<PAGE>
As filed with the Securities and Exchange Commission on May 25, 1999
Registration Nos. 33-36528;
811-6161
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. ___ / /
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Post-Effective Amendment No. 39 / X /
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
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Amendment No. 41 / X /
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PIMCO FUNDS: MULTI-MANAGER SERIES
(Exact Name of Registrant as Specified in Charter)
840 Newport Center Drive, Newport Beach, CA 92660
(Address of principal executive offices) (Zip code)
(949) 760-4867
(Registrant's telephone number, including area code)
Name and address
of agent for service: Copies to:
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Stephen J. Treadway Newton B. Schott, Jr., Joseph B. Kittredge, Esq.
c/o PIMCO Funds Esq. Ropes & Gray
Distributors LLC c/o PIMCO Funds One International Place
2187 Atlantic Street Distributors LLC Boston, Massachusetts
Stamford, Connecticut 2187 Atlantic Street 02110
06902 Stamford, Connecticut
06902
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
---
/ / On [date] pursuant to paragraph (b)
---
/ / 60 days after filing pursuant to paragraph (a)(1)
---
/ / On [date] pursuant to paragraph (a)(1)
---
/ X / 75 days after filing pursuant to paragraph (a)(2)
---
/ / On [date] pursuant to paragraph (a)(2) of rule 485
---
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
This Post-Effective Amendment relates solely to PIMCO Mega-Cap Fund, a new
series of the Registrant. No information relating to any other series of the
Registrant is amended or superseded hereby.
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
CROSS-REFERENCE SHEET
Required by Rule 404 Under the Securities Act of 1933
Prospectus for Institutional Class and Administrative Class Shares of PIMCO
Mega-Cap Fund.
Part A
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Item Heading
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1. Cover Page Cover Page
2. Synopsis Prospectus Summary; Expense
Information
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Investment Objectives and Policies;
Investment Restrictions;
Characteristics and Risks of
Securities and Investment Techniques
5. Management of the Fund Management of the Fund; Portfolio
Transactions
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities Other Information; Portfolio
Transactions; Dividends,
Distributions and Taxes
7. Purchase of Securities Being Offered Management of the Fund; Purchase of
Shares; Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
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<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
CROSS-REFERENCE SHEET
Required by Rule 404 Under the Securities Act of 1933
Statement of Additional Information for PIMCO Mega-Cap Fund.
Part B
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Item Heading
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12 General Information and History Cover Page
13. Investment Objective and Policies Investment Objectives and Policies;
Investment Restrictions
14. Management of the Fund Management of the Fund
15. Control Persons and Principal Other Information
Holders of Securities
16. Investment Advisory and Other Management of the Fund; Distribution
Services of Fund Shares
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing Distribution of Fund Shares; Net
of Securities Being Offered Asset Value
20. Tax Status Taxation
21. Underwriters Distribution of Fund Shares
22. Calculation of Performance Data Other Information
23. Financial Statements Not Applicable
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<PAGE>
PIMCO Funds Prospectus
Multi-Manager CADENCE CAPITAL MANAGEMENT
Series Mega-Cap Fund
_________, 1999
Share Classes
Institutional
Administrative
<PAGE>
PIMCO Funds: Multi-Manager Series
PROSPECTUS
________, 1999
PIMCO Funds: Multi-Manager Series (the "Trust"), formerly PIMCO Funds: Equity
Advisors Series, is an open-end series management investment company ("mutual
fund"). This Prospectus describes PIMCO Mega-Cap Fund, a separate diversified
investment portfolio (the "Fund") of the Trust. The Trust is designed to provide
access to the professional investment management services offered by PIMCO
Advisors L.P. ("PIMCO Advisors") and the Fund's Sub-Adviser, Cadence Capital
Management ("Cadence").
This Prospectus describes two classes of shares offered by the Fund: the
"Institutional Class" and the "Administrative Class."
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. It should be read and retained for
ready reference to information about the Fund. Information about the investment
objective of the Fund, along with a detailed description of the types of
securities in which the Fund may invest, and of investment policies and
restrictions applicable to the Fund, are set forth in this Prospectus. There
can be no assurance that the investment objective of the Fund will be achieved.
Because the market value of the Fund's investments will change, the investment
returns and net asset value per share of the Fund will vary.
A Statement of Additional Information, dated ________, 1999, as amended or
supplemented from time to time, containing additional and more detailed
information about the Fund, has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference into this Prospectus. The
Securities and Exchange Commission maintains an Internet World Wide Web site (at
www.sec.gov) which contains the Statement of Additional Information, materials
that are incorporated by reference into this Prospectus and the Statement of
Additional Information, and other information about the Fund. The Statement of
Additional Information is available without charge and may be obtained by
writing or calling:
PIMCO Funds
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Telephone: 1-800-927-4648
1-800-987-4626
(PIMCO Infolink Audio Response Network).
These securities 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. Any representation to the contrary is
a criminal offense.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency, and involve risk, including the possible loss of principal.
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<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.................................................... 4
EXPENSE INFORMATION................................................... 6
INVESTMENT OBJECTIVES AND POLICIES.................................... 7
INVESTMENT RESTRICTIONS............................................... 8
CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES..... 9
MANAGEMENT OF THE FUND................................................ 12
PURCHASE OF SHARES.................................................... 15
REDEMPTION OF SHARES.................................................. 17
PORTFOLIO TRANSACTIONS................................................ 20
NET ASSET VALUE....................................................... 20
DIVIDENDS, DISTRIBUTIONS AND TAXES.................................... 21
OTHER INFORMATION..................................................... 22
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<PAGE>
PROSPECTUS SUMMARY
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end management
investment company ("mutual fund") organized as a Massachusetts business trust
on August 24, 1990. This Prospectus describes a separate diversified investment
portfolio (the "Fund") offered by the Trust.
Fund at a Glance
The following chart provides general information about the Fund. It is
qualified in its entirety by the more complete descriptions of the Fund
appearing elsewhere in this Prospectus.
Sub-Adviser and Fund Investment Objective Primary Investments
Cadence Capital Management
Mega-Cap Fund Seeks growth of capital. Invests primarily in
common stocks of
companies with market
capitalizations of at
least $5 billion at
the time of investment
that have improving
fundamentals and whose
stock is reasonably
valued by the market.
Investment Risks and Considerations
The following are some of the primary risks relevant to an investment in
the Fund and to the securities in which the Fund invests. Investors should read
this Prospectus carefully for a more complete discussion of the risks relating
to an investment in the Fund. The value of all securities and other instruments
held by the Fund vary from time to time in response to a wide variety of market
factors. Consequently, the net asset value per share of the Fund will vary.
The net asset value per share of the Fund may be less at the time of redemption
than it was at the time of investment. It is the policy of the Fund to be as
fully invested as practicable in common stock and the Fund may not invest in
debt securities as a defensive investment posture (although it may invest in
such securities to provide for payment of expenses and to meet redemption
requests), and, therefore, may be particularly vulnerable to general declines in
stock prices.
The Fund's investment techniques may involve a form of borrowing, which
may tend to exaggerate the effect on net asset value of any increase or decrease
in the market value of the Fund's portfolio and may require liquidation of
portfolio positions when it is not advantageous to do so.
The Fund offers its shares to both institutional and retail investors.
Institutional shareholders, some of whom also may be investment advisory clients
of PIMCO Advisors L.P. or its affiliates, may hold large positions in the Fund.
Such shareholders may on occasion make large redemptions of their holdings in
the Fund to meet their liquidity needs, in connection with strategic adjustments
to their overall portfolio of investments, or for other purposes. Large
redemptions from the Fund could require liquidation of portfolio positions when
it is not most desirable to do so. Liquidation of portfolio holdings also may
cause the Fund to realize taxable capital gains.
Investment Adviser and Sub-Adviser
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") serves as
investment adviser to the Fund. PIMCO Advisors is one of the largest investment
management firms in the U.S. As of _________, 1999, PIMCO Advisors and its
subsidiary partnerships had approximately $____ billion in assets under
management. Subject to
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<PAGE>
the supervision of the Board of Trustees of the Trust, the Adviser is
responsible for the investment program for the Fund in accordance with the
Fund's investment objective, policies, and restrictions. The Adviser has engaged
its affiliate, Cadence Capital Management ("Cadence"), to serve as the Fund's
Sub-Adviser. Under the supervision of PIMCO Advisors, the Sub-Adviser makes
determinations with respect to the purchase and sale of portfolio securities,
and places, in the name of the Fund, orders for execution of the Fund's
transactions. For its services, the Adviser receives fees based on the average
daily net assets of the Fund. The Adviser (and not the Fund or the Trust)
compensates the Sub-Adviser out of its advisory fees. See "Management of the
Fund."
Purchase of Shares
This Prospectus describes two classes of shares of the Fund: the
"Institutional Class" and the "Administrative Class." Shares of the
Institutional Class are offered primarily for direct investment by institutional
investors (Institutional Class shares may also be offered through certain
financial intermediaries that charge their customers transaction or other fees
with respect to the customers' investments in the Fund). Shares of the
Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers and other intermediaries. The Fund pays service
and/or distribution fees to such entities for services they provide to the
Fund's shareholders of that class.
Shares of the Institutional Class and Administrative Class of the Fund are
offered at the relevant next determined net asset value with no sales charge or
other fee. The minimum initial investment for shares of either class is $5
million, subject to certain exceptions described under "Purchase of Shares."
Shares of either class may also be offered to clients of the Adviser and its
affiliates.
Redemptions and Exchanges
Institutional Class and Administrative Class shares of the Fund may be
redeemed without cost (except as noted below) at the relevant net asset value
per share of the particular class next determined after receipt of the
redemption request. The redemption price may be more or less than the purchase
price.
Institutional Class and Administrative Class shares of the Fund may be
exchanged without cost (except as noted below) on the basis of relative net
asset values for shares of the same class of any other series of the Trust
offered generally to the public, or for shares of the same class of a series of
PIMCO Funds: Pacific Investment Management Series, an affiliated mutual fund
family composed primarily of fixed income portfolios managed by Pacific
Investment Management Company, an affiliate of the Adviser. See "Redemption of
Shares."
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<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses (Institutional Class and Administrative Class):
Sales Load Imposed on Purchases........................................ None
Sales Load Imposed on Reinvested Dividends............................. None
Redemption Fee......................................................... None
Exchange Fee........................................................... None
Annual Fund Operating Expenses (as a percentage of average daily net assets):
<TABLE>
<CAPTION>
Service/
Advisory Administrative 12b-1 Total
Fee Fee Fee Expenses
--------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Institutional Class Shares... 0.45% 0.25% None 0.70%
Administrative Class Shares.. 0.45% 0.25% 0.25% 0.95%
</TABLE>
For a more detailed discussion of the Fund's fees and expenses, see "Fund
Administrator," "Advisory and Administrative Fees," and "Service and
Distribution Fees" under the caption "Management of the Fund."
Example of Fund Expenses:
An investor would pay the following expenses on a $1,000 investment in the
noted class of shares of the Fund, assuming (1) a hypothetical 5% annual return
and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Class Shares... $ 7 $22 $39 $ 87
Administrative Class Shares.. 10 30 53 117
</TABLE>
The above tables are provided to assist investors in understanding the
various expenses which may be borne directly or indirectly in connection with an
investment in the Fund. The information is based upon estimated fees and
expenses for the Fund's initial fiscal year. This example should not be
considered a representation of past or future expenses or performance. Actual
expenses may be higher or lower than those shown.
-6-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of the Fund are
described below. There can be no assurance that the investment objective of the
Fund will be achieved. Because the market value of the Fund's investments will
change, the net asset value per share of the Fund also will vary. Specific
portfolio securities eligible for purchase by the Fund, investment techniques
that may be used by the Fund, and the risks associated with these securities and
techniques are described more fully under "Characteristics and Risks of
Securities and Investment Techniques" in this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information.
Mega-Cap Fund seeks growth of capital. The Fund invests primarily in
common stocks of 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 the approximately 250
largest market capitalization stocks, all of which are those of companies with
market capitalizations of at least $5 billion at the time of investment. The
Fund usually invests in approximately 40 to 60 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 Sub-Adviser believes that the models identify the stocks in the universe
exhibiting growth characteristics with reasonable valuations. Stocks are
replaced when the 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. The Portfolio Managers for the Fund are David B. Breed,
William B. Bannick, Katherine A. Burdon, and Peter B. McManus of PIMCO Advisors'
subsidiary Cadence.
It is the policy of the Fund to be as fully invested in common stocks as
practicable at all times. This policy precludes the Fund from investing in debt
securities as a defensive investment posture (although the Fund may invest in
such securities to provide for payment of expenses and to meet redemption
requests). Accordingly, investors in the Fund bear the risk of general declines
in stock prices and the risk that the Fund's exposure to such declines cannot be
lessened by investment in debt securities. The 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.
The Fund may also lend portfolio securities; enter into repurchase
agreements and reverse repurchase agreements (subject to the Fund's investment
limitations described below); purchase and sell securities on a when-issued or
delayed delivery basis; and enter into forward commitments to purchase
securities. The Fund may also invest in American Depository Receipts ("ADRs"),
which are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer, and
are publicly traded on exchanges or over-the-counter in the United States. For
more information on these and other investment practices, see "Characteristics
and Risks of Securities and Investment Techniques" in this Prospectus and
"Investment Objectives and Policies" in the Statement of Additional Information.
-7-
<PAGE>
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of the
Fund and may not be changed without shareholder approval by vote of a majority
of the outstanding shares of the Fund. The investment objective of the Fund is
non-fundamental and may be changed without shareholder approval. Under the
following fundamental restrictions, the 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 or swap agreements), except that
the 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 the 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
the Fund's assets).
(8) Issue senior securities, except insofar as the 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
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<PAGE>
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 the 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.
(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.
Unless otherwise noted, the remaining restrictions and policies of the Fund
relating to the investment of its assets and activities are non-fundamental and
may be changed without shareholder approval. Unless otherwise indicated, all
limitations applicable to the Fund's investments apply only at the time a
transaction is entered into.
CHARACTERISTICS AND RISKS OF SECURITIES
AND INVESTMENT TECHNIQUES
The different types of securities and investment techniques used by the
Fund 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. Investors should carefully consider the investment
objective, investment policies, and potential risks of the Fund before
investing.
The following describes potential risks associated with different types of
investment techniques that may be used by the Fund. For more detailed
information on these investment techniques, as well as information on the types
of securities in which the Fund may invest, see the Statement of Additional
Information.
Repurchase Agreements
For the purposes of maintaining liquidity and achieving income, the 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 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 Fund will invest in repurchase agreements only as a cash management
technique with respect to that portion of the portfolio maintained in cash. The
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 may for some purposes be considered
borrowing that involves the sale of a security by the Fund and its agreement to
repurchase the instrument at a specified time and price. The Fund will
segregate assets determined to be liquid by the Adviser or Sub-Adviser in
accordance with procedures established
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<PAGE>
by the Board of Trustees to cover its obligations under reverse repurchase
agreements. Reverse repurchase agreements will be subject to the Fund's
limitations on borrowings. The Fund also may borrow money for investment
purposes subject to any policies of the Fund currently described in this
Prospectus or in the Statement of Additional Information. Such a practice will
result in leveraging of the Fund's assets. Leverage will tend to exaggerate the
effect on net asset value of any increase or decrease in the value of the Fund's
portfolio and may cause the Fund to liquidate portfolio positions when it would
not be advantageous to do so.
Loans of Portfolio Securities
For the purpose of achieving income, the 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 the Fund's limitation on lending its portfolio securities.
The Fund's performance will continue to reflect changes in the value of the
securities loaned and will also reflect the receipt of either interest, through
investment of cash collateral by the Fund in permissible investments, or a fee,
if the collateral is U.S. Government securities. Securities lending involves
the risk of loss of rights in the collateral or delay in recovery of the
collateral should the borrower fail to return the security loaned or become
insolvent. The Fund may pay lending fees to the party arranging the loan.
Short Sales
The Fund may from time to time make short sales involving securities held
in the Fund's portfolio or which the Fund has the right to acquire without the
payment of further consideration. For these purposes, the Fund may also hold or
have the right to acquire securities which, without the payment of any further
consideration, are convertible into or exchangeable for the securities sold
short. Short sales expose the Fund to the risk that it will be required to
acquire, convert or exchange securities to cover its short position at a time
when the securities sold short have appreciated in value, thus resulting in a
loss to the Fund.
When-Issued, Delayed Delivery and Forward Commitment Transactions
The Fund may purchase securities which it is eligible to purchase on a
when-issued basis, may purchase and sell such securities for delayed delivery
and may make contracts to purchase securities for a fixed price at a future date
beyond normal settlement time (forward commitments). When-issued transactions,
delayed delivery purchases and forward commitments involve a risk of loss if the
value of the securities declines prior to the settlement date, which risk is in
addition to the risk of decline in the value of the Fund's other assets.
Typically, no income accrues on securities the Fund has committed to purchase
prior to the time delivery of the securities is made, although the Fund may earn
income on securities it has segregated.
-10-
<PAGE>
Investment in Investment Companies
The Fund may invest up to 5% of its assets in other investment companies.
As a shareholder of an investment company, the Fund may indirectly bear service
and other fees which are in addition to the fees the Fund pays its service
providers.
Money Market Instruments
The Fund may hold a portion of its assets in the following kinds of money
market instruments:
(1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other bank
obligations rated in the two highest rating categories by at least two
NRSROs, or, if rated by only one NRSRO, in such agency's two highest
grades, or, if unrated, determined to be of comparable quality by the
Adviser or the Sub-Adviser. Bank obligations must be those of a bank
that has deposits in excess of $2 billion or that is a member of the
Federal Deposit Insurance Corporation. The Fund may invest in
obligations of U.S. branches or subsidiaries of foreign banks ("Yankee
dollar obligations") or foreign branches of U.S. banks ("Eurodollar
obligations");
(3) commercial paper rated in the two highest rating categories by at
least two NRSROs, or, if rated by only one NRSRO, in such agency's two
highest grades, or, if unrated, determined to be of comparable quality
by the Adviser or the Sub-Adviser;
(4) corporate obligations with a remaining maturity of 397 days or less
whose issuers have outstanding short-term debt obligations rated in
the highest rating category by at least two NRSROs, or, if rated by
only one NRSRO, in such agency's highest grade, or, if unrated,
determined to be of comparable quality by the Adviser or the Sub-
Adviser; and
(5) repurchase agreements with domestic commercial banks or registered
broker-dealers.
Illiquid Securities
The Fund may invest in securities that are illiquid so long as no more than
15% of the net assets of the Fund (taken at market value at the time of
investment) would be invested in such securities. Certain illiquid securities
may require pricing at fair value as determined in good faith under the
supervision of the Board of
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<PAGE>
Trustees. The Sub-Adviser may be subject to significant delays in disposing of
illiquid securities, and transactions in illiquid securities may entail
registration expenses and other transaction costs that are higher than those 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 the Fund has valued the securities. Illiquid
securities are considered to include, among other things, repurchase agreements
with maturities in excess of seven days and securities that are subject to legal
or contractual restrictions on resale (such as privately placed securities), and
other securities which legally or in the Adviser's or the Sub-Adviser's opinion
may be deemed illiquid (not including securities issued pursuant to Rule 144A
under the Securities Act of 1933 and certain commercial paper that the Adviser
or the Sub-Adviser has determined to be liquid under procedures approved by the
Board of Trustees).
Service Systems -- Year 2000 Problem
Many of the services provided to the Fund depend on the smooth functioning
of computer systems. Many systems in use today cannot distinguish between the
year 1900 and the year 2000. Should any of the service systems fail to process
information properly, that could have an adverse impact on the Fund's operations
and services provided to shareholders. The Adviser, Distributor, Shareholder
Servicing and Transfer Agent, Custodian, and certain other service providers to
the Fund have reported that each is working toward mitigating the risks
associated with the so-called "year 2000 problem." However, there can be no
assurance that the problem will be corrected in all respects and that the Fund's
operations and services provided to shareholders will not be adversely affected,
nor can there be any assurance that the year 2000 problem will not have an
adverse effect on the entities whose securities are held by the Fund or on
domestic or global equity markets or economies, generally.
"Fundamental" Policies
The investment objective of the Fund described in this Prospectus may be
changed by the Board of Trustees without shareholder approval. If there is a
change in the Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial position and needs.
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the direction of the
Board of Trustees. Information about the Trustees and the Trust's executive
officers may be found in the Statement of Additional Information under the
heading "Management of the Trust."
Investment Adviser
PIMCO Advisors serves as investment adviser to the Fund 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 as of ________, 1999 were approximately
$____ billion.
The general partners of PIMCO Advisors are PIMCO Partners, G.P. and PIMCO
Advisors Holdings L.P. ("PAH"). PIMCO Partners, G.P. is a general partnership
between PIMCO Holding LLC, a Delaware limited liability company and an indirect
wholly-owned subsidiary of Pacific Life Insurance Company, and PIMCO Partners
LLC, a California limited liability company controlled by the current Managing
Directors and two former
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Managing Directors of Pacific Investment Management. PIMCO Partners, G.P. is the
sole general partner of PAH. PIMCO Advisors is governed by a Management Board,
which exercises substantially all of the governance powers of the general
partner and serves 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 seven subsidiary investment adviser
partnerships, including Cadence, the Fund's Sub-Adviser.
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 Fund and for managing, either directly or through
others selected by PIMCO Advisors, the investments of the Fund. PIMCO Advisors
also furnishes to the Board of Trustees periodic reports on the investment
performance of the Fund.
Sub-Adviser
Pursuant to a portfolio management agreement, PIMCO Advisors employs
Cadence, an affiliated firm, to serve as Sub-Adviser for the Fund. PIMCO
Advisors (and not the Fund or the Trust) compensates the Sub-Adviser from its
advisory fee. The Sub-Adviser has full investment discretion and makes all
determinations with respect to the investment of the Fund's assets, and makes
all determinations respecting the purchase and sale of the Fund's securities and
other investments. If Cadence ceases to serve as Sub-Adviser for the Fund,
PIMCO Advisors will either assume full responsibility for the management of the
Fund, or retain a new sub-adviser subject to the approval of the Trustees and,
if required, the Fund's shareholders. The following provides a description of
Cadence and the individual portfolio managers of the 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 __________, 1999 of approximately $_____ 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, and Peter B.
McManus are primarily responsible for the day-to-day management of the Fund.
Mr. Breed is a Managing Director, the Chief Executive Officer, and a founding
partner of Cadence, and has 25 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 13 years' investment management experience. He
previously served as Executive Vice President of George D. Bjurman & Associates
and as Supervising Portfolio Manager of Trinity Investment Management
Corporation. Mr. Bannick joined the predecessor of Cadence in 1992. He
graduated from the University of Massachusetts and received his MBA from Boston
University. Mr. Bannik is a Chartered Financial Analyst. Ms. Burden is a
Managing Director and Portfolio Manager of Cadence and has 10 years' investment
management experience. She previously served as a Vice President and Portfolio
Manager of The Boston Company. Ms. Burdon joined the predecessor of 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. McManus is Director of Fund
Management of Cadence and has 21 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 he is
certified as a Financial Planner.
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Registration as an investment adviser with the SEC does not involve
supervision by the SEC over investment advice. The portfolio management
agreement is not exclusive, and Cadence may provide, and currently is providing,
investment management services to other clients, including other investment
companies.
Fund Administrator
PIMCO Advisors also serves as administrator (the "Administrator") for the
Fund's Institutional Class and Administrative Class shares pursuant to an
administration agreement with the Trust. The Administrator provides or procures
administrative services for Institutional Class and Administrative Class
shareholders of the Fund, which include clerical help and accounting,
bookkeeping, internal audit services and certain other services required by the
Fund, and preparation of reports to the Fund's shareholders and regulatory
filings. The Administrator has retained Pacific Investment Management to
provide such services as sub-administrator. The Administrator and/or the sub-
administrator may also retain other affiliates to provide certain of these
services. In addition, the Administrator, at its own expense, arranges for the
provision of legal, audit, custody, transfer agency (including sub-transfer
agency and other administrative services) and other services necessary for the
ordinary operation of the Fund, and is responsible for the costs of registration
of the Fund's shares and the printing of prospectuses and shareholder reports
for current shareholders.
The Fund (and not the Administrator) is responsible for its share of 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, Pacific Investment Management, 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, the Sub-Advisor, 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 service and/or distribution fees
payable with respect to the Administrative Class shares, and may include certain
other expenses as permitted by the Trust's Multiple Class Plan adopted pursuant
to Rule 18f-3 under the Investment Company Act of 1940 (the "1940 Act"), subject
to review and approval by the Trustees.
Advisory and Administrative Fees
The Fund features fixed advisory and administrative fees. For providing or
arranging for the provision of investment advisory services to the Fund as
described above, PIMCO Advisors receives monthly fees at an annual rate of 0.45%
based on the average daily net assets of the Fund.
For providing or procuring administrative services for the Fund as
described above, the Administrator receives monthly fees at an annual rate of
0.25% based on the average daily net assets attributable in the aggregate to the
Fund's Institutional Class and Administrative Class shares.
The investment advisory, administration, and sub-administration agreements
for the fund may be terminated by the Trustees, PIMCO Advisors or Pacific
Investment Management (as the case may be) on 60 days' written notice.
Following their initial terms, the agreements will continue from year to year if
approved by the Trustees.
Pursuant to the portfolio management agreement between the Adviser and the
Sub-Adviser, PIMCO Advisors (and not the Fund or the Trust), pays the Sub-
Adviser a fee at the annual rate of 0.35% based on the average daily net assets
of the Fund.
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<PAGE>
Service and Distribution Fees
The Trust has adopted an Administrative Services Plan and a Distribution
Plan (the "Plans") with respect to the Administrative Class shares of the Fund.
Under the terms of the Plans, the Trust is permitted to reimburse, out of the
Administrative Class assets of the Fund, in an amount up to .25% on an annual
basis of the average daily net assets of that class, financial intermediaries
that provide services in connection with the distribution and marketing of
shares and/or the provision of certain shareholder services (in the case of the
Distribution Plan) or the administration of plans or programs that use Fund
shares as their funding medium (in the case of the Administrative Services
Plan), and to reimburse certain other related expenses. Total reimbursement
under the Plans may be paid in an amount up to .25% on an annual basis of the
average daily net assets attributable to the Administrative Class shares of the
Fund. The same entity may not receive both distribution and administrative
services fees with respect to the same assets but may with respect to separate
assets receive fees under each Plan. Fees paid pursuant to either Plan may be
paid for shareholder services and the maintenance of accounts, and therefore may
constitute "service fees" for purposes of applicable rules of the National
Association of Securities Dealers, Inc. Each Plan has been adopted in
accordance with the requirements of Rule 12b-1 under the 1940 Act and will be
administered in accordance with the provisions of that rule, except that
shareholders will not have the voting rights set forth in Rule 12b-1 with
respect to the Administrative Services Plan that they will have with respect to
the Distribution Plan. For more complete disclosure regarding the Plans and
their terms, see the Statement of Additional Information.
Institutional and Administrative Class shares of the Fund may also 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
other than service fees paid with respect to Administrative Class shares.
Service agents may impose additional or different conditions on the purchase or
redemption of Fund shares by their customers and may charge their customers
transaction or other account fees on the purchase and redemption of Fund shares.
Each service agent is responsible for transmitting to its customers a schedule
of any such fees and information regarding any additional or different
conditions regarding purchases and redemptions. Shareholders who are customers
of service agents should consult their service agents for information regarding
these fees and conditions.
Distributor
Shares of the fund are distributed through PIMCO Funds Distributors LLC
(the "Distributor"), a wholly owned subsidiary of PIMCO Advisors. The
Distributor, located at 2187 Atlantic Street, Stamford, Connecticut 06902, is a
broker-dealer registered with the SEC.
PURCHASE OF SHARES
The Fund offers Institutional Class and Administrative Class shares in this
Prospectus. Shares of the Institutional Class are offered primarily for direct
investment by investors such as pension and profit sharing plans, employee
benefit trusts, endowments, foundations, corporations, and high net worth
individuals (Institutional Class shares may also be offered through certain
financial intermediaries that charge their customers transaction or other fees
with respect to their customers' investments in the Fund). Shares of the
Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers, and other intermediaries, and the Fund pays service
and/or distribution fees to such entities for services they provide to
shareholders of that class.
Shares of either the Institutional Class or the Administrative Class of the
Fund may be purchased at the relevant net asset value of that class without a
sales charge or other fee. The minimum initial investment for shares of either
class is $5 million, except that the minimum initial investment for a registered
investment adviser purchasing Institutional Class shares for its clients through
omnibus accounts is $250,000 per Fund. Shares may also be offered to clients of
Cadence and other affiliates of PIMCO Advisors, and to the benefit plans of
PIMCO
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<PAGE>
Advisors and its affiliates. In addition, the minimum initial investment
does not apply to shares of the Institutional Class offered through fee-based
programs sponsored and maintained by a registered broker-dealer and approved by
the Distributor pursuant to which each investor pays an asset based fee at an
annual rate of at least .50% of the assets in the account to a financial
intermediary for investment advisory and/or administrative services.
Pension and profit-sharing plans, employee benefit trusts and employee
benefit plan alliances and "wrap account" programs established with broker-
dealers or financial intermediaries may purchase shares of either class only if
the plan or programs for which the shares are being acquired will maintain an
omnibus or pooled account for the Fund and will not require the Fund to pay any
type of administrative payment per participant account to any third party.
The investment minimums discussed in this section and the limitations set
forth in "Investment Limitations" below do not apply to participants in PIMCO
Advisors Portfolio Strategies, a managed product sponsored by PIMCO Advisors.
Initial Investment
An account may be opened by completing and signing a Client Registration
Application and mailing it to PIMCO Funds at the following address: 840 Newport
Center Drive, Suite 300, Newport Beach, California 92660. A Client Registration
Application may be obtained by calling 1-800-800-0952.
Except as provided below, purchases of Institutional Class and
Administrative Class shares can only be made by wiring federal funds to National
Financial Data Services (the "Transfer Agent"), 330 West 9th Street, 4th Floor,
Kansas City, Missouri 64105. Before wiring federal funds, the investor must
first telephone the Trust at 1-800-927-4648 to receive instructions for wire
transfer, and the following information will be requested: name of authorized
person; shareholder name; shareholder account number; name of the Fund and share
class; amount being wired; and wiring bank name.
Shares may be purchased without first wiring federal funds if the proceeds
of the investment are derived from an advisory account maintained by the
investor with PIMCO Advisors or one of its affiliates; from surrender or other
payment from an annuity, insurance, or other contract held by Pacific Life
Insurance Company; or from an investment by broker-dealers, institutional
clients or other financial intermediaries which have established a shareholder
servicing relationship with the Trust on behalf of their customers.
A purchase order, together with payment in proper form, received by the
Transfer Agent prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange (the "Exchange"), on a day the
Trust is open for business, will be effected at that day's net asset value. An
order received after the close of regular trading on the Exchange will be
effected at the net asset value determined on the next business day. However,
orders received by certain retirement plans and other financial intermediaries
on a business day prior to the close of regular trading on the Exchange and
communicated to the Transfer Agent prior to 9:00 a.m., Eastern time, on the
following business day will be effected at the net asset value determined on the
prior business day. The Trust is "open for business" on each day the Exchange
is open for trading, which excludes the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Purchase
orders will be accepted only on days on which the Trust is open for business.
Additional Investments
Additional Investments may be made at any time at the relevant net asset
value for the particular class by calling the Trust and wiring federal funds to
the Transfer Agent as outlined above.
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<PAGE>
Other Purchase Information
Purchases of the Fund's Institutional Class and Administrative Class shares
will be made in full and fractional shares. In the interest of economy and
convenience, certificates for shares will not be issued.
The Trust and the Distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the Fund or to reject any
purchase order, in whole or in part, when, in the judgment of management, such
suspension or rejection is in the best interests of the Trust. The Trust and
the Distributor may also waive the minimum initial investment for certain
investors.
Purchases and sales should be made for long-term investment purposes only.
The Trust and Adviser each reserves the right to restrict purchases of Fund
shares (including exchanges) when a pattern of frequent purchases and sales made
in response to short-term fluctuations in share price appears evident.
Institutional Class and Administrative Class shares of the Fund are not
qualified or registered for sale in all states. Prospective investors should
inquire as to whether shares of the Fund are available for offer and sale in
their state of residence. Shares of the Fund may not be offered or sold in any
state unless registered or qualified in that jurisdiction or unless an exemption
from registration or qualification is available.
Investors may, subject to the approval of the Trust, purchase shares of the
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with the Fund's investment policies and restrictions) and that have
a value that is readily ascertainable in accordance with the Trust's valuation
policies. These transactions will be effected only if the Sub-Adviser intends
to retain the security in the Fund as an investment. Assets so purchased by the
Fund will be valued in generally the same manner as they would be valued for
purposes of pricing the Fund's shares, if such assets were included in the
Fund's assets at the time of purchase. The Trust reserves the right to amend or
terminate this practice at any time.
Retirement Plans
Shares of the Fund are available for purchase by retirement and savings
plans, including Keogh plans, 401(k) plans, 403(b) custodial accounts, and
Individual Retirement Accounts. The administrator of a plan or employee
benefits office can provide participants or employees with detailed information
on how to participate in the plan and how to elect the Fund as an investment
option. Participants in a retirement or savings plan may be permitted to elect
different investment options, alter the amounts contributed to the plan, or
change how contributions are allocated among investment options in accordance
with the plan's specific provisions. The plan administrator or employee
benefits office should be consulted for details. For questions about
participant accounts, participants should contact their employee benefits
office, the plan administrator, or the organization that provides recordkeeping
services for the plan. Investors who purchase shares through retirement plans
should be aware that plan administrators may aggregate purchase and redemption
orders for participants in the plan. Therefore, there may be a delay between
the time the investor places an order with the plan administrator and the time
the order is forwarded to the Transfer Agent for execution.
REDEMPTION OF SHARES
Redemptions by Mail
Institutional Class and Administrative Class shares may be redeemed by
submitting a written request to PIMCO Funds, 840 Newport Center Drive, Suite
300, Newport Beach, California 92660, stating the name of the Fund, the class of
shares, the number or dollar amount of the shares to be redeemed and the account
number. The request must be signed exactly as the names of the registered
owners appear on the Trust's account records, and the request must be signed by
the minimum number of persons designated on the Client Registration Application
that are required to effect a redemption.
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<PAGE>
Redemptions by Telephone or Other Wire Communication
If an election is made on the Client Registration Application (or
subsequently in writing), redemptions of shares may be requested by calling the
Trust at 1-800-927-4648, by sending a facsimile to 1-949-760-4456, or by other
means of wire communication. Investors should state the name of the Fund and
the class of shares to be redeemed, the number or dollar amount of the shares to
be redeemed and the account number. Redemption requests of an amount of $10
million or more may be initiated by telephone, but must be confirmed in writing
by an authorized party prior to processing.
