<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X] Filed by a Party other than the
Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PIMCO Funds: Multi-Manager Series
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[Preliminary Materials]
PIMCO ADVISORS L.P.
800 Newport Center Drive
Newport Beach, California 92660
January , 2000
Dear PIMCO Funds: Multi-Manager Series Shareholder:
On behalf of the Board of Trustees of PIMCO Funds: Multi-Manager Series (the
"Trust"), we are pleased to invite you to a special meeting of the
shareholders of PIMCO Funds: Multi-Manager Series to be held at 10:00 a.m.,
Eastern time, on March 3, 2000, at 2187 Atlantic Street, Stamford, Connecticut
06902.
As discussed in more detail in the enclosed proxy statement, PIMCO Advisors
L.P. ("PIMCO Advisors"), its two general partners, PIMCO Advisors Holdings
L.P. and PIMCO Partners G.P., certain of their affiliates, Allianz of America,
Inc. ("Allianz of America") and certain other parties entered into an
Implementation and Merger Agreement pursuant to which Allianz of America will
acquire approximately 70% of the outstanding partnership interests in PIMCO
Advisors. At the meeting, you will be asked to approve the following
proposals:
. Approval of a new Investment Advisory Agreement between the Trust and PIMCO
Advisors. The new Investment Advisory Agreement provides that following the
Transaction, PIMCO Advisors will continue to provide investment advisory
services to each series of the Trust (each, a "Fund") on the same terms and
with the same compensation structure under which it currently operates.
. Approval of new Portfolio Management Agreements between PIMCO Advisors and
each Fund's sub-adviser. The new Portfolio Management Agreements provide
that following the Transaction, the sub-advisers will continue to provide
portfolio management services to the Funds on the same terms and with the
same or lower compensation structure under which they currently operate.
. Approval of changes to each Fund's fundamental investment restrictions
relating to borrowing money. The changes would allow each Fund to borrow
money from other funds within the PIMCO Funds family.
. Approval of a proposal allowing PIMCO Advisors to enter into new or amended
portfolio management agreements with respect to each Fund without
shareholder approval. If approved, this proposal will allow PIMCO Advisors
to change a Fund's sub-adviser without the expense and delay of convening a
shareholder meeting. Shareholders of the International Fund previously voted
to approve such an arrangement.
. Approval of an Administrative Distribution Plan for the Administrative Class
shareholders of the Capital Appreciation and Small-Cap Growth Funds. If
approved, the total administrative expenses that may be paid by
Administrative Class shareholders of the Capital Appreciation and Small-Cap
Growth Funds would not increase as a result of the proposal.
. Election of an additional Trustee of the Trust.
Your vote is important
After reviewing these proposals, your Board of Trustees unanimously voted to
approve them and to recommend approval by each Fund's shareholders, as more
fully described in the accompanying proxy statement. Now it is your turn to
review the proposals and vote. For more information about the issues requiring
your vote, please refer to the accompanying proxy statement.
<PAGE>
No matter how many shares you own, your timely vote is important. If you are
not able to attend the meeting, then please complete, sign, date and mail the
enclosed proxy promptly in order to avoid the expense of additional mailings
or having our proxy solicitor, DF King & Co., Inc. ("DF King"), telephone you.
You may also vote by telephoning DF King at 1-800-949-2583.
Thank you in advance for your participation in this important event.
Sincerely,
Stephen J. Treadway
Executive Vice President
<PAGE>
[Preliminary Materials]
PIMCO FUNDS: MULTI-MANAGER SERIES
PIMCO Equity Income Fund
PIMCO Value Fund
PIMCO Tax-Efficient Equity
PIMCO Renaissance Fund
PIMCO Enhanced Equity Fund
PIMCO Growth Fund
PIMCO Capital Appreciation Fund
PIMCO Mid-Cap Growth Fund
PIMCO Target Fund
PIMCO Small-Cap Value Fund
PIMCO Small-Cap Growth Fund
PIMCO Opportunity Fund
PIMCO Micro-Cap Growth Fund
PIMCO Core Equity Fund
PIMCO Mid-Cap Equity Fund
PIMCO Innovation Fund
PIMCO International Fund
PIMCO International Growth Fund
PIMCO Tax-Efficient Structured Emerging Markets Fund
PIMCO Structured Emerging Markets Fund
PIMCO Mega-Cap Fund
PIMCO Funds Asset Allocation Series--90/10 Portfolio
PIMCO Funds Asset Allocation Series--60/40 Portfolio
PIMCO Funds Asset Allocation Series--30/70 Portfolio
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
March 3, 2000
----------------
To the Shareholders of the above-referenced series of PIMCO Funds: Multi-
Manager Series:
Notice is hereby given that a Special Meeting of Shareholders of the series
of PIMCO Funds: Multi-Manager Series (the "Trust") listed above (each a "Fund"
and, together, the "Funds") will be held at the offices of PIMCO Funds
Distributors LLC, 2187 Atlantic Street, Stamford, Connecticut 06902, on March
3, 2000 at 10:00 a.m., Eastern time, for the following purposes:
1. To be voted on separately by shareholders of each Fund: To
approve the New Advisory Agreement, in the form set forth in
Appendix A to the attached Proxy Statement, between the Trust on
behalf of each such Fund and PIMCO Advisors L.P. (the "Adviser"),
as described in Part I of the attached Proxy Statement.
2.a. To be voted on separately by shareholders of the Tax-Efficient
Equity, Enhanced Equity, Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds: To approve a New
Portfolio Management Agreement for each of these Funds, in the
form set forth in Appendix B to the attached Proxy Statement,
between the Adviser and Parametric Portfolio Associates and
assented to by the Trust on behalf of each such Fund, as
described in Part II-A of the attached Proxy Statement.
<PAGE>
b. To be voted on separately by shareholders of the Capital
Appreciation, Mid-Cap Growth, Micro-Cap Growth, Mega-Cap and
Small-Cap Growth Funds: To approve a New Portfolio Management
Agreement for each of these Funds, in the form set forth in
Appendix B to the attached Proxy Statement, between the Adviser
and Cadence Capital Management and assented to by the Trust on
behalf of each such Fund, as described in Part II-B of the
attached Proxy Statement.
c. To be voted on separately by shareholders of the Small-Cap
Value Fund: To approve a New Portfolio Management Agreement for
the Small-Cap Value Fund, in the form set forth in Appendix B
to the attached Proxy Statement, between the Adviser and NFJ
Investment Group and assented to by the Trust on behalf of the
Small-Cap Value Fund, as described in Part II-C of the attached
Proxy Statement.
d. To be voted on separately by shareholders of the International
Fund: To approve the New Portfolio Management Agreement for the
International Fund, in the form set forth in Appendix B to the
attached Proxy Statement, between the Adviser and Blairlogie
Capital Management and assented to by the Trust on behalf of
the International Fund, as described in Part II-D of the
attached Proxy Statement.
3.a. To be voted on separately by shareholders of the Renaissance,
Growth, Target, Opportunity, Innovation, International and
International Growth Funds: To approve a proposal amending each
Fund's fundamental investment restriction relating to borrowing
money to permit each Fund to borrow money from other funds in
the PIMCO Funds family under certain circumstances, as
described in Part III-A of the attached Proxy Statement.
b. To be voted on separately by shareholders of the Equity Income,
Value, Tax-Efficient Equity, Enhanced Equity, Core Equity, Mid-
Cap Equity, Mega-Cap, Capital Appreciation, Mid-Cap Growth,
Small-Cap Value, Small-Cap Growth, Micro-Cap Growth, Tax-
Efficient Structured Emerging Markets and Structured Emerging
Markets Funds: To approve a proposal amending each Fund's
fundamental investment restriction relating to borrowing money
to permit each Fund to borrow money from other funds in the
PIMCO Funds family under certain circumstances, as described in
Part III-B of the attached Proxy Statement.
c. To be voted on separately by shareholders of the 90/10
Portfolio, 60/40 Portfolio and the 30/70 Portfolio (each a
"Portfolio"): To approve a proposal amending each Portfolio's
fundamental investment restriction relating to borrowing money
to permit each Portfolio to borrow money from other funds in
the PIMCO Funds family under certain circumstances, as
described in Part III-C of the attached Proxy Statement.
4. To be voted on separately by shareholders of each Fund except the
International Fund: To approve a proposal with respect to the
future operations of each relevant Fund whereby each Fund may,
from time to time, to the extent permitted by any exemption or
exemptions granted by the Securities and Exchange Commission,
permit the Adviser to enter into new or amended portfolio
management agreements with sub-adviser(s) with respect to each
Fund without obtaining shareholder approval of such agreement(s),
and to permit such sub-adviser(s) to manage the assets of each
Fund pursuant to such portfolio management agreement(s), as
described in Part IV of the attached Proxy Statement.
5. To be voted on separately by the Administrative Class
shareholders of the Capital Appreciation and the Small-Cap Growth
Funds: To approve the Administrative Distribution Plan (which
will not increase expenses of the Capital Appreciation Fund or
Small-Cap Growth Fund) to be adopted in accordance with Rule 12b-
1 under the Investment
<PAGE>
Company Act of 1940, as amended, with respect to the
Administrative Class shares of the Capital Appreciation and the
Small-Cap Growth Funds, as described in Part V of the attached
Proxy Statement.
6. To be voted on by shareholders of all Funds, voting together: To
elect a Trustee, as described in Part VI of the attached Proxy
Statement.
7. To consider and act upon such other matters as may properly come
before the meeting and any adjourned session thereof.
Shareholders of record at the close of business on December 20, 1999 are
entitled to notice of, and to vote at, the Meeting.
By order of the Board of Trustees,
Newton B. Schott, Jr., Secretary
January , 2000
YOUR VOTE IS IMPORTANT
PLEASE RESPOND--YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE SO THAT YOU WILL BE REPRESENTED AT THE
MEETING.
<PAGE>
[Preliminary Materials]
----------------
PROXY STATEMENT
----------------
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
The enclosed proxy is solicited by the Trustees of PIMCO Funds: Multi-
Manager Series (the "Trust") for use at a Special Meeting of Shareholders to
be held at 10:00 a.m., Eastern time on March 3, 2000, at 2187 Atlantic Street,
Stamford, Connecticut 06902, and at any adjournment thereof (the "Meeting").
The Notice, this Proxy Statement and the enclosed form of proxy are being
mailed to shareholders on or about January 4, 2000. A copy of the annual
reports of the Trust (relating to Class A, B and C shares of the Trust, to
Class D shares of the Trust and to Administrative and Institutional Class
shares of the Trust) for the fiscal year ended June 30, 1999 may be obtained
without charge by writing to PIMCO Funds Distributors LLC, 2187 Atlantic
Street, Stamford, Connecticut 06902, or by calling 1-800-927-4645 (if you own
Institutional or Administrative Class shares of a Fund) or 1-800-426-0107 (if
you own Class A, B, C or D shares of a Fund).
PIMCO Funds: Multi-Manager Series, is an open-end management investment
company ("mutual fund") that currently consists of twenty-six separate
operational diversified investment series. The following twenty-one series
(the "Funds") invest directly in common stocks and other securities and
instruments: the Equity Income Fund, the Value Fund, the Renaissance Fund, the
Tax-Efficient Equity Fund, the Enhanced Equity Fund, the Growth Fund, the
Mega-Cap Fund, the Capital Appreciation Fund, the Mid-Cap Growth Fund, the
Target Fund, the Small-Cap Value Fund, Core Equity Fund, Mid-Cap Equity Fund,
the Small-Cap Growth Fund, the Opportunity Fund, the Micro-Cap Growth Fund,
the Innovation Fund, the International Fund, the International Growth Fund,
the Tax-Efficient Structured Emerging Markets Fund and the Structured Emerging
Markets Fund. Three additional series, PIMCO Funds Asset Allocation Series--
90/10 Portfolio (the "90/10 Portfolio"), PIMCO Funds Asset Allocation Series--
60/40 Portfolio (the "60/40 Portfolio"), and PIMCO Funds Asset Allocation
Series--30/70 Portfolio (the "30/70 Portfolio," and together with the 90/10
Portfolio and the 60/40 Portfolio, the "Portfolios"), are so-called "funds-of-
funds" which invest all of their assets in certain of the Funds and other
mutual funds in the PIMCO Funds family. Unless otherwise indicated or the
context otherwise requires, the term "Funds" as used herein includes the 90/10
Portfolio, 60/40 Portfolio and the 30/70 Portfolio. It is expected that the
PIMCO Value 25 and Precious Metals Funds, series of the Trust that are not the
subject of this Proxy Statement, will be liquidated prior to the date of the
Meeting.
<PAGE>
All shareholders of record at the close of business on December 20, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the meeting or any
adjourned session. The number of shares of each class of each Fund and
Portfolio issued and outstanding on the Record Date was as follows:
<TABLE>
<CAPTION>
Number of Issued
and Outstanding Shares
Name of Fund Per Class
------------ ----------------------
<S> <C>
Equity Income Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
Value Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
Renaissance Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
Tax-Efficient Equity Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
Enhanced Equity Fund
Institutional Class
Administrative Class
Core Equity Fund
Institutional Class
Administrative Class
Mid-Cap Equity Fund
Institutional Class
Administrative Class
Growth Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Number of Issued
and Outstanding Shares
Name of Fund Per Class
------------ ----------------------
<S> <C>
Capital Appreciation Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
Mid-Cap Growth Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
Target Fund
Class A
Class B
Class C
Institutional Class
Administrative Class
Small-Cap Value Fund
Class A
Class B
Class C
Institutional Class
Administrative Class
Small-Cap Growth Fund
Class A
Class B
Class C
Institutional Class
Administrative Class
Opportunity Fund
Class A
Class B
Class C
Institutional Class
Administrative Class
Micro-Cap Growth Fund
Institutional Class
Administrative Class
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Number of Issued
and Outstanding Shares
Name of Fund Per Class
------------ ----------------------
<S> <C>
Innovation Fund
Class A
Class B
Class C
Class D
Institutional Class
Administrative Class
International Fund
Class A
Class B
Class C
Institutional Class
Administrative Class
International Growth Fund
Institutional Class
Administrative Class
Tax-Efficient Structured Emerging Markets Fund
Institutional Class
Administrative Class
Structured Emerging Markets Fund
Institutional Class
Administrative Class
Mega-Cap Fund
Institutional Class
Administrative Class
PIMCO Funds Asset Allocation Series--90/10
Portfolio
Class A
Class B
Class C
Institutional Class
Administrative Class
PIMCO Funds Asset Allocation Series--60/40
Portfolio
Class A
Class B
Class C
Institutional Class
Administrative Class
PIMCO Funds Asset Allocation Series--30/70
Portfolio
Class A
Class B
Class C
Institutional Class
Administrative Class
</TABLE>
4
<PAGE>
Each whole share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional share shall be entitled to a
proportionate fractional vote.
Shares represented by timely, duly executed proxies will be voted as you
instruct. If no specification is made with respect to a particular matter,
shares will be voted in accordance with the recommendation of the Trustees.
Proxies may be revoked at any time before they are exercised by sending a
written revocation which is received by the Secretary of the Trust, by
properly executing a later-dated proxy or by attending the meeting and voting
in person.
Summary of Proposals and Funds Affected*
<TABLE>
<CAPTION>
II-A. Proposal II-B. Proposal II-D. Proposal
to Approve a to Approve a II-C. Proposal to Approve a
New Portfolio New Portfolio to Approve a New Portfolio
Management Management New Portfolio Management
I. Proposal Agreement Agreement Management Agreement
to Approve between the between the Agreement between the
a New Adviser and Adviser and between the Adviser and
Investment Parametric Cadence Adviser and Blairlogie
Advisory Portfolio Capital NFJ Investment Capital
Name of Fund Agreement Associates Management Group Management
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Income Fund X
- ---------------------------------------------------------------------------------------------------
Value Fund X
- ---------------------------------------------------------------------------------------------------
Renaissance Fund X
- ---------------------------------------------------------------------------------------------------
Tax-Efficient Equity
Fund X X
- ---------------------------------------------------------------------------------------------------
Enhanced Equity Fund X X
- ---------------------------------------------------------------------------------------------------
Growth Fund X
- ---------------------------------------------------------------------------------------------------
Capital Appreciation
Fund X X
- ---------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund X X
- ---------------------------------------------------------------------------------------------------
Target Fund X
- ---------------------------------------------------------------------------------------------------
Small-Cap Value Fund X X
- ---------------------------------------------------------------------------------------------------
Small-Cap Growth Fund X X
- ---------------------------------------------------------------------------------------------------
Opportunity Fund X
- ---------------------------------------------------------------------------------------------------
Micro-Cap Growth Fund X X
- ---------------------------------------------------------------------------------------------------
Innovation Fund X
- ---------------------------------------------------------------------------------------------------
International Fund X X
- ---------------------------------------------------------------------------------------------------
International Growth
Fund X
- ---------------------------------------------------------------------------------------------------
Tax-Efficient Structured
Emerging Markets Fund X X
- ---------------------------------------------------------------------------------------------------
Structured Emerging
Markets Fund X X
- ---------------------------------------------------------------------------------------------------
Mega-Cap Fund X X
- ---------------------------------------------------------------------------------------------------
Core Equity Fund X
- ---------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund X
- ---------------------------------------------------------------------------------------------------
PIMCO Funds Asset
Allocation Series--
90/10 Portfolio X
- ---------------------------------------------------------------------------------------------------
PIMCO Funds Asset
Allocation Series--
60/40 Portfolio X
- ---------------------------------------------------------------------------------------------------
PIMCO Funds Asset
Allocation Series--
30/70 Portfolio X
</TABLE>
* An "X" denotes that the Fund is affected by the proposal and that the Fund's
shareholders are being solicited with respect to that proposal.
