "Signature Guarantee" under "General."
[Certificated Shares To redeem shares for which certificates have been issued,
the certificates must be mailed to or deposited with the Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "Signature
Guarantee." Further documentation may be requested from institutions or
fiduciary accounts, such as corporations, custodians (e.g., under the Uniform
Gifts to Minors Act), executors, administrators, trustees or guardians
("institutional account owners"). The redemption request and stock power must
be signed exactly as the account is registered, including indication of any
special capacity of the registered owner.]
Automatic Withdrawal Plan
An investor who owns or buys shares of a fund having a net asset value
of $10,000 or more may open an Automatic Withdrawal plan and have a designated
sum of money (not less than $100 per Fund) paid monthly (or quarterly)
B-22
<PAGE>
to the investor or another person. Such a plan may be established by obtaining
an Automatic Withdrawal Plan Application from the Distributor or your broker.
If an Automatic Withdrawal Plan is set up after the account is established
providing for payment to a person other than the record shareholder or to an
address other than the address of record, a signature guarantee is required.
See "Signature Guarantee" under "General." Shares of each class of any fund
are deposited in a Plan account and all distributions are reinvested in
additional shares of that class of Fund at the net asset value. Shares in a
Plan account are then redeemed at net asset value (less any applicable CDSC) to
make each withdrawal payment. Any applicable CDSC may be waived for certain
redemptions under an Automatic Withdrawal Plan. See "Waiver of Contingent
Deferred Sales Charges" under "Alternative Purchase Arrangements" above.
Redemptions for the purpose of withdrawals are ordinarily made on the
business day preceding the day of payment at that day's closing net asset value
and checks are mailed on the day of payment selected by the shareholder. The
Transfer Agent may accelerate the redemption and check mailing date by one day
to avoid weekend delays. Payment will be made to any person the investor
designates; however, if the shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary, except in the case
of a profit-sharing or pension plan where payment will be made to the designee.
As withdrawal payments may include a return of principal, they cannot be
considered a guaranteed annuity or actual yield of income to the investor. The
redemption of shares in connection with an Automatic Withdrawal Plan may result
in a gain or loss for tax purposes. Continued withdrawals in excess of income
will reduce and possibly exhaust invested principal, especially in the event of
a market decline. The maintenance of an Automatic Withdrawal Plan concurrently
with purchases of additional shares of the Fund would be disadvantageous to the
investor because of the CDSC that may become payable on such withdrawals in the
case of Class A, Class B or Class C shares and because of the initial sales
charge in the case of Class A shares. For this reason, the minimum investment
accepted for a Fund while an Automatic Withdrawal Plan is in effect for that
Fund is $1,000, and an investor may not maintain a Plan for the accumulation of
shares of the Fund (other than through reinvestment of distributions) and an
Automatic Withdrawal Plan at the same time. The cost of administering the
Automatic Withdrawal Plans for the benefit of those shareholders participating
in them is borne by the Trust as an expense of all shareholders. The Trust or
the Distributor may terminate or change the terms of the Automatic Withdrawal
Plan at any time.
Because the Automatic Withdrawal Plan may involve invasion of capital,
investors should consider carefully with their own financial advisers whether
the plan and the specified amounts to be withdrawn are appropriate in their
circumstances. The Trust and the Distributor make no recommendations or
representations in this regard.
PORTFOLIO TRANSACTIONS
Pursuant to the portfolio management agreements, a Portfolio Manager
places orders for the purchase and sale of portfolio investments for the Funds'
accounts with brokers or dealers selected by it in its discretion. In effecting
purchases and sales of portfolio securities for the account of the Funds, the
Portfolio Manager will seek the best price and execution of the Funds' orders.
In doing so, a Fund may pay higher commission rates than the lowest available
when the Portfolio Manager believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. The Portfolio Manager also may consider sales of shares of the
Trust as a factor in the selection of broker-dealers to execute portfolio
transactions for the Trust.
The Portfolio Managers manages the Funds without regard generally to
restrictions on portfolio turnover, except those imposed on its ability to
engage in short-term trading by provisions of the federal tax laws. Trading in
fixed income securities does not generally involve the payment of brokerage
commissions, but does involve indirect transaction costs. The use of futures
contracts may involve the payment of commissions to futures commission
merchants. The higher the rate of portfolio turnover of a Fund, the higher all
these transaction costs borne by the Fund generally will be.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Portfolio Manager. If a purchase or
sale of securities consistent with the investment policies of a Fund and one or
more of these clients served by the Portfolio Manager is considered at or about
the same time, transactions in such securities will be allocated among the Fund
and clients in a manner deemed fair and reasonable by the Portfolio Manager.
NET ASSET VALUE
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<PAGE>
The net asset value per share of each class of each Fund is determined
as of the close of trading on the New York Stock Exchange (ordinarily 4:00 p.m.,
Eastern time) by dividing the total market value of a Fund's portfolio
investments and other assets attributable to that class, less any liabilities,
by the number of total outstanding shares of that class. Net asset value will
not be determined on days on which the New York Stock Exchange is closed.
Portfolio securities and other assets for which market quotations are
readily available are stated at market value. Market value is determined on the
basis of last reported sales prices, or if no sales are reported, as is the case
for most securities traded over-the-counter, at the mean between representative
bid and asked quotations obtained from a quotation reporting system or from
established market makers. Fixed income securities, including those to be
purchased under firm commitment agreements (other than obligations having a
maturity of 60 days or less), are normally valued on the basis of quotations
obtained from brokers and dealers or pricing services, which take into account
appropriate factors such as institutional-sized trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data.
Short-term investments having a maturity of 60 days or less are valued
at amortized cost, when the Board of Trustees determines that amortized cost is
their fair value. Certain fixed income securities for which daily market
quotations are not readily available may be valued, pursuant to guidelines
established by the Board of Trustees, with reference to fixed income securities
whose prices are more readily obtainable and whose durations are comparable to
the securities being valued. Subject to the foregoing, other securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Shares begin earning dividends on the effective date of purchase,
provided notification deadlines are met. See "How to Buy Shares." Net
investment income from interest and dividends, if any, will be declared and paid
quarterly to shareholders of record by the NFJ Diversified Low P/E Fund. Net
investment income from interest and dividends, if any, will be declared and paid
at least annually to shareholders of record by the Cadence Mid Cap Growth Fund.
Any net realized capital gains from the sale of portfolio securities will be
distributed no less frequently than once yearly. Net realized short-term
capital gains may be paid more frequently. Dividend and capital gain
distributions of a Fund will be reinvested in additional shares of that Fund
unless the shareholder elects to have them paid in cash. Dividends from net
investment income with respect to Class B and C shares are expected to be lower
than those paid with respect to Class A shares, reflecting the payment of
distribution fees by those classes.
Shareholders may elect to invest dividends and/or distributions paid
by any Fund in shares of the same class of any other Fund of the Trust at net
asset value. The shareholder must have an account existing in the Fund selected
for investment with the identical registered name and address and must elect
this option on a form provided for that purpose or by a telephone request to the
Transfer Agent at [800-426-0107]. For further information on this option,
contact your broker or call the Distributor at [800-426-0107].
Each Fund intends to qualify as a regulated investment company annually
and to elect to be treated as a regulated investment company under the Internal
Revenue Code of 1986, as amended. As such, a Fund generally will not pay federal
income tax on the income and gains it pays as dividends to its shareholders. In
order to avoid a 4% federal excise tax, each Fund intends to distribute each
year substantially all of its net income and gains.
Distributions received by tax-exempt shareholders will not be subject
to federal income tax to the extent permitted under applicable tax law. To the
extent that a shareholder is not exempt from tax on Fund distributions, such
shareholder will be subject to tax on dividends received from a Fund, regardless
of whether received in cash or reinvested in additional shares. All
shareholders must treat dividends, other than capital gain dividends or
dividends that represent a return of capital to shareholders, as ordinary
income. Dividends designated by a Fund as capital gain dividends are taxable to
shareholders as long-term capital gain except as provided by an applicable tax
exemption. Any distributions that are not from a Fund's net investment income
or net capital gain may be characterized as a return of capital to shareholders
or, in some cases, as capital gain. Certain dividends declared in October,
November or December of a calendar year are taxable to shareholders (who
otherwise are subject to tax on dividends) as though received on December 31 of
that year if paid to shareholders during January of the following calendar year.
Each Fund will advise shareholders annually of the amount and nature of the
dividends paid to them.
B-24
<PAGE>
Taxable shareholders should note that the timing of their investment
could have undesirable tax consequences. If shares are purchased on or just
before the day a Fund declares a dividend, taxable shareholders will pay full
price for the shares and may receive a portion of their investment back as a
taxable distribution.
The preceding discussion relates only to federal income tax; the
consequences under other tax laws may differ. For additional information
relating to the tax aspects of investing in a Fund, see the Statement of
Additional Information.
OTHER INFORMATION
Capitalization
The Trust was organized as a Massachusetts business trust on August
24, 1990. The Board of Trustees may establish additional portfolios in the
future. The capitalization of the Trust consists solely of an unlimited number
of shares of beneficial interest with a par value of $0.001 each. When issued,
shares of the Trust are fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the Amended
and Restated Agreement and Declaration of Trust (the "Declaration of Trust")
disclaims liability of the shareholders, Trustees or officers of the Trust for
acts or obligations of the Trust, which are binding only on the assets and
property of the Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Trust
property for all loss and expense of any shareholder held personally liable for
the obligations of the Trust. The risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations, and thus should be
considered remote.
Voting
Shareholders have the right to vote on the election of Trustees and on
any and all matters on which the law or the Declaration of Trust states they may
be entitled to vote. The Trust is not required to hold regular annual meetings
of Trust shareholders and does not intend to do so. Shareholders of a class of
shares have separate voting rights with respect to matters that only affect that
class. Shares entitle their holders to one vote per share (with proportional
voting for fractional shares). See "Other Information--Voting Rights" in the
Statement of Additional Information.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust.
Performance Information
The Trust may, from time to time, include the yield and total return
for each class of shares of its Funds in advertisements or reports to
shareholders or prospective investors. Quotations of yield for a Fund or class
will be based on the investment income per share (as defined by the SEC) during
a particular 30-day (or one-month) period (including dividends and interest),
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share on the last day of the period. Quotations of average annual total
return for a Fund or class will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in the fund or class over
periods of one, five and ten years (up to the life of the Fund), reflect the
deduction of a proportional share of Fund or class expenses (on an annual
basis), and assume that all dividends and distributions are reinvested when
paid.
The Trust also may provide current distribution information to its
shareholders reports or other shareholder communications, or in certain types of
sales literature provided to prospective investors. Current distribution
information for a particular class of a Fund will be based on distributions for
a specified period (i.e., total dividends from net investment income), divided
by the relevant class net asset value per share on the last day of the period
and annualized. The rate of current distributions does not reflect deductions
for unrealized losses from transactions in derivative instruments such as
options and futures, which may reduce total return. Current distribution rates
differ from standardized
B-25
<PAGE>
yield rates in that they represent what a class of a Fund has declared and paid
to shareholders as of the end of a specified period rather than the Fund's
actual net investment income for that period.
Performance information for the Trust may also be compared to: (i) the
S&P 500, the Dow Jones Industrial Average, the EAFE Index, the MSCI Free Index,
the Baring Index, the IFC Index, the Russell 1000 Value Index, the Russell 1000
Growth Index, or other unmanaged indexes that measure performance of a pertinent
group of securities; (ii) other groups of mutual funds tracked by Lipper
Analytical Services ("Lipper"), a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives, and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
investment in the Funds. Unmanaged indexes (i.e., other than Lipper) generally
do not reflect deductions from administrative and management costs and expenses.
The Adviser and any of the Portfolio Mangers may also report to shareholders or
to the public in advertisements concerning the performance of the Adviser and
the Portfolio Manager as advisers to clients other than the Trust, and on the
comparative performance or standing of the Adviser or the Portfolio Manager in
relation to other money managers. Such comparative information may be compiled
or provided by independent ratings services or by news organizations. Any
performance information, whether related to the Funds, the Adviser or the
Portfolio Managers, should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Funds, and the
market conditions during the time period indicated, and should not be considered
to be representative of what may be achieved in the future. For a description of
the methods used to determine yield and total return for the Funds, see the
Statement of Additional Information.
Investment results of the Funds will fluctuate over time, and any
representations of the Funds' total return or yield for any prior period should
not be considered as a representation of what an investor's total return or
yield may be in any future period.
B-26
<PAGE>
APPENDIX C
INFORMATION FROM ANNUAL REPORT
NFJ DIVERSIFIED LOW P/E FUND
Portfolio Manager:
NFJ Investment Group
Dallas, Texas
Investment Objective and Primary Investments:
Seeks long-term growth of capital and income; invests primarily in common stocks
with below-average price to earnings ratios relative to their industry groups.
<TABLE>
<CAPTION>
Annualized Returns Ended 6/30/96
- -----------------------------------------------------------
Since
1Yr. 3Yrs. 4Yrs. Inception
<S> <C> <C> <C> <C>
NFJ Diversified
Low P/E
Fund (%) 26.66 16.58 17.24 15.71
- -----------------------------------------------------------
S&P 500
Index (%) 26.12 17.25 n/a n/a
- -----------------------------------------------------------
</TABLE>
[Line Graph Appears Here]
<TABLE>
<CAPTION>
NFJ DIVER- S&P 500
SIFIED LOW INDEX
P/E FUND
<S> <C> <C>
1/01/92 $200,000 $200,000
6/30/92 $202,697 $198,726
6/30/93 $241,679 $225,765
6/30/94 $247,669 $228,763
6/30/95 $302,310 $288,481
6/30/96 $382,897 $363,827
</TABLE>
The line graph above assumes the investment of $200,000 on 1/1/92, the first
full month following the Fund's Institutional Class inception on 12/30/91,
compared with the S&P 500 Index, an unmanaged market index. Past performance is
not an indication of future results.
. Cyclical and financial stocks, with their improved relative performance, were
overweighted in the Fund, enhancing returns.
. The underperformance of technology stocks during the fourth quarter of 1995
helped the Fund due to its considerably below-index weighting in this sector.
. Emphasis on mid cap issues was a setback in a market that rewarded large and
small cap stocks.
. The yield factor had been a drag on performance, but turned around to become
a positive influence.
Portfolio Composition
<TABLE>
<CAPTION>
Top Ten Common Stocks
% of Total
Company Investments
- -----------------------------------------------------
<S> <C>
Sprint Corp. 2.7%
- -----------------------------------------------------
PHH Corp. 2.7%
- -----------------------------------------------------
Pharmacia & Upjohn, Inc. 2.6%
- -----------------------------------------------------
Amoco Corp. 2.6%
- -----------------------------------------------------
Repsol 2.6%
- -----------------------------------------------------
American Home Products 2.6%
- -----------------------------------------------------
Anheuser Busch 2.6%
- -----------------------------------------------------
Maytag Corp. 2.5%
- -----------------------------------------------------
Chase Manhattan Corp. 2.5%
- -----------------------------------------------------
Phillip Morris Co., Inc. 2.5%
- -----------------------------------------------------
Top Ten Total 25.9%
</TABLE>
Industry Classifications as a Percent of Total Investments
<TABLE>
<S> <C>
Consumer Discretionary 14.9%
- -----------------------------------------------------
Consumer Staples 10.0%
- -----------------------------------------------------
Energy 10.3%
- -----------------------------------------------------
Financial & Business Services 13.8%
- -----------------------------------------------------
Health Care 8.5%
- -----------------------------------------------------
Utilities 9.8%
- -----------------------------------------------------
Short-Term Instruments 11.9%
- -----------------------------------------------------
Other 20.8%
- -----------------------------------------------------
</TABLE>
C-1
<PAGE>
CADENCE MID CAP GROWTH FUND
PORTFOLIO MANAGER:
Cadence Capital Management
Boston, Massachusetts
INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS:
Seeks growth of capital; invests primarily in common stocks of companies with
market capitalizations in excess of $500 million that have improving
fundamentals and whose stock is reasonably valued by the market.
<TABLE>
<CAPTION>
Annualized Returns Ended 6/30/96
- -----------------------------------------------------------
Since
1Yr. 3Yrs. 4Yrs. Inception
----- ----- ------ ---------
<S> <C> <C> <C> <C>
Cadence Mid Cap
Growth Fund
Inst. Class (%) 21.56 15.13 17.71 16.10
- -----------------------------------------------------------
Cadence Mid Cap
Growth Fund
Admin. Class (%) 21.25 n/a n/a 29.60
- -----------------------------------------------------------
S&P MidCap
Index (%) 21.58 14.13 n/a n/a
- -----------------------------------------------------------
</TABLE>
[Line Graph Appears Here]
<TABLE>
<CAPTION>
CADENCE MID
CAP GROWTH S&P MidCap
FUND INDEX
<S> <C> <C>
9/01/91 $200,000 $200,000
6/30/92 $215,126 $215,802
6/30/93 $270,638 $264,758
6/30/94 $268,017 $264,642
6/30/95 $339,767 $323,803
6/30/96 $413,028 $393,578
</TABLE>
The line graph above assumes the investment of $200,000 on 9/1/91, the first
full month following the Fund's Institutional Class inception on 8/26/91,
compared with the S&P MidCap Index, an unmanaged market index. The performance
of the Administrative Class from inception on 11/30/94 (shown at left), reflects
the payment of a service fee in an amount not to exceed 0.25% on an annualized
basis. Past performance is not an indication of future results.
. Technology stocks came under severe pressure in the fourth quarter of 1995,
weakening investment results.
. The Fund's best-performing holdings were in health care, financial services,
and consumer services.
. HBO & Co., Guidant, Medtronic, and Health Management Associates set the pace
for the Fund's health care stocks. Financial Services was driven by
attractive valuations, strong earnings growth, and actual results that
exceeded Wall Street expectations.
. Other strong performing holdings included Callaway Golf and Mattel in the
consumer goods area, Kroger and Tiffany in consumer services, and Loral, a
defense electronics company acquired by Lockheed Martin.
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
Top Ten Common Stocks
% of Total
Company Investments
- -----------------------------------------------------
<S> <C>
Callaway Golf Co. 1.9%
- -----------------------------------------------------
Raychem Corp. 1.7%
- -----------------------------------------------------
First Brands Corp. 1.7%
- -----------------------------------------------------
America West Airlines 1.6%
- -----------------------------------------------------
Parametric Technology Corp. 1.6%
- -----------------------------------------------------
Mattel, Inc. 1.6%
- -----------------------------------------------------
Praxair, Inc. 1.6%
- -----------------------------------------------------
HBO & Co. 1.6%
- -----------------------------------------------------
Cytec Industries, Inc. 1.6%
- -----------------------------------------------------
McDonnell Douglas 1.6%
- -----------------------------------------------------
Top Ten Total 16.5%
</TABLE>
Industry Classifications as a Percent of Total Investments
<TABLE>
<S> <C>
Consumer Discretionary 11.0%
- -----------------------------------------------------
Capital Goods 11.9%
- -----------------------------------------------------
Financial & Business Services 30.9%
- -----------------------------------------------------
Health Care 11.1%
- -----------------------------------------------------
Materials & Processing 5.7%
- -----------------------------------------------------
Technology 10.0%
- -----------------------------------------------------
Short-Term Instruments 5.1%
- -----------------------------------------------------
Other 14.3%
- -----------------------------------------------------
</TABLE>
C-2
<PAGE>
[Outside Back Cover]
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
OVERVIEW -4-
Proposed Transactions................................................ -4-
Operating Expenses................................................... -5-
Examples............................................................. -9-
Federal Income Tax Consequences...................................... -10-
Comparison of Investment Objectives, Policies
and Restrictions................................................... -10-
Comparison of Distribution Policies and Purchase,
Exchange and Redemption Procedures................................. -12-
RISK FACTORS............................................................. -13-
SPECIAL MEETING OF SHAREHOLDERS.......................................... -15-
PROPOSALS 1 and 2:
APPROVAL OR DISAPPROVAL OF AGREEMENT AND
PLAN OF REORGANIZATION.......................................... -15-
Background and Reasons for the Proposed Mergers...................... -16-
Information About the Mergers........................................ -17-
INFORMATION ABOUT THE ACQUIRING FUNDS.................................... -28-
INFORMATION ABOUT THE ACQUIRED FUNDS..................................... -28-
VOTING INFORMATION....................................................... -28-
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION................................ A-1
APPENDIX B
INFORMATION ABOUT THE ACQUIRING FUNDS............................... B-1
APPENDIX C
INFORMATION FROM ANNUAL REPORT...........................................
</TABLE>
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSAL.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR the
proposal.
Proposal to approve the merger of the Fund [_] FOR [_] AGAINST [_] ABSTAIN
named on the reverse side of this card, as
described in the Prospectus/Proxy Statement
and the relevant Agreement and Plan of
Reorganization.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
____________ FUND PROXY SOLICITED BY THE BOARD OF TRUSTEES
A SERIES OF ____________________
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS -- DECEMBER ___, 1996
The undersigned hereby appoints Robert A. Prindiville, Stephen J. Treadway and
Newton B. Schott, Jr., and each of them, proxies, with power of substitution to
each, and hereby authorizes them to represent and to vote, as designated below,
at the Special Meeting of Shareholders of the Fund indicated above, a series of
PIMCO Advisors Funds, on December ___, 1996 at _____ Eastern time, and at any
adjournments thereof, all of the shares of the Fund which the undersigned would
be entitled to vote if personally present.
