SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
CONSULTING GROUP CAPITAL MARKETS FUNDS
(Name of Registrant as Specified In Its Charter)
James B. O'Connell
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(j)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-11:1
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4) Proposed maximum aggregate value of transaction:
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1 Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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LARGE CAPITALIZATION VALUE EQUITY INVESTMENTS
SMALL CAPITALIZATION VALUE EQUITY INVESTMENTS
EACH A PORTFOLIO OF
CONSULTING GROUP CAPITAL MARKETS FUNDS
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 31, 1994
To the Shareholders of:
LARGE CAPITALIZATION VALUE EQUITY INVESTMENTS
SMALL CAPITALIZATION VALUE EQUITY INVESTMENTS
Notice is hereby given that a Special Meeting of Shareholders of Large
Capitalization Value Equity Investments and Small Capitalization Value Eq-
uity Investments, each a portfolio of Consulting Group Capital Markets
Funds, a Massachusetts business trust (the "Trust"), will be held at Two
World Trade Center, 100th Floor, New York, New York 10048 at 10:00 a.m.,
on October 31, 1994.
The Special Meeting is held for the purposes of:
1. Approving or disapproving a new Investment Advisory Agreement for
Large Capitalization Value Equity Investments with Parametric Portfo-
lio Associates. -- LARGE CAPITAL VALUE EQUITY INVESTMENTS;
2. Approving or disapproving a new Investment Advisory Agreement for
Small Capitalization Value Equity Investments with NFJ Investment
Group. -- SMALL CAPITAL VALUE EQUITY INVESTMENTS; and
3. Transacting such other business as may properly come before the meet-
ing or any adjournment thereof.
The Board of Trustees of the Trust has fixed the close of business on Sep-
tember 21, 1994 as the record date for the determination of shareholders
entitled to notice of, and to vote at, the Special Meeting and any ad-
journments thereof.
By Order of the Board of Trustees,
CHRISTINA T. SYDOR
Secretary
September 29, 1994
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COM-
PLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR
THE PROPER EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER. IT IS
IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you in order that the Fund may avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the reg-
istration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration
on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of regis-
tration. For example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
<S> <C>
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
</TABLE>
LARGE CAPITALIZATION VALUE EQUITY INVESTMENTS
SMALL CAPITALIZATION VALUE EQUITY INVESTMENTS
EACH A PORTFOLIO OF
CONSULTING GROUP CAPITAL MARKETS FUNDS
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 31, 1994
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of Consulting Group Capital Markets Funds
(the "Trust") for use at a Special Meeting of Shareholders of Large Capi-
talization Value Equity Investments and Small Capitalization Value Equity
Investments (each a "Portfolio" and together the "Portfolios") to be held
at 10:00 a.m. on October 31, 1994, at Two World Trade Center, 100th Floor,
New York, New York 10048, and at any adjournments thereof (the "Meeting").
A Notice of the Meeting and a proxy card accompany this Proxy Statement.
Proxy solicitations will be made primarily by mail, but proxy solicita-
tions also may be made by telephone, telegraph or personal interviews con-
ducted by officers and employees of the Trust; Smith Barney Inc. ("Smith
Barney"); Smith, Barney Advisers, Inc., administrator of the Trust, a part
of which is the Consulting Group, the investment manager of the Trust;
Parametric Portfolio Associates, Inc. ("Parametric") and NFJ Investment
Group, Inc. ("NFJ"), each wholly owned subsidiaries of Pacific Financial
Asset Management Corporation ("PFAMCo") an indirect wholly owned subsid-
iary of Pacific Mutual Life Insurance Company ("Pacific Mutual"), invest-
ment advisers to the Portfolios; The Boston Company Advisors, Inc. ("Bos-
ton Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corpo-
ration, the sub-administrator of the Trust; and/or The Shareholder
Services Group, Inc. ("TSSG"), a subsidiary of First Data Corporation, the
transfer agent of the Trust. The costs of proxy solicitation and expenses
incurred in connection with the preparation of this Proxy Statement and
its enclosures will be paid by PFAMCo. PFAMCo also will reimburse broker-
age firms and others for their expenses in forwarding solicitation mate-
rial to the beneficial owners of Trust shares.