5
<PAGE>
Summary of Proposals and Funds Affected (continued)*
<TABLE>
<CAPTION>
IV. Proposal
to Allow the
Adviser to
III-A Proposal III-B Proposal III-C Proposal Enter into
to Amend the to Amend the to Amend the New or
Fund's Fund's Portfolio's Amended
Fundamental Fundamental Fundamental Portfolio
Investment Investment Investment Management V. Proposal to
Restriction Restriction Restriction Agreements Approve
Relating to Relating to Relating to without Administrative VI. Proposal
Borrowing Borrowing Borrowing Shareholder Distribution to Elect a
Name of Fund Money Money Money Approval Plan Trustee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Income Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Value Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Renaissance Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Tax-Efficient Equity
Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Enhanced Equity Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Growth Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Capital Appreciation
Fund X X X** X
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Target Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Small-Cap Value Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Small-Cap Growth Fund X X X** X
- -----------------------------------------------------------------------------------------------------------------
Opportunity Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Micro-Cap Growth Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Innovation Fund X X X
- -----------------------------------------------------------------------------------------------------------------
International Fund X X
- -----------------------------------------------------------------------------------------------------------------
International Growth
Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Tax-Efficient Structured
Emerging Markets Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Structured Emerging
Markets Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Mega-Cap Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Core Equity Fund X X X
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund X X X
- -----------------------------------------------------------------------------------------------------------------
PIMCO Funds Asset
Allocation Series--
90/10 Portfolio X X X
- -----------------------------------------------------------------------------------------------------------------
PIMCO Funds Assets
Allocation Series--
60/40 Portfolio X X X
- -----------------------------------------------------------------------------------------------------------------
PIMCO Funds Asset
Allocation Series--
30/70 Portfolio X X X
</TABLE>
* An "X" denotes that the Fund is affected by the proposal and that the
Fund's shareholders are being solicited with respect to that proposal.
** Only Administrative Class shareholders of these Funds are being solicited
with respect to Proposal V.
Solicitation of the proxies by personal interview, mail and telephone may be
made by officers and Trustees of the Trust and officers and employees of PIMCO
Advisors L.P., its affiliates and other representatives of the Trust. The
Trust has retained DF King & Co., Inc. ("DF King") 77 Water Street, New York,
New York 10005, to aid in the solicitation of proxies. The costs of retaining
DF King and other expenses incurred in connection with the solicitation of
proxies, and the costs of holding the Meeting, will not be borne by the Funds,
but will be divided equally between Allianz of America and the Adviser.
6
<PAGE>
DESCRIPTION OF THE TRANSACTION
On October 31, 1999, PIMCO Advisors L.P. ("PIMCO Advisors" or the
"Adviser"), its two general partners, PIMCO Advisors Holdings L.P. ("PAH") and
PIMCO Partners G.P. ("Partners GP"), certain of their affiliates, Allianz of
America, Inc. ("Allianz of America") and certain other parties entered into an
Implementation and Merger Agreement (the "Merger Agreement") pursuant to which
Allianz of America will acquire majority ownership of PIMCO Advisors.
The Merger Agreement provides for the acquisition of PAH by Allianz of
America through a merger of a subsidiary of Allianz of America with and into
PAH. In the merger, all of the outstanding units of limited and general
partnership interest in PAH will be converted into the right to receive cash
in an amount per unit equal to $38.75, subject to downward adjustment if PIMCO
Advisors' investment advisory revenue base, expressed as a "revenue run rate,"
declines (excluding market-based changes) below a specified level (the "Unit
Transaction Price"). As a result of the merger, PAH will become an indirect
wholly owned subsidiary of Allianz of America.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire for cash at the Unit Transaction Price substantially
all of the remaining interests in PIMCO Advisors (the "PA Units"), other than
those interests beneficially owned by Pacific Life Insurance Company ("Pacific
Life"). As part of the transaction, a subsidiary of Allianz of America will
acquire Partners GP through an acquisition of the managing general partner
interest in Partners GP from PIMCO Partners LLC (the managing general partner
of Partners GP) for approximately $5.5 million and of the member interests in
Partners GP that are indirectly owned by Pacific Life. Pacific Life, which
through subsidiaries owns approximately a 31% interest in PIMCO Advisors, will
maintain an indirect interest in PIMCO Advisors following the closing. In
connection with the closing, Allianz of America will enter into at put/call
arrangement for the eventual disposition of Pacific Life's indirect investment
in PIMCO Advisors.
As a result of the transactions contemplated by the Merger Agreement
(together, the "Transaction"), Allianz of America will control PIMCO Advisors,
having acquired approximately 70% of the outstanding partnership interests in
PIMCO Advisors. The Transaction is expected to be completed by the end of the
first quarter of 2000, although there is no assurance that the Transaction
will be completed.
PIMCO Advisors serves as Investment Adviser to the Funds, and affiliates of
PIMCO Advisors serve as Sub-Advisers to several of the Funds. PIMCO Advisors
and these affiliates will undergo a change of control as a result of the
consummation of the Transaction, resulting in the automatic termination of the
current Amended and Restated Investment Advisory Agreement and portfolio
management agreements with respect to each Fund (respectively, the "Current
Advisory Agreement" and "Current Portfolio Management Agreements"). Following
completion of the Transaction, it is expected that PIMCO Advisors and its
affiliates will continue to serve as Investment Adviser or Sub-Adviser, as the
case may be, of each Fund. Therefore, in connection with the Transaction and
as required by the Investment Company Act of 1940, as amended (the "1940
Act"), shareholders of each Fund are being asked in Proposal 1 to approve an
investment advisory agreement between the Trust, on behalf of each Fund and
PIMCO Advisors that is substantially identical to the Current Investment
Advisory Agreement for such Fund (the "New Advisory Agreement"). Likewise,
shareholders of each Fund for which PIMCO Advisors has retained a Sub-Adviser
are being asked in Proposal 2 to approve a portfolio management agreement with
respect to such Fund that is substantially identical to the Current Portfolio
Management Agreement for such Fund (each a "New Portfolio Management
Agreement"). By voting in favor of Proposal 1 and Proposal 2, shareholders
will also be voting to re-approve the New Advisory Agreement and the New
Portfolio Management Agreements following any exercise of the Pacific
Life/Allianz put/call arrangement referred to above. If the Transaction is not
completed for any reason, the Current Advisory Agreement and Current Portfolio
Management Agreements will remain in effect.
7
<PAGE>
Completion of the Transaction is subject to a number of conditions,
including, among others, (i) the approval of the public unitholders of PAH,
(ii) the receipt of certain regulatory approvals and (iii) PIMCO Advisors'
revenue run-rate for all accounts managed by PIMCO Advisors and its
subsidiaries being at least 75% of the September 30, 1999 revenue run-rate
amount. PIMCO Advisors has agreed to use its reasonable best efforts to
obtain, prior to completion of the Transaction, the approval of the New
Advisory Agreement by the shareholders of each Fund. In the event the New
Advisory Agreement is not approved by any Fund's shareholders and the
Transaction is completed, the Board of Trustees of the Trust will consider
appropriate action.
Pursuant to the Merger Agreement, PIMCO Advisors and Pacific Investment
Management Company, a subsidiary partnership of PIMCO Advisors, will enter
into employment, retention and incentive arrangements with key employees of
PIMCO Advisors and Pacific Investment Management Company. These benefits
include new employment agreements, retention and incentive awards vesting over
a term of years and restricted stock grants. In addition, certain key
employees of PIMCO Advisors' investment advisory affiliates will receive
payments in respect of previously existing non-competition arrangements in
connection with the acquisition by Allianz of America of the PA Units on which
such arrangements were based.
Post-Transaction Structure and Operations
Upon completion of the Transaction, PIMCO Advisors and its subsidiaries will
be controlled by Allianz of America. Allianz of America is a holding company
that owns several insurance and financial service companies and is a
subsidiary of Allianz AG, which, together with its subsidiaries, comprise the
world's second largest insurance group as measured by premium income. Allianz
of America will control PIMCO Advisors through its managing member interest in
PacPartners LLC, which will be the sole general partner of PIMCO Advisors
following the Transaction. While Allianz of America will control PacPartners
LLC, Pacific Life will hold a portion of its continuing interest in PIMCO
Advisors through an interest in PacPartners LLC.
Operationally, PIMCO Advisors is expected to become a unit of Allianz Asset
Management ("AAM"), the division of Allianz that coordinates global Allianz
asset management activities. The equity operations of PIMCO Advisors and its
subsidiaries will remain separately branded and managed. PIMCO Advisors and
its subsidiaries are currently expected to continue to operate in the United
States under their existing names.
Both William S. Thompson Jr., a member of the Management Board and Chairman
of the Executive Committee of PIMCO Advisors, and William H. Gross, the
current Chief Investment Officer of PIMCO Advisors, will have roles on the
Executive Committee of AAM, with Mr. Thompson serving as the Executive
Committee's Deputy Chairman. In the Transaction, Messrs. Thompson and Gross
will enter into employment contracts with a term of seven years following the
Transaction. Other key employees of PIMCO Advisors have also contractually
agreed to remain with PIMCO Advisors following the Transaction.
William D. Cvengros serves as a Trustee of the Trust, and is President and
Chief Executive Officer of PIMCO Advisors and a Member of its Management
Board. In connection with the Transaction, Mr. Cvengros and the Cvengros
Living Trust will receive cash for 5,000 and 355,000 PA Units, respectively,
at the Unit Transaction Price. Additionally, Mr. Cvengros, who has elected not
to continue his employment with PIMCO Advisors after the Transaction, will
receive a transition award of approximately $1.7 million per annum for three
years. Options for 250,000 PA Units previously granted to Mr. Cvengros
pursuant to PIMCO Advisors' 1998 Unit Incentive Plan will be converted into
the right to receive cash for the difference between the exercise price for
those options (which averages $16.65) and the Unit Transaction Price.
8
<PAGE>
Stephen J. Treadway serves as Trustee, President and Chief Executive Officer
of the Trust, as Executive Vice President of PIMCO Advisors, and as Chairman
and President of PIMCO Funds Distributors LLC. In connection with the
Transaction, Mr. Treadway will sell approximately 22,000 PA Units at the Unit
Transaction Price. Upon completion of the Transaction, Mr. Treadway will enter
into an employment agreement with PIMCO Advisors for an initial term of two
years, beginning January 1, 2000, with automatic renewal for successive two
year periods. Mr. Treadway will receive an annual salary and bonus, and will
be eligible to participate in certain benefit plans and programs. In addition,
pursuant to a new PIMCO Advisors LP Transition and Retention Plan, Mr.
Treadway will receive a fixed payment of $1 million per year for five years
and will be eligible for a performance based award of up to $1 million per
year for five years depending on the achievement of certain retail product
sales targets. Additionally, 25,668 PA Units attributable to Mr. Treadway's
account balance in PIMCO Advisors' Executive Deferred Compensation Plan
(including certain restricted PA Units) will fully vest and the PA Units owned
by that plan will be exchanged for cash at the Unit Transaction Price. Options
for 105,000 PA Units previously granted to Mr. Treadway pursuant to PIMCO
Advisors' 1998 Unit Incentive Plan will be converted into the right to receive
cash for the difference between the exercise price for those options (which
averages $22.75) and the Unit Transaction Price.
Kenneth M. Poovey, a nominee for Trustee of the Trust, is Chief Operating
Officer of PIMCO Advisors. In connection with the Transaction, Mr. Poovey will
receive cash for approximately 17,000 PA Units at the Unit Transaction Price.
Additionally, Mr. Poovey is managing general partner of a partnership owning
PA Units, but disclaims beneficial ownership of such PA Units. Upon completion
of the Transaction, Mr. Poovey will enter into an employment agreement with
PIMCO Advisors for an initial term of two years, beginning January 1, 2000,
with automatic renewal for successive two year periods. Mr. Poovey will
receive an annual salary and be eligible to participate in certain benefit
plans and programs. Pursuant to the new PIMCO Advisors LP Transition and
Retention Plan, Mr. Poovey will receive a fixed payment of $5 million per year
for two years. Additionally, 19,220 PA Units attributable to Mr. Poovey's
account balance in PIMCO Advisors' Executive Deferred Compensation Plan will
fully vest and all of the PA Units owned by that plan will be exchanged for
cash at the Unit Transaction Price. Options for 30,000 PA Units previously
granted to Mr. Poovey pursuant to PIMCO Advisors' 1998 Unit Incentive Plan
will be converted into the right to receive the difference between the
exercise price for those options ($21.81) and the Unit Transaction Price.
Jeffrey M. Sargent, John P. Hardaway, Joseph D. Hattesohl and Garlin G.
Flynn serve as Vice President, Treasurer, Assistant Treasurer and Assistant
Secretary, respectively, of the Trust, and are officers of Pacific Investment
Management Company. Newton B. Schott, Jr. serves as Vice President and
Secretary of the Trust and is an officer of PIMCO Advisors and PIMCO Funds
Distributors LLC. Richard M. Weil, a former Vice President of the Trust, is
General Counsel of PIMCO Advisors and Chief Operating Officer of Oppenheimer
Capital. R. Wesley Burns, a former Executive Vice President of the Trust, is a
Managing Director of Pacific Investment Management Company and a member of
PIMCO Partners LLC. Any options for PA Units held by the foregoing persons
will be converted to a right to receive the difference between the exercise
price for such options and the Unit Transaction Price. Additionally, any such
person's interest in PIMCO Advisors' Executive Deferred Compensation Plan will
fully vest and the PA Units owned by that plan will be sold at the Unit
Transaction Price.
As a result of the direct and indirect interests in the Transaction and in
PIMCO Advisors and its affiliates, as well as the employment arrangements with
PIMCO Advisors and its affiliates, each of the persons identified in the
foregoing paragraphs may be deemed to have a substantial interest in
shareholder approval of the matters set forth in Parts I and II of this Proxy
Statement.
9
<PAGE>
Description of Allianz and Its Affiliates
Allianz AG, the parent of Allianz of America, is a publicly traded German
Aktiengesellschaft which, together with its subsidiaries, comprise the world's
second largest insurance group as measured by premium income. Allianz AG is a
leading provider of financial services, particularly in Europe, and is
represented in 68 countries world-wide through subsidiaries, branch and
representative offices, and other affiliated entities. The Allianz group
currently has assets under management of more than $390 billion, and in its
last fiscal year wrote approximately $50 billion in gross insurance premiums.
After completion of the Transaction, Allianz AG, PIMCO Advisors and their
subsidiaries will have over $650 billion in assets under management. Allianz
AG's address is: Allianz Aktiengesellschaft, Koniginstrasse 28, D-80802,
Munich, Germany.
Affiliates of Allianz AG currently include Dresdner Bank AG, Deutsche Bank
AG, Munich Re, and HypoVereinsbank. These entities, as well as certain broker-
dealers controlled by or affiliated with these entities, such as Bankers Trust
Company and BT Alex. Brown Incorporated, may be considered "Affiliated
Brokers." Once the Transaction is completed, absent an SEC exemption or other
relief, each Fund would generally be precluded from effecting principal
transactions with any Affiliated Brokers, and its ability to purchase
securities from underwriting syndicates including an Affiliated Broker or to
utilize any Affiliated Brokers for agency transactions would be subject to
restrictions. PIMCO Advisors does not believe that applicable restrictions on
transactions with the Affiliated Brokers described above will materially
adversely affect its ability, post-closing, to provide services to the Funds,
the Funds' ability to take advantage of market opportunities, or any Fund's
overall performance.
Section 15(f) of the 1940 Act
Section 15(f) provides a non-exclusive safe harbor for an investment adviser
or any affiliated persons to receive any amount or benefit in connection with
a change of control of the investment adviser to an investment company as long
as two conditions are satisfied. First, an "unfair burden" must not be imposed
on investment company clients of the adviser as a result of the transaction,
or any express or implied terms, conditions or understandings applicable to
the transaction. The term "unfair burden" (as defined in the 1940 Act)
includes any arrangement during the two-year period after the transaction
whereby the investment advisor (or predecessor or successor advisor), or any
"interested person" (as defined in the 1940 Act) (an "Interested Person") of
any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from such an investment company or its security
holders (other than fees for bona fide investment advisory or other services)
or from any other person in connection with the purchase or sale of securities
or other property to, from or on behalf of such investment company. The Board
of Directors of the Funds has been advised that PIMCO Advisors is aware of no
circumstances arising from the Transaction that might result in an unfair
burden being imposed on the Fund.
The second condition of Section 15(f) is that during the three-year period
after the transaction, at least 75% of each such investment company's board of
directors must not be Interested Persons of the investment advisor (or
predecessor or successor advisor).
Allianz and each of the other parties to the Agreement have agreed to use
their reasonable best efforts to assure compliance with these safe harbor
requirements of Section 15(f) during the applicable time periods.
10
<PAGE>
I. APPROVAL OR DISAPPROVAL OF THE NEW ADVISORY AGREEMENT
The Trustees of the Trust are proposing that shareholders approve the New
Advisory Agreement between the Trust and the Adviser that will be entered into
between the Adviser and the Trust on behalf of each Fund on or about the
closing of the Transaction. A description of the New Advisory Agreement,
including the services provided thereunder, the procedure for its termination
and renewal and other services provided by the Adviser and its affiliates, is
set forth below. The description is qualified in its entirety by reference to
the form of New Advisory Agreement included as Appendix A to this Proxy
Statement. Additional information about the Adviser is set forth below in the
section entitled "Information About the Adviser."
The New Advisory Agreement was approved by all the Trustees, including the
Independent Trustees (as defined below), at an in-person meeting held on
December 9, 1999. The Trustees last approved the continuance of the Trust's
Current Advisory Agreement for all Funds on December 9, 1999 and no actions
have been taken with respect to either the New Advisory Agreement or the
Current Advisory Agreement since that date.
Description of the New Advisory Agreement
The Adviser, or a predecessor of the Adviser, has acted as each Fund's
adviser since such Fund's inception, and currently acts as each Fund's adviser
pursuant to the Current Advisory Agreement. The shareholders of the Equity
Income, Growth, Innovation, Opportunity and Target Funds last approved the
Current Advisory Agreement on December 20, 1996 in connection with a
transaction in which several series of PIMCO Advisors Funds reorganized into
series of the Trust. The shareholders of the Value, Small-Cap Value, Core
Equity, Mid-Cap Equity, Capital Appreciation, Mid-Cap Growth, Micro-Cap
Growth, Small-Cap Growth, Enhanced Equity, Renaissance and International Funds
last approved the Current Advisory Agreement on [ ] in connection with
[ ]. The shareholders of the Mega-Cap Fund last approved the Current
Advisory Agreement on June 3, 1999 in connection with the organization of such
Fund. The shareholders of the Structured Emerging Markets, Tax-Efficient
Structured Emerging Markets and International Growth Funds last approved the
Current Advisory Agreement on September 5, 1997 in connection with the
organization of such Funds. The shareholders of the Tax-Efficient Equity Fund
last approved the Current Advisory Agreement on July 10, 1998 in connection
with the organization of such Fund. The shareholders of the Portfolios last
approved the Current Advisory Agreement on September 28, 1998 in connection
with the organization of the Portfolios.