NOTE: Please sign exactly as your name appears on
this card. All joint owners should sign. When
signing as executor, administrator, attorney,
trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation,
please sign in full corporate name and indicate
the signer's office. If a partner, sign in the
partnership name.
Signature(s):
--------------------------------------------------
--------------------------------------------------
Date
--------------------------------------------------
<PAGE>
PIMCO FUNDS: EQUITY ADVISORS SERIES
NFJ Diversified Low P/E Fund and
Cadence Mid Cap Growth Fund
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
October __, 1996
This Statement of Additional Information relates to proposed mergers (the
"Mergers") of the Value Fund and the Discovery Fund (each an "Acquired Fund"),
each a series of PIMCO Advisors Funds, a Massachusetts business trust (the "PAF
Trust"), with and into, respectively, the NFJ Diversified Low P/E Fund and the
Cadence Mid Cap Growth Fund (each an "Acquiring Fund"), each a series of PIMCO
Funds: Equity Advisors Series, a Massachusetts business trust (the "PFEAS
Trust").
This Statement of Additional Information contains information which may be
of interest to shareholders but which is not included in the Prospectus/Proxy
Statement dated October __, 1996 (the "Prospectus/Proxy Statement") of the PFEAS
Trust which relates to the Mergers. As described in the Prospectus/Proxy
Statement, the Mergers would involve the transfer of all the assets of each
Acquired Fund in exchange for shares of the corresponding Acquiring Fund and the
assumption of all the liabilities of the Acquired Fund. Each Acquired Fund
would distribute the Acquiring Fund shares it receives to its shareholders in
complete liquidation of the Acquired Fund.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus/Proxy Statement. The Prospectus/Proxy
Statement has been filed with the Securities and Exchange Commission and is
available upon request and without charge by writing PIMCO Funds: Equity
Advisors Series, 840 Newport Center Drive, Suite 360, Newport Beach, CA 92660,
or by calling (800) 927-4648.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
I. Additional Information about Acquiring and Acquired Funds ...........
II. Financial Statements ................................................
1. Incorporation by Reference
2. Unaudited Pro Forma Combined Financial Statements
A. The PAF Trust's Value Fund and the PFEAS Trust's NFJ
Diversified Low P/E Fund .........................
B. The PAF Trust's Discovery Fund and the PFEAS Trust's
Cadence Mid Cap Growth Fund ......................
</TABLE>
-2-
<PAGE>
I. Additional Information about Acquiring and Acquired Funds.
This Statement of Additional Information is accompanied by (i) the
current Prospectus and Statement of Additional Information of the PFEAS Trust,
each dated September 15, 1996, which provide further information relating to the
Acquiring Funds and (ii) the current Prospectus, dated February 1, 1996, and
Statement of Additional Information, dated July 12, 1996, of the PAF Trust which
provide further information relating to the Acquired Funds. Each of the
documents listed in (i) and (ii) has been filed with the Securities and Exchange
Commission and is incorporated herein by reference.
The PFEAS Trust currently offers Institutional Class shares and
Administrative Class shares of the Acquiring Funds to certain categories of
institutional investors and high net-worth individuals through its current
Prospectus and Statement of Additional Information. The PAF Trust currently
offers Class A, Class B and Class C shares of the Acquired Funds to the general
public through its current Prospectus and Statement of Additional Information.
On or about the effective date of the Mergers, the Acquiring Funds will begin
offering Class A, Class B and Class C shares (in addition to Institutional Class
shares and Administrative Class shares) with substantially the same
characteristics (including dividend, voting and redemption rights) and
arrangements for distribution, purchases, redemptions and exchanges as are
currently in effect for the PAF Trust's Class A, Class B and Class C shares.
Accordingly, in addition to the Prospectus/Proxy Statement, shareholders should
consult "How to Buy Shares," "Alternative Purchase Arrangements," "Exchange
Privilege," "How to Redeem," "How Net Asset Value is Determined" and
"Description of the Trust" in the PAF Trust's current Prospectus and "Exchange
Privilege," "How to Redeem," "How Net Asset Value is Determined" and
"Organization and Capitalization of the Trust" in the PAF Trust's current
Statement of Additional Information for further information applicable to Class
A, Class B and Class C shares of the Acquiring Funds that will be issued to
Acquired Fund shareholders in connection with the Mergers.
The following documents, which have previously been filed with the Securities
and Exchange Commission, have been incorporated by reference into Part A of this
Registration Statement:
(1) PIMCO Advisors Funds Prospectus dated February 1, 1996 (filed on
February 7, 1996 pursuant to Rule 497 under the Securities Act of 1933)
(Registration Nos. 2-87203 and 811-3881)
(2) PIMCO Advisors Funds Prospectus Supplement dated September 27, 1996 (filed
on September 27, 1996 pursuant to Rule 497 under the Securities Act of
1933)
(Registration Nos. 2-87203 and 811-3881)
(3) PIMCO Advisors Funds Statement of Additional Information dated July 12,
1996 (filed on July 16, 1996 pursuant to Rule 497 under the Securities Act
of 1933)
(Registration Nos. 2-87203 and 811-3881)
(4) PIMCO Funds: Equity Advisors Series Prospectus dated September 15, 1996
(filed on September 10, 1996 as part of Post-Effective Amendment No. 23
to Registration Statement on Form N-1A)
(Registration Nos. 33-36528 and 811-06161)
(5) PIMCO Funds: Equity Advisors Series Statement of Additional Information
dated September 15, 1996 (filed on September 10, 1996 as part of Post-
Effective Amendment No. 23 to Registration Statement on Form N-1A)
(Registration Nos. 33-36528 and 811-06161)
(6) PIMCO Advisors Funds Semi-Annual Report dated March 31, 1996 (filed on
May 30, 1996)
(Registration Nos. 2-87203 and 811-3881)
(7) PIMCO Funds: Equity Advisors Series Annual Report dated June 30, 1996
(filed on September 9, 1996)
(Registration Nos. 33-36528 and 811-06161)
II. Financial Statements.
1. Incorporation by Reference. This Statement of Additional Information
--------------------------
is accompanied by the PFEAS Trust's Annual Report for the fiscal year ended June
30, 1996 and the PAF Trust's Semi-Annual Report for the six-month period ended
March 31, 1996 which contain historical financial information regarding the
Acquiring Funds and the Acquired Funds, respectively. Such reports have been
filed with the Securities and Exchange Commission and are incorporated herein by
reference. The PAF Trust's current Statement of Additional Information which
accompanies this Statement of Additional Information includes financial
statements for the Acquired Funds from the PAF Trust's Annual Report for the
fiscal year ended September 30, 1995.
2. Unaudited Pro Forma Combined Financial Statements. The following pro
-------------------------------------------------
forma combined financial statements for the Acquiring Funds should be read in
conjunction with the separate financial statements of the Acquiring and Acquired
Funds referred to in the preceding paragraph.
-3-
<PAGE>
A. The PAF Trust's Value Fund and the PFEAS Trust's NFJ Diversified Low P/E
Fund.
-4-
<PAGE>
June 30, 1996
PRO FORMA COMBINED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
All numbers are in thousands (except per share amounts)
<TABLE>
<CAPTION>
PIMCO Funds: PIMCO
Equity Advisors Advisors Funds
Series
New Value Fund
NFJ Div.
Low P/E Value Pro Forma Pro Forma
Fund Fund Adjustments Combined
---------------- ---------------- ---------------- -----------------
Assets:
<S> <C> <C> <C> <C>
Investments, at value $ 55,606 $ 49,577 $ - $ 105,183
Cash, receivables and other assets 638 3,235 (40) 3,833
---------------- ---------------- ---------------- -----------------
Total assets 56,244 52,812 (40) 109,016
---------------- ---------------- ---------------- -----------------
Liabilities:
Total liabilities 3,517 514 75 (2) 4,106
---------------- ---------------- ---------------- -----------------
Net Assets: $ 52,727 $ 52,298 $ (115) $ 104,910
================ ================ ================ =================
Cost of investments owned $ 52,446 $ 45,917 $ - $ 98,363
================ ================ ================ =================
Net Assets Consist of:
Paid in capital $ 48,467 $ 47,763 $ (115) $ 96,115
Undistributed
net investment income 348 33 - 381
Accumulated undistributed
net realized gain 752 842 - 1,594
Net unrealized appreciation 3,160 3,660 - 6,820
---------------- ---------------- ---------------- -----------------
Net assets $ 52,727 $ 52,298 $ (115) $ 104,910
================ ================ ================ =================
Shares Issued and Outstanding:
PIMCO Funds
-----------
Institutional class 4,232 - - 4,232
Administrative class - - - -
Class A - - 692 692
Class B - - 1,182 1,182
Class C - - 2,424 2,424
PIMCO Advisors Funds
---------------------
Institutional class - - - -
Administrative class - - - -
Class A - 692 (692) -
Class B - 1,182 (1,182) -
Class C - 2,424 (2,424) -
Net Asset Value Per Share (1):
PIMCO Funds
-----------
Institutional class $ 12.46 $ - $ - $ 12.46
Administrative class $ - $ - $ - $ -
Class A (1) $ - $ - $ 12.17 $ 12.17
Class B $ - $ - $ 12.17 $ 12.17
Class C $ - $ - $ 12.17 $ 12.17
PIMCO Advisors Funds
---------------------
Institutional class $ - $ - $ - $ -
Administrative class $ - $ - $ - $ -
Class A (1) $ - $ 12.17 $ (12.17) $ -
Class B $ - $ 12.17 $ (12.17) $ -
Class C $ - $ 12.17 $ (12.17) $ -
</TABLE>
(1) All per share amounts represent Net Asset Value per share. Maximum offering
price of $12.88 per share for Class A shares reflects the 5.5% sales
commission charged up front as set forth in the prospectus.
(2) In connection with the reorganization, the combined Portfolio will incur
non-recurring reorganization costs of approximately $75,000 or $0.01 per
share.
See Notes to Pro Forma combined financial statements.
<PAGE>
For the 12 months ended June 30, 1996
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (unaudited)
All numbers are in thousands
<TABLE>
<CAPTION>
PIMCO Funds: PIMCO
Equity Advisors Advisors Funds
Series
New Value Fund
NFJ Div.
Low P/E Value Pro Forma Pro Forma
Fund Fund Adjustments Combined
------ ------ ----------- --------
Investment income:
<S> <C> <C> <C> <C>
Dividends, interest, and other $ 594 $ 972 $ -- $1,566
------ ------ ----- ------
Expenses:
Investment advisory fees 87 187 (65) 209
Administrative fees 49 -- 108 157
Service fees
--- Administrative Class -- -- -- --
--- Class A -- 11 -- 11
--- Class B -- 19 -- 19
--- Class C -- 36 -- 36
Distribution fees
--- Class B -- 57 -- 57
--- Class C -- 109 -- 109
Transfer agent and custody fees -- 58 (58) --
Professional fees -- 13 (13) --
Shareholder reports and notices -- 10 (10) --
Trustees' fees 1 3 -- 4
Other -- 14 (14) --
------ ------ ----- ------
Net expenses 137 517 (52) 602
------ ------ ----- ------
Net investment income (loss) 457 455 52 964
------ ------ ----- ------
Realized and unrealized gain (loss) on
security transactions:
Net realized gain (loss) on security transactions 1,583 842 -- 2,425
Net unrealized gain (loss) on security transactions 1,698 3,660 -- 5,358
------ ------ ----- ------
Net gain on security transactions 3,281 4,502 -- 7,783
------ ------ ----- ------
Net increase in net assets resulting from
operations $3,738 $4,957 $ 52 $8,747
====== ====== ===== ======
</TABLE>
See Notes to Pro Forma combined financial statements.
<PAGE>
<TABLE> <CAPTION>
NFJ PIMCO NFJ PIMCO % Combined
Diversified Advisors Pro Forma Diversified Advisors Pro Forma Value of Net
Low P/E Value Combined Low P/E Value Combined Assets
--------------------------------------- ---------------------------------------- ------------
Shares Value (000's)
--------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Capital Goods
Deere & Co. 23,600 13,000 36,600 $ 944 $ 520 $ 1,464 1.4%
GATX Corp. -- 11,000 11,000 -- 531 531 0.5%
944 1,051 1,995 1.9%
Consumer Discretionary
Brunswick Corp. 23,200 33,000 56,200 464 660 1,124 1.1%
Chrysler Corp. 22,105 16,000 38,105 1,371 992 2,363 2.3%
Dillard Department Stores 26,500 6,000 32,500 967 219 1,186 1.1%
Ford Motor Co. -- 14,000 14,000 -- 453 453 0.4%
Goodyear Tire & Rubber 17,900 10,000 27,900 864 483 1,347 1.3%
Harland (John H.) Co. -- 16,000 16,000 -- 394 394 0.4%
J.C. Penney Co., Inc. -- 9,400 9,400 -- 494 494 0.5%
Maytag Corp. 67,900 62,000 129,900 1,417 1,294 2,711 2.6%
Reebok International Limited 14,600 3,600 18,200 491 121 612 0.6%
Springs Industries, Inc., 'A' -- 10,000 10,000 -- 505 505 0.5%
Tandy Corp. 10,200 3,800 14,000 483 180 663 0.6%
Tupperware Corp. (a) 11,000 6,000 17,000 465 254 719 0.7%
Washington Post Co. 2,700 1,600 4,300 875 518 1,393 1.3%
Xerox Corp. 16,500 20,000 36,500 883 1,070 1,953 1.9%
8,280 7,637 15,917 15.3%
Consumer Staples
Anheuser Busch 18,900 17,000 35,900 1,418 1,275 2,693 2.6%
IBP, Inc. 30,100 18,000 48,100 832 497 1,329 1.3%
Philip Morris Co., Inc. 13,400 13,000 26,400 1,394 1,352 2,746 2.6%
RJR Nabisco Holdings Corp. -- 14,000 14,000 -- 434 434 0.4%
Supervalu, Inc. 29,800 31,000 60,800 939 977 1,916 1.8%
Unilever NV 6,600 4,000 10,600 958 581 1,539 1.4%
5,541 5,115 10,656 10.1%
Energy
Amoco Corp. 20,000 17,000 37,000 1,448 1,230 2,678 2.6%
Atlantic Richfield Co. 8,100 8,500 16,600 960 1,007 1,967 1.9%
Repsol SA - ADR 41,400 30,000 71,400 1,439 1,043 2,482 2.4%
Ultramar Corp. 48,000 60,000 108,000 1,392 1,740 3,132 3.0%
Union Texas Petroleum
Holdings, Inc. 24,600 14,000 38,600 480 273 753 0.6%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NFJ PIMCO
Diversified Advisors Pro Forma
Low P/E Value Combined
---------------------------------------
Shares
---------------------------------------
<S> <C> <C> <C>
Financial & Business Services
Aetna Life & Casualty Co. - 7,000 7,000
Bankers Trust N.Y. Corp. - 6,000 6,000
Bear Stearns Cos. 38,850 63,000 101,850
Chase Manhattan Corp. 19,984 18,000 37,984
Loews Corp. 10,400 6,000 16,400
Meditrust - 15,000 15,000
Mellon Bank Corp. 22,400 22,000 44,400
PHH Corp. 25,900 18,000 43,900
PNC Bank Corp. - 14,500 14,500
Provident Cos., Inc. 24,300 30,000 54,300
Standard Federal Bancorp. 23,200 13,000 36,200
Health Care
American Home Products 23,700 22,000 45,700
Baxter International, Inc. - 10,000 10,000
Beckman Instruments 26,200 14,000 40,200
Bristol Myers Squibb - 5,000 5,000
Pharmacia & Upjohn, Inc. 33,010 29,000 62,010
Tenet Healthcare Corp. (a) 40,400 22,000 62,400
Materials & Processing
Dow Chemical - 5,600 5,600
Lennar Corp. 37,250 18,000 55,250
Phelps Dodge Corp. 22,100 24,000 46,100
Potlatch Corp. - 12,000 12,000
PPG Industries, Inc. - 9,000 9,000
Union Carbide Corp. 24,400 12,000 36,400
Wellman, Inc. 20,300 9,500 29,800
Willamette Industries 7,200 4,500 11,700
Technology
Harris Corp. 7,500 11,000 18,500
Mentor Graphics Corp. (a) 29,200 12,500 41,700
Northrop Grumman Corp. 13,800 23,000 36,800
</TABLE>
<TABLE>
<CAPTION>
NFJ PIMCO % Combined
Diversified Advisors Pro Forma Value of Net
Low P/E Value Combined Assets
-------------------------------------------- ------------
Value (000's)
--------------------------------------------
<S> <C> <C> <C> <C>
5,719 5,293 11,012 10.5%
Financial & Business Services
Aetna Life & Casualty Co. - 501 501 0.5%
Bankers Trust N.Y. Corp. - 443 443 0.4%
Bear Stearns Cos. 918 1,488 2,406 2.3%
Chase Manhattan Corp. 1,411 1,271 2,682 2.6%
Loews Corp. 820 473 1,293 1.2%
Meditrust - 501 501 0.5%
Mellon Bank Corp. 1,277 1,254 2,531 2.4%
PHH Corp. 1,476 1,026 2,502 2.4%
PNC Bank Corp. - 431 431 0.4%
Provident Cos., Inc. 899 1,110 2,009 1.9%
Standard Federal Bancorp. 893 501 1,394 1.3%
7,694 8,999 16,693 15.9%
Health Care
American Home Products 1,425 1,323 2,748 2.6%
Baxter International, Inc. - 473 473 0.4%
Beckman Instruments 996 532 1,528 1.5%
Bristol Myers Squibb - 450 450 0.4%
Pharmacia & Upjohn, Inc. 1,465 1,287 2,752 2.6%
Tenet Healthcare Corp. (a) 863 470 1,333 1.3%
4,749 4,534 9,283 8.8%
Materials & Processing
Dow Chemical - 426 426 0.4%
Lennar Corp. 931 450 1,381 1.3%
Phelps Dodge Corp. 1,378 1,497 2,875 2.7%
Potlatch Corp. - 470 470 0.4%
PPG Industries, Inc. - 439 439 0.4%
Union Carbide Corp. 970 477 1,447 1.4%
Wellman, Inc. 475 222 697 0.7%
Willamette Industries 427 268 695 0.7%
4,181 4,248 8,429 8.0%
Technology
Harris Corp. 458 671 1,129 1.1%
Mentor Graphics Corp. (a) 475 203 678 0.6%
Northrop Grumman Corp. 940 1,567 2,507 2.4%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NFJ PIMCO NFJ PIMCO % Combined
Diversified Advisors Pro Forma Diversified Advisors Pro Forma Value of Net
Low P/E Value Combined Low P/E Value Combined Assets
-------------------------------------------- ----------------------------------- ------------
Shares Value (000's)
-------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Raytheon Co. 18,400 10,000 28,400 950 516 1,466 1.4%
Seagate Technology (a) 22,000 12,000 34,000 990 540 1,530 1.5%
Teradyne, Inc. (a) 28,100 12,000 40,100 484 207 691 0.6%
4,297 3,704 8,001 7.6%
Transportation
AMR Corp. (a) 10,600 2,500 13,100 965 228 1,193 1.2%
Conrail, Inc. 17,900 11,000 28,900 1,187 730 1,917 1.8%
2,152 958 3,110 3.0%
Utilities
DTE Energy Co. 39,000 44,000 83,000 1,204 1,359 2,563 2.4%
NICOR, Inc. 32,800 36,000 68,800 931 1,022 1,953 1.9%
Pacific Gas & Electric 40,200 42,000 82,200 935 977 1,912 1.8%
Pacific Telesis 26,900 23,000 49,900 908 776 1,684 1.6%
Peoples Energy Corp. - 18,000 18,000 - 603 603 0.6%
P.P.& L. Resources, Inc. - 22,000 22,000 - 520 520 0.5%
Southern New England
Telecom. Corp. - 11,000 11,000 - 462 462 0.4%
Sprint Corp. 35,200 31,000 66,200 1,477 1,302 2,779 2.6%
U.S. West, Inc. - 16,000 16,000 - 510 510 0.5%
Washington Water Power Co. - 27,000 27,000 - 509 509 0.6%
5,455 8,038 13,493 12.9%
Total Common Stocks (Cost $45,852, $45,917
and $91,769, respectively) 49,012 49,577 98,589 94.0%
</TABLE>
SHORT-TERM INSTRUMENTS
<TABLE>
<CAPTION>
NFJ PIMCO NFJ PIMCO % Combined
Diversified Advisors Pro Forma Diversified Advisors Pro Forma Value of Net
Low P/E Value Combined Low P/E Value Combined Assets
-------------------------------------------- ----------------------------------- ------------
Principal Amount (000's) Value (000's)
-------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Repurchase Agreement
State Street Bank $6,594 - $6,594 6,594 - 6,594 6.3%
4.000% due 07/01/96
(Dated 06/28/96. Collateralized by U.S. Treasury Bond 9.250% due 02/15/16 valued at $6,726,300.
Repurchase proceeds are $6,596,198.)