In electing a telephone redemption, the investor authorizes Pacific
Investment Management and the Transfer Agent to act on telephone instructions
from any person representing himself to be the investor, and reasonably believed
by Pacific Investment Management and the Transfer Agent to be genuine. Neither
the Trust nor its Transfer Agent may be liable for any loss, cost or expense for
acting on instructions (whether in writing or by telephone) believed by the
party receiving such instructions to be genuine and in accordance with the
procedures described in this Prospectus. Shareholders should realize that by
electing the telephone or wire redemption option, they may be giving up a
measure of security that they might have if they were to redeem their shares in
writing. Furthermore, interruptions in telephone service may mean that a
shareholder will be unable to effect a redemption by telephone when desired.
The Transfer Agent also provides written confirmation of transactions initiated
by telephone as a procedure designed to confirm that telephone instructions are
genuine (written confirmation is also provided for redemption requests received
in writing). All telephone transactions are recorded, and Pacific Investment
Management or the Transfer Agent may request certain information in order to
verify that the person giving instructions is authorized to do so. If the Trust
or Transfer Agent fails to employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, it may be liable for any
losses due to unauthorized or fraudulent telephone transactions. All
redemptions, whether initiated by letter or telephone, will be processed in a
timely manner, and proceeds will be forwarded by wire in accordance with the
redemption policies of the Trust detailed below. See "Redemption of Shares --
Other Redemption Information."
Shareholders may decline telephone exchange or redemption privileges after
an account is opened by instructing the Transfer Agent in writing at least seven
business days prior to the date the instruction is to be effective.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity. During periods of volatile economic
or market conditions, shareholders may wish to consider transmitting redemption
orders by telegram, facsimile or overnight courier.
Defined contribution plan participants may request redemptions by
contacting the employee benefits office, the plan administrator or the
organization that provides recordkeeping services for the plan.
Other Redemption Information
Redemption requests for Fund shares are effected at the net asset value per
share next determined after receipt in good order of the redemption request by
the Trust or its designee. A redemption request received by the Trust or its
designee prior to the close of regular trading on the Exchange (normally 4:00
p.m., Eastern time), on a day the Trust is open for business, is effective on
that day. A redemption request received after that time becomes effective on
the next business day.
Payment of the redemption price will ordinarily be wired to the investor's
bank within three business days after the redemption request, but may take up to
seven business days. Redemption proceeds will be sent by wire only to the bank
name designated on the Client Registration Application. The Trust may suspend
the right of redemption or postpone the payment date at times when the Exchange
is closed, or during certain other periods as permitted under the federal
securities laws.
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For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application that
are required to effect a redemption, and accompanied by a signature guarantee
from any eligible guarantor institution, as determined in accordance with the
Trust's procedures. Shareholders should inquire as to whether a particular
institution is an eligible guarantor institution. A signature guarantee cannot
be provided by a notary public. In addition, corporations, trusts, and other
institutional organizations are required to furnish evidence of the authority of
the persons designated on the Client Registration Application to effect
transactions for the organization.
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem Institutional Class and Administrative Class shares
in any account for their then-current value (which will be promptly paid to the
investor) if at any time, due to redemption by the investor, the shares in the
account do not have a value of at least $100,000. A shareholder will receive
advance notice of a mandatory redemption and will be given at least 30 days to
bring the value of its account up to at least $100,000. This mandatory
redemption policy does not apply to participants in PIMCO Advisors Portfolio
Strategies, a managed product sponsored by PIMCO Advisors.
The Trust agrees to redeem shares of the Fund solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-days period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust reserves the right to pay any redemption proceeds
exceeding this amount in whole or in part by a distribution in kind of
securities held by the Fund in lieu of cash. It is highly unlikely that shares
would ever be redeemed in kind. When shares are redeemed in kind, the redeeming
shareholder should expect to incur transaction costs upon the disposition of the
securities received in the distribution.
Exchange Privilege
Shares of the Fund may be exchanged for shares of the same class of any
other series of the Trust based on the respective net asset values of the shares
involved. An exchange may be made by following the redemption procedure
described above under "Redemptions by Mail" or, if the telephone redemption
option has been elected, by calling the Trust at 1-800-927-4648. Shares of the
Fund may also be exchanged for shares of the same class of a series of PIMCO
Funds: Pacific Investment Management Series, an affiliated mutual fund family
composed primarily of fixed income portfolios managed by Pacific Investment
Management. Shareholders interested in such an exchange may request a
prospectus for these other series by contacting PIMCO Funds: Pacific Investment
Management Series at the same address and telephone number as the Trust.
Exchanges may be made only with respect to other eligible series that are
registered in the state of residence of the investor or where an exemption from
registration is available. An exchange order is treated the same for tax
purposes as a redemption followed by a purchase and may result in a capital gain
or loss, and special rules may apply in computing tax basis when determining
gain or loss. See "Taxation" in the Statement of Additional Information.
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 Trust
or the Fund. Currently, the Trust limits the number of "round trip" exchanges
an investor may make. An investor makes a "round trip" exchange when the
investor purchases shares of the Fund, subsequently exchanges those shares for
shares of a different series, and then exchanges back into the Fund. The Trust
has the right to refuse any exchange for any investor who completes (by making
the exchange back into the shares of the Fund) more than six round trip
exchanges in any twelve-month period. Although the Trust will attempt to give
shareholders prior notice whenever it is reasonably able to do so, it may impose
additional restrictions on exchanges at any time.
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PORTFOLIO TRANSACTIONS
Pursuant to the portfolio management agreement, the Sub-Adviser places
orders for the purchase and sale of portfolio investments for the Fund's
accounts with brokers or dealers selected by it in its discretion. In effecting
purchases and sales of portfolio securities for the account of the Fund, the
Sub-Advisers will seek the best price and execution of the Fund's orders. In
doing so, the Fund may pay higher commission rates than the lowest available
when the Sub-Adviser 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 Sub-Adviser also may consider sales of shares of the Fund as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Trust.
Some securities considered for investment by the Fund may also be
appropriate for other clients served by the Adviser or the Sub-Adviser. If a
purchase or sale of securities consistent with the investment policies of the
Fund and one or more of these clients 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 Adviser or Sub-Adviser. The Sub-
Adviser may aggregate orders for the Fund with simultaneous transactions entered
into on behalf of its other clients so long as price and transaction expenses
are averaged either for the portfolio transaction or for that day.
A change in the securities held by the Fund is known as "portfolio
turnover." The Sub-Adviser manages the Fund without regard generally to
restrictions on portfolio turnover, except those imposed on their ability to
engage in short-term trading by provisions of the federal tax laws. High
portfolio turnover (e.g., over 100%) involves correspondingly greater expenses
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestment in other
securities. Such sales may result in realization of taxable capital gains
(including short-term capital gains which are generally taxed to shareholders at
ordinary income tax rates). See "Dividends, Distributions and Taxes." It is
estimated that the annual portfolio turnover rate for the Fund will be
approximately 70%.
NET ASSET VALUE
The net asset values of Institutional and Administrative Class shares of
the Fund will be determined once on each day on which the Exchange is open (a
"Business Day"), as of the close of regular trading (normally 4:00 p.m., Eastern
time) on the Exchange. Net asset value will not be determined on days which the
Exchange is closed.
Portfolio securities and other assets for which market quotations are
readily available are stated at market value. Fixed income securities 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. 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. 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. All other securities and assets are valued at their fair
value as determined in good faith by the Trustees or by persons acting at their
direction.
The Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that class's distribution and/or servicing
fees and any other expenses specially allocated to that class are then deducted
from the class's proportionate interest in the Fund's assets, and the resulting
amount for each class is
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divided by the number of shares of that class outstanding to produce the class's
"net asset value" per share. Under certain circumstances, the per share net
asset value of the Administrative Class shares of the Fund may be lower than the
per share net asset value of the Institutional Class shares as a result of the
daily expense accruals of the service and/or distribution fees applicable to the
Administrative Class shares. To the extent that the Fund pays income dividends,
those dividends are expected to differ over time by approximately the amount of
the expense accrual differential between the Fund's classes.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Shares begin earning dividends on the effective date of purchase, provided
notification deadlines are met. See "Purchase of Shares." Net investment income
from interest and dividends, if any, will be declared and paid at least annually
to shareholders of record by the Fund. Any net capital gains from the sale of
portfolio securities will be distributed no less frequently than once annually.
Net short-term capital gains may be paid more frequently. Dividend and capital
gain distributions of the Fund will be reinvested in additional shares of the
Fund unless the shareholder elects to have them paid in cash. Dividends from
net investment income with respect to Administrative Class shares will be lower
than those paid with respect to Institutional Class shares, reflecting the
payment of service and/or distribution fees by that class.
The 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 (the "Code"). As such, the 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, the Fund intends to
distribute each year substantially all of its net income and gains.
Shareholders subject to U.S. federal income tax will be subject to tax on
dividends received from the Fund, regardless of whether received in cash or
reinvested in additional shares. Distributions received by tax-exempt
shareholders generally will not be subject to federal income tax to the extent
permitted under applicable tax law. All shareholders must treat dividends, other
than capital gain dividends, exempt-interest dividends, if any, and dividends
that represent a return of capital to shareholders, as ordinary income. In
particular, distributions derived from short-term gains will be treated as
ordinary income. Dividends, if any, derived from interest on certain U.S.
Government securities may be exempt from state and local taxes, although
interest on mortgage-backed U.S. Government securities is generally not so
exempt.
Dividends designated by the Fund as capital gain dividends derived from the
Fund's net capital gains (that is, the excess of its net long-term capital gains
over its net short-term capital losses) are taxable to shareholders as long-term
capital gain (generally subject to a 20% tax rate for shareholders who are
individuals) except as provided by an applicable tax exemption. Any
distributions that are not from the 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. The Fund
will advise shareholders annually of the amount and nature of the dividends paid
to them.
Taxable shareholders should note that the timing of their investment or
redemptions could have undesirable tax consequences. Dividends and
distributions on the Fund's shares are generally subject to federal income tax
as described herein to the extent they do not exceed the Fund's realized income
and gains, even though such dividends and distributions may economically
represent a return of a particular shareholder's investment. Such distributions
are likely to occur in respect of shares purchased at a time when the Fund's net
asset value reflects gains that are either unrealized or realized but not
distributed. Such realized gains may be required to be distributed even when
the Fund's net asset value also reflects unrealized losses.
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<PAGE>
As discussed above under "Characteristics and Risks of Securities and
Investment Techniques--Investment in Investment Companies," the Fund may invest
in the securities of other investment companies. Investments in other
investment companies may increase the amount of taxes payable by shareholders of
the Fund. For more information on the tax consequences of such investments, see
"Taxation" in the Statement of Additional Information.
The preceding discussion relates only to federal income tax; the
consequences under other tax laws may differ. Shareholders should consult their
tax advisers as to the possible application of foreign, state and local income
tax laws to Fund dividends and capital gain distributions. 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, and currently consists of twenty-seven portfolios that are operational,
one of which are described in this Prospectus. Other portfolios may be offered
by means of a separate prospectus. The Board of Trustees may establish
additional portfolios in the future. The capitalization of the Trust consists of
an unlimited number of shares of beneficial interest. When issued, shares of
the Trust are fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances,
be held liable for the obligations of the Trust. However, the Second Amended
and Restated Agreement and Declaration of Trust (the "Declaration of Trust") of
the Trust disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees.
The Declaration of Trust also provides for indemnification out of the Fund's
property for all loss and expense of any shareholder of the Fund held liable on
account of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which such disclaimer is inoperative or the fund is unable to
meet its obligations, and thus should be considered remote.
Multiple Classes of Shares
Institutional Class and Administrative Class shares of the Fund represent
interests in the assets of the Fund, and each class has identical dividend,
liquidation and other rights and the same terms and conditions, except that
expenses related to the distribution and/or shareholder servicing of
Administrative Class shares are borne solely by such class, and each class may,
at the Trustees' discretion, also pay a different share of other expenses, not
including advisory or custodial fees or other expenses related to the management
of the Fund'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 the other classes. All other expenses are allocated
to each class on the basis of the net asset value of that class in relation to
the net asset value of the Fund.
Voting
Each class of shares of the Fund has identical voting rights, except that
each class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. The Administrative Class shares
have exclusive voting rights with respect to matters pertaining to any
Distribution Plan applicable to that class. These shares are entitled to vote
at meetings of shareholders. Matters submitted to shareholder vote must be
approved by the Fund separately except (i) when required by the 1940 Act, shares
shall be voted together with other series at the Trust, and (ii) when the
Trustees have determined that the
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<PAGE>
matter does not affect all Series, then only shareholders of the Series affected
shall be entitled to vote on the matter. All classes of shares of the Fund will
vote together, except with respect to a Distribution Plan or agreement
applicable to a class of shares or when a class vote is required as specified
above or otherwise by the 1940 Act. Shares are freely transferable, are entitled
to dividends as declared by the Trustees and, in liquidation of the Trust, are
entitled to receive the net assets of their Series, but not of the other Series.
The Trust does not generally hold annual meetings of shareholders and will do so
only when required by law. Shareholders may remove Trustees from office by votes
cast in person or by proxy at a meeting of shareholders or by written consent.
Such a meeting will be called at the written request of the holders of 10% of
the Trust's outstanding shares.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of
a majority of the outstanding shares" of the Fund (or the Trust) means the vote
of the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting, if the holders of more than 50% of the outstanding shares are present
in person or by proxy; or (2) more than 50% of the outstanding shares of the
Fund (or the Trust).
Performance Information
From time to time the Trust may make available certain information about
the performance of the Institutional Class and Administrative Class shares of
the Fund. Information about the Fund's performance is based on the Fund's
record to a recent date and is not intended to indicate future performance.
Performance information is computed separately for the Fund's Institutional
Class and Administrative Class shares in accordance with the formulas described
below. Because Administrative Class shares bear the expense of service and/or
distribution fees, it is expected that, under normal circumstances, the level of
performance of the Fund's Administrative Class shares will be lower than that of
the Fund's Institutional Class shares.
The total return of Institutional Class and Administrative Class shares of
the Fund may be included in advertisements or other written material. When the
Fund's total return is advertised with respect to its Institutional Class and
Administrative Class shares, it will be calculated for the past year, the past
five years, and the past ten years (or if the Fund has been offered for a period
shorter than one, five or ten years, that period will be substituted) since the
establishment of the Fund, as more fully described in the Statement of
Additional Information.
Total return for each class is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the redemption
value of the investment in the Fund at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions at net asset
value). Total return may be advertised using alternative methods that reflect
all elements of return, but that may be adjusted to reflect the cumulative
impact of alternative fee and expense structures.
The Fund may also provide current distribution information to their
shareholders in shareholder reports or other shareholder communications, or in
certain types of sales literature provided to prospective investors. Current
distribution information for a particular class of the 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. Current distribution rates differ from
standardized yield rates in that they represent what a class of the 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.
The Adviser and Sub-Adviser may also report to shareholders or to the
public in advertisements concerning its performance as adviser to clients other
than the Fund, and on its comparative performance or standing 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 Fund, the Adviser, or the Sub-Adviser,
should be considered in light of the Fund's investment objectives and policies,
characteristics and
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<PAGE>
quality of the Fund, 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.
Investment results of the Fund will fluctuate over time, and any
representation of the Fund's total return for any prior period should not be
considered as a representation of what an investor's total return may be in any
future period.
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<PAGE>
-----------------------------------------------------
PIMCO Funds: INVESTMENT ADVISER AND ADMINISTRATOR
Multi-Manager Series PIMCO Advisors L.P., 800 Newport Center Drive,
Newport Beach, CA 92660
-----------------------------------------------------
CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania,
Kansas City, MO 64105
-----------------------------------------------------
TRANSFER AGENT
National Financial Data Services, 330 West 9th St.,
4th Floor, Kansas City, MO 64105
-----------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway,
Kansas City, MO 64105
-----------------------------------------------------
LEGAL COUNSEL
Ropes & Gray, One International Place,
Boston, MA 02110
-----------------------------------------------------
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<PAGE>
<TABLE>
<S> <C> <C>
For More Information Statement of Additional Information about the Trust
Information (SAI). The SAI (including the SAI) can be
The following documents are or contains additional information reviewed and copied at the
will be available that offer about the Fund. A current SAI Securities and Exchange
further information on the Fund has been filed with the Commission's Public Reference
and other series of PIMCO Securities and Exchange Room in Washington, D.C.
Funds: Multi-Manager Series. Commission, and is Information on the operation of
incorporated into this prospectus the public reference room may
Annual/Semi-Annual Reports by reference. be obtained by calling the
to Shareholders. The Trust's Commission at 1-800-SEC-
annual and semi-annual reports To request a free copy of these 0330. Reports and other
include a discussion of the documents or to make inquiries information about the Trust are
market conditions and about the Fund or other series of available on the Commission's
investment strategies that the Trust, please write or call: Internet site at www.sec.gov,
significantly affected the and copies of that information
performance of its series during PIMCO Funds: may be obtained, upon payment
the last fiscal year or other Multi-Manager Series of a duplicating fee, by writing
period. Because the Fund is a 840 Newport Center Drive the Public Reference Section of
new series, it is not included in Suite 300 the Commission, Washington,
the most recent reports. Newport Beach, CA 92660 D.C. 20549-6009.
Telephone:
1-800-927-4648
1-800-987-4626 (PIMCO
Infolink Audio Response
Network)
</TABLE>
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<PAGE>
PIMCO Funds:
Multi-Manager Series
PIMCO Mega-Cap Fund
STATEMENT OF ADDITIONAL INFORMATION
Institutional and Administrative Class Shares
______________, 1999
PIMCO Funds: Multi-Manager Series (the "Trust"), formerly PIMCO Funds:
Equity Advisors Series, PIMCO Advisors Institutional Funds, PFAMCo Funds, and
PFAMCo Fund, is an open-end management investment company ("mutual fund")
currently consisting of twenty-seven separate diversified investment series.
This Statement of Additional Information relates to PIMCO Mega-Cap Fund, a
separate series of the Trust.
The Fund's investment adviser is PIMCO Advisors L.P. ("PIMCO Advisors" or
the "Adviser"), 800 Newport Center Drive, Newport Beach, California 92660.
The Fund currently offers Institutional and Administrative Class shares
through a prospectus dated ________, 1999 (the "Prospectus"). This Statement of
Additional Information is not a Prospectus, and should be used in conjunction
with the Prospectus for the Fund, as supplemented from time to time A copy of
the Prospectus may be obtained free of charge at the address and telephone
number(s) listed below.
PIMCO Funds
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Telephone: 1-800-927-4648
1-800-987-4626 (PIMCO Infolink Audio
Response Network)
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
INVESTMENT OBJECTIVES AND POLICIES....................................... 1
U.S. Government Securities.......................................... 1
Borrowing........................................................... 1
Preferred Stock..................................................... 2
Corporate Debt Securities........................................... 2
Participation on Creditors Committees............................... 2
Variable and Floating Rate Securities............................... 3
Foreign Securities.................................................. 3
Bank Obligations.................................................... 3
Commercial Paper.................................................... 4
When-Issued, Delayed Delivery and Forward Commitment Transactions... 4
Warrants to Purchase Securities..................................... 5
Repurchase Agreements............................................... 5
Securities Loans.................................................... 5
INVESTMENT RESTRICTIONS.................................................. 6
Fundamental Investment Restrictions................................. 6
Non-Fundamental Investment Restrictions............................. 7
MANAGEMENT OF THE FUND................................................... 8
Trustees and Officers............................................... 8
Trustees' Compensation.............................................. 12
Investment Adviser.................................................. 13
Portfolio Management Agreement...................................... 14
Fund Administrator.................................................. 15
DISTRIBUTION OF FUND SHARES.............................................. 16
Distributor and Multi-Class Plan.................................... 16
Distribution and Administrative Services Plans for
Administrative Class Shares......................................... 16
Purchases, Exchanges and Redemptions................................ 18
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................... 19
Investment Decisions................................................ 19
Brokerage and Research Services..................................... 19
Portfolio Turnover.................................................. 20
NET ASSET VALUE.......................................................... 21
TAXATION................................................................. 21
Distributions....................................................... 21
Sales of Shares..................................................... 22
Backup Withholding.................................................. 22
Original Issue Discount............................................. 23
Other Taxation...................................................... 23
OTHER INFORMATION........................................................ 24
Capitalization...................................................... 24
Performance Information............................................. 24
Year 2000 Readiness Disclosure...................................... 30
Compliance Efforts Related to the Euro.............................. 31
Voting Rights....................................................... 31
Certain Ownership of Trust Shares................................... 31
Custodian........................................................... 31
Independent Accountants............................................. 32
Registration Statement.............................................. 32
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of the Fund are
described in the Prospectus. Additional information concerning the
characteristics of certain of the Fund's investments are set forth below.
U.S. Government Securities
U.S. Government securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. The U.S. Government does not
guarantee the net asset value of the Fund's shares. Some U.S. Government
securities, such as Treasury bills, notes and bonds, and securities guaranteed
by the Government National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the United States; others, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as those of the Federal National Mortgage
Association ("FNMA"), are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as those
of the Student Loan Marketing Association, are supported only by the credit of
the instrumentality. U.S. Govern ment securities include securities that have
no coupons, or have been stripped of their unmatured interest coupons,
individual interest coupons from such securities that trade separately, and
evidences of receipt of such securities. Such securities may pay no cash income,
and are purchased at a deep discount from their value at maturity. Because
interest on zero coupon securities is not distributed on a current basis but is,
in effect, compounded, zero coupon securities tend to be subject to greater
market risk than interest-paying securities of similar maturities. Custodial
receipts issued in connection with so-called trademark zero coupon securities,
such as CATs and TIGRs, are not issued by the U.S. Treasury, and are therefore
not U.S. Government securities, although the underlying bond represented by such
receipt is a debt obligation of the U.S. Treasury. Other zero coupon Treasury
securities (e.g., STRIPs and CUBEs) are direct obligations of the U.S.
Government.
Borrowing
Subject to the limitations described under "Investment Restrictions" below,
the Fund may be permitted to borrow for temporary purposes and/or for investment
purposes. Such a practice will result in leveraging of the Fund's assets and
may cause the Fund to liquidate portfolio positions when it would not be
advantageous to do so. This borrowing may be unsecured. Provisions of the
Investment Company Act of 1940, as amended ("1940 Act"), require the Fund to
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed, with
an exception for borrowings not in excess of 5% of the Fund's total assets made
for temporary administrative purposes. As noted under "Investment
Restrictions," the Fund is subject to limitations on borrowings which are more
strict than those imposed by the 1940 Act. Any borrowings for temporary
administrative purposes in excess of 5% of the Fund's total assets must maintain
continuous asset coverage. If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, the Fund may be required to sell
some of its portfolio holdings within three days to reduce the debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Borrowing will tend to
exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed will be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased. The Fund also may be required to maintain minimum average
balances in connection with such borrowing or to pay a commitment or other fee
to maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate.
In addition to borrowing for temporary purposes, the Fund may enter into
reverse repurchase agreements if permitted to do so under its investment
restrictions. A reverse repurchase agreement involves the sale of a portfolio-
eligible security by the Fund, coupled with its agreement to repurchase the
instrument at a specified time and price. The Fund will segregate assets
determined to be liquid by the Adviser or Cadence Capital Management, the Fund's
sub-adviser (the "Sub-Adviser") in accordance with procedures established by the
Board of Trustees and equal (on a daily mark-to-market basis) to its obligations
under reverse repurchase agreements with broker-dealers (but not banks).
However, reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. Reverse
repurchase agreements will be subject to the Fund's limitations on borrowings as
specified under "Investment Restrictions" below.
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<PAGE>
Preferred Stock
The Fund may invest in preferred stock. Preferred stock is a form of
equity ownership in a corporation. The dividend on a preferred stock is a fixed
payment which the corporation is not legally bound to pay. Certain classes of
preferred stock are convertible, meaning the preferred stock is convertible into
shares of common stock of the issuer. By holding convertible preferred stock,
the Fund can receive a steady stream of dividends and still have the option to
convert the preferred stock to common stock.
Corporate Debt Securities
The Fund may invest in short-term corporate debt securities. The
investment return of corporate debt securities reflects interest earnings and
changes in the market value of the security. The market value of a corporate
debt obligation may be expected to rise and fall inversely with interest rates
generally. There also exists the risk that the issuers of the securities may not
be able to meet their obligations on interest or principal payments at the time
called for by an instrument.
The Fund's investments in U.S. dollar or foreign currency-denominated
corporate debt securities of domestic or foreign issuers are limited to
corporate debt securities (corporate bonds, debentures, notes and other similar
corporate debt instruments, including convertible securities) which meet the
minimum ratings criteria set forth for the Fund, or, if unrated, are deemed to
be comparable in quality to corporate debt securities in which the Fund may
invest. The rate of return or return of principal on some debt obligations may
be linked or indexed to the level of exchange rates between the U.S. dollar and
a foreign currency or currencies.
Among the corporate debt securities in which the Fund may invest are
convertible securities. A convertible debt security is a bond, debenture, note,
or other security that entitles the holder to acquire common stock or other
equity securities of the same or a different issuer. A convertible security
generally entitles the holder to receive interest paid or accrued until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to non-
convertible debt securities. Convertible securities rank senior to common stock
in a corporation's capital structure and, therefore, generally entail less risk
than the corporation's common stock.
A convertible security may be subject to redemption at the option of the
issuer at a predetermined price. If a convertible security held by the Fund is
called for redemption, the Fund would be required to permit the issuer to redeem
the security and convert it to underlying common stock, or would sell the
convertible security to a third party.
Participation on Creditors Committees
The Fund may from time to time participate on committees formed by
creditors to negotiate with the management of financially troubled issuers of
securities held by the Fund. Such participation may subject the Fund to
expenses such as legal fees and may make the Fund an "insider" of the issuer for
purposes of the federal securities laws, and therefore may restrict the Fund's
ability to trade in or acquire additional positions in a particular security
when it might otherwise desire to do so. Participation by the Fund on such
committees also may expose the Fund to potential liabilities under the federal
bankruptcy laws or other laws governing the rights of creditors and debtors. The
Fund would participate on such committees only when the Adviser and the Sub-
Adviser believe that such participation is necessary or desirable to enforce the
Fund's rights as a creditor or to protect the value of securities held by the
Fund.
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<PAGE>
Variable and Floating Rate Securities
Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be event
based, such as based on a change in the prime rate.
The Fund may invest in floating rate debt instruments ("floaters"). The
interest rate on a floater is a variable rate which is tied to another interest
rate, such as a money-market index or U.S. Treasury bill rate. The interest
rate on a floater resets periodically, typically every six months. Because of
the interest rate reset feature, floaters provide the Fund with a certain degree
of protection against rises in interest rates, but generally do not allow the
Fund to participate fully in appreciation resulting from any general decline in
interest rates.
Foreign Securities
The Fund may invest in American Depository Receipts ("ADRs"). ADRs are
dollar-denominated receipts issued generally by domestic banks and represent the
deposit with the bank of a security of a foreign issuer. ADRs may be issued as
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities trade in the form of ADRs. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include: differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of 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), political instability which can
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. In addition, 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. Changes in foreign exchange
rates will affect the value of those securities which are denominated or quoted
in currencies other than the U.S. dollar.
The risks of investing in foreign securities are particularly high when
securities of issuers based in developing (or "emerging market") countries are
involved. Investing in emerging market countries involves certain risks not
typically associated with investing in U.S. securities, and imposes risks
greater than, or in addition to, risks of investing in foreign, developed
countries. These risks include: greater risks of nationalization or
expropriation of assets or confiscatory taxation; currency devaluations and
other currency exchange rate fluctuations; greater social, economic and
political uncertainty and instability (including the risk of war); more
substantial government involvement in the economy; higher rates of inflation;
less government supervision and regulation of the securities markets and
participants in those markets; controls on foreign investment and limitations on
repatriation of invested capital and on the Fund's ability to exchange local
currencies for U.S. dollars; unavailability of currency hedging techniques in
certain emerging market countries; the fact that companies in emerging market
countries may be smaller, less seasoned and newly organized companies; the
difference in, or lack of, auditing and financial reporting standards, which may
result in unavailability of material information about issuers; the risk that it
may be more difficult to obtain and/or enforce a judgment in a court outside the
United States; and greater price volatility, substantially less liquidity and
significantly smaller market capitalization of securities markets.
Bank Obligations
Bank obligations in which the Fund may invest include certificates of
deposit, bankers' acceptances, and fixed time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a commercial
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<PAGE>
bank for a definite period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. The Fund will not invest
in fixed time deposits which (1) are not subject to prepayment or (2) provide
for withdrawal penalties upon prepayment (other than overnight deposits) if, in
the aggregate, more than 15% of its net assets (taken at market value at the
time of investment) would be invested in such deposits, repurchase agreements
maturing in more than seven days and other illiquid assets. The Fund may also
hold funds on deposit with its sub-custodian bank in an interest-bearing account
for temporary purposes.
The Fund limits its investments in United States bank obligations to
obligations of United States banks (including foreign branches) which have more
than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the Federal Deposit Insurance Corporation. The
Fund also may invest in certificates of deposit of savings and loan associations
(federally or state chartered and federally insured) having total assets in
excess of $1 billion.
Commercial Paper
The Fund may invest in commercial paper. Commercial paper represents short-
term unsecured promissory notes issued in bearer form by banks or bank holding
companies, corporations and finance companies. The commercial paper purchased
by the Fund consists of U.S. dollar-denominated obligations of domestic issuers
which, at the time of investment, are (i) rated "P-1" or "P-2" by Moody's or "A-
1" or "A-2" or better by S&P, (ii) issued or guaranteed as to principal and
interest by issuers or guarantors having an existing debt security rating of "A"
or better by Moody's or "A" or better by S&P, or (iii) securities which, if not
rated, are, in the opinion of the Sub-Adviser, of an investment quality
comparable to rated commercial paper in which the Fund may invest. The rate of
return on commercial paper may be linked or indexed to the level of exchange
rates between the U.S. dollar and a foreign currency or currencies.
When-Issued, Delayed Delivery and Forward Commitment Transactions
The Fund may purchase or sell securities on a when-issued or delayed
delivery basis. These transactions involve a commitment by the Fund to purchase
or sell securities for a predetermined price or yield, with payment and delivery
taking place more than seven days in the future, or after a period longer than
the customary settlement period for that type of security. When delayed
delivery purchases are outstanding, the Fund will segregate until the settlement
date assets determined to be liquid by the Adviser or the Sub-Adviser in
accordance with procedures established by the Board of Trustees in an amount
sufficient to meet the purchase price. Typically, no income accrues on
securities purchased on a delayed delivery basis prior to the time delivery of
the securities is made, although the Fund may earn income on segregated
securities. When purchasing a security on a delayed delivery basis, the Fund
assumes the rights and risks of ownership of the security, including the risk of
price and yield fluctuations, and takes such fluctuations into account when
determining its net asset value. Because the Fund is not required to pay for
the security until the delivery date, these risks are in addition to the risks
associated with the Fund's other investments. If the Fund remains substantially
fully invested at a time when delayed delivery purchases are outstanding, the
delayed delivery purchases may result in a form of leverage. When the Fund has
sold a security on a delayed delivery basis, the Fund does not participate in
future gains or losses with respect to the security. If the other party to a
delayed delivery transaction fails to deliver or pay for the securities, the
Fund could miss a favorable price or yield opportunity or could suffer a loss.
The Fund may dispose of or renegotiate a delayed delivery transaction after it
is entered into, and may sell when-issued securities before they are delivered,
which may result in a capital gain or loss. There is no percentage limitation
on the extent to which the Fund may purchase or sell securities on a delayed
delivery basis.
-4-
<PAGE>
The Fund may make contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments") if the Fund
either (i) segregates until the settlement date assets determined to be liquid
by the Adviser or the Sub-Adviser in accordance with procedures established by
the Board of Trustees in an amount sufficient to meet the purchase price or (ii)
enters into an offsetting contract for the forward sale of securities of equal
value that it owns. Forward commitments may be considered securities in
themselves. They involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. The Fund may dispose
of a commitment prior to settlement and may realize short-term profits or losses
upon such disposition.
Warrants to Purchase Securities
The Fund may invest in warrants to purchase securities. Bonds with
warrants attached to purchase equity securities have many characteristics of
convertible bonds and their prices may, to some degree, reflect the performance
of the underlying stock. Bonds also may be issued with warrants attached to
purchase additional fixed income securities at the same coupon rate. A decline
in interest rates would permit the Fund to buy additional bonds at the favorable
rate or to sell the warrants at a profit. If interest rates rise, the warrants
would generally expire with no value.
Repurchase Agreements
The Fund may enter into repurchase agreements with domestic commercial
banks or registered broker/dealers. A repurchase agreement is a contract under
which the Fund would acquire a security for a relatively short period (usually
not more than one week) subject to the obligation of the seller to repurchase
and the Fund to resell such security at a fixed time and price (representing the
Fund's cost plus interest). In the case of repurchase agreements with broker-
dealers, the value of the underlying securities (or collateral) will be at least
equal at all times to the total amount of the repurchase obligation, including
the interest factor. The Fund bears a risk of loss in the event that the other
party to a repurchase agreement defaults on its obligations and the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities. The Sub-Adviser will monitor the creditworthiness of the counter
parties.
Securities Loans
Subject to certain conditions described in the Prospectus, the Fund may
make secured loans of its portfolio securities amounting to no more than 33% of
its total assets. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
However, such loans will be made only to broker-dealers that are believed by the
Adviser or the Sub-Adviser to be of relatively high credit standing. Securities
loans are made to broker-dealers pursuant to agreements requiring that loans be
continuously secured by collateral at least equal at all times to the market
value of the securities lent. The borrower pays to the lending Fund an amount
equal to any dividends or interest received on the securities lent. The Fund
may invest only the cash collateral received in interest-bearing, short-term
securities or receive a fee from the borrower. In the case of cash collateral,
the Fund typically pays a rebate to the lender. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The Fund may also call such loans in order
to sell the securities involved.
-5-
<PAGE>
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The investment restrictions set forth below are fundamental policies of the
Fund and may not be changed without shareholder approval by vote of a majority
of the outstanding shares of the Fund. Under the following restrictions, the
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 or swap agreements), except that the 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 the 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 the Prospectuses
and in this Statement of Additional Information (the deposit of assets in escrow
in connection with the writing of covered put and call options and the purchase
of securities on a when-issued or delayed delivery basis 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 the Fund's assets);
(8) issue senior securities, except insofar as the 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;
-6-
<PAGE>
(9) lend any funds or other assets, except that the 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 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.
Notwithstanding the provisions of fundamental investment restrictions (7)
and (8) above, the Fund may borrow money for temporary administrative purposes.
To the extent that borrowings for temporary administrative purposes exceed 5% of
the total assets of the Fund, such excess shall be subject to the 300% asset
coverage requirement of fundamental investment restriction (7).
The investment objective of the Fund is non-fundamental and may be changed
by the Trustees without shareholder approval.