The terms and provisions of the New Advisory Agreement are substantially
identical to those of the Current Advisory Agreement, including with respect
to the advisory fees payable thereunder to the Adviser.
The New Advisory Agreement requires that, subject to the general supervision
of the Trustees, the Adviser, either directly or through others engaged by it,
provide a continuous investment program for the Funds and determine the
composition of the assets of the Funds, including the determination of the
purchase, retention or sale of securities, cash and other investments for the
Funds. The Adviser provides or arranges for the provision of such services in
accordance with the Funds' investment objective, investment policies and
investment restrictions as stated in the Trust's registration statement filed
with the Securities and Exchange Commission (the "SEC"), as supplemented or
amended from time to time. The New Advisory Agreement provides that the
Adviser may, at its expense and subject to its supervision, engage sub-
advisers to render any or all of the investment advisory services that the
Adviser would be obligated to provide under the New Advisory Agreement. It is
pursuant to this authority that the Adviser has entered into the Current
Portfolio Management Agreements (as defined below) with Parametric Portfolio
Associates, Cadence Capital Management, NFJ Investment Group and Blairlogie
Capital Management (each, a "Sub-Adviser" and, collectively, the "Sub-
Advisers").
11
<PAGE>
The New Advisory Agreement provides that it will, unless sooner terminated
in accordance with its terms, continue in effect with respect to a Fund for a
period of two years from its effective date and thereafter on an annual basis
with respect to the Fund, provided such continuance is specifically approved
at least annually (a) by the vote of a majority of the Board of Trustees of
the Trust or (b) by the vote of a majority of the outstanding voting
securities of the Fund, and provided continuance is also specifically approved
by the vote of a majority of the Board of Trustees of the Trust who are not
parties to the New Advisory Agreement or "interested persons" (as defined by
the 1940 Act) of the Trust or the Adviser (the "Independent Trustees"), cast
in person at a meeting called for the purpose of voting on such approval. The
New Advisory Agreement provides that it terminates automatically in the event
of its assignment (as defined by the 1940 Act) by the Adviser. The New
Advisory Agreement provides that it may not be materially amended without a
majority vote of the outstanding voting securities of the pertinent Fund or
Funds.
The New Advisory Agreement may be terminated at any time, without the
payment of any penalty, by the Trust by vote of a majority of the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Trust or, with respect to a particular Fund, by a vote of a majority of the
outstanding voting securities of the Fund, upon 60 days' written notice to the
Adviser, or by the Adviser upon 60 days' written notice to the Trust. With
respect to the Growth, Target, Opportunity, Innovation, Renaissance and
International Funds only, the New Advisory Agreement may also be terminated at
any time, without the payment of any penalty, by vote of a majority of
Trustees who are not "interested persons" (as defined by the 1940 Act) of the
Trust.
The New Advisory Agreement provides that the Adviser shall not be subject to
any liability arising out of any services rendered by it under the New
Advisory Agreement, except by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties under the New Advisory Agreement.
The New Advisory Agreement provides that the Adviser shall pay the expenses
associated with maintaining its staff and personnel and shall, at its own
expense, provide all services, equipment, office space and facilities
necessary to perform its obligations under the New Advisory Agreement.
The advisory fee rates payable by the Funds to the Adviser under the Current
Advisory Agreement are the same as those payable under the New Advisory
Agreement and no change in the current fee structure is being proposed, except
that, under the New Advisory Agreement, the Advisory Fee for the International
Growth Fund would decrease by 0.10% from its current annual rate of 0.85% to
0.75%. Under the New Advisory Agreement, each Fund will pay the Adviser a
monthly advisory fee at the following annual rates, based on the average daily
net assets of the particular Fund:
<TABLE>
<CAPTION>
Advisory
Fund Fee Rate
- ---- --------
<S> <C>
Equity Income, Value, Tax-Efficient Equity, Capital Appreciation,
Mid-Cap Growth, Mega-Cap, Structured Emerging Markets, Tax-Efficient
Structured Emerging Markets and Enhanced Equity Funds 0.45%
Growth Fund 0.50%
International and Target Funds 0.55%
Core Equity Fund 0.57%
Small-Cap Value and Renaissance Funds 0.60%
Mid-Cap Equity Fund 0.63%
Opportunity and Innovation Funds 0.65%
International Growth Fund* 0.75%
Small-Cap Growth Fund 1.00%
Micro-Cap Growth Fund 1.25%
</TABLE>
- --------
* Under the International Growth Fund's current advisory agreement, the
International Growth Fund pays the Adviser a monthly advisory fee at an
annual rate of 0.85%.
12
<PAGE>
PIMCO Advisors' Asset Allocation Committee is responsible for determining
how the assets of the 90/10 Portfolio, the 60/40 Portfolio and the 30/70
Portfolio are allocated and reallocated from time to time among the mutual
funds in the PIMCO Funds family in which the Portfolios invest ("PIMCO
Funds"). As with the Current Advisory Agreement, the Portfolios will not pay
any advisory fees to PIMCO Advisors in return for these services under the New
Advisory Agreement. The Portfolios do, however, indirectly pay a proportionate
share of the advisory fees paid to PIMCO Advisors or Pacific Investment
Management Company, as the case may be, by the underlying PIMCO Funds in which
the Portfolios invest.
For the fiscal year ended June 30, 1999, the Funds paid the Adviser the
following amounts under the Current Advisory Agreement (the Mega-Cap Fund was
not operational during the fiscal year ended June 30, 1999):
<TABLE>
<CAPTION>
Year Ended
Fund 6/30/99
- ---- -----------
<S> <C>
Equity Income Fund $ 892,889
Value Fund 1,043,826
Small-Cap Value Fund 2,215,048
Core Equity Fund 413,258
Mid-Cap Equity Fund 74,646
Capital Appreciation Fund 5,057,813
Mid-Cap Growth Fund 3,926,642
Micro-Cap Growth Fund 3,035,025
Small-Cap Growth Fund 574,447
Enhanced Equity Fund 238,001
Renaissance Fund 3,771,388
Growth Fund 10,728,640
Target Fund 5,837,985
Opportunity Fund 3,171,024
Innovation Fund 4,453,888
International Fund 753,828
International Growth Fund 58,010
Tax Efficient Equity Fund 56,985
Structured Emerging Markets Fund 156,322
Tax-Efficient Structured Emerging Markets Fund 212,327
60/40 Portfolio N/A
70/30 Portfolio N/A
90/10 Portfolio N/A
- ----------- ---------
TOTAL $47,116,679
</TABLE>
Information About the Adviser
The Adviser serves as investment adviser to each Fund of the Trust pursuant
to the Current Advisory Agreement. The Adviser is a Delaware limited
partnership organized in 1987. The Adviser provides investment management and
advisory services to private accounts of institutional and individual clients
and to mutual funds. Total assets under management by the Adviser and its
subsidiary partnerships as of December 31, 1999 were approximately $[ ]
billion. The current general partners of the Adviser are Partners GP and PAH.
Partners GP is a general partnership between PIMCO Holdings LLC, a Delaware
limited liability company and an indirect wholly-owned subsidiary of Pacific
Life, 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. Partners GP is the sole general
partner of PAH. The Adviser 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.
13
<PAGE>
Partners GP 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 Partners GP 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 Partners GP ; (iii) three disinterested
persons designated by representatives of the Public General Partner or, if
there is no Public General Partner, Partners GP 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.
The Adviser, Partners GP and PAH are located at 800 Newport Center Drive,
Newport Beach, California 92660. William D. Cvengros is Chief Executive
Officer, President and a Member of the Management Board of the Adviser, as
well as Chairman of the Board of Trustees and a Trustee of the Trust. Mr.
Cvengros' principal occupation is his position with the Adviser. His business
address is at the Adviser.
Approval of the New Advisory Agreement by the Trustees of the Trust
Based on a thorough review of the investment approach and investment
practices used by the Adviser and/or the Portfolio Manager in managing each
Fund's investment portfolios, each Fund's performance record under its current
management and the benefits of continuity of management, the Trustees
determined that it would be appropriate for the Adviser to remain responsible
for the management of each Fund's investment portfolio following the
Transaction. Thus, on December 9, 1999, the Trustees approved the New Advisory
Agreement.
In evaluating the New Advisory Agreement, the Trustees took into account
that the New Advisory Agreement and the Current Advisory Agreement, including
their terms relating to the services to be provided by the Adviser, are
substantially identical. The Trustees also considered the terms of the
Transaction and the possible effects of the Transaction on the Adviser's
ability to continue to provide portfolio management services to each Fund.
Representatives of the Adviser represented to the Trustees that the
Transaction would not result in any changes, other than changes in the
ordinary course of business, in the management, operations, personnel or legal
structure of the Adviser, and that the Adviser's personnel who provide
portfolio management services to the Fund's are not expected to change as a
result of the Transaction. The Trustees were also assured that there were no
plans to discontinue any existing voluntary fee waivers and expense
reimbursement arrangements as a result of the Transaction and that the Funds
would not bear any of the expenses of the preparation and mailing of this
Proxy Statement. The Trustees took into account the change in portfolio
manager for the Small-Cap Value Fund as well as representations made to them
by representatives of the Adviser that the Transaction would not result in any
adverse changes, other than in the ordinary course of business, in the
management or operations of the Adviser or in the services provided to the
Funds.
In addition, the Trustees requested and were provided with detailed
information regarding Allianz and heard a report from a representative of
Allianz about the Transaction, its effects on the Adviser and future plans and
intentions of Allianz for the Adviser and the Funds.
14
<PAGE>
After consideration of the foregoing factors and such other factors as the
Trustees deemed relevant, the Trustees concluded that it was appropriate and
desirable for the Adviser to continue, after the Transaction, to act as
investment adviser to each Fund on the same terms as were in effect before the
Transaction. Accordingly, the Trustees unanimously approved the New Advisory
Agreement and recommend its approval by the shareholders.
Required Vote
Approval of the New Advisory Agreement with respect to a Fund will require
the affirmative vote of a "majority of the outstanding voting securities" of
that Fund, which means the affirmative vote of the lesser of (1) more than 50%
of the outstanding shares of that Fund or (2) 67% or more of the shares of
that Fund present at the Meeting if more than 50% of the outstanding shares of
that Fund are represented at the meeting in person or by proxy. If the
shareholders of any Fund do not approve the New Advisory Agreement, the
Trustees will take such further action as they may deem to be in the best
interests of the shareholders of that Fund. Also, if shareholders of any Fund
that are also considering a New Portfolio Management Agreement, as discussed
in Part II, approve the New Advisory Agreement, but not the New Portfolio
Management Agreement, the Trustees will take such further action as they may
deem to be in the best interests of the shareholders of that Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF EACH FUND VOTE FOR
APPROVAL OF THE NEW ADVISORY AGREEMENT FOR THEIR FUND.
II. APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENTS
The Trustees of the Trust are proposing that shareholders of each of the
Tax-Efficient Equity, Enhanced Equity, Structured Emerging Markets, and Tax-
Efficient Structured Emerging Markets Funds approve a New Portfolio Management
Agreement between the Adviser and Parametric Portfolio Associates
("Parametric"); that shareholders of the Capital Appreciation, Mid-Cap Growth,
Micro-Cap Growth, Mega-Cap and Small-Cap Growth Funds approve a New Portfolio
Management Agreement between the Adviser and Cadence Capital Management
("Cadence"); that shareholders of the Small-Cap Value Fund approve a New
Portfolio Management Agreement between the Adviser and NFJ Investment Group
("NFJ"); and that shareholders of the International Fund approve a New
Portfolio Management Agreement between the Adviser and Blairlogie Capital
Management ("Blairlogie"). Information applicable to all of the New Portfolio
Management Agreements is set forth under "General Information Concerning the
New Portfolio Management Agreements" below and information relating to
specific Funds and Sub-Advisers is set forth in Parts A, B, C and D below.
PIMCO Equity Advisors, a division of the Adviser, provides day-to-day
portfolio management services for the Growth, Target, Core Equity, Mid-Cap
Equity, Opportunity, Innovation, International Growth and Renaissance Funds.
Consequently, there is no new Portfolio Management Agreement proposed for
these Funds. The Adviser does not retain a sub-adviser to manage the assets of
the Portfolios. After the closing of the Transaction, PIMCO Equity Advisors
will also assume day-to-day portfolio management responsibility for the Equity
Income and Value Funds from NFJ, those Funds' current Sub-Adviser.
General Information Concerning the New Portfolio Management Agreements
The terms and provisions of the New Portfolio Management Agreements that
will be entered into between the Adviser and the Sub-Advisers on or about the
closing of the Transaction are substantially identical to those of the
relevant Current Portfolio Management Agreements now in effect, including with
respect to the fees payable by the Adviser to the Sub-Advisers thereunder. The
following discussion of the New Portfolio Management Agreements is qualified
in its entirety by reference to the form of the New Portfolio Management
15
<PAGE>
Agreement attached to this Proxy Statement as Appendix B. The New Portfolio
Management Agreements were approved by the Board of Trustees of the Trust,
including the Independent Trustees, at meetings held on December 9, 1999 and
December 22, 1999.
The shareholders of the Enhanced Equity last approved their Current
Portfolio Management Agreement on December 20, 1996 in connection with [ ].
The shareholders of the Tax-Efficient Equity, Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds last approved their Current
Portfolio Management Agreement on July 10, 1998, September 5, 1997 and
September 5, 1997, respectively, in connection with the organization of such
Funds. The shareholders of the Enhanced Equity, Capital Appreciation, Small-
Cap Value Mid-Cap Growth, Micro-Cap Growth and Small-Cap Growth Funds last
approved their Current Portfolio Management Agreement on December 20, 1996 in
connection with a transaction in which several series of PIMCO Advisors Funds
reorganized into series of the Trust. The shareholders of the Mega-Cap Fund
last approved the Current Portfolio Management Agreement on August 30, 1999 in
connection with the organization of such Fund. The shareholders of the
International Fund last approved the Current Portfolio Management Agreement on
February 26, 1999 in connection with the sale of a controlling interest in
Blairlogie by the Adviser to subsidiaries of the Allegheny Corporation.
Each New Portfolio Management Agreement provides that, subject to the
general supervision of the Trustees and the Adviser, the relevant Sub-Adviser
shall provide a continuous investment program for the relevant Fund(s) and
determine the composition of the investment portfolios of the relevant
Fund(s), including the determination of the purchase, retention or sale of
securities, cash and other investments for the Fund(s). Each Sub-Adviser
provides such services in accordance with the relevant Fund's investment
objective, investment policies and investment restrictions as stated in the
Trust's registration statement filed with the SEC, as supplemented and amended
from time to time.
Each New Portfolio Management Agreement provides that it will continue in
effect with respect to a Fund for a period of two years from its effective
date and thereafter on an annual basis with respect to such Fund, provided
such continuance is 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 securities of the Fund, and provided that continuance is
also approved by the vote of a majority of the Trustees who are not
"interested persons" (as defined by the 1940 Act) of the Trust, the Adviser or
the relevant Fund's portfolio manager, cast in person at a meeting called for
the purpose of voting on such approval. Each New Portfolio Management
Agreement provides that it may not be materially amended without a majority
vote of the outstanding voting securities of the relevant Fund, except to the
extent permitted by the terms of any exemptive relief that may be granted by
the SEC, and also provides that it terminates automatically in the event of
its assignment (as defined by the 1940 Act).
Each New Portfolio Management Agreement may be terminated at any time,
without the payment of any penalty, by (a) the Trust by vote of a majority of
the Board of Trustees, or, in the case of the Portfolio Management Agreement
between the Adviser and Blairlogie, by a majority vote of the Trustees who are
not "interested persons" (as defined by the 1940 Act) of the Trust, the
Adviser or the Fund's Sub-Adviser, or by vote of a majority of the outstanding
voting securities of the Trust, or, with respect to a particular Fund, by vote
of a majority of the outstanding voting securities of the Fund, upon 60 days'
written notice to the relevant Sub-Adviser or (b) by the Adviser upon 60 days'
written notice to the relevant Sub-Adviser. The New Portfolio Management
Agreements may be terminated by each Sub-Adviser upon 60 days' written notice
to the Trust.
Each New Portfolio Management Agreement provides that, except as required by
applicable law, the Sub-Adviser and its affiliates and controlling persons
shall not be liable for any act or omission or mistake in judgment connected
with or arising out of any services rendered under the agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of reckless disregard of
16
<PAGE>
the Sub-Adviser's obligations and duties under the agreement. In addition,
each New Portfolio Management Agreement provides that each of the Adviser and
relevant Sub-Adviser shall indemnify the other party and its affiliates and
controlling persons for liability incurred by such persons arising out of the
indemnifying party's responsibilities to the Trust, based on (a) the
misfeasance, malfeasance or nonfeasance of the indemnifying party or its
employees, representatives, affiliates or persons acting on its behalf or (b)
material inaccuracies or omissions in the Trust's registration statement made
in reliance on information furnished by the indemnifying party.
Required Vote
Approval of the New Portfolio Management Agreement with respect to a Fund
will require the affirmative vote of a "majority of the outstanding voting
securities" of that Fund, which means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of that Fund or (2) 67% or more of
the shares of that Fund present at the Meeting if more than 50% of the
outstanding shares of that Fund are represented at the Meeting in person or by
proxy. If the shareholders of any Fund do not approve the New Portfolio
Management Agreement, the Trustees will take such further action as they may
deem to be in the best interests of the shareholders of that Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH OF THE TAX-
EFFICIENT EQUITY, ENHANCED EQUITY, STRUCTURED EMERGING MARKETS, TAX-EFFICIENT
STRUCTURED EMERGING MARKETS, CAPITAL APPRECIATION, MID-CAP GROWTH, MICRO-CAP
GROWTH, MEGA-CAP, SMALL-CAP GROWTH, SMALL-CAP VALUE AND INTERNATIONAL FUNDS
VOTE FOR APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT FOR THEIR
PARTICULAR FUND.