Total Short-Term Instruments (Cost $6,594, $0 and
$6,594, respectively) 6,594 - 6,594 6.3%
Total Investments (Cost $52,446, $45,917 and
$98,363, respectively) 55,606 49,577 105,183 100.3%
Other Assets and Liabilities (Net) (2,879) 2,721 (158) -0.2%
Pro Forma Adjustments - - (115) -0.1%
Net Assets $52,727 $52,298 $104,910 100.0%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NFJ PIMCO NFJ PIMCO % Combined
Diversified Advisors Pro Forma Diversified Advisors Pro Forma Value of Net
Low P/E Value Combined Low P/E Value Combined Assets
-------------------------------------------- -------------------------------------------- ------------
Principal Amount (000's) Value (000's)
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
Notes to Pro Forma Combined Schedules of Investments
(a) Non-income producing security.
<PAGE>
B. The PAF Trust's Discovery Fund and the PFEAS Trust's Cadence Mid Cap Growth
Fund.
<PAGE>
June 30, 1996
PRO FORMA COMBINED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
All numbers are in thousands (except per share amounts)
<TABLE>
<CAPTION>
PIMCO Funds: PIMCO Mid Cap
Equity Advisors Advisors Funds Growth Fund
Series
Cadence
Mid Cap Discovery Pro Forma Pro Forma
Growth Fund Fund Adjustments Combined
------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value $ 231,855 $ 59,378 $ -- $ 291,233
Cash, receivables and other assets 1,212 8,975 (40) 10,147
------------- --------------- ------------- ----------------
Total assets 233,067 68,353 (40) 301,380
------------- --------------- ------------- ----------------
Liabilities:
Total liabilities 985 408 66 (2) 1,459
------------- --------------- ------------- ----------------
Net Assets: $ 232,082 $ 67,945 $ (106) $ 299,921
============= =============== ============= ================
Cost of investments owned $ 200,715 $ 52,417 $ -- $ 253,132
============= =============== ============= ================
Net Assets Consist of:
Paid in capital $ 169,974 $ 64,842 $ (106) $ 234,710
Undistributed (overdistributed)
net investment income 2,129 (93) -- 2,036
Accumulated undistributed net
realized gain (loss) 28,839 (3,765) -- 25,074
Net unrealized appreciation 31,140 6,961 -- 38,101
------------ --------------- ------------- ----------------
Net assets $ 232,082 $ 67,945 $ (106) $ 299,921
============ =============== ============= ================
Shares Issued and Outstanding:
PIMCO Funds
-----------
Institutional class 11,881 -- -- 11,881
Administrative class 55 -- -- 55
Class A -- -- 928 928
Class B -- -- 1,721 1,721
Class C -- -- 3,474 3,474
PIMCO Advisors Funds
--------------------
Institutional class -- -- -- --
Administrative class -- -- -- --
Class A -- 928 (928) --
Class B -- 1,721 (1,721) --
Class C -- 3,474 (3,474) --
Net Asset Value Per Share (1):
PIMCO Funds
-----------
Institutional class $ 19.44 $ -- $ -- $ 19.44
Administrative class $ 19.44 $ -- $ -- $ 19.44
Class A(1) $ -- $ -- $ 11.17 $ 11.17
Class B $ -- $ -- $ 11.08 $ 11.08
Class C $ -- $ -- $ 11.08 $ 11.08
PIMCO Advisors Funds
--------------------
Institutional class $ -- $ -- $ -- $ --
Administrative class $ -- $ -- $ -- $ --
Class A(1) $ -- $ 11.17 $ (11.17) $ --
Class B $ -- $ 11.08 $ (11.08) $ --
Class C $ -- $ 11.08 $ (11.08) $ --
</TABLE>
(1) All per share amounts represent Net Asset Value per share. Maximum offering
price of $11.82 per share for Class A shares reflects the 5.5% sales
commission charged up front as set forth in the prospectus.
(2) In connection with the reorganization, the combined Portfolio will incur
non-recurring reorganization costs of approximately $66,000 or $0.00 per
share.
See Notes to Pro Forma combined financial statements.
<PAGE>
For the 12 months ended June 30, 1996
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (unaudited)
All numbers are in thousands
<TABLE>
<CAPTION>
PIMCO Funds: PIMCO Mid Cap
Equity Advisors Advisors Funds Growth Fund
Series
Cadence
Mid Cap Discovery Pro Forma Pro Forma
Growth Fund Fund Adjustments Combined
Investment income: ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Dividends, interest, and other $ 3,080 $ 823 $ -- $ 3,903
--------------- -------------- ---------------- --------------
Expenses:
Investment advisory fees 890 354 (142) 1,102
Administrative fees 494 -- 189 683
Service fees
--- Administrative Class 2 -- -- 2
--- Class A -- 21 -- 21
--- Class B -- 34 -- 34
--- Class C -- 64 -- 64
Distribution fees
--- Class B -- 101 -- 101
--- Class C -- 191 -- 191
Transfer agent and custody fees -- 114 (114) --
Professional fees -- 19 (19) --
Shareholder reports and notices -- 18 (18) --
Trustees' fees 11 5 -- 16
Other -- 17 (17) --
--------------- ------------- --------------- -------------
Net expenses 1,397 938 (121) 2,214
--------------- ------------- ---------------- -------------
Net investment income (loss) 1,683 (115) 121 1,689
--------------- ------------- ---------------- -------------
Realized and unrealized gain (loss) on
security transactions:
Net realized gain (loss) on security transactions 36,703 (3,765) -- 32,938
Net unrealized gain (loss) on security transactions (3,281) 6,961 -- 3,680
--------------- ------------ --------------- -------------
Net gain on security transactions 33,422 3,196 -- 36,618
--------------- ------------ --------------- -------------
Net increase in net assets resulting from
operations $ 35,105 $ 3,081 $ 121 $ 38,307
=============== ============ =============== ============
</TABLE>
See Notes to Pro Forma combined financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PIMCO
Cadence Mid Advisors Pro Forma
Cap Growth Discovery Combined
-------------------------------------------------------
Shares
-------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
Capital Goods
Belden, Inc. 112,000 24,400 136,400
Duriron Co., Inc. -- 30,000 30,000
EG&G, Inc. 126,400 34,600 161,000
Harnischfeger Industries, Inc. 79,700 -- 79,700
IDEX Corp. -- 17,500 17,500
Mark IV Industries, Inc. 110,711 -- 110,711
McDonnell Douglas 76,300 -- 76,300
Medusa Corp. -- 25,200 25,200
Methode Electronics 'A' -- 52,500 52,500
Raychem Corp. 54,600 10,500 65,100
Roper Industries, Inc. -- 20,100 20,100
Stolt-Nielsen SA 140,900 22,600 163,500
Stolt-Nielsen SA - ADR (b) 100 11,300 11,400
United Dominion Industries 116,500 32,400 148,900
York International Corp. 65,800 -- 65,800
Consumer Discretionary
Ameristar Casinos, Inc. (a) (b) -- 3,500 3,500
Callaway Golf Co. 129,400 27,000 156,400
Consolidated Stores Corp. (a) 65,300 18,400 83,700
Dollar General Corp. 78,900 -- 78,900
First Brands Corp. 145,100 29,400 174,500
Friedman's, Inc. 'A' (a) (b) -- 30,000 30,000
K2, Inc. (b) -- 29,600 29,600
Liz Claiborne, Inc. 78,400 -- 78,400
Mattel, Inc. 131,589 -- 131,589
Omnicom Group 62,100 -- 62,100
SPX Corp. (b) -- 1,000 1,000
Tiffany & Co. 45,700 12,200 57,900
Consumer Services
Lennar Corp. 113,600 32,300 145,900
PIMCO % Combined
Cadence Mid Advisors Pro Forma Value of Net
Cap Growth Discovery Combined Assets
------------------------------------------------------------------ ------------
Value (000's)
------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS
Capital Goods
Belden, Inc. $ 3,360 $ 732 $ 4,092 1.4%
Duriron Co., Inc. -- 720 720 0.2%
EG&G, Inc. 2,702 740 3,442 1.1%
Harnischfeger Industries, Inc. 2,650 -- 2,650 0.9%
IDEX Corp. -- 665 665 0.2%
Mark IV Industries, Inc. 2,505 -- 2,505 0.8%
McDonnell Douglas 3,701 -- 3,701 1.2%
Medusa Corp. -- 781 781 0.3%
Methode Electronics 'A' -- 893 893 0.3%
Raychem Corp. 3,924 755 4,679 1.6%
Roper Industries, Inc. -- 980 980 0.3%
Stolt-Nielsen SA 2,554 410 2,964 1.0%
Stolt-Nielsen SA - ADR (b) 2 210 212 0.1%
United Dominion Industries 2,680 745 3,425 1.1%
York International Corp. 3,405 -- 3,405 1.2%
27,483 7,631 35,114 11.7%
Consumer Discretionary
Ameristar Casinos, Inc. (a) (b) -- 46 46 0.0%
Callaway Golf Co. 4,303 898 5,201 1.7%
Consolidated Stores Corp. (a) 2,400 676 3,076 1.0%
Dollar General Corp. 2,308 -- 2,308 0.8%
First Brands Corp. 3,918 794 4,712 1.6%
Friedman's, Inc. 'A' (a) (b) -- 765 765 0.3%
K2, Inc. (b) -- 803 803 0.3%
Liz Claiborne, Inc. 2,715 -- 2,715 0.9%
Mattel, Inc. 3,767 -- 3,767 1.3%
Omnicom Group 2,888 -- 2,888 1.0%
SPX Corp. (b) -- 24 24 0.0%
Tiffany & Co. 3,336 890 4,226 1.3%
25,635 4,896 30,531 10.2%
Consumer Services
Lennar Corp. 2,840 808 3,648 1.2%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PIMCO
Cadence Mid Advisors Pro Forma
Cap Growth Discovery Combined
--------------------------------------------------------
Shares
--------------------------------------------------------
<S> <C> <C> <C>
Oakwood Homes 129,300 31,400 160,700
Promus Hotel Corp. (a) 97,800 97,800
Redman Industries, Inc. (a) 135,900 38,200 174,100
Ross Stores, Inc. 29,300 29,300
United Video Satellite 'A' (a) 47,800 47,800
Westwood One, Inc. (b) 4,700 4,700
Consumer Staples
Kroger Co. (a) 86,300 86,300
Richfood Holdings, Inc. 96,800 28,400 125,200
Energy
Camco International, Inc. 20,000 20,000
Flores & Rucks, Inc. (a) (b) 1,000 1,000
Reading & Bates Corp. (a) 131,800 131,800
Tosco Corp. 63,000 63,000
Financial & Business Services
Advanta Corp. 'A' 47,650 47,650
Allmerica Financial Corp. 109,100 22,800 131,900
American Re Corp. 64,400 64,400
Associated Banc-Corp. 20,800 20,800
Bank of Boston Corp. 40,100 40,100
Baybanks, Inc. 19,200 19,200
Centura Banks, Inc. 20,000 20,000
Citizens Corp. 141,900 32,900 174,800
City National Corp. 51,600 51,600
Comdisco, Inc. 120,650 120,650
Countrywide Credit Industries, Inc. 111,600 34,800 146,400
Crestar Financial Corp. 49,800 49,800
Cullen/Frost Bankers, Inc. 98,300 32,200 130,500
Equifax 112,800 112,800
Finova Group, Inc. 52,000 14,100 66,100
First American Corp. 54,100 54,100
First Commerce Corp. 63,700 18,800 82,500
</TABLE>
<TABLE>
<CAPTION>
PIMCO % Combined
Cadence Mid Advisors Pro Forma Value of Net
Cap Growth Discovery Combined Assets
-------------------------------------------------------- ------------
Value (000's)
--------------------------------------------------------
<S> <C> <C> <C> <C>
Oakwood Homes 648 3,315 1.1% 2,667
Promus Hotel Corp. (a) 2,897 1.0% 2,897
Redman Industries, Inc. (a) 793 3,613 1.2% 2,820
Ross Stores, Inc. 1,018 1,018 0.4%
United Video Satellite 'A' (a) 1,003 1,003 0.3%
Westwood One, Inc. (b) 71 71 0.0%
4,341 15,565 5.2% 11,224
Consumer Staples
Kroger Co. (a) 3,409 1.1% 3,409
Richfood Holdings, Inc. 923 4,069 1.4% 3,146
923 7,478 2.5% 6,555
Energy
Camco International, Inc. 677 677 0.2%
Flores & Rucks, Inc. (a) (b) 35 35 0.0%
Reading & Bates Corp. (a) 2,916 1.0% 2,916
Tosco Corp. 3,166 1.1% 3,166
712 6,794 2.3% 6,082
Financial & Business Services
Advanta Corp. 'A' 2,430 0.8% 2,430
Allmerica Financial Corp. 678 3,924 1.3% 3,246
American Re Corp. 2,890 1.0% 2,890
Associated Banc-Corp. 806 806 0.3%
Bank of Boston Corp. 1,985 0.7% 1,985
Baybanks, Inc. 2,069 0.7% 2,069
Centura Banks, Inc. 735 735 0.2%
Citizens Corp. 617 3,278 1.1% 2,661
City National Corp. 813 813 0.3%
Comdisco, Inc. 3,212 1.1% 3,212
Countrywide Credit Industries, Inc. 861 3,623 1.2% 2,762
Crestar Financial Corp. 2,658 0.9% 2,658
Cullen/Frost Bankers, Inc. 894 3,622 1.2% 2,728
Equifax 2,961 1.0% 2,961
Finova Group, Inc. 687 3,222 1.0% 2,535
First American Corp. 2,279 0.8% 2,279
First Commerce Corp. 665 2,918 1.0% 2,253
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE> <CAPTION>
PIMCO
Cadence Mid Advisors Pro Forma
Cap Growth Discovery Combined
--------------------------------------------
Shares
--------------------------------------------
<S> <C> <C> <C>
First USA, Inc. 40,500 40,500 2,228
Green Tree Financial Corp. 88,400 23,400 111,800
HCC Insurance Holdings, Inc. -- 33,750 33,750
Mark Twain Bancshares, Inc. 62,000 15,300 77,300
Mid Ocean Limited 70,300 21,300 91,600
Mutual Risk Management Limited 92,699 24,266 116,965
NAC Re Corp. 77,900 17,900 95,800
National Re Corp. -- 19,900 19,900
North Folk (b) -- 1,000 1,000
Olympic Financial Ltd. (a) (b) -- 1,000 1,000
One Valley Bancorp, Inc. (b) -- 1,000 1,000
Penncorp Financial Group, Inc. 71,100 24,800 95,900
Protective Life Corp. 75,800 22,200 98,000
Reinsurance Group of America -- 17,300 17,300
Selective Insurance Group -- 21,600 21,600
Southern National Corp. 100,600 -- 100,600
Summit Bancorp 76,060 -- 76,060
SunAmerica, Inc. 59,450 -- 59,450
The Money Store 103,200 30,175 133,375
Trustmark Corp. 17,000 18,100 35,100
Union Planters Corp. 80,100 25,900 106,000
Vesta Insurance Group, Inc. -- 19,800 19,800
Health Care
Beckman Instruments 75,900 20,900 96,800
Biovail Corp. International (a) -- 1,000 1,000
Boston Scientific Corp. (a) 61,100 -- 61,100
Genzyme Corp. (a) 50,700 -- 50,700
Guidant Corp. 50,500 -- 50,500
HBO & Co. 55,400 -- 55,400
Health Management Associates 'A' 177,975 46,575 224,550
ICN Pharmaceuticals, Inc. -- 34,200 34,200
Kinetic Concepts, Inc. -- 58,100 58,100
Ornda Healthcorp (a) 105,300 25,000 130,300
Orthodontic Centers of America, Inc. -- 30,000 30,000
</TABLE>
<TABLE> <CAPTION>
PIMCO % Combined
Cadence Mid Advisors Pro Forma Value of Net
Cap Growth Discovery Combined Assets
-------------------------------------------- ------------
Value (000's)
--------------------------------------------
<S> <C> <C> <C> <C>
First USA, Inc. 2,228 2,228 0.7%
Green Tree Financial Corp. 2,763 731 3,494 1.2%
HCC Insurance Holdings, Inc. -- 759 759 0.3%
Mark Twain Bancshares, Inc. 2,294 566 2,860 1.0%
Mid Ocean Limited 2,882 873 3,755 1.3%
Mutual Risk Management Limited 2,897 758 3,655 1.2%
NAC Re Corp. 2,610 600 3,210 1.0%
National Re Corp. -- 751 751 0.3%
North Folk (b) -- 26 26 0.0%
Olympic Financial Ltd. (a) (b) -- 23 23 0.0%
One Valley Bancorp, Inc. (b) -- 35 35 0.0%
Penncorp Financial Group, Inc. 2,257 787 3,044 1.0%
Protective Life Corp. 2,662 780 3,442 1.1%
Reinsurance Group of America -- 653 653 0.2%
Selective Insurance Group -- 702 702 0.2%
Southern National Corp. 3,194 -- 3,194 1.1%
Summit Bancorp 2,672 -- 2,672 0.9%
SunAmerica, Inc. 3,359 -- 3,359 1.1%
The Money Store 2,283 668 2,951 1.0%
Trustmark Corp. 357 380 737 0.2%
Union Planters Corp. 2,433 787 3,220 1.0%
Vesta Insurance Group, Inc. -- 661 661 0.2%
71,560 17,296 88,856 29.6%
Health Care
Beckman Instruments 2,884 794 3,678 1.3%
Biovail Corp. International (a) -- 31 31 0.0%
Boston Scientific Corp. (a) 2,750 -- 2,750 0.9%
Genzyme Corp. (a) 2,548 -- 2,548 0.8%
Guidant Corp. 2,487 -- 2,487 0.8%
HBO & Co. 3,753 -- 3,753 1.3%
Health Management Associates 'A' 3,604 943 4,547 1.5%
ICN Pharmaceuticals, Inc. -- 795 795 0.3%
Kinetic Concepts, Inc. -- 901 901 0.3%
Ornda Healthcorp (a) 2,527 600 3,127 1.0%
Orthodontic Centers of America, Inc. -- 795 795 0.3%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PIMCO
Cadence Mid Advisors Pro Forma
Cap Growth Discovery Combined
-----------------------------------------------------
Shares
-----------------------------------------------------
<S> <C> <C> <C>
PHP Healthcare Corp. (b) 15,100 15,100
Physican Reliance Network (a) -- 30,000 30,000
Physio-Control International
Corp. -- 38,300 38,300
Rexall Sundown, Inc. (a) -- 1,000 1,000
Rotech Medical Corp. (a) (b) -- 41,400 41,400
Sybron Corp. (a) 109,800 33,300 143,100
Universal Health Services,
Inc. 'B' -- 27,600 27,600
Watson Pharmaceutical, Inc. (a) 61,900 15,800 77,700
Materials & Processing
Bemis, Inc. 86,800 23,900 110,700
Cytec Industries, Inc. (a) 43,500 9,300 52,800
Gencorp, Inc. -- 1,000 1,000
Mississippi Chemical Corp. (b) -- 19,900 19,900
Mueller Industries, Inc. (a) -- 22,800 22,800
Oregon Metallurgical
Corp. (a) (b) -- 1,000 1,000
Praxair, Inc. 89,000 -- 89,000
Texas Industries, Inc. 40,000 11,900 51,900
United Waste Systems, Inc. (a) -- 30,400 30,400
Technology
Alliant Techsystems, Inc. (a) -- 14,000 14,000
Analog Devices (a) 108,400 23,100 131,500
Ascend Communications, Inc. (a) 46,900 -- 46,900
Cadence Designs Systems,
Inc. (a) 82,400 39,150 121,550
Ceridian Corp. (a) 71,200 -- 71,200
Computer Horizons Corp. (a) -- 20,800 20,800
Credence Systems Co. (a) 8,160 5,000 13,160
McAfee Associates, Inc. (a) 71,700 19,500 91,200
MEMC Electronic Materials,
Inc. (a) 57,200 -- 57,200
Parametric Technology Corp. (a) 87,200 20,000 107,200
Rational Software Corp. (a) -- 18,000 18,000
Samina Corp. (a) -- 28,000 28,000
Stratus Computer, Inc. (a) -- 1,000 1,000
Structural Dynamics Research (a) 81,000 19,000 100,000
</TABLE>
<TABLE>
<CAPTION>
PIMCO % Combined
Cadence Mid Advisors Pro Forma Value of Net
Cap Growth Discovery Combined Assets
-------------------------------------------------------------- ---------------
Value (000's)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
PHP Healthcare Corp. (b) 476 476 0.2%
Physican Reliance Network (a) -- 668 668 0.2%
Physio-Control International Corp. 675 675 0.2%
Rexall Sundown, Inc. (a) -- 27 27 0.0%
Rotech Medical Corp. (a) (b) -- 807 807 0.3%
Sybron Corp. (a) -- 833 3,578 1.2%
Universal Health Services, Inc. 'B' 2,745 721 721 0.2%
Watson Pharmaceutical, Inc. (a) 598 2,942 1.0%
-- 9,664 35,306 11.8%
Materials & Processing 2,344
Bemis, Inc. 25,642 837 3,875 1.3%
Cytec Industries, Inc. (a) 795 4,514 1.5%
Gencorp, Inc. 3,038 15 15 0.0%
Mississippi Chemical Corp. (b) 3,719 398 398 0.1%
Mueller Industries, Inc. (a) -- 946 946 0.3%
Oregon Metallurgical Corp. (a) (b) -- 30 30 0.0%
Praxair, Inc. -- -- 3,760 1.3%
Texas Industries, Inc. 817 3,562 1.2%
United Waste Systems, Inc. (a) -- 980 980 0.3%
3,760 4,818 18,080 6.0%
Technology 2,745
Alliant Techsystems, Inc. (a) -- 660 660 0.2%
Analog Devices (a) 13,262 589 3,353 1.1%
Ascend Communications, Inc. (a) -- 2,638 0.9%
Cadence Designs Systems, Inc. (a) -- 1,321 4,101 1.4%
Ceridian Corp. (a) 2,764 -- 3,596 1.2%
Computer Horizons Corp. (a) 2,638 822 822 0.3%
Credence Systems Co. (a) 67 177 0.1%
McAfee Associates, Inc. (a) 2,780 956 4,469 1.5%
MEMC Electronic Materials, Inc. (a) 3,596 -- 2,217 0.7%
Parametric Technology Corp. (a) -- 868 4,650 1.5%
Rational Software Corp. (a) 110 968 968 0.3%
Samina Corp. (a) 3,513 756 756 0.3%
Stratus Computer, Inc. (a) 29 29 0.0%
Structural Dynamics Research (a) 2,217 417 2,198 0.7%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO FORMA COMBINED SCHEDULES OF INVESTMENTS (Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PIMCO PIMCO % Combined
Cadence Mid Advisors Pro Forma Cadence Mid Advisors Pro Forma Value of Net
Cap Growth Discovery Combined Cap Growth Discovery Combined Assets
------------------------------------------ ---------------------------------- -------------
Shares Value (000's)
------------------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wyle Electronics 18,900 18,900 625 625 0.2%
23,181 8,078 31,259 10.4%
Transportation
America West Airlines (a) 173,600 37,300 210,900 3,818 821 4,639 1.5%
Utilities
Allegheny Power System 93,100 93,100 2,874 2,874 1.0%
Portland General Corp. 84,300 84,300 2,602 2,602 0.9%
Vanguard Cellular Systems 'A' (a) 9,100 9,100 198 198 0.0%
5,476 198 5,674 1.9%
Total Common Stocks (Cost $188,778, $52,417
and $241,195, respectively) 219,918 59,378 279,296 93.1%
SHORT-TERM INSTRUMENTS
Principal Amount (000's)
Repurchase Agreement
State Street Bank $11,937 $11,937 11,937 11,937 4.0%
4.000% due 07/01/96
(Dated 06/28/96. Collateralized by
U.S. Treasury Bond 8.750% due 11/15/08
valued at $12,178,550. Repurchase
proceeds are $11,940,979.)
