<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for use of the Commission
Only (as permitted by Rule 14c-5(d)(2))
/X/ Definitive Information Statement
PIMCO Funds: Multi-Manager Series
-----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g)
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>
PIMCO CORE EQUITY FUND
A SERIES OF PIMCO FUNDS: MULTI-MANAGER SERIES
March 10, 2000
INFORMATION STATEMENT
I. GENERAL INFORMATION
This Information Statement, which is first being mailed on or about March
10, 2000, is distributed in connection with the following actions expected to be
taken by written consent of the Majority Shareholder (as defined below) of PIMCO
Core Equity Fund (the "Fund"), a series of PIMCO Funds: Multi-Manager Series
(the "Trust"): (1) to change the Fund's investment objective and make the
objective non-fundamental; (2) to change the Fund's classification from a
"diversified" to a "non-diversified" company and eliminate related fundamental
policies of the Fund; and (3) to approve a new Investment Advisory Agreement for
the Fund and re-approve the Agreement as necessary in connection with an
anticipated change in control of the Fund's adviser, as more fully described
below.
It is expected that the Majority Shareholder will execute a written consent
taking these actions on or about March 31, 2000. THIS DOCUMENT IS REQUIRED
UNDER THE FEDERAL SECURITIES LAWS AND IS PROVIDED SOLELY FOR YOUR INFORMATION.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The Trustees of the Trust set March 2, 2000 (the "Record Date") as the
record date for determining the number of shares and the shareholders entitled
to give consent and to receive this Information Statement. On the Record Date,
PIMCO Advisors L.P. ("PIMCO Advisors" and also the "Majority Shareholder") owned
of record or beneficially 74.53% of the outstanding shares of the Fund. PIMCO
Advisors is also the Fund's investment adviser, and is referred to herein as the
"Adviser" in this capacity.
The Fund currently has two classes of shares outstanding, the Institutional
Class and the Administrative Class. On the Record Date, 61,841.383
Institutional Class shares and 2,067.820 Administrative Class shares of the Fund
were outstanding. As of the Record Date, 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 the Fund as a whole.
<PAGE>
The table below sets forth information concerning the Majority Shareholder
and other persons who owned of record or beneficially more than 5% of the noted
class of shares of the Fund on the Record Date.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES SHARES OF CLASS
OWNED OWNED
---------- -----
INSTITUTIONAL CLASS
- -------------------
<S> <C> <C>
PIMCO Advisors L.P. 47,089.945 76.15%
800 Newport Center Drive, 6th Floor
Attn: Jesse Jue
Newport Beach, California 92660
National Financial Services Corporation for 11,241.082 18.18%
Exclusive Benefit of their Customers**
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
ADMINISTRATIVE CLASS
- --------------------
Donaldson Lufkin & Jenrette** 921.965 44.59%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303
PIMCO Advisors L.P. 542.018 26.21%
800 Newport Center Drive, 6th Floor
Attn: Jesse Jue
Newport Beach, California 92660
Norwest Bank MN NA 453.087 21.91%
FBO Hanna & Morton LLP
Employee 401K
2700 Snelling Avenue, Suite 300
Minneapolis, Minnesota 55479
National Financial Services Corporation for 148.122 7.16%
Exclusive Benefit of their Customers**
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
</TABLE>
________________
* Entity owned 25% or more of the outstanding shares of beneficial interest of
the Fund, and therefore may be presumed to "control" thze Fund, as that term
is defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
** Shares are believed to be held only as nominee.
Proposals 1, 2 and 3 were approved by the Trustees, including a majority of
those Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Fund or the Adviser (the "Independent Trustees"), at an in-person meeting
held on March 2, 2000.
-2-
<PAGE>
The Proposals must also be approved by the Fund's shareholders. For each
of Proposals 1, 2, and 3, this will require the consent of a "majority of the
outstanding voting securities" of the Fund (as defined in the 1940 Act), which
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund or (2) 67% or more of the shares of the Fund present at a
meeting if more than 50% of the outstanding shares of the Fund are represented
at the meeting in person or by proxy. As stated above, the Majority Shareholder
has indicated that, as permitted by the Trust's By-laws, it intends to execute a
written consent to be effective on or about March 31, 2000, which would by
itself constitute the necessary shareholder approval of each Proposal in
accordance with the 1940 Act. It is expected that each Proposal will be
implemented effective April 1, 2000. NO ACTION IS REQUIRED TO BE TAKEN BY YOU
AS A SHAREHOLDER OF THE FUND; THIS INFORMATION STATEMENT IS FURNISHED TO YOU
SOLELY FOR YOUR INFORMATION AS REQUIRED BY RELEVANT FEDERAL SECURITIES LAWS.
At their March 2, 2000 meeting, the Trustees also granted approval for the
Fund to change its name to "PIMCO Select Growth Fund" effective on or about
April 1, 2000.
FURTHER INFORMATION CONCERNING THE FUND IS CONTAINED IN TRUST'S ANNUAL
REPORT (RELATING TO INSTITUTIONAL CLASS AND ADMINISTRATIVE CLASS SHARES) FOR THE
FISCAL YEAR ENDED JUNE 30, 1999, AND SEMI-ANNUAL REPORT (RELATING TO
INSTITUTIONAL CLASS AND ADMINISTRATIVE CLASS SHARES) FOR THE FISCAL PERIOD ENDED
DECEMBER 31, 1999, EACH OF WHICH MAY BE OBTAINED FREE OF CHARGE BY WRITING TO
PIMCO FUNDS: MULTI-MANAGER SERIES, 840 NEWPORT CENTER DRIVE, SUITE 300, NEWPORT
BEACH, CALIFORNIA 92660, OR BY TELEPHONING 1-800-927-4645.
II. PROPOSALS
PROPOSAL 1. TO CHANGE THE FUND'S INVESTMENT OBJECTIVE AND MAKE THE OBJECTIVE
- ----------
NON-FUNDAMENTAL.
At the recommendation of the Adviser, the Trustees have approved (i) a
change to the Fund's investment objective as described below and (ii) making the
investment objective non-fundamental so that it may be changed in the future
without shareholder approval.
Under its current investment objective, the Fund "seeks long-term growth of
capital, with income as a secondary objective." The Adviser has recommended
that the Fund change its investment objective such that it "seeks long-term
growth of capital; income is an incidental consideration."
The change is proposed in connection with recent adjustments to the
investment strategies used by the Adviser for the Fund. Effective February 8,
2000, the Fund's strategies are now substantially the same as those of PIMCO
Growth Fund, another series of the Trust managed by the Adviser, except that the
Fund invests in fewer securities than PIMCO Growth
-3-
<PAGE>
Fund, as described in Proposal 2 below. The Fund's proposed new investment
objective, in which income is an incidental consideration, is identical to the
current investment objective of PIMCO Growth Fund. Like PIMCO Growth Fund, the
Adviser currently selects stocks for the Fund using a "growth" style.
Previously, the Adviser used a "growth" style for approximately one-half of the
Fund's portfolio, and a "value" style for the remainder of the portfolio. In
applying the growth style, the Adviser causes the Fund to focus more on growth
companies with higher price-to-earnings ("P/E") ratios and which the Adviser
believes may have consistent, predictable earnings.
The Adviser believes that the new investment objective is appropriate for
the Fund because it will permit the Adviser to place less emphasis on income and
more on each issuer's growth prospects, so that income may constitute a very
small element of the Fund's total return as compared to capital appreciation.
The Adviser believes that by focusing on an issuer's growth prospects rather
than on its income potential, it will be able to select stocks that may provide
a higher return to the Fund. However, this change of focus may also cause the
Fund to earn less income from its investments.
The Fund's current investment objective is fundamental, which means that it
may not be changed without shareholder approval. In addition to the change
proposed above, the Adviser also recommends that the Fund's investment objective
be made non-fundamental, which would permit the Trustees to change the objective
in the future without obtaining shareholder approval. The Adviser believes that
this would provide the Fund with enhanced investment management flexibility to
change its investment objective in response to market, industry or regulatory
changes without the delay and costs associated with obtaining shareholder
approval. The Fund has no current intention to further change its investment
objective, but, if this matter is approved, the Trustees could thereafter change
the objective at any time. Shareholders will therefore no longer be able to
vote on future changes to the Fund's investment objective except to extent the
Trustees decide to submit a proposed change to a shareholder vote. Any such
change would be disclosed in the Fund's prospectus, as supplemented from time to
time.
TRUSTEES' CONSIDERATIONS. Based on the Adviser's recommendations, the
Trustees unanimously recommend changing the Fund's investment objective and
making the objective non-fundamental.
In approving the proposals, the Trustees considered that the proposed
investment objective is identical to the objective of PIMCO Growth Fund, and
will represent less of a limitation on the growth investment style used by the
Adviser on behalf of the Fund. The Trustees also considered the enhanced
flexibility associated with making the Fund's investment objective non-
fundamental, thereby permitting the Fund to change the objective in response to
market and other developments without the delay and costs associated with
obtaining shareholder approval. They noted that the Trustees would still have
to approve any future change to the Fund's investment objective after
considering the best interests of shareholders.
-4-
<PAGE>
PROPOSAL 2. TO CHANGE THE FUND'S CLASSIFICATION FROM A "DIVERSIFIED" TO A
- ----------
"NON-DIVERSIFIED" COMPANY AND ELIMINATE RELATED FUNDAMENTAL
POLICIES OF THE FUND.
At the recommendation of the Adviser, the Trustees have approved a change
in the Fund's classification from a "diversified company" to a "non-diversified"
company under the 1940 Act and, in connection therewith, the elimination of
related fundamental policies of the Fund regarding diversification.
The Fund is currently classified as a "diversified company" pursuant to
Section 5(b)(1) of the 1940 Act. In general terms, this means that, with
respect to seventy-five percent of the value of the Fund's total assets, the
Fund may not invest in the securities of any one issuer if, immediately after
the investment, (i) more than five percent of the value of the Fund's total
assets would be invested in securities of that issuer or (ii) the investment
would constitute more than ten percent of the outstanding voting securities of
that issuer. These requirements do not apply to the Fund's holdings in cash and
cash items (including receivables), Government securities, and securities of
other investment companies. Under Section 5(b)(1), the remaining twenty-five
percent of the Fund's total assets may be invested without regard to these
requirements.
As described in the Fund's Statement of Additional Information, the Fund
observes two fundamental policies relating to its classification as a
diversified company under Section 5(b)(1). Under these restrictions, the Fund
may not:
1. with respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at market
value at the time of such investment) would be invested in the securities of any
one issuer, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities; and
2. with respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the time of
such investment) of the outstanding voting securities of any one issuer, except
that this restriction does not apply to securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
In addition to the new growth management style described in Proposal 1
above, the Fund proposes to adopt a more focused investment strategy by
investing in 15 to 25 issuers under normal circumstances. Previously, the Fund
invested in approximately 40 issuers. The Fund's current diversification
policies may inhibit the Fund in pursuing this new strategy, particularly if the
Adviser deems it beneficial for the Fund to invest more than 5% of its assets in
a number of issuers and/or a relatively high percentage of its assets in only a
few issuers. Accordingly, the Adviser recommends that the Fund change its
classification from a
-5-
<PAGE>
"diversified" to a "non-diversified" company to give the Fund additional
flexibility to pursue a more focused strategy. In addition, the Adviser
recommends that the Fund eliminate the fundamental policies described above,
which impose substantially similar requirements as those specified in Section
5(b)(1).