A. New Portfolio Management Agreement for the Tax-Efficient Equity, Enhanced
Equity, Structured Emerging Markets and Tax-Efficient Structured Emerging
Markets Funds
Pursuant to a Portfolio Management Agreement between the Adviser and
Parametric dated November 15, 1994, as amended on January 14, 1997 and as
further amended or supplemented from time to time (the "Current Parametric
Portfolio Management Agreement"), the Adviser has delegated to Parametric its
responsibility to provide portfolio management services to each of the Tax-
Efficient Equity, Enhanced Equity, Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds (the "Parametric Funds").
Parametric or its predecessor has acted as Sub-Adviser to each Parametric Fund
since the inception of each such Fund. The Trustees last approved the
continuance of the Current Parametric Portfolio Management Agreement for each
Parametric Fund on December 9, 1999 and no actions have been taken with
respect to the Agreement since that date.
Under the New Portfolio Management Agreement between the Adviser and
Parametric (the "New Parametric Portfolio Management Agreement"), subject
always to the control of the Trustees of the Trust, the obligation of
Parametric is to furnish continuously an investment program for each
Parametric Fund, and to make investment decisions concerning, and to place
orders for, the purchase and sale of portfolio securities and all other
investments for each Parametric Fund. For the services provided to each Fund,
the Adviser (not the Trust) pays Parametric a monthly fee for each Fund at an
annual rate (based on the average daily net assets of the particular Fund
taken separately) of 0.35% for each Parametric Fund.
The fee rates payable by the Adviser to Parametric under the Current
Parametric Portfolio Management Agreement are the same as those payable under
the New Parametric Portfolio Management Agreement. For the fiscal year ended
June 30, 1999, the Adviser paid Parametric $44,322 for its portfolio
management services with respect to the Tax-Efficient Equity Fund, $185,113
with respect to the Enhanced Equity Fund, $121,584 with respect to the
Structured Emerging Markets Fund and $165,144 with respect to the Tax-
Efficient Structured Emerging Markets Fund.
17
<PAGE>
Parametric is an investment management firm organized as a general
partnership and is an affiliated sub-partnership of the Adviser. Parametric is
the successor investment adviser to Parametric Portfolio Associates, Inc.
Parametric has two partners: PIMCO Advisors as the supervisory partner, and
Parametric Management Inc. as the managing partner. Parametric's predecessor
commenced operations in 1987. Parametric is located at 7310 Columbia Center,
701 Fifth Avenue, Seattle, Washington 98104-7090. Parametric provides
investment management services to a number of institutional accounts,
including employee benefit plans, college endowment funds and foundations.
Accounts managed by Parametric had combined assets, as of September 30, 1999,
of approximately $3.9 billion.
B. New Portfolio Management Agreement for the Capital Appreciation, Mid-Cap
Growth, Micro-Cap Growth, Mega-Cap and Small-Cap Growth Funds
Pursuant to a Portfolio Management Agreement between the Adviser and Cadence
dated November 15, 1994, as amended on January 14, 1997 and as further amended
from time to time (the "Current Cadence Portfolio Management Agreement"), the
Adviser has delegated to Cadence its responsibility to provide portfolio
management services to each of the Capital Appreciation, Mid-Cap Growth,
Micro-Cap Growth, Mega-Cap and Small-Cap Growth Funds (the "Cadence Funds").
Cadence or its predecessor has acted as Sub-Adviser to each Cadence Fund since
the inception of each such Fund. The Trustees last approved the continuance of
the Current Cadence Portfolio Management Agreement for each Cadence Fund on
December 22, 1999 and no actions have been taken with respect to the Agreement
since that date.
Under the New Portfolio Management Agreement between the Adviser and Cadence
(the "New Cadence Portfolio Management Agreement"), subject always to the
control of the Trustees of the Trust, the obligation of Cadence is to furnish
continuously an investment program for each Cadence Fund, and to make
investment decisions concerning, and to place orders for, the purchase and
sale of portfolio securities and all other investments for each Cadence Fund.
For the services provided, the Adviser (not the Trust) pays Cadence a monthly
fee for each Fund at the following annual rates (based on the average daily
net assets of the particular Fund taken separately): 0.35% for the Capital
Appreciation Fund, 0.35% for the Mid-Cap Growth Fund,1.15% for the Micro-Cap
Growth Fund, 0.35% for the Mega-Cap Fund and 0.90% for the Small-Cap Growth
Fund.
The fee rates payable by the Advisor to Cadence under the Current Cadence
Portfolio Management Agreement are the same as those payable under the New
Cadence Portfolio Management Agreement. For the fiscal year ended June 30,
1999, the Adviser paid Cadence $3,933,855 for its portfolio management
services with respect to the Capital Appreciation Fund, $3,054,054 with
respect to the Mid-Cap Growth Fund, $2,794,415 with respect to the Micro-Cap
Growth Fund and $517,002 with respect to the Small-Cap Growth Fund. The Mega-
Cap Fund was not operational during the fiscal year ended June 30, 1999.
Cadence is an investment management firm organized as a general partnership.
Cadence is the successor investment adviser to Cadence Capital Management
Corporation. Cadence has two partners: PIMCO Advisors as the supervisory
partner, and Cadence Capital Management Inc. as the managing partner.
Cadence's predecessor 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 September 30, 1999, of
approximately $6.5 billion.
C.New Portfolio Management Agreement for the Small-Cap Value Fund
Pursuant to a Portfolio Management Agreement between the Adviser and NFJ
dated November 15, 1994, as amended on January 14, 1997 and as further amended
from time to time (the "Current NFJ Portfolio Management Agreement"), the
Adviser has delegated to NFJ its responsibility to provide portfolio
management
18
<PAGE>
services to the Small-Cap Value Fund. NFJ or its predecessor has acted as Sub-
Adviser to the Small-Cap Value Fund since the Fund's inception. The Trustees
last approved the continuance of the Current NFJ Portfolio Management
Agreement on December 22, 1999, and no actions have been taken with respect to
the Agreement since that date.
Under the New Portfolio Management Agreement between the Adviser and NFJ
(the "New NFJ Portfolio Management Agreement"), subject always to the control
of the Trustees of the Trust, the obligation of NFJ is to furnish continuously
an investment program for the Small-Cap Value Fund, and to make investment
decisions concerning, and to place orders for, the purchase and sale of
portfolio securities and all other investments for the Small-Cap Value Fund.
For the services provided, the Adviser (not the Trust) pays NFJ a monthly fee
at a annual rate (based on the average daily net assets of the Fund) of 0.50%.
The fee rate payable by the Adviser to NFJ under the Current NFJ Portfolio
Management Agreement is the same as that payable under the New NFJ Portfolio
Management Agreement. For the fiscal year ended June 30, 1999, the Adviser
paid NFJ $1,845,873 for its portfolio management services with respect to the
Small-Cap Value Fund.
NFJ is an investment management firm organized as a general partnership. NFJ
is the successor investment adviser to NFJ Investment Group, Inc. NFJ has two
partners: PIMCO Advisors as the supervisory partner, and NFJ Management Inc.
as the managing partner. NFJ's predecessor commenced operations in 1989. NFJ
is located at 2121 San Jacinto, Suite 1840, Dallas, Texas 75201. NFJ provides
investment management services to a number of institutional accounts,
including employee benefit plans, college endowment funds and foundations.
Accounts managed by NFJ had combined assets, as of September 30, 1999, of
approximately $2.2 billion.
D.New Portfolio Management Agreement for the International Fund
Pursuant to a Portfolio Management Agreement between the Adviser and
Blairlogie dated April 30, 1999 (the "Current Blairlogie Portfolio Management
Agreement"), the Adviser has delegated to Blairlogie its responsibility to
provide portfolio management services to the International Fund. Blairlogie
has acted as sub-adviser to the International Fund since 1994. The Trustees
last approved the continuance of the Current Blairlogie Portfolio Management
Agreement on December 9, 1999.
Under the New Portfolio Management Agreement between the Adviser and
Blairlogie (the "New Blairlogie Portfolio Management Agreement"), subject
always to the control of the Trustees of the Trust, the obligation of
Blairlogie is to furnish continuously an investment program for the
International Fund, and to make investment decisions concerning, and to place
orders for, the purchase and sale of portfolio securities and all other
investments for the International Fund. For the services provided, the Adviser
(not the Trust) pays Blairlogie a monthly fee for the Fund at the annual rate
of .40% based on the average daily net assets of the International Fund.
The fee rate payable by the Adviser to Blairlogie under the Current
Blairlogie Portfolio Management Agreement is the same as that payable under
the New Blairlogie Portfolio Management Agreement. For the fiscal year ended
June 30, 1999, the Adviser paid Blairlogie $540,637 for its services with
respect to the International Fund pursuant to the Current Blairlogie Portfolio
Management Agreement.
Blairlogie is an investment management firm organized as a limited
partnership under the laws of the United Kingdom. Blairlogie's predecessor
commenced operations in 1992. Blairlogie is an indirect majority-owned
subsidiary of the Alleghany Corporation. Until April 30, 1999, Blairlogie was
an affiliate of the Adviser. On April 30, 1999, the Adviser sold all of its
ownership interests in Blairlogie to subsidiaries of the Alleghany Corporation
in a transaction worth approximately $6.6 million and Blairlogie is no longer
affiliated with the
19
<PAGE>
Adviser. Blairlogie is located at 125 Princes Street, 4th Floor, Edinburgh EH2
4AD, Scotland. Blairlogie provides investment management services to a number
of institutional accounts, including employee benefit plans, college endowment
funds and foundations. Accounts managed by Blairlogie had combined assets, as
of September 30, 1999, of approximately $903 million. Because of his position
with and ownership interests in PIMCO Advisors, Kenneth M. Poovey, a nominee
for election as a Trustee of the Trust, may be deemed to have had a
substantial interest in this transaction.
III. APPROVAL OF CHANGES TO THE FUNDS' FUNDAMENTAL INVESTMENT
RESTRICTIONS RELATING TO BORROWING MONEY TO PERMIT INTERFUND BORROWING
The Trustees of the Trust are proposing that the shareholders of the
Renaissance, Growth, Target, Opportunity, Innovation, International and
International Growth Funds approve changes to each Fund's fundamental
investment restriction relating to borrowing money, as described in Part III-A
below. The Trustees of the Trust are also proposing that the shareholders of
the Equity Income, Value, Tax-Efficient Equity, Enhanced Equity, Core Equity,
Mid-Cap Equity, Mega-Cap, Capital Appreciation, Mid-Cap Growth, Small-Cap
Value, Small-Cap Growth, Micro-Cap Growth, Tax-Efficient Structured Emerging
Markets and Structured Emerging Markets Funds approve changes to each Fund's
fundamental investment restriction relating to borrowing money, as described
in Part III-B below. The Trustees of the Trust are also proposing that the
shareholders of the 90/10 Portfolio, 60/40 Portfolio and 30/70 Portfolio
approve changes to each Portfolio's fundamental investment restriction
relating to borrowing money, as described in Part III-C below.
The Trust believes these changes will provide each Fund and Portfolio with
the flexibility to borrow from any fund within the PIMCO Funds family,
including funds that are series of PIMCO Funds: Pacific Investment Management
Series ("PIMS"), a separate trust. At this time, the Trust anticipates that
the Funds and Portfolios will borrow only from the PIMCO Money Market Fund, a
series of PIMS, although the Funds and Portfolios reserve the right to borrow
from other PIMCO funds as the Trustees or their designees deem appropriate.
The Trust is requesting a vote on these changes because the investment
restrictions are "fundamental" and may be changed only with shareholder
approval. Before a Fund or Portfolio may engage in interfund borrowing it will
require an exemptive order from the SEC. The Funds and Portfolios currently do
not have such an order and intend to seek one.
The Trust is requesting shareholder approval on this proposal for several
reasons. The Trust believes that each Fund and Portfolio will benefit from the
flexibility of being able to borrow money from any fund within the PIMCO Funds
family, rather than from banks. Additionally, each Fund will likely receive
more favorable loan terms and incur fewer transaction costs through interfund
borrowing. In addition, the borrowing restrictions will be liberalized to the
extent permitted under the 1940 Act. The Trust believes that the proposed
amendments to each Fund's and Portfolio's investment restrictions will more
clearly reflect current regulatory practice and will expand their borrowing
opportunities.
Required Vote
Approval of the changes to each Fund's and Portfolio's fundamental
investment restriction relating to borrowing money will require the
affirmative vote of a "majority of the outstanding voting securities" of that
Fund, which means the affirmative vote of the lesser of (i) more than 50% of
the outstanding shares of that Fund or (2) 67% or more of the shares of that
Fund present at the Meeting if more than 50% of the outstanding shares of that
Fund are represented at the Meeting in person or by proxy. If the required
approval of a change to a fundamental restriction is not obtained for a Fund,
that Fund's existing restriction will continue in effect, and the Trustees
will take such further action as they deem in the best interests of the Fund.
20
<PAGE>
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND AND
PORTFOLIO VOTE FOR APPROVAL OF THE PROPOSED CHANGES IN ITS FUNDAMENTAL
INVESTMENT RESTRICTION RELATING TO BORROWING MONEY.
A. Changes to the Fundamental Investment Restriction relating to Borrowing
Money of the Renaissance, Growth, Target, Opportunity, Innovation,
International and International Growth Funds
The table below sets forth the current fundamental investment restriction of
each above-referenced Fund relating to borrowing money in the left hand column
and the proposed amended restriction in the right hand column.
<TABLE>
<CAPTION>
Proposed Amended Fundamental Investment
Current Fundamental Investment Restriction Restriction
- -------------------------------------------------------------------------------------------
<S> <C>
The Fund may not borrow money in excess of The Fund may borrow money to the maximum
10% of the value (taken at the lower cost extent permitted by law, including without
or current value) of the Fund's total limitation (i) borrowing from banks or
assets (not including the amount borrowed) entering into reverse repurchase agreements,
at the time the borrowing is made, and then or employing similar investment techniques,
only from banks as a temporary measure to and pledging its assets in connection
facilitate the meeting of redemption therewith, if immediately after each
requests (not for leverage) which might borrowing and continuing thereafter, there
otherwise require the untimely disposition is asset coverage of 300% and (ii) entering
of portfolio investments or for into reverse repurchase agreements and
extraordinary or emergency purposes. Such transactions in options, futures, options on
borrowings will be repaid before any futures, and forward foreign currency
additional investments are purchased. contracts.
</TABLE>
21
<PAGE>
B. Changes to the Fundamental Investment Restriction relating to Borrowing of
Money of the Equity Income, Value, Tax-Efficient Equity, Enhanced Equity,
Core Equity, Mid-Cap Equity, Mega-Cap, Capital Appreciation, Mid-Cap
Growth, Small-Cap Value, Small-Cap Growth, Micro-Cap Growth, Tax-Efficient
Structured Emerging Markets and Structured Emerging Markets Funds
The table sets forth the current fundamental investment restriction of each
above-referenced Fund relating to borrowing money in the left hand column and
the proposed amended restriction in the right hand column.
<TABLE>
<CAPTION>
Proposed Amended Fundamental Investment
Current Fundamental Investment Restriction Restriction
- -------------------------------------------------------------------------------------------
<S> <C>
The Fund may not borrow money, or pledge, The Fund may borrow money to the maximum
mortgage or hypothecate its assets, except extent permitted by law, including without
that the Fund may (i) borrow from banks or limitation (i) borrowing from banks or
enter into reverse repurchase agreements, entering into reverse repurchase agreements,
or employ similar investment techniques, or employing similar investment techniques,
and pledge its assets in connection and pledging its assets in connection
therewith, but only if immediately after therewith, if immediately after each
each borrowing and continuing thereafter, borrowing and continuing thereafter, there
there is asset coverage of 300% and (ii) is asset coverage of 300% and (ii) entering
enter into reverse repurchase agreements into reverse repurchase agreements and
and transactions in options, futures, transactions in options, futures, options on
options on futures, and forward foreign futures, and forward foreign currency
currency contracts (the deposit of assets contracts.
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 such Fund's
assets).
</TABLE>
22
<PAGE>
C. Changes to the Fundamental Investment Restriction relating to Borrowing of
Money of the 90/10 Portfolio, the 60/40 Portfolio and the 30/70 Portfolio
The table below sets forth the current fundamental investment restriction of
each Portfolio relating to borrowing of money in the left hand column and the
proposed amended restriction in the right hand column.
<TABLE>
<CAPTION>
Proposed Amended Fundamental Investment
Current Fundamental Investment Restriction Restriction
- -------------------------------------------------------------------------------------------
<S> <C>
The Portfolio may not borrow money, or The Fund may borrow money to the maximum
pledge, mortgage or hypothecate its assets, extent permitted by law, including without
except that the Portfolio may (i) borrow limitation (i) borrowing from banks or
from banks or enter into reverse repurchase entering into reverse repurchase agreements,
agreements, or employ similar investment or employing similar investment techniques,
techniques, and pledge its assets in and pledging its assets in connection
connection therewith, but only if therewith if immediately after each
immediately after each borrowing and borrowing and continuing thereafter, there
continuing thereafter, there is asset is asset coverage of 300% and (ii) entering
coverage of 300% and (ii) enter into into reverse repurchase agreements and
reverse repurchase agreements and transactions in options, futures, options on
transactions in options, futures, options futures, and forward foreign currency
on futures, and forward foreign currency contracts.
contracts (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 such Portfolio's assets).
</TABLE>
IV. FUTURE PORTFOLIO MANAGEMENT AGREEMENTS WITHOUT SHAREHOLDER APPROVAL
With respect to each Fund (excluding the International Fund, whose
shareholders have previously approved a similar proposal), the Trustees of the
Trust are proposing that shareholders grant approval to permit the Adviser to
enter into new or amended portfolio management agreements with a sub-
adviser(s) with respect to each Fund without obtaining shareholder approval of
such portfolio management agreements, and to permit such sub-adviser(s) to
manage the assets of each Fund pursuant to such agreements. If shareholders
approve the proposal, the Adviser would be able to take these actions only 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.
This Proposal is being submitted to the shareholders of each Fund for
approval as required by the terms of an exemptive application which the Trust
and the Adviser expect to file with the SEC (the "Proposed SEC Exemption
Request") and will not become effective with respect to a Fund unless and
until (a) the SEC has granted the relief requested in the Proposed SEC
Exemption Request and (b) this Proposal has been approved by the shareholders
of that Fund.