Total Short-Term Instruments (Cost $11,937,
$0 and $11,937, respectively) 11,937 11,937 4.0%
Total Investments (Cost $200,715, $52,417
and $253,132, respectively) 231,855 59,378 291,233 97.1%
Other Assets and Liabilities (Net) 227 8,567 8,794 2.9%
Pro Forma Adjustments (106) 0.0%
Net Assets $232,082 $67,945 $299,921 100.0%
Notes to Pro Forma Combined Schedules of Investments
(a) Non-income producing security.
(b) Security subject to sale upon completion of reorganization.
</TABLE>
<PAGE>
Notes to Pro Forma Financial Statements
PIMCO Funds: Equity Advisors Series
Cadence Mid Cap Growth and NFJ Diversified Low P/E Funds
Basis of Presentation:
Subject to the approval of the Agreement and Plan of Reorganization ("Plan of
Reorganization") by the shareholders of the Value Fund and the Discovery Fund
(each an "Acquired Fund") of PIMCO Advisors ("PAF") and the NFJ Diversified Low
P/E Fund (the "New Value Fund") and the Cadence Mid Cap Growth Fund (the "Mid
Cap Fund") (each an "Acquiring Fund") of PIMCO Funds: Equity Advisors Series
("PFEAS"), the New Value Fund and the Mid Cap Fund would acquire, respectively,
all the assets of the Value Fund and the Discovery Fund in exchange for newly
issued shares of beneficial interest of the Acquiring Fund (the "Merger Shares")
and the assumption by the respective Acquiring Fund of all of the liabilities of
the Acquired Fund followed by a distribution of the Merger Shares to the
shareholders of the Acquired Fund.
As a result of each proposed transaction, the Acquired Fund will receive a
number of Class A, Class B and Class C shares of the Acquiring Fund equal in
value to the value of the net assets of the Acquired Fund being transferred and
attributable to the Class A, Class B and Class C shares of the Acquired Fund.
Following the transfer, each Class A, Class B and Class C shareholder of the
Acquired Fund will receive, on a tax-free basis, a number of full and fractional
Class A, Class B or Class C Merger Shares of the Acquiring Fund equal in value,
as of the close of business on the day of the exchange, to the value of the
shareholder's Class A, Class B or Class C Acquired Fund shares. The completion
of these transactions will result in the liquidation of the Acquired fund.
The pro forma combined financial statements reflect the combined financial
position of the New Value Fund with the Value Fund (hereafter the "Combined New
Value Fund") and the combined financial position of the Mid Cap Fund with the
Discovery Fund (hereafter the "Combined Mid Cap Fund") at June 30, 1996, and the
pro forma combined results of operations of the Combined New Value Fund and the
Combined Mid Cap Fund for the period from July 1, 1995 to June 30, 1996, as
though the reorganization had occurred on July 1, 1995.
The pro forma combined financial statements are presented for the information of
the reader and may not necessarily be representative of how the pro forma
combined financial statements would have appeared had the reorganization
actually occurred. The pro forma combined financial statements should be read in
conjunction with the historical financial statements of the respective
portfolios.
Pro Forma Adjustments:
<PAGE>
The pro forma combined Statements of Assets and Liabilities reflect the
reclassification of capital for the respective Acquired Funds into shares of
beneficial interest of the respective Acquiring Funds. Also, net assets and
total liabilities reflect an adjustment for $39,947 at June 30, 1996 for each
Combined Fund for the elimination of the capitalized asset representing the
organizational and registration costs incurred which were being amortized over
the period of benefit for the Acquired Funds not to exceed 60 months. In
addition, the additional paid-in-capital and total liabilities reflect an
adjustment for $74,942 and $66,355 at June 30, 1996 for the Combined New Value
Fund and the Combined Mid Cap Fund, respectively, for the estimated non-
recurring costs to effect the reorganization, including such items as legal,
accounting, federal and state Blue Sky Fees and proxy costs.
The pro forma combined Statements of Operations reflect the following
adjustments:
. A decrease in the advisory fee paid by the Discovery Fund and the Value
Fund as a result of the application of the .45% advisory fee for each of
the New Value and Mid Cap Funds. Previously, advisory fees of .70% and .75%
paid, respectively, by the Value Fund and the Discovery Fund included
certain administrative services which will be included under a separate
.40% administrative fee to be paid by retail shareholders of the Combined
Funds described below.
. An elimination of the transfer agent and custody fees, professional fees,
shareholder reports and notices and certain miscellaneous expenses such as
insurance and membership fees of trade organizations as a result of the
assumption of those expenses by the administrator (currently Pacific
Investment Management Company and to become PIMCO Advisors L.P. at the time
of the proposed transaction), as part of the .40% administrative fee paid
by the shareholders of the retail classes (i.e., Classes A, B, and C) of
the Acquired Fund.
. A decrease in other expenses as a result of the elimination of amortization
related to deferred organizational costs previously discussed.
<PAGE>
PIMCO FUNDS: EQUITY ADVISORS SERIES
NFJ Diversified Low P/E Fund
and Cadence Mid Cap Growth Fund
Form N-14
PART C
OTHER INFORMATION
Item 15. Indemnification.
Reference is made to Article 5, Section 5.4 of the Amended and
Restated Agreement and Declaration of Trust (the "Agreement and Declaration of
Trust") of PIMCO Funds: Equity Advisors Series (the "Registrant") which is
incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant by the Registrant pursuant to the
Agreement and Declaration of Trust, its By-Laws or otherwise, the Registrant is
aware that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by directors, officers or controlling persons of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted by such directors, officers or controlling persons in connection with
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issues.
Item 16. Exhibits.
(1) Form of Amended and Restated Agreement and Declaration of Trust dated
as of August 20, 1996(4)
(2) By-Laws(1)
(3) None
<PAGE>
(4) Form of Agreement and Plan of Reorganization - filed as Appendix A to
Part A hereof
(5) (a) Article VI (Shares of Beneficial Interest) and Article IX
(Shareholders) of the Agreement and Declaration of Trust(4)
(b) Article I (Shareholder Meetings) of the By-Laws(1)
(6) (a) Form of Investment Advisory Agreement(4)
(b) (i) Form of Portfolio Management Agreement with NFJ Investment
Group and relate Addendum(4)
(ii) Form of Portfolio Management Agreement with Cadence Capital
Management and related Addendum(4)
(7) (a) Distribution Agreement and related Addendum(4)
(b) Form of Distribution Contract is filed herewith
(8) None
(9) Form of Custody Agreement and Addenda(4)
(10) (a) (i) Form of Distribution and Servicing Plan for Class A
shares is filed herewith
(ii) Form of Distribution and Servicing Plan for Class B
shares is filed herewith
(iii) Form of Distribution and Servicing Plan for Class C
shares is filed herewith
(b) Amended and Restated Multi-Class Plan adopted pursuant to
Rule 18f-3 is filed herewith
(11) Opinion and consent of counsel as to legality of securities being
registered is filed herewith
(12) Opinion of counsel as to tax matters - to be filed by post-effective
amendment
-2-
<PAGE>
(13) Material Contracts
(a) Form of Agency Agreement and Addenda(4)
(b) Form of Service Plan for Institutional Services Shares (2)
(c) Form of Sub-Administration Agreement(3)
(d) Administration Agreement(4)
(e) Form of Administration Agreement is filed herewith
(f) Form of Sub-Administration Agreement is filed herewith
(14) (a) Consent of Price Waterhouse LLP is filed herewith
(b) Consent of Coopers & Lybrand LLP is filed herewith
(15) None
(16) Powers of Attorney for Messrs. Cvengros, Nelson, Porter and Richards
are filed herewith
(17) Copy of Registrant's Declaration under Rule 24f-2(1)
_______________________________________________________
/1/ Included in the Registrant's initial Registration Statement (the
"Registration Statement") on Form N-1A (File No. 33-36528), as filed
on August 24, 1990.
/2/ Included in Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A (File No. 33-36528), as filed on April 12,
1994.
/3/ Included in Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A (File No. 33-36528), as filed on October 31,
1995.
/4/ Included in Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A (File No. 33-36528), as filed on July 1, 1996.
-3-
<PAGE>
Item 17. Undertakings.
(a) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) under the Securities Act
of 1933, the reoffering prospectus will contain the information called for
by the applicable registration form for the reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(b) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (a) above will be filed as a part of an amendment to this
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial
bona fide offering of them.
(c) The undersigned Registrant agrees to file, by post-effective amendment, an
opinion of counsel or a copy of an Internal Revenue Service ruling
supporting the tax consequences of the proposed mergers described in this
Registration Statement within a reasonable time after receipt of such
opinion or ruling.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Newport Beach in the State
of California on the 27th day of September, 1996.
PIMCO Funds: Equity Advisors Series
WILLIAM D. CVENGROS*
------------------------------------
William D. Cvengros, Chairman of the
Board, President and Trustee
*By: /s/ Teresa A. Wagner
--------------------------------
Teresa A. Wagner as
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
/s/ John P. Hardaway
- --------------------------
John P. Hardaway Treasurer (Principal September 27, 1996
Financial and
Accounting Officer)
RICHARD L. NELSON*
- --------------------------
Richard L. Nelson Trustee September 27, 1996
LYMAN W. PORTER*
- --------------------------
Lyman W. Porter Trustee September 27, 1996
-5-
<PAGE>
ALAN RICHARDS*
- --------------------------
Alan Richards Trustee September 27, 1996
WILLIAM D. CVENGROS*
- --------------------------
William D. Cvengros Chairman of the Board, September 27, 1996
President and Trustee
*By: /s/ Teresa A. Wagner
--------------------------
Teresa A. Wagner as
Attorney-in-Fact
-6-
<PAGE>
EXHIBIT LIST
Exhibit No. Exhibit Name
- ----------- ------------
7(b) Form of Distribution Contract
10(a)(i) Form of Distribution and Servicing Plan for
Class A Shares
10(a)(ii) Form of Distribution and Servicing Plan for
Class B Shares
10(a)(iii) Form of Distribution and Servicing Plan for
Class C Shares
10(b) Amended and Restated Multi-Class Plan
11 Opinion and Consent of Counsel as to legality of securities
being issued
13(e) Form of Administration Agreement
13(f) Form of Sub-Administration Agreement
14(a) Consent of Price Waterhouse LLP
14(b) Consent of Coopers & Lybrand LLP
16 Powers of Attorney
<PAGE>
EXHIBIT 7(b)
DISTRIBUTION CONTRACT
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive
Newport Beach, California 92660
___________, 1996
PIMCO Advisors Distribution Company
2187 Atlantic Avenue
Stamford, Connecticut 06902
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
you (the "Distributor") as follows:
1. Description of Trust and Classes of Shares. The Trust is an open-end
investment company which presently has the following [twenty] investment
portfolios: Equity Income Fund, Value Fund, Summit Fund, Enhanced Equity Fund,
Growth Fund, Capital Appreciation Fund, Mid Cap Growth Fund, Target Fund, Small
Cap Value Fund, Small Cap Growth Fund, Opportunity Fund, Micro Cap Growth Fund,
Innovation Fund, International Fund, [New International Fund], Emerging Markets
Fund, Precious Metals Fund, Balanced Fund and Tax Exempt Fund (each a "Fund,"
and collectively, the "Funds"). Additional investment portfolios may be
established in the future. This Contract shall pertain to the Funds and to such
additional investment portfolios as shall be designated in Supplements to this
Contract, as further agreed between the Trust and the Distributor. A separate
series of shares of beneficial interest in the Trust is offered to investors
with respect to each Fund, and each Fund currently offers its shares with
respect to five classes: Class A shares, Class B shares, and Class C shares
(together, the "Retail Classes"), and Institutional Class shares and
<PAGE>
Administrative Class shares. The Trust engages in the business of investing and
reinvesting the assets of the Funds in the manner and in accordance with the
investment objective and restrictions specified in the Trust's currently
effective Prospectus or Prospectuses and Statement of Additional Information
(together, the "Prospectus") relating to the Retail, Institutional and
Administrative Classes of the Funds included in the Trust's Registration
Statement, as amended from time to time (the "Registration Statement"), as filed
by the Trust under the Investment Company Act of 1940, as amended (together with
the rules and regulations thereunder, the "1940 Act") and the Securities Act of
1933, as amended (together with the rules and regulations thereunder, the "1933
Act"). Copies of the documents referred to in the preceding sentence have been
furnished to the Distributor. Any amendments to those documents shall be
furnished to the Distributor promptly. The Trust has adopted separate
Distribution and Servicing Plans pursuant to Rule 12b-l under the 1940 Act with
respect to each of the Retail Classes (the "Retail Class Plans") and has adopted
a Distribution Plan, also pursuant to Rule 12b-1, with respect to the
Administrative Class shares of the Funds (the "Administrative Distribution
Plan"). The Trust has also adopted an Administrative Services Plan with respect
to the Administrative Class shares of the Funds, in conformity with Rule 12b-1,
as if the expenditures made thereunder were subject to Rule 12b-1, excepting the
shareholder voting rights under Rule 12b-1 (the "Administrative Services Plan,"
and together with the Retail Class Plans and the Administrative Distribution
Plan, the "Plans").
2. Appointment and Acceptance. The Trust hereby appoints the Distributor
as a distributor of shares of beneficial interest in the Trust (the "shares")
which may from time to time be registered under the 1933 Act and as servicing
agent of shareholders and shareholder accounts of the Trust, and the Distributor
hereby accepts such appointment in accordance with the terms and conditions set
forth herein. As the Trust's agent, the Distributor shall, except to the extent
provided in Section 4 hereof, be the exclusive distributor for the unsold
portion of the shares.
3. Sale of Shares to Distributor and Sales by Distributor. The
Distributor will have the right, as principal, to sell shares of each Class of
each Fund directly to the public against orders therefor at the applicable
public offering price as described below in the case of Class A shares, and at
net asset value in the case of Class B shares, Class C shares, Institutional
Class shares and Administrative Class shares. For such purposes, the
Distributor will have the right to purchase shares at net asset value. The
Distributor will also have the right, as agent, to sell shares of a Fund
indirectly to the public through broker dealers who are members of the National
Association of Securities Dealers, Inc. and who are acting as introducing
brokers pursuant to clearing agreements with the Distributor ("introducing
brokers"), to broker dealers which are members of the National Association of
Securities Dealers, Inc. and who have entered into selling agreements with the
Distributor ("participating brokers") or through other financial intermediaries,
in each case against orders therefor. The price for introducing brokers,
participating brokers and other financial intermediaries shall be, in the case
of Class A shares, the applicable public offering price less a concession to be
determined by the Distributor, which concession will not exceed the amount of
the sales
-2-
<PAGE>
charge or underwriting discount, if any, described below and, in the case of
Class B shares, Class C shares, Institutional Class shares and Administrative
Class shares, net asset value.
The Trust shall sell through the Distributor, as the Trust's agent, shares
to eligible investors as described in the Prospectus. All orders through the
Distributor shall be subject to acceptance and confirmation by the Trust. The
Trust shall have the right, at its election, to deliver either shares issued
upon original issue or treasury shares.
Prior to the time of transfer of any shares by the Trust to, or on the
order of, the Distributor or any introducing broker, participating broker or
other financial intermediary, the Distributor shall pay or cause to be paid to
the Trust or to its order an amount in New York clearing house funds equal to
the applicable net asset value of the shares. Upon receipt of registration
instructions in proper form, the Distributor will transmit or cause to be
transmitted such instructions to the Trust or its agent for registration of the
shares purchased.
The public offering price of Class A shares shall be the net asset value of
such shares, plus any applicable sales charge as set forth in the Prospectus.
In no event will any applicable sales charge or underwriting discount exceed the
limitations on permissible sales loads imposed by Section 22(b) of the 1940 Act
and Section 26(d)(1) of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as either or both may be
amended from time to time.
On every sale, the Trust shall receive the net asset value of the shares.
The net asset value of the shares shall be determined in the manner provided in
the Declaration of Trust and By-laws of the Trust as then amended or restated.
In the case of Class A shares, the Distributor may retain so much of any sales
charge or underwriting discount as is not allowed by the Distributor as a
concession to dealers and such sales charge or underwriting discount shall be in
addition to the fee paid to the Distributor in respect of Class A shares as
described in Section 5 hereof.
4. Sales of Shares by the Trust. In addition to sales by the Distributor,
the Trust reserves the right to issue shares at any time directly to its
shareholders as a stock dividend or stock split or to sell shares to its
shareholders or other persons at not less than net asset value to the extent
that the Trust, its officers, or other persons associated with the Trust
participate in the sale, or to the extent that the Trust or the transfer agent
for its shares receive purchase requests for shares.
5. Fees. For its services as servicing agent of a Fund's Class A
shareholders and Class A shareholder accounts, the Trust shall pay the
Distributor on behalf of the Fund a servicing fee at the annual rate of 0.25% of
the Fund's average daily net assets attributable to its Class A shares upon the
terms and conditions set forth in the Distribution and Servicing Plan attached
as Exhibit A hereto, and as amended from time to time, and may retain so much of
any sales charge or underwriting discount as is not allowed by the Distributor
as a
-3-
<PAGE>
concession to dealers, and shall receive any contingent deferred sales charge as
provided in Section 8 hereof.
For its services as distributor of a Fund's Class B and Class C shares and
as servicing agent of Class B and Class C shareholders and Class B and Class C
shareholder accounts, the Trust shall pay the Distributor on behalf of the Fund
a distribution fee at the annual rate of 0.75% of the Fund's average daily net
assets, and a servicing fee at the annual rate of 0.25% of the Fund's average
daily net assets, attributable to the Fund's Class B shares and Class C shares,
respectively, upon the terms and conditions set forth in the relevant
Distribution and Servicing Plans attached as Exhibits B and C hereto, as amended
from time to time, and shall receive any contingent deferred sales charge as
provided in Section 8 hereof. The respective distribution and servicing fees
shall be accrued daily and paid monthly to the Distributor as soon as
practicable after the end of the calendar month in which they accrue, but in any
event within 5 business days following the last calendar day of each month.
The Trust shall reimburse the Distributor at an annual rate not to exceed
0.25% of the Fund's average daily net assets attributable to its Administrative
Class shares for payments made by the Distributor to various financial
intermediaries in connection with the distribution of Administrative Class
shares upon the terms and conditions set forth in the Administrative
Distribution Plan set forth as Exhibit D hereto.