Non-Fundamental Investment Restrictions
The Fund is also subject to the following non-fundamental restrictions and
policies (which may be changed without shareholder approval) and, unless
otherwise indicated, may not:
(1) invest in (a) securities which at the time of such investment are not
readily marketable, (b) securities the disposition of which is restricted under
federal securities laws, (c) repurchase agreements maturing in more than seven
days, (d) OTC options (to the extent described above under "Derivative
Instruments -- OTC Options"), and (e) IO/PO SMBS (as described above under
"Mortgage-Related and Asset-Backed Securities -- Stripped Mortgage -Backed
Securities") if, as a result, more than 15% of the Fund's net assets, taken at
current value, would then be invested in securities described in (a), (b), (c),
(d) and (e) above. For the purpose of this restriction, securities subject to a
7-day put option or convertible into readily saleable securities or commodities
are not included with subsections (a) or (b);
(2) purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities. (For this
purpose, the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.);
(3) make short sales of securities or maintain a short position for the
account of the Fund unless at all times when a short position is open the Fund
owns an equal amount of such securities or owns or has the right to acquire
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities of the same issue as, and equal in amount
to, the securities sold short;
(4) purchase or sell commodities or commodity contracts except that the
Fund may purchase and sell financial futures contracts and related options;
(5) purchase securities the disposition of which is restricted under the
federal securities laws (excluding for purposes of this restriction securities
offered and sold pursuant to Rule 144A of the 1933 Act and Section 4(2)
commercial paper) if, as a result, such investments would exceed 15% of the
value of the net assets of the Fund;
(6) write (sell) or purchase options except that the Fund may (a) write
covered call options or covered put options on securities that it is eligible to
purchase and enter into closing purchase transactions with respect to such
options, and (b) in combination therewith, or separately, purchase put and call
options on securities it is eligible to purchase, and (c) the Fund may engage in
options on securities indexes, options on foreign currencies, options on
-7-
<PAGE>
futures contracts, and options on other financial instruments or one or more
groups of instruments; provided that the premiums paid by the Fund on all
outstanding options it has purchased do not exceed 5% of its total assets. The
Fund may enter into closing sale transactions with respect to options it has
purchased;
(7) borrow money (excluding reverse repurchase agreements which are
subject to the Fund's fundamental borrowing restriction), except for temporary
administrative purposes.
Unless otherwise indicated, all limitations applicable to the Fund's
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
the Fund's assets invested in certain securities or other instruments resulting
from market fluctuations or other changes in the Fund's total assets will not
require the Fund to dispose of an investment until the Adviser or Sub-Adviser
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 Sub-
Adviser 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.
The phrase "shareholder approval," as used in the Prospectus, and the
phrase a "vote of a majority of the outstanding voting securities," as used
herein, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or the Trust, as the case may be, or (2) 67% or
more of the shares of the Fund or the Trust, as the case may be, present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
MANAGEMENT OF THE FUND
Trustees and Officers
The Trustees and officers of the Trust, their ages, and a description of
their principal occupations during the past five years are listed below. Except
as shown, each Trustee's and officer's principal occupation and business
experience for the last five years have been with the employer(s) indicated,
although in some cases the Trustee may have held different positions with such
employer(s). Unless otherwise indicated, the business address of the persons
listed below is 840 Newport Center Drive, Suite 300, Newport Beach, California
92660.
-8-
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s) During the
Name, Address and Age Trust Past Five Years
- -------------------------- -------------------- ----------------------------------
<S> <C> <C>
E. Philip Cannon Trustee Proprietor, Cannon & Company, an affiliate of
3838 Olympia Inverness Management LLC, a private equity
Houston, TX 77019 investment firm. Formerly, Headmaster, St. John's
Age 58 School, Houston, Texas, Trustee of PIMCO
Advisors Funds ("PAF") and Cash Accumulation
Trust ("CAT"), General Partner, J.B. Poindexter &
Co., Houston, Texas (private partnership), and
Partner, Iberia Petroleum Company (oil and gas
production). Mr. Cannon was a director of WNS
Inc., a retailing company which filed a petition in
bankruptcy within the last five years.
Donald P. Carter Trustee Formerly, Trustee of PAF and CAT, Chairman,
434 Stable Lane Executive Vice President and Director,
Lake Forest, IL 60045 Cunningham & Walsh, Inc., Chicago (advertising
Age 71 agency).
Gary A. Childress Trustee Private investor. Formerly, Chairman and Director,
11 Longview Terrace Bellefonte Lime Company, Inc. Mr. Childress is a
Madison, CT 06443 partner in GenLime, L.P., a private limited
Age 65 partnership, which has filed a petition in bankruptcy
within the last five years. Formerly, Trustee of
PAF and CAT.
William D. Cvengros* Trustee Chairman of the Board of the Trust; Chief
800 Newport Center Drive Executive Officer, President, and member of the
Newport Beach, CA 92660 Management Board, PIMCO Advisors; President
Age 50 and Chief Executive Officer, Value Advisors LLC;
Co-Chairman, The Emerging Markets Income
Fund, Inc., The Emerging Markets Income Fund
II, Inc., The Emerging Markets Floating Rate
Fund, Inc., Global Partners Income Fund, Inc.,
Municipal Partners Fund, Inc., and Municipal
Partners Fund II, Inc. Chairman and Director,
PIMCO Advisors Funds plc, PIMCO Global
Advisors (Ireland) Limited. Formerly, Trustee of
PAF and CAT, President of the Trust, Director,
Vice Chairman, and Chief Investment Officer,
Pacific Life Insurance Company ("Pacific Life")
and Director, PIMCO Funds Distribution Company
(currently, PIMCO Funds Distributors LLC).
Richard L. Nelson Trustee President, Nelson Financial Consultants; Director,
8 Cherry Hills Lane Wynn's International, Inc.; and Trustee, Pacific
Newport Beach, CA 92660 Select Fund. Formerly, Partner, Ernst & Young.
Age 69
Lyman W. Porter Trustee Professor of Management at the University of
2639 Bamboo Street California, Irvine; and Trustee, Pacific Select
Newport Beach, CA 92660 Fund.
Age 69
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s) During the
Name, Address and Age Trust Past Five Years
- -------------------------- -------------------- ----------------------------------
<S> <C> <C>
Alan Richards Trustee Retired Chairman of E.F. Hutton Insurance Group;
7381 Elegans Place Former Director of E.F. Hutton and Company,
Carlsbad, CA 92009 Inc.; Chairman of IBIS Capital, LLC; Director,
Age 69 Inspired Arts, Inc.; Former Director of Western
National Corporation.
Joel Segall Trustee Formerly, Trustee of PAF and CAT, President and
11 Linden Shores University Professor, Bernard M. Baruch College,
Branford, CT 06405 The City University of New York; Deputy Under
Age 76 Secretary for International Affairs, United States
Department of Labor; Professor of Finance,
University of Chicago; and Board of Managers,
Coffee, Sugar and Cocoa Exchange.
W. Bryant Stooks Trustee President, Bryant Investments, Ltd.; Director,
1530 E. Montebello American Agritec LLC; and Director, Valley Isle
Phoenix, AZ 85014 Excursions, Inc. Formerly, Trustee of PAF and
Age 58 CAT, President, Senior Vice President, Director
and Chief Executive Officer, Archirodon Group
Inc.; Partner, Arthur Andersen & Co.
Gerald M. Thorne Trustee Director, UPI Inc. and American Orthodontics
5 Leatherwood Lane Corp. Formerly, Trustee of PAF and CAT,
Savannah, GA 31414 Director, Kaytee, Inc., President and Director,
Age 60 Firstar National Bank of Milwaukee; Chairman,
President and Director, Firstar National Bank of
Sheboygan; Director, Bando-McGlocklin.
Stephen J. Treadway* Trustee, President Executive Vice President, PIMCO Advisors;
2187 Atlantic Street and Chief Executive Chairman and President, PIMCO Funds
Stamford, CT 06902 Officer Distributors LLC ("PFD"); Executive Vice
Age 51 President, Value Advisors LLC; Chairman,
Municipal Advantage Fund, Inc. and The Central
European Value Fund, Inc.; President, The
Emerging Markets Income Fund, Inc., The
Emerging Markets Income Fund II, Inc., The
Emerging Markets Floating Rate Fund, Inc., Global
Partners Income Fund, Inc., Municipal Partners
Fund, Inc. and Municipal Partners Fund II, Inc.
Formerly, Trustee, President and Chief Executive
Officer of CAT; Executive Vice President, Smith
Barney Inc.
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s) During the
Name, Address and Age Trust Past Five Years
- -------------------------- -------------------- ----------------------------------
<S> <C> <C>
R. Wesley Burns Executive Vice Trustee and President, PIMS; Managing Director,
Age 39 President Pacific Investment Management Company ("Pacific
Investment Management"); Trustee and President,
PIMCO Variable Insurance Trust ("PVIT");
Director and President, PIMCO Commercial
Mortgage Securities Trust, Inc. ("PCM"); Director,
PIMCO Advisors Funds plc; and Director, PIMCO
Global Advisors (Ireland) Limited. Formerly,
Executive Vice President, Pacific Investment
Management, PAF and CAT.
Newton B. Schott, Jr. Vice President and Executive Vice President, Chief Administrative
2187 Atlantic Street Secretary Officer, General Counsel and Secretary, PFD;
Stamford, CT 06902 Senior Vice President, Value Advisors LLC;
Age 56 Executive Vice President, The Emerging Markets
Income Fund, Inc., The Emerging Markets Income
Fund II, Inc., The Emerging Markets Floating Rate
Fund, Inc., The Central European Value Fund,
Inc., Global Partners Income Fund, Inc., Municipal
Advantage Fund, Inc., Municipal Partners Fund,
Inc. and Municipal Partners Fund II, Inc.
Formerly, Vice President and Clerk of PAF and
CAT, Senior Vice President-Legal and Secretary,
PIMCO Advisors; Executive Vice President,
Secretary and General Counsel, Thomson Advisory
Group and PIMCO Advisors.
Jeffrey M. Sargent Vice President Vice President and Manager Shareholder Services
Age 36 and Fund Administration, Pacific Investment
Management; Senior Vice President of PIMS;
Senior Vice President, PVIT; and Senior Vice
President, PCM.
Richard M. Weil Vice President General Counsel, PIMCO Advisors. Formerly,
Age 35 Vice President, Bankers Trust Company; Associate,
Simpson, Thatcher & Bartlett.
John P. Hardaway Treasurer Senior Vice President and Manager of Investment
Age 41 Operations Accounting, Pacific Investment
Management; Treasurer, PIMS, PVIT and PCM.
Formerly, Vice President, Pacific Investment
Management.
Joseph D. Hattesohl Assistant Vice President and Manager of Financial Reporting
Age 35 Treasurer and Taxes, Pacific Investment Management;
Assistant Treasurer, PIMS, PVIT and PCM.
Formerly, Director of Financial Reporting, Carl J.
Brown & Co.; Tax Manager, Price Waterhouse
LLP.
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s) During the
Name, Address and Age Trust Past Five Years
- -------------------------- -------------------- ----------------------------------
<S> <C> <C>
Garlin G. Flynn Assistant Secretary Specialist, Pacific Investment Management;
Age 53 Secretary, PIMS; Secretary, PVIT; and Secretary,
PCM. Formerly, Senior Fund Administrator,
Pacific Investment Management; Senior Mutual
Fund Analyst, PIMCO Advisors Institutional
Services.
</TABLE>
* Trustee is an "interested person" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act).
Trustees' Compensation
Trustees, other than those affiliated with PIMCO Advisors, the Sub-Adviser,
another affiliate of PIMCO Advisors, or Pacific Investment Management Company,
receive an annual retainer of $45,000, plus $2,000 for each Board of Trustees
meeting attended, and $500 for each Audit and Performance Committee meeting
attended, plus reimbursement of related expenses. Each Audit and Performance
Committee member receives an additional annual retainer of $1,000, the Chairman
of the Audit and Performance Committees receives an additional annual retainer
of $2,000, the Chairman of the Independent Trustees receives an additional
annual retainer of $6,000, and each Vice Chairman of the entire Board receives
an additional annual retainer of $3,000. Trustees do not currently receive any
pension or retirement benefits from the Trust or the Fund Complex (see below).
The Trust has adopted a deferred compensation plan for the Trustees, which went
into place during 1997, which permits the Trustees to defer their receipt of
compensation from the Trust, at their election, in accordance with the terms of
the plan.
-12-
<PAGE>
The following table sets forth information regarding compensation received
by those Trustees who are not "interested persons" (as defined in the 1940 Act)
of the Trust for the fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
(1) (2) (3)
Total
Aggregate Compensation
Compensation from from Trust and
Name of Trustee Trust Fund Complex/1/
- --------------------- ----------------- ---------------
<S> <C> <C>
E. Philip Cannon/2/ $51,600 $60,000
Donald P. Carter $58,425 $65,500
Gary A. Childress $51,600 $60,000
Gary L. Light/3/ $38,700 $45,500
Richard L. Nelson $51,275 $93,000
Lyman W. Porter/2/ $49,900 $90,500
Alan Richards $56,100 $98,500
Joel Segall/2/ $49,475 $57,500
W. Bryant Stooks $49,475 $56,500
Gerald M. Thorne/2/ $51,175 $59,500
</TABLE>
Investment Adviser
PIMCO Advisors serves as investment adviser to the Fund pursuant to an
investment advisory agreement ("Advisory Agreement") between PIMCO Advisors and
the Trust. PIMCO Advisors was organized as a limited partnership under Delaware
law in 1987. PIMCO Partners, G.P. ("PGP") and PIMCO Advisors Holdings L.P.
("PAH") are the general partners of PIMCO Advisors. PGP is a general
partnership between PIMCO Holding LLC ("PH LLC"), a Delaware limited liability
company and an indirect wholly-owned subsidiary of Pacific Life Insurance
Company, and PIMCO Partners LLC, a California limited liability company
controlled by the current Managing Directors and two former Managing Directors
of Pacific Investment Management Company (collectively, the "Managing
Directors"). PGP is the sole general partner of PAH. PGP and PAH have equal
right, power and authority to manage and control the business and affairs of
PIMCO Advisors and to take any action deemed necessary or desirable by them in
connection with the business of PIMCO Advisors.
/1/ The amounts listed in column (3) include total compensation paid to the
Trustees for their services as Trustees of the Trust (for all Trustees), CAT
(for all Trustees), and Pacific Select Fund (for Messrs. Nelson, Porter, and
Richards) for the twelve-month period ended June 30, 1998. By virtue of having
PIMCO Advisors or an affiliate of PIMCO Advisors as investment adviser, the
Trust, CAT and Pacific Select Fund were considered to be part of the same "Fund
Complex" for these purposes. As a result of a change in management of CAT on
December 12, 1997, no Trustee of the Trust is currently a Trustee of CAT and CAT
is no longer part of the same "Fund Complex" as the Trust.
/2/ The Trust has adopted a deferred compensation plan (the "Plan") which
went into place during fiscal 1997. Of the amounts listed in column (2), the
following Trustees elected to have the following amounts deferred from the Trust
and all investment companies in the Fund Complex, respectively: Cannon -
$51,600, $60,000; Porter - $49,900, $58,000; Segall - $26,650, $32,000; Thorne -
$51,175, $59,500.
/3/ Mr. Light retired as a Trustee of the Trust during the fiscal year ended
June 30, 1998.
-13-
<PAGE>
PGP and PAH have substantially delegated their management and control of
PIMCO Advisors to a Management Board. Pursuant to the terms of the delegation
of authority by PGP and PAH, the Management Board of PIMCO Advisors is composed
of (i) the Chief Executive Officer of PIMCO Advisors; (ii) six other persons
designated by PGP; (iii) three disinterested persons designated by
representatives of the Public General Partner or, if there is no Public General
Partner, PGP or its successor as general partner of PIMCO Advisors; (iv) the
Chief Executive Officer and one Managing Director of each of the two Investment
Managing Companies having the greatest total income, determined as of the date
of appointment; and (v) one Managing Director of each of two other Investment
Managing Companies designated from time to time by the Management Board upon the
recommendation of the Nominating Committee. PAH is a Public General Partner for
the purposes set forth above.
The Management Board has in turn delegated the authority to manage day-to-
day operations and policies to an Executive Committee. The Executive Committee
is composed of four members. The members of the Executive Committee are William
D. Cvengros, Brent R. Harris, Glenn S. Schafer and William S. Thompson, Jr.
PIMCO Advisors, PGP and PAH are located at 800 Newport Center Drive,
Newport Beach, California 92660. PIMCO Advisors and its subsidiary partnerships
had approximately $_______ billion of assets under management as of __________,
1999.
PIMCO Advisors, subject to the supervision of the Board of Trustees, is
responsible for providing advice and guidance with respect to the Fund and for
managing, either directly or through others selected by the Adviser, the
investment of the Fund. PIMCO Advisors retains its affiliate, Cadence Capital
Management ("Cadence"), to serve as the Fund's Sub-Adviser. PIMCO Advisors also
furnishes to the Board of Trustees periodic reports on the investment
performance of the Fund.
Under the terms of the Advisory Agreement, PIMCO Advisors is obligated to
manage the Fund in accordance with applicable laws and regulations. The
investment advisory services of PIMCO Advisors to the Trust are not exclusive
under the terms of the Advisory Agreement. PIMCO Advisors is free to, and does,
render investment advisory services to others.
The Advisory Agreement will continue in effect with respect to the Fund for
two years from its effective date, and thereafter on a yearly basis, provided
such continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund, or by the Board of Trustees, and (ii)
by a majority of the Trustees who are not "interested persons" of the Trust (as
defined in the 1940 Act) and who have no direct or indirect financial interest
in the Advisory Agreement. The Advisory Agreement may be terminated without
penalty by vote of the Trustees or the shareholders of the Trust, or by the
Adviser, on 60 days' written notice to the other party and will terminate
automatically in the event of its assignment.
The Adviser receives a monthly investment advisory fee from the Fund at the
following annual rate (based on the average daily net assets of the Fund):
<TABLE>
<CAPTION>
Fund Advisory
- ---- Fee Rate
--------
<S> <C>
Mega-Cap Fund........................................... .45%
</TABLE>
The Fund commences operations in ________, 1999 and has not paid advisory
fees to the Adviser for a full fiscal year.
Portfolio Management Agreement
Pursuant to a Portfolio Management Agreement between the Adviser and
Cadence, Cadence provides investment advisory services to the Fund. For the
services provided, the Adviser (not the Trust) pays Cadence a monthly fee at the
annual rate of .35% based on the average daily net assets of the Fund.
-14-
<PAGE>
Cadence is an investment management firm organized as a general
partnership. Cadence is the successor investment adviser to Cadence Capital
Management Corporation, a wholly-owned subsidiary of PFAMCo. Cadence has two
partners: PIMCO Advisors as the supervisory partner, and Cadence Capital
Management Inc. as the managing partner. The predecessor investment adviser to
Cadence commenced operations in 1988. Cadence is located at Exchange Place, 53
State Street, Boston, Massachusetts 02109. Cadence provides investment
management services to a number of institutional accounts, including employee
benefit plans, college endowment funds and foundations. Accounts managed by
Cadence had combined assets, as of ________, 1999, of approximately $________
billion.
The Fund commenced operations in ________, 1999 and the Sub-Adviser has not
received fees with respect to the Fund for a full fiscal year.
Fund Administrator
In addition to its services as Adviser, PIMCO Advisors serves as
administrator (and is referred to in this capacity as the "Administrator") to
the Fund pursuant to an administration agreement (the "Administration
Agreement") with the Trust. The Administrator provides or procures
administrative services to the Fund, which include clerical help and accounting,
bookkeeping, internal audit services and certain other services it requires and
preparation of reports to the Fund's shareholders and regulatory filings. PIMCO
Advisors has retained Pacific Investment Management Company ("Pacific Investment
Management") as sub-administrator to provide such services pursuant to a sub-
administration agreement (the "Sub-Administration Agreement"). PIMCO Advisors
may also retain other affiliates to provide such services. In addition, the
Administrator arranges at its own expense for the provision of legal, audit,
custody, transfer agency and other services necessary for the ordinary operation
of the Fund, and is responsible for the costs of registration of the Fund's
shares and the printing of prospectuses and shareholder reports for current
shareholders. Under the Administration Agreement, the Administrator has agreed
to provide or procure these services, and to bear these expenses, at the annual
rate of .25% based on the Fund's average daily net assets attributable in the
aggregate to its Institutional Class and Administrative Class shares.
Except for the expenses paid by the Administrator, the Trust bears all
costs of its operations. 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, Pacific Investment Management, or their subsidiaries or affiliates;
(ii) taxes and governmental fees; (iii) brokerage fees and commissions and other
portfolio transaction expenses; (iv) costs of borrowing money, including
interest expenses; (v) fees and expenses of the Trustees who are not "interested
persons" of PIMCO Advisors, the Sub-Adviser or another affiliate of PIMCO
Advisors, 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 principals; and (viii) any expenses allocated or allocable
to a specific class of shares ("Class-specific expenses").
Class-specific expenses include distribution and/or service fees payable
with respect to Administrative Class shares and administrative fees as described
above, and may include certain other expenses as permitted by the Trust's
Amended and Restated Multi-Class Plan (the "Multi-Class Plan") adopted pursuant
to Rule 18f-3 under the 1940 Act, which is subject to review and approval by the
Trustees. It is not presently anticipated that any expenses other than
distribution and/or service fees and administrative fees will be allocated on a
class-specific basis.
The Administration Agreement may be terminated by the Trust on behalf of
the Fund at any time by vote of (1) a majority of the Trustees, or (2) a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to PIMCO Advisors.
After an initial two-year term, the Sub-Administration Agreement will
continue from year to year upon the approval of the parties thereto. The Sub-
Administration Agreement may be terminated at any time by PIMCO Advisors or
Pacific Investment Management upon 60 days' written notice to the other party
and, with respect to the services rendered to the Fund, at any time by vote of a
majority of the disinterested Trustees of the Trust. The Sub-Administration
Agreement will also terminate upon termination of the Administration Agreement.
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The Fund recently commenced operations and did not pay any administrative
fees during the last fiscal year.
DISTRIBUTION OF FUND SHARES
Distributor and Multi-Class Plan
PIMCO Funds Distributors LLC (the "Distributor") serves as the distributor
of each class of the Fund's shares pursuant to a distribution contract (the
"Distribution Contract") with the Trust. The Distributor is a wholly-owned
subsidiary of PIMCO Advisors. The Distribution Contract is terminable with
respect to the Fund or a class of shares without penalty, at any time, by the
Fund or class by not more than 60 days' nor less than 30 days' written notice to
the Distributor, or by the Distributor upon not more than 60 days' nor less than
30 days' written notice to the Trust. The Distributor is not obligated to sell
any specific amount of Fund shares.
The Distribution Contract will continue in effect with respect to the Fund,
and each class of shares thereof, for successive one-year periods, provided that
each such continuance is specifically approved (i) by the vote of a majority of
the entire Board of Trustees or by the majority of the outstanding shares of the
Fund or class, and (ii) by a majority of the Trustees who are not interested
persons (as defined in the 1940 Act) of the Trust and who have no direct or
indirect interest financial interest in the Distribution Contract or the
Distribution Plan described below, by vote cast in person at a meeting called
for the purpose. If the Distribution Contract is terminated (or not renewed)
with respect to one or more series of the Trust or classes of shares, it may
continue in effect with respect to any series or class as to which it has not
been terminated (or has been renewed).
The Trust currently offers two classes of shares of the Fund:
Institutional Class and Administrative Class shares. Institutional Class shares
are offered primarily for direct investment by investors such as pension and
profit sharing plans, employee benefit trusts, endowments, foundations,
corporations, and high net worth individuals (Institutional Class shares may
also be offered through certain financial intermediaries that charge their
customers transaction or other fees with respect to the customers' investments
in the Fund). Administrative Class shares are offered primarily through
employee benefit plan alliances, broker-dealers, and other intermediaries, and
the Fund pays service or distribution fees to such entities for services they
provide to Administrative Class shareholders.
Under the Trust's Multi-Class Plan, shares of each class of the Fund
represent an equal pro rata interest in the Fund and, generally, have identical
voting, dividend, liquidation, and other rights preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except that:
(a) each class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements; and (d) each class has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class.
Distribution and Administrative Services Plans for Administrative Class Shares
The Trust has adopted an Administrative Services Plan with respect to the
Administrative Class shares of the Fund. The Trust also has adopted a
Distribution Plan (together with the Administrative Services Plan, the
"Administrative Plans") with respect to the Administrative Class shares of the
Fund.
Under the terms of the Administrative Distribution Plan, the Trust is
permitted to reimburse, out of the assets attributable to the Administrative
Class shares of the Fund, in an amount up to 0.25% on an annual basis of the
average daily net assets of that class, financial intermediaries for costs and
expenses incurred in connection with the distribution and marketing of
Administrative Class shares and/or the provision of certain shareholder services
to its customers that invest in Administrative Class shares of the Fund. Such
services may include, but are not limited to,
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the following: providing facilities to answer questions from prospective
investors about the Fund; receiving and answering correspondence, including
requests for prospectuses and statements of additional information; preparing,
printing and delivering prospectuses and shareholder reports to prospective
shareholders; complying with federal and state securities laws pertaining to the
sale of Administrative Class shares; and assisting investors in completing
application forms and selecting dividend and other account options.
Under the terms of the Administrative Services Plan, the Trust is permitted
to reimburse, out of the assets attributable to the Administrative Class shares
of the Fund, in an amount up to 0.25% on an annual basis of the average daily
net assets of that class, financial intermediaries that provide certain
administrative services for Administrative Class shareholders. Such services
may include, but are not limited to, the following: receiving, aggregating and
processing shareholder orders; furnishing shareholder sub-accounting; providing
and maintaining elective shareholder services such as check writing and wire
transfer services; providing and maintaining pre-authorized investment plans;
communicating periodically with shareholders; acting as the sole shareholder of
record and nominee for shareholders; maintaining accounting records for
shareholders; answering questions and handling correspondence from shareholders
about their accounts; and performing similar account administrative services.
The same entity may be the recipient of fees under both the Administrative
Distribution Plan and the Administrative Services Plan, but may not receive fees
under both plans with respect to the same assets.
Each Administrative Plan provides that it may not be amended to increase
materially the costs which Administrative Class shareholders may bear under the
Plan without the approval of a majority of the outstanding voting securities of
the Administrative Class, and by vote of a majority of both (i) the Trustees of
the Trust and (ii) those Trustees ("disinterested Administrative Plan Trustees")
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of the Plan
or any agreements related to it, cast in person at a meeting called for the
purpose of voting on the Plan and any related amendments.
Each Administrative Plan provides that it may not take effect until
approved by vote of a majority of both (i) the Trustees of the Trust and (ii)
the disinterested Administrative Plan Trustees. The Administrative Class
Distribution Plan further provides that it may not take effect unless approved
by the vote of a majority of the outstanding voting securities of the
Administrative Class.
Each Administrative Plan provides that it shall continue in effect so long
as such continuance is specifically approved at least annually by the Trustees
and the disinterested Administrative Plan Trustees. Each Administrative Plan
provides that any person authorized to direct the disposition of monies paid or
payable by a class pursuant to the Plan or any related agreement shall provide
to the Trustees, and the Board shall review at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made.
Each Administrative Plan provides that expenses payable under the Plan may
be carried forward for reimbursement for up to twelve months beyond the date in
which the expense is incurred, subject to the limit that not more than 0.25% of
the average daily net assets of Administrative Class shares may be used in any
month to pay expenses under the Plan. Each Administrative Plan requires that
Administrative Class shares incur no interest or carrying charges.
Rules of the NASD limit the amount of distribution fees that may be paid by
mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that some, if not
all, of the fees paid pursuant to both Administrative Plans will qualify as
"service fees" and therefore will not be limited by NASD rules.
The Fund recently commenced operations and did not make any payments under
the Administrative Plans during the last fiscal year.
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Purchases, Exchanges and Redemptions
Purchases, exchanges and redemptions of the Fund's shares are discussed in
the Prospectus under the headings "Purchase of Shares," "Redemption of Shares,"
and "Net Asset Value."
Certain clients of the Adviser or Sub-Adviser whose assets would be
eligible for purchase by the Fund may purchase shares of the Trust with such
assets. Assets so purchased by the Fund will be valued in accordance with
procedures adopted by the Board of Trustees.
One or both classes of shares of the Fund may not be qualified or
registered for sale in all States. Prospective investors should inquire as to
whether shares of the Fund, or class of shares thereof, are available for offer
and sale in their State of domicile or residence. Shares of the Fund may not be
offered or sold in any State unless registered or qualified in that
jurisdiction, unless an exemption from registration or qualification is
available.
As described in the Prospectus under the caption "Redemption of Shares," a
shareholder may exchange shares of the Fund for shares of the same class of any
other series of the Trust that is available for investment, or any series of
PIMCO Funds: Pacific Investment Management Series, on the basis of their
respective net asset values. For federal income tax purposes, an exchange is
treated as a sale of shares and generally results in a capital gain or loss.
Orders for exchanges accepted prior to the close of regular trading on the
New York Stock Exchange on any day the Trust is open for business will be
executed at the respective net asset values determined as of the close of
business that day. Orders for exchanges received after the close of regular
trading on the New York Stock Exchange on any business day will be executed at
the respective net asset values determined at the close of the next business
day.
An excessive number of exchanges may be disadvantageous to the Trust.
Therefore, the Trust, in addition to its right to reject any exchange, reserves
the right to adopt a policy of terminating the exchange privilege of any
shareholder who makes more than a specified number of exchanges in a 12 month
period or in any calendar year. For example, the Trust currently limits the
number of "round trip" exchanges an investor may make. An investor makes a
"round trip" exchange when the investor purchases shares of the Fund,
subsequently exchanges those shares for shares of a different series of the
Trust and then exchanges back into the Fund. The Trust has the right to refuse
any exchange for any investor who completes (by making the exchange back into
the shares of the Fund) more than six round trip exchanges in any twelve-month
period. Although the Trust has no current intention of terminating or modifying
the exchange privilege other than as set forth in the preceding sentence, it
reserves the right to do so as described in the Prospectus.
The Trust reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed for other than customary
weekend and holiday closings; (b) the SEC has by order permitted such
suspension; or (c) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
The Trust is committed to paying in cash all requests for redemptions by
any shareholder of record of the Fund, limited in amount with respect to each
shareholder during any 90-day period to the lesser of (i) $250,000, or (ii) 1%
of the net asset value of the Fund at the beginning of such period. Although the
Fund will normally redeem all shares for cash, it may redeem amounts in excess
of the lesser of (i) or (ii) above by payment in kind of securities held by the
Fund.
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time, due to shareholder
redemption, the shares in the account do not have a value of at least a
specified amount, the minimums of which are currently set at $100,000 with
respect to Institutional Class and Administrative Class shares. The
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Prospectus may set forth higher minimum account balances for one or both classes
from time to time depending upon the Trust's current policy. An investor will be
notified that the value of the account is less than the minimum and allowed at
least 30 days to bring the value of the account up to at least the specified
amount before the redemption is processed. The Trust's Agreement and Declaration
of Trust, as amended and restated (the "Declaration of Trust"), also authorizes
the Trust to redeem shares under certain other circumstances as may be specified
by the Board of Trustees. The Fund may also charge periodic account fees for
accounts that fall below minimum balances as described in the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Investment Decisions
Investment decisions for the Fund and for the other investment advisory
clients of the Adviser and Sub-Adviser are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved
(including the Fund). Thus, a particular security may be bought or sold for
certain clients even though it could have been bought or sold for other clients
at the same time. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling the security. In some instances,
one client may sell a particular security to another client. It also sometimes
happens that two or more clients simultaneously purchase or sell the same
security, in which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such clients in a manner
which in the Adviser's or the Sub-Adviser's opinion is equitable to each and in
accordance with the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients.
Brokerage and Research Services
There is generally no stated commission in the case of fixed-income
securities, which are traded in the over-the-counter markets, but the price paid
by the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Fund of negotiated brokerage commissions. Such commissions vary among different
brokers. Also, a particular broker may charge different commissions according
to such factors as the difficulty and size of the transaction. Transactions in
foreign securities generally involve the payment of fixed brokerage commissions,
which are generally higher than those in the United States.
The Adviser and/or Sub-Adviser places orders for the purchase and sale of
portfolio securities, options and futures contracts and buys and sells such
securities, options and futures for the Fund through a substantial number of
brokers and dealers. In so doing, the Adviser or Sub-Adviser uses its best
efforts to obtain for the Trust the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable price and
execution, the Adviser or Sub-Adviser, having in mind the Fund's best interests,
considers all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial stability of
the broker-dealer involved and the quality of service rendered by the broker-
dealer in other transactions.
The Fund recently commenced operations and did not pay any brokerage
commissions during the last fiscal year.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the Adviser and Sub-Adviser receive research services from many broker-dealers
with which the Adviser and Sub-Adviser place the Trust's
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portfolio transactions. These services, which in some cases may also be
purchased for cash, include such matters as general economic and security market
reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to the Adviser and Sub-Adviser in advising various of
their clients (including the Fund), although not all of these services are
necessarily useful and of value in managing the Fund. The advisory fees paid by
the Fund are not reduced because the Adviser and Sub-Adviser receive such
services.
In reliance on the "safe harbor" provided by Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Adviser and
Sub-Adviser may cause the Fund to pay broker-dealers which provide them with
"brokerage and research services" (as defined in the 1934 Act) an amount of
commission for effecting a securities transaction for the Trust in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
Consistent with the Rules of the NASD and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Adviser or Sub-Adviser may also consider sales of shares of
the Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Trust.
The Adviser or Sub-Adviser may place orders for the purchase and sale of
exchange-listed portfolio securities with a broker-dealer that is an affiliate
of the Adviser or Sub-Adviser where, in the judgment of the Adviser or Sub-
Adviser, such firm will be able to obtain a price and execution at least as
favorable as other qualified broker-dealers.
Pursuant to rules of the SEC, a broker-dealer that is an affiliate of the
Adviser or a Sub-Adviser may receive and retain compensation for effecting
portfolio transactions for the Fund on a national securities exchange of which
the broker-dealer is a member if the transaction is "executed" on the floor of
the exchange by another broker which is not an "associated person" of the
affiliated broker-dealer, and if there is in effect a written contract between
the Adviser or Sub-Adviser and the Trust expressly permitting the affiliated
broker-dealer to receive and retain such compensation.
SEC rules further require that commissions paid to such an affiliated
broker-dealer, the Adviser, or Sub-Adviser by the Fund on exchange transactions
not exceed "usual and customary brokerage commissions." The rules define "usual
and customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time."
Portfolio Turnover
Except as described in the Prospectus, the Sub-Adviser manages the
portfolio of the Fund without regard generally to restrictions on portfolio
turnover. Trading in fixed income securities does not generally involve the
payment of brokerage commissions, but does involve indirect transaction costs.
The higher the rate of portfolio turnover of the Fund, the higher these
transaction costs borne by the Fund generally will be. To the extent portfolio
turnover results in the realization of net short-term capital gains, such gains
are generally taxed to shareholders at ordinary income tax rates. See
"Taxation."
The portfolio turnover rate of the Fund is calculated by dividing (a) the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by (b) the monthly average of the value of the portfolio securities owned
by the Fund during the particular fiscal year. In calculating the rate of
portfolio turnover, there is excluded from both (a) and (b) all securities,
including options, whose maturities or expiration dates at the time of
acquisition were one year or less. Proceeds from short sales and assets used to
cover short positions undertaken are included in the amounts of securities sold
and purchased, respectively, during the year.