23
<PAGE>
The 1940 Act generally provides that an investment adviser or sub-adviser to
a mutual fund may act as such only pursuant to a written agreement which has
been approved by a vote of a majority of the outstanding voting securities of
the fund as well as by a vote of a majority of the trustees of the fund who
are not parties to such agreement or interested persons of any party to such
agreement. The Trust and the Adviser, however, intend to file with the SEC the
Proposed SEC Exemption Request. If the Proposed SEC Exemption Request is
granted, the Adviser would be permitted, under specified conditions, to enter
into new and amended portfolio management agreements for the management of
each Fund, including agreements with new sub-advisers and agreements with
existing sub-advisers if there is a material change in the terms of the
portfolio management agreement or if there is an "assignment," as defined in
the 1940 Act, or other event causing termination of the existing portfolio
management agreement, without obtaining the approval of the Fund's
shareholders of such new or amended portfolio management agreements. Such
agreements must nevertheless be approved by the Independent Trustees, in
accordance with the requirements of the 1940 Act. While the conditions will be
established in the course of the exemption process, prior exemptive orders
suggest that one of the conditions of the Proposed SEC Exemption Request would
be that within 90 days after entering into a new or amended portfolio
management agreement without shareholder approval, each Fund must provide to
shareholders an information statement setting forth substantially the
information that would be required to be contained in a proxy statement for a
meeting of shareholders to vote on the approval of the agreement. Furthermore,
shareholder approval would still be required to amend the Advisory Agreement
with respect to each Fund (including any amendment to raise the management fee
rate payable under the Advisory Agreement) or to enter into a new Advisory
Agreement with the Adviser or any other adviser.
The Trust is requesting shareholder approval of this Proposal for several
reasons. As described in Part I, the Advisory Agreement permits each Fund to
utilize an adviser/sub-adviser management structure whereby the Adviser,
acting as each Fund's investment adviser, delegates day-to-day portfolio
management responsibilities to a sub-adviser. All Funds except the
Renaissance, Core Equity, Mid-Cap Equity, Growth, Target, Opportunity,
Innovation and International Growth Funds and the Portfolios currently utilize
this structure, and it is anticipated that at or around the closing of the
Transaction, the Equity Income and Value Funds will no longer utilize this
structure as well. Under such a structure, the Fund's sub-adviser acts in a
capacity similar to a manager of a mutual fund who is employed by such mutual
fund's investment adviser and who manages the portfolio under the oversight
and supervision of the investment adviser. If the Adviser were to change sub-
advisers for a Fund or to retain a sub-adviser for a Fund that does not
currently have one, the Adviser would continue in its role as adviser and
would continue to exercise oversight and supervision of the Fund's investment
affairs as conducted by the new sub-adviser. The Trust believes that these
situations are analogous to a situation where an investment adviser of a
mutual fund replaces an employee who manages the fund's investment portfolio
with a different manager, which does not require shareholder approval under
the 1940 Act.
In addition, the shareholder approval requirement under the 1940 Act may
cause each Fund's shareholders to incur unnecessary expenses, such as the
expenses involved in holding, and soliciting proxies for, a shareholder
meeting, and could hinder the prompt implementation of sub-advisory changes
that are in the best interest of the shareholders, such as prompt engagement
or replacement of a sub-adviser if circumstances so warrant. The Trustees
believe that without the ability to promptly retain a new sub-adviser and/or
replace an existing sub-adviser, or to reapprove existing portfolio management
agreements, as the case may be, investors' expectations may be frustrated. For
instance, a Fund and its shareholders could be disadvantaged under the
following circumstances: (i) where the Adviser determines to terminate a
Fund's sub-adviser due to unsatisfactory performance or another appropriate
reason, (ii) where the Adviser wishes to retain an initial sub-adviser for a
Fund that does not, at present, utilize a sub-advisory structure, (iii) where
a Fund's sub-adviser resigns, ceases operations or is otherwise incapable of
providing portfolio management services on behalf of the Fund, or (iv) where
there has been an assignment of a portfolio management agreement with a
current sub-adviser (for
24
<PAGE>
instance, due to a change in control of the sub-adviser) or some other event
causing the termination of the portfolio management agreement. In many cases,
these events are beyond the control of the Trust, the Adviser and the
applicable Fund. In such circumstances, the Adviser may deem it in the best
interests of the Fund to retain a new sub-adviser or to reinstate a terminated
portfolio management agreement with a current sub-adviser promptly. For these
reasons, the Trustees believe that approval of the Proposal would benefit
shareholders.
In reaching this conclusion, the Trustees considered, among other matters,
that the Proposal would be beneficial to the Funds by reducing or eliminating
the costs of shareholder meetings and the possible negative impact caused by a
delay in replacing or hiring a new sub-adviser, or reapproving existing
portfolio management arrangements. They also considered that the Funds would
forego any benefits associated with shareholder scrutiny of proposed portfolio
management agreements. To this end, the Trustees considered that, even in the
absence of shareholder scrutiny and approval, any proposal to add or replace a
sub-adviser, or to materially amend a portfolio management agreement with an
existing sub-adviser, would receive careful review. First, the Adviser would
assess each Fund's needs and, if it believed that the Fund would benefit from
a new or replacement sub-adviser, the Adviser would review the relevant
universe of available investment managers. Second, any recommendations made by
the Adviser would have to be approved by a majority of the Board of Trustees,
including a majority of the Independent Trustees. Finally, in the absence of
shareholder approval, any retention of a new or replacement sub-adviser or any
amendment of an existing portfolio management agreement would have to comply
with conditions contained in the Proposed SEC Exemption Request, assuming it
is granted.
Although the Trust currently intends to file the Proposed SEC Exemption
Request, it reserves the right not to file the Proposed SEC Exemption Request
if the Trustees believe such action is in the best interest of the Fund and
its shareholders.
Required Vote
Approval of the grant of authority to permit the Adviser to enter into new
and amended portfolio management agreements for a Fund without shareholder
approval will require the affirmative vote of a "majority of the outstanding
voting securities" of that Fund, which means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of that Fund or (2) 67%
or more of the shares of that Fund present at the Meeting if more than 50% of
the outstanding shares of that Fund are represented at the Meeting in person
or by proxy.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND (WITH
THE EXCEPTION OF THE INTERNATIONAL FUND) VOTE FOR APPROVAL OF THE PROPOSED
GRANT OF AUTHORITY TO PERMIT THE ADVISER TO ENTER INTO NEW OR AMENDED
PORTFOLIO MANAGEMENT AGREEMENTS WITH SUB-ADVISERS WITH RESPECT TO EACH FUND
WITHOUT OBTAINING SHAREHOLDER APPROVAL OF SUCH AGREEMENTS, AND TO PERMIT SUCH
SUB-ADVISERS TO MANAGE THE ASSETS OF EACH FUND PURSUANT TO SUCH PORTFOLIO
MANAGEMENT AGREEMENTS.
25
<PAGE>
V. APPROVAL OF AN ADMINISTRATIVE DISTRIBUTION PLAN WITH RESPECT TO THE
ADMINISTRATIVE CLASS SHARES OF THE CAPITAL APPRECIATION AND THE SMALL-CAP
GROWTH FUNDS
The Trustees are proposing that holders of Administrative Class shares of
the Capital Appreciation and Small-Cap Growth Funds approve an Administrative
Distribution Plan (the "Distribution Plan") as it relates to each Fund. There
is currently no distribution plan for Administrative Class shares of each of
these Funds. The Distribution Plan would supplement other arrangements under
which shareholder services are currently rendered to Administrative Class
shareholders of these Funds, and would not increase the expenses of that class
of shares. The full text of the Distribution Plan is attached as Appendix C to
this Proxy Statement and qualifies in its entirety the description of the
Distribution Plan set forth in this Proxy Statement.
The Distribution Plan, which was drafted pursuant to Section 12(b) of the
1940 Act and Rule 12b-1 thereunder (the "Rule"), was approved with respect to
both Funds on December 9, 1999 by the Trustees, including those Trustees who
are not "interested persons" of the Trust or the Trust's principal
underwriter, PIMCO Funds Distributors LLC (the "Distributor") and who have no
direct or indirect interest in the Distribution Plan or any related agreements
(the "Qualified Trustees"). The Distribution Plan is being submitted for
shareholder approval pursuant to a requirement in the Rule.
Administrative Distribution Plan
Under the terms of the Distribution Plan, the Funds (or the Distributor
acting as agent of the Funds) will use their Administrative Class assets to
reimburse brokers and other service organizations (each a "Service
Organization") for costs and expenses incurred in connection with the
distribution and marketing of the Administrative Class shares and/or the
provision of shareholder services to its customers that invest in
Administrative Class shares of the Funds, at an annual rate not to exceed
0.25% of the average daily net assets attributable to each Fund's
Administrative Class shares. The Distribution Plan is a "reimbursement plan"
which means that fees are payable to the relevant financial intermediary only
to the extent necessary to reimburse expenses incurred pursuant to the plan.
Any expense payable under the Distribution Plan may be carried forward for
reimbursement for up to twelve months beyond the date in which it is incurred,
but may never exceed 0.25% of average daily net assets in any month. Such
"carried forward" expense may only be paid by the Trust under the Distribution
Plan during periods in which the Distribution Plan continues to be in effect.
The services provided under the Distribution Plan may include, but are not
limited to, placing orders directly for the purchase of a Fund's shares,
providing facilities to answer questions from prospective investors about the
Funds, providing information about the Funds, 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. Shareholder services that may be provided under the
Plan may include 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 shareholder of record and
nominee for shareholders, maintaining accounting records for shareholders,
answering questions and handling correspondence from shareholders about their
accounts, issuing confirmations for transactions by shareholders, and
performing similar account administrative services. The Plan requires the
Trustees to review, at least quarterly, a written report of expenditures under
the Plan.
26
<PAGE>
The Plan shall continue in effect so long as its continuance is specifically
approved at least annually by vote of both a majority of the Trustees and a
majority of the Qualified Trustees. The Plan and any related agreements
(including the Distributor's Contract described below) may be terminated as to
either Fund at any time by vote of a majority of the Qualified Trustees or by
vote of a majority of the outstanding shares of the Administrative Class
shares of either Fund. All agreements relating to the Plan must be in writing
and all will terminate automatically if assigned. The Plan may not be amended
to increase materially the amount of the distribution fee permitted thereunder
with respect to either Fund without a vote of a majority of the outstanding
shares of the Administrative Class of that Fund. In addition, the Plan may not
be materially amended in any way without a vote of the majority of both the
Trustees and the Qualified Trustees at an in-person meeting called for that
purpose.
The Trust has adopted an Administrative Services Plan (the "Services Plan")
for the Administrative Class shares of the Capital Appreciation and Small-Cap
Growth Funds. Shareholders do not have the voting rights set forth in the Rule
under the Services Plan. Pursuant to the terms of the Services Plan, each Fund
may use their Administrative Class assets to reimburse financial
intermediaries for services in connection with the administration of plans or
programs that use Administrative Class shares of the Funds as their funding
medium and for related expenses. The Services Plan permits each Fund to make
total reimbursement of up to 0.25% on an annual basis of the average daily net
assets of a Fund attributable to its Administrative Class shares. For the
fiscal year ended June 30, 1999, the fees paid under the Services Plan for the
Administrative Class shares of the Capital Appreciation Fund totaled $514,736
and the Small-Cap Growth Fund totaled $3,438.
Services provided under the Services Plan include, but are not limited to,
one or more of the following: receiving, aggregating and processing
shareholder orders, furnishing shareholder sub-accounting; providing and
maintaining preauthorized services such as check writing and wire transfer
services; providing and maintaining preauthorized investment plans;
communicating periodically with shareholders; acting as the shareholder of
record and nominee for shareholders; maintaining accounting records for
shareholders; answering questions and handling correspondence from
shareholders about their accounts; issuing confirmations for transactions by
shareholders; and performing similar account administrative services.
The Trustees believe that, in addition to using the financial intermediaries
currently engaged pursuant to the Services Plan, adoption of the Distribution
Plan would, in part, provide both Funds with the opportunity to engage and
compensate registered broker-dealers to aid in the sale of Administrative
Class shares in a manner consistent with regulatory requirements. Based upon
information provided to the Trustees by the Distributor and PIMCO Advisors,
the Trustees believe that the Distribution Plan may benefit each Fund and
their shareholders by stimulating sales of each Fund's Administrative Class
shares and/or by reducing redemptions of such shares. Increased sales and/or
reduced redemptions may allow the Adviser to provide current and future
shareholders with the potential for greater diversification of their assets
and for any increase in investment opportunities for each Fund. In addition,
the Trustees believe that the Distribution Plan, as part of the overall
restructuring, (i) will improve Fund distribution through institutional
channels, (ii) will enhance market presence and brand awareness and (iii) will
not result in any additional expense to the Trust or the Administrative Class
shares of either Fund.
In accordance with their terms, the Distribution Plan and the Services Plan,
in combination, permit a Fund to make total reimbursements at an annual rate
of up to 0.25% of the Fund's average daily net assets attributable to its
Administrative Class shares. The same financial intermediary or other entity
may not receive fees under the Distribution Plan and the Services Plan with
respect to the same Administrative Class assets, but may receive fees under
each Plan with respect to separate assets and a separate class of services. If
the Distribution Plan is adopted, the expenses that may be paid by
Administrative Class shareholders of the Funds would not increase as a result
of the proposal but, as noted above, the Funds would be able to engage and
compensate registered brokers/dealers to aid in the sale of Administrative
Class shares.
27
<PAGE>
Distributor's Contract
The Distributor, a wholly-owned subsidiary of the Adviser, acts as the
principal underwriter of shares of each series of the Trust pursuant to a
Distributor's Contract with the Trust. Under the Distributor's Contract, the
Distributor is not obligated to sell any specific number of shares, but only
to sell Trust shares on a best efforts basis.
By virtue of their current positions with the Adviser, the Distributor and
their affiliates, William D. Cvengros, the Chairman of the Board of the Trust,
and Stephen J. Treadway, a Trustee and the President and Chief Executive
Officer of the Trust and the Chairman and President of the Distributor, may be
deemed to have a material interest in the Distributor's Contract.
The Trustees, including all of the Qualified Trustees, have determined that
there is a reasonable likelihood that the Distribution Plan will benefit the
Trust, both Funds and the Administrative Class shareholders of both Funds and
unanimously recommend that Administrative Class shareholders of both Funds
approve the Plan.
Required Vote
Approval of the Distribution Plan as to each Fund's Administrative Class
shares will require the affirmative vote of a "majority of the outstanding
voting securities" of the Administrative Class of that Fund, which means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares
of the Administrator Class of that Fund or (2) 67% or more of the
Administrative Class shares of that Fund present at the Meeting if more than
50% of the outstanding Administrative Class shares of that Fund are
represented at the Meeting in person or by proxy.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF THE ADMINISTRATIVE
CLASS OF THE CAPITAL APPRECIATION AND THE SMALL-CAP GROWTH FUNDS VOTE FOR
APPROVAL OF THE ADMINISTRATIVE CLASS DISTRIBUTION PLAN FOR THEIR FUND.
VI. ELECTION OF A TRUSTEE
The Board of Trustees of the Trust proposes that shareholders elect Kenneth
M. Poovey to serve as a Trustee of the Trust (the "Nominee").
Information about the Nominee
Information about the Nominee is presented below. Except as shown, the
Nominee's principal occupation and business experience for the last five years
has been with the employer indicated, although in some cases the Nominee may
have held different positions with such employer. The business address of the
Nominee is 1345 Avenue of the Americas, New York, New York 10150.
<TABLE>
<CAPTION>
Principal Occupation(s) During the Past Five
Name, Age and Address Years
- -------------------------------------------------------------------------------
<C> <S>
Kenneth M. Poovey* Chief Operating Officer, Management Board Member,
1345 Avenue of the Americas PIMCO Advisors
New York, NY 10150
Age 67
</TABLE>
* Is or will be an "interested person" of the Trust (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")). Mr. Poovey is
an "interested person" of the Trust because of his affiliation with PIMCO
Advisors, as indicated in the above chart, and his ownership interest in
PIMCO Advisors.
28
<PAGE>
Information regarding the material interests of the Nominee in the
Transaction is described under "Description of the Transaction" above.
The election of Mr. Poovey is being proposed in connection with the
anticipated resignation of Mr. Cvengros. Should the nominee be elected, his
term of office will be until his successor is elected and qualified. The
Nominee has agreed to serve as a Trustee if elected and if Mr. Cvengros
resigns. If the Nominee should be unavailable for election at the time of the
Meeting (which is not presently anticipated), the persons named as proxies may
vote for other persons in their discretion, or the Trustees may vote to fix
the number of Trustees at fewer than eleven.
The Trust's Amended and Restated Agreement and Declaration of Trust (the
"Current Declaration") does not provide for the annual election of Trustees.
However, in accordance with the 1940 Act, (i) the Trust will hold a
shareholders' meeting for the election of Trustees at such time as less than a
majority of the Trustees holding office have been elected by shareholders, and
(ii) if, as a result of a vacancy in the Board of Trustees, less than two-
thirds of the Trustees holding office have been elected by the shareholders,
that vacancy may only be filled by a vote of the shareholders.
Information about Current Trustees
Currently, ten persons serve as Trustees on the Trust's Board of Trustees:
E. Philip Cannon, Donald P. Carter, Gary A. Childress, William D. Cvengros,
Richard L. Nelson, Lyman W. Porter, Alan Richards, W. Bryant Stooks, Gerald M.
Thorne and Stephen J. Treadway. Shareholders are not being asked to elect the
current Trustees, as each will continue to serve under the terms of the
Current Declaration. The Trustees, their ages, their business addresses, their
term as a Trustee of the Trust (or the Trust's predecessor), their positions
with the Trust, and a description of their principal occupations are shown
below. Except as shown, each Trustee'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).
<TABLE>
<CAPTION>
Principal Occupation(s) During the
Name, Age and Address Term as Trustee Past Five Years
- -----------------------------------------------------------------------------------------
<S> <C> <C>
E. Philip Cannon Trustee since 1987 Proprietor, Cannon & Company, an
3838 Olympia affiliate of Inverness Management
Houston, TX 77019 LLC, a private equity investment
Age 59 firm. Formerly, Headmaster, St.