6. Reservation of Right Not to Sell. The Trust reserves the right to
refuse at any time or times to sell any of its shares for any reason deemed
adequate by it.
7. Use of Sub-Agents; Non-exclusivity. The Distributor may employ such
sub-agents, including one or more participating brokers or introducing brokers,
for the purposes of selling shares of the Trust as the Distributor, in its sole
discretion, shall deem advisable or desirable. The Distributor may enter into
similar arrangements with other issuers and, except to the extent necessary to
perform its obligations hereunder, nothing herein shall be deemed to limit or
restrict the right of the Distributor, or any affiliate of the Distributor, or
any employee of the Distributor, to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, firm, individual or association.
8. Repurchase of Shares. The Distributor will act as agent for the Trust
in connection with the repurchase and redemption of shares by the Trust upon the
terms and conditions set forth in the Prospectus or as the Trust acting through
its Trustees may otherwise direct. The Distributor may employ such sub-agents,
including one or more participating brokers or introducing brokers, for such
purposes as the Distributor, in its sole discretion, shall deem to be advisable
or desirable. Any contingent deferred sales charge imposed on repurchases and
redemptions of Class A, Class B and Class C shares upon the terms and conditions
set forth in the Prospectus shall be paid to the Distributor in addition to the
fees with respect to Class A, Class B and Class C shares set forth in Section 5
hereof. The Trust
-4-
<PAGE>
will take such steps as are commercially reasonable to track on a share-by-share
basis the aging of its shares for purposes of calculating any contingent
deferred sales charges and/or distribution fees.
9. Basis of Purchases and Sales of Shares. The Distributor's obligation
to sell shares hereunder shall be on a best efforts basis only and the
Distributor shall not be obligated to sell any specific number of shares.
Shares will be sold by the Distributor only against orders therefor. The
Distributor will not purchase shares from anyone other than the Trust except in
accordance with Section 8 hereof, and will not take "long" or "short" positions
in shares contrary to any applicable provisions of the Declaration of Trust of
the Trust, as amended or restated from time to time.
10. Rules of Securities Associations, etc. As the Trust's agent, the
Distributor may sell and distribute shares in such manner not inconsistent with
the provisions hereof and the Trust's Prospectus as the Distributor may
determine from time to time. In this connection, the Distributor shall comply
with all laws, rules and regulations applicable to it, including, without
limiting the generality of the foregoing, all applicable rules or regulations
under the 1940 Act and of any securities association registered under the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "1934 Act"). The Distributor will conform to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and the securities laws of any jurisdiction in which it sells, directly or
indirectly, any shares. The Distributor also agrees to furnish to the Trust
sufficient copies of any agreement or plans it intends to use in connection with
any sales of shares in adequate time for the Trust to file and clear them with
the proper authorities before they are put in use, and not to use them until so
filed and cleared.
11. Independent Contractor. The Distributor shall be an independent
contractor and neither the Distributor nor any of its officers or employees as
such, is or shall be an employee of the Trust. The Distributor is responsible
for its own conduct and the employment, control and conduct of its agents and
employees and for injury to such agents or employees or to others through its
agents or employees. The Distributor assumes full responsibility for its agents
and employees under applicable statutes and agrees to pay all employer taxes
thereunder.
12. Registration and Qualification of Shares. The Trust agrees to execute
such papers and to do such acts and things as shall from time to time be
reasonably requested by the Distributor for the purpose of qualifying and
maintaining qualification of the shares for sale under the so-called Blue Sky
Laws of any state or for maintaining the registration of each Fund of the Trust
and the Trust under the 1933 Act and the 1940 Act, to the end that there will be
available for sale from time to time such number of shares as the Distributor
may reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the Securities and Exchange Commission or any
authorities of any state or territory, of which it may be advised, affecting
registration or qualification of the Trust, a Fund or the
-5-
<PAGE>
shares thereof, or rights to offer such shares for sale and (b) the happening of
any event which makes untrue any statement or which requires the making of any
change in the registration statement or Prospectus in order to make the
statements therein not misleading.
13. Securities Transactions. The Trust agrees that the Distributor may
effect a transaction on any national securities exchange of which it is a member
for the account of the Trust and any Fund of the Trust which is permitted by
Section 11(a) of the 1934 Act.
14. Expenses.
(a) The Distributor shall from time to time employ or associate with
it such persons as it believes necessary to assist it in carrying out its
obligations under this Contract. The compensation of such persons shall be paid
by the Distributor.
(b) The Distributor shall pay all expenses incurred in connection with
its qualification as a dealer or broker under Federal or state law.
(c) The Distributor will pay all expenses of preparing, printing and
distributing advertising and sales literature as such expenses relate to Retail
Class shares (apart from expenses of registering shares under the 1933 Act and
the 1940 Act and the preparation and printing of prospectuses and reports for
shareholders as required by said Acts and the direct expenses of the issue of
shares, except that the Distributor will pay the cost of the preparation and
printing of prospectuses and shareholders' reports used by it in the sale of
Trust shares). The Trust may enter into arrangements with affiliates of the
Distributor providing for the payment by such affiliates of some or all of these
expenses as they relate to Institutional and Administrative Class shares.
(d) The Trust shall pay or cause to be paid all expenses incurred in
connection with (i) the preparation, printing and distribution to shareholders
of the Prospectus and reports and other communications to existing shareholders,
(ii) future registrations of shares under the 1933 Act and the 1940 Act, (iii)
amendments of the Registration Statement subsequent to the initial public
offering of shares, (iv) qualification of shares for sale in jurisdictions
designated by the Distributor, including under the securities or so-called "Blue
Sky" laws of any State, (v) qualification of the Trust as a dealer or broker
under the laws of jurisdictions designated by the Distributor, (vi)
qualification of the Trust as a foreign corporation authorized to do business in
any jurisdiction if the Distributor determines that such qualification is
necessary or desirable for the purpose of facilitating sales of shares,
(vii) maintaining facilities for the issue and transfer of shares, (viii)
supplying information, prices and other data to be furnished by the Trust under
this Contract, (ix) any expenses assumed by the Trust with regard to shares of
each Retail Class of each Fund pursuant to the Retail Class Plan applicable to
that class; (x) any expenses assumed by the Trust with regard to the
Administrative Class shares of each Fund pursuant to the Administrative
Distribution
-6-
<PAGE>
Plan; and (xi) any expenses assumed by the Trust with regard to the
Administrative Class shares of each Fund pursuant to the Administrative Services
Plan.
(e) The Trust shall pay any original issue taxes or transfer taxes
applicable to the sale or delivery of shares or certificates therefor.
15. Indemnification of Distributor. The Trust shall prepare and furnish
to the Distributor from time to time such number of copies of the most recent
form of the Prospectus filed with the SEC as the Distributor may reasonably
request. The Trust authorizes the Distributor to use the Prospectus, in the
form furnished to the Distributor from time to time, in connection with the sale
of shares. The Trust shall indemnify, defend and hold harmless the Distributor,
its officers and trustees and any person who controls the Distributor within the
meaning of the 1933 Act, from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) which the Distributor, its officers and trustees or any such
controlling person may incur under the 1933 Act, the 1940 Act, the common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either or necessary to make the statements in either
not misleading. This Contract shall not be construed to protect the Distributor
against any liability to the Trust or its shareholders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Contract. This indemnity
agreement is expressly conditioned upon the Trust being notified of any action
brought against the Distributor, its officers or directors or any such
controlling person, which notification shall be given by letter or by telegram
addressed to the Trust at its principal office in Newport Beach, California, and
sent to the Trust by the person against whom such action is brought within 10
days after the summons or other first legal process shall have been served. The
failure to notify the Trust of any such action shall not relieve the Trust from
any liability which it may have to the person against whom such action is
brought by reason of any such alleged untrue statement or omission otherwise
than on account of the indemnity agreement contained in this Section 15. The
Trust shall be entitled to assume the defense of any suit brought to enforce any
such claim, demand or liability, but, in such case, the defense shall be
conducted by counsel chosen by the Trust and approved by the Distributor. If
the Trust elects to assume the defense of any such suit and retain counsel
approved by the Distributor, the defendant or defendants in such suit shall bear
the fees and expenses of any additional counsel retained by any of them, but in
case the Trust does not elect to assume the defense of any such suit, or in the
case the Distributor does not approve of counsel chosen by the Trust, the Trust
will reimburse the Distributor, its officers and directors or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by the Distributor or them. In addition,
the Distributor shall have the right to employ counsel to represent it, its
officers and directors and any such controlling person who may be subject to
liability arising
-7-
<PAGE>
out of any claim in respect of which indemnity may be sought by the Distributor
against the Trust hereunder if in the reasonable judgment of the Distributor it
is advisable for the Distributor, its officers and directors or such controlling
person to be represented by separate counsel, in which event the fees and
expense of such separate counsel shall be borne by the Trust. This indemnity
agreement and the Trust's representations and warranties in this Contract shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Distributor, its officers and directors or any such
controlling person. This indemnity agreement shall inure exclusively to the
benefit of the Distributor and its successors, the Distributor's officers and
directors and their respective estates and any such controlling persons and
their successors and estates. The Trust shall promptly notify the Distributor
of the commencement of any litigation or proceedings against it in connection
with the issue and sale of any shares.
16. Indemnification of Trust. The Distributor agrees to indemnify, defend
and hold harmless the Trust, its officers and trustees and any person who
controls the Trust within the meaning of the 1933 Act, from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or trustees
or any such controlling person, may incur under the 1933 Act, the 1940 Act, the
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or trustees or such controlling person
resulting from such claims or demands shall arise out of or be based upon (a)
any alleged untrue statement of a material fact contained in information
furnished in writing by the Distributor to the Trust specifically for use in the
Registration Statement or the Prospectus or shall arise out of or be based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or the
Prospectus or necessary to make such information not misleading, (b) any alleged
act or omission on the Distributor's part as the Trust's agent that has not been
expressly authorized by the Trust in writing, and (c) any claim, action, suit or
proceeding which arises out of or is alleged to arise out of the Distributor's
failure to exercise reasonable care and diligence with respect to its services
rendered in connection with investment, reinvestment, employee benefit and other
plans for shares. The foregoing rights of indemnification shall be in addition
to any other rights to which the Trust or a trustee may be entitled as a matter
of law. This indemnity agreement is expressly conditioned upon the Distributor
being notified of any action brought against the Trust, its officers or trustees
or any such controlling person, which notification shall be given by letter or
telegram addressed to the Distributor at its principal office in Stamford,
Connecticut, and sent to the Distributor by the person against whom such action
is brought, within 10 days after the summons or other first legal process shall
have been served. The failure to notify the Distributor of any such action
shall not relieve the Distributor from any liability which it may have to the
Trust, its officers or trustees or such controlling person by reason of any
alleged misstatement, omission, act or failure on the Distributor's part
otherwise than on account of the indemnity agreement contained in this Section
16. The Distributor shall have a right to control the defense of such action
with counsel of its own choosing and approved by the Trust if such
-8-
<PAGE>
action is based solely upon such alleged misstatement, omission, act or failure
on the Distributor's part, and in any other event the Trust, its officers and
trustees or such controlling person shall each have the right to participate in
the defense or preparation of the defense of any such action at their own
expense. If the Distributor elects to assume the defense of any such suit and
retain counsel approved by the Trust, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any of
them, but in case the Distributor does not elect to assume the defense of any
such suit, or in the case the Trust does not approve of counsel chosen by the
Distributor, the Distributor will reimburse the Trust, its officers and trustees
or the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by the Trust or them. In
addition, the Trust shall have the right to employ counsel to represent it, its
officers and trustees and any such controlling person who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Trust against the Distributor hereunder if in the reasonable judgment of
the Trust it is advisable for the Trust, its officers and trustees or such
controlling person to be represented by separate counsel, in which event the
fees and expense of such separate counsel shall be borne by the Distributor.
This indemnity agreement and the Distributor's representations and warranties in
this Contract shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Trust, its officers and trustees
or any such controlling person. This indemnity agreement shall inure exclusively
to the benefit of the Trust and its successors, the Trust's officers and
trustees and their respective estates and any such controlling persons and their
successors and estates. The Distributor shall promptly notify the Trust of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any shares.
17. Assignment Terminates this Contract; Amendments of this Contract.
This Contract shall automatically terminate, without the payment of any penalty,
in the event of its assignment. This Contract may be amended only if such
amendment be approved either by action of the Trustees of the Trust or at a
meeting of the shareholders of the Trust by the affirmative vote of a majority
of the outstanding shares of the Trust, and by a majority of the Trustees of the
Trust who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plans or this Contract by
vote cast in person at a meeting called for the purpose of voting on such
approval.
18. Effective Period and Termination of this Contact. This Contract shall
take effect upon the date first above written and shall remain in full force and
effect continuously as to a Fund and a class of shares thereof (unless
terminated automatically as set forth in Section 17 hereof) until terminated:
(a) Either by such Fund or such class or the Distributor by not more
than sixty (60) days' nor less than thirty (30) days' written notice delivered
or mailed by registered mail, postage prepaid, to the other party; or
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<PAGE>
(b) Automatically as to any Fund or class thereof at the close of
business one year from the date hereof, or upon the expiration of one year
from the effective date of the last continuance of this Contract, whichever
is later, if the continuance of this Contract is not specifically approved
at least annually by the Trustees of the Trust or the shareholders of such
Fund or such class by the affirmative vote of a majority of the outstanding
shares of such Fund or such class, and by a majority of the Trustees of the
Trust who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plans or this Contract
by vote cast in person at a meeting called for the purpose of voting on
such approval.
Action by a Fund or a class thereof under (a) above may be taken either (i)
by vote of the Trustees of the Trust, or (ii) by the affirmative vote of a
majority of the outstanding shares of such Fund or such class. The requirement
under (b) above that the continuance of this Contract be "specifically approved
at least annually" shall be construed in a manner consistent with the 1940 Act
and the rules and regulations thereunder.
Termination of this Contract pursuant to this Section 18 shall be without
the payment of any penalty.
If this Contract is terminated or not renewed with respect to one or more
Funds or classes thereof, it may continue in effect with respect to any Fund or
any class thereof as to which it has not been terminated (or has been renewed).
19. Limited Recourse. The Distributor hereby acknowledges that the
Trust's obligations hereunder with respect to the distribution fee or servicing
fee or contingent deferred sales charges payable with respect to the shares of
any Fund of the Trust or a particular class of shares of a Fund are binding only
on the assets and property belonging to such Fund or allocated to such class.
20. Certain Definitions. For the purposes of this Contract, the
"affirmative vote of a majority of the outstanding shares" means the affirmative
vote, at a duly called and held meeting of shareholders, (a) of the holders of
67% or more of the shares of the Trust, Fund or class, as the case may be,
present (in person or by proxy) and entitled to vote at such meeting, if the
holders of more than 50% of the outstanding shares of the Trust, Fund or class,
as the case may be, entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Trust, Fund or class, as the case may be, entitled to vote at such meeting,
whichever is less.
For the purposes of this Contract, the terms "interested persons" and
"assignment" shall have the meanings defined in the 1940 Act, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. Certain other items used herein that are not otherwise defined
have the meaning given in the Trust's Prospectus or constituent agreements or
documents of the Trust.
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<PAGE>
A copy of the First Amended and Restated Agreement and Declaration of Trust
of the Trust is on file with the Secretary of The Commonwealth of Massachusetts
and notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Trust.
If the foregoing correctly sets forth the agreement between the Trust and
the Distributor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO FUNDS: MULTI-
MANAGER SERIES
By: ___________________
Title:
ACCEPTED:
PIMCO ADVISORS DISTRIBUTION COMPANY
By: _______________________________________
Title:
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<PAGE>
Exhibit 10(a)(i)
PIMCO FUNDS: MULTI-MANAGER SERIES
----------------------------------
Distribution and Servicing Plan (Class A)
This Plan (the "Plan") dated as of __________, 1996, and amended
thereafter, constitutes the Distribution and Servicing Plan with respect to the
Class A shares of PIMCO FUNDS: MULTI-MANAGER SERIES, a Massachusetts business
trust (the "Trust").
Section 1. The Trust will pay to the principal distributor of the
Trust's shares (the "Distributor") a fee (the "Servicing Fee") for services
rendered and expenses borne by the Distributor in connection with personal
service rendered to Class A shareholders of the Trust and/or maintenance of
Class A shareholder accounts, at an annual rate with respect to each Fund
(series) of the Trust (a "Fund") not to exceed 0.25% of the Fund's average daily
net assets attributable to its Class A shares. Subject to such limit and
subject to the provisions of Section 9 hereof, the Servicing Fee shall be as
approved from time to time by (a) the Trustees of the Trust and (b) the
Independent Trustees of the Trust and may be paid in respect of services
rendered and expenses borne in the past as to which no Servicing Fee was paid on
account of such limitation. If at any time this Plan shall not be in effect with
respect to all Funds of the Trust, the Servicing Fee shall be computed on the
basis of net assets attributable to Class A shares of those Funds for which the
Plan is in effect. The Servicing Fee shall be accrued daily and paid monthly or
at such other intervals as the Trustees shall determine.
Section 2. The Servicing Fee may be spent by the Distributor on
personal services rendered to Class A shareholders of the Trust and/or
maintenance of Class A shareholder accounts (but will generally not be spent on
record keeping charges, accounting expenses, transfer costs, or custodian fees).
The Distributor's expenditures may include, but shall not be limited to,
compensation to, and expenses (including telephone and overhead expenses) of,
financial consultants or other employees of the Distributor or of participating
or introducing brokers, certain banks and other financial intermediaries who aid
in the processing of purchase or redemption requests for Class A shares or the
processing of dividend payments with respect to Class A shares, who provide
information periodically to Class A shareholders showing their positions in a
Fund's Class A shares, who issue confirmations for transactions by Class A
shareholders, who forward communications from the Trust to Class A shareholders,
who render ongoing advice concerning the suitability of particular investment
opportunities offered by the Trust in light of Class A shareholders' needs, who
provide and maintain elective Class A shareholder services such as check writing
and wire transfer services, who provide and maintain pre-authorized investment
plans for Class A shareholders, who act as sole shareholder of record and
nominee for Class A shareholders, who respond to inquiries from Class A
shareholders relating to such services, who train personnel in the provision of
such services or who provide such similar services as permitted under applicable
statutes, rules or regulations.
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<PAGE>
Section 3. This Plan shall not take effect with respect to any Fund
of the Trust until it has been approved by a vote of at least a majority of the
outstanding Class A voting securities of that Fund. This Plan shall be deemed
to have been effectively approved with respect to any Fund if a majority of the
outstanding Class A voting securities of that Fund votes for the approval of
this Plan, notwithstanding that this Plan has not been approved by a majority of
the outstanding Class A voting securities of any other Fund or that this Plan
has not been approved by a majority of the outstanding Class A voting securities
of the Trust.
Section 4. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 5. This Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4. It is acknowledged that the Distributor may expend or
impute interest expense in respect of its activities or expenses under this Plan
and the Trustees and the Independent Trustees may give such weight to such
interest expense as they determine in their discretion.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
Section 7. This Plan may be terminated at any time with respect to
the Class A shares of any Fund by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding Class A voting securities
of that Fund.
Section 8. All agreements with any person relating to implementation
of this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:
A. That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent Trustees or by
vote of majority of the outstanding Class A voting securities of such Fund, on
not more than 60 days' written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event
of its assignment.
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<PAGE>
Section 9. This Plan may not be amended to increase materially the
amount of Servicing Fees permitted pursuant to Section 1 hereof without approval
in the manner provided in Section 3 hereof, and all material amendments to this
Plan shall be approved in the manner provided for approval of this Plan in
Section 4 hereof.
Section 10. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission, (c) the term "introducing broker" shall mean any broker or
dealer who is a member of the National Association of Securities Dealers, Inc.
and who is acting as an introducing broker pursuant to clearing agreements with
the Distributor; and (d) the term "participating broker" shall mean any broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. and who has entered into a selling or dealer agreement with the
Distributor.
Section 11. This Plan has been adopted pursuant to Rule 12b-1 under
the Act and is designed to comply with all applicable requirements imposed under
such Rule. To the extent that any or all of the Servicing Fees may be deemed to
have financed any activity which is primarily intended to result in the sale of
the Trust's shares (within the meaning of Rule 12b-1), all those Servicing Fees
paid by the Trust shall be deemed to be made under this Plan and pursuant to
clause (b) of such Rule.
Dated: ______________, 1996
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<PAGE>
Exhibit 10(a)(ii)
Draft of 8/13/96
- ----------------
PIMCO FUNDS: MULTI-MANAGER SERIES
----------------------------------
Distribution and Servicing Plan (Class B)
This Plan (the "Plan"), dated as of ____________, 1996, and amended
thereafter, constitutes the Distribution and Servicing Plan with respect to the
Class B shares of PIMCO FUNDS: MULTI-MANAGER SERIES, a Massachusetts business
trust (the "Trust").