If the enclosed proxy is properly executed and returned in time to be
voted at the Meeting, the shares of beneficial interest in the Trust
("Shares") represented thereby will be voted in accordance with the in-
structions marked thereon. Unless instructions to the contrary are marked
thereon, the proxy will be voted FOR the approval of the Investment Advi-
sory Agreements described herein. Any shareholder who has given a proxy
has the right to revoke it at any time prior to its exercise either by at-
tending the Meeting and voting his or her shares in person, or by submit-
ting a letter of revocation or a later-dated proxy to the Trust at the
above address prior to the date of the Meeting.
In the event that a quorum is not present at the Meeting, or in the event
that a quorum is present but sufficient votes to approve any of the pro-
posals are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of prox-
ies. Any such adjournment will require the affirmative vote of a majority
of those Shares represented at the Meeting in person or by proxy. If a
quorum is present, the persons named as proxies will vote those proxies
which they are entitled to vote FOR any such proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST any
such proposal against any such adjournment. Under the Master Trust Agree-
ment of the Trust dated April 12, 1991, as amended, a quorum is consti-
tuted by the presence in person or by proxy of the holders of a majority
of the outstanding Shares entitled to vote on a particular matter at the
Meeting.
The Trust has an unlimited number of shares of beneficial interest, par
value $0.001 per share, which are divided among twenty-five portfolios of
the Trust. Shares of thirteen of such portfolios, including the Portfo-
lios, are currently offered for sale to shareholders. Since the matter
being submitted to each Portfolio's shareholders for approval affects the
interests of the shareholders of that Portfolio only and not the other
portfolios of the Trust, the Trust's Board of Trustees has determined that
proxies should be solicited from shareholders of only the Portfolios. As
of the record date, September 21, 1994, the following number of Shares
were outstanding for each Portfolio:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO SHARES OUTSTANDING
<S> <C>
Large Capitalization Value Equity Investments 89,696,457.733
Small Capitalization Value Equity Investments 36,466,485.078
</TABLE>
Each Share outstanding on the record date is entitled to one vote, and
fractional Shares are entitled to proportionate shares of one vote. As of
September 21, 1994, to the knowledge of the Board of Trustees, no single
shareholder or "group" (as that term is used in Section 13(d) of the Secu-
rities Exchange Act of 1934, as amended) beneficially owned more than 5%
of either of the Portfolio's outstanding Shares. As of September 21, 1994,
the Board of Trustees beneficially owned less than 1% of the outstanding
Shares of Large Capitalization Value Equity Investments and Small Capital-
ization Value Equity Investments, respectively.
In order that your Shares may be represented at the Meeting, you are re-
quested to:
- -- indicate your instructions on the enclosed proxy card;
- -- date and sign the proxy card;
- -- mail the proxy card promptly in the enclosed envelope, which requires
no postage if mailed in the United States; and
- -- allow sufficient time for the proxy card to be received on or before
9:30 a.m., October 31, 1993.
Proposals 1 and 2 require the affirmative vote of a "majority of the out-
standing voting securities" of the applicable Portfolio which, as defined
in the Investment Company Act of 1940, as amended ("1940 Act"), means the
lesser of (a) 67% of the Portfolio's Shares present at a meeting of its
shareholders if the owners of more than 50% of the Shares of the Portfolio
then outstanding are present in person or by proxy or (b) more than 50% of
the Portfolio's outstanding shares ("Majority Vote").
BACKGROUND ON PROPOSALS 1 AND 2
(PROPOSAL 1 TO BE VOTED ON BY SHAREHOLDERS OF LARGE CAPITALIZATION
VALUE EQUITY INVESTMENTS ONLY AND PROPOSAL 2 TO BE VOTED ON
BY SHAREHOLDERS OF SMALL CAPITALIZATION VALUE EQUITY INVESTMENTS ONLY)
Parametric currently serves as an investment adviser ("Adviser") to Large
Capitalization Value Equity Investments pursuant to an Advisory Agreement
dated March 3, 1994 between The Consulting Group (the Manager) and Para-
metric. NFJ currently serves as an Adviser to Small Capitalization Value
Equity Investments pursuant to an Advisory Agreement dated April 1, 1993
between The Consulting Group and NFJ (the current Advisory Agreements with
Parametric and NFJ hereinafter collectively referred to as "Current Advi-
sory Agreements.") Parametric and NFJ are each wholly owned subsidiaries
of PFAMCo, which is in turn, an indirect wholly owned subsidiary of Pa-
cific Mutual.