John's School, Houston, Texas;
Trustee of PIMCO Advisors Funds
("PAF") and Cash Accumulation Trust
("CAT"); General Partner, J.B.
Poindexter & Co., Houston, Texas, a
private partnership; and Partner,
Iberia Petroleum Company, an oil and
gas production company. Mr. Cannon
was a director of WNS Inc., a
retailing company which filed a
petition in bankruptcy within the
last five years.
- -----------------------------------------------------------------------------------------
Donald P. Carter Trustee since 1983 Formerly, Trustee of PAF and CAT;
434 Stable Lane Chairman, Executive Vice President
Lake Forest, IL 60045 and Director, Cunningham & Walsh,
Age 72 Inc., Chicago, an advertising agency.
- -----------------------------------------------------------------------------------------
Gary A. Childress Trustee since 1994 Private investor. Formerly, Chairman
11 Longview Terrace and Director, Bellefonte Lime
Madison, CT 06443 Company, Inc., and partner in
Age 65 GenLime, L.P., a private limited
partnership which filed a petition in
bankruptcy within the last five
years. Formerly, Trustee of PAF and
CAT.
</TABLE>
29
<PAGE>
Name, Age Principal Occupation(s) During the
and Address Term as Trustee Past Five Years
- -------------------------------------------------------------------------------
William D. Trustee since 1990 Chairman of the Board of the Trust;
Cvengros * Chief Executive Officer, President,
800 Newport and member of the Management Board,
Center PIMCO Advisors; Chairman, Value
Drive Advisors LLC; Co-Chairman, The
Newport Emerging Markets Income Fund, Inc.,
Beach, CA The Emerging Markets Income Fund II,
92660 Inc., The Emerging Markets Floating
Age 51 Rate Fund, Inc., Global Partners
Income Fund, Inc., Municipal Partners
Fund, Inc., and Municipal Partners
Fund II, Inc.; Chairman and Director,
PIMCO Funds: Global Investors Series
plc and 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. Trustee since 1990 President, Nelson Financial
Nelson Consultants; Director, Wynn's
8 Cherry International, Inc., a building
Hills Lane supplies company; and Trustee,
Newport Pacific Select Fund. Formerly,
Beach, CA Partner, Ernst & Young.
92660
Age 69
- --------------------------------------------------------------------------------
Lyman W. Trustee since 1990 Professor of Management at the
Porter University of California, Irvine; and
2639 Bamboo Trustee, Pacific Select Fund.
Street
Newport
Beach, CA
92660
Age 69
- -------------------------------------------------------------------------------
Alan Trustee since 1990 Retired Chairman of E.F. Hutton
Richards Insurance Group; Former Director of
7381 E.F. Hutton and Company, Inc.;
Elegans Chairman of IBIS Capital, LLC, a
Place reverse mortgage company; Director,
Carlsbad, Inspired Arts, Inc.; Former Director
CA 92009 of Western National Corporation.
Age 69
- --------------------------------------------------------------------------------
W. Bryant Trustee since 1994 President, Bryant Investments, Ltd.;
Stooks Director, American Agritec LLC, a
9701 E. manufacturer of hydrophonics
Happy products; and Director, Valley Isle
Valley Rd. Excursions, Inc., a tour operator.
# 15 Formerly, Trustee of PAF and CAT,
Scottsdale, President, Senior Vice President,
AZ 85255 Director and Chief Executive Officer,
Age 59 Archirodon Group Inc.; Partner,
Arthur Andersen & Co.
- --------------------------------------------------------------------------------
Gerald M. Trustee since 1994 Director, VPI Inc., a plastics
Thorne company, and American Orthodontics
5 Corp. Formerly, Trustee of PAF and
Leatherwood CAT; Director, Kaytee, Inc., a
Lane birdseed company; President and
Savannah, Director, Firstar National Bank of
GA 31414 Milwaukee; Chairman, President and
Age 61 Director, Firstar National Bank of
Sheboygan; Director, Bando-
McGlocklin, a small business
investment company.
- --------------------------------------------------------------------------------
Stephen J. Trustee since 1997 Executive Vice President, PIMCO
Treadway* Advisors; Chairman and President,
2187 PIMCO Funds Distributors LLC ("PFD");
Atlantic Executive Vice President, Value
Street Advisors LLC; Chairman, Municipal
Stamford, Advantage Fund, Inc. and The Central
CT 06902 European Value Fund, Inc.; President,
Age 52 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.
* Is an "interested person" of the Trust (as defined by the 1940 Act). Mr.
Cvengros is an "interested person" of the Trust because of his affiliation
with PIMCO Advisors as indicated in the above chart. Mr. Treadway is an
"interested person" of the Trust because of his affiliation with PIMCO
Advisors and the Distributor, as indicated in the above chart.
30
<PAGE>
For the fiscal year ended June 30, 1999, the Board of Trustees held five
meetings. Each of the Trustees attended at least 75% of the meetings.
Committees of the Board
The Trust's Board of Trustees had three standing committees as of the fiscal
year ended June 30, 1999: the Audit Oversight Committee, the Nominating
Committee and the Performance Committee.
The members of the Audit Oversight Committee are Richard L. Nelson, Donald
P. Carter, W. Bryant Stooks and Gerald M. Thorne. The responsibilities of the
Trust's Audit Committee include review of financial and accounting controls
and procedures, recommendations as to the selection of the independent
accountants, and review of the scope of the audit. During the fiscal year
ended June 30, 1999, the Audit Oversight Committee met four times.
The members of the Nominating Committee are E. Philip Cannon, Donald P.
Carter, Gary A. Childress, Richard L. Nelson, Lyman W. Porter, Alan Richards,
W. Bryant Stooks and Gerald M. Thorne. The Nominating Committee's
responsibilities include the screening and nomination of candidates for
election to the Board of Trustees as independent trustees of the Trust. The
Nominating Committee did not hold any meetings during the fiscal year ended
June 30, 1999.
The members of the Performance Committee are E. Philip Cannon, Gary A.
Childress, Lyman W. Porter and Alan Richards. The Trust's Performance
Committee provides a forum for its members to review certain matters related
to Fund performance to be presented to the Trust's full Board of Trustees for
their review and/or consideration, and to discuss other issues and concerns
that the members of the Committee deem appropriate. During the fiscal year
ended June 30, 1999, the Policy Committee met four times.
31
<PAGE>
Information About the Executive Officers
The Executive Officers, their ages, their business addresses, their position
with the Trust, the year they became an Executive Officer of the Trust and a
description of their principal occupations are shown below.
<TABLE>
<CAPTION>
Office Principal Occupation(s)
Held During the Past Five
Name, Age and Address Position with the Trust Since Years
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Stephen J. Treadway President and Chief Executive Officer 1997 Executive Vice
2187 Atlantic Street President, PIMCO
Stamford, CT 06902 Advisors; Chairman and
Age 52 President, PIMCO Funds
Distributors LLC
("PFD"); Executive Vice
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.
- ---------------------------------------------------------------------------------------------
Newton B. Schott, Jr. Vice President and Secretary 1997 Director, Executive Vice
2187 Atlantic Street President, Chief
Stamford, CT 06902 Administrative Officer,
Age 57 General Counsel and
Secretary, PFD; Senior
Vice President, Value
Advisors LLC; 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.
- ---------------------------------------------------------------------------------------------
Jeffrey M. Sargent Vice President 1996 Vice President and
Age 36 Manager Shareholder
Services and Fund
Administration, Pacific
Investment Management;
Senior Vice President of
PIMS, PVIT and PCM.
- ---------------------------------------------------------------------------------------------
John P. Hardaway Treasurer 1995 Senior Vice President
Age 42 and Manager of
Investment Operations
Accounting, Pacific
Investment Management;
Treasurer, PIMS, PVIT
and PCM. Formerly, Vice
President, Pacific
Investment Management.
- ---------------------------------------------------------------------------------------------
Joseph D. Hattesohl Assistant Treasurer 1997 Vice President and
Age 36 Manager of Financial
Reporting and Taxation,
Pacific Investment
Management; Assistant
Treasurer, PIMS, PVIT
and PCM. Formerly,
Manager of Fund
Taxation, Pacific
Investment Management,
Director of Financial
Reporting, Carl J. Brown
& Co.; Tax Manager,
Price Waterhouse LLP.
- ---------------------------------------------------------------------------------------------
Garlin G. Flynn Assistant Secretary 1995 Specialist, Pacific
Age 53 Investment Management;
Secretary, PIMS, PVIT
and PCM. Formerly,
Senior Fund
Administrator, Pacific
Investment Management;
Senior Mutual Fund
Analyst, PIMCO Advisors
Institutional Services.
</TABLE>
Compensation of the Trustees and Certain Executive Officers
Trustees, other than those affiliated with PIMCO Advisors, a Sub-Adviser, or
Pacific Investment Management Company, receive an annual retainer of $47,000,
plus $2,000 for each Board of Trustees meeting attended ($1,000 if the meeting
is attended by telephone), and $1,000 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 $2,000,
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
Independent Trustees receives an additional annual retainer of $3,000. If in
the judgment of the Independent Trustees, it is necessary or appropriate for
any
32
<PAGE>
Independent Trustee, including the Chairman, to perform services in connection
with extraordinary Fund activities or circumstances, the Trustee shall be
compensated for such services at the rate of $2,000 per day, plus
reimbursement of reasonable expenses. 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.
The following table sets forth information regarding compensation received
by those Trustees who are not "interested persons" (as defined by the 1940
Act) of the Trust for the fiscal year ended June 30, 1999:
COMPENSATION TABLE
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
(1) (2) (3)
Name of Person Aggregate Compensation Total Compensation From the
From the Trust Trust and Fund Complex Paid
to the Trustees/1/
- ---------------------------------------------------------------------------------
<S> <C> <C>
E. Philip Cannon/2 $57,000.00 $ 57,000.00
- ---------------------------------------------------------------------------------
Donald P. Carter $66,500.00 $ 66,500.00
- ---------------------------------------------------------------------------------
Gary A. Childress $58,000.00 $ 58,000.00
- ---------------------------------------------------------------------------------
Richard L. Nelson $58,500.00 $ 96,500.00
- ---------------------------------------------------------------------------------
Lyman W. Porter/2 $57,000.00 $ 96,000.00
- ---------------------------------------------------------------------------------
Alan Richards $62,000.00 $100,000.00
- ---------------------------------------------------------------------------------
Joel Segall $58,000.00 $ 58,000.00
- ---------------------------------------------------------------------------------
W. Bryant Stooks $56,500.00 $ 56,500.00
- ---------------------------------------------------------------------------------
Gerald M. Thorne/2 $57,500.00 $ 57,500.00
</TABLE>
/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) and
Pacific Select Fund (for Messrs. Nelson, Porter, and Richards) for the
twelve-month period ended June 30, 1999. By virtue of having PIMCO Advisors
or an affiliate of PIMCO Advisors as investment adviser, the Trust and
Pacific Select Fund were considered to be part of the same "Fund Complex"
for these purposes.
/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-$57,000, $57,000; Porter-$57,000, $57,000; and Thorne-$57,500,
$57,500.
Trustee Indemnification
The Current Declaration provides that the Trust will indemnify its Trustees
and officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, except with respect to any matter as to which it has been determined
that (i) they have not acted in good faith in the reasonable belief that their
actions were in or were not opposed to the best interests of the Trust or that
(ii) such indemnification would relieve any officer or Trustee of any
liability to the Trust or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of his or her duties. The
Trust's administrator, PIMCO Advisors, provides liability insurance for the
benefit of the Trustees and officers of the Trust.
33
<PAGE>
Required Vote
The election of the Trustee of the Trust will be by a plurality of the
shares of the Trust (all Funds of the Trust voting together as a single class)
present at the Meeting in person or by proxy.
THE TRUSTEES UNANIMOUSLY RECOMMEND A VOTE FOR THE NOMINEE.
VII. OTHER INFORMATION
The Trust is a diversified, open-end management investment company organized
in 1990 as a business trust under the laws of Massachusetts. The Trust is a
series type company with twenty-six investment portfolios that are
operational. The address of the Trust is 840 Newport Center Drive, Suite 300,
Newport Beach, California 92660.
Brokerage and Research Services
Transactions on stock exchanges and other agency transactions involve the
payment by the Funds 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.
When the Adviser or Sub-Advisers place orders for the purchase and sale of
portfolio securities for the Funds, it is anticipated that such transactions
will be effected through a number of brokers and dealers. In so doing, the
Adviser or Sub-Advisers intend to use their best efforts to obtain for each
Fund 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-Advisers
consider all factors they deem relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security,
the amount of commission, the timing of the transactions 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.
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, statistical and quotation services from broker-
dealers which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, the Adviser or Sub-Advisers may receive
research, statistical and quotation services from many of the broker-dealers
with which each Fund's portfolio transactions are placed. These services,
which in some instances could 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 or Sub-Advisers
in advising its other clients, although not all of these services are
necessarily useful and of value in advising each Fund. The fees paid to the
Adviser or Sub-Advisers are not reduced because the Adviser or Sub-Advisers
receives such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"1934 Act"), under the New Advisory Agreement and the New Portfolio Management
Agreements, the Adviser and/or a Sub-Adviser may cause each Fund to pay a
broker-dealer which provides "brokerage and research services" (as defined by
the 1934 Act) to the Adviser or Sub-Advisers an amount of disclosed commission
for effecting a securities transaction for each Fund in excess of the
commission which another broker-dealer would have charged for effecting the
same transaction. The authority of the Adviser or Sub-Advisers to cause each
Fund to pay any such greater commission is subject to such policies as the
Trustees may adopt from time to time.
34
<PAGE>
During the fiscal year ended June 30, 1999, each Fund did not pay any
brokerage commissions to any broker then affiliated with the Adviser or the
relevant Sub-Adviser.
Because the Portfolios invest exclusively in Institutional Class shares of
underlying PIMCO Funds, they generally do not pay brokerage commissions and
related costs, but do indirectly bear a proportionate share of these costs
incurred by the underlying PIMCO Funds in which they invest.
Ownership of Shares and Voting Information
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 shares of
the Fund and of the Trust as a whole. As of [ , 1999], the following
persons owned of record or beneficially 5% or more of the noted class of
shares of the noted Fund:
<TABLE>
<CAPTION>
Percentage of
Shares Shares
Name and Addresses Beneficially Beneficially
Fund of Beneficial Owner Owned Owned
- ---- ------------------- ------------- -------------
<S> <C> <C> <C>
[To be added.]
</TABLE>
Certain Trustees and Officers of the Trust
The following table lists the names of each Trustee and officer of the Trust
who is also an officer, employee, director, general partner or shareholder of
PIMCO Advisors, Parametric, Cadence, NFJ or Blairlogie:
<TABLE>
<CAPTION>
Position with the Adviser or
Name Position with the Trust Sub-Adviser
- -----------------------------------------------------------------------------
<C> <C> <S>
President and Chief Executive
William D. Cvengros Trustee Officer of PIMCO Advisors
- -----------------------------------------------------------------------------
Stephen J. Treadway Trustee, President and Executive Vice President of
Chief Executive Officer PIMCO Advisors
</TABLE>
None of the Trustees purchased or sold shares of the Adviser or its Parents,
or subsidiaries since July 1, 1998. The Nominee exercised options to purchase
Units of limited partnership interests of the Adviser (the "Units") on two
occasions since July 1, 1998. The Nominee exercised options to purchase 5,000
Units on September 1, 1998 and 10,000 Units on April 26, 1999.
35
<PAGE>
Other Funds Managed by the Adviser and the Sub-Advisers
The Adviser and each Sub-Adviser provide investment services to other funds
having similar investment objectives to the Funds covered by this Proxy
Statement. The Table below sets forth a list of each such other fund and
states the size of each other fund and the rate of compensation paid to the
Adviser and Sub-Advisers for the provision of investment services.
<TABLE>
<CAPTION>
Annual Portfolio
Management Fee Rate Approximate Net Assets
Adviser/ (as a percentage of (in millions) as of
Name of Fund Sub-Adviser average daily net assets) November 30, 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation
Portfolio Cadence 0.70% $935,262,165
- ----------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio Cadence 0.70% $976,409,705
- ----------------------------------------------------------------------------------------
Smith Barney CGCM Small
Cap Value Equity Fund NFJ 0.50% $261,400,000*
- ----------------------------------------------------------------------------------------
Centurion US Equity Fund Parametric 0.30% $ 31,000,000
- ----------------------------------------------------------------------------------------
Clearwater Growth Fund Parametric 0.15% $158,000,000
- ----------------------------------------------------------------------------------------
</TABLE>
* This figure represents the portion of the net assets of the Smith Barney
CGCM Small-Cap Value Equity Fund that NFJ provides advisory services for.
The approximate total net assets as of November 30, 1999 of this Fund were
$728,000,000.
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 Funds and Portfolios pursuant to an administration agreement (the
"Administration Agreement") with the Trust. The Administrator provides or
procures administrative services to the Funds and Portfolios, which include
clerical help and accounting, bookkeeping, internal audit services and certain
other services they require, and preparation of reports to the Trust's
shareholders and regulatory filings.
36
<PAGE>
For the fiscal year ended June 30, 1999, the aggregate amount of the
administration fees paid by the Funds and Portfolios was as follows:
<TABLE>
<CAPTION>
Year Ended
Fund 06/30/99
---- -----------
<S> <C>
Equity Income Fund $ 579,501
Value Fund 778,004
Small-Cap Value Fund 1,373,378
Core Equity Fund 181,254
Mid-Cap Equity Fund 29,621
Capital Appreciation Fund 3,129,528
Mid-Cap Growth Fund 2,641,971
Micro-Cap Growth Fund 607,005
Small-Cap Growth Fund 143,612
Enhanced Equity Fund 132,223
Renaissance Fund 2,513,413
Growth Fund 8,581,473
Target Fund 4,244,469
Opportunity Fund 1,950,916
Innovation Fund 2,740,592
International Fund 877,968
International Growth Fund 34,123
Tax-Efficient Equity Fund 49,326
Structured Emerging Markets Fund 173,691
Tax-Efficient Structured Emerging Markets Fund 235,919
60/40 Portfolio 20,123
70/30 Portfolio 10,422
90/10 Portfolio 14,344
------------
TOTAL $31,363,276
</TABLE>
The Mega-Cap Fund was not operational during the Fiscal year ended June 30,
1999, and did not pay any administration fees during this period.