Section 1. The Trust will pay to the principal distributor of the Trust's
shares (the "Distributor") a fee (the "Distribution Fee") for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class B shares of the Trust and another fee (the "Servicing Fee") in connection
with personal services rendered to Class B shareholders of the Trust and/or
maintenance of Class B shareholder accounts. The Distribution Fee shall be paid
at an annual rate with respect to each Fund (series) of the Trust (a "Fund") not
to exceed 0.75 of 1% of the Fund's average daily net assets attributable to its
Class B shares, and the Servicing Fee shall be paid at an annual rate not to
exceed 0.25 of 1% of the Fund's average daily net assets attributable to Class B
shares. Subject to such limits and subject to the provisions of Section 9
hereof, the Distribution and Servicing Fees shall be as approved from time to
time by (a) the Trustees of the Trust and (b) the Independent Trustees of the
Trust and may be paid in respect of services rendered and expenses borne in the
past as to which no Distribution and Servicing Fees were paid on account of such
limitation. If at any time this Plan shall not be in effect with respect to all
Funds of the Trust, the Distribution and Servicing Fees shall be computed on the
basis of sales of Class B shares or net assets attributable to Class B shares
(as applicable) of those Funds for which the Plan is in effect. The
Distribution and Servicing Fees shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
Section 2. The Distribution Fee may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of Class B
shares of the Trust, including, but not limited to compensation to, and expenses
(including overhead and telephone expenses) of, financial consultants or other
employees of the Distributor or of participating or introducing brokers who
engage in distribution of Class B shares, preparing, printing and delivering
prospectuses and reports for other than existing Class B shareholders, providing
facilities to answer questions from other than existing Class B shareholders,
advertising and preparation, printing and distribution of sales literature,
receiving and answering correspondence, including requests for prospectuses and
statements of additional information, complying with federal and state
securities laws pertaining to the sale of Class B shares and assisting investors
in completing application forms and selecting dividend and other account options
for Class B shares. The Servicing Fee may be spent by the Distributor on
personal services rendered to Class B shareholders of the Trust and/or
maintenance of Class B shareholder accounts (but will
-1-
<PAGE>
generally not be spent on record keeping charges, accounting expenses, transfer
costs, or custodian fees). The Distributor's Servicing Fee expenditures may
include, but shall not be limited to, compensation to, and expenses (including
telephone and overhead expenses) of, financial consultants or other employees of
the Distributor or of participating or introducing brokers, certain banks and
other financial intermediaries who aid in the processing of purchase or
redemption requests for Class B shares or the processing of dividend payments
with respect to Class B shares, who provide information periodically to Class B
shareholders showing their positions in a Fund's Class B shares, who issue
confirmations for transactions by Class B shareholders, who forward
communications from the Trust to Class B shareholders, who render ongoing advice
concerning the suitability of particular investment opportunities offered by the
Trust in light of Class B shareholders' needs, who provide and maintain elective
Class B shareholder services such as check writing and wire transfer services,
who provide and maintain pre-authorized investment plans for Class B
shareholders, who act as sole shareholder of record and nominee for Class B
shareholders, who respond to inquiries from Class B shareholders relating to
such services, who train personnel in the provision of such services or who
provide such similar services as permitted under applicable statutes, rules or
regulations.
Section 3. This Plan shall not take effect with respect to any Fund of the
Trust until it has been approved by a vote of at least a majority of the
outstanding Class B voting securities of that Fund. This Plan shall be deemed
to have been effectively approved with respect to any Fund if a majority of the
outstanding Class B voting securities of that Fund votes for the approval of
this Plan, notwithstanding that this Plan has not been approved by a majority of
the outstanding Class B voting securities of any other Fund or that this Plan
has not been approved by a majority of the outstanding Class B voting securities
of the Trust.
Section 4. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4. It is acknowledged that the Distributor may expend or impute
interest expense in respect of its activities or expenses under this Plan and
the Trustees and the Independent Trustees may give such weight to such interest
expense as they determine in their discretion.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
-2-
<PAGE>
Section 7. This Plan may be terminated at any time with respect to the
Class B shares of any Fund by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class B voting securities of that Fund.
Section 8. All agreements with any person relating to implementation of
this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:
A. That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Class B voting securities of such Fund, on not
more than 60 days' written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of
its assignment.
Section 9. This Plan may not be amended to increase materially the
aggregate amount of Distribution and Servicing Fees permitted pursuant to
Section 1 hereof without approval in the manner provided in Section 3 hereof,
and all material amendments to this Plan shall be approved in the manner
provided for approval of this Plan in Section 4 hereof.
Section 10. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission, (c) the term "introducing broker" shall mean any broker or
dealer who is a member of the National Association of Securities Dealers, Inc.
and who is acting as an introducing broker pursuant to clearing agreements with
the Distributor; and (d) the term "participating broker" shall mean any broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. and who has entered into a selling or dealer agreement with the
Distributor.
Section 11. This Plan has been adopted pursuant to Rule 12b-1 under the
Act and is designed to comply with all applicable requirements imposed under
such Rule. All Distribution Fees and, to the extent that any or all of the
Servicing Fees may be deemed to have financed any activity which is primarily
intended to result in the sale of the Trust's shares (within the meaning of Rule
12b-1), those Servicing Fees shall be deemed to have been paid under this Plan
and pursuant to clause (b) of such Rule.
Dated: _________________, 1996.
-3-
<PAGE>
Exhibit 10(a)(iii)
Draft of 8/13/96
- ----------------
PIMCO FUNDS: MULTI-MANAGER SERIES
----------------------------------
Distribution and Servicing Plan (Class C)
This Plan (the "Plan"), dated as of ____________, 1996, and amended
thereafter, constitutes the Distribution and Servicing Plan with respect to the
Class C shares of PIMCO FUNDS: MULTI-MANAGER SERIES, a Massachusetts business
trust (the "Trust").
Section 1. The Trust will pay to the principal distributor of the Trust's
shares (the "Distributor") a fee (the "Distribution Fee") for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class C shares of the Trust and another fee (the "Servicing Fee") in connection
with personal services rendered to Class C shareholders of the Trust and/or
maintenance of Class C shareholder accounts. The Distribution Fee shall be paid
at an annual rate with respect to each Fund (series) of the Trust (a "Fund") not
to exceed 0.75 of 1% of the Fund's average daily net assets attributable to its
Class C shares, and the Servicing Fee shall be paid at an annual rate not to
exceed 0.25 of 1% of the Fund's average daily net assets attributable to Class C
shares. Subject to such limits and subject to the provisions of Section 9
hereof, the Distribution and Servicing Fees shall be as approved from time to
time by (a) the Trustees of the Trust and (b) the Independent Trustees of the
Trust and may be paid in respect of services rendered and expenses borne in the
past as to which no Distribution and Servicing Fees were paid on account of such
limitation. If at any time this Plan shall not be in effect with respect to all
Funds of the Trust, the Distribution and Servicing Fees shall be computed on the
basis of sales of Class C shares or net assets attributable to Class C shares
(as applicable) of those Funds for which the Plan is in effect. The
Distribution and Servicing Fees shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
Section 2. The Distribution Fee may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of Class C
shares of the Trust, including, but not limited to compensation to, and expenses
(including overhead and telephone expenses) of, financial consultants or other
employees of the Distributor or of participating or introducing brokers who
engage in distribution of Class C shares, preparing, printing and delivering
prospectuses and reports for other than existing Class C shareholders, providing
facilities to answer questions from other than existing Class C shareholders,
advertising and preparation, printing and distribution of sales literature,
receiving and answering correspondence, including requests for prospectuses and
statements of additional information, complying with federal and state
securities laws pertaining to the sale of Class C shares and assisting investors
in completing application forms and selecting dividend and other account options
for Class C shares. The Servicing Fee may be spent by the Distributor on
personal services rendered to Class C shareholders of the Trust and/or
maintenance of Class C shareholder accounts (but will generally not be spent on
record keeping charges, accounting expenses, transfer costs, or
-1-
<PAGE>
custodian fees). The Distributor's Servicing Fee expenditures may include, but
shall not be limited to, compensation to, and expenses (including telephone and
overhead expenses) of, financial consultants or other employees of the
Distributor or of participating or introducing brokers, certain banks and other
financial intermediaries who aid in the processing of purchase or redemption
requests for Class C shares or the processing of dividend payments with respect
to Class C shares, who provide information periodically to Class C shareholders
showing their positions in a Fund's Class C shares, who issue confirmations for
transactions by Class C shareholders, who forward communications from the Trust
to Class C shareholders, who render ongoing advice concerning the suitability of
particular investment opportunities offered by the Trust in light of Class C
shareholders' needs, who provide and maintain elective Class C shareholder
services such as check writing and wire transfer services, who provide and
maintain pre-authorized investment plans for Class C shareholders, who act as
sole shareholder of record and nominee for Class C shareholders, who respond to
inquiries from Class C shareholders relating to such services, who train
personnel in the provision of such services or who provide such similar services
as permitted under applicable statutes, rules or regulations.
Section 3. This Plan shall not take effect with respect to any Fund of the
Trust until it has been approved by a vote of at least a majority of the
outstanding Class C voting securities of that Fund. This Plan shall be deemed
to have been effectively approved with respect to any Fund if a majority of the
outstanding Class C voting securities of that Fund votes for the approval of
this Plan, notwithstanding that this Plan has not been approved by a majority of
the outstanding Class C voting securities of any other Fund or that this Plan
has not been approved by a majority of the outstanding Class C voting securities
of the Trust.
Section 4. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4. It is acknowledged that the Distributor may expend or impute
interest expense in respect of its activities or expenses under this Plan and
the Trustees and the Independent Trustees may give such weight to such interest
expense as they determine in their discretion.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
-2-
<PAGE>
Section 7. This Plan may be terminated at any time with respect to the
Class C shares of any Fund by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class C voting securities of that Fund.
Section 8. All agreements with any person relating to implementation of
this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of majority of the outstanding Class C voting securities of such
Fund, on not more than 60 days' written notice to any other party to
the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 9. This Plan may not be amended to increase materially the
aggregate amount of Distribution and Servicing Fees permitted pursuant to
Section 1 hereof without approval in the manner provided in Section 3 hereof,
and all material amendments to this Plan shall be approved in the manner
provided for approval of this Plan in Section 4 hereof.
Section 10. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission, (c) the term "introducing broker" shall mean any broker or
dealer who is a member of the National Association of Securities Dealers, Inc.
and who is acting as an introducing broker pursuant to clearing agreements with
the Distributor; and (d) the term "participating broker" shall mean any broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. and who has entered into a selling or dealer agreement with the
Distributor.
Section 11. This Plan has been adopted pursuant to Rule 12b-1 under the
Act and is designed to comply with all applicable requirements imposed under
such Rule. All Distribution Fees and, to the extent that any or all of the
Servicing Fees may be deemed to have financed any activity which is primarily
intended to result in the sale of the Trust's shares (within the meaning of Rule
12b-1), those Servicing Fees shall be deemed to have been paid under this Plan
and pursuant to clause (b) of such Rule.
Dated: _________________, 1996.
-3-
<PAGE>
Exhibit 10(b)
PIMCO FUNDS: MULTI-MANAGER SERIES
(formerly PIMCO Funds: Equity Advisors Series)
AMENDED AND RESTATED MULTI-CLASS PLAN
Plan pursuant to Rule 18f-3 under the Investment Company Act of 1940
--------------------------------------------------------------------
Effective Date [December 31, 1996]
WHEREAS, the Board of Trustees of the PIMCO Funds: Multi-Manager Series
(formerly PIMCO Funds: Equity Advisors Series) (the "Trust") have considered the
following Amended and Restated Multi-Class Plan (the "Plan") under which the
Trust may offer multiple classes of shares of its now existing and hereafter
created series pursuant to Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, a majority of the Trustees of the Trust and a majority of the
Trustees who are not interested persons of the Trust have found the Plan, as
proposed, to be in the best interests of each class of the Trust individually
and the Trust as a whole;
NOW, THEREFORE, the Trust hereby approves and adopts the following Plan
pursuant to Rule 18f-3 under the 1940 Act.
1. FEATURES OF THE CLASSES
Each now existing and hereafter created series (each a "Fund") of the Trust
is authorized to issue from time to time its shares of beneficial interest in
five classes: Class A shares, Class B shares, Class C shares, Institutional
Class shares and Administrative Class shares./1/ Each class is subject to
such investment minimums and other conditions of eligibility as are set forth in
the Trust's prospectus(es) as from time to time in effect (together with all
relevant Statements of Additional Information, the "Prospectus"). Each Fund
offers such classes of shares to such classes of persons as are set forth in the
Prospectus.
- ----------------------
/1/ Currently, Class A and Class C shares of the Trust's Opportunity Fund
are not available for purchase by new investors in that Fund. The Opportunity
Fund has never offered Class B shares. Shareholders who owned shares of the
Opportunity Fund on December 31, 1992 will still be permitted to purchase
additional shares for as long as they continue to own any shares of the Fund.
Similarly, participants in any self-directed qualified benefit plan that owned
Opportunity Fund shares on March 1, 1993 will be eligible to direct the purchase
of Opportunity Fund shares by their plan account for so long as the plan
continues to own shares of the Fund.
<PAGE>
Shares of each class of a Fund shall represent an equal pro rata interest
in such Fund and, generally, shall have identical voting, dividend, liquidation,
and other rights, preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (a) each class shall have a different
designation; (b) each class of shares shall bear any Class Expenses, as defined
in Section 4 below and (c) each class shall have separate voting rights on any
matter submitted to shareholders in which the interests of one class differ from
the interests of any other class and shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to that class.
In addition, Class A, Class B, Class C, Institutional Class and
Administrative Class shares shall have the features described in Sections 2, 3,
4 and 5 below. These features are subject to change, to the extent permitted by
law and by the Amended and Restated Declaration of Trust and By-laws of the
Trust, by action of the Board of Trustees of the Trust.
2. SALES CHARGE STRUCTURE
(a) Initial Sales Charge. Class A shares of the Funds are offered at a
--------------------
public offering price that is equal to their net asset value ("NAV") plus a
sales charge of up to 5.50% of the public offering price (which maximum may be
less for certain Funds, as described in the Prospectus). The sales charges on
Class A shares are subject to reduction or waiver as permitted by Rule 22d-1
under the 1940 Act, as described in the Prospectus. For example, as of the date
of this Plan, each Fund may waive the Class A sales charge for certain
categories of investors, including current or retired officers, trustees,
directors or employees of the Trust, and for current registered representatives
and other full-time employees of participating brokers.
Class B, Class C, Institutional Class and Administrative Class shares of
the Funds are offered at their NAV, without an initial sales charge.
(b) Contingent Deferred Sales Charge. A contingent deferred sales charge
--------------------------------
(a "CDSC") may be imposed on Class A, Class B or Class C shares under certain
circumstances. The Trust imposes a CDSC on redemptions of a particular class of
shares of a Fund if the investor redeems an amount which causes the current
value of the investor's account for the Fund to fall below the total dollar
amount of purchase payments subject to the CDSC, except that no CDSC is imposed
if the shares redeemed have been acquired through the reinvestment of dividends
or capital gains distributions or if the amount redeemed is derived from
increases in the value of the account above the amount of purchase payments
subject to a CDSC. In determining whether a CDSC is payable, it is assumed that
the purchase payment from which the redemption is made is the earliest purchase
payment from which a redemption or exchange has not already been effected. In
determining whether an amount is available for redemption of a certain class
without incurring a CDSC, the purchase payments made for all shares of that
class in the investor's account with the particular Fund are aggregated, and the
current value of all such shares is aggregated.
-2-
<PAGE>
Purchases of Class A shares of each Fund of $1 million or more that are
redeemed within eighteen months of their purchase are subject to a CDSC of 1%,
except that the CDSC on Class A shares does not apply to an investor purchasing
$1 million or more of a Fund's Class A shares if such investor is otherwise
eligible (i.e. without regard to the amount of the purchase) to purchase Class A
shares of such Fund without any sales charge. The conditions for such
eligibility will be set forth in the Prospectus.
Class B shares that are redeemed within 6 years from purchase are subject
to a CDSC of up to 5% of the redemption amount to which the CDSC applies; such
percentage declines, eventually to 0%, the longer the shares are held, as
described in the Prospectus. As of the date of this Plan, purchases of Class B
shares are subject to a CDSC according to the following schedule:
<TABLE>
<CAPTION>
Years Since Purchase Percentage
Payment was Made CDSC
---------------- ----------
<S> <C>
First............... 5
Second.............. 4
Third............... 3
Fourth.............. 3
Fifth............... 2
Sixth............... 1
Seventh............. 0
Eighth.............. *
</TABLE>
* Class B shares convert into Class A shares as described below.
Class C shares are subject to a CDSC of 1% if redeemed within 1 year after
purchase.
As permitted by Rule 6c-10 under the 1940 Act and as described in the
Prospectus, the CDSC otherwise applicable to Class A, Class B and Class C shares
is subject to reduction or waiver in connection with particular classes of
transactions provided the conditions in Rule 22d-1 under the 1940 Act are
satisfied. As of the date of this Plan, examples of redemptions for which the
CDSC is not applicable include any partial or complete redemption following
death or disability of a shareholder from an account in which the deceased or
disabled is named, provided the redemption is requested within one year of the
death or initial determination of disability (which applies to all classes), and
any redemption resulting from a return of an excess contribution to a qualified
employer retirement plan or an IRA (which applies only to Class A and Class C
shares).
Institutional Class and Administrative Class shares of each Fund are not
subject to a CDSC.
-3-
<PAGE>
3. SERVICE, DISTRIBUTION AND ADMINISTRATIVE FEES
(a) Service and Distribution Fees. Class A, Class B and Class C shares
-----------------------------
pay PIMCO Advisors Distribution Company (the "Distributor") fees for services
rendered and expenses borne in connection with personal services rendered to
shareholders of that class and the maintenance of shareholder accounts ("Service
Fees"). Class A, Class B and Class C shares of each Fund pay a Service Fee of
up to 0.25% per annum of the average daily net assets of such Fund attributable
to such class, as described in the Prospectus. In addition, Class B and Class C
shares pay the Distributor fees in connection with the distribution of shares of
that class ("Distribution Fees"). Class B and Class C shares of each Fund pay a
Distribution Fee of up to 0.75% per annum of the average daily net assets of
such Fund attributable to such class, as described in the Prospectus. Class A
Service Fees and Class B and C Distribution and Service Fees ("12b-1 Fees") are
paid pursuant to separate plans adopted for each class pursuant to Rule 12b-1
under the 1940 Act.
The Trust has not adopted an administrative services plan or a distribution
plan with respect to the Institutional Class shares of the Funds. However,
Institutional Class shares may be offered through certain brokers and financial
intermediaries ("service agents") that have established a shareholder servicing
relationship with the Trust on behalf of their customers. The Trust pays no
compensation to such entities. Service agents may impose additional or different
conditions on the purchase or redemption of Trust shares and may charge
transaction or account fees. Service agents are responsible for transmitting to
their customers a schedule of any such fees and conditions.
The Trust has adopted an administrative services plan and a distribution
plan with respect to the Administrative Class shares of each Fund. Under the
terms of each plan, the Trust is permitted to reimburse, out of the
Administrative Class assets of each Fund, in an amount up to 0.25% on an annual
basis of the average daily net assets of that class ("Administrative Class
Fees"), financial intermediaries that provide services in connection with the
distribution of shares or administration of plans or programs that use Fund
shares as their funding medium, as described in the Prospectus. The same entity
may not receive both distribution and administrative services fees with respect
to the same assets but, with respect to separate assets, may receive fees under
both a distribution plan and an administrative services plan.
(b) Administration Fees. Each class of shares of a Fund pays an
-------------------
administration fee ("Administration Fees") to Pacific Investment Management
Company (the "Administrator") pursuant to an administration agreement, which may
be amended from time to time, to provide for such management services as
custody, transfer agency, accounting, legal and printing services. As of the
date of this Plan, with respect to every Fund except the Metals, International
and Emerging Markets Funds, (i) Class A, Class B and Class C shares pay an
Administration Fee of 0.40% of their respective average daily net asset and (ii)
Institutional Class and Administrative Class shares pay an Administration Fee of
0.25% of their respective
-4-
<PAGE>
average daily net asset value. The classes of shares of the Metals,
International and Emerging Markets Funds pay the following Administration Fees:
<TABLE>
<CAPTION>
Fees for Fees for Instit'l Class
Fund Class A, B, C and Admin. Class
---- ------------- ----------------
<S> <C> <C>
Metals 0.50% 0.35%
International 0.60% 0.45%
Emerging Markets 0.65% 0.50%
</TABLE>
4. ALLOCATION OF INCOME AND EXPENSES
(a) Class A, Class B, Class C and Administrative Class shares pay the
expenses associated with their different distribution and shareholder servicing
arrangements. All classes pay their respective Administration Fees. Each class
of shares may, at the Trustees' discretion, also pay a different share of other
expenses (together with 12b-1 Fees, Administrative Class Fees and Administration
Fees, "Class Expenses"), not including advisory fees or other expenses related
to the management of the Trust's assets, if these expenses are actually incurred
in a different amount by that class, or if the class receives services of a
different kind or to a different degree than other classes.
(b) The gross income of each Fund generally shall be allocated to each
class on the basis of net assets. To the extent practicable, certain expenses
(other than Class Expenses as defined above, which shall be allocated more
specifically) shall be subtracted from the gross income on the basis of the net
assets of each class of the Fund. These expenses include:
(1) Expenses incurred by the Trust (including, but not limited
to, fees of Trustees, insurance and legal counsel) not
attributable to a particular Fund or to a particular class of
shares of a Fund ("Corporate Level Expenses"); and
(2) Expenses incurred by a Fund not attributable to any
particular class of the Fund's shares (for example, advisory
fees, custodial fees, or other expenses relating to the
management of the Fund's assets) ("Fund Expenses").