These changes also involve risks. For example, because the Fund will focus
on a smaller number of issuers, it will be more susceptible to risks associated
with a single economic, political or regulatory occurrence, and to factors
affecting a particular issuer, such as management performance, financial
leverage, or reduced demand for the issuer's goods and services. In addition,
the Fund's performance and share price are likely to fluctuate more sharply and
less predictably than if the Fund remained diversified.
TRUSTEES' CONSIDERATIONS. Based on the Adviser's recommendation, the
Trustees unanimously recommend that the Fund change its classification to a
"non-diversified" company and eliminate its related fundamental policies. The
Trustees believe that these changes are appropriate because they will provide
the Fund with additional flexibility in pursuing a focused investment strategy.
In approving the proposals, the Trustees considered that changing the
Fund's classification and eliminating its related fundamental policies involve
potential risks. By permitting the Fund to focus investments in a smaller
number of issuers, the Fund would be more susceptible to risks associated with a
single economic, political or regulatory occurrence, and to factors affecting a
particular issuer, such as management performance, financial leverage, or
reduced demand for the issuer's goods and services. In this regard, the
Trustees noted that the Fund's performance and share price are likely to
fluctuate more sharply and less predictably than if the Fund remained
diversified.
The Trustees also considered that the Fund would, in any case, generally
be limited by certain diversification requirements under the Internal Revenue
Code of 1986 (the "Code") in order to qualify as a regulated investment company
under the Code.
PROPOSAL 3. APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT FOR THE FUND.
- ----------
At the recommendation of the Adviser, the Trustees have approved a new
Investment Advisory Agreement (the "New Agreement") between the Trust and the
Adviser on behalf of the Fund. It is expected that the New Agreement will be
entered into on or about April 1, 2000, effective with the consent of the
Majority Shareholder. A description of the New Agreement, including the
services provided thereunder, the procedures 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 Agreement included as Appendix A to this Information Statement. Additional
information about the Adviser is set forth below in the section entitled
"Information About the Adviser."
-6-
<PAGE>
The New Agreement was approved by all the Trustees, including the
Independent Trustees, at an in-person meeting held on March 2, 2000. The
Trustees, including the Independent Trustees, have recommended approval of the
New Agreement by shareholders.
The Trustees last approved the continuance of the Fund's current Amended
and Restated Investment Advisory Agreement (the "Current Agreement") on December
9, 1999. No actions have been taken with respect to the Current Agreement since
that date, although the Trustees and shareholders approved a new investment
advisory agreement for the Fund, which is substantially identical to the Current
Agreement, in connection with a pending change in control of the Adviser as
described under "Information Regarding Pending Change in Control of the Adviser"
below. Prior to that approval, the shareholders of the Fund last approved the
Current Agreement on December 28, 1994 in connection with the organization of
the Fund.
DESCRIPTION OF THE NEW AGREEMENT
The New Agreement is identical in all material respects to the Current
Agreement, except that the New Agreement reflects (i) an increase in the
advisory fee payable to the Adviser thereunder from an annual rate of 0.57% to
0.60% of the Fund's average daily net assets and (ii) a change in the name of
the Fund from "PIMCO Core Equity Fund" to "PIMCO Select Growth Fund."
The New 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 Fund and determine the composition of
the assets of the Fund, including the determination of the purchase, retention
or sale of securities, cash and other investments for the Fund. The Adviser
provides or arranges for the provision of such services in accordance with the
Fund's 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 Agreement provides that the Adviser may (subject to any applicable
shareholder approval requirements), 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 Agreement.
The Adviser's PIMCO Equity Advisors division currently manages the Fund's
portfolio and the Adviser does not retain a sub-adviser for the Fund.
The New Agreement provides that it will, unless sooner terminated in
accordance with its terms, continue in effect with respect to the 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 Independent Trustees, cast in person at a meeting called for
the purpose of voting on such approval. The New Agreement provides that it
terminates automatically in the event of its
-7-
<PAGE>
assignment (as defined by the 1940 Act) by the Adviser, and provides that it may
not be materially amended without a majority vote of the outstanding voting
securities of the Fund.
The New 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 the 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.
The New Agreement provides that the Adviser shall not be subject to any
liability arising out of any services rendered by it 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 its obligations
and duties under the Agreement.
The New 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 Agreement.
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. Because of their positions with PIMCO Advisors, and because
PIMCO Advisors will be paid at an increased advisory fee rate pursuant to the
New Agreement, these persons may be considered to have an interest in the New
Agreement.
<TABLE>
<CAPTION>
NAME POSITION WITH THE TRUST POSITION WITH THE ADVISER OR SUB-ADVISER
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Stephen J. Treadway Trustee, President and Executive Vice President of PIMCO Advisors
Chief Executive Officer
- --------------------------------------------------------------------------------------------------------
Newton B. Schott, Jr. Vice President and Secretary Senior Vice President, PIMCO Advisors Mutual
Fund Division
- --------------------------------------------------------------------------------------------------------
Dennis P. McKechnie Vice President Portfolio Manager, PIMCO Equity Advisors Division
- --------------------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE FEE AND EXPENSE INFORMATION. Under the Current Agreement, the
Fund pays the Adviser a monthly fee based on average daily net assets of the
Fund at an annual rate of 0.57% of such average daily net assets. For the
fiscal year ended June 30, 1999, the Fund paid the Adviser $413,258 under the
Current Agreement. Under the New Agreement, the Fund would pay the Adviser a
monthly fee based on average daily net assets of the Fund at an annual rate of
0.60% of such average daily net assets. If the proposed fee under the New
Agreement had been in effect during the fiscal year ended June 30, 1999, the
Fund would have paid the Adviser $435,008. This represents a 5.26% increase
over the fee paid under the Current Agreement during such period.
-8-
<PAGE>
The tables and Examples on the next page are provided to assist
shareholders in understanding and comparing the fees and expenses of buying and
holding Institutional Class or Administrative Class shares of the Fund with the
Current Agreement in effect, on the one hand, or the New Agreement, on the
other. The information is based on the Fund's expenses for the fiscal year
ended June 30, 1999.
-9-
<PAGE>
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
Current Agreement None
New Agreement None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Current Agreement:
- -----------------
<TABLE>
<CAPTION>
Distribution and/or
Advisory Service Other Total Annual Fund
Share Class Fees (12b-1) Fees Expenses (1) Operating Expenses
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.57% None 0.25% 0.82%
- ------------------------------------------------------------------------------------
Administrative 0.57% 0.25% 0.25% 1.07%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflect a 0.25% Administrative Fee paid by the Class.
New Agreement (pro forma):
- -------------------------
<TABLE>
<CAPTION>
Distribution and/or
Advisory Service Other Total Annual Fund
Share Class Fees (12b-1) Fees Expenses (1) Operating Expenses
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.60% None 0.25% 0.85%
- ------------------------------------------------------------------------------------
Administrative 0.60% 0.25% 0.25% 1.10%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflect a 0.25% Administrative Fee paid by the
Class.
EXAMPLES. The Examples below are intended to help you compare the cost of
investing in Institutional Class or Administrative Class shares of the Fund with
the Current or New Agreements in effect. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, and then
redeem all your shares at the end of those periods. The Examples also assume
that your investment has a 5% return each year, the reinvestment of all
dividends and distributions, and the Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, the Examples show
what your costs would be based on these assumptions.
Current Agreement:
- -----------------
<TABLE>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
- -------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $ 84 $262 $455 $1,014
- -------------------------------------------------
Administrative $109 $340 $590 $1,306
- -------------------------------------------------
</TABLE>
New Agreement (pro forma):
- -------------------------
<TABLE>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
- -------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $ 87 $271 $471 $1,049
- -------------------------------------------------
Administrative $112 $350 $606 $1,340
- -------------------------------------------------
</TABLE>
-10-
<PAGE>
INFORMATION ABOUT THE ADVISER
The Adviser is a Delaware limited partnership organized in 1987. The
Adviser provides investment management and advisory services to private accounts
and 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 $260 billion. Additional information regarding the
Adviser is provided on pages 13-14 of the Proxy Statement of the Trust dated
January 12, 2000, which is included as Appendix B to this Information Statement
(the "Proxy Statement).
As noted below under "Information Regarding Pending Change In Control
of the Adviser", and described in greater detail under "Description of the
Transaction" beginning on page 7 of the Proxy Statement, the corporate structure
and certain management personnel of PIMCO Advisors are expected to change in
connection with a pending acquisition of PIMCO Advisors Holdings L.P. ("PAH") by
Allianz of America, Inc. ("Allianz of America"). Mr. Cvengros has elected not
to continue his employment with PIMCO Advisors and is expected to resign as a
Trustee of the Trust after the transaction.
PIMCO Advisors also serves as the Fund's administrator. PIMCO
Advisors' address is 800 Newport Center Drive, Newport Beach, California 92660.
PRINCIPAL UNDERWRITER
PIMCO Funds Distributors LLC, whose address is 2187 Atlantic Street,
Stamford, Connecticut 06902, is the Fund's principal underwriter. PIMCO Funds
Distributors LLC is a wholly owned subsidiary of PIMCO Advisors.
INFORMATION REGARDING PENDING CHANGE IN CONTROL OF THE ADVISER
As discussed in more detail in the Proxy Statement, on October 31,
1999, PIMCO Advisors, its two general partners, PAH and PIMCO Partners GP
("Partners GP"), certain of their affiliates, Allianz of America, and certain
other parties entered into an Implementation and Merger Agreement pursuant to
which Allianz of America will acquire majority ownership of PIMCO Advisors (the
"Transaction"). See "Description of the Transaction" beginning on page 7 of the
---
Proxy Statement for a description of, among other matters, the Transaction, the
post-transaction structure and operations of PIMCO Advisors, and a description
of Allianz of America and its affiliates.
It was initially anticipated that the Transaction would be completed
by the end of the first quarter of 2000. It is now expected that the
Transaction will be completed on or about May 5, 2000, although there is no
assurance that the Transaction will be completed or completed on or about that
date.
-11-
<PAGE>
PIMCO Advisors will undergo a change in control as a result of the
consummation of the Transaction, resulting in the automatic termination of (i)
the Current Agreement if it remains in effect, or (ii) the New Agreement
proposed above if it is entered into prior to the completion of the Transaction.
As proposed in the Proxy Statement, at a meeting held on March 3,
2000, shareholders of the Fund approved a new investment advisory agreement (the
"Pending Agreement"), which is substantially identical to the Current Agreement,
to replace the Current Agreement upon its termination as a result of the
Transaction. See Proposal I beginning on page 11 of the Proxy Statement.