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NET ASSET VALUE
As indicated in the Prospectus under the heading "Net Asset Value," the
Fund's net asset value per share for the purpose of pricing purchase and
redemption orders is determined on each day the New York Stock Exchange is open
as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the
Exchange. The Trust expects that the holidays upon which the Exchange will be
closed are as follows: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
TAXATION
The following discussion is general in nature and should not be regarded as
an exhaustive presentation of all possible tax ramifications. All shareholders
should consult a qualified tax adviser regarding their investment in the Fund.
The Fund intends to qualify annually and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, the Fund
generally must, among other things, (a) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stock,
securities or foreign currencies, or other income (including but not limited to
gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies ("Qualifying
Income Test") and (b) diversify its holdings so that, at the end of each quarter
of the taxable year, (i) at least 50% of the value of the Fund's total assets is
represented by cash, cash items (including receivables), U.S. Government
securities, securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
the Fund's total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities (other than U.S. Government securities or the securities of
other regulated investment companies) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades or businesses. In order to qualify for the special tax treatment
accorded regulated investment companies, the Fund must distribute each taxable
year the sum of (i) at least 90% of its investment company taxable income (which
includes dividends, interest and net short-term capital gains in excess of any
net long-term capital losses) and (ii) 90% of its tax exempt interest, net of
expenses allocable thereto. By qualifying as a regulated investment company,
the Fund will not be subject to federal income taxes to the extent that its net
investment income, net short-term capital gains and net long-term capital gains
are distributed. In addition, the Treasury Department is authorized to
promulgate regulations under which gains from foreign currencies (and options,
futures, and forward contracts on foreign currency) would not constitute
qualifying income for purposes of the Qualifying Income Test if such gains are
not directly related to investing in securities (or options and futures with
respect to stock or securities). To date, such regulations have not been
issued.
In years when the Fund distributes amounts in excess of its earnings and
profits, such distributions may be treated in part as a return of capital. A
return of capital is not taxable to a shareholder and has the effect of reducing
the shareholder's basis in the shares.
Distributions
As a regulated investment company, the Fund generally will not be subject
to U.S. federal income tax on its investment company taxable income and net
capital gains (any net long-term capital gains in excess of the sum of net
short-term capital losses and capital loss carryovers from prior years)
designated by the Fund as capital gain dividends, if any, that it distributes to
shareholders on a timely basis. The Fund intends to distribute to its sharehold
ers, at least annually, substantially all of its investment company taxable
income and any net capital gains. In addition, amounts not distributed by the
Fund on a timely basis in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax. To avoid the tax, the
Fund must distribute during each calendar year an amount equal to the sum of (1)
at least 98% of its ordinary income (not taking into account any
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capital gains or losses) for the calendar year, (2) at least 98% of its capital
gains in excess of its capital losses (and adjusted for certain ordinary losses)
for the twelve month period ending on October 31 of the calendar year, and (3)
all ordinary income and capital gains for previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of the calendar year if it is declared by the Fund in October,
November or December of that year to shareholders of record on a date in such a
month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders (other than those not subject to
federal income tax) in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To avoid application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
The tax status of the Fund and the distributions which it may make are
summarized in the Prospectus under the caption "Dividends, Distributions and
Taxes." All dividends and distributions of the Fund, whether received in shares
or cash, are taxable and must be reported on each shareholder's federal income
tax return. Distributions received by tax-exempt shareholders will not be
subject to federal income tax to the extent permitted under the applicable tax
exemption.
A portion of the dividends paid by the Fund on investments in stock of U.S.
corporations may qualify for the deduction for dividends received by
corporations (subject generally to a 46-day holding period requirement).
Distributions of net capital gains, if any, designated as capital gain
dividends, are taxable as long-term capital gains (generally subject to a 20%
tax rate for shareholders who are individuals), regardless of how long the
shareholder has held the Fund's shares and are not eligible for the dividends
received deduction. Any distributions that are not from the Fund's investment
company taxable income or net capital gains may be characterized as a return of
capital to shareholders or, in some cases, as capital gain. The tax treatment
of dividends and distributions will be the same whether a shareholder reinvests
them in additional shares or elects to receive them in cash. The Fund's
investment in other investment companies could affect the amount, timing and
character of distributions to shareholders of the Fund.
Dividends and distributions on shares of the Fund are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the net asset value of the Fund reflects gains that are either unrealized,
or realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses.
Sales of Shares
Upon the disposition of shares of the Fund (whether by redemption, sale or
exchange), a shareholder will realize a gain or loss. Such gain or loss will be
capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Long-term capital gains will
generally be taxed at a federal income tax rate of 20% to shareholders who are
individuals. Any loss realized on a disposition will be disallowed to the
extent the shares disposed of are replaced within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a share holder on a disposition of
shares held by the shareholder for six months or less will be treated as a long-
term capital loss to the extent of any distributions of capital gain dividends
received by the shareholder with respect to such shares.
Backup Withholding
The Fund may be required to withhold 31% of all taxable distributions
payable to shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders
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and certain other shareholders specified in the Code generally are exempt from
such backup withholding. Backup withholding is not an additional tax. Any
amounts withheld may be credited against the shareholder's U.S. federal tax
liability.
Original Issue Discount
Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by the Fund may be treated
as debt securities that are issued originally at a discount. Generally, the
amount of the original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even though payment of
that amount is not received until a later time, usually when the debt security
matures.
Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by the Fund in the
secondary market may be treated as having market discount. Generally, any gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. Market discount generally accrues in equal daily
installments. The Fund may make one or more of the elections applicable to debt
securities having market discount, which could affect the character and timing
of recognition of income.
Some debt securities (with a fixed maturity date of one year or less from
the date of issuance) that may be acquired by the Fund may be treated as having
acquisition discount, or OID in the case of certain types of debt securities.
Generally, the Fund will be required to include the acquisition discount, or
OID, in income over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt security
matures. The Fund may make one or more of the elections applicable to debt
securities having acquisition discount, or OID, which could affect the character
and timing of recognition of income.
The Fund generally will be required to distribute dividends to shareholders
representing discount on debt securities that is currently includable in income,
even though cash representing such income may not have been received by the
Fund. Cash to pay such dividends may be obtained from sales proceeds of
securities held by the Fund.
Other Taxation
Pursuant to Treasury Department regulations, certain expenses of
nonpublicly offered regulated investment companies, including advisory fees, are
not deductible by those regulated investment companies for purposes of
calculating the income of certain shareholders, generally including individuals
and entities that compute their taxable income in the same manner as an
individual (thus, for example, a qualified pension plan is not subject to this
rule). The shareholder's pro rata portion of such expenses will be treated as
income to the shareholder and will be deductible by the shareholder, subject to
the 2% "floor" on miscellaneous itemized deductions and other limitations on
itemized deductions set forth in the Code. A regulated investment company
generally will be classified as nonpublicly offered unless it either has 500
shareholders at all times during a taxable year or continuously offers shares
pursuant to a public offering.
Distributions also may be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Under the laws of
various states, distributions of investment company taxable income generally are
taxable to shareholders even though all or a substantial portion of such
distributions may be derived from interest on certain federal obligations which,
if the interest were received directly by a resident of such state, would be
exempt from such state's income tax ("qualifying federal obligations").
However, some states may exempt all or a portion of such distributions from
income tax to the extent the shareholder is able to establish that the
distribution is derived from qualifying federal obligations. Moreover, for
state income tax purposes, interest on some federal obligations generally is not
exempt from taxation, whether received directly by a shareholder or through
distributions of investment company taxable income (for example, interest on
FNMA Certificates and GNMA
-23-
<PAGE>
Certificates). The Fund will provide information annually to shareholders
indicating the amount and percentage of its dividend distribution which is
attributable to interest on federal obligations, and will indicate to the extent
possible from what types of federal obligations such dividends are derived. The
Trust is organized as a Massachusetts business trust. Under current law, so long
as the Fund qualifies for the federal income tax treatment described above, it
is believed that neither the Trust nor the Fund will be liable for any income or
franchise tax imposed by Massachusetts. Shareholders, in any event, are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
OTHER INFORMATION
Capitalization
The Trust is a Massachusetts business trust established under an Agreement
and Declaration of Trust as amended and restated on January 14, 1997. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest. The Board of Trustees may establish additional series
(with different investment objectives and fundamental policies) at any time in
the future. Establishment and offering of additional series will not alter the
rights of the Trust's shareholders. When issued, shares are fully paid, non-
assessable, redeemable and freely transferable. Shares do not have preemptive
rights or subscription rights. In liquidation of the Fund, each shareholder is
entitled to receive his pro rata share of the net assets of the Fund.
Performance Information
Performance information is computed separately for each class of the Fund.
The Fund may from time to time include the total return of each class of its
shares in advertisements or in information furnished to present or prospective
shareholders. The Fund may from time to time include in advertisements the
total return of each class and the ranking of those performance figures relative
to such figures for groups of mutual funds categorized by Lipper Analytical
Services as having the same investment objectives. Information provided to any
newspaper or similar listing of the Fund's net asset values and public offering
prices will separately present each class of shares. The Fund also may compute
current distribution rates and use this information in its Prospectus and
Statement of Additional Information, in reports to current shareholders, or in
certain types of sales literature provided to prospective investors.
Calculation of Total Return
Quotations of average annual total return for the Fund, or a class of
shares thereof, 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), calculated pursuant to the
following formula: P (1 + T)/n/ = ERV (where P = a hypothetical initial payment
of $1,000, T = the average annual total return, n = the number of years, and ERV
= the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). Except as noted below, all total return figures
reflect the deduction of a proportionate share of Fund or class expenses on an
annual basis, and assume that (i) the maximum sales load (or other charges
deducted from payments), if any, is deducted from the initial $1,000 payment and
that the maximum contingent deferred sales charge, if any, is deducted at the
times, in the amounts, and under the terms disclosed in the Prospectus and (ii)
all dividends and distributions are reinvested when paid. Quotations of total
return may also be shown for other periods. The Fund may also, with respect to
certain periods of less than one year, provide total return information for that
period that is unannualized. Under applicable regulations, any such information
is required to be accompanied by standardized total return information.
Performance information for the Fund may also be compared to: (i) the
Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average 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
-24-
<PAGE>
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 Fund. Unmanaged indexes (i.e., other than Lipper)
generally do not reflect deductions for administrative and management costs or
expenses. The Adviser and the Sub-Adviser may also report to shareholders or to
the public in advertisements concerning the performance of the Adviser and/or
the Sub-Adviser as advisers to clients other than the Trust, and on the
comparative performance or standing of the Adviser and/or the Sub-Adviser 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 Fund, the Adviser or the Sub-
Adviser, should be considered in light of the Fund's investment objectives and
policies, characteristics and quality, 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.
The S&P's Composite Index of 500 Stocks (the "S&P 500") is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 380 industrial, 10 transportation, 39 utilities and 71
financial services concerns. The S&P 500 represents about 73% of the market
value of all issues traded on the New York Stock Exchange.
The S&P's 400 Mid-Cap Index (the "S&P 400 Mid-Cap Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 400 stocks of companies whose capitalization range from $100 million to
over $5 billion and which represent a wide range of industries. As of February
26, 1999, approximately 25% of the 400 stocks were stocks listed on the National
Association of Securities Dealers Automated Quotations ("NASDAQ") system, 73%
were stocks listed on the New York Stock Exchange and 2% were stocks listed on
the American Stock Exchange. The Standard & Poor's Midcap 400 Index P/TR
consists of 400 domestic stocks chosen for market size (median market
capitalization of $1.54 billion), liquidity and industry group representation.
It is a market value-weighted index (stock price times shares outstanding), with
each stock affecting the index in proportion to its market value. The index is
comprised of industrials, utilities, financials and transportation, in size
order.
From time to time, the Fund may use, in its advertisements or information
furnished to present or prospective shareholders, data concerning the
performance and ranking of certain countries' stock markets, including
performance and ranking data based on annualized returns over one-, three-,
five- and ten-year periods. The Trust may also use data about the portion of
world equity capitalization represented by U.S. securities. As of December 31,
1998, the U.S. equity market capitalization represented approximately 40% of the
equity market capitalization of all the world's markets. This compares with 52%
in 1980 and 70% in 1972.
From time to time, the Trust may use, in its advertisements and other
information relating to the Fund, data concerning the performance of stocks
relative to that of fixed income investments and relative to the cost of living
over various periods of time. The table below sets forth the annual returns for
each calendar year from 1973 through 1998 (as well as a cumulative return and
average annual return for this period) for the S&P 500 and Treasury bills (using
the formula set forth after the table) as well as the rates of inflation (based
on the Consumer Price Index) during such periods.
-25-
<PAGE>
<TABLE>
<CAPTION>
Consumer Price
Period S&P 500 Treasury Bills Index
- ----------------------- -------- --------------- ------
<S> <C> <C> <C>
1973 -14.7 6.9 8.8
1974 -26.5 8.0 12.2
1975 37.2 5.8 7.0
1976 23.8 5.0 4.8
1977 -7.2 5.1 6.8
1978 6.5 7.2 9.0
1979 18.4 10.4 13.3
1980 32.4 11.2 12.4
1981 -4.9 14.7 8.9
1982 21.4 10.5 3.8
1983 22.5 8.8 3.8
1984 6.3 9.9 3.9
1985 32.2 7.7 3.8
1986 18.5 6.1 1.1
1987 5.2 5.5 4.4
1988 16.8 6.3 4.4
1989 31.5 8.4 4.6
1990 -3.2 7.8 6.1
1991 30.5 5.6 3.1
1992 7.7 3.5 2.9
1993 10.1 2.9 2.7
1994 1.3 3.9 2.7
1995 37.4 5.6 2.7
1996 23.1 5.2 3.3
1997 33.4 5.3 1.7
1998 28.6 4.9 1.6
- ----------------------------------------------------------
Cumulative Return
1973-1998 2,667.2% 478.0% 285.6%
- ----------------------------------------------------------
Average Annual Return
1973-1998 13.6% 7.0% 5.3%
- ----------------------------------------------------------
</TABLE>
The average returns for Treasury bills were computed using the following
method. For each month during a period, the Treasury bill having the shortest
remaining maturity (but not less than one month) was selected. (Only the
remaining maturity was considered; the bill's original maturity was not
considered). The return for the selected Treasury bill was computed based on
the price of the bill as of the last trading day of the previous month and the
price on the last trading day of the current month. The price of the bill (P)
at each time (t) is given by:
P\\t\\ = [ 1- rd ]
---
360
where,
r = decimal yield on the bill at time t (the average
of bid and ask quotes); and
d = the number of days to maturity as of time t.
<TABLE>
<CAPTION>
Small Mid-Size Large
Period Companies Companies Companies
- ----------------------- ---------- ---------- ----------
<S> <C> <C> <C>
1981 (2/28-12/31) 1.8 10.6 -2.5
1982 25.0 22.7 21.4
1983 29.1 26.1 22.5
1984 -7.3 1.2 6.3
1985 31.1 36.0 32.2
1986 5.7 16.2 18.5
1987 -8.8 -2.0 5.2
1988 24.9 20.9 16.8
1989 16.2 35.6 31.5
1990 -19.5 -5.1 -3.2
1991 46.1 50.1 30.5
1992 18.4 11.9 7.7
1993 18.9 14.0 10.1
1994 -1.8 -3.6 1.3
1995 28.4 30.9 37.6
1996 16.5 19.2 22.9
1997 22.8 32.3 33.4
1998 -2.6 19.1 28.6
- -----------------------------------------------------------
Cumulative Return
2/28/81-12/31/98 710.5% 1,784.5% 1,616.9%
- -----------------------------------------------------------
Average Annual Return
2/28/81-12/31/98 12.4% 17.9% 17.3%
- -----------------------------------------------------------
</TABLE>
-26-
<PAGE>
The Fund may use, in its advertisements and other information, data
concerning the projected cost of a college education in future years based on
1997/1998 costs of college (using tuition and fees only) and an assumed rate of
increase for such costs. For example, the table below sets forth the projected
cost of four years of college at a public college and a private college assuming
a steady increase in both cases of 3% per year. In presenting this information,
the Fund is making no prediction regarding what will be the actual growth rate
in the cost of a college education, which may be greater or less than 3% per
year and may vary significantly from year to year. The Trust makes no
representation that an investment in the Fund will grow at or above the rate of
growth of the cost of a college education.
<TABLE>
<CAPTION>
Potential College Cost Table
Start Public Private Start Public Private
Year College College Year College College
- --------- --------- -------- ----- ------- -------
<S> <C> <C> <C> <C> <C>
1997 $13,015 $57,165 2005 $16,487 $72,415
1998 $13,406 $58,880 2006 $16,982 $74,587
1999 $13,808 $60,646 2007 $17,491 $76,825
2000 $14,222 $62,466 2008 $18,016 $79,130
2001 $14,649 $64,340 2009 $18,557 $81,504
2002 $15,088 $66,270 2010 $19,113 $83,949
2003 $15,541 $68,258 2011 $19,687 $86,467
2004 $16,007 $70,306 2012 $20,278 $89,061
</TABLE>
Costs assume a steady increase in the annual cost of college of 3% per year from
a 1996-97 base year amount. Actual rates of increase may be more or less than 3%
and may vary.
In its advertisements and other materials, the Trust may compare the
returns over periods of time of investments in stocks, bonds and treasury bills
to each other and to the general rate of inflation. For example, the average
annual return of each during the period from 1973 through 1998 was:
*Stocks: 13.6%
Bonds: 9.5%
T-Bills: 7.0%
Inflation: 5.3%
*Returns of unmanaged indexes do not reflect past or future
performance of the Fund. Stocks are represented by Ibbotson's Large Company
Stock Total Return Index. Bonds are represented by Ibbotson's Long-term
Corporate Bond Index. Treasury bills are represented by Ibbotson's
Treasury Bill Index and Inflation is represented by the Cost of Living
Index. These are all unmanaged indexes, which can not be invested in
directly. While Treasury bills are insured and offer a fixed rate of
return, both the principal and yield of investment securities will
fluctuate with changes in market conditions. Source: Ibbotson, Roger G.,
and Rex A. Sinquefiled, Stocks, Bonds, Bill and Inflation (SBBI), 1989,
updated in Stocks, Bonds, Bills and Inflation 1999 Yearbook, Ibbotson
Associates, Chicago. All rights reserved.
-27-
<PAGE>
The Trust may also compare the relative historic returns and range of
returns for an investment in each of common stocks, bonds and treasury bills to
a portfolio that blends all three investments. For example, over the period
from 1973 through 1998, the average annual return of stocks comprising the
Ibbotson's Large Company Stock Total Return Index ranged from -26.5% to 37.4%
while the annual return of a hypothetical portfolio comprised 40% of such common
stocks, 40% of bonds comprising the Ibbotson's Long-term Corporate bond Index
and 20% of Treasury bills comprising the Ibbottson's Treasury Bill Index (a
"mixed portfolio") would have ranged from -10.2% to 28.2% over the same period.
The average annual returns of each investment for each of the years from 1973
through 1998 is set forth in the following table.
<TABLE>
<CAPTION>
MIXED
YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
- ------ ------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1973 -14.66% 1.14% 6.93% 8.80% -4.02%
1974 -26.47% -3.06% 8.00% 12.26% -10.21%
1975 37.20% 14.64% 5.80% 7.01% 21.90%
1976 23.84% 18.65% 5.08% 4.81% 18.01%
1977 -7.18% 1.71% 5.12% 6.77% -1.17%
1978 6.56% -0.07% 7.18% 9.03% 4.03%
1979 18.44% -4.18% 10.38% 13.31% 7.78%
1980 32.42% 2.61% 11.24% 12.40% 14.17%
1981 -4.91% -0.96% 14.71% 8.94% 0.59%
1982 21.41% 43.79% 10.54% 3.87% 28.19%
1983 22.51% 4.70% 8.80% 3.80% 12.64%
1984 6.27% 16.39% 9.85% 3.95% 11.03%
1985 32.16% 30.90% 7.72% 3.77% 26.77%
1986 18.47% 19.85% 6.16% 1.13% 16.56%
1987 5.23% -0.27% 5.46% 4.41% 3.08%
1988 16.81% 10.70% 6.35% 4.42% 12.28%
1989 31.49% 16.23% 8.37% 4.65% 20.76%
1990 -3.17% 6.87% 7.52% 6.11% 2.98%
1991 30.55% 19.79% 5.88% 3.06% 21.31%
1992 7.67% 9.39% 3.51% 2.90% 7.53%
1993 10.06% 13.17% 2.89% 2.75% 9.84%
1994 1.31% -5.76% 3.90% 2.67% -1.00%
1995 37.40% 27.20% 5.60% 2.70% 26.90%
1996 23.10% 1.40% 5.20% 3.30% 10.84%
1997 33.40% 12.90% 7.10% 1.70% 19.94%
1998 28.58% 10.76% 4.86% 1.61% 16.70%
</TABLE>
Returns of unmanaged indexes do not reflect past or future performance of
the Fund. Stocks are represented by Ibbotson's Large Company Stock Total
Return Index. Bonds are represented by Ibbotson's Long-term Corporate Bond
Index. Treasury bills are represented by Ibbotson's Treasury Bill Index and
Inflation is represented by the Cost of Living Index. Treasury bills are
all unmanaged indexes, which can not be invested in directly. While
Treasury bills are insured and offer a fixed rate of return, both the
principal and yield of investment securities will fluctuate with changes in
market conditions. Source: Ibbotson, Roger G., and Rex A. Sinquefiled,
Stocks, Bonds, Bill and Inflation (SBBI), 1989, updated in Stocks, Bonds,
Bills and Inflation 1999 Yearbook, Ibbotson Associates, Chicago. All rights
reserved.
-28-
<PAGE>
The Trust may use in its advertisements and other materials examples
designed to demonstrate the effect of compounding when an investment is
maintained over several or many years. For example, the following table shows
the annual and total contributions necessary to accumulate $200,000 of savings
(assuming a fixed rate of return) over various periods of time:
<TABLE>
<CAPTION>
Investment Annual Total Total
Period Contribution Contribution Saved
- ---------------- ------------ ------------ --------
<S> <C> <C> <C>
30 Years $ 1,979 $ 59,370 $200,000
25 Years $ 2,955 $ 73,875 $200,000
20 Years $ 4,559 $ 91,180 $200,000
15 Years $ 7,438 $111,570 $200,000
10 Years $13,529 $135,290 $200,000
</TABLE>
This hypothetical example assumes a fixed 7% return compounded annually and
a guaranteed return of principal. The example is intended to show the
benefits of a long-term, regular investment program, and is in no way
representative of any past or future performance of the Fund. There can be
no guarantee that you will be able to find an investment that would provide
such a return at the times you invest and an investor in the Fund should be
aware that the Fund may experience in the future periods of negative
growth.
The Trust may set forth in its advertisements and other materials
information regarding the relative reliance in recent years on personal savings
for retirement income versus reliance on Social Security benefits and company
sponsored retirement plans. For example, the following table offers such
information for 1998:
<TABLE>
<CAPTION>
% of Income for Individuals
Aged 65 Years and Older in 1997*
-------------------------------
Social Security
Year and Pension Plans Other
---- ----------------- -----
<S> <C> <C>
1997 43% 57%
</TABLE>
* For individuals with an annual income of at least $51,000. Other
includes personal savings, earnings and other undisclosed sources of
income. Source: Social Security Administration.
Articles or reports which include information relating to performance,
rankings and other characteristics of the Fund may appear in various national
publications and services including, but not limited to: The Wall Street
Journal, Barron's, Pensions and Investments, Forbes, Smart Money, Mutual Fund
Magazine, The New York Times, Kiplinger's Personal Finance, Fortune, Money
Magazine, Morningstar's Mutual Fund Values, CDA Investment Technologies and The
Donoghue Organization. Some or all of these publications or reports may publish
their own rankings or performance reviews of mutual funds, including the Fund,
and may provide information relating to the Adviser and the Sub-Adviser,
including descriptions of assets under management and client base, and opinions
of the author(s) regarding the skills of personnel and employees of the Adviser
or the Sub-Adviser who have portfolio management responsibility. From time to
time, the Trust may include references to or reprints of such publications or
reports in its advertisements and other information relating to the Fund.
From time to time, the Trust may set forth in its advertisements and other
materials information about the growth of a certain dollar-amount invested in
the Fund over a specified period of time and may use charts and graphs to
display that growth.
-29-
<PAGE>
From time to time, the Trust may set forth in its advertisements and other
materials the names of and additional information regarding investment analysts
employed by the Sub-Adviser who assist with portfolio management and research
activities on behalf of the Fund.
Ibbotson Associates ("Ibbotson") has analyzed the risk and returns of the
series of the Trust and relevant benchmark market indexes in a variety of market
conditions. Based on its independent research and analysis, Ibbotson may
develop, from time to time, model portfolios of the Trust's series, including
the Fund, and series of PIMS which indicate how, in Ibbotson's opinion, a
hypothetical investor with a 5+ year investment horizon might allocate his or
her assets among PIMCO Funds. Ibbotson bases its model portfolios on five
levels of investor risk tolerance which it developed and defines as ranging from
"Very Conservative" (low volatility; emphasis on capital preservation, with some
growth potential) to "Very Aggressive" (high volatility; emphasis on long-term
growth potential). However, neither Ibbotson nor the Trust offers Ibbotson's
model portfolios as investments. Moreover, neither the Trust, the Adviser, the
Sub-Adviser nor Ibbotson represent or guarantee that investors who allocate
their assets according to Ibbotson's models will achieve their desired
investment results.
Year 2000 Readiness Disclosure
Many of the world's computer systems may be unable to correctly recognize,
interpret or use dates beyond the year 1999 (the "Year 2000 Problem"). This
inability might lead to significant business disruptions. PIMCO Advisors and
Pacific Investment Management, which serves as sub-administrator to the Fund,
are taking steps to ensure that their computer systems will function properly.
PIMCO Advisors has designated a team of information and business professionals
(the "Year 2000 Team") to address the Year 2000 Problem and has developed a
written "Year 2000 Plan."
The Year 2000 Plan consists of five general phases: Awareness, Assessment,
Remediation, Testing and Implementation. The Year 2000 Plan and budget were
prepared and approved by PIMCO Advisors' Management Board on July 21, 1998.
During the Awareness phase, the Year 2000 Team informed the employees of the
Adviser and its subsidiaries, including their highest levels of management,
about the Year 2000 Problem. During the Assessment phase, the Year 2000 Team
prepared an inventory of information technology ("IT") and non-IT systems used
by the Adviser, its subsidiaries and Pacific Investment Management. Systems
were classified as software, hardware or embedded chips. Separately, systems
were also classified as mission critical or non-mission critical. As the
inventory was compiled and verified, each system was preliminarily assessed for
Year 2000 compliance. This preliminary assessment was made by obtaining
manufacturers' representations that a given product is Year 2000 compliant or
other evidence of compliance. Systems for which no such evidence can be
obtained were identified as candidates for correction or replacement
("Remediation"). During the Remediation phase, software, hardware and embedded
chips identified during the Assessment phase to be non-Year 2000 compliant are
corrected or replaced. Necessarily, further corrections and replacements may
need to be made after the Remediation phase has been completed as a result of
problems identified during the Testing phase or otherwise. During the Testing
phase, the Adviser performs internal testing, point-to-point testing and
industry testing programs. Testing generally will be performed in order of
criticality, with mission-critical systems receiving the highest priority.
PIMCO Advisors does not plan to test non-mission critical systems that are not
used in its business (e.g., software applications incidently installed on PCs).
Several subsidiaries of the Adviser plan on participating in the Securities
Industry Association industry-wide testing forum. During the Implementation
phase, systems that have been tested and identified as being Year 2000 compliant
are put into normal business operation and contingency plans are finalized.
As with all investment advisers, the business operations of the Adviser,
its investment advisory subsidiaries and Pacific Investment Management are
heavily dependent upon a complete worldwide network of financial systems that
utilize date fields. The ability of the Adviser, its investment advisory
subsidiaries and Pacific Investment Management to endure any adverse effects of
the transition to the Year 2000 are highly dependent upon the efforts of third
parties, particularly issuers, brokers, dealers and custodians. The failure of
third party organizations to resolve their own processing issues with respect to
the Year 2000 Problem in a timely manner could have a material adverse effect on
the Adviser's business. As of the date of this Statement of Additional
Information, the management of each of the Adviser, its investment advisory
subsidiaries and Pacific Investment Management believes that the
-30-
<PAGE>
transition to the Year 2000 will not have a material adverse effect on its
business or operations. However, complications as yet unidentified may arise in
internal or external systems or with data providers, other securities firms or
institutions, issuers, counterparties or other entities or even with general
economic conditions related to the Year 2000 Problem. Although the Adviser's
efforts and expenditures in connection with the Year 2000 Problem are
substantial, there can be no assurances that shareholders of the Fund will not
suffer from disruptions or adverse results arising as a consequence of the Year
2000 Problem.
Compliance Efforts Related to the Euro
Another potential computer system problem may arise in conjunction with the
recent introduction of the euro. Whether introducing the euro to financial
companies' systems will be problematic is not fully known; however, the cost
associated with making systems recognize the euro is not currently expected to
be material.
Voting Rights
Under the Declaration of Trust, the Trust is not required to hold annual
meetings of Trust shareholders to elect Trustees or for other purposes. It is
not anticipated that the Trust will hold shareholders' meetings unless required
by law or the Declaration of Trust. In this regard, the Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. Shareholders 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. In the
event that such a request was made, the Trust has represented that it would
assist with any necessary shareholder communications. Shareholders of a class
of shares have different voting rights with respect to matters that affect only
that class.
Each class of shares of the Fund has identical voting rights except that
each class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. These shares are entitled to vote
at meetings of shareholders. Matters submitted to shareholder vote must be
approved by the Fund separately except (i) when required by the 1940 Act shares
shall be voted together and (ii) when the Trustees have determined that the
matter does not affect all series of the Trust, then only shareholders of the
series affected shall be entitled to vote on the matter. Each class of shares
of the Fund will vote together, except with respect to the Distribution or
Administrative Services Plans applicable to Administrative Class shares, to the
Administration Agreement as applicable to a particular class or classes, or when
a class vote is required as specified above or otherwise by the 1940 Act.
The Trust's shares do not have cumulative voting rights. Therefore, the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
Certain Ownership of Trust Shares
As of ______________, 1999, the Trust believes that the Trustees and
officers of the Trust, as a group, owned less than one percent of each class of
the Fund. As of _______________, 1999, no person owned of record or
beneficially 5% or more of either class of shares of the Fund.
Custodian
Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for assets of the Trust. Pursuant to a sub-
custody agreement between IFTC and State Street Bank and Trust Company ("State
Street"), State Street serves as subcustodian of the Trust for the custody of
the foreign securities acquired by the Trust's series that invest in foreign
securities. Under the agreement, State Street may hold
-31-
<PAGE>
foreign securities at its principal offices and its branches, and subject to
approval by the Board of Trustees, at a foreign branch of a qualified U.S. bank,
with an eligible foreign subcustodian, or with an eligible foreign securities
depository.
Pursuant to rules or other exemptions under the 1940 Act, the Trust may
maintain foreign securities and cash in the custody of certain eligible foreign
banks and securities depositories. Selection of these foreign custodial
institutions is currently made by the Board of Trustees following a
consideration of a number of factors, including (but not limited to) the
reliability and financial stability of the institution; the ability of the
institution to perform capably custodial services for the Trust; the reputation
of the institution in its national market; the political and economic stability
of the country in which the institution is located; and further risks of
potential nationalization or expropriation of Trust assets, although the
Trustees reserve the right to delegate their selection responsibilities in light
of recent amendments to Rule 17f-5 under the 1940 Act, in which case the factors
for consideration would differ from those referenced above. Currently, the
Board of Trustees reviews annually the continuance of foreign custodial
arrangements for the Trust, but reserves the right to discontinue this practice
as permitted by the recent amendments to Rule 17f-5. No assurance can be given
that the Trustees' appraisal of the risks in connection with foreign custodial
arrangements will always be correct or that expropriation, nationalization,
freezes, or confiscation of assets that would impact assets of the Fund will not
occur, and shareholders bear the risk of losses arising from these or other
events.
Independent Accountants
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, Missouri 64105,
serves as the independent public accountants for the Fund.
PricewaterhouseCoopers LLP provides audit services, accounting assistance, and
consultation in connection with SEC filings.
Registration Statement
This Statement of Additional Information and the Prospectus do not contain
all of the information included in the Trust's registration statements filed
with the SEC under the 1933 Act with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statements, including the exhibits
filed therewith, may be examined at the offices of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the relevant registration statement, each such statement
being qualified in all respects by such reference.
-32-
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
(1) Part A
Financial Highlights.
(2) Part B
Financial statements dated as of June 30, 1998 are
incorporated by reference in the Statement of Additional
Information from the Funds' Annual Reports dated as of June
30, 1998 and include the following:
Schedule of Investments
Financial Highlights
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Accountants.
(b) Unaudited financial statements dated as of December 31, 1998 are
incorporated by reference in the Statement of Additional
Information from the Funds' Semi-Annual Reports dated as of
December 31, 1998 and include the following:
Schedule of Investments
Financial Highlights
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
(b) Exhibits (the number of each exhibit relates to the exhibit
designation in Form N-1A):
(1) Form of Second Amendment and Restated Agreement and
Declaration of Trust (2)
(2) Form of First Amended and Restated Bylaws (4)
(3) Not Applicable
(4) (a) Article III (Shares) and Article V (Shareholders' Voting
Powers and Meetings) of the Second Amended and Restated
Agreement and Declaration of Trust (2)
(b) Article 9 (Issuance of Shares Certificates) and Article 11
(Shareholders' Voting Powers and Meetings) of the First
Amended and Restated Bylaws (4)
<PAGE>
(5) (a) (i) Form of Amended and Restated Investment Advisory
Agreement (4)
(ii) Form of Addendum to Amended and Restated Investment
Advisory Agreement to add PIMCO International Growth
Fund and PIMCO Tax-Efficient Structured Emerging
Markets Fund (6)
(iii) Form of Addendum to Amended and Restated
Investment Advisory Agreement to add PIMCO Value 25
Fund, PIMCO Hard Assets Fund, and PIMCO Tax-Efficient
Equity Fund (10)
(iv) Form of Addendum to Amended and Restated Investment
Advisory Agreement to add PIMCO Funds Asset Allocation
Series - 90/10 Portfolio, PIMCO Funds Asset Allocation
Series - 60/40 Portfolio, and PIMCO Funds Asset
Allocation Series -30/70 Portfolio (9)
(v) Form of Addendum to Amended and Restated Investment
Advisory Agreement to add PIMCO Mega-Cap Fund is filed
herewith.
(b) (i) Form of Portfolio Management Agreement with Pacific
Investment Management Company (6)
(ii) Form of Portfolio Management Agreement, as amended,
with NFJ Investment Group (4)
(iii) Form of Addendum to Portfolio Management Agreement
with NFJ Investment Group to add PIMCO Value 25 Fund
and PIMCO Hard Assets Fund (10)
(iv) Form of Portfolio Management Agreement, as amended,
with Cadence Capital Management (4)
(v) Form of Addendum to Portfolio Management Agreement
with Cadence Capital Management to add PIMCO Mega-Cap
Fund is filed herewith.