Parametric, NFJ, and others have entered into an agreement ("Consolidation
Agreement") with Thomson Advisory Group L.P. ("TAG") providing for the
consolidation of Parametric, NFJ, and certain other entities with TAG (the
"Consolidation"). As described in more detail below, the Consolidation
would result in the transfer of the current investment advisory businesses
of Parametric and NFJ to new general partnerships that are expected to be
called Parametric Portfolio Associates ("New Parametric") and NFJ Invest-
ment Group ("New NFJ"), respectively (although it is possible that these
names may change prior to closing of the Consolidation).
The Current Advisory Agreements each provide for their automatic termina-
tion in the event of an "assignment," as that term is defined in the 1940
Act, and the Consolidation may result in an assignment and resulting ter-
mination of the Current Advisory Agreements with Parametric and NFJ. Con-
sequently, Parametric and NFJ have proposed that The Consulting Group
enter into new Advisory Agreements for Large Capitalization Value Equity
Investments and Small Capitalization Value Equity Investments to take ef-
fect upon the closing of the Consolidation.
At a meeting held on September 1, 1994, after considering various factors
described below, the Trustees, including the Trustees who are not parties
to the Advisory Agreements or interested persons (as defined in the 1940
Act) of any such party (the "Independent Trustees"), unanimously approved
two proposed new Advisory Agreements (collectively referred to hereinafter
as the "New Advisory Agreements"), one between The Consulting Group and
New Parametric for Large Capitalization Value Equity Investments, and one
between The Consulting Group and New NFJ for Small Capitalization Value
Equity Investments. The form of the New Advisory Agreements is attached as
Exhibit A.
PFAMCo has advised the Board of Trustees that after the Consolidation, New
Parametric and New NFJ will each retain the services of their respective
advisory personnel and employees who currently provide services to Large
Capitalization Value Equity Investments and Small Capitalization Value Eq-
uity Investments. PFAMCo further advised the Trustees that, subject to ap-
proval of the New Advisory Agreements by shareholders, the Consolidation
is not expected to materially affect the level or quality of advisory ser-
vices provided to Large Capitalization Value Equity Investments and Small
Capitalization Value Equity Investments, and that the same investment man-
agement personnel who currently manage these Portfolios are expected to
continue to do so after the Consolidation. No change is anticipated in the
investment objectives and policies of these Portfolios.
THE CONSOLIDATION TRANSACTION
The Consolidation Agreement provides for the consolidation of the invest-
ment advisory and other businesses of Parametric, NFJ, and other subsid-
iaries of PFAMCo with TAG, which will change its name to PIMCO Advisors,
L.P. TAG and its affiliates provide investment advisory and related ser-
vices to a wide range of institutional and individual clients, including
mutual funds. As a result of the Consolidation, the current investment ad-
visory business of Parametric and NFJ would be transferred to separate
general partnerships that are expected to be called Parametric Portfolio
Associates and NFJ Investment Group, respectively (although it is possible
that these names will change prior to closing on the Consolidation). These
new general partnerships would be subsidiary partnerships of PIMCO Advi-
sors.
The general partner of PIMCO Advisors would be another partnership, to be
called PIMCO Partners, G.P. PFAMCo would indirectly hold a majority in-
terest in PIMCO Partners, G.P., and the remainder would be held indirectly
by a group comprised of the current Managing Directors of Pacific Invest-
ment Management Company ("PIMCO"), another subsidiary of PFAMCo. As a re-
sult of the Consolidation, Pacific Mutual and its affiliates would hold a
majority interest in PIMCO Advisors, New Parametric, and New NFJ, through
direct or indirect ownership of PIMCO Advisors.
Under the Consolidation, PIMCO Partners, G.P.'s power to conduct the busi-
ness of PIMCO Advisors will be delegated to two boards that will govern
PIMCO Advisors -- an Operating Board and an Equity Board. The Operating
Board will exercise substantially all of the governance powers of the gen-
eral partner and will delegate day-to-day operational issues to an Operat-
ing Committee. The Operating Board and Operating Committee cannot effect
certain transactions and other material matters without the prior consent
of the Equity Board. For purposes of governance of PIMCO Advisors, the Op-
erating Board and the Equity Board are intended to constitute the func-
tional and legal equivalent of a board of directors of PIMCO Advisors. Pa-
cific Mutual and its affiliates will hold a majority interest in PIMCO Ad-
visors, New Parametric and New NFJ after the Consolidation through its
indirect ownership of units of PIMCO Advisors.