Should the New Agreement be entered into prior to the completion of
the Transaction (thereby replacing the Current Agreement), the Trustees,
including the Independent Trustees, have approved the renewal of the New
Agreement upon its termination as a result of the Transaction. This approval
occurred at an in-person meeting held on March 2, 2000. The Majority
Shareholder has indicated that, to the extent necessary, it intends to re-
approve the New Agreement should it be entered into before (and, hence, be
terminated as a result of) the Transaction.
If the Transaction is not completed for any reason, (i) the New
Agreement will remain in effect if it is entered into or (ii) the Current
Agreement will remain in effect if the New Agreement is not entered into.
TRUSTEES' CONSIDERATIONS. In approving the New Agreement at their
March 2, 2000 meeting, the Trustees, including the Independent Trustees,
requested and evaluated information provided by the Adviser which, in the
Adviser's opinion, constituted all information reasonably necessary for the
Trustees to form a judgment as to whether the New Agreement would be in the best
interests of the Fund and its shareholders.
The Trustees considered the fact that the New Agreement would have
terms and conditions substantially identical to those of the Current Agreement
with the exception of the increase in the compensation payable to the Adviser
thereunder. The Trustees believe that the proposed fee increase will allow the
Adviser to continue to receive fees for its services that are competitive with
fees paid by other mutual funds to high-quality investment managers. In recent
years, the Trustees have noticed a general increase in the complexity of the
investment process and in the competition for talented investment personnel and
believe that the proposed increase will, over the long term, enable the Adviser
to continue to provide high-quality management services to the Fund.
In considering the New Agreement, the Trustees placed primary emphasis
upon the nature and quality of the services being provided by the Adviser,
taking into account the relative complexity of managing the Fund under its
proposed new investment objective and strategies described in Proposals 1 and 2
above. The Trustees also considered the proposed higher advisory fees under the
New Agreement, the recent investment performance of the
-12-
<PAGE>
Fund, and the other expenses paid by the Fund as compared to those of similar
funds managed by other investment advisers.
The Trustees also considered that, under both the Current and New
Agreements, the Adviser may receive research services from brokers in connection
with portfolio securities transactions for the Fund as described under "Other
Information - Brokerage and Research Services" on page 32 of the Proxy
Statement. The Trustees and the Adviser foresee no material changes to the
Fund's brokerage arrangements resulting from the New Agreement.
Regarding the pending change in control of the Adviser and proposal to
re-approve the New Agreement, as necessary, in connection with the Transaction,
the Trustees reconsidered all the matters described under "Approval of the New
Advisory Agreement by the Trustees of the Trust" on page 14 of the Proxy
Statement with respect to the New Agreement, including with respect to the
advisory fee increase described above. After consideration of the foregoing
factors and such other factors as the Trustees deemed relevant, the Trustees
concluded that, should the Transaction occur after the New Agreement goes into
effect, it would be appropriate and desirable for the Adviser to continue, after
the Transaction, to act as investment adviser to the Fund under the New
Agreement.
III. 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-four investment portfolios that are
operational and whose shares are offered for sale. The address of the Trust is
840 Newport Center Drive, Suite 300, Newport Beach, California 92660.
OTHER FUNDS MANAGED BY THE ADVISER
The Adviser provides investment services to other funds. The Table below
sets forth information about another fund with a similar investment objective
and states the size of such other fund and the rate of compensation paid to the
Adviser or its affiliates for the provision of investment services. The
Management Fee for the fund listed below is not currently subject to any
contractual fee waiver.
<TABLE>
<CAPTION>
CURRENT ANNUAL PORTFOLIO APPROXIMATE NET ASSETS
MANAGEMENT FEE RATE AS OF
NAME OF FUND (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C>
PIMCO Growth Fund 0.50% $2,891,412,409
- -------------------------------------------------------------------------------------------
</TABLE>
Information regarding the Adviser's brokerage arrangements for the Fund,
certain Trustees and officers of the Trust, and the Fund's administrator and
principal underwriter are provided under "Other Information - 'Brokerage and
Research Services' (page 32), 'Certain Trustees and Officers of the Trust' (page
56), 'Fund Administrator' (pages 56-57), and 'Principal Underwriter' (page 57)
in the Proxy Statement. It is expected the Fund's administrative and
distribution arrangements will remain the same whether or not any of the
Proposals described herein are approved or implemented.
-13-
<PAGE>
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
-14-
<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 , 199 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 SELECT GROWTH FUND (FORMERLY, 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
<PAGE>
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
-----------
advisory 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 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-2
<PAGE>
(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 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.
A-3
<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 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.
A-4
<PAGE>
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
(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;
A-5
<PAGE>
(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;
(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.
A-6
<PAGE>
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.
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
A-7
<PAGE>
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 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.
A-8
<PAGE>
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.
(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-9
<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% 06/04/1998
PIMCO Capital Appreciation Fund .45% 11/15/1994
PIMCO Mega-Cap Fund .45% 08/09/1999
PIMCO Mid-Cap Growth Fund .45% 11/15/1994
PIMCO Tax-Efficient Structured
Emerging Markets Fund .45% 09/04/1997
PIMCO Equity Income Fund .45% 11/15/1994
PIMCO Value Fund .45% 11/15/1994
PIMCO Enhanced Equity Fund .45% 11/15/1994
PIMCO Structured Emerging Markets Fund .45% 09/15/1996
PIMCO Growth Fund .50% 01/14/1997
PIMCO International Fund .55% 01/14/1997
PIMCO Target Fund .55% 01/14/1997
PIMCO SELECT GROWTH FUND .60%
======================================== ====
(FORMERLY, PIMCO CORE EQUITY FUND)
========================================
PIMCO Renaissance Fund .60% 01/14/1997
PIMCO Small-Cap Value Fund .60% 11/15/1994
PIMCO Mid-Cap Equity Fund .63% 11/15/1994
PIMCO Opportunity Fund .65% 01/14/1997
PIMCO Innovation Fund .65% 01/14/1997
PIMCO International Growth Fund .75% 09/04/1997
PIMCO Small-Cap Growth Fund 1.00% 11/15/1996
PIMCO Micro-Cap Growth Fund 1.25% 11/15/1996
</TABLE>
A-10
<PAGE>
APPENDIX B
----------
[The Proxy Statement dated January 12, 2000 of PIMCO Funds: Multi-Manager
Series is attached.]
B-1
<PAGE>
PIMCO ADVISORS L.P.
800 Newport Center Drive
Newport Beach, California 92660
January 12, 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 (the "Transaction"). 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.
. 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 any Fund's sub-adviser without the expense and delay of convening
a shareholder meeting. Because shareholders of the International Fund
previously approved such an arrangement, they are not being asked to vote on
this proposal.
. Approval of an Administrative Distribution (12b-1) 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.
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 card(s) promptly in order to avoid the expense of additional
mailings or having our proxy solicitor, DF King & Co., Inc. ("DF King"),
telephone you. If you have any questions regarding the proxy statement, please
call DF King at 1-800-949-2583.
Thank you in advance for your participation in this important event.
Sincerely,
/s/ Stephen Treadway
Stephen Treadway
Executive Vice President
MMS
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
840 Newport Center Drive
Newport Beach, California 92660
For proxy information, please call (800) 949-2583
For account information, please call:
(800) 927-4648 (Institutional and Administrative Class Shares)
(800) 426-0107 (All Other Classes of Shares)
----------------
PIMCO Equity Income Fund
PIMCO Value Fund
PIMCO Tax-Efficient Equity Fund
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 Value 25 Fund
PIMCO Precious Metals 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 except
the Value 25 and Precious Metals Funds: 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.
<PAGE>
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
("Parametric"), whereby Parametric would serve as Sub-Adviser
of each such Fund, as described in Part II-A of the attached
Proxy Statement.
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 ("Cadence"), whereby Cadence
would serve as Sub-Adviser 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 ("NFJ"), whereby NFJ would serve as Sub-
Adviser of the 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 ("Blairlogie"), whereby Blairlogie would
serve as Sub-Adviser of the 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 to the maximum extent
permitted by law, 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 to the maximum extent
permitted by law, 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 to the maximum extent
permitted by law, 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, Value 25 and Precious Metals Funds: 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.
<PAGE>
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 (12b-1) 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 Company Act of 1940, as amended,
with respect to the Administrative Class shares of the Capital
Appreciation and 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 12, 2000
YOUR VOTE IS IMPORTANT
PLEASE RESPOND--YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD(S) IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE SO THAT YOU WILL BE REPRESENTED AT THE
MEETING.
<PAGE>
----------------
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 12, 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 that are operational and whose
shares are offered for sale. The following twenty-three 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, the Core Equity Fund, the 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, the Structured Emerging
Markets Fund, the Value 25 Fund and the Precious Metals 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 prior to the date of the Meeting
the Value 25 Fund will be liquidated in a transaction in which it reorganizes
with and into the PIMCO Value Fund and that the PIMCO Precious Metals Fund
will be liquidated in a transaction in which its shares will be redeemed for
cash, and therefore the shareholders of the PIMCO Value 25 and Precious Metals
Funds are being solicited only with respect to Proposal 6.