Expenses of a Fund shall be apportioned to each class of shares depending
on the nature of the expense item. Corporate Level Expenses and Fund Expenses
shall be allocated among the classes of shares based on their relative net asset
values in relation to the net asset value of the Trust. Approved Class Expenses
shall be allocated to the particular class to which they are attributable. In
addition, certain expenses may be allocated differently if their method of
imposition changes. Thus, if a Class Expense can no longer be attributed to a
class, it shall be charged to a Fund for allocation among classes, as determined
by the Board of Trustees. Any additional Class Expenses not specifically
identified above which are subsequently
-5-
<PAGE>
identified and determined to be properly allocated to one class of shares shall
not be so allocated until approved by the Board of Trustees of the Trust in
light of the requirements of the 1940 Act and the Internal Revenue Code of 1986,
as amended (the "Code").
5. EXCHANGE PRIVILEGES
Except with respect to exchanges for shares of the Opportunity Fund,
shareholders may exchange shares of one class of a Fund at net asset value,
without the imposition of any sales charge or CDSC, for shares of the same class
offered by another Fund or by PIMCO Funds: Pacific Investment Management Series,
a registered investment company advised by the Administrator, provided that the
exchange is made in states where the securities being acquired are properly
registered. Shareholders of Funds other than the Opportunity Fund are not
permitted to exchange any of their shares for Opportunity Fund shares unless the
shareholders are independently eligible to purchase Opportunity Fund shares as
described in footnote 1 above. Institutional Class shares of a Fund may be
exchanged for Administrative Class shares offered by any Fund or by PIMCO Funds:
Pacific Investment Management Series, or vice versa, provided that the
Institutional Class or Administrative Class shareholder, as the case may be,
meets the eligibility requirements of the class into which the shareholder seeks
to exchange.
With respect to Class A, Class B and Class C shares subject to a CDSC, if
less than all of an investment is exchanged out of a Fund, any portion of the
investment attributable to capital appreciation and/or reinvested dividends or
capital gains distributions will be exchanged first, and thereafter any portions
exchanged will be from the earliest investment made in the Fund from which the
exchange was made.
6. CONVERSION FEATURES
Class B shares of each Fund automatically convert to Class A shares of the
same Fund after they have been held for 7 years, and thereafter are subject to
the lower fees charged to Class A shares. In this regard, if there is any
material increase in 12b-1 Fees applicable to Class A shares without the
approval of the Class B shareholders, the Trust will establish a new class of
shares, into which Class B shares would convert, on the same terms as those that
applied to Class A shares before such increase. No other conversion features
exist between classes of shares of the Funds.
7. DIVIDENDS/DISTRIBUTIONS
Each Fund pays out as dividends substantially all of its net investment
income (which comes from dividends and interest it receives from its
investments) and net realized short-term capital gains.
All dividends and/or distributions will be paid in the form of additional
shares of the
-6-
<PAGE>
class of shares of the Fund to which the dividends and/or distributions relate
or, at the election of the shareholder, of another Fund or a series of PIMCO
Funds at net asset value of such Fund or series, unless the shareholder elects
to receive cash. Dividends paid by each Fund are calculated in the same manner
and at the same time with respect to each class.
8. WAIVER OR REIMBURSEMENT OF EXPENSES
Expenses may be waived or reimbursed by any adviser or sub-adviser to the
Trust, by the Trust's underwriter or any other provider of services to the Trust
without the prior approval of the Trust's Board of Trustees.
9. EFFECTIVENESS OF PLAN
This Plan shall not take effect until it has been approved by votes of a
majority of both (a) the Trustees of the Trust and (b) the Independent Trustees
and supersedes all previous plans of the Trust adopted pursuant to Rule 18f-3
under the 1940 Act.
10. MATERIAL MODIFICATIONS
This Plan may not be amended to modify materially its terms unless such
amendment is approved in the manner provided for initial approval hereof in
section 9 above.
11. LIMITATION OF LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or any Fund under this Plan, and the
Administrator or any other person, in asserting any rights or claims under this
Plan, shall look only to the assets and property of the Trust or such Funds in
settlement of such right or claim, and not to such Trustees or shareholders.
-7-
<PAGE>
Exhibit 11
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
(202) 626-3300
September 27, 1996
PIMCO Funds: Equity Advisors Series
840 Newport Center Drive
Suite 360
Newport Beach, California 92660
Dear Sirs:
We have acted as counsel to PIMCO Funds: Equity Advisors Series, a
Massachusetts business trust (the "Trust"), and we have a general familiarity
with the Trust's business operations, practices and procedures. You have asked
for our opinion regarding the issuance of shares of beneficial interest by the
Trust in connection with the acquisition by the NFJ Diversified Low P/E Fund, a
series of the Trust, of the assets of the Value Fund, a series of PIMCO Advisors
Funds, a Massachusetts business trust (the "PAF Trust"), and the acquisition by
the Cadence Mid Cap Growth Fund, a series of the Trust, of the assets of the
Discovery Fund, a series of the PAF Trust, which will be registered on a Form
N-14 Registration Statement (the "Registration Statement") to be filed by the
Trust with the Securities and Exchange Commission.
We have examined originals or certified copies, or copies otherwise
identified to our satisfaction as being true copies, of various corporate
records of the Trust and such other instruments, documents and records as we
have deemed necessary in order to render this opinion. We have assumed the
genuineness of all signatures, the authenticity of all documents examined by us
and the correctness of all statements of fact contained in those documents.
On the basis of the foregoing, we are of the opinion that the shares of
beneficial interest of the Trust being registered under the Securities Act of
1933 in the Registration Statement will be legally and validly issued, fully
paid and non-assessable by the Trust, upon transfer of assets pursuant to the
terms of the Agreement and Plan of Reorganization included in the Registration
Statement.
We hereby consent to the filing of this opinion with and as part of the
Registration Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
<PAGE>
Exhibit 13(e)
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made this _____ day of _____, 199_, between
PIMCO Funds: Multi-Manager Series (the "Trust"), a Massachusetts business trust,
and PIMCO Advisors L.P. (the "Administrator" or "PALP"), a limited partnership
organized under the laws of Delaware.
WHEREAS, the Trust is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial
interest ("Shares") in separate series, with each such series representing
interests in a separate portfolio of securities and other assets; and
WHEREAS, the Trust has established multiple series, including PIMCO
International Fund, PIMCO International Developed Fund, PIMCO Emerging Markets
Fund, PIMCO Capital Appreciation Fund, PIMCO Mid Cap Growth Fund, PIMCO Small
Cap Growth Fund, PIMCO Micro Cap Growth Fund, PIMCO Renaissance Fund, PIMCO
Growth Fund, PIMCO Target Fund, PIMCO Opportunity Fund, PIMCO Innovation Fund,
PIMCO Tax Exempt Fund, PIMCO Equity Income Fund, PIMCO Value Fund, PIMCO Small
Cap Value Fund, PIMCO Enhanced Equity Fund, PIMCO Structured Emerging Markets
Fund, PIMCO Balanced Fund, and PIMCO Precious Metals Fund (each a "Fund"); and
WHEREAS, on or after the effect date of this agreement, each Fund
offers five classes of shares: Institutional Class, Administrative Class, Class
A, Class B, and Class C, of which Class A, Class B, and Class C shares are
referred to herein as "Retail Class" shares; and
WHEREAS, the Trust wishes to retain PALP to provide administrative and
other services to the Trust with respect to the Funds in the manner and on the
terms hereinafter set forth; and
WHEREAS, PALP is willing to furnish such services in the manner and on
the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
<PAGE>
1. Appointment. The Trust hereby appoints PALP as the Administrator
-----------
to provide the administrative and other services with respect to the Funds for
the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees during such period to render the services
herein set forth for the compensation herein provided.
In the event the Trust establishes and designates additional series
with respect to which it desires to retain the Administrator to render
administrative and other services hereunder, it shall notify the Administrator
in writing. If the Administrator is willing to render such services, it shall
notify the Trust in writing, whereupon such additional series shall become a
Fund hereunder.
2. Duties. Subject to the general supervision of the Board of
------
Trustees, the Administrator shall provide all organizational, administrative and
other services reasonably necessary for the operation of the Funds other than
the investment advisory services provided by PALP pursuant to its Investment
Advisory Agreement with the Trust.
(a) Administrative Services. Subject to the approval or consent
-----------------------
of the Board of Trustees, the Administrator shall provide or procure,
at the Administrator's expense, services to include the following:
(i) coordinating matters relating to the operation of the Funds,
including any necessary coordination among the adviser or advisers to
the Funds, the custodian(s), transfer agent(s), dividend disbursing
agent(s), and recordkeeping agent(s) (including pricing and valuation
of the Funds), accountants, attorneys, and other parties performing
services or operational functions for the Funds; (ii) providing the
Funds with the services of a sufficient number of persons competent to
perform such administrative and clerical functions as are necessary to
ensure compliance with federal securities laws, as well as other
applicable laws, and to provide effective administration of the Funds;
(iii) maintaining, or supervising the maintenance by third parties, of
such books and records of the Trust and the Funds as may be required
by applicable federal or state law other than the records and ledgers
maintained under the Investment Advisory Agreement; (iv) preparing or
supervising the preparation by third parties of all federal, state,
and local tax returns and reports of the Funds required by applicable
law; (v) preparing, filing, and arranging for the distribution of
proxy materials and periodic reports to shareholders of the Funds as
required by
- 2 -
<PAGE>
applicable law; (vi) preparing and arranging for the filing of such
registration statements and other documents with the SEC and other
federal and state regulatory authorities as may be required to
register the shares of the Funds and qualify the Trust to do business
or as otherwise required by applicable law; (vii) taking such other
action with respect to the Funds as may be required by applicable law,
including, without limitation, the rules and regulations of the SEC
and of state securities commissions and other regulatory agencies;
and (viii) providing the Funds with adequate personnel, office space,
communications facilities, and other facilities necessary for the
Funds' operations as contemplated in this Agreement.
(b) Other Services. Subject to the general supervision of the
--------------
Board of Trustees, the Administrator shall also provide or procure on
behalf of the Trust and the Funds, and at the expense of the
Administrator, the following services to the Funds: (i) custodian
services to provide for the safekeeping of the Funds' assets; (ii)
recordkeeping services to maintain the portfolio accounting records
for the Funds; (iii) transfer agency services to maintain the
portfolio accounting records for the Funds; and (iv) dividend
disbursing services for the Funds. The services to be provided under
(iii) and (iv) of this Section 2(b) shall be commensurate with the
level of services reasonably necessary for the institutional investors
that are eligible to invest in Institutional and Administrative
Classes of the Funds, as set forth in the prospectus or prospectuses
for such Classes of the Funds. The Trust may be a party to any
agreement with any person or persons engaged to provide the services
referred to in this Section 2(b).
(c) Retail Class Services. In addition to the Administrator's
---------------------
responsibilities as specified in Subsections (a) and (b) above,
subject to the general supervision of the Board of Trustees, the
Administrator, at its own expense, also shall provide, directly or
through persons selected by the Administrator, to the Retail Classes
of the Funds administrative, recordkeeping, and shareholder services
reasonably required by the Retail Classes of the Funds, which may
include some or all of the following services: (i) transfer agency
services reasonably necessary to meet the increased account activity
associated with Retail Classes; (ii) dividend disbursing services
reasonably necessary to meet the
- 3 -
<PAGE>
increased number of accounts associated with the Retail Classes; (iii)
preparing and arranging for the distribution of prospectuses,
statements of additional information, proxy materials, periodic
reports to shareholders, and other communications with Retail Class
shareholders; and (iv) taking such other actions and providing or
procuring such other services with respect to the Retail Classes as
are reasonably necessary or desirable.
(d) Organizational Services. The Administrator shall provide the
-----------------------
Trust and the Funds, at the Administrator's expense, with the services
necessary to organize any Funds that commence operations on or after
the date of this Agreement so that such Funds can conduct business as
described in the Trust's Registration Statement.
(e) The Administrator shall also make its officers and employees
available to the Board of Trustees and officers of the Trust for
consultation and discussions regarding the administration of the Funds
and services provided to the Funds under this agreement.
(f) In performing these services, the Administrator:
(i) Shall conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's
Board of Trustees, and with the provisions of the Trust's Registration
Statement filed on Form N-1A as supplemented or amended from time to
time.
(ii) Will make available to the Trust, promptly upon
request, any of the Funds' books and records as are maintained under
this Agreement, and will furnish to regulatory authorities having the
requisite authority any such books and records and any information or
reports in connection with the Administrator's services under this
Agreement that may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
(iii) Will regularly report to the Trust's Board of Trustees
on the services provided under this Agreement and will furnish the
Trust's Board of
- 4 -
<PAGE>
Trustees with respect to the Funds such periodic and special reports
as the Trustees may reasonably request.
3. Documentation. The Trust has delivered copies of each of the
-------------
following documents to the Administrator and will deliver to it all future
amendments and supplements thereto, if any:
(a) the Trust's Registration Statement as filed with the SEC and
any amendments thereto; and
(b) exhibits, powers of attorneys, certificates and any and all
other documents relating to or filed in connection with the
Registration Statement described above.
4. Independent Contractor. The Administrator shall for all purposes
----------------------
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the Trust
from time to time, have no authority to act for or represent the Trust in any
way or otherwise be deemed its agent.
5. Compensation. As compensation for the services rendered under
------------
this Agreement, the Trust shall pay to the Administrator a fee based on the
average daily net assets of each of the Funds as set forth in the attached
Schedule. The fees payable to the Administrator shall be computed and accrued
daily and paid monthly. If the Administrator shall serve for less than any
whole month, the foregoing compensation shall be prorated.
6. Non-Exclusivity. It is understood that the services of the
---------------
Administrator hereunder are not exclusive, and the Administrator shall be free
to render similar services to other investment companies and other clients.
7. Expenses. During the term of this Agreement, the Administrator
--------
will pay all expenses incurred by it in connection with its obligations under
this Agreement, except such expenses as are those of the Funds under this
Agreement. The Administrator shall pay for maintaining its staff and personnel
and shall, at its own expense provide the equipment, office space, and
facilities necessary to perform its obligations under this Agreement. In
addition, the Administrator shall, at its expense, furnish to the Trust:
(a) Services by the Trust's independent public accountants to
perform all audits;
- 5 -
<PAGE>
(b) Services of the Trust's transfer agent(s), registrar,
dividend disbursing agent(s), and shareholder recordkeeping services;
(c) Services of the Trust's custodian, including any
recordkeeping services provided by the custodian;
(d) Services of obtaining quotations for calculating the value of
each Fund's net assets;
(e) Services of obtaining Fund Activity Reports for each Fund;
(f) Services of maintaining the Trust's tax records;
(g) Services, including procurement of legal services, incident
to meetings of the Trust's shareholders, the preparation and mailing
of prospectuses and reports of the Trust to its shareholders, the
filing of reports with regulatory bodies, the maintenance of the
Trust's existence and qualification to do business, and the
registration of shares with federal and state securities authorities
(except as described in subsection (f) below);
(h) Procurement of ordinary legal services, including the
services that arise in the ordinary course of business for a
Massachusetts business trust registered as an open-end management
investment company;
(i) Certificates representing shares of the Trust;
(j) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(k) Association membership dues; and
(l) Services to organize and offer shares of the Trust and the
Funds.
The Trust shall bear the following expenses:
(a) Salaries and other compensation of any of the Trust's
executive officers and employees, if any, who are not officers,
directors, stockholders, or employees of the Administrator or its
subsidiaries or affiliates;
- 6 -
<PAGE>
(b) Taxes, if any, levied against the Trust or any of its Funds;
(c) Brokerage fees and commissions in connection with the
purchase and sale of portfolio securities for any of the Funds;
(d) Costs, including the interest expenses, of borrowing money;
(e) Fees and expenses of trustees who are not officers,
employees, or stockholders of PALP or its subsidiaries or affiliates,
and the fees and expenses of any counsel, accountants, or any other
persons engaged by such trustees in connection with the duties of
their office with the Trust;
(f) Extraordinary expenses, including extraordinary legal
expenses and federal and state securities registration fees and
expenses to the extent authorized by the Trust's Board of Trustees, as
may arise, including expenses incurred in connection with litigation,
proceedings, other claims and the legal obligations of the Trust to
indemnify its trustees, officers, employees, shareholders,
distributors, and agents with respect thereto;
(g) Organizational and offering expenses of the Trust and the
Funds to the extent authorized by the Trust's Board of Trustees, and
any other expenses which are capitalized in accordance with generally
accepted accounting principles; and
(h) Any expenses allocated or allocable to a specific class of
shares, including fees paid pursuant to an administrative services or
distribution plan.
8. Liability. The Administrator shall give the Trust the benefit of
---------
the Administrator's best efforts in rendering services under this Agreement.
The Administrator may rely on information reasonably believed by it to be
accurate and reliable. As an inducement for the Administrator's undertaking to
render services under this Agreement, the Trust agrees that neither the
Administrator nor its stockholders, officers, directors, or employees shall be
subject to any liability for, or any damages, expenses or losses incurred in
connection with, any act or omission or mistake in judgment connected with or
arising out of any services rendered under this Agreement, except by reason of
willful misfeasance, bad faith, or gross negligence in performance of the
Administrator's duties, or by reason of
- 7 -
<PAGE>
reckless disregard of the Administrator's obligations and duties under this
Agreement. This provision shall govern only the liability to the Trust of the
Administrator and that of its stockholders, officers, directors, and employees,
and shall in no way govern the liability to the Trust or the Administrator or
provide a defense for any other person, including persons that provide services
for the Funds as described in Section 2(b) or (c) of this Agreement.
9. Term and Continuation. This Agreement shall take effect as of
---------------------
the date hereof, and shall remain in effect, unless sooner terminated as
provided herein, until two years from the date of this Agreement, and shall
continue thereafter on an annual basis with respect to each Fund, provided that
such continuance is specifically approved at least annually (a) by the vote of a
majority of the Board of Trustees of the Trust, or (b) by vote of a majority of
the outstanding voting shares of the Funds, and provided continuance is also
approved by the vote of a majority of the Board of Trustees of the Trust who are
not parties to this Agreement or "interested persons" (as defined in the 1940
Act) of the Trust, or PALP, cast in person at a meeting called for the purpose
of voting on such approval.
This Agreement may be terminated:
(a) by the Trust at any time with respect to the services
provided by the Administrator, by vote of a majority of the entire
Board of Trustees of the Trust, by vote of a majority of the Trustees
of the Trust who are not "interested persons" (as defined in the 1940
Act) of the Trust or PALP, or by a vote of a majority of the
outstanding voting shares of the Trust or, with respect to a
particular Fund, by vote of a majority of the outstanding voting
shares of such Fund, on 60 days' written notice to the Administrator;
and
(b) by the Administrator at any time, without the payment of any
penalty, upon 60 days' written notice to the Trust.
10. Use of Name. It is understood that the name "PIMCO Advisors
-----------
L.P." or "PALP" or any derivative thereof or logo associated with those names
are the valuable property of PALP and its affiliates, and that the right of the
Trust and/or the Funds to use such names (or derivatives or logos) shall be
governed by ____________.
11. Notices. Notices of any kind to be given to the Administrator by
-------
the Trust shall be in writing and shall be duly given if mailed or delivered to
the Administrator at 800 Newport Center Drive, Newport Beach, California 92660,
or to such other address or to such individual as shall be specified by the
- 8 -
<PAGE>
Administrator. Notices of any kind to be given to the Trust by the
Administrator shall be in writing and shall be duly given if mailed or delivered
to 840 Newport Center Drive, Suite 360, Newport Beach, California 92660, or to
such other address or to such individual as shall be specified by the Trust.
12. Trust Obligation. A copy of the Trust's Amended and Restated
----------------
Agreement and Declaration of Trust, as amended, is on file with the Secretary of
the Commonwealth of Massachusetts, and notice is hereby given that the Agreement
has been executed on behalf of the Trust by a trustee of the Trust in his or her
capacity as trustee and not individually. The obligations of this Agreement
shall only be binding upon the assets and property of the Trust and shall not be
binding upon any trustee, officer, or shareholder of the Trust individually.
13. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original.
14. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of California,
provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act or any rule or order of the SEC thereunder.
(b) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable. To the
extent that any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise with regard to any party
hereunder, such provisions with respect to other parties hereto shall not
be affected thereby.
(c) The captions in this Agreement are included for convenience
only and in no way define any of the provisions hereof or otherwise affect
their construction or effect.
(d) This Agreement may not be assigned by the Trust or the
Administrator without the consent of the other party.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below on the day and year first above
written.
PIMCO FUNDS: MULTI-MANAGER
SERIES
Attest: By:
--------------------- ----------------------
Title: Title:
PIMCO ADVISORS L.P.