Principal Underwriter
PIMCO Funds Distributors LLC, whose address is 2187 Atlantic Street,
Stamford, Connecticut 06902, is the principal underwriter for the Funds. PIMCO
Funds Distributors LLC is a wholly-owned subsidiary of the Adviser.
Quorum and Methods of Tabulation
The holders of 30% of the shares of each Fund outstanding as of the Record
Date, present in person or represented by proxy, constitute a quorum for the
transaction of business by the shareholders of each Fund at the Meeting,
although it is necessary for more than 50% of the shares of each Fund to be
represented at the Meeting in order for any proposals (except Proposal VI) to
be approved. Votes cast by proxy or in person at the Meeting will be counted
by persons appointed by the Trust as tellers for the Meeting. The tellers will
count the total number of votes cast "for" approval of each Proposal for
purposes of determining whether sufficient affirmative votes have been cast.
The tellers will count all shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees
as to which (a) instructions have not been received from
37
<PAGE>
the beneficial owners or the persons entitled to vote and (b) the broker or
nominee does not have discretionary voting power on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Assuming the presence of a quorum, abstentions and
broker non-votes have the effect of a negative vote on each Proposal.
Representatives of the New York Stock Exchange (the "Exchange") have informed
the Trust that pursuant to the rules and policies of the Exchange, members of
the Exchange may vote on the Proposals without instructions from the
beneficial owners of the Funds' shares.
Adjournments
In the event that a quorum is not present for purposes of acting on a
Proposal, or if sufficient votes in favor of a Proposal are not received by
the time of the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a plurality of the
shares present in person or represented by proxy at the session of the Meeting
to be adjourned. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of any
Proposal that has not then been adopted. They will vote against any such
adjournment those proxies required to be voted against each Proposal that has
not then been adopted and will not vote any proxies that direct them to
abstain from voting on such Proposals.
The costs of any additional Solicitation and of any adjourned session will
be divided equally between PIMCO Advisors and Allianz of America. Any proposal
for which sufficient favorable votes have been received by the time of the
Meeting will be acted upon and such action will be final regardless of whether
the Meeting is adjourned to permit additional solicitation with respect to
another proposal.
Voting
Electronic Voting. In addition to voting by mail, you may also give your
voting instructions via the Internet or by touchtone telephone by following
the instructions enclosed with the proxy card. DF King & Co., Inc. ("DF
King"), which has been engaged by the Adviser to provide proxy-related
services, will record your instructions and transmit them to the official
tabulator.
Telephone Voting. You may give your voting instructions over the telephone
by calling 1-800-949-2583. A representative of DF King will answer your call.
When receiving your instructions by telephone, the DF King representative is
required to ask you for your full name, address, the last four digits of your
social security or employer identification number, title (if the person giving
the proxy is authorized to act for an entity, such as a corporation), the name
of the Fund(s) owned and to confirm that you have received the proxy statement
in the mail. If the information you provide matches the information provided
to DF King by the Adviser, then the DF King representative will explain the
proxy process. DF King is not permitted to recommend to you how to vote, other
than to read any recommendation included in the proxy statement. DF King will
record your instructions and transmit them to the official tabulator.
As the Meeting date approaches, you may receive a call from a representative
of DF King if the Adviser has not yet received your vote. DF King may ask you
for authority, by telephone or by electronically transmitted instructions, to
permit DF King to sign a proxy on your behalf. DF King will record all
instructions it receives from shareholders by telephone or electronically, and
the proxies it signs in accordance with those instructions, in accordance with
the procedures set forth above. The Trustees of the Trust believe those
procedures are reasonably designed to determine accurately the shareholder's
identity and voting instructions.
Voting by Mail. If you wish to participate in the Meeting, but do not wish
to give a proxy by telephone or via the Internet, you can still complete, sign
and mail the proxy card received with the proxy statement or attend the
Meeting in person.
38
<PAGE>
Shareholder Proposals at Future Meetings
The Trust does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Trust must be received by the Trust a reasonable time before that meeting
in order for such proposals to be considered for inclusion in the proxy
materials relating to that meeting.
Other Matters
The Trust is not aware of any other matters that are expected to arise at
the Meeting. If any other matter should arise, however, the persons named in
properly executed proxies have discretionary authority to vote such proxies as
they shall decide.
January , 2000
39
<PAGE>
Appendix A
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made the 15th day of November, 1994 and amended and restated
effective as of this day of , 2000 between PIMCO Funds: Multi-Manager
Series ("Trust"), a Massachusetts business trust, and PIMCO Advisors L.P.
("Adviser"), a limited partnership.
WHEREAS, the Trust is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in separate series with each such series representing interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Trust has established multiple series, including 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 International Growth Fund, PIMCO Growth Fund, PIMCO
Target Fund, PIMCO Opportunity Fund, PIMCO Core Equity Fund, PIMCO Mid-Cap
Equity Fund, PIMCO Innovation Fund, PIMCO Equity Income Fund, PIMCO Value
Fund, PIMCO Small-Cap Value Fund, PIMCO Enhanced Equity Fund, PIMCO Structured
Emerging Markets Fund, PIMCO Tax-Efficient Equity Fund, PIMCO Mega-Cap Fund,
PIMCO Tax-Efficient Structured Emerging Markets 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, with
respect to which the Trust desires to retain the Adviser to render investment
advisory services hereunder, and with respect to which the Adviser is willing
to do so, being herein collectively referred to also as the "Funds"; and
WHEREAS, the Adviser is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940; and
WHEREAS, the Adviser is the parent company or an affiliate of other
companies that render investment advisory services and are registered as
investment advisers under the Investment Advisers Act of 1940; and
WHEREAS, the Trust desires to retain the Adviser so that it and its
subsidiaries and affiliates will render investment advisory services to the
Funds in the manner and on the terms hereinafter set forth; and
WHEREAS, the Adviser is willing to render such services and engage its
subsidiaries, affiliates, and others to render such services to the Trust;
NOW, THEREFORE, in consideration of the premises, the promises, and mutual
covenants herein contained, it is agreed between the parties as follows:
1. Appointment. The Trust hereby appoints the Adviser to provide investment
advisor services to the Trust with respect to the Funds for the period and on
the terms set forth in this Agreement. The Adviser accepts such appointment
and agrees to render the services herein set forth for the compensation herein
provided.
In the event the Trust establishes and designates additional series with
respect to which it desires to retain the Adviser to render investment
advisory services hereunder, it shall notify the Adviser in writing. If the
Adviser
A-1
<PAGE>
is willing to render such services it shall notify the Trust in writing,
whereupon such additional series shall become a Fund hereunder.
2. Duties. Subject to the general supervision of the Board of Trustees, the
Adviser shall provide general, overall advice and guidance with respect to the
Funds and provide advice and guidance to the Trust's Trustees. In discharging
these duties the Adviser shall, either directly or indirectly through others
("Portfolio Managers") engaged by it pursuant to Section 3 of this Agreement,
provide a continuous investment program for each Fund and determine the
composition of the assets of each Fund, including determination of the
purchase, retention, or sale of the securities, cash, and other investments
for the Fund. The Adviser (or Portfolio Manager) will provide investment
research and analysis, which may consist of a computerized investment
methodology, and will conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Fund 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 Adviser (or 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 Adviser (or 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. The
Adviser (or Portfolio Manager) will provide the services under this Agreement
for each Fund 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.
In performing these duties, the Adviser, either directly or indirectly
through others selected by the Adviser:
(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 each 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 Funds, for broker-dealer and futures commission merchant ("FCM")
selection, and for negotiation of commission rates. The Adviser's (or
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 Exchange Act of 1934,
the Adviser (or 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 Adviser (or 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 Adviser's (or Portfolio Manager's) overall
responsibilities with respect to the Fund and to their other clients as to
which they exercise investment discretion. To the extent consistent
A-2
<PAGE>
with these standards, and in accordance with Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-(T) thereunder, and subject
to any other applicable laws and regulations, the Adviser (or Portfolio
Manager) is further authorized to allocate the orders placed by it on
behalf of the Fund to the Adviser (or 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 Adviser (or Portfolio Manager). Such
allocation shall be in such amounts and proportions as the Adviser shall
determine consistent with the above standards, and, upon request, the
Adviser will report on said allocation regularly to the Board of Trustees
of the Trust indicating the broker-dealers to which such allocations have
been made and the basis therefor.
(d) May, on occasions when the purchase or sale of a security is deemed
to be in the best interest of a 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 Adviser (or Portfolio Manager) in a manner that is fair and equitable
in the judgment of the Adviser (or 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 each
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 make available to the Trust, promptly upon request, any of the
Funds' investment records and ledgers as are necessary to assist the Trust
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940, 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.
(g) Will regularly report to the Trust's Board of Trustees on the
investment program for each Fund and the issuers and securities represented
in each Fund's portfolio, and will furnish the Trust's Board of Trustees
with respect to the Funds such periodic and special reports as the Trustees
may reasonably request.
3. Appointment of Portfolio Managers. The Adviser may, at its expense and
subject to its supervision, engage one or more persons, including, but not
limited to, subsidiaries and affiliated persons of the Adviser, to render any
or all of the investment advisory services that the Adviser is obligated to
render under this Agreement including, for one or more of the Funds and, to
the extent required by applicable law, subject to the approval of the Trust's
Board of Trustees and/or the shareholders of one or more of the Funds, a
person to render investment advisory services including the provision of a
continuous investment program and the determination of the composition of the
securities and other assets of such Fund or Funds.
4. Documentation. The Trust has delivered copies of each of the following
documents to the Adviser and will deliver to it all future amendments and
supplements thereto, if any:
(a) the Trust's Registration Statement as filed with the SEC and any
amendments thereto; and
A-3
<PAGE>
(b) exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration
Statement described above.
The Adviser has delivered to the Trust copies of the Adviser's and the
Portfolio Managers' Uniform Application for Investment Adviser Registration on
Form ADV, as filed with the SEC. The Adviser agrees to provide the Trust with
current copies of the Adviser's and the Portfolio Managers' Forms ADV, and any
supplements or amendments thereto, as filed with the SEC.
5. Records. The Adviser agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be
maintained by the Adviser with respect to the Funds by the 1940 Act. The
Adviser further agrees that all records which it maintains for the Funds are
the property of the Trust and it will promptly surrender any of such records
upon request.
6. Expenses. During the term of this Agreement, the Adviser will pay all
expenses incurred by it in connection with its obligations under this
Agreement, except such expenses as are assumed by the Funds under this
Agreement and any expenses that are paid by a party other than the Trust under
the terms of any other agreement to which the Trust is a party or a third-
party beneficiary. The Adviser further agrees to pay or cause its subsidiaries
or affiliates to pay all salaries, fees, and expenses of any officer or
Trustee of the Trust who is an officer, director, or employee of the Adviser
or a subsidiary or affiliate of the Adviser. The Adviser assumes and shall pay
for maintaining its staff and personnel and shall, at its own expense provide
the equipment, office space, and facilities necessary to perform its
obligations under this Agreement. The Adviser shall not, under the terms of
this Agreement, bear the following expenses (although the Adviser or an
affiliate may bear certain of these expenses under one or more other
agreements):
(a) Expenses of all audits by 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 each
Fund's net assets;
(e) Expenses of obtaining Portfolio Activity Reports for each Fund;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Adviser, its subsidiaries or affiliates,
or any Portfolio Manager of the Trust;
(h) Taxes, if any, levied against the Trust or any of its Funds;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for any of the Funds;
(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 qualification to do business, and
the registration of shares with federal and state securities 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;
A-4
<PAGE>
(m) Costs of printing certificates representing shares of the Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Adviser, its subsidiaries or affiliates,
or any Portfolio Manager of the Trust;
(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 as may arise, including expenses incurred in
connection with litigation, proceedings, other claims and the legal
obligations of the Trust to indemnify its trustees, officers, employees,
shareholders, distributors, and agents with respect thereto; and
(r) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
7. Liability. The Adviser shall give the Trust the benefit of the Adviser's
best judgment and efforts in rendering services under this Agreement. The
Adviser may rely on information reasonably believed by it to be accurate and
reliable. As an inducement for the Adviser's undertaking to render services
under this Agreement, the Trust agrees that neither the Adviser nor its
stockholders, partners, limited partners, officers, directors, employees, or
agents shall be subject to any liability for, or any damages, expenses or
losses incurred in connection with, any act or omission or mistake in judgment
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in
performance of the Adviser's duties, or by reason of reckless disregard of the
Adviser's investment advisory obligations and duties under this Agreement.
8. Independent Contractor. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees of the Trust from time
to time, have no authority to act for or represent the Trust in any way or
otherwise be deemed its agent.
9. Compensation. As compensation for the services rendered under this
Agreement, the Trust shall pay to the Adviser a fee at an annual rate of the
average daily net assets of each of the Funds as set forth on the Schedule
attached hereto. The fees payable to the Adviser for all of the Funds shall be
computed and accrued daily and paid monthly. If the Adviser shall serve for
less than any whole month, the foregoing compensation shall be prorated.
10. Non-Exclusivity. It is understood that the services of the Adviser
hereunder are not exclusive, and the Adviser shall be free to render similar
services to other investment companies and other clients whether or not their
investment objectives are similar to those of any of the Funds.
11. Term and Continuation. This Agreement shall take effect as of the date
hereof, and shall remain in effect, unless sooner terminated as provided
herein, with respect to a Fund for a period of two years following the date
set forth on the attached Schedule. This Agreement shall continue thereafter
on an annual basis with respect to a Fund provided that such continuance is
specifically approved at least annually (a) by the vote of a majority of the
Board of Trustees of the Trust, or (b) by vote of a majority of the
outstanding voting shares of the Fund, and provided continuance is also
approved by the vote of a majority of the Board of Trustees of the Trust who
are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of the Trust or the Adviser, cast in person at a meeting called for
the purpose of voting on such approval. This Agreement may not be materially
amended without a majority vote of the outstanding voting shares (as defined
in the 1940 Act) of the pertinent Fund or Funds.
A-5
<PAGE>
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 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 Adviser in event of its assignment, as that term is
defined in the 1940 Act, by the Adviser.
This 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 a vote of a majority of the
outstanding voting shares of the Trust or, with respect to a particular
Fund, by vote of a majority of the outstanding voting shares of such Fund,
on 60 days' written notice to the Adviser or, in the case of the PIMCO
Growth Fund, PIMCO Target Fund, PIMCO Opportunity Fund, PIMCO Innovation
Fund, PIMCO Tax Exempt Fund, PIMCO Renaissance Fund and PIMCO International
Fund, by a vote of a majority of the Trustees of the Trust who are not
"interested persons" (as such term is defined in the 1940 Act) of the
Trust;
(b) by the Adviser at any time, without the payment of any penalty, upon
60 days' written notice to the Trust.
12. Use of Name. It is understood that the name "PIMCO Advisors L.P." or
"PIMCO" or any derivative thereof or logo associated with those names are the
valuable property of the Adviser and its affiliates, and that the Trust and/or
the Funds have the right to use such names (or derivatives or logos) only so
long as this Agreement shall continue with respect to such Trust and/or Funds.
Upon termination of this Agreement, the Trust (or Fund) shall forthwith cease
to use such names (or derivatives or logos) and, in the case of the Trust,
shall promptly amend its Declaration of Trust to change its name.
13. Notices. Notices of any kind to be given to the Advisor by the trust
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 800 Newport Center Drive, Newport Beach, California 92660, or to
such other address or to such individual as shall be specified by the Adviser.
Notices of any kind to be given to the Trust by the Adviser shall be in
writing and shall be duly given if mailed or delivered to 840 Newport Center
Drive, Newport Beach, California 92660, or to such other address or to such
individual as shall be specified by the Trust.
14. Fund Obligation. A copy of the Trust's Second Amended and Restated
Agreement and Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and notice is hereby given that the Agreement
has been executed on behalf of the Trust by a trustee of the Trust in his or
her capacity as trustee and not individually. The obligations of this
Agreement shall only be binding upon the assets and property of the Trust and
shall not be binding upon any trustee, officer, or shareholder of the Trust
individually.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
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 Investment Advisers Act of 1940, or any rule or order to the
SEC thereunder.
A-6
<PAGE>
(b) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision
of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise with regard to any part hereunder, such
provisions with respect to other parties hereto shall not be affected
thereby.
(c) The captions in this Agreement are included for convenience only and
in no way define any of the provisions hereof or otherwise affect their
construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
PIMCO FUNDS: MULTI-MANAGER SERIES
Attest: _____________________________ By: _________________________________
Title: ______________________________ Title: ______________________________
PIMCO ADVISORS, L.P.
Attest: _____________________________ By: _________________________________
Title: ______________________________ Title: ______________________________
A-7
<PAGE>
Schedule to Amended and Restated
Investment Advisory Agreement
<TABLE>
<CAPTION>
Fund Fee Rate Effective Date
- ---- -------- --------------
<S> <C> <C>
PIMCO Tax-Efficient Equity Fund....................... .45%
PIMCO Capital Appreciation Fund....................... .45%
PIMCO Mega-Cap Fund................................... .45%
PIMCO Mid-Cap Growth Fund............................. .45%
PIMCO Tax-Efficient Structured Emerging Markets Fund.. .45%
PIMCO Equity Income Fund.............................. .45%
PIMCO Value Fund...................................... .45%
PIMCO Enhanced Equity Fund............................ .45%
PIMCO Structured Emerging Markets Fund................ .45%
PIMCO Growth Fund..................................... .50%
PIMCO International Fund.............................. .55%
PIMCO Target Fund..................................... .55%
PIMCO Core Equity Fund................................ .57%
PIMCO Renaissance Fund................................ .60%
PIMCO Small-Cap Value Fund............................ .60%
PIMCO Mid-Cap Value Fund.............................. .63%
PIMCO Opportunity Fund................................ .65%
PIMCO Innovation Fund................................. .65%
PIMCO International Growth Fund....................... .75%
PIMCO Small-Cap Growth Fund........................... 1.00%
PIMCO Micro-Cap Growth Fund........................... 1.25%
PIMCO Funds Asset Allocation Series - 90/10 Portfolio
..................................................... 0.00%
PIMCO Funds Asset Allocation Series - 60/40 Portfolio
..................................................... 0.00%
PIMCO Funds Asset Allocation Series - 30/70 Portfolio
..................................................... 0.00%
</TABLE>
A-8
<PAGE>
Appendix B
FORM OF
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 2000 between PIMCO Advisors L.P. (the
"Adviser"), a limited partnership, and (the "Portfolio Manager"), a .