<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 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
Institutional Class 8,696,715.111
Administrative Class 1,033,593.492
Class A 1,319,724.741
Class B 1,637,632.060
Class C 1,713,375.215
Class D 10,280.995
Value Fund
Institutional Class 6,750,247.699
Administrative Class 1,835,926.680
Class A 1,693,169.057
Class B 2,638,328.928
Class C 5,512,346.941
Class D 2,007.934
Renaissance Fund
Institutional Class 8,149.445
Administrative Class 55,638.690
Class A 5,126,349.882
Class B 7,954,612.094
Class C 26,625,294.134
Class D 4,043.660
Tax-Efficient Equity Fund
Institutional Class 95,789.945
Administrative Class 1,546,290.725
Class A 703,541.779
Class B 910,559.907
Class C 1,296,802.470
Class D 932.836
Enhanced Equity Fund
Institutional Class 3,245,341.540
Administrative Class 2,135,494.058
Core Equity Fund
Institutional Class 63,479.832
Administrative Class 1,835.316
Mid-Cap Equity Fund
Institutional Class 468,609.760
Growth Fund
Institutional Class 111,346.103
Administrative Class 469,431.082
Class A 6,402,220.780
Class B 5,189,729.366
Class C 70,944,786.963
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Number of Issued
and Outstanding Shares
Name of Fund Per Class
------------ ----------------------
<S> <C>
Capital Appreciation Fund
Institutional Class 21,713,968.887
Administrative Class 8,131,233.845
Class A 3,205,855.977
Class B 2,413,335.869
Class C 3,237,325.329
Class D 16,073.176
Mid-Cap Growth Fund
Institutional Class 24,770,014.204
Administrative Class 4,379,753.291
Class A 5,326,681.401
Class B 3,191,462.849
Class C 3,914,076.335
Class D 12,338.609
Target Fund
Institutional Class 187,115.479
Administrative Class 338,623.651
Class A 9,208,896.811
Class B 5,352,195.830
Class C 57,435,079.338
Small-Cap Value Fund
Institutional Class 2,722,994.165
Administrative Class 1,078,301.533
Class A 7,609,573.934
Class B 5,234,477.633
Class C 6,152,964.021
Small-Cap Growth Fund
Institutional Class 5,380,256.657
Administrative Class 210,835.686
Opportunity Fund
Institutional Class 256,601.986
Administrative Class 334,140.725
Class A 4,995,743.574
Class B 476,081.519
Class C 15,181,787.859
Micro-Cap Growth Fund
Institutional Class 10,359,768.733
Administrative Class 227,320.971
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Number of Issued
and Outstanding Shares
Name of Fund Per Class
------------ ----------------------
<S> <C>
Innovation Fund
Institutional Class 127,385.969
Class A 12,579,394.820
Class B 16,258,371.102
Class C 23,361,431.058
Class D 656,196.614
International Fund
Institutional Class 413,498.509
Administrative Class 1,550,482.668
Class A 883,234.766
Class B 825,488.314
Class C 9,043,757.094
International Growth Fund
Institutional Class 575,757.011
Tax-Efficient Structured Emerging Markets Fund
Institutional Class 5,969,697.353
Structured Emerging Markets Fund
Institutional Class 3,988,175.108
Mega-Cap Fund
Institutional Class 300,000.000
Value 25 Fund
Institutional Class 25,510.204
Class A 156,974.401
Class B 127,948.984
Class C 138,899.733
Precious Metals Fund
Class A 435,766.633
Class B 1,091,168.312
Class C 2,111,697.255
PIMCO Funds Asset Allocation Series--90/10
Portfolio
Institutional Class 916.590
Administrative Class 916.590
Class A 74,541.941
Class B 160,004.823
Class C 877,282.084
PIMCO Funds Asset Allocation Series--60/40
Portfolio
Institutional Class 1,355.505
Administrative Class 962.446
Class A 249,492.210
Class B 327,899.282
Class C 775,915.278
PIMCO Funds Asset Allocation Series--30/70
Portfolio
Institutional Class 1,024.514
Administrative Class 1,022.601
Class A 45,184.380
Class B 177,348.819
Class C 659,655.542
</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
- ---------------------------------------------------------------------------------------------------
Value 25 Fund
- ---------------------------------------------------------------------------------------------------
Precious Metals Fund
- ---------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------
Value 25 Fund X
- -----------------------------------------------------------------------------------------------------------------
Precious Metals Fund 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, Inc. 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, each of the outstanding limited partnership and general
partner units in PAH will be converted into the right to receive in cash an
amount per unit equal to $38.75, subject to a downward adjustment if the
aggregate annualized investment advisory and subadvisory fees for all accounts
managed by PIMCO Advisors and its subsidiaries, expressed as a "revenue run-
rate," declines (excluding market-based changes) below a specified level (the
"Unit Transaction Price"). In no event will the Unit Transaction Price be
reduced below $31.00 per unit. As a result of the merger, PAH will become an
indirect wholly-owned subsidiary of Allianz of America.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire for cash additional partnership interests in PIMCO
Advisors (the "PA Units"), bringing its ownership interest in PIMCO Advisors
to approximately 70%, including the approximately 44% interest held through
PAH. As part of these transactions, 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 Insurance Company
("Pacific Life"). Pacific Life, which through subsidiaries owns approximately
a 30% 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 a
put/call arrangement for the possible disposition of Pacific Life's indirect
interest in PIMCO Advisors. The put option held by Pacific Life will allow it
to require Allianz of America, on the last business day of each calendar
quarter following the closing, to purchase at a formula-based price all of the
PIMCO Advisors' units owned directly or indirectly by Pacific Life. The call
option held by Allianz of America will allow it, beginning January 31, 2003 or
upon a change in control of Pacific Life, to require Pacific Life to sell or
cause to be sold to Allianz of America, at the same formula-based price, all
of the PIMCO Advisors' units owned directly or indirectly by Pacific Life.
As a result of the transactions contemplated by the Merger Agreement,
Allianz of America will control PIMCO Advisors, having acquired approximately
70% of the outstanding partnership interests in PIMCO Advisors for a total
consideration of approximately $3.3 billion (together, the "Transaction"),
while the remainder will continue to be indirectly owned by Pacific Life. 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 Parametric
Portfolio Associates, NFJ Investment Group and Cadence Capital Management,
which are 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
7
<PAGE>
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"). If the Transaction is not completed for any reason,
the Current Advisory Agreement and Current Portfolio Management Agreements
will remain in effect.
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. Allianz of America will control PIMCO Advisors
through its managing member interest in Pacific-Allianz Partners LLC
("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. Allianz of America, through
subsidiaries, will be the managing member of PacPartners LLC and will have
full authority and control over all actions taken by PacPartners LLC as the
general partner of PIMCO Advisors, provided that Pacific Life's consent is
required for certain extraordinary actions.
Operationally, PIMCO Advisors is expected to become a unit of Allianz Asset
Management ("AAM"), the division of Allianz AG that coordinates global Allianz
AG asset management activities. PIMCO 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 Pacific Investment Management Company,
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 exchange 5,000 and 355,000 PA Units, respectively, at the
Unit Transaction Price (for an expected total exchange value of $193,750 and
$13,756,250, respectively). 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 in an expected total amount of $5,525,000, which is
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 exchange approximately 22,000 PA Units at the
Unit Transaction Price (for an expected total exchange value of $852,500).
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 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 unvested PA Units (with an expected total exchange value
of $994,635) attributable to Mr. Treadway'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 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 in an expected total amount of $1,680,000, which is 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
exchange approximately 17,000 PA Units at the Unit Transaction Price (for an
expected total exchange value of $658,750). 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,
19,020 unvested PA Units (with an expected total exchange value of $737,025)
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
cash in an expected total amount of $508,200, which is 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, Garlin G. Flynn
and Dennis P. McKechnie serve as Vice President, Treasurer, Assistant
Treasurer, Assistant Secretary and Vice President, respectively, of the Trust.
Messrs. Sargent, Hardaway and Hattesohl are also 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, if any, in PIMCO Advisors' Executive Deferred Compensation
Plan will fully vest and the PA Units owned by that plan will be exchanged for
cash at the Unit Transaction Price. Also, to the extent any such person owns
PA Units outright, such PA Units will be exchanged for cash 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.
Description of Allianz and Its Affiliates
Allianz AG, the parent of Allianz of America, is a publicly-traded German
Aktiengesellschaft (a German publicly-traded company) which, together with its
subsidiaries, comprise the world's second largest insurance
9
<PAGE>
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: Koniginstrasse 28, D-
80802, Munich, Germany.
Significant institutional shareholders of Allianz AG currently include,
among others, Dresdner Bank AG, Deutsche Bank AG, Munich Re, and
HypoVereinsbank. These entities, as well as certain broker-dealers that might
be deemed to be affiliated with these entities, such as Bankers Trust Company,
BT Alex. Brown Incorporated, Deutsche Bank Securities, Inc. and Dresdner
Kleinwort Benson North America LLC, 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 adviser (or predecessor or successor adviser), 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 adviser (or
predecessor or successor adviser).
Allianz of America 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 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 and Portfolio, with
the exception of the Value 25 and Precious Metals Funds, 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
Renaissance, Growth, Innovation, International, 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, Capital Appreciation, Mid-Cap Growth, Micro-Cap Growth, Small-Cap
Growth, Enhanced Equity and Equity Income Funds last approved the Current
Advisory Agreement on October 26, 1994 in connection with a change of control
of such Funds' investment adviser. The shareholders of the Mega-Cap Fund last
approved the Current Advisory Agreement on August 30, 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
Core Equity and Mid-Cap Equity Funds last approved the Current Advisory
Agreement on December 28, 1994 in connection with the organization of such
Funds. 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, except that the
Advisory Fee for the International Growth Fund would decrease by 0.10% from
its current annual rate of 0.85%, to 0.75%.
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 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 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%.
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
12
<PAGE>
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 $46,671,992
</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 September 30, 1999 were approximately $256
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.
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
13
<PAGE>
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 its 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 Equity Income and Value Funds 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 AG and heard a report from a representative of
Allianz AG about the Transaction, its effects on the Adviser and future plans
and intentions of Allianz AG for the Adviser and the Funds.
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.
14
<PAGE>
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF EACH FUND AND
PORTFOLIO (WITH THE EXCEPTION OF THE VALUE 25 AND PRECIOUS METALS FUNDS) 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"). Parametric, Cadence, NFJ and Blairlogie serve as
sub-advisers to several of the Funds and are referred to herein as "Sub-
Advisers." 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
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 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 Alleghany 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
15
<PAGE>
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 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 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 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
16
<PAGE>
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.
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.
17
<PAGE>
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 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 an 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
18
<PAGE>
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 (the "Alleghany
Transaction"), and Blairlogie is no longer affiliated with the 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.
III. APPROVAL OF CHANGES TO THE FUNDS' AND PORTFOLIOS'
FUNDAMENTAL INVESTMENT RESTRICTIONS RELATING TO BORROWING MONEY
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 is proposing that these fundamental investment restrictions be
liberalized to allow the Funds and Portfolios to borrow money to the maximum
extent permitted by law. The Trust is requesting a vote on these changes
because the investment restrictions are "fundamental" and may be changed only
with shareholder approval. 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
lenders other than banks. Additionally, each Fund may receive more favorable
loan terms and incur fewer transaction costs because of this flexibility. 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.
In addition, 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. Pursuant to its Amended and Restated Agreement and
Declaration of Trust and First Amended and Restated Bylaws, the Trust is not
required to submit these potential interfund borrowing arrangements for
shareholder approval, and therefore shareholders are not being asked to
approve these arrangements. Instead, before a Fund or Portfolio may engage in
interfund borrowing it will require an exemptive order from the SEC, as well
as Trustee approval. The Funds and Portfolios currently do not have such an
exemptive order and are currently seeking one.
19
<PAGE>
If the proposals are approved, the Funds and Portfolios will be allowed to
borrow in situations and under circumstances in which they were previously not
allowed to borrow. Borrowing may cause the value of a Fund's or Portfolio's
shares to be more volatile than if the Fund or Portfolio did not borrow. This
is because borrowing tends to exaggerate the effect of any increase or
decrease in the value of a Fund's or Portfolio's securities.
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 (ii) 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.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND AND
PORTFOLIO (WITH THE EXCEPTION OF THE VALUE 25 AND PRECIOUS METALS FUNDS) 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>
20
<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>
21
<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 and Portfolio (excluding the International Fund,
whose shareholders have previously approved a similar proposal, and the Value
25 and Precious Metals Funds), 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 this 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 have filed with the SEC (the "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 SEC Exemption Request and (b) this
Proposal has been approved by the shareholders of that Fund.
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, have filed with the SEC the SEC
Exemption Request. If the SEC Exemption Request is granted, the Adviser would
be permitted, under specified conditions, to enter into new and amended
portfolio management agreements for the
22
<PAGE>
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 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.
By approving the Proposal, shareholders will forego any benefits associated
with shareholder review of proposed portfolio management agreements, such as
the ability to consider a sub-adviser's performance record.
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 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
23
<PAGE>
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 SEC
Exemption Request, assuming it is granted.