Attest: By:
--------------------- ----------------------
Title: Title:
Attest: By:
--------------------- ----------------------
Title: Title:
- 10 -
<PAGE>
Schedule to Administration Agreement
<TABLE>
<CAPTION>
Fee Rate:
---------
Fund Non-Retail Classes Retail Classes/*/
- ---- ------------------------ --------------------------
Custody Custody
and and
Portfolio Portfolio
Accounting Other Total Accounting Other Total
---------- ----- ------- ----------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
PIMCO Capital Appreciation .10% .15% .25% .10% .30% .40%
PIMCO Mid Cap Growth .10% .15% .25% .10% .30% .40%
PIMCO Small Cap Growth .10% .15% .25% .10% .30% .40%
PIMCO Micro Cap Growth .10% .15% .25% .10% .30% .40%
PIMCO Renaissance .10% .15% .25% .10% .30% .40%
PIMCO Growth .10% .15% .25% .10% .30% .40%
PIMCO Target .10% .15% .25% .10% .30% .40%
PIMCO Opportunity .10% .15% .25% .10% .30% .40%
PIMCO Innovation .10% .15% .25% .10% .30% .40%
PIMCO Tax Exempt .10% .15% .25% .10% .30% .40%
PIMCO Equity Income .10% .15% .25% .10% .30% .40%
PIMCO Value .10% .15% .25% .10% .30% .40%
PIMCO Small Cap Value .10% .15% .25% .10% .30% .40%
PIMCO Enhanced Equity .10% .15% .25% .10% .30% .40%
PIMCO Balanced .10% .15% .25% .10% .30% .40%
PIMCO Precious Metals .10% .20% .30% .10% .35% .45%
PIMCO International .10% .40% .50% .10% .55% .65%
PIMCO International
Developed .10% .40% .50% .10% .55% .65%
PIMCO Emerging Markets .10% .40% .50% .10% .55% .65%
PIMCO Structured Emerging
Markets .10% .40% .50% .10% .55% .65%
- --------------------
</TABLE>
/*/ Subject to a reduction of .05% once Fund assets attributable to Retail
Class shares exceed $2.5 billion.
- 11 -
<PAGE>
EXHIBIT 13(f)
SUB-ADMINISTRATION AGREEMENT
This Sub-Administration Agreement (the "Agreement") is made as of the
____ day of ____________, 199_ between PIMCO Advisors L.P., a limited
partnership having its principal place of business at 800 Newport Center Drive,
Newport Beach, CA 92679 ("PALP" or the "Administrator") and Pacific Investment
Management Company, a California corporation, having its principal place of
business at 840 Newport Center Drive, Suite 360, Newport Beach, CA 92660
("PIMCO" or the "Sub-Administrator").
WITNESSETH:
WHEREAS, PIMCO Funds: Multi-Manager Series, a Massachusetts business
trust having its principal place of business at 840 Newport Center Drive, Suite
360, Newport Beach, CA 92660 (the "Trust"), has established multiple series,
including PIMCO International Fund, PIMCO International Developed Fund, PIMCO
Emerging Markets Fund, PIMCO Capital Appreciation Fund, PIMCO Mid Cap Growth
Fund, PIMCO Small Cap Growth Fund, PIMCO Micro Cap Growth Fund, PIMCO
Renaissance Fund, PIMCO Growth Fund, PIMCO Target Fund, PIMCO Opportunity Fund,
PIMCO Innovation Fund, PIMCO Tax Exempt Fund, PIMCO Equity Income Fund, PIMCO
Value Fund, PIMCO Small Cap Value Fund, PIMCO Enhanced Equity Fund, PIMCO
Structured Emerging Markets Fund, PIMCO Balanced Fund, and PIMCO Precious Metals
Fund (each a "Fund"); and
WHEREAS, on or after the effect date of this agreement, each Fund
offers five classes of shares: Institutional Class, Administrative Class, Class
A, Class B, and Class C, of which Class A, Class B, and Class C shares are
referred to herein as "Retail Class" shares; and
WHEREAS, pursuant to the Administration Agreement between the Trust
and PALP dated _____________, 199_, the Trust has appointed PALP as
Administrator of the Trust, including each of the aforementioned Funds, and PALP
has accepted such appointment; and
WHEREAS, the Administrator desires to retain PIMCO to perform certain
administrative services for each of the aforementioned series of the Trust; and
WHEREAS, PIMCO desires to perform such administrative services,
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. Appointment. The Administrator hereby appoints PIMCO as the Sub-
-----------
Administrator of the Trust and PIMCO accepts such appointment.
<PAGE>
2. Duties.
------
(a) Subject to the general supervision of the Board of Trustees of the Trust
and the direct supervision of the Administrator, the Sub-Administrator shall
provide or procure, at the Sub-Administrator's expense, services to include the
following: (i) coordinating matters relating to the operation of the Funds,
including any necessary coordination among the adviser or advisers to the Funds,
the custodian(s), transfer agent(s), dividend disbursing agent(s), and
recordkeeping agent(s) (including pricing and valuation of the Funds),
accountants, attorneys, and other parties performing services or operational
functions for the Funds; (ii) providing the Funds with the services of a
sufficient number of persons competent to perform such administrative and
clerical functions as are necessary to ensure compliance with federal securities
laws, as well as other applicable laws, and to provide effective administration
of the Funds; (iii) maintaining, or supervising the maintenance by third
parties, of such books and records of the Trust and the Funds as may be required
by applicable federal or state law other than the records and ledgers maintained
under the Investment Advisory Agreement; (iv) preparing or supervising the
preparation by third parties of all federal, state, and local tax returns and
reports of the Funds required by applicable law; (v) preparing, filing, and
arranging for the distribution of proxy materials and periodic reports to
shareholders of the Funds as required by applicable law; (vi) preparing and
arranging for the filing of such registration statements and other documents
with the SEC and other federal and state regulatory authorities as may be
required to register the shares of the Funds and qualify the Trust to do
business or as otherwise required by applicable law; (vii) taking such other
action with respect to the Funds as may be required by applicable law,
including, without limitation, the rules and regulations of the SEC and of state
securities commissions and other regulatory agencies; and (viii) providing the
Funds with adequate personnel, office space, communications facilities, and
other facilities necessary for the Funds' operations as contemplated in this
Agreement.
(b) Other Services. Subject to the general supervision of the Board of
--------------
Trustees and the direct supervision of the Administrator, the Sub-Administrator
shall also provide or procure on behalf of the Trust and the Funds, and at the
expense of the Sub-Administrator, the following services to the Funds: (i)
custodian services to provide for the safekeeping of the Funds' assets; (ii)
recordkeeping services to maintain the portfolio accounting records for the
Funds; (iii) transfer agency services to maintain the portfolio accounting
records for the Funds; and (iv) dividend disbursing services for the Funds. The
services to be provided under (iii) and (iv) of this Section 2(b) shall be
commensurate with the level of services reasonably necessary for the
- 2 -
<PAGE>
institutional investors that are eligible to invest in Institutional and
Administrative Classes of the Funds, as set forth in the prospectus or
prospectuses for such Classes of the Funds. The Trust may be a party to any
agreement with any person or persons engaged to provide the services referred to
in this Section 2(b).
(c) Retail Class Services. In addition to the Sub-Administrator's
---------------------
responsibilities as specified in Subsections (a) and (b) above, subject to the
general supervision of the Board of Trustees of the Trust and the direct
supervision of the Administrator, the Sub-Administrator, at its own expense,
also shall provide, directly or through persons selected by the Administrator,
to the Retail Classes of the Funds administrative, recordkeeping, and
shareholder services reasonably required by the Retail Classes of the Funds,
which may include some or all of the following services: (i) transfer agency
services reasonably necessary to meet the increased account activity associated
with Retail Classes; (ii) dividend disbursing services reasonably necessary to
meet the increased number of accounts associated with the Retail Classes; (iii)
preparing and arranging for the distribution of prospectuses, statements of
additional information, proxy materials, periodic reports to shareholders, and
other communications with Retail Class shareholders; and (iv) taking such other
actions and providing or procuring such other services with respect to the
Retail Classes as are reasonably necessary or desirable.
(d) Organizational Services. The Sub-Administrator shall provide the Trust and
-----------------------
the Funds, at the Sub-Administrator's expense, with the services necessary to
organize any Funds that commence operations on or after the date of this
Agreement so that such Funds can conduct business as described in the Trust's
Registration Statement.
(e) The Sub-Administrator shall also make its officers and employees available
to the Board of Trustees and Officers of the Trust, as well as to the
Administrator, for consultation and discussions regarding the administration of
the Funds and services provided to the Funds under this Agreement.
(f) The Sub-Administrator acknowledges that, while it is assuming full
responsibility for the day-to-day administrative services to the Trust described
in subparagraphs (a)-(d) above, the Administrator retains overall responsibility
for the provision of such services, including, but not limited to, the
responsibility and authority to supervise and direct such services.
- 3 -
<PAGE>
(g) In performing these services, the Sub-Administrator:
(i) Shall conform with the Investment Company Act of 1940, as amended
(the "1940 Act") and all rules and regulations thereunder, all other
applicable federal and state laws and regulations, with any applicable
procedures adopted by the Trust's Board of Trustees, and with the
provisions of the Trust's Registration Statement filed on Form N-1A as
supplemented or amended from time to time.
(ii) Will make available to the Administrator or the Trust, promptly upon
request, any of the Funds' books and records as are maintained under this
Agreement, and will furnish to regulatory authorities having the requisite
authority any such books and records and any information or reports in
connection with the Sub-Administrator's services under this Agreement that
may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and
regulations.
(iii) Will regularly report to the Administrator and to the Trust's Board
of Trustees on the services provided under this Agreement and will furnish
to the Administrator and to the Trust's Board of Trustees with respect to
the Funds such periodic and special reports as the Administrator or the
Trustees reasonably may request.
3. Documentation. The Administrator has delivered copies of each of the
-------------
following documents to the Sub-Administrator and will deliver to it all future
amendments and supplements thereto, if any:
(i) the Trust's Registration Statement as filed with the Securities and
Exchange Commission ("SEC") and any amendments thereto; and
(ii) exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration
Statement described above.
4. Independent Contractor. The Sub-Administrator shall for all purposes
----------------------
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Administrator or the Board of
Trustees of the Trust from time to time, have no authority to act for or
represent the Administrator or the Trust in any way or otherwise be deemed its
agent.
5. Compensation. As compensation for the services rendered under this
------------
Agreement, the Administrator shall pay to the Sub-
- 4 -
<PAGE>
Administrator a fee based on the average daily net assets of each of the Funds
as set forth in the attached Schedule. These fees shall be computed and accrued
daily and paid monthly. If the Sub-Administrator shall provide services
pursuant to this Agreement for less than any whole month, the foregoing
compensation shall be prorated. The Administrator and the Sub-Administrator
agree that all payments made to the Sub-Administrator under this Agreement shall
be for the provision of administrative services, which are described in Section
2 of this Agreement.
6. Non-Exclusivity. It is understood that the services of the Sub-
---------------
Administrator hereunder are not exclusive, and the Sub-Administrator shall be
free to render similar services to other investment companies and other clients.
7. Liability. The Sub-Administrator shall give the Administrator and the
---------
Trust the benefit of the Sub-Administrator's best efforts in rendering services
under this Agreement. The Sub-Administrator may rely on information reasonably
believed by it to be accurate and reliable. As an inducement for the Sub-
Administrator's undertaking to render services under this Agreement, the
Administrator agrees that neither the Sub-Administrator nor its partners,
officers, or employees shall be subject to any liability for, or any damages,
expenses or losses incurred in connection with, any act or omission or mistake
in judgment connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in performance of the Sub-Administrator's obligations and duties
under this Agreement, or the Sub-Administrator's reckless disregard of such
obligations and duties. This provision shall govern only the liability to the
Administrator of the Sub-Administrator and that of its partners, officers, and
employees, and shall in no way govern the liability to the Trust of the Sub-
Administrator.
8. Term and Continuation
---------------------
(a) This Agreement shall take effect as of the date indicated above, and shall
remain in effect, unless sooner terminated as provided herein, for two years
from such date, and shall continue thereafter on an annual basis with respect to
each Fund provided that such continuance is specifically approved at least
annually by the Administrator or by the vote of a majority of the Board of
Trustees of the Trust who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of the Trust, or the Administrator or the
Sub-Administrator, cast in person at a meeting called for the purpose of voting
on such approval.
(b) The parties specifically agree and recognize the Trust as a third party
beneficiary of this Agreement.
- 5 -
<PAGE>
(c) This Agreement may be terminated:
(i) by the Administrator or the Trust at any time with respect to the
services provided by the Sub-Administrator, by vote of a majority of the
entire Board of Trustees of the Trust or by a vote of a majority of the
outstanding voting shares of the Trust or, with respect to a particular
Fund, by vote of a majority of the outstanding voting shares of such Fund,
on 60 days' written notice to the Sub-Administrator;
(ii) by the Sub-Administrator at any time, without the payment of any
penalty, upon 60 days' written notice to the Administrator and the Trust;
(iii) automatically in the event the Administration Agreement between the
Trust and PALP is terminated.
9. Notices. Notices of any kind to be given to any party shall be in writing
-------
and shall be duly given if mailed or delivered to the addresses below or to such
other address or to such other individual as shall be specified in writing to
the other parties:
If to the Trust: 840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
If to PIMCO: 840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
If to PALP: 800 Newport Center Drive
Newport Beach, CA 92660
10. Use of Name. It is understood that the name "Pacific Investment Management
-----------
Company" or "PIMCO" or any derivative thereof or logo associated with those
names are the valuable property of PIMCO and its affiliates, and that the right
of the Administrator, the Trust and/or the Funds to use such names (or
derivatives or logos) shall be governed by ____________.
11. Counterparts. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed to be an original.
12. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of California, provided that
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or order of the SEC thereunder.
(b) If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby and, to this extent, the provisions of this Agreement shall
be deemed to be
- 6 -
<PAGE>
severable. To the extent that any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise with regard to any
party hereunder, such provisions with respect to the other party hereto shall
not be affected thereby.
(c) The captions in this Agreement are included for convenience only and in no
way define any of the provisions hereof or otherwise affect their construction
or effect.
(d) This Agreement may not be assigned by the Administrator or the Sub-
Administrator without the consent of the other party.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
PIMCO ADVISORS L.P.
By:
- ------------------------- --------------------------------
Attest:
Title: Title:
-----------------------------
By:
- ------------------------- --------------------------------
Attest:
Title: Title:
-----------------------------
PACIFIC INVESTMENT MANAGEMENT COMPANY
By:
- ------------------------- --------------------------------
Attest:
Title: Title:
-----------------------------
- 7 -
<PAGE>
Schedule to Sub-Administration Agreement
<TABLE>
<CAPTION>
Fee Rate:
---------
Non-Retail Classes Retail Classes/*/
------------------------------------- ----------------------------------------
Custody and Custody and
Fund Portfolio Accounting Other Total Portfolio Accounting Other Total
- ---- -------------------- ----- ----- -------------------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
PIMCO Capital Appreciation .10% .15% .25% .10% .30% .40%
PIMCO Mid Cap Growth .10% .15% .25% .10% .30% .40%
PIMCO Small Cap Growth .10% .15% .25% .10% .30% .40%
PIMCO Micro Cap Growth .10% .15% .25% .10% .30% .40%
PIMCO Summit .10% .15% .25% .10% .30% .40%
PIMCO Growth .10% .15% .25% .10% .30% .40%
PIMCO Target .10% .15% .25% .10% .30% .40%
PIMCO Opportunity .10% .15% .25% .10% .30% .40%
PIMCO Innovation .10% .15% .25% .10% .30% .40%
PIMCO Tax Exempt .10% .15% .25% .10% .30% .40%
PIMCO Equity Income .10% .15% .25% .10% .30% .40%
PIMCO Value .10% .15% .25% .10% .30% .40%
PIMCO Small Cap Value .10% .15% .25% .10% .30% .40%
PIMCO Enhanced Equity .10% .15% .25% .10% .30% .40%
PIMCO Balanced .10% .15% .25% .10% .30% .40%
PIMCO Precious Metals .10% .20% .30% .10% .35% .45%
PIMCO International .10% .40% .50% .10% .55% .65%
PIMCO International Developed .10% .40% .50% .10% .55% .65%
PIMCO Emerging Markets .10% .40% .50% .10% .55% .65%
PIMCO Structured Emerging Markets .10% .40% .50% .10% .55% .65%
- --------------------
</TABLE>
/*/ Subject to a reduction of .05% once Fund assets attributable to Retail
Class shares exceed $2.5 billion.
- 8 -
<PAGE>
EXHIBIT 14(a)
Consent of Independent Accountants
We hereby consent to the incorporation by reference of our report dated August
12, 1996, relating to the financial statements and financial highlights
appearing in the Annual Report to Shareholders dated June 30, 1996 of PIMCO
Funds: Equity Advisors Series, which have been further incorporated into this
registration statement on Form N-14 of the PIMCO Funds: Equity Advisors Series.
We also consent to the references to us under the heading "Financial Highlights"
in the Prospectus and under the headings "Independent Accountants" and
"Financial Statements" in the Statement of Additional Information which are also
incorporated by reference into this registration statement on Form N-14 of the
PIMCO Funds: Equity Advisors Series.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Kansas City, Missouri
September 26, 1996
<PAGE>
EXHIBIT 14(b)
Coopers & Lybrand L.L.P
a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
------------------
We consent to the incorporation by reference in the Registration Statement on
Form N-14 of PIMCO Funds: Equity Advisors Series (on behalf of its NFJ
Diversified Low P/E Fund and Cadence Mid Cap Growth Fund series) of our report
dated November 16, 1995 on our audits of the financial statements and financial
highlights of PIMCO Advisors Funds as of September 30, 1995 and for the years
then ended which are included in the Statement of Additional Information of
PIMCO Advisors Funds dated July 12, 1996. We also consent to the reference to
our firm under the heading "Independent Accountants" in such Statement of
Additional Information, which is incorporated by reference into such
Registration Statement.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
New York, New York
September 26, 1996
<PAGE>
Exhibit 16
POWER OF ATTORNEY
I, the undersigned Trustee of the PIMCO Funds: Equity Advisors Series
(the "Trust"), hereby severally constitute and appoint R. Wesley Burns and
Teresa A. Wagner, and each of them singly, our true and lawful attorneys, with
full power to them and each of them, to sign for us, and in our names and in the
capacities indicated below, the Registration Statements on Form N-14 of the
Trust and any and all amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
with the securities commissioner of any state, or with other regulatory
authorities, granting unto our said attorneys, and each of them acting alone,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to all intents and
purposes as he or she might or could do in person, and hereby ratify and confirm
all that said attorneys or either of them may lawfully do or cause to be done by
virtue thereof.
WITNESS my hand and the common seal on the date set forth below.
Signature Title Date
- --------- ----- ----
/s/ Lyman W. Porter Trustee August 8th, 1996
- -------------------
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee of the PIMCO Funds: Equity Advisors Series
(the "Trust"), hereby severally constitute and appoint R. Wesley Burns and
Teresa A. Wagner, and each of them singly, our true and lawful attorneys, with
full power to them and each of them, to sign for us, and in our names and in the
capacities indicated below, the Registration Statements on Form N-14 of the
Trust and any and all amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
with the securities commissioner of any state, or with other regulatory
authorities, granting unto our said attorneys, and each of them acting alone,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to all intents and
purposes as he or she might or could do in person, and hereby ratify and confirm
all that said attorneys or either of them may lawfully do or cause to be done by
virtue thereof.
WITNESS my hand and the common seal on the date set forth below.
Signature Title Date
- --------- ----- ----
/s/ William D. Cvengros Trustee August 8th, 1996
- -----------------------
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee of the PIMCO Funds: Equity Advisors Series
(the "Trust"), hereby severally constitute and appoint R. Wesley Burns and
Teresa A. Wagner, and each of them singly, our true and lawful attorneys, with
full power to them and each of them, to sign for us, and in our names and in the
capacities indicated below, the Registration Statements on Form N-14 of the
Trust and any and all amendments (including Post-effective amendments) to said
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
with the securities commissioner of any state, or with other regulatory
authorities, granting unto our said attorneys, and each of them acting alone,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to all intents and
purposes as he or she might or could do in person, and hereby ratify and confirm
all that said attorneys or either of them may lawfully do or cause to be done by
virtue thereof.
WITNESS my hand and the common seal on the date set forth below.
Signature Title Date
- --------- ----- ----
/s/ Alan Richards Trustee August 8th, 1996
- -----------------
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee of the PIMCO Funds: Equity Advisors Series
(the "Trust"), hereby severally constitute and appoint R. Wesley Burns and
Teresa A. Wagner, and each of them singly, our true and lawful attorneys, with
full power to them and each of them, to sign for us, and in our names and in the
capacities indicated below, the Registration Statements on Form N-14 of the
Trust and any and all amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
with the securities commissioner of any state, or with other regulatory
authorities, granting unto our said attorneys, and each of them acting alone,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to all intents and
purposes as he or she might or could do in person, and hereby ratify and confirm
all that said attorneys or either of them may lawfully do or cause to be done by
virtue thereof.
WITNESS my hand and the common seal on the date set forth below.
Signature Title Date
- --------- ----- ----
/s/ Richard L. Nelson Trustee August 8th, 1996
- ---------------------