The Consolidation Agreement provides for the discretionary award of op-
tions on units of PIMCO Advisors to provide incentives and rewards to key
management employees of PIMCO Advisors and its subsidiary partnerships.
The Consolidation Agreement contemplates that the Trust conform with the
provisions of Section 15(f) of the 1940 Act, which provides, in pertinent
part, that a fund's investment adviser (or its controlling person) may re-
ceive any amount or benefit in connection with its sale which results in
an assignment of an investment advisory contract if (1) for a period of
three years after the time of the event, 75% of the members of the fund's
board of directors are not "interested persons" (as defined in the 1940
Act) of the new or old investment adviser; and (2) there is no "unfair
burden" imposed on the fund as a result of the transaction.
The Board of Trustees currently conforms with these provisions, and is ex-
pected to continue to conform with these provisions for the required time
period. PFAMCo and the Consulting Group have committed to the Trust's
Board that there is no present intention to seek an increase in the
Trust's advisory or management fees with respect to the Portfolios for
which Parametric or NFJ serves as Adviser for a period of at least two
years following the Consolidation.
TAG and its affiliates provide investment advisory and related services to
a wide range of institutional and individual clients including mutual
funds. TAG is a Delaware limited partnership organized in 1987. TAG's out-
standing partnership units are traded on the New York Stock Exchange. As
of June 30, 1994, TAG managed approximately $9.4 billion in assets, prima-
rily through its Columbus Circle Investors division ("CCI").
Consummation of the Consolidation is contingent upon certain events, in-
cluding regulatory approvals and consents, approval by TAG unitholders,
and approval of new advisory contracts or consent by a substantial portion
of the advisory clients of TAG and PFAMCo and its subsidiaries, including
Parametric and NFJ.
See Exhibit A for additional information about the consolidation.
THE CURRENT AND NEW ADVISORY AGREEMENTS
The Current Advisory Agreement with Parametric was initially approved by
the Trustees on December 9, 1993 and by the shareholders of the Large Cap-
italization Value Equity Investments Portfolio on March 3, 1994, and was
last approved by the Trustees on September 1, 1994. The Current Advisory
Agreement with NFJ was initially approved by the Trustees on March 4, 1993
and by the shareholders of the Portfolio on June 1, 1993, and was last ap-
proved by the Trustees on September 1, 1994.
If the New Advisory Agreements are approved by shareholders, upon consum-
mation of the Consolidation, New Parametric would replace Parametric as
Adviser to Large Capitalization Value Equity Investments, and New NFJ
would replace NFJ as Adviser to Small Capitalization Value Equity Invest-
ments. THE TERMS AND CONDITIONS OF THE NEW ADVISORY AGREEMENTS ARE IDENTI-
CAL IN ALL MATERIAL RESPECTS TO THOSE OF THE CURRENT ADVISORY AGREEMENTS
WITH THE EXCEPTION OF THE IDENTITY OF THE ADVISER, AND THE EFFECTIVENESS
AND TERMINATION DATES.
Each of the New Advisory Agreements, like each of the Current Advisory
Agreements, provides that the Adviser is required to manage a portion of
the securities held by the Portfolio it serves, subject to the supervision
and stated direction of the Manager and ultimately the Board of Trustees
in accordance with the Portfolio's investment objective and policies, make
investment decisions for the Portfolio, and place orders to purchase and
sell securities on behalf of the Portfolio.
Each of the New Advisory Agreements and the Current Advisory Agreements
provide that the Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Manager or the Trust in
connection with any investment advisory services rendered under the agree-
ment, except, provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Advisor against any liability to the
Manager or the Trust or to holders of the Trust's shares representing in-
terests in the Portfolio to which the Adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or by reason of the Adviser's reck-
less disregard of its obligations and duties under the agreement.
Each of the New Advisory Agreements, like each of the Current Advisory
Agreements provides that it terminates automatically in the event of its
assignment. In addition, each of these agreements may be terminated by the
Manager at any time without penalty, upon written notice to the appropri-
ate Adviser and the Trust, by the Adviser upon 60 days' written notice to
the Manager and the Trust, and by the Trust at any time without penalty,
upon the vote of a majority of the Trust's Board of Trustees or a majority
of the outstanding voting securities of the Portfolio of the Trust to
which the agreement pertains, upon written notice to the appropriate Ad-
viser and the Manager.
Shareholders should refer to Exhibit B for the complete terms of the New
Advisory Agreements.