There is no assurance that the SEC will grant the SEC Exemption Request, and
the Trust reserves the right to withdraw the 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 AND
PORTFOLIO (WITH THE EXCEPTION OF THE INTERNATIONAL, VALUE 25 AND PRECIOUS
METALS FUNDS) 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 OR PORTFOLIO WITHOUT OBTAINING
SHAREHOLDER APPROVAL OF SUCH AGREEMENTS, AND TO PERMIT SUCH SUB-ADVISERS TO
MANAGE THE ASSETS OF EACH FUND AND PORTFOLIO PURSUANT TO SUCH PORTFOLIO
MANAGEMENT AGREEMENTS.
V. APPROVAL OF AN ADMINISTRATIVE DISTRIBUTION (12B-1) 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 (12b-1) 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 22, 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.
24
<PAGE>
If the Distribution Plan is adopted, the total expenses that may be paid by
Administrative Class shareholders of the Funds would not increase as a result
of the Proposal but, as noted below, the Funds will be able to engage and
compensate brokers and other service organizations to aid in the sale of
Administrative Class shares of the Funds.
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 that may provide one or more
of the services listed below (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.
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.
25
<PAGE>
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 total 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 brokers and other Service Organizations to aid in the sale of
Administrative Class shares.
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.
26
<PAGE>
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 and Management Board
1345 Avenue of the Americas Member, PIMCO Advisors
New York, NY 10150
Age 67
</TABLE>
* Is 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.
Information regarding the material interests of the Nominee in the
Transaction is provided under "Description of the Transaction" above. In
addition, because of his position with and ownership interests in PIMCO
Advisors, Mr. Poovey may be deemed to have had a substantial interest in the
Alleghany Transaction referred to above under "Approval of the New Portfolio
Management Agreements--New Portfolio Management Agreement for the
International Fund."
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
27
<PAGE>
Trust, and a description of their principal occupations are shown in the
following table. 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>
Name, Age and Address Term as Trustee Principal Occupation(s) During the Past Five Years
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
E. Philip Cannon* Trustee since Proprietor, Cannon & Company, an affiliate of
3838 Olympia 1987 Inverness Management LLC, a private equity
Houston, TX 77019 investment firm. Formerly, Headmaster, St. John's
Age 59 School, Houston, Texas; Trustee of PIMCO Advisors
Funds ("PAF") and Cash Accumulation Trust ("CAT");
General Partner, J.B. Poindexter & Co., Houston,
Texas, a private equity investment firm; 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 Formerly, Trustee of PAF and CAT; Chairman,
434 Stable Lane 1983 Executive Vice President and Director, Cunningham &
Lake Forest, IL 60045 Walsh, Inc., Chicago, an advertising agency.
Age 72
- ------------------------------------------------------------------------------------------------------
Gary A. Childress Trustee since Private investor. Formerly, Chairman and Director,
11 Longview Terrace 1994 Bellefonte Lime Company, Inc. (a calcitic lime
Madison, CT 06443 producer), and partner in GenLime, L.P. (a dolomitic
Age 65 lime producer), a private limited partnership which
filed a petition in bankruptcy within the last five
years. Formerly, Trustee of PAF and CAT.
- ------------------------------------------------------------------------------------------------------
William D. Cvengros** Trustee since Chairman of the Board of the Trust; Chief Executive
800 Newport Center Drive 1990 Officer, President, and member of the Management
Newport Beach, CA 92660 Board, PIMCO Advisors; Co-Chairman, The Emerging
Age 51 Markets Income Fund, Inc., The Emerging Markets
Income Fund II, Inc., The Emerging Markets Floating
Rate Fund, Inc., Global Partners Income Fund, Inc.,
Municipal Partners Fund, Inc., and Municipal
Partners Fund II, Inc.; Chairman and Director, PIMCO
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. Nelson Trustee since President, Nelson Financial Consultants; Director,
8 Cherry Hills Lane 1990 Wynn's International, Inc., a building supplies
Newport Beach, CA 92660 company; and Trustee, Pacific Select Fund. Formerly,
Age 69 Partner, Ernst & Young.
- ------------------------------------------------------------------------------------------------------
Lyman W. Porter Trustee since Professor of Management at the University of
2639 Bamboo Street 1990 California, Irvine; and Trustee, Pacific Select
Newport Beach, CA 92660 Fund.
Age 69
- ------------------------------------------------------------------------------------------------------
Alan Richards Trustee since Retired Chairman of E.F. Hutton Insurance Group;
7381 Elegans Place 1990 Former Director of E.F. Hutton and Company, Inc.;
Carlsbad, CA 92009 Chairman of IBIS Capital, LLC, a reverse mortgage
Age 69 company; Director, Inspired Arts, Inc.; Former
Director of Western National Corporation, a life
insurance holding company.
- ------------------------------------------------------------------------------------------------------
W. Bryant Stooks Trustee since President, Bryant Investments, Ltd.; Director,
9701 E. Happy Valley Rd. # 15 1994 American Agritec LLC, a manufacturer of hydrophonics
Scottsdale, AZ 85255 products; President and Director, Ocotillo at Price
Age 59 LLC property leasing company; and Director, Valley
Isle Excursions, Inc., a tour operator. Formerly,
Trustee of PAF and CAT, President, Senior Vice
President, Director and Chief Executive Officer,
Archirodon Group Inc., an international construction
firm; Partner, Arthur Andersen & Co.
- ------------------------------------------------------------------------------------------------------
Gerald M. Thorne Trustee since Director, VPI Inc., a plastics company, and American
5 Leatherwood Lane 1994 Orthodontics Corp. Formerly, Trustee of PAF and CAT;
Savannah, GA 31414 Director, Kaytee, Inc., a birdseed company;
Age 61 President and Director, Firstar National Bank of
Milwaukee; Chairman, President and Director, Firstar
National Bank of Sheboygan; Director, Bando-
McGlocklin, a small business investment company.
- ------------------------------------------------------------------------------------------------------
Stephen J. Treadway** Trustee since Executive Vice President, PIMCO Advisors; Chairman
2187 Atlantic Street 1997 and President, PIMCO Funds Distributors LLC ("PFD");
Stamford, CT 06902 Chairman, Municipal Advantage Fund, Inc. and The
Age 52 Central European Value Fund, Inc.; President, The
Emerging Markets Income Fund, Inc., The Emerging
Markets Income Fund II, Inc., The Emerging Markets
Floating Rate Fund, Inc., Global Partners Income
Fund, Inc., Municipal Partners Fund, Inc. and
Municipal Partners Fund II, Inc. Formerly, Trustee,
President and Chief Executive Officer of CAT;
Executive Vice President, Smith Barney Inc.
</TABLE>
* Mr. Cannon is currently a nominee for election as a Trustee of PIMCO Funds:
Pacific Investment Management Series, PIMCO Variable Insurance Trust and
PIMCO Commercial Mortgage Securities Trust, Inc., which are trusts in the
PIMCO Funds family.
** 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.
28
<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.
29
<PAGE>
Information About the Officers of the Trust
The Officers of the Trust, their ages, their business addresses, their
position with the Trust, the year they became an 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 1997 Executive Vice
2187 Atlantic Street Officer President, PIMCO
Stamford, CT 06902 Advisors; Chairman and
Age 52 President, PIMCO Funds
Distributors LLC
("PFD"); 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;
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
840 Newport Center Drive Manager Shareholder
Suite 300 Services and Fund
Newport Beach, CA 92660 Administration, Pacific
Age 36 Investment Management;
Senior Vice President of
PIMS, PVIT and PCM.
- -------------------------------------------------------------------------------------------
John P. Hardaway Treasurer 1995 Senior Vice President
840 Newport Center Drive and Manager of
Suite 300 Investment Operations
Newport Beach, CA 92660 Accounting, Pacific
Age 42 Investment Management;
Treasurer, PIMCO Funds:
Pacific Investment
Management Series
("PIMS"), PIMCO Variable
Insurance Trust ("PVIT")
and PIMCO Commercial
Mortgage Securities
Trust, Inc. ("PCM").
Formerly, Vice
President, Pacific
Investment Management.
- -------------------------------------------------------------------------------------------
Joseph D. Hattesohl Assistant Treasurer 1997 Vice President and
840 Newport Center Drive Manager of Financial
Suite 300 Reporting and Taxation,
Newport Beach, CA 92660 Pacific Investment
Age 36 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
840 Newport Center Drive Investment Management;
Suite 300 Secretary, PIMS, PVIT
Newport Beach, CA 92660 and PCM. Formerly,
Age 53 Senior Fund
Administrator, Pacific
Investment Management;
Senior Mutual Fund
Analyst, PIMCO Advisors
Institutional Services.
- -------------------------------------------------------------------------------------------
Dennis P. McKechnie Vice President 1999 Portfolio Manager, PIMCO
1345 Avenue of the Americas Equity Advisors division
50th Floor of PIMCO Advisors.
New York, NY 10105 Formerly, Portfolio
Age 34 Manager at Columbus
Circle Investors.
</TABLE>
30
<PAGE>
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 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 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/3/ $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.
/3/.Mr. Segall retired as a Trustee on December 9, 1999.
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.
31
<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
and whose shares are offered for sale. 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.
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.
32
<PAGE>
Ownership of Shares and Voting Information
As of December 15, 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 December 15, 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 Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
PIMCO Capital Appreciation Fund
Institutional
Donaldson Lufkin & Jenrette** 2,707,663.351 12.44%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303-2052
Charles Schwab & Co., Inc.--Reinvest ** 2,267,663.135 10.42%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
MAC & Co. A/C ALNF5039832 1,349,517.434 6.20%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
Administrative
Invesco Trust Company FBO 2,536,665.174 31.04%
Reynolds & Reynolds 401k Plan
P. O. Box 77405
Atlanta, Georgia 30357
Certain Employee (Fidelity) ** 2,346,556.508 28.72%
100 Magetian KWIC
Covington, Kentucky 41015
First Union National Bank ** 1,240,090.112 15.18%
401 S. Tryon Street, FRB-3
Charlotte, North Carolina 28202
National Financial Services Corporation for ** 637,750.674 7.80%
the Exclusive Benefit of Our Customers
1 World Financial Center
200 Liberty Street
New York, New York 10281
New York Life Trust Company ** 454,136.689 5.56%
51 Madison Avenue, Room 117A
New York, New York 10010
Class A
Merrill Lynch Pierce Fenner & Smith Inc. ** 809,594.010 25.00%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------ -------------
<S> <C> <C>
Carn & Co. 02087501 605,891.932 18.71%
American Yazaki Employee
Savings and Retirement
Plan
Attn: Mutual Funds--Star
P. O. Box 96211
Washington, D.C. 20090-
6211
Prudential Bank & Trust
Co. 188,885.966 5.83%
Defined Contribution
Plan
FBO Plan Participants
30 Scranton Office Park
Scranton, Pennsylvania
18507-1755
Class B
Merrill Lynch Pierce
Fenner & Smith Inc. ** 404,175.451 16.74%
Attn: Book Entry
Department
4800 Deer Lake Drive E.,
Fl. 3
Jacksonville, Florida
32246-6484
Class C
Merrill Lynch Pierce
Fenner & Smith Inc. ** 423,701.461 12.98%
Attn: Book Entry
Department
4800 Deer Lake Drive E.,
Fl. 3
Jacksonville, Florida
32246-6484
Class D
Charles Schwab & Co.,
Inc.--Reinvest.** 15,381.844 95.70%
The Schwab Building
101 Montgomery Street
San Francisco,
California 94104-4122
PIMCO Core Equity Fund
Institutional
PIMCO Advisors L.P. 47,044.031 74.11%*
800 Newport Center Dr.,
6th Floor
Attn: Jesse Jue
Newport Beach,
California 92660
National Financial
Services Corp. for 11,230.121 17.69%
Exclusive Benefit of
their Customers
P.O. Box 3908
Church Street Station
New York, New York
10008-3908
Donaldson Lufkin &
Jenrette 3,806.855 6.00%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey
07303
Administrative
Donaldson Lufkin &
Jenrette** 785.855 43.55%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey
07303
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
PIMCO Advisors L.P. 541.168 29.99%
800 Newport Center Dr., 6th Floor
Attn: Jesse Jue
Newport Beach, California 92660
Norwest Bank MN NA 327.072 18.12%
FBO Hanna & Morton LLP Emp. 401K
2700 Snelling Avenue, Suite 300
Minneapolis, Minnesota 55479
National Financial Services Corp. for 147.890 8.20%
Exclusive Benefit of their Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
PIMCO Enhanced Equity Fund
Institutional
Pacific Mutual Life Insurance Company 1,637,106.516 49.74%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
CMTA-GMPP & Allied Workers Pension 415,757.791 12.63%
c/o Associated Third Party Administrator
1640 South Loop Road
Alameda, California 94502
BAC Local #19 Pension Trust 285,990.990 8.69%
Attn: Allied Administrators Inc.