(vi) Form of Portfolio Management Agreement, as amended,
with Parametric Portfolio Associates (4)
(vii) Form of Addendum to Portfolio Management Agreement with
Parametric Portfolio Associates to add PIMCO Tax-
Efficient Structured Emerging Markets Fund (6)
-2-
<PAGE>
(viii) Form of Addendum to Portfolio Management
Agreement with Parametric Portfolio Associates
to add PIMCO Tax-Efficient Equity Fund (10)
(ix) Form of Portfolio Management Agreement with
Blairlogie Capital Management is filed herewith
(x) Form of Amended and Restated Portfolio
Management Agreement with Columbus Circle
Investors (4)
(xi) Form of Addendum to Portfolio Management
Agreement with Columbus Circle Investors to add
PIMCO International Growth Fund (6)
(xii) Form of Portfolio Management Agreement with Van
Eck Associates Corporation (4)
(6) (a) Amended Distribution Contract (4)
(b) Form of Amended and Restated Distribution Contract (to
add Class D shares) (7)
(c) Form of Addendum to Distribution Contract to add
PIMCO International Growth Fund and PIMCO Tax-Efficient
Structured Emerging Markets Fund (6)
(d) Form of Addendum to Distribution Contract to add
PIMCO Value 25 Fund, PIMCO Hard Assets Fund, and PIMCO
Tax-Efficient Equity Fund (10)
(e) Form of Addendum to Distribution Contract to add
PIMCO Funds Asset Allocation Series - 90/10 Portfolio,
PIMCO Funds Asset Allocation Series - 60/40 Portfolio
and PIMCO Funds Asset Allocation Series - 30/70
Portfolio (9)
(f) Form of Supplement to Distribution Contract to add PIMCO
Mega-Cap Fund is filed herewith.
(7) Not Applicable
(8) (a) Form of Custody and Investment Accounting Agreement is
filed herewith.
(9) (a) Form of Amended Administration Agreement between the
Trust and PIMCO Advisors L.P. (4)
-3-
<PAGE>
(b) Form of Amended and Restated Administration Agreement
(to include Class D shares ) between the Trust and PIMCO
Advisors L.P. (7)
(c) Form of Administration Agreement between PIMCO Advisors
L.P. and Pacific Investment Management Company (4)
(d) Form of Amendment to Administration Agreement (to
include Class D shares) between PIMCO Advisors L.P. and
Pacific Investment Management Company (11)
(e) Form of Agency Agreement and Addenda (1)
(f) Form of Addendum to Agency Agreement (4)
(g) Form of Assignment of Agency Agreement (4)
(h) Form of Addendum to Agency Agreement (6)
(i) Form of Transfer Agency Agreement with Shareholder
Services, Inc. (3)
(j) Form of Service Plan for Institutional Services Shares
(6)
(k) Form of Administrative Services Plan for Administrative
Class Shares (4)
(10) Opinion and Consent of Counsel (6)
(11) (a) Consent of PricewaterhouseCoopers LLP (12)
(b) Consent and Opinion of Coopers & Lybrand LLP (6)
(12) Not Applicable
(13) Initial Capital Agreement (6)
(14) Not Applicable
(15) (a) Form of Distribution and Servicing Plan (Class A) (4)
(b) Form of Distribution and Servicing Plan (Class B) (4)
(c) Form of Distribution and Servicing Plan (Class C) (4)
(d) Form of Distribution Plan for Administrative Class
Shares (4)
-4-
<PAGE>
(e) Form of Distribution Plan for Class D Shares included as
part of the Form of Amended and Restated Administration
Agreement included in Exhibit 9(b)
(16) Schedule of Computation of Performance (6)
(17) (a) Financial Data Schedules for the period ended
6/30/98 (11)
(b) Financial Data Schedules for the period ended
12/31/98 (12)
(18) Form of Amended and Restated Multi-Class Plan (7)
(19) (a) Powers of Attorney and Certificate of Secretary (1)
(b) Power of Attorney for E. Philip Cannon, Donald P.
Carter, Gary A. Childress, William D. Cvengros, John P.
Hardaway, Joel Segall, W. Bryant Stooks, Gerald M.
Thorne, Richard L. Nelson, Lyman W. Porter and Alan
Richards (5)
- --------------------
1 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.
2 Included in Definitive Proxy Statement (File No. 811-06161), as filed on
November 7, 1996.
3 Included in Post-Effective Amendment No. 33 to the Registration Statement
on Form N-1A of PIMCO Advisors Funds (File No. 2-87203), as filed on
November 30, 1995.
4 Included in Post-Effective Amendment No. 25 to the Registration Statement
on Form N-1A (File 33-36528), as filed on January 13, 1997.
5 Included in Post-Effective Amendment No. 27 to the Registration Statement
on Form N-1A (File 33-36528), as filed on October 10, 1997.
6 Included in Post-Effective Amendment No.28 to the Registration Statement on
Form N-1A (File 33-36528), as filed on October 31, 1997.
7 Included in Post-Effective Amendment No. 30 to the Registration Statement
on Form N-1A (File 33-36528), as filed on March 13, 1998.
8 Included in Post-Effective Amendment No. 32 to the Registration Statement
on Form N-1A (File 33-36528), as filed on April 21, 1998.
9 Included in Post-Effective Amendment No. 33 to the Registration Statement
on Form N-1A (File 33-36528), as filed on June 30, 1998.
10. Included in Post-Effective Amendment No. 34 to the Registration Statement
on Form N-1A (File 33-36528), as filed on July 2, 1998.
11. Included in Post-Effective Amendment No. 36 to the Registration Statement
on Form N-1A (File 33-36528), as filed on October 30, 1998.
12. Included in Post-Effective Amendment No. 38 to the Registration Statement
on Form N-1A (File 33-36528), as filed on March 31, 1999.
Item 25. Persons Controlled by or Under Common Control with Registrant.
-5-
<PAGE>
Not applicable.
Item 26. No longer required.
Item 27. Indemnification
Reference is made to Article VIII, Section 1, of the Registrant's Second
Amended and Restated Agreement and Declaration of Trust, which is incorporated
by reference herein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to the Trust's
Second Amended and Restated 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 trustees, officers or controlling
persons of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustees, officers or controlling persons in
connection with the securities 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 issue.
Item 28. Business and Other Connections of Investment Advisor and Portfolio
Managers.
Unless otherwise stated, the principal business address of each
organization listed in 800 Newport Center Drive, Newport Beach, CA 92660.
PIMCO Advisors L.P.
Name Position with Advisor Other Affiliations
Walter E. Auch, Sr. Member of Management Board Management Consultant;
Director, Fort Dearborn Fund,
Shearson VIP Fund, Shearson
Advisors Fund, Shearson TRAK
Fund, Banyan Land Trust,
Banyan Land Fund II, Banyan
Mortgage Fund, Allied
Healthcare Products, Inc.,
First Western Inc., DHR Group
and Geotech Industries.
William R. Benz Member of Management Board See Pacific Investment
Management Company.
-6-
<PAGE>
David B. Breed Member of Management Board Director, Managing Director
and Chief Executive Officer,
Cadence Capital Management,
Inc.; Managing Director and
Chief Executive Officer,
Cadence Capital Management.
Donald A. Chiboucas Member of Management Board Director, Columbus Circle
Investors Management, Inc.;
Managing Director, Columbus
Circle Investors.
Kenneth W. Corba Member of Management Board. None.
Managing Director and Chief
Investment Officer of
PIMCO Equity Advisors.
William D. Cvengros Chief Executive Officer Trustee and Chairman of the
and President, Member of Trust; Director, PIMCO Funds
Management Board Distributors LLC, Chief
Executive Officer and
President, Value Advisors
LLC; Director, PIMCO Funds
Advertising Agency; Director,
President and Chief Executive
Officer, Thomson Advisory
Group, Inc.
Walter B. Gerken Chairman and Member of Director, Mullin Consulting
Management Board Inc Director, Executive
Services Corps. of Southern
California.
Colin Glinsman Member of Management Managing Director,
Board Oppenheimer Capital.
William H. Gross Operating Board Director and Managing
and Equity Board Director, PIMCO Management,
Inc.; Managing Director,
Pacific Investment Management
Company; Senior Vice
President, PIMCO Funds:
Pacific Investment Management
Series, PIMCO Variable
Insurance Trust; Director and
Vice President, StocksPLUS
Management, Inc.; Member of
PIMCO Partners LLC.
Brent R. Harris Member of Management Board Director and Managing
Director, PIMCO Management,
Inc.; Managing Director,
Pacific Investment Management
Company; Director and Vice
President,
-7-
<PAGE>
StocksPLUS Management,
Inc.; Chairman of the
Board and Trustee,
PIMCO Funds: Pacific
Investment Management
Series, PIMCO Variable
Insurance Trust and
PIMCO Commercial
Mortgage Securities
Trust, Inc.; Member of
PIMCO Partners LLC.
Donald R. Kurtz Member of Management Board Donald R. Kurtz Member
of Management Board
Formerly, Vice
President of Internal
Asset Management,
General Motors
Investment Management
Corp.; Director,
Thomson Advisory Group
L.P.
George A. Long Member of Management Board Chairman and Chief
Executive Officer of
Oppenheimer Capital.
James McCaughan Member of Management Board Chief Executive
Officer, Oppenheimer
Capital
James F. McIntosh Member of Management Board Executive Director,
Allen Matkins, Leck,
Gamble & Mallory LLP.
Formerly, Director,
Pacific Investment
Management Company.
Kenneth H. Mortenson Member of Management Board Managing Director of
Oppenheimer Capital.
William F. Podlich, III Member of Management Board Director and Managing
Director, PIMCO
Management, Inc.;
Managing Director,
Pacific Investment
Management Company;
Vice President, PIMCO
Commercial Mortgage
Securities Trust, Inc.;
Member of PIMCO
Partners LLC.
William C. Powers Member of Management See Pacific Investment
Board Management Company.
Glenn S. Schafer Member of Management Board President and
Board Director, Pacific
Mutual Holding Company,
Pacific LifeCorp,
Pacific Life Insurance
Company, Pacific
Financial Asset
Management Corp.,
PMRealty Advisors,
Inc.; Director, Pacific
Mutual Distributors,
Inc., Mutual Service
Corporation,
UnitedPlanners' Group,
Inc., Thomson Advisory
Group.
-8-
<PAGE>
Thomas C. Sutton Member of Management Board Chairman, Chief Executive
Officer and Director, Pacific
William S. Thomson, Jr.
Mutual Holding Company,
Pacific LifeCorp, Pacific
Life Insurance Company,
Pacific Financial Asset
Management Corp.; Director,
Pacific Mutual Distributors,
Inc., Mutual Service
Corporation, United Planners'
Group, Inc., PMRealty
Advisors, Inc.
William S. Thomson, Member of Management Board; Director, Managing Director
Jr. Chairman, Executive and Chief Executive Committee
Committee Fitzgerald Officer, PIMCO
Management, Inc.; Chief
Executive Officer and
Managing Director, Pacific
Investment Management
Company; Member, President
and Chief Executive Officer,
PIMCO Partners LLC; Director
and President, StocksPLUS
Management, Inc.; Vice
President, PIMCO Variable
Insurance Trust, PIMCO Funds:
Pacific Investment Management
Series, and PIMCO Commercial
Mortgage Securities Trust,
Inc.; Director, Thomson
Advisory Group, Inc.
Robert M. Fitzgerald Senior Vice President Chief Financial Officer and
and Chief Treasurer, PIMCO Funds
Financial Officer Distributors, LLC, Columbus
Circle Investors, Columbus
Circle Investors Management,
Inc., Cadence Capital
Management, Inc., NFJ
Investment Group, NFJ
Management, Inc., Parametric
Portfolio Associates,
Parametric Management, Inc.,
PIMCO Management, Inc.,
Pacific
-9-
<PAGE>
Investment Management
Company, and StocksPLUS
Management, Inc.; Chief
Financial Officer and
Assistant Treasurer, Cadence
Capital Management; Senior
Vice President and Chief
Financial Officer, Value
Advisors LLC; Chief Financial
Officer, Columbus Circle
Trust Company; Chief
Financial Officer and
Treasurer, PIMCO Funds
Advertising Agency; Senior
Vice President, Chief
Financial Officer and
Treasurer, Thomson Advisory
Group, Inc.
Benjamin L. Trosky Member of Management Board Managing Director, Pacific
Investment Management
Company; Director and
Managing Director, PIMCO
Management, Inc.; Senior Vice
President, PIMCO Commercial
Mortgage Securities Trust,
Inc.; Member of PIMCO
Partners LLC.
Bradley W. Paulson Vice President Vice President and Secretary,
PIMCO Global Advisors
(Europe) Limited, PIMCO
Global Advisors (Japan)
Limited; Vice President,
Pacific Investment Management
Company.
Kenneth M. Poovey Chief Operating Officer Executive Vice President and
and General Counsel General Counsel, Value
Advisors LLC and Thomson
Advisory Group, Inc.
Stephen J. Treadway Executive Vice President Chairman, President, and
Chief Executive Officer,
PIMCO Funds Advertising
Agency, Inc., PIMCO Funds
Distributors LLC, and
Trustee, President and Chief
Executive Officer of the
Trust;
-10-
<PAGE>
Executive Vice President,
Value Advisors LLC.
Robert S. Venable Vice President None
James G. Ward Senior Vice President, Senior Vice President, Human
Human Resources Resources, Value Advisors
LLC; Senior Vice President,
Thomson Advisory Group, Inc.
Richard M. Weil Senior Vice President - Senior Vice President,
Legal, Secretary Assistant Secretary, PIMCO
Management, Inc.; Secretary,
Cadence Capital Management,
Inc., NFJ Investment Group,
NFJ Management, Inc.,
Parametric Portfolio
Associates, Parametric
Management, Inc., and
StocksPLUS Management, Inc.;
Assistant Secretary, Columbus
Circle Investors, Columbus
Circle Investors Management,
Inc., Cadence Capital
Management, PIMCO Funds
Advertising Agency, Inc. and
Pacific Management Investment
Company; Senior Vice
President, Legal, Secretary
Value Advisors LLC, Thomson
Advisors LLC, Thomson
Advisory Group, Inc., and
Vice President of the
Trust.
Frank C. Poli Vice President, Director of Compliance Officer,
Compliance PIMCO Funds Distributors LLC
Vinh T. Nguyen Vice President, Controller Vice President, Controller,
Columbus Circle Investors
Management, Inc., Cadence
Capital Management, Inc., NFJ
Management, Inc., Parametric
Management, Inc., StocksPLUS
Management, Inc., PIMCO Funds
Advertising Agency, Inc.,
PIMCO
-11-
<PAGE>
Funds Distributors LLC,
and Value Advisors LLC;
Controller, Pacific
Investment Management Company
and PIMCO Management, Inc.
Timothy R. Clark Vice President, Mutual Senior Vice President, PIMCO
Funds Division Funds Distributors LLC
Newton B. Schott, Senior Vice President, Director, Executive Vice
Jr. Mutual Funds Division President, Chief
Administrative Officer,
General Counsel and
Secretary, PIMCO Funds
Distributors LLC and PIMCO
Funds Advertising Agency,
Inc.; Chief Legal Officer and
Secretary, Columbus Circle
Investors, Columbus Circle
Investors Management, Inc.;
Senior Vice President, Mutual
Fund Division; General
Counsel and Secretary,
Columbus Circle Trust
Company; Vice President and
Secretary, the Trust; Senior
Vice President, Value
Advisors LLC.
Diane P. Dubois Vice President, Finance None.
Ernest L. Schmider Senior Vice President See Pacific Investment
Management Company
Cadence Capital Management
Exchange Place, 53 State Street
Boston, Massachusetts 02109
Name Position with Portfolio Other Affiliations
Manager
William B. Bannick Managing Director and Director and Managing
Executive Vice President Director,
Cadence Capital Management,
Inc.
David B. Breed Managing Director and Member of Management Board,
Chief Executive Officer PIMCO Advisors L.P.;
Director, Managing Director
and Chief Executive Officer,
Cadence Capital Management,
Inc.
-12-
<PAGE>
Katherine A. Burdon Managing Director None.
Mary Ellen Melendez Secretary None.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Assistant Treasurer
Barbara M. Green Treasurer None.
Richard M. Weil Assistant Secretary See PIMCO Advisors L.P.
NFJ Investment Group
2121 San Jacinto, Suite 1440
Dallas, Texas 75201
Name Position with Portfolio Other Affiliations
Manager
Benno J. Fischer Managing Director Director, Managing
Director, and Co-Chairman,
NFJ Management, Inc.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Treasurer
John L. Johnson Managing Director Director, and Co-Chairman
Managing Director, NFJ
Management, Inc.
Jack C. Najork Managing Director Director, Managing
Director, Co-Chairman, NFJ
Management, Inc.
Richard M. Weil Secretary See PIMCO Advisors L.P.
-13-
<PAGE>
Parametric Portfolio Associates
7310 Columbia Center, 701 Fifth Avenue,
Seattle, Washington 98104-7090
Name Position with Portfolio Other Affiliations
Manager
William E. Cornelius, Managing Director Director, Managing
Jr. Chief Executive Officer
Parametric Management,
Inc.
David M. Stein Managing Director Director and Managing
Director, Parametric
Management, Inc.
Brian Langstraat Managing Director None.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Treasurer
Richard M. Weil Secretary See PIMCO Advisors L.P.
Pacific Investment Management Company ("PIMCO")
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Name Position with Portfolio Other Affiliations
Manager
George C. Allan Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Tamara J. Arnold Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Michael R. Asay Vice President Vice President, PIMCO
Management, Inc.
Leslie A. Barbi Senior Vice President Senior Vice President,
PIMCO Management, Inc.
William R. Benz, II Managing Director Director and Managing
Director, PIMCO
Management, Inc.; Member
of PIMCO Partners
LLC. Member of Management
Board, PIMCO Advisors L.P.
-14-
<PAGE>
Gregory A. Bishop Vice President None.
Andrew Brick Senior Vice President Senior Vice President,
PIMCO Management, Inc.
John B. Brynjolfsson Vice President Vice President, PIMCO
Management, Inc.
R. Welsley Burns Managing Director Executive Vice President,
PIMCO Management, Inc. and
the Trust; President, PIMCO
Funds: Pacific Investment
Management Series; President
and Director, PIMCO
Commercial Mortgage
Securities Trust, Inc.;
President and Trustee, PIMCO
Variable Insurance Trust;
Director, PIMCO Global
Advisors (Ireland) Limited
and PIMCO Advisors Funds
plc.
Carl J. Cohen Vice President Vice President, PIMCO
Management, Inc.
Jerry L. Coleman Vice President Vice President, PIMCO
Management, Inc.
Doug Cummings Vice President Vice President, PIMCO
Management, Inc.
Wendy W. Cupps Vice President Vice President, PIMCO
Management, Inc.
Chris Dialynas Director Managing Director, PIMCO
Management, Inc.
David J. Dorff Vice President
Michael Dow Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
-15-
<PAGE>
Anita Dunn Vice President Vice President, PIMCO
Management, Inc.
A. Benjamin Ehlert Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Robert A. Ettl Senior Vice President and Vice President, PIMCO
Chief Operations Officer Management, Inc.
Anthony L. Faillace Vice President Vice President, PIMCO
Management, Inc.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Treasurer
Ursula T. Frisch Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
William H. Gross Managing Director See PIMCO Advisors L.P.
John L. Hague Managing Director Director, PIMCO Management,
Inc., Member of PIMCO
Partners LLC.
Gordon C. Hally Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Pasi M. Hamalainen Executive Vice President Executive Vice President,
PIMCO Management, Inc.
John P. Hardaway Senior Vice President Vice President, PIMCO
Management, Inc.; Treasurer
of the Trust, PIMCO Funds:
Pacific Investment
Management Series, PIMCO
Commercial Mortgage
Securities Trust, Inc., and
PIMCO Variable Insurance
Trust.
Brent R. Harris Managing Director See PIMCO Advisors L.P.
Joseph Hattesohl Vice President and Manager Vice President, PIMCO
of Fund Taxation Management, Inc.; Assistant
Treasurer, the Trust, PIMCO
Funds: Pacific Investment
Management Series, PIMCO
Variable Insurance Trust,
and PIMCO Commercial
Mortgage Securities Trust,
Inc.
-16-
<PAGE>
Raymond C. Hayes Vice President Vice President, PIMCO Robert
G. Herin Management, Inc.
and PIMCO Funds: Pacific
Investment Management
Series.
Robert G. Herin Vice President Vice President, PIMCO
Management, Inc.
David C. Hinman Vice President Vice President, PIMCO
Management, Inc.
Liza Hocson Vice President Vice President, PIMCO
Management, Inc.
Douglas M. Hodge Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Brent L. Holden Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Dwight F. Holloway, Vice President Vice President, PIMCO
Jr. Management, Inc.
Jane T. Howe Vice President Vice President, PIMCO
Management, Inc.
Mark Hudoff Vice President Vice President, PIMCO
Management, Inc.
Margaret E. Isberg Executive Vice President Executive Vice President,
PIMCO Management, Inc.;
Senior Vice President, PIMCO
Funds: Pacific Investment
Management Series.
James M. Keller Vice President Vice President, PIMCO
Management, Inc.
-17-
<PAGE>
Sharon K. Kilmer Executive Vice President None.
Thomas J. Kelleher Vice President Vice President, PIMCO
Management, Inc.
Raymond G. Kennedy Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Mark R. Kiesel Vice President Vice President, PIMCO
Management, Inc.
Steven P. Kirkbaumer Vice President None.
John S. Loftus Executive Vice President Executive Vice President,
PIMCO Management, Inc.; Vice
President and Assistant
Secretary, StocksPLUS
Management, Inc.
David Lown Vice President Vice President, PIMCO
Management, Inc.
Andre J. Mallegol Vice President Vice President, PIMCO
Management, Inc.
Michael E. Martini Vice President Vice President, PIMCO
Management, Inc.
Dean S. Meiling Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Vice President, PIMCO
Funds: Pacific Investment
Management Series and PIMCO
Commercial Mortgage
Securities Trust, Inc.;
Member of PIMCO Partners
LLC.
Joseph V. McDevitt Executive Vice President Vice President, PIMCO
Management, Inc.
-18-
<PAGE>
James F. Muzzy Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Vice President, PIMCO
Funds: Pacific Investment
Management Series; Director
and Vice President,
StocksPLUS Management, Inc.;
Member of PIMCO Partners
LLC.
Doris S. Nakamura Vice President
Vinh T. Nguyen Controller See PIMCO Advisors L.P.
Douglas J. Ongaro Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
Thomas J. Otterbein Vice President Vice President, PIMCO
Management, Inc.
Victoria M. Paradis Vice President Vice President, PIMCO
Management, Inc.
Bradley W. Paulson Vice President Vice President and
Secretary, Vice President
PIMCO Global Advisors
(Europe) Limited, PIMCO
Global Advisors (Japan)
Limited.
Elizabeth M. Philipp Vice President Vice President, PIMCO
Management, Inc.
David J. Pittman Vice President None.
William F. Podlich,
III Managing Director See PIMCO Advisors L.P.
William C. Powers Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Senior Vice President
PIMCO Commercial Mortgage
Securities Trust, Inc.;
Member of PIMCO Partners
LLC. Member of Management
Board, PIMCO Advisors L.P.
Edward P. Rennie Senior Vice President Senior Vice President, PIMCO
Management, Inc.
-19-
<PAGE>
Terry A. Randall Vice President
Scott L. Roney Vice President Vice President, PIMCO
Management, Inc.
Michael J. Rosborough Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Seth R. Ruthen Vice President Vice President, PIMCO
Management, Inc.
Jeffrey M. Sargent Vice President and Manager Vice President of the Trust,
Shareholder Services and PIMCO Management, Inc.;
Senior Vice President,
Fund Administration PIMCO Funds: Pacific
Investment Management
Series, PIMCO Variable
Insurance Trust, and
PIMCO Commercial Mortgage
Securities Trust, Inc.
Ernest L. Schmider Executive Vice President, Executive Vice President,
Secretary, Chief Secretary, Chief
Administrative and Legal Administrative
Officer and Legal Officer, PIMCO
Management, Inc.; Director,
Assistant Secretary,
Assistant Treasurer,
StocksPLUS
Management, Inc.;
Secretary, PIMCO
Partners LLC.
Leland T. Scholey Senior Vice President Senior Vice President, PIMCO
Management, Inc., and PIMCO
Funds: Pacific Investment
Management Series.
Richard W. Selby Senior Vice President None.
and Chief Technology
Officer
Denise C. Seliga Vice President Vice President, PIMCO
Management, Inc.
Rita J. Seymour Vice President Vice President, PIMCO
Management, Inc.
Christopher Sullivan Vice President Vice President, PIMCO
Management, Inc.
-20-
<PAGE>
Cheryl L. Sylwester Vice President Vice President, PIMCO
Management, Inc.
Lee R. Thomas, III Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Member of PIMCO
Partners LLC.
William S. Thomson, Director, Managing See PIMCO Advisors L.P.
Jr. Director, Chief
Executive Officer
Benjamin L. Trosky Managing Director See PIMCO Advisors L.P.
Richard E. Tyson Vice President Vice President, PIMCO
Management, Inc.
Peter A. Van de Zilver Vice President Vice President, PIMCO
Management, Inc.
Marilyn Wegener Vice President Vice President, PIMCO
Management, Inc.
Richard M. Weil Assistant Secretary See PIMCO Advisors L.P.
Paul C. Westhead Vice President Vice President, PIMCO
Management, Inc.
Kristen M. Wilsey Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
George H. Wood Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Michael A. Yetter Vice President Vice President, PIMCO
Management, Inc.
David Young Vice President Vice President, PIMCO
Management, Inc.
-21-
<PAGE>
Columbus Circle Investors
Metro Center
One Station Place, 8th Floor
Stamford, Connecticut 06902
Name Position with Portfolio Other Affiliations
Manager
Christopher B. Managing Director and Director, Columbus
Burnham Chief Executive Officer Circle Investors
Management, Inc.
Louis P. Celentano Managing Director and Director, Columbus Circle
Chief Operating Officer Investors Management, Inc.;
Director, Chairman and Chief
Operating Officer, Columbus
Circle Trust Company
Donald A. Chiboucas Managing Director See PIMCO Advisors L.P.
Robert W. Fehrmann Managing Director Director, Columbus Circle
Investors Management, Inc.
Marc S. Felman Managing Director Director, Columbus Circle
Investors Management, Inc.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Treasurer
Clifford G. Fox Managing Director Director, Columbus Circle
Investors Management, Inc.
Taegan D. Goddard Senior Vice President None.
Winthrop S. Headley Senior Vice President None.
Amy M. Hogan Managing Director Director of Columbus Circle
Investors Management, Inc.;
Executive Vice President and
Chief Investment Officer,
Columbus Circle Trust
Company.
-22-
<PAGE>
Anthony Rizza Managing Director Director, Columbus
Circle Investors
Management, Inc.
Newton B. Schott, Jr. Chief Legal Officer and See PIMCO Advisors L.P.
Secretary
Irwin F. Smith Managing Director Director, Columbus Circle
Investors Management, Inc.
Nathaniel J. Belknap Vice President None.
Anne Maloney Vice President None.
Paul Meeks Vice President None.
Michele Montano Senior Vice President Executive Vice President,
Columbus Circle Trust
Company.
Paul A. Pantalena Senior Vice President None.
Cecelia Pastore Vice President None.
Harold R. Snedcof Vice President Executive Vice President,
Columbus Circle Trust
Company.
Jennifer Kennedy Vice President None
Vinh T. Nguyen Vice President and See PIMCO Advisors L.P.
Controller
Richard M. Weil Assistant Secretary See PIMCO Advisors, Inc.
Bradford Higgins Executive Vice President None.
Deborah Grennan Vice President None.
Alison Kelley Vice President None.
Dennis McKechnie Vice President None.
Steven E. Moeller Vice President None.
Michele Ward Vice President None.
-23-
<PAGE>
Blairlogie Capital Management, Limited
4th Floor, 125 Princes Street
Edinburgh EH2 4AD, Scotland
Name Position with Portfolio Other Affiliations
Manager
Gavin R. Dobson Chief Executive Officer Director and Chief Executive
and Managing Director Officer, Blairlogie Holdings
Limited (U.K.).
James G. S. Smith Chief Investment Officer Director and Chief
and Managing Director Investment Officer,
Blairlogie Holdings
Limited (U.K.).
Van Eck Associates Corporation
99 Park Avenue
New York, New York 10016
Name Position with Portfolio Other Affiliations
Manager
Philip DeFeo Director, President and Trustee, Van Eck Funds
Chief Executive Officer ("VEF") and Van Eck
Worldwide Insurance Trust
("WWIT"); Director,
President and Chief
Executive Officer,
Van Eck Securities
Corporation ("VESC").
John C. van Eck Chairman of the Board Chairman of the Board and
President, VEF and WWIT;
Chairman of the Board, VESC;
Director, Eclipse Financial
Asset Trust. Formerly,
Director, Abex Inc.;
Director, The Henley Group,
Inc.
Fred M. van Eck Director Trustee, VEF and WWIT;
Private Investor, Director,
VESC.
Sigrid S. van Eck Director, Vice President Vice President, Assistant
and Assistant Treasurer Treasurer and Director,
VESC.
-24-
<PAGE>
Jan van Eck Director Director and Executive Vice
President, VESC.
Derek M. van Eck Director and Executive Vice Director and Executive Vice
President; Director, Global President, VESC; President
Investments Global Hard Assets Series
of the Van Eck Funds and
Worldwide Hard Assets
Series of WWIT; Vice
President, Global Balanced
Series of VEF.
Bruce J. Smith Vice President, Treasurer, Vice President, Treasurer,
Controller and Chief Controller and Chief
Financial Officer Financial Officer, VESC;
Vice President, VEF and
WWIT.
Thaddeus M. Vice President, Secretary Vice President and
Leszcynski and General Counsel Secretary, VEF and WWIT;
Vice President, Secretary
and General Counsel, VESC.
Henry J. Bingham Executive Managing Director Executive Vice President,
VEF and WWIT; Executive Vice
President of VESC.
Lucille Palermo Associate, Mining Research President, International
Investors
Gold and Gold/Resources
Series of VEF.
Kevin Reid Director, Real Estate President, Global Real
Research Estate Series of VEF and
Worldwide Real Estate
Series of WWIT; Vice
President, Global Hard
Assets Series of VEF and
Worldwide Hard Assets
Series of WWIT.
Charles Cameron Director, Trading Vice President, VEF
and WWIT.
-25-
<PAGE>
Item 29. Principal Underwriters.
(a) PIMCO Funds Distributors LLC (the "Distributor") serves as
Distributor of shares for the Registrant and also of PIMCO Funds:
Pacific Investment Management Series. The Distributor is a wholly
owned subsidiary of PIMCO Advisors L.P., the Registrant's Adviser.
(b)
Positions and Positions
Name and Principal Offices with and Offices
Business Address* Underwriter with Registrant
Jeffrey L. Booth Vice President Vice President, PIMCO
Funds Advertising
Agency, Inc.
James D. Bosch Regional Vice President None
Deborah P. Brennan Vice President None
Timothy R. Clark Senior Vice President None
Jonathan P. Fessel Vice President None
Robert M. Fitzgerald Chief Financial Officer None
and Treasurer
Michael J. Gallagher Vice President None
David S. Goldsmith Vice President None
Ronald H. Gray Vice President None
John B. Hussey Vice President None
Edward W. Janeczek Senior Vice President None
Stephen R. Jobe Vice President Vice President, PIMCO
Funds Advertising
Agency, Inc.
Jonathan C. Jones Vice President None
Raymond Lazcano Vice President None
-26-
<PAGE>
William E. Lynch Senior Vice President None
Kevin D. Maloney Compliance Officer None
Jacqueline A. McCarthy Vice President None
Andrew J. Meyers Executive Vice President Executive Vice
President,
PIMCO Funds
Advertising Agency, Inc.
Fiora N. Moyer Regional Vice President None
Philip J. Neugebauer Vice President Vice President, PIMCO
Funds Advertising Agency
Vinh T. Nguyen Vice President, Controller None
Joffrey H. Pearlman Regional Vice President None
Glynne P. Pisapia Regional Vice President None
Francis C. Poli Compliance Officer Vice President, Director
of Compliance, PIMCO
Advisors L.P.
Mark J. Porterfield Vice President, Vice President,
Compliance Officer Compliance Officer,
PIMCO Advisors L.P.
Newton B. Schott, Jr. Executive Vice President, Vice President and
Chief Administrative Secretary
Officer, General Counsel
and Secretary
Robert M. Smith Vice President None
Ellen Z. Spear Vice President Vice President, PIMCO
Funds Advertising
Agency, Inc.
Daniel W. Sullivan Vice President None
William H. Thomas, Jr. Regional Vice President None
-27-
<PAGE>
Stephen J. Treadway Chairman, President and Executive Vice
Chief Executive Officer President,
PIMCO Advisors L.P.
and Trustee
Paul H. Troyer Senior Vice President None
Brian F. Trumbore Executive Vice President None
Richard M. Weil Assistant Secretary None
Glen A. Zimmerman Vice President None
- -----------------------
Principal business address for all individuals listed is 2187 Atlantic
Street, Stamford, CT 06902, except for Messrs. Fitzgerald, Maloney, Nguyen, Poli
and Weil, for whom the address is 800 Newport Center Drive, Newport Beach, CA
92660.
(c) The Registrant has no principal underwriter that is not an affiliated
person of the Registrant or an affiliated person of such an
affiliated person.
Item 30. Location of Accounts and Records.
The account books and other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of Investors Fiduciary
Trust Company, 21 West 10th Street, Kansas City, Missouri 64105, and Shareholder
Services, Inc., P.O. Box 5866, Denver, CO 80217.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant, if requested to do so by the holders of at least 10% of
the Registrant's outstanding shares, will call a meeting of
shareholders for the purpose of voting upon the questions of removal
of a trustee or trustees, and will assist communications among
shareholders as set forth within Section 16(c) of the 1940 Act.
-28-
<PAGE>
(d) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report(s) to
shareholders, upon request and without charge.
-29-
<PAGE>
NOTICE
------
A copy of the Agreement and Declaration of Trust of PIMCO Funds: Multi-
Manager Series (the "Trust"), together with all amendments thereto, 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 Trust by an
officer of the Trust as an officer and not individually and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees of
the Trust or shareholders of any series of the Trust individually but are
binding only upon the assets and property of the Trust or the respective series.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Stamford, and
the State of Connecticut on the 25th of May, 1999.
PIMCO FUNDS: MULTI-MANAGER SERIES
By: /s/ Stephen J. Treadway
------------------------------
Stephen J. Treadway,
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 39 has been signed below by the following persons in the
capacities and on the dates indicated.