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 and the rules and
regulations thereunder, as amended from time to time (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 and series that are expected to be operational; and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 and the rules and
regulations thereunder, as amended from time to time (the "Advisers Act"); and
WHEREAS, the Trust has retained the Adviser to render management services to
the Trust's series pursuant to an Investment Advisory Agreement dated as of
, 2000, and such Agreement authorizes the Adviser to engage sub-advisers
to discharge the Adviser's responsibilities with respect to the management of
such 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 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 to act as Portfolio
Manager to the Funds (the "Funds") 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 of the Trust other than the
Funds, 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, whereupon such series shall become a Fund hereunder, and
be subject to this Agreement.
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 Funds and determine the composition of
the assets of the Funds, including determination of the purchase, retention,
or sale of the securities, cash, and other investments for the Funds. The
Portfolio Manager will provide investment research
B-1
<PAGE>
and analysis, which may consist of computerized investment methodology, and
will conduct a continuous program of evaluation, investment, sales, and
reinvestment of the Funds' assets by determining the securities and other
investments that shall be purchased, entered into, sold, closed, or exchanged
for the Funds, when these transactions should be executed, and what portion of
the assets of the Funds 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 Funds. To the
extent permitted by the investment policies of the Funds, the Portfolio
Manager shall make decisions for the Funds 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 Funds. The Portfolio
Manager will provide the services under this Agreement in accordance with each
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 (the
"Registration Statement"), copies of which shall be sent to the Portfolio
Manager by the Adviser. In performing these duties, the Portfolio Manager:
(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 Registration Statement, as supplemented or
amended from time to time.
(b) Shall use reasonable efforts to manage each Fund so that it qualifies
as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (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 Funds, 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 Funds, 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 Exchange 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 a 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 Funds 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 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 Funds 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 Funds 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 the Board of
Trustees of the Trust, indicating the brokers or dealers to which such
allocations have been made and the basis therefor.
B-2
<PAGE>
(d) May, on occasions when the purchase or sale of a security is deemed
to be in the best interest of a 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
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 each
Fund, arrange for the transmission to the custodian for the Trust on a
daily basis, such confirmations, 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 such Fund, as
may be reasonably necessary to enable the custodian to perform its
administrative and recordkeeping responsibilities with respect to such
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, the value of any portfolio securities
or other assets of each 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 the Adviser, promptly upon
request, any of the Funds' investment records and ledgers as are necessary
to assist the Trust to comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940, 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 each Fund and the issuers and securities represented
in the Fund's portfolio, and will furnish the Trust's Board of Trustees
with respect to each Fund such periodic and special reports as the Trustees
may reasonably request.
(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 to required 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.
B-3
<PAGE>
3. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the Registration Statement 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.
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 each
Fund's net assets;
(e) Expenses of obtaining Portfolio Activity Reports for each Fund;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Adviser, its subsidiaries or affiliates;
(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 Funds;
(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 and 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, if any, representing Shares of
the Trust;
(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;
B-4
<PAGE>
(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 each Fund as set forth on the Schedule A
attached hereto.
6. Seed Money. The Adviser agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Trust or
any Fund.
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 a 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 respecting or relating 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 commenced proceedings or an investigation that may result in any of these
actions, and (ii) upon having a reasonable basis for believing that any 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 Funds 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 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 that Rule.
B-5
<PAGE>
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 Funds) 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 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 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, "PM 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 a PM 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 or any Fund, 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 a PM 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 obligation 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 person, if any, who, within the meaning of Section
15 of the 1933 Act controls the Portfolio Manager (collectively, "Adviser
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 an
Adviser Indemnified Person) or (ii) may be based upon any untrue statement
B-6
<PAGE>
or alleged untrue statement of a material fact contained in a registration
statement or prospectus covering Shares of the Trust or any Fund, 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 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 an Adviser
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, and shall remain in effect for two years from such date, and
continue thereafter on an annual basis with respect to a Fund; provided that
such annual continuance is specifically approved at least annually (a) by the
vote of a majority of the entire Board of Trustees of the Trust, or (b) by the
vote of a majority of the outstanding voting securities (as such term is
defined in the 1940 Act) of that 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 with respect to a Fund without
the vote of a majority of the outstanding voting securities (as such term is
defined in the 1940 Act) of that 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. 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 entire Board of 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;]/1/ or (3) by vote of a
majority of the outstanding voting securities (as such term is defined in
the 1940 Act) of the Trust or, with respect to a particular Fund, by vote
of a majority of the outstanding voting securities of that 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;
(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 voting securities (as such term is defined in the 1940 Act) of a
particular Fund shall be effective to continue this Agreement with respect to
the Fund notwithstanding (a) that this Agreement has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
or other series of the Trust or (b) that this Agreement has not been approved
by the vote of a majority of the outstanding voting securities 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 the event of its assignment, as
that term is defined in the 1940 Act, by the Portfolio Manager.
- --------
/1/The bracketed provision applies only to the proposed Portfolio Management
Agreement between the Adviser and Blairlogic Capital Management.
B-7
<PAGE>
15. Agreement and Declaration of Trust. A copy of the Second Amended and
Restated Agreement and Declaration of Trust of the Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts. Notice is hereby
given that this Agreement is executed on behalf of the Trustees of the Trust
as Trustees and not individually, and that the obligations of or arising out
of this Agreement are not binding upon any of the Trustees, officers or
shareholders of the Trust individually, but are binding only upon the assets
and property of the Trust.
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 provisions 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.
(e) With respect to any actions brought by the Adviser or the Trust against
the Sub-Adviser, the Sub-Adviser: (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 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 Adviser at 800 Newport
Center Drive, Newport Beach, California 92660, or any other address designated
by the Adviser as the address to which notices pursuant to this Agreement
should be sent. The Sub-Adviser agrees that service to such address shall be
deemed to constitute sufficient service of process under 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 Sub-
Adviser consents to the subject matter and in personam jurisdiction and venue
in a California State court of competent jurisdiction in Orange County.]/2/
- --------
/2/The bracketed provisions constitute Sections 16(d) and 16(e) in the
proposed Portfolio Management Agreement with Blairlogie Capital Management
only.
B-8
<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:
[SUB-ADVISER]
By: _________________________________
_____________________________________ Title:
Attest:
Title:
B-9
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Fund Portfolio Manager Annual Fee Rate*
- ---- ------------------------------- ----------------
<S> <C> <C>
Mega-Cap Fund Cadence Capital Management 0.35%
Capital Appreciation Fund Cadence Capital Management 0.35%
Mid-Cap Growth Fund Cadence Capital Management 0.35%
Small-Cap Growth Fund Cadence Capital Management 0.90%
Micro-Cap Growth Fund Cadence Capital Management 1.15%
Small-Cap Value Fund NFJ Investment Group 0.50%
Enhanced Equity Fund Parametric Portfolio Associates 0.35%
Tax-Efficient Equity Fund Parametric Portfolio Associates 0.35%
Structured Emerging Markets Parametric Portfolio Associates 0.35%
Fund
Tax-Efficient Structured Parametric Portfolio Associates 0.35%
Emerging
Markets Fund
International Fund Blairlogie Capital Management 0.40%
</TABLE>
- --------
* The Annual Fee Rates are based on the average daily net assets of the
particular Fund taken separately.
B-10
<PAGE>
Appendix C
PIMCO FUNDS: MULTI-MANAGER SERIES
DISTRIBUTION PLAN
FOR ADMINISTRATIVE CLASS SHARES
WHEREAS, PIMCO Funds: Multi-Manager Series (the "Trust") is registered as an
open-end management investment company under the Investment Company of Act of
1940, as amended (the "1940 Act");
WHEREAS, the Trust issues shares of beneficial interest ("shares") in
separate series ("Funds"), with each Fund representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Trust issues shares of the Funds in separate classes of shares,
one of which is designated the Administrative Class (the "Administrative
Class" shares);
WHEREAS, certain shareholders of the Trust may require distribution and
related services that are in addition to services required by other
shareholders, and the provision of such services to shareholders requiring
these services may benefit such shareholders and facilitate their ability to
invest in the Funds;
WHEREAS, issuance of shares of the Funds in a class subject to fee for the
Funds' cost of providing distribution and related services would allocate the
Funds' expense of rendering such services to the shareholders who receive such
additional services;
WHEREAS, the Funds with respect to their Administrative Class shares intend
to enter into Distribution Agreements ("Agreements") pursuant to this
Distribution Plan (the "Plan") with various Service Organizations ("Service
Organizations"), either directly or through the Trust's distributor, PIMCO
Funds Distribution Company (the "Distributor"), pursuant to which the Service
Organization will make available or offer Administrative Class shares of the
Funds for sale to the public and/or provide certain shareholder services to
its customers that invest in the Funds;
WHEREAS, the Funds have adopted a multiple class plan pursuant to Rule 18f-3
under the 1940 Act to permit the issuance of shares in different classes;
WHEREAS, the Board of Trustees of the Trust has determined that there is a
reasonable likelihood that the Plan will benefit the Funds and their
shareholders;
NOW THEREFORE, the Trust hereby adopts this Distribution Plan on the
following terms and conditions:
1. The Trust (or the Distributor, acting as agent of the Trust) shall
reimburse a Service Organization with which the Trust (or the Distributor),
regarding the Administrative Class of a Fund, has an Agreement, for costs and
expenses incurred in connection with the distribution and marketing of shares
of that Class and/or the provision of certain shareholder services to its
customers that invest in the Funds, at a rate specified in paragraph 2 below,
based upon the average daily net assets of the Fund attributable to the
Administrative Class.
2. Subject to the limitations of applicable law and regulations, including
rules of the National Association of Securities Dealers, Inc. ("NASD"), the
Service Organization will be reimbursed quarterly for such costs, expenses or
payments at an annual rate of up to but not more than 0.25% of the average
daily net assets of the Fund attributable to the Administrative Class. Any
expense payable hereunder may be carried forward for reimbursement for up to
twelve months beyond the date in which it is incurred, subject always to the
limit that
C-1
<PAGE>
not more than 0.25% of the average daily net assets attributable to an
Administrative Class may be used in any month to pay expenses pursuant to the
Agreement. An Administrative Class shall incur no interest or carrying charges
for expenses carried forward. In the event the Plan is terminated as herein
provided, the Administrative Class shall have no liability for expenses that
were not reimbursed as of the date of termination.
3. The payment of fees to a Service Organization is subject to compliance by
the Service Organization with the terms of the Agreement between the Service
Organization and the Trust (or the Distributor). If an Administrative Class
shareholder ceases to be a client of a Service Organization that has entered
into an Agreement with the Trust (or the Distributor), but continues to hold
Administrative Class shares, the Service Organization will be entitled to
receive a similar payment in respect of the services provided to such
investors, except that the Distributor may determine that the Service
Organization shall no longer be entitled to such payment if the client becomes
a client of another Service Organization that has an Agreement with the Trust
(or the Distributor). For the purposes of determining the fees payable under
the Plan, the average daily net asset value of the Fund attributable to the
Administrative Class shares shall be computed in the manner specified in the
Trust's Declaration of Trust and current prospectus.
4. Services which a Service Organization will provide under an Agreement may
include, but are not limited to, the following functions: placing orders
directly for the purchase of a Fund's shares and tendering a Fund's shares for
redemption; engaging in advertising with respect to a Fund's shares; providing
information about the Funds; 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 applying to purchase Fund shares and selecting dividend and other account
options. Shareholder services which a Service Organization will provide under
an Agreement may include, but are not limited to, the following functions:
receiving, aggregating and processing shareholder orders; furnishing
shareholder sub-accounting; providing and maintaining elective shareholder
services such as check writing and wire transfer services; providing and
maintaining pre-authorized investment plans; communicating periodically with
shareholders; acting as the sole shareholder of record and nominee for
shareholders; maintaining accounting records for shareholders; answering
questions and handling correspondence from shareholders about their accounts;
issuing confirmations for transactions by shareholders; and performing similar
account administrative services. In addition, Service Organizations can
provide their endorsement of the Administrative Class shares of a Fund to
their clients, members or customers as an inducement to invest in the Fund.
5. Any Service Organization entering into an Agreement with a fund (or with
the Distributor) under this Plan may also enter into an Administrative
Services Agreement with regard to its Administrative Class with the Fund (or
with the Distributor), pursuant to an Administrative Services Plan adopted by
the Trust, which will not be subject to the terms of this Plan. However, in
the event the Service Organization enters into both types of agreements, the
Service Organization shall not be eligible to receive fees under more than one
agreement with respect to the same assets. A Fund (or the Distributor, acting
as the Fund's agent) under this Plan may enter into more than one Distribution
Agreement for its Administrative Class shares, with different Service
Organizations providing services to different groups of shareholders.
6. For so long as required pursuant to Rule 12b-1 under the 1940 Act, the
Plan shall not take effect with respect to a Fund until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Administrative Class of that Fund, which
may include the vote by an affiliated person of the Fund as the sole
shareholder of the Fund. With respect to the submission of the Plan for
C-2
<PAGE>
such a vote, it shall have been effectively approved with respect to a Fund if
a majority of the outstanding voting securities of the Administrative Class of
the Fund votes for approval of the Plan, notwithstanding that the matter has
not been approved by a majority of the outstanding voting securities of the
Administrative Class of any other Fund.
7. The Plan shall not take effect until it has been approved, together with
any related agreements and supplements, by votes of a majority of both (a) the
Board of Trustees of the Trust, and (b) those Trustees of the Trust who are
not "interested persons" (as defined in the 1940 Act) and have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to it (the "Plan Trustees"), cast in person at a meeting (or meetings)
called for the purpose of voting on the Plan and such related agreements.
8. The Plan shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in paragraph 7.
9. Any person authorized to direct the disposition of monies paid or payable
by an Administrative Class pursuant to the Plan or any related agreement shall
provide to the Trust's Board of 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.
10. Any agreement related to the Plan, as such phrase is used in Rule 12b-1
under the 1940 Act, shall be in writing and shall provide: (a) that such
agreement may be terminated at any time as to a Fund, without payment of any
penalty, by vote of a majority of the Plan Trustees or by vote of a majority
of the outstanding voting securities of the Administrative Class of a Fund, on
not more than sixty (60) days' written notice to any other party to the
agreement; and (b) that such agreement shall terminate automatically in the
event of its assignment.
11. The Plan may be amended at any time with respect to a Fund by the Board
of Trustees, provided that (a) for so long as required pursuant to Rule 12b-1
under 1940 Act, any amendment to increase materially the costs which the
Administrative Class shares may bear for distribution pursuant to the Plan
shall be effective only upon approval by a vote of a majority of the
outstanding voting securities of the Administrative Class of the Fund, and (b)
any material amendments of the terms of the Plan shall become effective only
upon approval as provided in paragraph 7 hereof.
12. While the Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the 1940 Act) of the Trust shall
be committed to the discretion of the Trustees who are not interested persons
of the Trust.
13. The Trust shall preserve copies of the Plan, any related agreement and
any report made pursuant to paragraph 9 hereof, for a period of not less than
six (6) years from the date of the Plan, such agreement or report, as the case
may be, the first two (2) years of which shall be in an easily accessible
place.
14. It is understood and expressly stipulated that neither the holders of
shares of any Fund nor any Trustee, officer, agent or employee of the Trust
shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder,
but the Trust only shall be liable.
C-3
<PAGE>
IN WITNESS WHEREOF, the Trust has adopted this Distribution Plan effective as
of the day of , 2000.
PIMCO FUNDS: MULTI-MANAGER SERIES
By: _________________________________
Title: Executive Vice President
C-4
<PAGE>
[PRELIMINARY MATERIALS]
[Name of Fund]
PIMCO FUNDS: MULTI-MANAGER SERIES
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON MARCH 3, 2000
The undersigned hereby appoints Stephen J. Treadway, Timothy R. Clark and Newton
B. Schott, Jr., and each of them separately, proxies with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Special Meeting of Shareholders of PIMCO FUNDS: MULTI-MANAGER
SERIES (the "Trust"), on March 3, 2000 at 10:00 Eastern time, and any
adjournments thereof, all of the shares of each Fund of the Trust which the
undersigned would be entitled to vote if personally present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. All joint owners should sign.
When signing as executor, administrator, attorney,
trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation,
please sign in full corporate name and indicate
the signer's office. If a partner, sign in the
partnership name.
_________________________________________________
Signature
_________________________________________________
Signature (if held jointly)
_________________________________________________
Date
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposals 1, 2a, 2b, 2c, 2d, 3a, 3b, 3c, 4, 5 and 6.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
1. Approval of a new Investment Advisory Agreement [ ] [ ] [ ]
between the Trust and PIMCO Advisors (All Funds).
2. Approval of a new Portfolio Management Agreement [ ] [ ] [ ]
between PIMCO Advisors and your Fund's sub-adviser (Tax-Efficient
Equity, Enhanced Equity Capital Appreciation, Mid-Cap Growth,
Small-Cap Value, Small-Cap Growth, Micro-Cap Growth,
International, Tax-Efficient Structured Emerging Markets,
Structured Emerging Markets and Mega-Cap Funds only)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
3. Approval of changes to your Fund's fundamental investment [ ] [ ] [ ]
restriction relating to borrowing money (All Funds).
4. Approval for PIMCO Advisors to enter into new or amended portfolio [ ] [ ] [ ]
management agreements without shareholder approval (All Funds except
the International Fund).
5. Approval of an Administrative Distribution Plan for Administrative [ ] [ ] [ ]
Class shares (Capital Appreciation and the Small-Cap Growth Funds only).
6. To elect a Trustee (All Funds voting together). [ ] [ ] [ ]
</TABLE>
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
2