777 Davis Street
San Francisco, California 94126-2500
California Race Track Association 209,774.529 6.37%
P.O. Box 67
LaVerne, California 91750
PIMCO Equity Income Fund
Institutional
Bank of New York Western Trust Co. 1,731,069.949 19.03%
as Trustee for
Pacific Life Insurance Company R.I.S.P.
700 S. Flower Street, 2nd Floor
Los Angeles, California 90017
AM Castle & Co Emp Pension Equity Seg 1,415,813.322 15.57%
A/C #22-39912
P.O. Box 92956
Chicago, Illinois 60675-2956
Miter & Co. 1,036,268.336 11.39%
C/O Marshall & Ilsley Trust Co. (Plymouth Tube)
P.O. Box 2977
Milwaukee, Wisconsin 53201
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------ -------------
<S> <C> <C>
Northern Trust Company as Trustee for 871,770.553 9.58%
Brush Wellman Inc.
P.O. Box 92956
Chicago, Illinois 60675-0001
Northern Trust Co. TTEE FBO 793,483.129 8.72%
Mazda Motor of America
A/C #22-89188
P.O. Box 92956
Chicago, Illinois 60675-2956
Mitra & Co. 477,171.486 5.25%
Attn: Mutual Funds
1000 N. Water Street, P.O. Box 2977
Milwaukee, Wisconsin 53201-2977
Administrative
First Union National Bank ** 702,891.618 68.02%
401 S. Tyon Street, FRB-3
CMG Fiduciary Operations Funds Group
Mail Code CMG-2-1151
Charlotte, North Carolina 28288-1151
Invesco Trust Co. TTEE 174,436.171 16.88%
Pasco Acquisition Inc. & Affiliates 401k Plan
P.O. Box 77405
Atlanta, Georgia 30357
Invesco Trust Co. TTEE FBO Lykes Retirement 111,419.135 10.78%
Savings Plan
P.O. Box 77405
Atlanta, Georgia 30357
Class A
Carn & Co. ** 268,945.796 20.09%
USI Insurance Services Corporation
401(k) Plan
P.O. Box 96211
Washington, D.C. 20090-6211
Merrill Lynch Pierce Fenner & Smith Inc. ** 157,155.797 11.74%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Khosrow B. Semnani 102,359.420 7.65%
P.O. Box 3508
Salt Lake City, Utah 84110-3508
Class B
Merrill Lynch Pierce Fenner & Smith Inc. ** 195,904.575 11.74%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
Class C
Merrill Lynch Pierce Fenner & Smith Inc. ** 168,306.225 9.61%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.--Reinvest ** 10,280.995 100.00%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO Growth Fund
Institutional Class
Pacific Life Foundation 48,277.930 41.98%
Attn: Michele Myszka
700 Newport Center Drive
Newport Beach, California 92660
Fort Wayne Newspaper Inc. 23,896.354 20.78%
Attn: John Kovatch
600 W. Main Street
Fort Wayne, Indiana 46802
90/10 Portfolio 21,062.117 18.32%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
60/40 Portfolio 16,670.374 14.50%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
Administrative Class
Chase Bank of Texas, N.A. Trustee 275,301.144 58.72%
1111 Fannin, 10th Floor
Houston, Texas 77002
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 482,826.632 7.33%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 1,295,277.244 25.19%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 8,960,941.963 12.63%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
PIMCO Innovation Fund
Institutional Class
PIMCO Advisors 401(k) Savings & Invest. Plan 30,698.721 24.47%
c/o Carn & Co.
P.O. Box 96211
Attn: Mutual Fund Department
Washington, D.C. 20090
Pacific Life Foundation 29,830.625 23.77%
Attn: Michele Myszka
700 Newport Center Drive
Newport Beach, California 92660
Peter O. Eslick & Dawn M. Eslick JT WROS 20,653.510 16.46%
1961 Marsh Creek Court
Santa Rosa, California 95403
Alpine Trust & Asset Management 20,582.203 16.40%
225 North 5th Street
Grand Junction, Colorado 81501
IFTC Custodian 8,778.725 7.00%
Jay R. Jackson (IRA)
1540 Kentwood Lane
York, Pennsylvania 17403
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 2,267,229.257 18.55%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 2,847,959.664 18.12%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 3,577,106.682 15.73%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.--Reinvest.** 585,963.012 90.92%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
PIMCO International Fund
Institutional
90/10 Portfolio 214,162.108 49.75%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
60/40 Portfolio 167,835.328 38.99%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
30/70 Portfolio 48,488.765 11.26%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
Class A
Mesirow Financial Inc. 97,870.598 7.84%
A/C 5490-9509
International Trading Partners
350 North Clark Street
Chicago, Illinois 60610
Merrill Lynch Pierce Fenner & Smith Inc.** 92,915.624 7.44%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 103,019.225 12.49%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 1,004,843.822 10.96%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO International Growth Fund
Institutional
PIMCO Advisors L.P. 348,273.405 61.29%*
Attn: Jesse Jue
800 Newport Center Drive, 6th Floor
Newport Beach, CA 92660
Charles Schwab & Co., Inc.--Reinvest.** 153,921.251 27.09%*
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
Pacific Asset Management LLC 56,520.240 9.95%
700 Newport Center Drive
Newport Beach, California 92660-6307
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
PIMCO Mega-Cap Fund
Institutional
PIMCO Advisors L.P. 300,000.000 100.00%*
Attn: Jesse Jue
800 Newport Center Drive, 6th Floor
Newport Beach, California 92660
PIMCO Micro-Cap Growth Fund
Institutional
Charles Schwab & Co., Inc.--Reinvest.** 2,257,116.741 21.71%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
Bost & Co. A/C DOMF 8526562 1,572,192.506 15.12%
Dominion Resources
Attn: Mutual Fund Operations
P.O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
University of Southern California 1,054,372.511 10.14%
Treasurer's Office
University Park, BKS 402
Los Angeles, California 90089-2541
Mac & Co. A/C OBRF 3331012 FBO 984,714.133 9.47%
Oberlin College
Attn: Mutual Fund Operations
P.O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
Mac & Co. A/C PNMF0550382 883,353.905 8.50%
Mellon Bank N.A.
Public Service of New Mexico
P. O. Box 3198
Mutual Funds Operations
Pittsburgh, Pennsylvania 15230-3198
Donald Lufkin & Jenrette** 676,025.739 6.50%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303
First Bank N.A., Custodian 599,955.053 5.77%
Community Investment Group
St. Paul Foundation
Mutual Funds #10146497
P.O. Box 64010
St. Paul, Minnesota 55164
Administrative
Centurion Trust Company 83,706.376 36.83%
FBO Omnibus/Centurion Capital Management
2425 EB Camelback Road, Suite 530
Phoenix, Arizona 85016
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
Northern Trust as Trustee for 79,462.628 34.96%
Sunday School Board
dba LifeWay Christian Resources
P.O. Box 92956
Chicago, Illinois 60675
New York Life Trust Company ** 57,148.602 25.14%
51 Madison Avenue, Room 117A
New York, New York 10010
PIMCO Mid-Cap Equity Fund
Institutional
Pacific Mutual Life Insurance Company 171,501.575 36.60%*
700 Newport Center Drive
Newport Beach, California 92660
IFTC as Custodian for 156,011.921 33.29%*
John W. Barnum
5175 Tilden Street, N.W.
Washington, D.C. 20016-1961
PIMCO Advisors L.P. 115,623.878 24.67%
800 Newport Center Dr., 6th Floor
Attn: Jesse Jue
Newport Beach, California 92660
PIMCO Mid-Cap Growth Fund
Institutional
Charles Schwab & Co., Inc.--Reinvest ** 6,207,459.946 25.07%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
Norwest Bank Minnesota NA Custodian FBO 1,622,621.571 6.55%
Parkview Memorial Hospital
c/o Mutual Fund Processing
733 Marquette Avenue MS 0036
Minneapolis, Minnesota 55479-0036
Administrative
Certain Employee (Fidelity) ** 1,982,201.571 45.29%
100 Magellan KW1C
Covington, Kentucky 41015
UMB TTEE FBO Andrew Profit Sharing Trust 392,164.664 8.96%
JP Morgan/American Century
P.O. Box 419784
Kansas City, Missouri 64141
New York Life Trust Company 284,375.016 6.50%
51 Madison Avenue
Room 117A
New York, New York 10010
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
First Union National Bank** 253,544.569 5.79%
401 S. Tryon Street, FRB-3
Charlotte, North Carolina 28202
Northern Turst as Trustee FBO 222,835.087 5.09%
Unisource Corporation
P.O. Box 92956
Chicago, Illinois 60675
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 2,557,562.684 48.25%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 652,467.213 20.18%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 611,481.308 15.42%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.--Reinvest.** 13,172.981 100.00%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO Opportunity Fund
Institutional Class
LaSalle Bank, N.A., Custodian 201,340.316 77.55%
AMFAC--408039428
P.O. Box 1443
Chicago, Illinois 60690
Pacific Life Foundation 21,129.094 8.14%
Attn: Michele Myszka
700 Newport Center Drive
Newport Beach, California 92660
90/10 Portfolio 13,133.764 5.06%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
Administrative Class
Chase Bank of Texas, N.A., Trustee 232,853.055 69.58%
1111 Fannin, 10th Floor
Houston, Texas 77002
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 715,763.259 14.36%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
American Express Trust Company 469,694.513 9.43%
FBO WESCO Distribution Inc.