Name Capacity Date
- ---- -------- ----
/s/ Stephen J. Treadway Trustee and President May 25, 1999
- ----------------------------
Stephen J. Treadway
John P. Hardaway* Treasurer and Principal
- ---------------------------- Financial and Accounting
John P. Hardaway Officer
William D. Cvengros* Trustee
- ----------------------------
William D. Cvengros
Joel Segall* Trustee
- ----------------------------
Joel Segall
Donald P. Carter* Trustee
- ----------------------------
Donald P. Carter
E. Philip Cannon* Trustee
- ----------------------------
E. Philip Cannon
Gary A. Childress* Trustee
- ----------------------------
Gary A. Childress
Richard L. Nelson* Trustee
- ----------------------------
Richard L. Nelson
Lyman W. Porter* Trustee
- ----------------------------
Lyman W. Porter
Alan Richards* Trustee
- ----------------------------
Alan Richards
W. Bryant Stooks* Trustee
- ----------------------------
W. Bryant Stooks
Gerald M. Thorne* Trustee
- ----------------------------
Gerald M. Thorne
*By: /s/ Stephen J. Treadway
----------------------------
Stephen J. Treadway,
Attorney-In-Fact
Date: May 25, 1999
-2-
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Name Page
- ----------- ------------ ----
5(a)(v) Form of Addendum to Amended and Restated Investment
Advisory Agreement to add PIMCO Mega-Cap Fund.
5(b)(v) Form of Addendum to Portfolio Management Agreement
with Cadence Capital Management to add PIMCO
Mega-Cap Fund.
5(b)(ix) Form of Portfolio Management Agreement with
Blairlogie Capital Management.
6(f) Form of Supplement to Distribution Contract to
add PIMCO Mega-Cap Fund.
8(a) Form of Custody and Investment Accounting Agreement.
<PAGE>
Exhibit 5(a)(v)
ADDENDUM TO INVESTMENT ADVISORY AGREEMENT
-----------------------------------------
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
__________, 1999
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, CA 92660
RE: Mega-Cap Fund
-------------
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
PIMCO Advisors L.P. (the "Adviser") as follows:
1. The Trust is an open-end management investment company organized as a
Massachusetts business trust and consisting of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. Up to six separate classes of shares of beneficial interest in
the Trust are offered to investors with respect to each investment portfolio.
PIMCO Mega-Cap Fund (the "New Fund") is a separate investment portfolio of the
Trust.
2. The Trust and the Adviser have entered into an Amended and Restated
Investment Advisory Agreement dated November 15, 1994, as further amended and
restated as of January 14, 1997 (the "Agreement") and as further supplemented
from time to time, pursuant to which the Trust employs the Adviser to provide
investment advisory and other services specified in the Agreement, and the
Adviser has accepted such employment.
3. As provided in paragraph 1 of the Agreement, the Trust hereby appoints
the Adviser to serve as Investment Adviser with respect to the New Fund, and the
Adviser accepts such appointment, the terms and conditions of such employment to
be governed by the Agreement, which is hereby incorporated herein by reference.
<PAGE>
4. As provided in paragraph 9 of the Agreement and subject to further
conditions set forth therein, the Trust shall with respect to the New Fund pay
the Adviser a monthly fee at the following annual rate based upon the average
daily net assets of the New Fund:
Fund Fee Rate
---- --------
Mega-Cap Fund 0.45%
5. This Addendum and the Agreement shall take effect with respect to the
New Fund on __________, 1999, and shall remain in effect, unless sooner
terminated as provided in the Agreement and herein, with respect to the New Fund
for a period of two years following such date. This Addendum and the Agreement
shall continue thereafter on an annual basis with respect to the New Fund
provided that such continuance is specifically approved at least annually (a) by
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 New Fund, and provided
continuance is also approved by vote of a majority of the Board of Trustees of
the Trust who are not parties to this Addendum or the Agreement or "interested
persons" (as defined in the 1940 Act) of the Trust, or the Adviser, cast in
person at a meeting called for the purpose of voting on such approval. This
Addendum and the Agreement may not be materially amended without a majority vote
of the outstanding voting shares (as defined in the 1940 Act) of the New Fund.
However, any approval of this Addendum and the Agreement by the holders of
a majority of the outstanding shares (as defined in the 1940 Act) of the New
Fund shall be effective to continue the Addendum and the Agreement with respect
to the New Fund notwithstanding (a) that this Addendum and the Agreement have
not been approved by the holders of a majority of the outstanding shares of any
other investment portfolio of the Trust or (b) that this Addendum and the
Agreement have not been approved by the vote of a majority of the outstanding
shares of the Trust, unless such approval shall be required by any other
applicable law or otherwise. The Agreement will terminate automatically with
respect to the services provided by the Adviser in the event of its assignment,
as that term in defined in the 1940 Act, by the Adviser.
This Addendum and the Agreement may be terminated:
(a) by the Trust at any time with respect to the services provided by
the Adviser, without the payment of any penalty, by vote of a majority of the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting shares of the Trust or by vote of a majority of the outstanding voting
shares the New Fund, on 60 days' written notice to the Adviser;
(b) by the Adviser at any time, without the payment of any penalty,
upon 60 days' written notice to the Trust.
-2-
<PAGE>
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO Funds: Multi-Manager Series
By:
______________________________
Title:
ACCEPTED:
PIMCO Advisors L.P.
By: ____________________________________
Title:
-3-
<PAGE>
Exhibit 5(b)(v)
ADDENDUM TO PORTFOLIO MANAGEMENT AGREEMENT
------------------------------------------
The Portfolio Management Agreement, made the 15th day of November, 1994 and
amended the 14th day of January, 1997 (the "Agreement") and as further
supplemented from time to time, between PIMCO Advisors L.P. ("PIMCO Advisors" or
"Adviser"), a limited partnership, and Cadence Capital Management ("Cadence" or
"Portfolio Manager"), a general partnership, is hereby amended as set forth in
this Addendum to the Agreement, which is made this ___ day of ___________, 1999.
WITNESSETH:
WHEREAS, PIMCO Funds: Multi-Manager Series (the "Trust") is authorized to
issue shares of beneficial interest in separate series, with each such series
representing interests in separate portfolios of securities and other assets;
and
WHEREAS, the Trust currently consists of multiple separate series,
including operational series or series that are expected to be operational that
are designated as the PIMCO International Fund, PIMCO Capital Appreciation Fund,
PIMCO Mid-Cap Growth Fund, PIMCO Small-Cap Growth Fund, PIMCO Micro-Cap Growth
Fund, PIMCO Renaissance Fund, PIMCO Core Equity Fund, PIMCO International Growth
Fund, PIMCO Mid-Cap Equity Fund, PIMCO Equity Income Fund, PIMCO Value Fund,
PIMCO Value 25 Fund, PIMCO Small-Cap Value Fund, PIMCO Growth Fund, PIMCO Target
Fund, PIMCO Opportunity Fund, PIMCO Innovation Fund, PIMCO Enhanced Equity Fund,
PIMCO Structured Emerging Markets Fund, PIMCO Tax-Efficient Equity Fund, PIMCO
Tax-Efficient Structured Emerging Markets Fund, PIMCO Balanced Fund, PIMCO
Precious Metals Fund, PIMCO Hard Assets Fund, PIMCO Funds Asset Allocation
Series--90/10 Portfolio, PIMCO Funds Asset Allocation Series--60/40 Portfolio
and PIMCO Funds Asset Allocation Series--30/70 Portfolio; and
WHEREAS, the Trust has retained PIMCO Advisors to render investment
management services to the Trust's series pursuant to an Amended and Restated
Investment Advisory Agreement dated as of November 15, 1994, as amended and
restated as of January 14, 1997 and further supplemented from time to time, and
such agreement authorizes the Adviser to engage portfolio mangers to discharge
the Adviser's responsibilities with respect to the management of the investment
portfolios of the Trust; and
WHEREAS, the Adviser has retained Cadence to furnish investment advisory
services to PIMCO Capital Appreciation Fund, PIMCO Mid-Cap Growth Fund, PIMCO
Small-Cap Growth Fund, PIMCO Micro-Cap Growth Fund, and a portion of the Common
Stock Segment of the Balanced Fund (together, the "Funds"); and
WHEREAS, the Adviser desires to retain Cadence to furnish investment
advisory services to PIMCO Mega-Cap Fund (the "New Fund") and Cadence desires to
acknowledge and accept such retention pursuant to this Addendum;
<PAGE>
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
1. The first sentence of Paragraph one (1) ("Appointment") of the
-----------
Agreement is hereby amended and restated as follows:
"1. Appointment. The Adviser hereby appoints Cadence Capital
-----------
Management to act as Portfolio Manager to PIMCO Capital
Appreciation Fund, PIMCO Mega-Cap Fund, PIMCO Mid-Cap Growth
Fund, PIMCO Small-Cap Growth Fund, PIMCO Micro-Cap Growth Fund,
and a portion of the Common Stock Segment of the Balanced Fund
allocated to Cadence by PIMCO Advisors (together, the "Funds")
for the periods and on the terms set forth in this Agreement.
2. Paragraph five (5) ("Compensation") of the Agreement is hereby amended
------------
and restated as follows:
"5. Compensation. For the services provided, the Adviser will
------------
pay the Portfolio Manger a fee for each Fund accrued and computed
daily and payable monthly at the following annual rate based on
the average daily net assets of such Fund:
Fund Fee Rate
---- --------
Capital Appreciation Fund 0.35%
Mega-Cap Fund 0.35%
Mid-Cap Growth Fund 0.35%
Small-Cap Growth Fund 0.90%
Micro-Cap Growth Fund 1.15%
Portion of the Common Stock
Segment of the Balanced
Fund allocated to Cadence 0.35%.
3. This Addendum and the Agreement shall take effect with respect to the
New Fund on __________, 1999, and shall remain in effect, unless sooner
terminated as provided in the Agreement and herein, with respect to the New Fund
for two years from such date and continue thereafter on an annual basis with
respect to the New Fund; provided that such annual
-2-
<PAGE>
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 the vote of a majority
of the outstanding voting shares of the New Fund, and provided that continuance
is also approved by the vote of a majority of the Board of Trustees of the Trust
who are not parties to this Addendum or the Agreement or "interested persons"
(as such term is defined in the 1940 Act) of the Trust, the Adviser, or the
Portfolio Manager, cast in person at a meeting called for the purpose of voting
on such approval. This Addendum and the Agreement may not be materially amended
with respect to the New Fund without a majority vote of the outstanding voting
shares (as defined in the 1940 Act) of the New Fund.
This Addendum and the Agreement may be terminated with respect to the New
Fund:
(a) by the Trust at any time with respect to the services provided by
the Portfolio Manager, without the payment of any penalty, by vote of a majority
of the entire Board of Trustees of the Trust or by vote of a majority of the
outstanding voting shares of the Trust or by vote of a majority of the
outstanding voting shares of the New Fund, on 60 days' written notice to the
Portfolio Manager;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, upon 60 days' written notice to the Trust; or
(c) by the Adviser any time, without the payment of any penalty, upon
60 days' written notice to the Portfolio Manager.
However, any approval of this Addendum and the Agreement by the holders of
a majority of the outstanding shares (as defined in the 1940 Act) of the New
Fund shall be effective to continue the Addendum and the Agreement with respect
to the New Fund notwithstanding (a) that this Addendum and the Agreement has not
been approved by the holders of a majority of the outstanding shares of any
other series or other investment portfolio of the Trust, or (b) that this
Addendum and the Agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. The Agreement, as amended by this
Addendum, will terminate automatically with respect to the services provided by
the Portfolio Manager in the event of its assignment, as that term in defined in
the 1940 Act, by the Portfolio Manager.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below.
PIMCO ADVISORS L.P.
By:
________________________________________
Title:
CADENCE CAPITAL MANAGEMENT
By:
________________________________________
Title:
-4-
<PAGE>
EXHIBIT 5(b)(ix)
PIMCO FUNDS: MULTI-MANAGER SERIES
PIMCO International Fund
PORTFOLIO MANAGEMENT AGREEMENT
------------------------------
AGREEMENT made this 30th day of April, 1999 between PIMCO Advisors L.P.
("Adviser"), a limited partnership, and Blairlogie Capital Management (the
"Portfolio Manager"), a partnership.
WHEREAS, PIMCO Funds: Multi-Manager Series (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; and
WHEREAS, the Trust has established multiple series, including operational
series or series that are expected to be operational that are designated as the
PIMCO International Fund, PIMCO Capital Appreciation Fund, PIMCO Mid-Cap Growth
Fund, PIMCO Small-Cap Growth Fund, PIMCO Micro-Cap Growth Fund, PIMCO
Renaissance Fund, PIMCO Core Equity Fund, PIMCO International Growth Fund, PIMCO
Mid-Cap Equity Fund, PIMCO Equity Income Fund, PIMCO Value Fund, PIMCO Value 25
Fund, PIMCO Small-Cap Value Fund, PIMCO Growth Fund, PIMCO Target Fund, PIMCO
Opportunity Fund, PIMCO Innovation Fund, PIMCO Enhanced Equity Fund, PIMCO
Structured Emerging Markets Fund, PIMCO Tax-Efficient Equity Fund, PIMCO Tax-
Efficient Structured Emerging Markets Fund, PIMCO Balanced Fund, PIMCO Precious
Metals Fund, PIMCO Hard Assets Fund, PIMCO Funds Asset Allocation Series 90/10
Portfolio, PIMCO Funds Asset Allocation Series 60/40 Portfolio and PIMCO Funds
Asset Allocation Series 30/70 Portfolio, such series together with any other
series subsequently established by the Trust, being collectively referred to
hereinafter as the "Series"; and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS, the Trust has retained the Adviser to render management services
to the Fund (as defined below) pursuant to an Investment Advisory Agreement
dated as of November 15, 1994, as from time to time amended, supplemented or
modified, and such Agreement authorizes the Adviser to engage Portfolio Managers
to discharge the Adviser's responsibilities with respect to the management of
the Series; and
WHEREAS, the Adviser desires to retain the Portfolio Manager to furnish
investment advisory services to one or more of the Series of the Trust, and the
Portfolio Manager is
<PAGE>
willing to furnish such services to such Series and the Adviser in the manner
and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Adviser and the
Portfolio Manager as follows:
1. Appointment. The Adviser hereby appoints Blairlogie Capital
Management to act as Portfolio Manager to the PIMCO International Fund (the
"Fund") for the periods and on the terms set forth in this Agreement.
The Portfolio Manager accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
In the event the Adviser wishes to retain the Portfolio Manager to
render investment advisory services to one or more Series other than the
Fund, the Adviser shall notify the Portfolio Manager in writing. If the
Portfolio Manager is willing to render such services, it shall notify the
Adviser in writing.
2. Portfolio Management Duties. Subject to the supervision of the
Trust's Board of Trustees and the Adviser, the Portfolio Manager will
provide a continuous investment program for the Fund and determine the
composition of the assets of the Fund, including determination of the
purchase, retention, or sale of the securities, cash, and other investments
for the Fund. The Portfolio Manager will provide investment research and
analysis, which may consist of computerized investment methodology, and
will conduct a continuous program of evaluation, investment, sales, and
reinvestment of the Fund's assets by determining the securities and other
investments that shall be purchased, entered into, sold, closed, or
exchanged for the Fund, when these transactions should be executed, and
what portion of the assets of the Fund should be held in the various
securities and other investments in which it may invest, and the Portfolio
Manager is hereby authorized to execute and perform such services on behalf
of the Fund. To the extent permitted by the investment policies of the
Fund, the Portfolio Manager shall make decisions for the Fund as to foreign
currency matters and make determinations as to the retention or disposition
of foreign currencies or securities or other instruments denominated in
foreign currencies, or derivative instruments based upon foreign
currencies, including forward foreign currency contracts and options and
futures on foreign currencies and shall execute and perform the same on
behalf of the Fund. The Portfolio Manager will provide the services under
this Agreement in accordance with the Fund's investment objective or
objectives, investment policies, and investment restrictions as stated in
the Trust's Registration Statement filed on Form N-1A with the SEC, as
supplemented or amended from time to time, copies of which shall be sent to
the Portfolio Manager by the Adviser. In performing these duties, the
Portfolio Manager:
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a. 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.
b. Shall use reasonable efforts to manage the Fund so that it
qualifies as a regulated investment company under Subchapter M of the
Internal Revenue Code.
c. Is responsible, in connection with its responsibilities under
this Section 2, for decisions to buy and sell securities and other
investments for the Fund, for broker-dealer and futures commission
merchant ("FCM") selection, and for negotiation of commission rates.
The Portfolio Manager's primary consideration in effecting a security
or other transaction will be to obtain the best execution for the
Fund, taking into account the factors specified in the Prospectus and
Statement of Additional Information for the Trust, as they may be
amended or supplemented from time to time. Subject to such policies as
the Board of Trustees may determine and consistent with Section 28(e)
of the Securities Act of 1934, the Portfolio Manager shall not be
deemed to have acted unlawfully or to have breached any duty created
by this Agreement or otherwise solely by reason of its having caused
the Fund to pay a broker or dealer, acting as agent, for effecting a
portfolio transaction at a price in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction, if the Portfolio Manager determines in good faith that
such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Portfolio
Manager's overall responsibilities with respect to the Fund and to its
other clients as to which it exercises investment discretion. To the
extent consistent with these standards, and in accordance with Section
11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and subject to any other applicable laws and regulations,
the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Fund to the Portfolio Manager if it is
registered as a broker or dealer with the SEC, to its affiliate that
is registered as a broker or dealer with the SEC, or to such brokers
and dealers that also provide research or statistical research and
material, or other services to the Fund or the Portfolio Manager. Such
allocation shall be in such amounts and proportions as the Portfolio
Manager shall determine consistent with the above standards, and, upon
request, the Portfolio Manager will report on said allocation to the
Adviser and Board of Trustees of the Trust, indicating the brokers or
dealers to which such allocations have been made and the basis
therefor.
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<PAGE>
d. May, on occasions when the purchase or sale of a security is
deemed to be in the best interest of the Fund as well as any other
investment advisory clients, to the extent permitted by applicable
laws and regulations, but shall not be obligated to, aggregate the
securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth
in the Registration Statement. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Portfolio Manager in a manner
that is fair and equitable in the judgment of the Portfolio Manager in
the exercise of its fiduciary obligations to the Trust and to such
other clients.
e. Will, in connection with the purchase and sale of securities
for the Fund, arrange for the transmission to the custodian for the
Trust on a daily basis, such confirmation, trade tickets, and other
documents and information, including, but not limited to, Cusip,
Sedol, or other numbers that identify securities to be purchased or
sold on behalf of the Fund, as may be reasonably necessary to enable
the custodian to perform its administrative and recordkeeping
responsibilities with respect to the Fund, and, with respect to
portfolio securities to be purchased or sold through the Depository
Trust Company, will arrange for the automatic transmission of the
confirmation of such trades to the Trust's custodian.
f. Will assist the custodian and recordkeeping agent(s) for the
Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value
of any portfolio securities or other assets of the Fund for which the
custodian and recordkeeping agent(s) seek assistance from the
Portfolio Manager or identify for review by the Portfolio Manager.
g. Will make available to the Trust and Adviser, promptly upon
request, the Fund's investment records and ledgers as are necessary to
assist the Trust to comply with the requirements of the 1940 Act and
the Advisers Act, as well as other applicable laws, and will furnish
to regulatory authorities having the requisite authority any
information or reports in connection with such services which 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.
h. Will regularly report to the Trust's Board of Trustees on the
investment program for the Fund and the issuers and securities
represented in the Fund's portfolio, and will furnish the Trust's
Board of Trustees with respect to the Fund such periodic and special
reports as the Trustees may reasonably request.
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<PAGE>
i. Shall be responsible for making reasonable inquiries and for
reasonably ensuring that any employee of the Portfolio Manager has
not, to the best of the Portfolio Manager's knowledge:
i. been convicted, in the last ten (10) years, of any
felony or misdemeanor involving the purchase or sale of any
security or arising out of such person's conduct as an
underwriter, broker, dealer, investment adviser, municipal
securities dealer, government securities broker, government
securities dealer, transfer agent, or entity or person required
to be registered under the Commodity Exchange Act, or as an
affiliated person, salesman, or employee of any investment
company, bank, insurance company, or entity or person required to
be registered under the Commodity Exchange Act; or
ii. been permanently or temporarily enjoined by reason of
any misconduct, by order, judgment, or decree of any court of
competent jurisdiction from acting as an underwriter, broker,
dealer, investment adviser, municipal securities dealer,
government securities broker, government securities dealer,
transfer agent, or entity or person required to be registered
under the Commodity Exchange Act, or as an affiliated person,
salesman or employee of any investment company, bank, insurance
company, or entity or person required to be registered under the
Commodity Exchange Act, or from engaging in or continuing any
conduct or practice in connection with any such activity or in
connection with the purchase or sale of any security.
3. Disclosure about Portfolio Manager. The Portfolio Manager has
reviewed the Registration Statement for the Trust filed with the SEC and
represents and warrants that, with respect to the disclosure about the
Portfolio Manager or information relating, directly or indirectly, to the
Portfolio Manager, such Registration Statement contains, as of the date
hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly
registered investment adviser under the Advisers Act and a duly registered
investment adviser in all states in which the Portfolio Manager is required
to be registered. The Adviser has received a current copy of the Portfolio
Manager's Uniform Application for Investment Adviser Registration on Form
ADV, as filed with the SEC. The Portfolio Manager agrees to provide the
Adviser with current copies of the Portfolio Manager's Form ADV, and any
supplements or amendments thereto, as filed with the SEC.
-5-
<PAGE>
4. Expenses. During the term of this Agreement, the Portfolio
Manager will pay all expenses incurred by it and its staff and for their
activities in connection with its services under this Agreement. The
Portfolio Manager shall not be responsible for any of the following:
a. Expenses of all audits by the Trust's independent public
accountants;
b. Expenses of the Trust's transfer agent(s), registrar,
dividend disbursing agent(s), and shareholder recordkeeping services;
c. Expenses of the Trust's custodial services, including
recordkeeping services provided by the custodian;
d. Expenses of obtaining quotations for calculating the value of
the Fund's net assets;
e. Expenses of obtaining Portfolio Activity Reports for the
Fund;
f. Expenses of maintaining the Trust's tax records;
g. 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 Adviser, its subsidiaries or
affiliates, or any Portfolio Manager of the Trust;
h. Taxes, if any, levied against the Trust or any of its Series;
i. Brokerage fees and commissions in connection with the
purchase and sale of portfolio securities for the Fund;
j. Costs, including the interest expenses, of borrowing money;
k. Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings 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 the
registration of shares with federal and state securities or insurance
authorities;
l. The Trust's legal fees, including the legal fees related to
the registration and continued qualification of the Trust's shares for
sale;
m. Costs of printing stock certificates representing shares of
the Trust;
-6-
<PAGE>
n. Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
o. The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
p. Association membership dues;
q. Extraordinary expenses of the Trust as may arise, including
expenses incurred in connection with litigation, proceedings and other
claims and the legal obligations of the Trust to indemnify its
trustees, officers, employees, shareholders, distributors, and agents
with respect thereto; and
r. Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and
commissions.
5. Compensation. For the services provided, the Adviser will pay the
Portfolio Manager a fee accrued and computed daily and payable monthly,
based on the average daily net assets of the Fund at the annual rate of
.40% of the average daily net assets of the Fund.
6. [Reserved].
7. Compliance.
a. The Portfolio Manager agrees that it shall immediately notify
the Adviser and the Trust in the event (i) that the SEC has censured
the Portfolio Manager; placed limitations upon its activities,
functions or operations; suspended or revoked its registration as an
investment adviser; or has commenced proceedings or an investigation
that may result in any of these actions, and (ii) upon having a
reasonable basis for believing that the Fund has ceased to qualify or
might not qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code. The Portfolio Manager further agrees to
notify the Adviser and the Trust immediately of any material fact
known to the Portfolio Manager that is not contained in the
Registration Statement or prospectus for the Trust, or any amendment
or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect.
b. The Adviser agrees that it shall immediately notify the
Portfolio Manager in the event (i) that the SEC has censured the
Adviser or the Trust; placed limitations upon either of their
activities, functions, or operations; suspended or revoked the
Adviser's registration as an investment adviser; or has
-7-
<PAGE>
commenced proceedings or an investigation that may result in any of
these actions, and (ii) upon having a reasonable basis for believing
that a Fund has ceased to qualify or might not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code.
8. Independent Contractor. The Portfolio Manager shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Adviser from time
to time, have no authority to act for or represent the Adviser in any way
or otherwise be deemed its agent. The Portfolio Manager understands that
unless expressly provided herein or authorized from time to time by the
Trust, the Portfolio Manager shall have no authority to act for or
represent the Trust in any way or otherwise be deemed the Trust's agent.
9. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Portfolio Manager hereby agrees that all
records which it maintains for the Fund are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon
the Trust's or the Adviser's request, although the Portfolio Manager may,
at its own expense, make and retain a copy of such records. The Portfolio
Manager further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act and to preserve the records required by Rule 204-2 under
the Advisers Act for the period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate
with each other party and with all appropriate governmental authorities
having the requisite jurisdiction (including, but not limited to, the SEC)
in connection with any investigation or inquiry relating to this Agreement
or the Trust.
11. Services Not Exclusive. It is understood that the services of
the Portfolio Manager are not exclusive, and nothing in this Agreement
shall prevent the Portfolio Manager (or its affiliates) from providing
similar services to other clients, including investment companies (whether
or not their investment objectives and policies are similar to those of the
Fund) or from engaging in other activities.
12. Liability. Except as provided in Section 13 and as may otherwise
be required by the 1940 Act or the rules thereunder or other applicable
law, the Adviser agrees that the Portfolio Manager, any affiliated person
of the Portfolio Manager, and each person, if any, who, within the meaning
of Section 15 of the Securities Act of 1933 (the "1933 Act") controls the
Portfolio Manager shall not be liable for, or subject to any damages,
expenses, or losses in connection with, any act or omission connected with
or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio
-8-
<PAGE>
Manager's duties, or by reason of reckless disregard of the Portfolio
Manager's obligations and duties under this Agreement.
13. Indemnification. The Portfolio Manager agrees to indemnify and
hold harmless the Adviser, any affiliated person within the meaning of
Section 2(a)(3) of the 1940 Act ("affiliated person") of the Adviser and
each person, if any, who, within the meaning of Section 15 of the 1933 Act,
controls ("controlling person") the Adviser (collectively, "Adviser
Indemnified Persons") against any and all losses, claims, damages,
liabilities or litigation (including legal and other expenses), to which
the Adviser or such affiliated person or controlling person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Portfolio Manager's
responsibilities to the Trust which (i) may be based upon any misfeasance,
malfeasance, or nonfeasance by the Portfolio Manager, any of its employees
or representatives, or any affiliate of or any person acting on behalf of
the Portfolio Manager (other than an Adviser Indemnified Person), or
(ii) may be based upon any untrue statement or alleged untrue statement of
a material fact contained in a registration statement or prospectus
covering the Shares of the Trust, the Fund or any Series, or any amendment
thereof or any supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such a statement or omission
was made in reliance upon information furnished to the Adviser, the Trust,
or any affiliated person of the Trust by the Portfolio Manager or any
affiliated person of the Portfolio Manager (other than an Adviser
Indemnified Person); provided, however, that in no case is the Portfolio
Manager's indemnity in favor of the Adviser or any affiliated person or
controlling person of the Adviser deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of
his duties, or by reason of his reckless disregard of obligations and
duties under this Agreement.
The Adviser agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person within the meaning of Section 2(a)(3) of the
1940 Act of the Portfolio Manager and each controlling person of the
Portfolio Manager (collectively, "Blairlogie Indemnified Persons") against
any and all losses, claims, damages, liabilities or litigation (including
legal and other expenses) to which the Portfolio Manager or such affiliated
person or controlling person may become subject under the 1933 Act, the
1940 Act, the Advisers Act, under any other statute, at common law or
otherwise, arising out of the Adviser's responsibilities as adviser of the
Trust which (i) may be based upon any misfeasance, malfeasance, or
nonfeasance by the Adviser, any of its employees or representatives or any
affiliate of or any person acting on behalf of the Adviser (other than a
Blairlogie Indemnified Person) or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering Shares of the Trust, the Fund
or any Series, or any amendment thereof or any supplement thereto, or the
omission or alleged
-9-
<PAGE>
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, unless such
statement or omission was made in reliance upon written information
furnished to the Adviser or any affiliated person of the Adviser by the
Portfolio Manager or any affiliated person of the Portfolio Manager (other
than a Blairlogie Indemnified Person); provided however, that in no case is
the indemnity of the Adviser in favor of the Portfolio Manager, or any
affiliated person or controlling person of the Portfolio Manager deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of his reckless
disregard of obligations and duties under this Agreement.
14. Duration and Termination. This Agreement shall take effect as of
the date hereof. This Agreement shall remain in effect for two years from
such date and continue thereafter on an annual basis with respect to the
Fund; provided that such annual 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 the vote of a majority of the outstanding voting shares
of the Fund, and provided that 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 such term is defined in the 1940
Act) of the Trust, the Adviser, or the Portfolio Manager, cast in person at
a meeting called for the purpose of voting on such approval. This
Agreement may not be materially amended without (1) a majority vote of the
outstanding shares (as defined in the 1940 Act) of the Fund, except to the
extent permitted by any exemption or exemptions that may be granted upon
application made to the SEC or by any applicable SEC rule, and (2) the
prior written consent of the Portfolio Manager and the Adviser. This
Agreement may be terminated:
a. by the Trust at any time with respect to the services
provided by the Portfolio Manager, without the payment of any penalty,
by vote of (1) a majority of the Trustees of the Trust; (2) a majority
of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as such term is defined in the 1940 Act) of the
Trust, the Adviser or the Portfolio Manager; or (3) a majority of the
outstanding voting shares of the Fund, on 60 days' written notice to
the Portfolio Manager;
b. by the Portfolio Manager at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust; or
c. by the Adviser at any time, without the payment of any
penalty, upon 60 days' written notice to the Portfolio Manager.
However, any approval of this Agreement by the holders of a majority
of the outstanding shares (as defined in the 1940 Act) of a particular Fund
shall be effective to
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<PAGE>
continue this Agreement with respect to such Fund notwithstanding (a) that
this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Fund or (b) that this Agreement has not
been approved by the vote of a majority of the outstanding shares of the
Trust, unless such approval shall be required by any other applicable law
or otherwise. This Agreement will terminate automatically with respect to
the services provided by the Portfolio Manager in event of its assignment,
as that term is defined in the 1940 Act, by the Portfolio Manager.
15. Agreement and Declaration of Trust. A copy of the Second Amended
and Restated Agreement and Declaration of Trust for the Trust is on file
with the Secretary of the Commonwealth of Massachusetts. The Second Amended
and Restated Agreement and Declaration of Trust has been executed on behalf
of the Trust by a Trustee of the Trust in his capacity as Trustee of the
Trust and not individually. The obligations of this Agreement shall 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.
16. Miscellaneous.
a. This Agreement shall be governed by the laws of California,
provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of
the SEC thereunder.
b. The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
c. 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.
d. The parties hereto acknowledge and agree that the Trust is an
express third party beneficiary to this Agreement. Except as provided
in the preceding sentence, the parties agree that this Agreement is
not intended to benefit, or create any right or cause of action in or
on behalf of, any other person or entity.
e. With respect to any actions brought by the Adviser or the
Trust against the Portfolio Manager, the Portfolio Manager:
(i) consents to the subject matter and in personam jurisdiction and
venue in the United States District Court for the Central District of
California; (ii) waives the right to contest the
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subject matter and in personam jurisdiction and venue in the United
States District Court for the Central District of California on any
ground; and (iii) agrees that service of process upon it can be made
either in person or by certified or registered mail, return receipt
requested, to The Chicago Trust Company, 171 North Clark Street,
Chicago, Illinois 60601, or any other address designated by the
Adviser as the address to which notices pursuant to this Agreement
should be sent. The Portfolio Manager agrees that service to such
address shall be deemed to constitute sufficient service of process
under both the federal and state rules of civil procedure wherever the
case is filed. In the event it is determined that the United States
District Court for the Central District of California should lack
subject matter jurisdiction for any reason, the Portfolio Manager
consents to the subject matter and in personam jurisdiction and venue
in a California State court of competent jurisdiction in Orange
County.
[The rest of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
PIMCO ADVISORS L.P.
_______________________________ By:___________________________
Attest: Title:
Title:
BLAIRLOGIE CAPITAL
MANAGEMENT
________________________________ By:____________________________
Attest: Title:
Title:
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<PAGE>
Exhibit 6(f)
SUPPLEMENT TO DISTRIBUTION CONTRACT
-----------------------------------
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
__________, 1999
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, Connecticut 06902
Re: Mega-Cap Fund
-------------
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
PIMCO Funds Distributors LLC (the "Distributor") as follows:
1. The Trust is an open-end management investment company organized as a
Massachusetts business trust and consisting of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. Up to six separate classes of shares of beneficial interest in
the Trust are offered to investors with respect to each investment portfolio.
PIMCO Mega-Cap Fund (the "New Fund") is a separate investment portfolio of the
Trust.
2. The Trust and the Distributor have entered into an Amended and
Restated Distribution Contract (the "Contract") dated April 8, 1998, pursuant to
which the Distributor has agreed to be the distributor of shares of beneficial
interest in the Trust.
3. In accordance with paragraph 1 of the Contract, the Trust and the
Distributor hereby designate the New Fund as an additional investment portfolio
to which the Contract pertains and adopt the Contract with respect to the New
Fund, the terms and conditions of the Contract being hereby incorporated herein
by reference.
4. This Supplement and the Contract shall become effective with
respect to the New Fund on __________, 1999 and shall remain in full force and
effect continuously as to the New Fund and a class of shares thereof (unless
terminated automatically as set forth in Section 17 of the Contract) until
terminated:
(a) Either by such New 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
<PAGE>
(b) Automatically as to the New 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 the Contract, whichever is later,
if the continuance of the Contract is not specifically approved at least
annually by the Trustees of the Trust or the shareholders of the New Fund or
such class by the affirmative vote of a majority of the outstanding shares of
the New 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 (as defined in the Contract) or
the Contract by vote cast in person at a meeting called for the purpose of
voting on such approval.
Action by the New 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 the New 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 Addendum and the Contract pursuant to this section
shall be without the payment of any penalty.
If the Contract is terminated or not renewed with respect to the New Fund
or any other investment portfolio of the Trust or class of shares thereof, it
may continue in effect with respect to any series or any class thereof as to
which it has not been terminated (or has been renewed).
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 Funds Distributors LLC
By: ____________________________________
Title:
-2-
<PAGE>
EXHIBIT 8(a)
CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT is made effective the 2nd day of January, 1998, by and
between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the
laws of the State of Missouri, having its principal office and place of business
at 801 Pennsylvania Avenue, Kansas City, Missouri 64105 ("IFTC"), EACH
REGISTERED INVESTMENT COMPANY LISTED ON SCHEDULE A hereto, as it may be amended
from time to time, incorporated herein by this reference, each having its
principal office and place of business at 840 Newport Center Drive, Newport
Beach, CA 92660 (each sometimes referred to as a "Fund" and, collectively, the
"Funds"), and PACIFIC INVESTMENT MANAGEMENT COMPANY, a Delaware partnership
having its principal office and place of business at 840 Newport Center Drive,
Newport Beach, CA 92660 ("PIMCO"), acting as administrator for each Fund.