If the New Advisory Agreements are approved by the shareholders of Large
Capitalization Value Equity Investments or Small Capitalization Value Eq-
uity Investments, as appropriate, they will become effective upon consum-
mation of the Consolidation, and will remain in effect, unless earlier
terminated, for an initial two year term, subject to annual review and
continuation thereafter.
Parametric, NFJ, TAG, and the other parties to the Consolidation Agreement
may proceed with the Consolidation, even if the New Advisory Agreements
are not approved by shareholders. In the event that the shareholders of
Large Capitalization Value Equity Investments or Small Capitalization
Value Equity Investments do not approve the New Advisory Agreements and
the Consolidation is consummated, subject to the approval of the Securi-
ties and Exchange Commission if necessary, the Board of Trustees could
seek to obtain for Large Capitalization Value Equity Investments and Small
Capitalization Value Equity Investments interim advisory services either
from the current Adviser or from another advisory organization. Thereaf-
ter, the Board of Trustees would either negotiate a new advisory agreement
with an advisory organization recommended by the Consulting Group and ap-
proved by the Board or make other appropriate arrangements in either event
subject to approval by the shareholders of Large Capitalization Value Eq-
uity Investments or Small Capitalization Value Equity Investments, as ap-
propriate. In the event the Consolidation is not consummated, Parametric
would continue to serve as an Adviser of Large Capitalization Value Equity
Investments pursuant to the terms of the Current Advisory Agreement for
that Portfolio, and NFJ would continue to serve as an Adviser to Small
Capitalization Value Equity Investments pursuant to the Current Advisory
Agreement for that Portfolio.
ADVISORY FEES
The fees under the New Advisory Agreements are the same as the fees under
the Current Advisory Agreements. The New Advisory Agreement for Large Cap-
italization Value Equity Investments provides that The Consulting Group
(and not the Trust) will pay New Parametric a fee, payable monthly, at an
annual rate of .20% of the value of Large Capitalization Value Equity In-
vestments' average daily net assets on the first $300 million of assets
and 0.15% of the value of the Portfolio's average daily net assets there-
after, multiplied by a fraction, the numerator of which is the average
daily value of the net assets of the Portfolio allocated to New Parametric
and the denominator of which is the average daily net asset value of the
Portfolio. For the fiscal period ended August 31, 1994, total advisory
fees paid by The Consulting Group to Parametric aggregated $417,098 based
on average net assets for the fiscal period of $532,691,573. The New Advi-
sory Agreement for Small Capitalization Value Equity Investments with New
NFJ provides that The Consulting Group (and not the Trust) will pay New
NFJ a fee, payable monthly, at an annual rate equal to .30% of the value
of average daily net assets of Small Capitalization Value Equity Invest-
ments, multiplied by a fraction, the numerator of which is the average
daily value of the net assets of the Portfolio allocated to New NFJ and
the denominator of which is the average daily net asset value of the Port-
folio. For the fiscal year ended August 31, 1994 and for the period August
2, 1993 to August 31, 1993, total advisory fees paid by The Consulting
Group to NFJ under the Ccurrent Advisory Agreement aggregated $303,211
and $1,503, respectively.
MANAGEMENT FEES
The Consulting Group serves as Manager to the Trust pursuant to a Manage-
ment Agreement. Large Capitalization Value Equity Investments pays The
Consulting Group a management fee, payable monthly, at an annual rate of
.60% of the average daily net assets of that Portfolio, and Small Capital-
ization Value Equity Investments pays The Consulting Group a management
fee, payable monthly, at an annual rate of .60% of the average daily net
assets of that Portfolio. The Consulting Group, in turn, pays the Advisers
to the Portfolios the advisory fees described above out of The Consulting
Group's assets.
PARAMETRIC PORTFOLIO ASSOCIATES, INC.
Parametric, located at 7310 Columbia Center, 701 Fifth Avenue, Seattle,
Washington 98104-7090, provides investment management services to large
accounts, such as employee benefit plans, college endowments, and founda-
tions. Accounts managed by Parametric have combined assets, as of December
31, 1993, of approximately $1.4 billion. Parametric is also a subsidiary
of PFAMCo. See Exhibit C for a list of the directors and principal execu-
tive officers of Parametric and a table setting forth the registered in-
vestment companies for which Parametric serves as investment adviser, in-
cluding the fees payable by such investment companies and their approxi-
mate net assets. Parametric's audited balance sheet as of December 31,
1993 is attached as Exhibit D.