Retirement Savings Plan
733 Marquette Avenue
Minneapolis, Minnesota 55402-2309
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 3,230,779.387 21.25%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO Precious Metals Fund
Class A
Prudential Securities Inc. FBO 195,039.414 17.44%
Samaritan Multi-Strategies LP
33 W. Higgins Road, Suite 3010
S. Barrington, Illinois 60010
Class B
BSDT Custodian Rollover IRA FBO 105,929.360 9.68%
Edwin J. Braun
918 East 2nd
Russell, Kansas 67665
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 285,096.531 10.69%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO Renaissance Fund
Institutional Class
National Investor Services Corp. 8,079.041 99.14%
for the Exclusive Benefit of our Customers
55 Water Street, 32nd Floor
New York, New York 10041
Administrative
Chase Manhattan Bank TTEE FBO 47,364.678 98.88%
MetLife Defined Contribution Group
770 Broadway, 10th Floor
New York, New York 10003
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 761,314.576 14.45%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 1,575,470.784 19.61%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 3,789,783.315 14.06%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class D
National Investor Services Corp. 2,102.526 51.90%
for the Exclusive Benefit of our Customers
55 Water Street, 32nd Floor
New York, New York 10041
Charles Schwab & Co., Inc.--Reinvest.** 1,199.637 29.61%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO Advisors L.P. 749.261 18.49%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
PIMCO Small-Cap Growth Fund
Institutional
The Jewish Federation of 1,279,573.170 23.40%
Metropolitan Chicago
One South Franklin Street, Room 625
Chicago, Illinois 60606-4609
DMNH Foundation 779,461.357 14.25%
2001 Colorado Blvd.
City Park
Denver, Colorado 00008-0205
Berklee College of Music, Inc. 595,741.955 10.89%
1140 Boylston Street
Boston, Massachusetts 02215-3693
Pacific Mutual Life Insurance Company 554,742.893 10.14%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
Northern Trust TTEE FBO 331,300.995 6.06%
Consolidated Cigar Inc.
Master Pension Trust 22-02096
P.O. Box 92956
Chicago, Illinois 60675
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
Auburn Theological Seminiary 330,487.906 6.04%
3041 Broadway
New York, New York 10027-5710
Rockdale Health System Inc. 327,864.626 5.99%
1412 Milstead Ave., N.E.
Conyers, Georgia 30012-3877
Regents of the University of Colorado 290,131.614 5.30%
4840 Pearl East Circle, Suite 103
Boulder, Colorado 80301-2408
PIMCO Small-Cap Value Fund
Institutional
Pacific Mutual Life Insurance Company 309,091.408 11.46%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
Little Company Of Mary Hospital 308,373.990 11.44%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, Pennsylvania 15230
Donaldson Lufkin & Jenrette** 141,202.412 5.24%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303-2052
Charles Schwab & Co., Inc. Rein** 139,418.578 5.17%
Attn: Mutual Funds Dept
101 Montgomery Street
San Francisco, California 94104-4122
Administrative
National Financial Services Corporation for the 395,618.436 34.74%
Exclusive Benefit of Our Customers**
1 World Trade Center
200 Liberty Street
New York, New York 10281
First Union National Bank** 288,767.352 25.35%
1525 West WT Harris Boulevard NC 1151
Charlotte, North Carolina 28288-1151
Norwest Bank MN NA FBO 63,106.611 5.54%
Heller Financial Corp. Def. Comp. #13581311
P.O. Box 1533
Minneapolis, Minnestoa 55480-1533
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 2,183,045.987 28.63%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
Norwest Bank MN NA 785,545.723 10.30%
Dain Rauscher Retirement Plan
#13281312 DTD 1/97
Attn: EBS MS 0035
510 Marquette, Suite 500
Minneapolis, Minnesota 55479-0035
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 1,287,686.503 24.36%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 1,369,968.222 22.00%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO Structured Emerging Markets Fund
Institutional
Rhode Island Foundation 950,187.159 23.83%
Attn: Michael Jenkenson
70 Elm Street
Providence, Rhode Island 02903
Berklee College of Music, Inc. 559,146.011 14.02%
1140 Boylston Street
Boston, Massachusetts 02215-3693
Hartford Foundation 356,606.997 8.94%
159 E. Main Street
Rochester, New York 14638
Munsen-Williams-Proctor Institute 316,230.667 7.93%
Attn: Anthony Spiridigloizzi
310 Genesee Street
Utica, New York 13502
The Reeves Foundation 285,271.110 7.15%
115 Summit Avenue
Summit, New Jersey 07901
Deseret Mutual Retiree Med. & Life Pl. Tr. 263,066.283 6.60%
c/o Doug Burton
60 East South Temple Street
Salt Lake City, Utah 84147
Brockton Health Corp. Endowment 221,045.334 5.54%
Attn: Steven Connolly
680 Centre Street
Brockton, Massachusetts 02402-3395
PIMCO Target Fund
Institutional Class
Pacific Life Foundation 65,722.338 34.33%
Attn: Michele Myszka
700 Newport Center Drive
Newport Beach, California 92660
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
-------------- -------------
<S> <C> <C>
90/10 Portfolio 45,455.669 23.75%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
60/40 Portfolio 37,555.653 19.62%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
Fort Wayne Newspaper Inc. 32,781.020 17.13%
Attn: John Kovatch
600 W. Main Street
Fort Wayne, Indiana 46802
30/70 Portfolio 9,876.794 5.16%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 1,429,863.491 15.88%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 1,718,466.869 32.35%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 14,012,637.462 24.42%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO Tax-Efficient Equity Fund
Institutional
Loni Austin Parrish UAW 12,574.156 13.13%
Joan D. Austin Dtd. 12-26-86
FBO Ashley Nicole Parrish
C/O Austin Industries
P.O. Box 1060
Newberg, Oregon 97132
Loni Austin Parrish UAW 11,199.270 11.69%
G. Kenneth Austin Jr. Dtd. 12-26-86
FBO Ashley Nicole Parrish
C/O Austin Industries
P.O. Box 1060
Newberg, Oregon 97132
Loni Austin Parrish UAW 10,745.961 11.22%
G. Kenneth Austin Jr. Dtd. 9-26-88
FBO Jessica Danielle Parrish
C/O Austin Industries
P.O. Box 1060
Newberg, Oregon 97132
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially
Owned Percentage of Outstanding Shares of Class Owned
------------ -----------------------------------------------
<S> <C> <C>
Loni Austin Parrish UAW 10,745.961 11.22%
Joan D. Austin Dtd. 9-26-88
FBO Jessica Danielle Parrish
C/O Austin Industries
P.O. Box 1060
Newberg, Oregon 97132
Scott N. Parrish 9,066.183 9.46%
C/O Austin Industries
P.O. Box 1060
Newberg, Oregon 97132
US Bank National Association Custodian 8,626.782 9.01%
JD Gray Irrv. Trust FBO JGG Dtd. 5-13-99
Trust Mutual Funds #97349240
P.O. Box 64010
St. Paul, Minnesota 55164
US Bank National Association Custodian 8,579.271 8.96%
JD Gray Irrv. Trust FBO SWG Dtd. 5-13-99
Trust Mutual Funds #97349230
P.O. Box 64010
St. Paul, Minnesota 55164
US Bank National Association Custodian 8,264.126 8.63%
FBO T.G. Gearhart Dtd. 5-13-99
Trust Mutual Funds #97349260
P.O. Box 64010
St. Paul, Minnesota 55164
US Bank National Association Custodian 7,921.337 8.27%
JD Gray Irrv. Trust FBO M.E. Gray Dtd. 5-13-99
Trust Mutual Funds #97349250
P.O. Box 64010
St. Paul, Minnesota 55164
US Bank National Association Custodian 7,425.686 7.75%
JD Gray Irrv. Trust FBO GBH Dtd. 5-13-99
Trust Mutual Funds #97349270
P.O. Box 64010
St. Paul, Minnesota 55164
Administrative
Centurion Trust Company 1,146,361.961 74.30%*
FBO Omnibus/Centurion Capital Management
2425 EB Camelback Road, Suite 530
Phoenix, Arizona 85016
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 82,091.730 11.76%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------ -------------
<S> <C> <C>
NFSC FEBO #0C8-332321 49,164.208 7.04%
The Robb Charitable
Trust
Richard A. Robb
U/A 09/04/1990
56 Pilgrim Road
Marblehead,
Massachusetts 01945-
1750
Dain Rauscher Inc. FBO 44,283.521 6.34%
Michael G. King and
Elizabeth W. King
Long Term Account JT
TEN/WROS
14800 164th Place N.E.
Seattle, WA 98101
LEWCO Securities Corp. 42,824.236 6.13%
FBO A/C #H10-690959-1-01
34 Exchange Place, 4th
Floor
Jersey City, New Jersey
07311
Class B
Merrill Lynch Pierce 192,496.151 20.87%
Fenner & Smith Inc.**
Attn: Book Entry
Department
4800 Deer Lake Drive E.,
Fl. 3
Jacksonville, Florida
32246-6484
Class C
Merrill Lynch Pierce 297,707.282 23.06%
Fenner & Smith Inc.**
Attn: Book Entry Depart-
ment
4800 Deer Lake Drive E.,
Fl. 3
Jacksonville, Florida
32246-6484
Class D
PIMCO Advisors L.P. 932.836 100.00%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, Califor-
nia 92660
PIMCO Tax-Efficient
Structured Emerging
Markets Fund
Institutional
Alscott Investments, LLC 994,743.878 16.66%
501 Baybrook Court
Boise, Idaho 83706
Rede & Company 738,891.610 12.38%
(Weyerhaeuser)
4380 S.W. Macadam, Suite
450
Portland, Oregon 97201
Waycrosse, 624,830.101 10.47%
Inc./International
Equity Fund II
P. O. Box 9300, MS 28
Minneapolis, Minnesota
55440-9300
Charles Schwab & Co., 595,834.346 9.98%
Inc.--Reinvest.**
The Schwab Building
101 Montgomery Street
San Francisco, Califor-
nia 94104-4122
Ruby Trust 588,903.067 9.86%
499 Park Avenue
New York, New York 10022
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------- -------------
<S> <C> <C>
Alscott Investments, LLC 479,994.043 8.04%
501 Baybrook Court
Boise, Idaho 83706
Topaz Trust 348,346.312 5.84%
499 Park Avenue
New York, New York 10022
PIMCO Value Fund
Institutional
Pacific Life Insurance Company 2,950,645.639 45.21%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
CMTA-GMPP & Allied Workers Pension Trust 776,234.463 11.89%
c/o Associated Third Party Administrator
1640 South Loop Road
Alameda, California 94502
BAC Local #19 Pension Trust 533,997.832 8.18%
Attn: Allied Administrators Inc.