WITNESSETH:
WHEREAS, PIMCO administers all of the operations of PIMCO Funds: Pacific
Investment Management Series ("PIMS"), a Massachusetts business trust that is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company, pursuant to an Administration Agreement between
PIMS and PIMCO, and procures or provides for the procurement on behalf of PIMS
at PIMCO's expense certain services, including custody services; and
WHEREAS, PIMCO Advisors L.P. ("PALP") administers all of the operations of
the PIMCO Funds: Multi-Manager Series ("MMS"), a Massachusetts business trust
that is registered with the SEC as an open-end management investment company,
pursuant to an Administration Agreement between MMS and PALP, and procures or
provides for procurement on behalf of MMS at PALP's expense certain services,
including custody services; and
WHEREAS, PIMCO pursuant to an Administration Agreement with PALP has been
appointed as sub-administrator to provide or procure certain services, including
custody services, for or on behalf of MMS; and
WHEREAS, PIMCO desires to appoint IFTC as custodian of the assets of each
Fund's investment portfolio or portfolios (each a "Portfolio", and collectively
the "Portfolios") and as each Fund's agent to perform certain investment
accounting and recordkeeping functions; and
WHEREAS, IFTC is willing to accept such appointment on the terms and
conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN AND AGENT. PIMCO hereby constitutes and appoints
----------------------------------
IFTC as:
<PAGE>
A. Custodian of the investment securities, interests in loans and other
non-cash investment property, and monies at any time owned by each of
the Portfolios and delivered to IFTC as custodian hereunder
("Assets"); and
B. Agent to perform certain accounting and recordkeeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule 31a of the Investment Company Act of
1940, as amended (the "1940 Act") and to calculate the net asset value
of the Portfolios.
2. REPRESENTATIONS AND WARRANTIES.
-------------------------------
A. Each Fund hereby represents, warrants and acknowledges to IFTC:
1. That it is a corporation or trust duly organized and existing and
in good standing under the laws of its state of organization, and
that it is registered under the 1940 Act; and
2. That it has the requisite power and authority under applicable
law and its articles of incorporation and its bylaws or its trust
instrument, as the case may be, to enter into this Agreement;
that it has taken all requisite action necessary to appoint IFTC
as custodian and investment accounting and recordkeeping agent,
that this Agreement has been duly executed and delivered by Fund;
and that this Agreement constitutes a legal, valid and binding
obligation of Fund, enforceable in accordance with its terms,
except that such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally, and general principles of equity.
B. IFTC hereby represents, warrants and acknowledges to each Fund and to
PIMCO:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by IFTC; and that this Agreement constitutes a legal,
valid and binding obligation of IFTC, enforceable in accordance
with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, and general principles of
equity.
C. PIMCO hereby represents, warrants and acknowledges to IFTC:
1. That it is a partnership duly organized and existing and in good
standing under the laws of the State of Delaware; and
2
<PAGE>
2. That it has the requisite power and authority under applicable
law and its partnership agreement to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by PIMCO; and that this Agreement constitutes a legal,
valid and binding obligation of PIMCO, enforceable in accordance
with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, and general principles of
equity.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
-------------------------------------------
A. Delivery of Assets. Except as permitted by the 1940 Act, PIMCO will
------------------
deliver or cause to be delivered to IFTC on the effective date hereof,
or as soon thereafter as practicable, and from time to time
thereafter, all Assets acquired by, owned by or from time to time
coming into the possession of each of the Portfolios during the term
hereof. IFTC has no responsibility or liability whatsoever for or on
account of assets not so delivered.
B. Delivery of Accounts and Records. PIMCO will turn over or cause to be
--------------------------------
turned over to IFTC all accounts and records needed by IFTC to fully
and properly perform its duties and responsibilities hereunder. IFTC
may rely conclusively on the completeness and correctness of such
accounts and records.
C. Delivery of Assets to Third Parties. IFTC will receive delivery of
-----------------------------------
and keep safely the Assets of each Portfolio segregated in a separate
account. IFTC will not deliver, assign, pledge or hypothecate any such
Assets to any person except as permitted by the provisions hereof or
any agreement executed according to the terms of Section 3.P hereof.
Upon delivery of any such Assets to a subcustodian appointed pursuant
hereto (hereinafter referred to as "Subcustodian"), IFTC will create
and maintain records identifying such Assets as belonging to the
applicable Portfolio. IFTC is responsible for the safekeeping of the
Assets only until they have been transmitted to and received by other
persons as permitted under the terms hereof, except for Assets
transmitted to Subcustodians, for which IFTC remains responsible to
the extent provided herein. IFTC may participate directly or
indirectly through a subcustodian in the Depository Trust Company
(DTC), Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved by a Fund
(as such entities are defined at 17 CFR Section 270.17f-4(b)) (each a
"Depository" and collectively the "Depositories"). IFTC will be
responsible to each Fund for any loss, damage or expense suffered or
incurred by such Fund resulting from the actions or omissions of any
Depository only to the same extent such Depository is responsible to
IFTC. IFTC shall be liable to the Funds for any loss or damage
resulting from the use of a Depository arising by reason of any
negligence, willful misconduct or bad faith on the part of IFTC or any
of its officers, employees or agents.
D. Registration. IFTC will at all times hold registered Assets in the
------------
name of IFTC as custodian, the applicable Portfolio, or a nominee of
either of them, unless specifically
3
<PAGE>
directed by Instructions, as hereinafter defined, to hold such
registered Assets in so-called "street name;" provided that, in any
event, IFTC will hold all such Assets in an account of IFTC as
custodian containing only Assets of the applicable Portfolio, or only
assets held by IFTC as a fiduciary or custodian for customers; and
provided further, IFTC's records will at all times indicate the
Portfolio or other customer for which such Assets are held and the
respective interests therein. If, however, PIMCO directs IFTC to
maintain Assets in "street name", notwithstanding anything contained
herein to the contrary, IFTC will be obligated only to utilize its
best efforts to timely collect income due the Portfolio on such Assets
and to notify the Portfolio of relevant information, such as
maturities and pendency of calls, and corporate actions including,
without limitation, calls for redemption, tender or exchange offers,
declaration, record and payment dates and amounts of any dividends or
income, reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, or conversion ("Corporate
Actions"). All Assets and the ownership thereof by a Portfolio will at
all times be identifiable on the records of IFTC. PIMCO agrees to hold
IFTC and its nominee harmless for any liability as a shareholder of
record of securities held in custody.
E. Exchange. Upon receipt of Instructions, IFTC will exchange, or cause
--------
to be exchanged, Assets held for the account of a Portfolio for other
Assets issued or paid in connection with any Corporate Action or
otherwise, and will deposit any such Assets in accordance with the
terms of any such Corporate Action. Without Instructions, IFTC is
authorized to exchange Assets in temporary form for Assets in
definitive form, to effect an exchange of shares when the par value of
stock is changed, and, upon receiving payment therefor, to surrender
bonds or other Assets at maturity or when advised of earlier call for
redemption, except that IFTC will receive Instruction prior to
surrendering any convertible security.
F. Purchases of Investments -- Other Than Options and Futures. On each
----------------------------------------------------------
business day on which a Portfolio makes a purchase of Assets other
than options and futures, PIMCO will deliver to IFTC Instructions
specifying with respect to each such purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the Asset;
3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or dealer through
whom the purchase was made; and
9. Whether the Asset is to be received in certificated form or via a
specified Depository.
4
<PAGE>
In accordance with such Instructions, IFTC will pay for out of monies
held for the purchasing Portfolio, but only insofar as such monies are
available for such purpose, and receive the Assets so purchased by or
for the account of such Portfolio, except that IFTC, or a
Subcustodian, may in its sole discretion advance funds to such
Portfolio which may result in an overdraft because the monies held on
behalf of such Portfolio are insufficient to pay the total amount
payable upon such purchase. Except as otherwise instructed by PIMCO,
IFTC will make such payment only upon receipt of Assets: (a) by IFTC;
(b) by a clearing corporation of a national exchange of which IFTC is
a member; or (c) by a Depository. Notwithstanding the foregoing, (i)
IFTC may release funds to a Depository prior to the receipt of advice
from the Depository that the Assets underlying a repurchase agreement
have been transferred by book-entry into the account maintained with
such Depository by IFTC on behalf of its customers; provided that
IFTC's instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the Assets
underlying the repurchase agreement in such account; (ii) IFTC may
make payment for time deposits, call account deposits, currency
deposits and other deposits, foreign exchange transactions, futures
contracts or options, before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; and (iii) IFTC
may make, or cause a Subcustodian to make, payment for the purchase of
Assets the settlement of which occurs outside of the United States of
America in accordance with generally accepted local custom and market
practice.
G. Sales and Deliveries of Investments -- Other Than Options and Futures.
---------------------------------------------------------------------
On each business day on which a Portfolio makes a sale of Assets other
than options and futures, PIMCO will deliver to IFTC Instructions
specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the Asset;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the Assets sold were purchased or other
information identifying the Assets sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by the Portfolio upon such sale;
and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
IFTC will deliver or cause to be delivered the Assets thus designated
as sold for the account of the selling Portfolio as specified in the
Instructions. Except as otherwise instructed by PIMCO, IFTC will make
such delivery upon receipt of: (a) payment therefor in such form as is
satisfactory to IFTC; (b) credit to the account of IFTC with a
clearing corporation of a national securities exchange of which IFTC
is a
5
<PAGE>
member; or (c) credit to the account maintained by IFTC on behalf of
its customers with a Depository. Notwithstanding the foregoing:
(i) IFTC will deliver Assets held in physical form in accordance with
"street delivery custom" to a broker or its clearing agent; or
(ii) IFTC may make, or cause a Subcustodian to make, delivery of
Assets the settlement of which occurs outside of the United States of
America upon payment therefor in accordance with generally accepted
local custom and market practice.
H. Purchases or Sales of Options and Futures. On each business day on
-----------------------------------------
which a Portfolio makes a purchase or sale of the options and/or
futures listed below, PIMCO will deliver to IFTC Instructions
specifying with respect to each such purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
2. In the case of security options:
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the
sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring
or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. In the case of security index futures contracts:
a. The last trading date specified in the contract and, when
available, the closing level, thereof;
6
<PAGE>
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
Instructions, and if not already in the possession of IFTC,
PIMCO will deliver a substantially complete and executed
custodial safekeeping account and procedural agreement,
incorporated herein by this reference); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Assets Pledged or Loaned. If specifically allowed for in the
------------------------
prospectus or registration statement of a Portfolio, and subject to
such additional terms and conditions as IFTC may require:
1. Upon receipt of Instructions, IFTC will release or cause to be
released Assets to the designated pledgee by way of pledge or
hypothecation to secure any loan incurred by a Portfolio;
provided, however, that IFTC will release Assets only upon
payment to IFTC of the monies borrowed, except that in cases
where additional collateral is required to secure a borrowing
already made, further Assets may be released or caused to be
released for that purpose. Upon receipt of Instructions, IFTC
will pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the Assets pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of Instructions, IFTC will release Assets to the
designated borrower; provided, however, that the Assets will be
released only upon deposit with IFTC of full cash collateral as
specified in such Instructions, and that the lending Portfolio
will retain the right to any dividends, interest or distribution
on such loaned Assets. Upon receipt of Instructions and the
loaned Assets, IFTC will release the cash collateral to the
borrower.
7
<PAGE>
J. Routine Matters. IFTC will, in general, attend to all routine and
---------------
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with the Assets
except as may be otherwise provided herein or upon Instruction from
PIMCO.
K. Deposit Accounts. IFTC will open and maintain one or more special
----------------
purpose deposit accounts for each Portfolio in the name of IFTC in
such banks or trust companies (including, without limitation,
affiliates of IFTC) as may be designated by it or PIMCO in writing
("Accounts"), subject only to draft or order by IFTC upon receipt of
Instructions. IFTC will deposit all monies received by IFTC from or
for the account of a Portfolio in an Account maintained for such
Portfolio. Subject to Section 5.K hereof, IFTC agrees:
1. To make Fed Funds available to the applicable Portfolio at
9:00 a.m., Kansas City time, on the second business day after
deposit of any check into an Account, in the amount of the check;
2. To make funds available immediately upon a deposit made by
Federal Reserve wire; and
3. To make funds available on the next business day after deposit of
ACH wires.
L. Income and Other Payments. IFTC will:
-------------------------
1. Collect, claim and receive and deposit for the account of the
applicable Portfolio all income (including income from the
Accounts) and other payments which become due and payable on or
after the effective date hereof with respect to the Assets, and
credit the account of such Portfolio in accordance with the
schedule attached hereto as Exhibit A. If, for any reason, a
Portfolio is credited with income that is not subsequently
collected, IFTC may reverse that credited amount. If monies are
collected after such reversal, IFTC will credit the Portfolio in
that amount;
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with (a) the collection, receipt and deposit of such
income and other payments, including but not limited to the
presentation for payment of all coupons and other income items
requiring presentation; and all other Assets which may mature or
be called, redeemed, retired or otherwise become payable and
regarding which IFTC has actual knowledge, or should reasonably
be expected to have knowledge; and (b) the endorsement for
collection, in the name of Fund or a Portfolio, of all checks,
drafts or other negotiable instruments.
8
<PAGE>
IFTC, however, will not be required to institute suit or take other
extraordinary action to enforce collection except upon receipt of
Instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. IFTC will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to Instructions.
M. Proxies and Notices. IFTC will promptly deliver or mail or have
-------------------
delivered or mailed to PIMCO all proxies properly signed, all notices
of meetings, all proxy statements and other notices, requests or
announcements affecting or relating to Assets and will, upon receipt
of Instructions, execute and deliver or mail (or cause its nominee to
execute and deliver or mail) such proxies or other authorizations as
may be required. Except as provided herein or pursuant to
Instructions hereafter received by IFTC, neither it nor its nominee
will exercise any power inherent in any such Assets, including any
power to vote the same, or execute any proxy, power of attorney, or
other similar instrument voting any of such Assets, or give any
consent, approval or waiver with respect thereto, or take any other
similar action.
N. Disbursements. IFTC will pay or cause to be paid, insofar as funds
-------------
are available for the purpose, bills, statements and other obligations
of each Portfolio (including but not limited to obligations in
connection with the conversion, exchange or surrender of Assets,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of such Portfolio) pursuant to Instructions setting forth the
name of the person to whom payment is to be made, and the amount and
purpose of the payment.
O. Daily Statement of Accounts. IFTC will, within a reasonable time,
---------------------------
render to PIMCO a detailed statement of the amounts received or paid
and of Assets received or delivered for the account of each Portfolio
during each business day. IFTC will maintain such books and records
as are necessary to enable it to render, from time to time upon
request by PIMCO, a detailed statement of the Assets. IFTC will
permit, and upon Instruction will cause any Subcustodian to permit,
such persons as are authorized by the applicable Fund, including such
Fund's independent public accountants, reasonable access to such
records or will provide reasonable confirmation of the contents of
such records, and if demanded, IFTC will permit, and will cause any
Subcustodian to permit, federal and state regulatory agencies to
examine the Assets, books and records of any Portfolio.
P. Appointment of Subcustodians. Notwithstanding any other provisions
----------------------------
hereof:
1. All or any of the Assets may be held in IFTC's own custody or in
the custody of one or more other banks or trust companies
(including, without limitation, affiliates of IFTC) acting as
Subcustodians as may be selected by IFTC. Any such Subcustodian
selected by IFTC must have the qualifications required for a
custodian under the 1940 Act. IFTC will be responsible to the
applicable
9
<PAGE>
Portfolio for any loss, damage or expense suffered or incurred by
such Portfolio resulting from the actions or omissions of any
Subcustodians selected and appointed by IFTC (except
Subcustodians appointed at the request of PIMCO and as provided
in Subsection 2 below) to the same extent IFTC would be
responsible to Fund hereunder if it committed the act or omission
itself.
2. Upon request of PIMCO, IFTC will contract with other
Subcustodians reasonably acceptable to IFTC for purposes of
(a) effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a common
custodian or subcustodian, or (b) providing depository and
clearing agency services with respect to certain variable rate
demand note securities, or (c) for other reasonable purposes
specified by PIMCO; provided, however, that IFTC will be
responsible to PIMCO for any loss, damage or expense suffered or
incurred by a Fund resulting from the actions or omissions of any
such Subcustodian only to the same extent such Subcustodian is
responsible to IFTC. PIMCO may review IFTC's contracts with such
Subcustodians.
Q. Foreign Custody Manager.
------------------------
1. Definitions. Capitalized terms in this Section Q have the
-----------
following meanings:
"Country Risk" means all factors reasonably related to the
systemic risk of holding Foreign Assets in a particular country
including, but not limited to, such country's political
environment; financial infrastructure (including financial
institutions such as any Mandatory Securities Depositories (but
not Eligible Foreign Custodians) operating in the country);
prevailing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign
Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in Section
(a)(1) of Rule 17f-5, except that the term does not include
Mandatory Securities Depositories.
"Foreign Assets" means any of the Portfolios' investments
(including foreign currencies) for which the primary market is
outside the United States and such cash and cash equivalents in
amounts deemed by PIMCO to be reasonably necessary to effect the
Portfolios' transactions in such investments.
"Foreign Custody Manager" or "FCM" has the meaning set forth in
Section (a)(2) of Rule 17f-5.
10
<PAGE>
"Mandatory Securities Depository" means a foreign securities
depository or clearing agency that, either as a legal or
practical matter, must be used if the manager of a Portfolio
determines to place Foreign Assets in a country outside the
United States (i) because required by law or regulation;
(ii) because securities cannot be withdrawn from such foreign
securities depository or clearing agency; or (iii) because
maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with
prevailing or developing custodial or market practices.
2. Delegation to IFTC as FCM. Each Fund, pursuant to resolution
-------------------------
adopted by its Board of Trustees or Directors (each a "Board"),
hereby delegates to IFTC, subject to Section (b) of Rule 17f-5,
the responsibilities set forth in this Section Q with respect to
Foreign Assets held outside the United States, and IFTC hereby
accepts such delegation, as FCM of each Portfolio. It is
understood and agreed that IFTC will sub-contract the performance
of its responsibilities hereunder with State Street Bank & Trust
Company. IFTC will be responsible to the applicable Portfolio
for any loss, damage or expense suffered or incurred by such
Portfolio resulting from the actions or omissions of State Street
Bank & Trust Company to the same extent IFTC would be responsible
to the Funds hereunder if it committed the act or omission
itself. References herein to "FCM" shall include IFTC and State
Street Bank & Trust Company.
3. Countries Covered. The FCM is responsible for performing the
-----------------
delegated responsibilities defined below only with respect to the
countries and custody arrangements for each such country listed
on Exhibit D hereto , which may be amended from time to time by
the FCM. The FCM will list on Exhibit D the Eligible Foreign
Custodians selected by the FCM to maintain the assets of each
Portfolio. Mandatory Securities Depositories are listed on
Exhibit E hereto, which Exhibit E may be amended from time to
time by the FCM. The FCM will provide amended versions of
Exhibits D and E in accordance with subsection 7 of this
Section Q.
Upon the receipt by the FCM of Instructions to open an account,
or to place or maintain Foreign Assets, in a country listed on
Exhibit D, and the fulfillment by PIMCO of the applicable account
opening requirements for such country, the FCM is deemed to have
been delegated by the applicable Board responsibility as FCM with
respect to that country and to have accepted such delegation.
Following the receipt of Instructions directing the FCM to close
the account of a Portfolio with the Eligible Foreign Custodian
selected by the FCM in a designated country, the delegation by
the applicable Board to IFTC as FCM for that country is deemed to
have been withdrawn and IFTC will immediately cease to be the FCM
of the Portfolio with respect to that country unless a substitute
Eligible Foreign Custodian is identified and added to Exhibit D.
11
<PAGE>
The FCM may withdraw its acceptance of delegated responsibilities
with respect to a designated country upon written notice to
PIMCO. Commencing sixty (60) days (or such longer period as to
which the parties agree in writing) after receipt of any such
notice by PIMCO, IFTC will have no further responsibility as FCM
to a Portfolio with respect to the country as to which IFTC's
acceptance of delegation is withdrawn.
4. Scope of Delegated Responsibilities.
-----------------------------------
a. Selection of Eligible Foreign Custodians. Subject to the
----------------------------------------
provisions of this Section Q, the FCM may place and maintain
the Foreign Assets in the care of the Eligible Foreign
Custodian selected by the FCM in each country listed on
Exhibit D, as amended from time to time.
In performing its delegated responsibilities as FCM to place
or maintain Foreign Assets with an Eligible Foreign
Custodian, the FCM will determine that the Foreign Assets
will be subject to reasonable care, based on the standards
applicable to custodians in the country in which the Foreign
Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of
such assets, including, without limitation, those set forth
in Rule 17f-5(c)(1)(i) through (iv).
b. Contracts With Eligible Foreign Custodians. The FCM will
------------------------------------------
determine that the contract (or the rules or established
practices or procedures in the case of an Eligible Foreign
Custodian that is a foreign securities depository or
clearing agency) governing the foreign custody arrangements
with each Eligible Foreign Custodian selected by the FCM
will provide reasonable care for the Foreign Assets held by
that Eligible Foreign Custodian based on the standards
applicable to custodians in the particular country and
referred to in the second paragraph of Section 4.a. Each
such contract will include the provisions set forth in Rule
17f-5(c)(2)(i)(A) through (F), or, in lieu of any or all of
the provisions set forth in said (A) through (F), such other
provisions that the FCM determines will provide, in their
entirety, the same or greater level of care and protection
for the Foreign Assets as the provisions set forth in said
(A) through (F) in their entirety.
c. Monitoring. In each case in which the FCM maintains Foreign
----------
Assets with an Eligible Foreign Custodian selected by the
FCM, the FCM will establish a system to monitor (a) the
appropriateness of maintaining the Foreign Assets with such
Eligible Foreign
12
<PAGE>
Custodian as provided in Section 4.a. and (b) the contract
governing the custody arrangements established by the FCM
with the Eligible Foreign Custodian as provided in Section
4.b. In the event the FCM determines that the custody
arrangements with an Eligible Foreign Custodian it has
selected are no longer appropriate, the FCM will notify the
applicable Board in accordance with subsection 7 of this
Section Q.
5. Guidelines for the Exercise of Delegated Authority. For purposes
--------------------------------------------------
of this Section Q, the applicable Board will be solely
responsible for considering and determining to accept such
Country Risk as is incurred by placing and maintaining the
Foreign Assets in each country for which IFTC is serving as FCM
of a Portfolio, and the Board will be solely responsible for
monitoring on a continuing basis such Country Risk to the extent
that such Board considers necessary or appropriate. PIMCO, on
behalf of the Funds, and IFTC each expressly acknowledge that the
FCM will not be delegated any responsibilities under this
Section Q with respect to Mandatory Securities Depositories.
6. Standard of Care as FCM of a Portfolio. In performing the
--------------------------------------
responsibilities delegated to it, the FCM agrees to exercise
reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would
exercise.
7. Reporting Requirements. The FCM will report the withdrawal of
----------------------
the Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the applicable Board amended Exhibits D
and E at the end of the calendar quarter in which an amendment to
either Exhibit has occurred. The FCM will make written reports
notifying the applicable Board of any other material change in
the foreign custody arrangements of a Portfolio described in this
Section Q promptly following after the occurrence of the material
change.
8. Representations with Respect to Rule 17f-5. The FCM represents
------------------------------------------
to PIMCO that it is a U.S. Bank as defined in Section (a)(7) of
Rule 17f-5.
PIMCO, on behalf of each Fund, represents to IFTC that the
applicable Board has determined that it is reasonable for such
Board to rely on IFTC and State Street Bank & Trust Company to
perform the responsibilities delegated pursuant to this Agreement
to IFTC and State Street Bank & Trust Company as the FCM of each
Portfolio and that IFTC has been granted the authority by each
Fund to delegate to State Street Bank & Trust Company the FCM
functions to which IFTC has been appointed by such Fund.
Each party represents that it will in good faith negotiate
revised terms for this Agreement to reflect future guidance from
the SEC staff or regulatory amendments affecting Rule 17f-5.
9. Effective Date and Termination of IFTC as FCM. Each Board's
---------------------------------------------
delegation to IFTC as FCM of a Portfolio will be effective as of
the effective date of the 1997 Amendments to Rule 17f-5 and will
remain in effect until terminated
13
<PAGE>
at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will
become effective thirty days after receipt by the non-terminating
party of such notice. The provisions of subsection 3 of this
Section Q govern the delegation to and termination of IFTC as FCM
of each Fund with respect to designated countries.
R. Accounts and Records. IFTC will prepare and maintain, with the
--------------------
direction and as interpreted by PIMCO, a Fund's or a Portfolio's
accountants and/or other advisors, in complete, accurate and current
form all accounts and records: (1) required to be maintained by a
Fund with respect to portfolio transactions under Section 31(a) of the
1940 Act and the rules and regulations from time to time adopted
thereunder; (2) required to be maintained as a basis for calculation
of each Portfolio's net asset value; and (3) as otherwise agreed upon
by the parties. PIMCO will advise IFTC in writing of all applicable
record retention requirements, other than those set forth in the 1940
Act or the regulations thereunder. IFTC will preserve such accounts
and records in the manner and for the periods prescribed in the 1940
Act or the regulations thereunder or for such longer period as is
agreed upon by the parties. PIMCO will furnish, in writing or its
electronic or digital equivalent, accurate and timely information
needed by IFTC to complete such accounts and records, including
Corporate Actions, when such information is not readily available from
generally accepted securities industry services or publications.
S. Accounts and Records Property of Fund. IFTC acknowledges that all of
-------------------------------------
the accounts and records maintained by IFTC pursuant hereto are the
property of the applicable Fund, and will be made available to the
applicable Fund and PIMCO on behalf of such Fund for inspection or
reproduction within a reasonable period of time, upon demand. IFTC
will assist any Fund's independent auditors, or upon approval of
PIMCO, or upon demand, any regulatory body, in any requested review of
such Fund's accounts and records but PIMCO will reimburse IFTC for all
expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from PIMCO of the
necessary information or instructions, IFTC will supply information
from the books and records it maintains for each Fund that such Fund
needs for tax returns, questionnaires, periodic reports to
shareholders and such other reports and information requests as PIMCO
and IFTC agree upon from time to time.
T. Adoption of Procedures. IFTC and PIMCO, on behalf of each Fund,
----------------------
hereby adopt the Funds Transfer Operating Guidelines attached hereto
as Exhibit B. IFTC and PIMCO may from time to time adopt such
additional procedures as they agree upon, and IFTC may conclusively
assume that no procedure approved or directed by PIMCO, any Fund's or
any Portfolio's accountants or other advisors conflicts with or
violates any requirements of the prospectus or registration statement,
articles of incorporation and bylaws or trust instrument, any
applicable law, rule or regulation, or any order, decree or agreement
by which the applicable Fund may be bound. PIMCO will be responsible
for notifying IFTC of any changes in statutes, regulations, rules,
requirements or policies which may impact IFTC's performance
14
<PAGE>
of its responsibilities hereunder or its related operational policies
and procedures as they relate to the Funds in a manner different from
or in addition to requirements applicable to investment companies
registered under the 1940 Act in general.
U. Calculation of Net Asset Value. PIMCO, on behalf of each Fund, will
------------------------------
give Instructions to IFTC specifying the outside pricing sources to be
utilized as sources of Asset prices ("Pricing Sources"). In the event
that PIMCO specifies Reuters America, Inc., it will enter into the
Agreement attached hereto as Exhibit C. IFTC will calculate each
Portfolio's net asset value, in accordance with the Portfolio's
prospectus or registration statement. IFTC will price the Assets,
including foreign currency holdings, of each Portfolio for which
market quotations are available from the Pricing Sources; all other
Assets will be priced in accordance with PIMCO's Instructions.
V. Advances. The applicable Fund will cause each Portfolio to pay on
--------
demand any advance of cash or securities made by IFTC or any
Subcustodian, in its sole discretion, for any purpose (including but
not limited to securities settlements, purchase or sale of foreign
exchange or foreign exchange contracts and assumed settlement) for the
benefit of any Portfolio. Any such cash advance will be subject to an
overdraft charge at the rate set forth in the then-current fee
schedule from the date advanced until the date repaid. As security
for each such advance, each Fund hereby separately grants IFTC and
such Subcustodian a lien on and security interest in all of such
Fund's Portfolio's Assets at any time held for the account of the
applicable Portfolio, including without limitation all Assets acquired
with the amount advanced. Should the applicable Portfolio fail to
promptly repay the advance, the applicable Fund agrees that IFTC and
such Subcustodian may utilize available cash and dispose of such
Portfolio's Assets pursuant to applicable law to the extent necessary
to obtain reimbursement of the amount advanced and any related
overdraft charges; provided, however, that prior to such utilization
and disposition, (i) IFTC or Subcustodian has given PIMCO 2 days'
notice of the amount due and of its intent to so utilize and dispose
of custodied Assets; and (ii) the applicable Portfolio shall not have
satisfied the obligation. During such 2 day notice period, PIMCO
shall have the option to direct IFTC or such Subcustodian by written
notice regarding which and in what priority order custodied Assets are
to be utilized and disposed of.
W. Exercise of Rights; Tender Offers. Upon receipt of Instructions, IFTC
---------------------------------
will: (1) deliver warrants, puts, calls, rights or similar
securities to the issuer or trustee thereof, or to the agent of such
issuer or trustee, for the purpose of exercise or sale, provided that
the new Assets, if any, are to be delivered to IFTC; and (2) deposit
securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to IFTC
or the tendered securities are to be returned to IFTC.
15
<PAGE>
X. Fund Shares.
------------
1. PIMCO will deliver to IFTC Instructions with respect to the
declaration and payment of any dividend or other distribution on
the shares of capital stock or beneficial interest, as the case
may be, of a Portfolio ("Fund Shares") by a Portfolio. On the
date specified in such Instruction, IFTC will pay out of the
monies held for the account of the Portfolio, insofar as it is
available for such purposes, and credit to the account of the
Dividend Disbursing Agent for the Portfolio, the amount specified
in such Instructions.
2. Whenever Fund Shares are repurchased or redeemed by a Portfolio,
PIMCO on behalf of such Portfolio or its agent will give IFTC
Instructions regarding the aggregate dollar amount to be paid for
such shares. Upon receipt of such Instruction, IFTC will charge
such aggregate dollar amount to the account of the Portfolio and
either deposit the same in the account maintained for the purpose
of paying for the repurchase or redemption of Fund Shares or
deliver the same in accordance with such Instruction. IFTC has no
duty or responsibility to determine that Fund Shares have been
removed from the proper shareholder accounts or that the proper
number of Fund Shares have been canceled and removed from the
shareholder records.
3. Whenever Fund Shares are purchased from a Portfolio, PIMCO will
deposit or cause to be deposited with IFTC the amount received
for such shares. IFTC has no duty or responsibility to determine
that Fund Shares purchased from a Portfolio have been added to
the proper shareholder account or that the proper number of such
shares have been added to the shareholder records.
4. INSTRUCTIONS.
-------------
A. The term "Instructions", as used herein, means written (including
telecopied, telexed, or electronically transmitted) or oral
instructions which IFTC reasonably believes were given by a designated
representative of PIMCO. PIMCO will deliver to IFTC, prior to
delivery of any Assets to IFTC and thereafter from time to time as
changes therein are necessary, written Instructions naming one or more
designated representatives to give Instructions in the name and on
behalf of each Fund, which Instructions may be received and accepted
by IFTC as conclusive evidence of the authority of any designated
representative to act for the applicable Fund and may be considered to
be in full force and effect until receipt by IFTC of notice to the
contrary. Unless such written Instructions delegating authority to
any person to give Instructions specifically limit such authority to
specific matters or require that the approval of anyone else will
first have been obtained, IFTC will be under no obligation to inquire
into the right of such person, acting alone, to give any Instructions
whatsoever. If PIMCO fails to provide IFTC any such Instructions
naming designated representatives, any Instructions received by IFTC
from a person reasonably believed to be an appropriate representative
of PIMCO will constitute
16
<PAGE>
valid and proper Instructions hereunder. "Designated representatives"
may include a Fund's or a Portfolio's employees and agents, including
investment managers and their employees.
B. No later than the next business day immediately following each oral
Instruction, PIMCO will send IFTC written confirmation of such oral
Instruction. At IFTC's sole discretion, IFTC may record on tape, or
otherwise, any oral Instruction whether given in person or via
telephone, each such recording identifying the date and the time of
the beginning and ending of such oral Instruction.
C. PIMCO will provide, upon IFTC's request, a certificate signed by an
officer or designated representative of PIMCO, as conclusive proof of
any fact or matter required to be ascertained from PIMCO hereunder.
PIMCO will also provide IFTC Instructions with respect to any matter
concerning this Agreement requested by IFTC. If IFTC reasonably
believes that it could not prudently act according to the
Instructions, or the instruction or advice of a Fund's or a
Portfolio's accountants or counsel, it may in its discretion, with
notice to PIMCO and such Fund, not act according to such Instructions.
5. LIMITATION OF LIABILITY OF IFTC.
--------------------------------
A. IFTC shall at all times use reasonable care and due diligence and act
in good faith in performing its duties under this Agreement. PIMCO
and each Fund is not responsible or liable for, and IFTC will
indemnify and hold PIMCO and each Fund harmless from and against, any
and all costs, expenses, losses, damages, charges, counsel fees,
payments and liabilities which may be asserted against or incurred by
PIMCO or any Fund or for which PIMCO or any Fund may be held to be
liable, arising out of or attributable to IFTC's failure to comply
with the terms of this Agreement or arising out of IFTC's (or its
agents' or delegees') negligence, willful misconduct, or bad faith.
B. IFTC is not responsible or liable for, and PIMCO will indemnify and
hold IFTC harmless from and against, any and all costs, expenses,
losses, damages, charges, counsel fees, payments and liabilities which
may be asserted against or incurred by IFTC or for which IFTC may be
held to be liable, arising out of or attributable to:
1. IFTC's action or omission to act pursuant hereto; provided that
IFTC has acted or failed to act in good faith and with due
diligence and reasonable care; and provided further, that neither
party is liable to the other for consequential, special, or
punitive damages in any event.
2. IFTC's payment of money as requested by PIMCO, or the taking of
any action which might make it or its nominee liable for payment
of monies or in any other way; provided, however, that nothing
herein obligates IFTC to take any such action or expend its own
monies in its sole discretion.
17
<PAGE>
3. IFTC's action or omission to act hereunder in reasonable reliance
upon any Instructions, advice, notice, request, consent,
certificate or other instrument or paper appearing to it to be
genuine and to have been properly executed, including any
Instructions, communications, data or other information received
by IFTC by means of the Systems, as hereinafter defined, or any
electronic system of communication.
4. IFTC's action or omission to act in good faith reliance on the
advice or opinion of counsel for PIMCO or of its own counsel with
respect to questions or matters of law, which advice or opinion
may be obtained by IFTC from counsel for PIMCO at the expense of
PIMCO or from IFTC's counsel at its own expense, or on the
Instructions, advice or statements of any officer or employee of
PIMCO, or the applicable Fund's accountants or other authorized
individuals, and other persons believed by it in good faith to be
expert in matters upon which they are consulted.