NFJ INVESTMENT GROUP, INC.
NFJ, located at 2121 San Jacinto, Suite 1440, Dallas, Texas 75201, pro-
vides investment management services to large accounts such as employee
benefit plans, college endowment funds, and foundations. Accounts managed
by NFJ had combined assets as of December 31, 1993 of approximately $965.9
million. NFJ is a subsidiary of PFAMCo, which is an indirect wholly owned
subsidiary of Pacific Mutual. See Exhibit E for a list of the directors
and principal executive officers of NFJ and a table setting forth the reg-
istered investment companies for which NFJ serves as investment adviser,
including the fees payable by such investment companies and their approxi-
mate net assets. NFJ's audited balance sheet as of December 31, 1993 is
attached as Exhibit F.
NEW PARAMETRIC AND NEW NFJ
New Parametric and New NFJ will each be a general partnership with two
partners. The supervisory partner for each will be PIMCO Advisors. The
managing partner for each will be Parametric Management, Inc. and NFJ Man-
agement, Inc., respectively, which will each be newly formed Delaware cor-
porations that are wholly owned by PIMCO Advisors. PIMCO Advisors will
hold 99.9% of the partnership interest of each of New NFJ and New Paramet-
ric.
The addresses of each of New Parametric and New NFJ (each a "New Portfolio
Manager") will be the same as the addresses of Parametric and NFJ, respec-
tively (each a "Current Portfolio Manager"). Under the Consolidation, the
day-to-day management of each New Portfolio Manager is entrusted to its
managing general partner, which will delegate authority over the business
and operations of such New Portfolio Manager to the New Portfolio Manag-
er's Managing Directors. The Managing Directors of each New Portfolio Man-
ager will be the same individuals who currently serve as Managing Direc-
tors of the applicable Current Portfolio Managers. Prior approval from
PIMCO Advisors will be necessary for certain extraordinary business trans-
actions, contractual arrangements, or other specified activities of each
New Portfolio Manager.
PROPOSAL 1: LARGE CAPITALIZATION VALUE EQUITY INVESTMENTS
The Board of Trustees has determined that, by approving the New Advisory
Agreement with New Parametric on behalf of Large Capitalization Value Eq-
uity Investments, the Portfolio can best assure itself that services cur-
rently provided by Parametric and its officers and employees will continue
to be provided after the Consolidation without interruption. The Board be-
lieves that, like the Current Advisory Agreement with Parametric, the New
Advisory Agreement with New Parametric will enable Large Capitalization
Value Equity Investments to obtain services of high quality at costs
deemed appropriate, reasonable, and in the best interests of the Portfolio
and its shareholders.
At a meeting on September 1, 1994, the Trustees considered information
with respect to whether the New Advisory Agreement with New Parametric was
in the best interests of Large Capitalization Value Equity Investments and
its shareholders. The Trustees considered, among other factors, represen-
tations by PFAMCo that the Consolidation would not materially affect the
investment advisory operations of Parametric or the level or quality of
advisory services provided to Large Capitalization Value Equity Invest-
ments; that, subject to Board and shareholder approval, the same personnel
at Parametric who currently provide services to Large Capitalization Value
Equity Investments are expected to continue to do so after the Consolida-
tion; that the advisory fee would not change as a result of the Consolida-
tion; and that Large Capitalization Value Equity Investments would be un-
affected in any other way by the Consolidation, including that the Portfo-
lio would not be subjected to any unfair burden as a result of the
transaction.
Based upon its review, the Board of Trustees concluded that the New Advi-
sory Agreement with New Parametric is reasonable, fair and in the best in-
terests of Large Capitalization Value Equity Investments and its share-
holders, and that the fees provided in the New Advisory Agreement with New
Parametric are fair and reasonable. In the Board's view, retaining New
Parametric to serve as Adviser of Large Capitalization Value Equity In-
vestments, under the terms of the New Advisory Agreement with New Paramet-
ric, after the Consolidation is desirable and in the best interests of the
Portfolio and its shareholders. Accordingly, after consideration of the
above factors, and such other factors and information as it deemed rele-
vant, the Board of Trustees, including all of the Independent Trustees,
unanimously approved the New Advisory Agreement with New Parametric and
voted to recommend its approval by Large Capitalization Value Equity In-
vestments' shareholders.
REQUIRED VOTE
Approval of the New Advisory Agreement requires a Majority Vote of the
outstanding shares of Large Capitalization Value Equity Investments.