777 Davis Street
San Francisco, California 94126-2500
Pacific Life Foundation 450,918.970 6.91%
Attn: Michele Myszka
700 Newport Center Drive
Newport Beach, California 92660-6307
California Race Track Association 380,365.978 5.83%
P.O. Box 60014
Arcadia, California 91006-6014
Class A
Teamsters Union Loc. No. 52 Pension Fund 338,759.448 19.84%
Attn: Dennis Vadini
3150 Chester Avenue
Cleveland, Ohio 44114
Merrill Lynch Pierce Fenner & Smith Inc.** 119,823.618 7.02%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class B
Merrill Lynch Pierce Fenner & Smith Inc.** 526,772.825 19.76%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 469,223.034 8.38%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------ -------------
<S> <C> <C>
Class D
Charles Schwab & Co., Inc.--Reinvest** 1,358.686 60.81%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO Advisors L.P. 875.470 39.19%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
PIMCO Value 25 Fund
Institutional
First Presbyterian Church of Dallas 25,510.204 100.00%
408 Park Avenue
Dallas, Texas 75201
Class A
Merrill Lynch Pierce Fenner & Smith Inc.** 127,047.197 81.18%*
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Donaldson Lufkin Jenerette Securities Corporation
Inc.** 10,712.440 6.85%
P.O. Box 2052
Jersey City, New Jersey 07303-2052
Merrill Lynch Pierce Fenner & Smith Inc.** 27,538.986 21.42%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Class C
Merrill Lynch Pierce Fenner & Smith Inc.** 70,583.844 49.40%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
First Clearing Corporation 9,000.000 6.30%
A/C 7174-2814
Seymour Shlomchik MD IRA
WFS as Custodian
729 Canterbury Lane
Villanova, Pennsylvania 19085
90/10 Portfolio
Institutional
PIMCO Advisors L.P. 916.590 100.00%
Attn: Jesse Jue
800 Newport Center Drive
Newport Beach, California 92660
Administrative
PIMCO Advisors L.P. 916.590 100.00%
Attn: Jesse Jue
800 Newport Center Drive
Newport Beach, California 92660
</TABLE>
51
<PAGE>
<TABLE>
<S> <C> <C>
Class A
Charles Baumstark and Daniel Baumstark TTEES 16,469.254 23.00%
Herman Lumber Company Penion Plan DTD 1/1/99
603 Market Street, P.O. Box 500
Hermann, Missouri 65041
Class B
Donaldson Lufkin Jenrette 8,883.347 5.56%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
60/40 Portfolio
Institutional
PIMCO Advisors L.P. 963.806 71.10%
Attn: Jesse Jue
800 Newport Center Drive
Newport Beach, California 92660
Carn & Co. #02127801 391.699 28.90%
PIMCO Advisors 401(k) Savings & Invest. Plan
P.O. Box 96211
Attn: Mutual Fund Dept.
Washington, D.C. 20090
Administrative
PIMCO Advisors L.P. 962.446 100.00%
Attn: Jesse Jue
800 Newport Center Drive
Newport Beach, California 92660
Class A
Charles Baumstark and Daniel Baumstark TTEES 66,763.874 27.05%
Herman Lumber Company Pension Plan DTD 1/1/99
603 Market Street, P.O. Box 500
Hermann, Missouri 65041
BSDT CUST Rollover IRA FBO 37,996.882 15.40%
Edmund A. Louie
1165 Corvallis Drive
San Jose, California 95120
BSDT Cust. IRA 23,430.436 9.49%
FBO Lloyd B. Bremer
7841 Bouma Circle
La Palma, CA 90623
Christine A. Dudenhoeffer & 14,031.800 5.69%
David C. Klos TTEE
Owensville Lumber Co., Inc. 401K Plan
FBO Plan Participants
1010 Hwy 28 West, P.O. Box 530
Owensville, Missouri 65066
Class B
Painewebber For the Benefit of 18,601.996 5.66%
Painewebber FBO
Elizabeth B. Stoeffler
P.O. Box 3321
Weehawken, New Jersey 07087-8154
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------ -------------
<S> <C> <C>
Merrill Lynch Pierce Fenner & Smith Inc.** 16,928.856 5.15%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
John H. & Susan Hutchison TTEES 90,291.419 10.31%
Jack & Susan Hutchison Living TR
DTD 10/30/1985
2441 Bayshore Drive
Newport Beach, California 92663
30/70 Portfolio
Institutional
PIMCO Advisors L.P. 1,024.514 100.00%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
Administrative
PIMCO Advisors L.P. 1,022.601 100.00%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
Class A
Stuart B. Crawford & Virginia Crawford 7,429.017 16.51%
JT TEN WROS NOT TC
4929 Whitcomb Drive
Madison, Wisconsin 53711
Donaldson Lufkin Jenrette 6,843.885 15.21%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
Donaldson Lufkin Jenrette 5,468.091 12.15%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
Mei W. Quinn 5,387.525 11.97%
TOD Howard Wong and Tom E. McGrath
Subject to FDISG TOD Rules
2425 W. New Street
Blue Island, Illinois 60406
Charles Baumstark and Daniel Baumstark TTEES 2,939.465 6.53%
Hermann Lumber Company Pension Plan DTD 1/1/99
603 Market Street, P.O. Box 500
Hermann, Missouri 65041
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------ -------------
<S> <C> <C>
Raymond James & Assoc. Inc. 2,490.040 5.53%
FAO Carolyn Union Grdn
FBO Jessica M. Pearce
A/C# 79537630
Route 3, Box 364
Lake City, Florida 32025
Raymond James & Assoc. Inc. 2,490.040 5.53%
FAO Carolyn Union Grdn
FBO Carolyn L. Pearce
A/C# 79537625 (Pass)
Route 3, Box 364
Lake City, Florida 32025
First Clearing Corporation 2,423.974 5.39%
A/C 7078-5821
Robert Selecky
25 Alyea Street
Newark, New Jersey 07105
Lake City, Florida 32025
NFSC FEBO #ORP-030368 2,280.153 5.07%
NFSC/FMTC IRA
FBO Jack A. Wedner
4729-D La Villa Marina
Marina del Rey, California 90292
Class B
Merrill Lynch Pierce Fenner & Smith Inc. ** 24,011.239 13.53%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
BSDT CUST IRA 22,996.653 12.96%
FBO Miriam P. Squillace
1941 E. River Road
Livingston, Montana 59047-9146
A. G. Edwards & Sons, Inc. C/F 19,409.266 10.93%
Dr. James R. Drake
IRA Account
3004 Brownwood Drive
Chattanooga, Tennessee 37404-6309
Janney Montgomery Scott, Inc. 14,008.096 7.89%
A/C 1021-6717
Joseph L. Abriola & Gloria C. Abriola JT TEN
1801 Market Street
Philadelphia, Pennsylvania 19103-1675
N. F. Verratti, Inc. 9,956.655 5.61%
Profit Sharing Plan DTD 1-1-1983
Nicholas F. Verratti, Jr. TTEE
450 Knowlton Road
Media, Pennsylvania 19063
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
------------ -------------
<S> <C> <C>
Joseph L. Abriola (IRA) 9,004.390 5.07%
JMS Inc. CUST FBO
A/C 1021-6665
2 Steeplechase Lane
Blue Bell, Pennsylvania 19422-2460
Class C
Jeffrey Le B. Morse 53,155.777 8.04%
P.O. Box 127
Sextonville, Wisconsin 53584
Sheila T. Fitzgerald 46,651.715 7.05%
1325 Buttermilk Lane
Reston, Virginia 20190
John P. Bohlman TTEE 44,921.062 6.79%
U/A DTD Feb. 24, 1973
Bohlman Drug Store Inc. PSP
1028 Wisconsin Ave.
Boscobel, Wisconsin 53805
Rachel G. Pontzer 33,547.675 5.07%
18040 33rd Place North
Minneapolis, Minnesota 55447
</TABLE>
- --------
* Entity owned 25% or more of the outstanding shares of beneficial interest
of the Fund, and therefore may be presumed to "control" the Fund, as that
term is defined in the 1940 Act.
** Shares are believed to be held only as nominee.
55
<PAGE>
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
- -------------------------------------------------------------------------------
Newton B. Schott, Jr. Vice President and Senior Vice President, PIMCO
Secretary Advisors Mutual Fund Division
- -------------------------------------------------------------------------------
Dennis P. McKechnie Vice President Portfolio Manager, PIMCO
Equity Advisors Division
</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.
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 such other fund and the rate of compensation paid to the
Adviser and Sub-Advisers for the provision of investment services.
<TABLE>
<CAPTION>
Current 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>
PIMCO Variable Insurance
Trust ("PVIT") Capital
Appreciation Portfolio Cadence 0.35% $ 3,290,305
- ----------------------------------------------------------------------------------------
PVIT Mid-Cap Growth
Portfolio Cadence 0.35% $ 3,321,488
- ----------------------------------------------------------------------------------------
PVIT Small-Cap Value
Portfolio NFJ 0.50% $ 2,929,790
- ----------------------------------------------------------------------------------------
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.
56
<PAGE>
For the fiscal year ended June 30, 1999, the aggregate amounts of the
administration fees paid by the Funds and Portfolios were 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
Value 25 Fund 5,790
Precious Metals Fund 94,460
60/40 Portfolio 20,123
70/30 Portfolio 10,422
90/10 Portfolio 14,344
------------
TOTAL $31,143,126
</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 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
57
<PAGE>
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 Proposals 1,
2 and 6 without instructions from the beneficial owners of the Funds' shares,
but cannot vote on the remaining Proposals unless they have received
instructions from such beneficial owners.
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.
Telephone Voting. You may give your voting instructions over the telephone
by calling 1-800-949-2583. A representative of DF King & Co., Inc. ("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 Trust, 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 Trust 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 or Facsimile. 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 or fax the proxy card received with the proxy
statement by following the instructions enclosed with the proxy card or you
can attend the Meeting in person.
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. Any such proposals should be submitted to
PIMCO Funds: Multi-Manager Series, c/o PIMCO Funds Distributors LLC, 2187
Atlantic Street, Stamford, CT 06902, Attention: Newton B. Schott, Jr.
58
<PAGE>
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 12, 2000
59
<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 is willing to render such services it shall notify the Trust in
writing, whereupon such additional series shall become a Fund hereunder.
A-1
<PAGE>
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 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,
A-2
<PAGE>
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
(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.
A-3
<PAGE>
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;
(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,
A-4
<PAGE>
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.
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.
A-5
<PAGE>
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.
(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-6
<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 Equity 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-7
<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 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
B-1
<PAGE>
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 the rules and regulations thereunder, and subject
to any other applicable laws and regulations, the Portfolio Manager is
further authorized to allocate the orders placed by it on behalf of the
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.
(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.
B-2
<PAGE>
(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.
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.
B-3
<PAGE>
4. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its services under this Agreement. The Portfolio Manager shall
not be responsible for any of the following:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Trust's transfer agent(s), registrar, dividend
disbursing agent(s), and shareholder recordkeeping services;
(c) Expenses of the Trust's custodial services, including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of 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;
(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
B-4
<PAGE>
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.
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,
B-5
<PAGE>
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 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;
B-6
<PAGE>
(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.
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-7
<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: _________________________________
Attest: Title:
Title:
B-8
<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-9
<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 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.
C-2
<PAGE>
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.
IN WITNESS WHEREOF, the Trust has adopted this Distribution Plan effective
as of the day of , 2000.
PIMCO FUNDS: MULTI-MANAGER SERIES
By: _________________________________
Title:
C-3
<PAGE>
MMS