5. The purchase or sale of any securities or foreign currency
positions. Without limiting the generality of the foregoing,
IFTC is under no duty or obligation to inquire into:
a. The validity of the issue of any securities purchased by or
for any Portfolio, or the legality of the purchase thereof
or of foreign currency positions, or evidence of ownership
required by PIMCO to be received by IFTC, or the propriety
of the decision to purchase or the amount paid therefor;
b. The legality of the sale of any securities or foreign
currency positions by or for any Portfolio, or the propriety
of the amount for which the same are sold; or
c. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor, the
legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor, or the
legality of the declaration of any dividend by either Fund,
or the legality of the issue of any Fund Shares in payment
of any stock dividend.
6. Any error, omission, inaccuracy or other deficiency in any
Portfolio's accounts and records or other information provided by
or on behalf of a Portfolio to IFTC, including the accuracy of
the prices quoted by the Pricing Sources or for the information
supplied by PIMCO to price the Assets, or the failure of PIMCO to
provide, or provide in a timely manner, any accounts, records, or
information needed by IFTC to perform hereunder.
18
<PAGE>
7. PIMCO's or any Fund's refusal or failure to comply with the terms
hereof (including without limitation PIMCO's or any Fund's
failure to pay or reimburse IFTC under Section 5 or 6 hereof),
PIMCO's or any Fund's negligence or willful misconduct, or the
failure of any representation or warranty of PIMCO or any Fund
hereunder to be and remain true and correct in all respects at
all times.
8. The use or misuse, whether authorized or unauthorized, of the
Systems or any electronic system of communication used hereunder,
by PIMCO or by any person who acquires access to the Systems or
such other systems through the terminal device, passwords, access
instructions or other means of access to such Systems or such
other system which are utilized by, assigned to or otherwise made
exclusively available to PIMCO, except to the extent attributable
to any negligence or willful misconduct by IFTC.
9. Any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the
payment of money to be received by IFTC on behalf of a Portfolio
until actually received; provided, however, that IFTC will advise
PIMCO promptly if it fails to receive any such money in the
ordinary course of business and will cooperate with PIMCO toward
the end that such money is received.
10. Except as provided in Section 3.P hereof, and subject to
Section 5.B.1 hereof, loss occasioned by the acts, neglects,
defaults or insolvency of any broker, bank, trust company, or any
other person with whom IFTC may deal.
11. The failure or delay in performance of its obligations hereunder,
or those of any entity for which it is responsible hereunder,
arising out of or caused, directly or indirectly, by
circumstances beyond the affected entity's reasonable control or
ability to take preemptive measures against, including, without
limitation: any interruption, loss or malfunction of any
utility, transportation, computer (hardware or software) or
communication service; inability to obtain labor, material,
equipment or transportation, or a delay in mails; governmental
or exchange action, statute, ordinance, rulings, regulations or
direction; war, strike, riot, emergency, civil disturbance,
terrorism, vandalism, explosions, labor disputes, freezes,
floods, fires, tornadoes, acts of God or public enemy,
revolutions, or insurrection.
6. COMPENSATION. In consideration for its services hereunder, IFTC will be
------------
paid the compensation set forth in a separate fee schedule, incorporated
herein by this reference, to be agreed to by each Fund, PIMCO and IFTC from
time to time, and reimbursement for IFTC's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees,
incurred by IFTC in connection with the performance of services hereunder,
on demand. IFTC, subject to Section 10 hereof, may charge such
compensation against monies held by it for the accounts of the Portfolios
following notice to PIMCO. IFTC will,
19
<PAGE>
subject to Section 10 hereof, be entitled to charge against any monies held
by it for the accounts of the Portfolios the amount of any loss, damage,
liability, advance, overdraft or expense for which it is entitled to
reimbursement from PIMCO. IFTC will be entitled to reimbursement by the
applicable Fund or PIMCO for the losses, damages, liabilities, advances,
overdrafts and expenses of Subcustodians only to the extent that (a) IFTC
would have been entitled to reimbursement hereunder if it had incurred the
same itself directly, and (b) IFTC is obligated to reimburse the
Subcustodian therefor. As between the Funds and PIMCO, it is agreed that
the compensation due IFTC hereunder shall be paid by PIMCO.
7. TERM AND TERMINATION. The initial term of this Agreement is for a period
--------------------
of one (1) year. Thereafter, PIMCO or IFTC may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the other party
and received not less than sixty (60) days prior to the date upon which
such termination will take effect. Upon termination hereof:
A. PIMCO will pay IFTC its fees and compensation due hereunder and its
reimbursable disbursements, costs and expenses paid or incurred to
such date;
B. PIMCO will designate a successor investment accounting and
recordkeeping agent (which may be PIMCO or any Fund) by Instruction to
IFTC;
C. PIMCO will designate a successor custodian by Instruction to IFTC. In
the event no such Instruction has been delivered to IFTC on or before
the date when such termination becomes effective, then IFTC may, at
its option, (i) choose as successor custodian a bank or trust company
meeting the qualifications for custodian set forth in the 1940 Act and
having not less than Two Million Dollars ($2,000,000) aggregate
capital, surplus and undivided profits, as shown by its last published
report, or (ii) apply to a court of competent jurisdiction for the
appointment of a successor or other proper relief, or take any other
lawful action under the circumstances; provided, however, that PIMCO
will reimburse IFTC for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith; and
D. IFTC will, upon payment of all sums due to IFTC from PIMCO hereunder,
deliver at IFTC's office (i) all accounts and records to the successor
investment accounting and recordkeeping agent or, if none, to PIMCO;
and (ii) all Assets, duly endorsed and in form for transfer, to the
successor custodian, or as specified by the court. IFTC will
cooperate in effecting changes in book-entries at all Depositories.
Upon delivery to a successor or as specified by the court, IFTC will
have no further obligations or liabilities hereunder. Thereafter such
successor will be the successor hereunder and will be entitled to
reasonable compensation for its services.
In the event that accounts, records or Assets remain in the possession of
IFTC after the date of termination hereof for any reason other than IFTC's
failure to deliver the same, IFTC is entitled to compensation as provided
in the then-current fee schedule for its services during such period, and
the provisions hereof relating to the duties and obligations of IFTC will
remain in full force and effect.
20
<PAGE>
8. NOTICES. Notices, requests, instructions and other writings addressed to
-------
PIMCO or either Fund at the address set forth above, or at such other
address as PIMCO or such Fund may have designated to IFTC in writing, will
be deemed to have been properly given to PIMCO or Fund hereunder. Notices,
requests, Instructions and other writings addressed to IFTC at the address
set forth above, Attention: Custody Department, or to such other address
as it may have designated to PIMCO and the Funds in writing, will be deemed
to have been properly given to IFTC hereunder.
9. THE SYSTEMS; CONFIDENTIALITY.
-----------------------------
A. If IFTC provides PIMCO direct access to the computerized investment
portfolio custody, recordkeeping and accounting systems used by IFTC
("Systems") or if IFTC and PIMCO agree to utilize any electronic
system of communication, PIMCO agrees to implement and enforce
appropriate security policies and procedures to prevent unauthorized
or improper access to or use of the Systems or such other system.
B. PIMCO will preserve the confidentiality of the Systems and the tapes,
books, reference manuals, instructions, records, programs,
documentation and information of, and other materials relevant to, the
Systems and the business of IFTC ("Confidential Information"). PIMCO
agrees that it will not voluntarily disclose any such Confidential
Information to any other person other than its own employees who
reasonably have a need to know such information pursuant hereto. PIMCO
will return all such Confidential Information to IFTC upon termination
or expiration hereof.
C. PIMCO has been informed that the Systems are licensed for use by IFTC
from one or more third parties ("Licensors"), and PIMCO acknowledges
that IFTC and Licensors have proprietary rights in and to the Systems
and all other IFTC or Licensor programs, code, techniques, know-how,
data bases, supporting documentation, data formats, and procedures,
including without limitation any changes or modifications made at the
request or expense or both of PIMCO (collectively, the "Protected
Information"). PIMCO acknowledges that the Protected Information
constitutes confidential material and trade secrets of IFTC and
Licensors. PIMCO will preserve the confidentiality of the Protected
Information, and PIMCO hereby acknowledges that any unauthorized use,
misuse, disclosure or taking of Protected Information, residing or
existing internal or external to a computer, computer system, or
computer network, or the knowing and unauthorized accessing or causing
to be accessed of any computer, computer system, or computer network,
may be subject to civil liabilities and criminal penalties under
applicable law. PIMCO will so inform employees and agents who have
access to the Protected Information or to any computer equipment
capable of accessing the same. Licensors are intended to be and are
third party beneficiaries of PIMCO's obligations and undertakings
contained in this Section.
D. PIMCO hereby represents and warrants to IFTC that it has determined to
its satisfaction that the Systems are appropriate and suitable for its
use.
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<PAGE>
THE SYSTEMS ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. IFTC
EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
E. IFTC agrees to defend any claim or action brought against PIMCO or any
Fund on the issue of infringement of any United States patent,
copyright, trade secret or trademark by the Systems as used within the
scope of this Agreement, and to indemnify PIMCO and each Fund against
all damages and costs, subject to the provisions of Section 5 hereof,
which may be assessed against them under any such claim or action.
10. MULTIPLE PORTFOLIOS. If a Fund is comprised of more than one Portfolio:
--------------------
A. Each Portfolio will be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered hereby,
every reference herein to a Portfolio is deemed to relate solely to
the particular Portfolio to which such transaction relates. Under no
circumstances will the rights, obligations or remedies with respect to
a particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single document to
memorialize the separate agreement of each Portfolio is understood to
be for clerical convenience only and will not constitute any basis for
joining the Portfolios for any reason.
B. PIMCO may appoint IFTC as its custodian and investment accounting and
recordkeeping agent for additional Portfolios from time to time by
written notice, provided that IFTC consents to such addition. Rates
or charges for each additional Portfolio will be as agreed upon by
IFTC and PIMCO in writing.
11. MISCELLANEOUS.
-------------
A. This Agreement will be construed according to, and the rights and
liabilities of the parties hereto will be governed by, the laws of the
State of Missouri without reference to the choice of laws principles
thereof.
B. All terms and provisions hereof will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties, the indemnifications extended
hereunder, and the provisions of Section 9 hereof are intended to and
will continue after and survive the expiration, termination or
cancellation hereof.
D. No provisions hereof may be amended or modified in any manner except
by a written agreement properly authorized and executed by each party
hereto.
22
<PAGE>
E. The failure of any party to insist upon the performance of any terms
or conditions hereof or to enforce any rights resulting from any
breach of any of the terms or conditions hereof, including the payment
of damages, will not be construed as a continuing or permanent waiver
of any such terms, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such forbearance
or waiver had occurred. No waiver, release or discharge of any
party's rights hereunder will be effective unless contained in a
written instrument signed by the party sought to be charged.
F. The captions herein are included for convenience of reference only,
and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which is deemed an original but all of which together constitute one
and the same instrument.
H. If any provision hereof is determined to be invalid, illegal, in
conflict with any law or otherwise unenforceable, the remaining
provisions hereof will be considered severable and will not be
affected thereby, and every remaining provision hereof will remain in
full force and effect and will remain enforceable to the fullest
extent permitted by applicable law.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
J. Neither the execution nor performance hereof will be deemed to create
a partnership or joint venture by and between IFTC, PIMCO and/or any
Fund or any Portfolio.
K. This Agreement supersedes the agreements previously entered into by
the parties hereto and the agreements affecting the Funds more
specifically described on Schedule A hereto. Except as specifically
provided herein, this Agreement does not in any way affect any other
agreements entered into among the parties hereto and any actions taken
or omitted by any party hereunder will not affect any rights or
obligations of the other parties hereunder.
L. If a Fund is a Trust, notice is hereby given that this Agreement has
been executed on behalf of such Fund by the undersigned duly
authorized representative of such Fund in his/her capacity as such and
not individually; and that the obligations of this Agreement are
binding only upon the assets and property of such Fund and not upon
any trustee, officer of shareholder of such Fund individually.
23
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY PACIFIC INVESTMENT MANAGEMENT COMPANY
a Delaware partnership
By: By:
- -------------------------------- ------------------------------------
Title: Title:
PIMCO FUNDS:
MULTI-MANAGER SERIES
By:
------------------------------------
Title:
PIMCO FUNDS:
PACIFIC INVESTMENT MANAGEMENT SERIES
By:
------------------------------------
Title:
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
FUND PREVIOUS AGREEMENTS
---- -------------------
<S> <C>
PIMCO Funds: Multi-Manager Series, Custody Agreement dated 12/17/90, as
a Massachusetts business trust amended 4/2/91; 6/1/91; 2/13/93; 11/14/94;
8/11/95; 8/20/96; 1/17/97; 1/17/97
PIMCO Funds: Pacific Investment Custody Agreement dated 4/1/89, as amended
Management Series. a Massachusetts 6/1/90; 5/94; 5/28/96
business trust
</TABLE>
25
<PAGE>
EXHIBIT A -- INCOME AVAILABILITY SCHEDULE
Foreign--Income will be credited contractually on pay day in the markets noted
with Contractual Income Policy. The markets noted with Actual income policy
will be credited income when it is received.
<TABLE>
<CAPTION>
====================================================================================================================================
Market Income Policy Market Income Policy Market Income Policy
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Argentina Actual Hong Kong Contractual Poland Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Australia Contractual Hungary Actual Portugal Contractual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Austria Contractual India Actual Russia Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Bahrain Actual Indonesia Actual Singapore Contractual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Bangladesh Actual Ireland Actual Slovak Republic Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Belgium Contractual Israel Actual South Africa Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Bermuda Actual Italy Contractual South Korea Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
* Bolivia Actual Ivory Coast Actual Spain Contractual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Botswana Actual * Jamaica Actual Sri Lanka Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Brazil Actual Japan Contractual Swaziland Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Canada Contractual Jordan Actual Sweden Contractual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Chile Actual Kenya Actual Switzerland Contractual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
China Actual Lebanon Actual Taiwan Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Colombia Actual Luxembourg Actual Thailand Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Cyprus Actual Malaysia Actual * Trinidad & Actual
Tobago
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Czech Republic Actual Mauritius Actual * Tunisia Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Denmark Contractual Mexico Actual Turkey Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Ecuador Actual Morocco Actual UnitedKingdom Contractual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Egypt Actual Namibia Actual United States See Attached
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
**Euroclear Contractual/ Netherlands Contractual Uruguay Actual
Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Euro CDs Actual New Zealand Contractual Venezuela Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Finland Contractual Norway Contractual Zambia Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
France Contractual Oman Actual Zimbabwe Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Germany Contractual Pakistan Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Ghana Actual Peru Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
Greece Actual Philippines Actual
- ----------------------- --------------------- --------------------- --------------------- --------------------- --------------------
</TABLE>
* Market is not 17F-5 eligible
** For Euroclear, contractual income paid only in markets listed with
Income Policy of Contractual.
United States--
<TABLE>
<CAPTION>
====================================================================================================================================
Income Type DTC FED PTC Physical
====================================================================================================================================
<S> <C> <C> <C> <C>
Dividends Contractual N/A N/A Actual
- ---------------------------- ------------------------- -------------------------- ------------------------- ------------------------
Fixed Rate Interest Contractual Contractual N/A Actual
- ---------------------------- ------------------------- -------------------------- ------------------------- ------------------------
Variable Rate Interest Contractual Contractual N/A Actual
- ---------------------------- ------------------------- -------------------------- ------------------------- ------------------------
GNMA I N/A N/A Contractual PD +1 N/A
- ---------------------------- ------------------------- -------------------------- ------------------------- ------------------------
GNMA II N/A N/A Contractual PD *** N/A
- ---------------------------- ------------------------- -------------------------- ------------------------- ------------------------
Mortgages Actual Contractual Contractual Actual
- ---------------------------- ------------------------- -------------------------- ------------------------- ------------------------
Maturities Actual Contractual N/A Actual
- ---------------------------- ------------------------- -------------------------- ------------------------- ------------------------
</TABLE>
Exceptions to the above Contractual Income Policy include securities
that are:
* Involved in a trade whose settlement either failed, or is pending
over the record date, (excluding the United States);
* On loan under a self directed securities lending program other than
IFTC's own vendor lending program;
* Known to be in a condition of default, or suspected to present a
risk of default or payment delay;
* In the asset categories, without limitation, of Private Placements,
Derivatives, Options, Futures, CMOs, and Zero Coupon
Bonds.
* Securities whose amount of income and redemption cannot be calculated
in advance of payable date, or determined in advance of actual
collection, examples include ADRs;
* Payments received as the result of a corporate action, not limited
to, bond calls, mandatory or optional puts, and tender offers.
*** For GNMA II securities, if the 19th day of the month is a business
day, Payable/Distribution Date is the next business day. If the 19th
is not a business day, but the 20th is a business day,
Payable/Distribution date is the first business day after the 20th.
If both the 19th and 20th are not business days, Payable/Distribution
will be the next business day thereafter.
26
<PAGE>
EXHIBIT B -- FUNDS TRANSFER OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: IFTC is authorized to promptly debit Fund's
("Client's") account(s) upon the receipt of a payment order in compliance with
any of the Security Procedures chosen by the Client, from those offered on the
attached selection form (and any updated selection forms hereafter executed by
the Client), for funds transfers and in the amount of money that IFTC has been
instructed to transfer. IFTC is hereby instructed to accept funds transfer
instructions only via the delivery methods and Security Procedures indicated on
the attached selection form (and any update executed by the Client). The Client
agrees that the Security Procedures are reasonable and adequate for its wire
transfer transactions and agrees to be bound by any payment orders, amendments
and cancellations, whether or not authorized, issued in its name and accepted by
IFTC after being confirmed by any of the selected Security Procedures. The
Client also agrees to be bound by any other valid and authorized payment order
accepted by IFTC. IFTC shall execute payment orders in compliance with the
selected Security Procedures and with the Client's/Investment Manager's
instructions on the execution date provided that such payment order is received
by the customary deadline for processing such a request, unless the payment
order specifies a later time. IFTC will use reasonable efforts to execute on the
execution date payment orders received after the customary deadline, but if it
is unable to execute any such payment order on the execution date, such payment
order will be deemed to have been received on the next business day.
2. SECURITY PROCEDURES: The Client acknowledges that the selected Security
Procedures were selected by the Client from Security Procedures offered by IFTC.
The Client shall restrict access to confidential information relating to the
Security Procedures to authorized persons as communicated in writing to IFTC.
The Client must notify IFTC immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Client's authorized personnel. IFTC shall verify the authenticity of all
instructions according to the selected Security Procedures.
3. ACCOUNT NUMBERS: IFTC shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number, the
account number shall take precedence and govern. Financial institutions that
receive payment orders initiated by IFTC at the instruction of the Client may
also process payment orders on the basis of account numbers, regardless of any
name included in the payment order. IFTC will also rely on any financial
institution identification numbers included in any payment order, regardless of
any financial institution name included in the payment order.
4. REJECTION: IFTC reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of IFTC's receipt of such payment order;
(b) if initiating such payment order would cause IFTC, in IFTC's sole judgment,
to exceed any applicable volume, aggregate dollar, network, time, credit or
similar limits upon wire transfers; or (c) if IFTC, in good faith, is unable to
satisfy itself that the transaction has been properly authorized.
27
<PAGE>
5. CANCELLATION OR AMENDMENT: IFTC shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in compliance
with the selected Security Procedures provided that such requests are received
in sufficient time to afford IFTC a reasonable opportunity to act prior to
executing the payment order. However, IFTC assumes no liability if the request
for amendment or cancellation cannot be satisfied by IFTC's reasonable efforts.
6. ERRORS: IFTC shall assume no responsibility for failure to detect any
erroneous payment order provided that IFTC complies with the payment order
instructions as received and IFTC complies with the selected Security
Procedures. The Security Procedures are established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
7. INTEREST AND LIABILITY LIMITS: IFTC shall assume no responsibility for lost
interest with respect to the refundable amount of any unauthorized payment
order, unless IFTC is notified of the unauthorized payment order within thirty
(30) days of notification by IFTC of the acceptance of such payment order. In
no event (including but not limited to failure to execute a payment order) shall
IFTC be liable for special, indirect or consequential damages, even if advised
of the possibility of such damages.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When
the Client initiates or receives ACH credit and debit entries pursuant to these
Guidelines and the rules of the National Automated Clearing House Association
and the Mid-America Payment Exchange or other similar body, IFTC or its agent
will act as an Originating Depository Financial Institution and/or Receiving
Depository Financial Institution, as the case may be, with respect to such
entries. Credits given with respect to an ACH credit entry are provisional
until final settlement for such entry is received from the Federal Reserve Bank.
If such final settlement is not received, the Client agrees to promptly refund
the amount credited to the Client in connection with such entry, and the party
making payment to the Client via such entry shall not be deemed to have paid the
amount of the entry.
9. CONFIRMATIONS: Confirmation of IFTC's execution of payment orders shall
ordinarily be provided within 24 hours. Notice may be delivered through IFTC's
account statements, advices, information systems, or by facsimile or callback.
The Client must report any objections to the execution of a payment order within
30 days.
10. MISCELLANEOUS: IFTC may use the Federal Reserve System Fedwire to execute
payment orders, and any payment order carried in whole or in part through
Fedwire will be subject to applicable Federal Reserve Board rules and
regulations. IFTC and the Client agree to cooperate to attempt to recover any
funds erroneously paid to wrong parties, regardless of any fault of IFTC or the
Client, but the party responsible for the erroneous payment shall bear all costs
and expenses incurred in trying to effect such recovery. These Guidelines may
not be amended except by a written agreement signed by the parties.
28
<PAGE>
SECURITY PROCEDURES SELECTION FORM
Please select one or more of the funds transfer security procedures indicated
below.
[X] SWIFT SWIFT (Society for Worldwide Interbank Financial Telecommunication)
is a cooperative society owned and operated by member financial
institutions that provides telecommunication services for its membership.
Participation is limited to securities brokers and dealers, clearing and
depository institutions, recognized exchanges for securities, and
investment management institutions. SWIFT provides a number of security
features through encryption and authentication to protect against
unauthorized access, loss or wrong delivery of messages, transmission
errors, loss of confidentiality and fraudulent changes to messages.
Selection of this security procedure would be most appropriate for existing
SWIFT members.
[X] REMOTE BATCH TRANSMISSION Wire transfer instructions are delivered via
Computer-to-Computer (CPU-CPU) data communications between the Client
and/or its agent and IFTC and/or its agent. Security procedures include
encryption and/or the use of a test key by those individuals authorized as
Automated Batch Verifiers or a callback procedure to those individuals.
Clients selecting this option should have an existing facility for
completing CPU-CPU transmissions. This delivery mechanism is typically
used for high-volume business such as shareholder redemptions and dividend
payments.
[X] TELEPHONE CONFIRMATION (CALL BACK) This procedure requires Clients to
designate individuals as authorized initiators and authorized verifiers.
IFTC will verify that the instruction contains the signature of an
authorized person and prior to execution of the payment order, will contact
someone other than the originator at the Client's location to authenticate
the instruction. Selection of this alternative is appropriate for Clients
who do not have the capability to use other security procedures.
[_] TEST KEY Test Key confirmation will be used to verify all non-repetitive
funds transfer instructions received via facsimile or phone. IFTC will
provide test keys if this option is chosen. IFTC will verify that the
instruction contains the signature of an authorized person and prior to
execution of the payment order, will authenticate the test key provided
with the corresponding test key at IFTC. Selection of this alternative is
appropriate for Clients who do not have the capability to use other
security procedures.
[X] REPETITIVE WIRES For situations where funds are transferred periodically
from an existing authorized account to the same payee (destination bank and
account number) and only the date and currency amount are variable, a
repetitive wire may be implemented. Repetitive wires will be subject to a
$10 million limit. If the payment order exceeds the $10 million limit, the
instruction will be confirmed by telephone or test key prior to execution.
Repetitive wire instructions must be reconfirmed annually. Clients may
establish Repetitive Wires by following the agreed upon security procedures
for as described by Telephone Confirmation (Call Back) or Test Key. This
alternative is recommended whenever funds are frequently transferred
between the same two accounts.
29
<PAGE>
[X] STANDING INSTRUCTIONS Funds are transferred by IFTC to a counter party on
the Client's established list of authorized counter parties. Only the date
and the dollar amount are variable. Clients may establish Standby
Instructions by following the agreed upon security procedures for Non-
Repetitive Wire Transfers as described by Telephone Confirmation (Call
Back) or Test Key. This option is used for transactions that include but
are not limited to Foreign Exchange Contracts, Time Deposits and Tri-Party
Repurchase Agreements.
[_] AUTOMATED CLEARING HOUSE (ACH) IFTC or its agent receives an automated
transmission from a Client for the initiation of payment (credit) or
collection (debit) transactions through the ACH network. The transactions
contained on each transmission or tape must be authenticated by the Client.
The transmission is sent from the Client's or its agent's system to IFTC's
or its agent's system with encryption.
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
/s/ /s/
- -------------------------------------- ----------------------------------------
Name Name
- -------------------------------------- ----------------------------------------
Address Address
- -------------------------------------- ----------------------------------------
City/State/Zip Code City/State/Zip Code
- -------------------------------------- ----------------------------------------
Telephone Number Telephone Number
- --------------------------------------
Facsimile Number
- --------------------------------------
SWIFT Number
30
<PAGE>
EXHIBIT C--REUTERS DATA SERVICE AGREEMENT
The undersigned acknowledges and agrees that some of the data being provided in
the service by IFTC to either Fund contains information supplied to IFTC by
Reuters America Inc. ("Reuters") (the "Data"). Such Fund agrees that:
(i) although Reuters makes every effort to ensure the accuracy and
reliability of the Data, the Fund acknowledges that Reuters, its
employees, agents, contractors, subcontractors, contributors and
third party providers will not be liable for any loss, cost or
damage suffered or incurred by the Fund arising out of any fault,
interruption or delays in the Data or out of any inaccuracies,
errors or omissions in the Data however such faults, interruptions,
delays, inaccuracies, errors or omissions arise, unless due to the
gross negligence or willful misconduct of Reuters;
(ii) it will not transfer, transmit, recirculate by digital or analogue
means, republish or resell all or part of the Data; and
(iii) certain parts of the Data are proprietary and unique to Reuters.
The undersigned further agrees that the benefit of this clause will inure to the
benefit of Reuters.
PACIFIC INVESTMENT MANAGEMENT COMPANY
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
PIMCO FUNDS:
MULTI-MANAGER SERIES
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
PIMCO FUNDS:
PACIFIC INVESTMENT MANAGEMENT SERIES
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
31
<PAGE>
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND OPTIONAL DEPOSITORIES
<TABLE>
<CAPTION>
Country Subcustodian Optional Depositories
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain The British Bank of the Middle East
(as delegate of the Hongkong and
Shanghai Banking Corporation
Limited) --
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. --
People's The Hongkong and Shanghai Banking
Republic of Corporation Limited, Shanghai and
China Shenzhen branches --
Colombia Cititrust Colombia S.A.Sociedad
Fiduciaria --
Costa Rica Banco BCT S.A. --
Croatia Privredana Banka Zagreb d.d --
Cyprus Barclays Bank Plc. Cyprus Offshore
Banking Unit --
Czech Ceskoslovenska Obchodni Banka, A.S. --
Republic
</TABLE>
32
<PAGE>
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND OPTIONAL DEPOSITORIES
<TABLE>
<CAPTION>
Country Subcustodian Optional Depositories
<S> <C> <C>
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A Bank of Greece,
System for Monitoring
Transactions in
Securities in
Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
Iceland Icebank Ltd. --
India Deutsche Bank AG;The Hongkong and
Shanghai Banking Corporation
Limited --
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques en Cote --
d'Ivoire
Jamaica Scotiabank Jamaica Trust and
Merchant Bank, Ltd. --
Japan The Daiwa Bank, Limited; The Fuji
Bank Limited Japan Securities Depository
</TABLE>
33
<PAGE>
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND OPTIONAL DEPOSITORIES
<TABLE>
<CAPTION>
Country Subcustodian Optional Depositories
<S> <C> <C>
Jordan British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation
Limited) --
Kenya Barclays Bank of Kenya Limited --
Republic of The Hongkong and Shanghai Banking --
Korea Corporation Limited
Latvia JSC Hansabank-Latvija --
Lebanon British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation
Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank Malaysia
Berhad --
Mauritius The Hongkong and Shanghai Banking --
Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group (New Zealand)
Limited --
Norway Christiania Bank og Kreditkasse --
Oman The British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation
Limited) --
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
</TABLE>
34
<PAGE>
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND OPTIONAL DEPOSITORIES
<TABLE>
<CAPTION>
Country Subcustodian Optional Depositories
<S> <C> <C>
Poland Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, AO,
Moscow (as delegate of
Credit Suisse First Boston,
Zurich) --
Singapore The Development Bank of
Singapore Ltd. --
Slovak Ceskoslovenska Obchodna Banka A.S. --
Republic
Slovenia Banka Austria d.d. --
South Africa Standard Bank of South Africa
Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai Banking
Corporation Limited --
Swaziland Barclays Bank of Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AS --
Taiwan - Central Trust of China --
R.O.C.
Thailand Standard Chartered Bank --
Trinidad Republic Bank Ltd. --
& Tobago
Tunisia Banque Internationale Arabe de
Tunisie --
Turkey Citibank, N.A.; Ottoman Bank --
Ukraine ING Bank, Ukraine --
</TABLE>
35
<PAGE>
EXHIBIT D
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND OPTIONAL DEPOSITORIES
<TABLE>
<CAPTION>
Country Subcustodian Optional Depositories
<S> <C> <C>
United State Street Bank and Trust Company, --
Kingdom London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street
London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)
/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
</TABLE>
36
<PAGE>
EXHIBIT E
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
Country Mandatory Depositories (Includes entities for which
use is mandatory as a matter of law or effectively
mandatory as a matter of market practice)
<C> <S>
Argentina -Caja de Valores S.A.
Australia -Austraclear Limited;
-Reserve Bank Information and Transfer System
Austria -Oesterreichische Kontrollbank AG (Wertpapiersammelbank
Division)
Belgium -Caisse Interprofessionnelle de Depot et de Virement de
Titres S.A.;
-Banque Nationale de Belgique
Brazil -Companhia Brasileira de Liquidacao e
-Custodia (CBLC)
-Bolsa de Valores de Rio de Janeiro
-All SSB clients presently use CBLC
-Central de Custodia e de Liquidacao Financeira de Titulos
Bulgaria -Central Depository AD
-Bulgarian National Bank
Canada -The Canadian Depositoryfor Securities Limited
People's Republic -Shanghai Securities Central Clearing and Registration
of China Corporation;
-Shenzhen Securities Central Clearing Co., Ltd.
Costa Rica -Central de Valores S.A. (CEVAL)
Croatia Ministry of Finance; - National Bank of Croatia
Czech Republic --Stredisko cennych papiru;
-Czech National Bank
Denmark -Vaerdipapircentralen (The Danish Securities Center)
Egypt -Misr Company for Clearing, Settlement, and Central
Depository
Estonia -Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities Depository
France -Societe Interprofessionnelle pour la Compensation des
Valeurs Mobilieres (SICOVAM)
</TABLE>
37
<PAGE>
EXHIBIT E
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
Country Mandatory Depositories (Includes entities for which
use is mandatory as a matter of law or effectively
mandatory as a matter of market practice)
<C> <S>
Germany -The Deutscher Borse Clearing AG
Greece -The Central Securities Depository (Apothetirion Titlon AE)
Hong Kong -The Central Clearing and Settlement System;
-Central Money Markets Unit
Hungary -The Central Depository and Clearing House (Budapest)
Ltd.(KELER) [Mandatory for Gov't Bonds only; SSB does not use
for other securities]
India -The National Securities Depository Limited
Indonesia -Bank Indonesia
Ireland -The Central Bank of Ireland, Securities Settlement Office
Israel -The Tel Aviv Stock Exchange Clearing House Ltd.;
-Bank of Israel
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Jamaica -The Jamaican Central Securities Depository
Japan -Bank of Japan Net System
Kenya -Central Bank of Kenya
Republic of Korea -Korea Securities Depository Corporation
Latvia -The Latvian Central Depository
Lebanon -The Custodian and Clearing Center of Financial Instruments
for Lebanon and the Middle East (MIDCLEAR) S.A.L.; - The
Central Bank of Lebanon
Lithuania -The Central Securities Depository of Lithuania
Malaysia -The Malaysian Central Depository Sdn. Bhd.;-Bank Negara
Malaysia, Scripless Securities Trading and Safekeeping
Systems
Mauritius -The Central Depository & Settlement Co. Ltd.
</TABLE>
38
<PAGE>
EXHIBIT E
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
Country Mandatory Depositories (Includes entities for which
use is mandatory as a matter of law or effectively
mandatory as a matter of market practice)
<C> <S>
Mexico -S.D. INDEVAL, S.A. de C.V.(Instituto para el Deposito de
Valores);
Morocco -Maroclear
The Netherlands -Nederlands Centraal Instituut voor Giraal Effectenverkeer
B.V. (NECIGEF)
-De Nederlandsche Bank N.V.
New Zealand -New Zealand Central Securities Depository Limited
Norway -Verdipapirsentralen (the Norwegian Registry of Securities)
Oman -Muscat Securities Market
Pakistan -Central Depository Company of Pakistan Limited
Peru -Caja de Valores y Liquidaciones S.A. (CAVALI)
Philippines -The Philippines Central Depository Inc.
-The Registry of Scripless Securities (ROSS) of the Bureau of
the Treasury
Poland -The National Depository of Securities (Krajowy Depozyt
Papierow Wartos'ciowych);
-Central Treasury Bills Registrar
Portugal -Central de Valores Mobiliarios (Central)
Romania -National Securities Clearing, Settlement and Depository Co.;
-Bucharest Stock Exchange Registry Division;
Singapore -The Central Depository (Pte)Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko Cennych Papierov;
-National Bank of Slovakia
Slovenia -Klirinsko Depotna Druzba d.d.
South Africa -The Central Depository Limited
Spain -Servicio de Compensacion y Liquidacion de Valores, S.A.;
-Banco de Espana; Central de Anotaciones en Cuenta
</TABLE>
39
<PAGE>
EXHIBIT E
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
Country Mandatory Depositories (Includes entities for which
use is mandatory as a matter of law or effectively
mandatory as a matter of market practice)
<C> <S>
Sri Lanka -Central Depository System (Pvt) Limited
Sweden -Vardepapperscentralen AB (the Swedish Central Securities
Depository)
Switzerland -Schweizerische Effekten - Giro AG;
Taiwan - R.O.C. -The Taiwan Securities Central Depository Company, Ltd.
Thailand -Thailand Securities Depository Company Limited
Tunisia - Societe Tunisienne Interprofessionelle de Compensation et
de Depot de Valeurs Mobilieres
-Central Bank of Tunisia;
-Tunisian Treasury
Turkey -Takas ve Saklama Bankasi A.S. (TAKASBANK)
-Central Bank of Turkey
Ukraine -The National Bank of Ukraine
United Kingdom -The Bank of England, The Central Gilts Office; The Central
Moneymarkets Office
Uruguay -Central Bank of Uruguay
Venezuela -Central Bank of Venezuela
Zambia -Lusaka Central Depository Limited
-Bank of Zambia
</TABLE>
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