THE TRUSTEES, INCLUDING ALL OF THE INDEPENDENT TRUSTEES, RECOMMEND THAT
THE SHAREHOLDERS OF LARGE CAPITALIZATION VALUE EQUITY INVESTMENTS VOTE
"FOR" THE NEW INVESTMENT ADVISORY AGREEMENT BETWEEN THE CONSULTING GROUP
AND NEW PARAMETRIC.
PROPOSAL 2: SMALL CAPITALIZATION VALUE EQUITY INVESTMENTS
The Board of Trustees has determined that, by approving the New Advisory
Agreement with New NFJ on behalf of Small Capitalization Value Equity In-
vestments, the Portfolio can best assure itself that services currently
provided by NFJ and their officers and employees will continue to be pro-
vided after the Consolidation without interruption. The Board believes
that, like the Current Advisory Agreements, the New Advisory Agreements
will enable Small Capitalization Value Equity Investments to obtain ser-
vices of high quality at costs deemed appropriate, reasonable, and in the
best interests of Small Capitalization Value Equity Investments and its
shareholders.
At a meeting on September 1, 1994, the Trustees considered information
with respect to whether the New Advisory Agreements with New NFJ were in
the best interests of Small Capitalization Value Equity Investments and
its shareholders. The Trustees considered, among other factors, represen-
tations by Pacific Mutual and PFAMCo that the Consolidation would not ma-
terially affect the investment advisory operations of NFJ or the level or
quality of advisory services provided to Small Capitalization Value Equity
Investments; that, subject to Board and shareholder approval, the same
personnel at NFJ who currently provide services to Small Capitalization
Value Equity Investments are expected to continue to do so after the Con-
solidation; that the advisory fees would not change as a result of the
Consolidation; and that Small Capitalization Value Equity Investments
would be unaffected in any other way by the Consolidation, including that
the Portfolio would not be subjected to any unfair burden as a result of
the transaction.
Based upon its review, the Board of Trustees concluded that the New Advi-
sory Agreement with New NFJ is reasonable, fair and in the best interests
of Small Capitalization Value Equity Investments and its shareholders, and
that the fees provided in the New Advisory Agreements with New NFJ are
fair and reasonable. In the Board's view, retaining New NFJ to serve as
Adviser of Small Capitalization Value Equity Investments, under the terms
of the New Advisory Agreement, after the Consolidation is desirable and in
the best interests of Small Capitalization Value Equity Investments and
its shareholders. Accordingly, after consideration of the above factors,
and such other factors and information as it deemed relevant, the Board of
Trustees, including all of the Independent Trustees, unanimously approved
the New Advisory Agreement and voted to recommend its approval by Small
Capitalization Value Equity Investments' shareholders.
REQUIRED VOTE
Approval of the New Advisory Agreement requires a Majority Vote of the
outstanding shares of Small Capitalization Value Equity Investments.
THE TRUSTEES, INCLUDING ALL OF THE INDEPENDENT TRUSTEES, RECOMMEND THAT
THE SHAREHOLDERS OF SMALL CAPITALIZATION VALUE EQUITY INVESTMENTS VOTE
"FOR" THE NEW ADVISORY AGREEMENT BETWEEN THE CONSULTING GROUP AND NEW NFJ.
ADDITIONAL INFORMATION
PORTFOLIO TRANSACTIONS AND BROKERAGE FEES
Portfolio securities transactions for each Portfolio are placed on behalf
of the Trust by its investment advisers, subject to the overall review of
the Investment Manager and the Board of Trustees. In selecting brokers or
dealers to execute portfolio transactions for a Portfolio, the Advisers
seek the best overall terms available. The Current and New Advisory Agree-
ments provide that, in assessing the best overall terms available for any
transaction, the Advisers consider the factors they deem relevant, includ-
ing the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer,
and the reasonableness of the commission, if any, for the specific trans-
action and on a continuing basis. In addition, the Advisory Agreements au-
thorize the Advisers, in selecting brokers or dealers to execute a partic-
ular transaction, and in evaluating the best overall terms available, to
consider the brokerage and research services provided to the Trust and/or
other accounts over which the Advisers or their affiliates exercise in-
vestment discretion. Fees under the Investment Management Agreement dated
July 30, 1993 between the Trust and the Investment Manager and the Advi-
sory Agreements are not reduced by reason of either Adviser's receiving
such brokerage and research services.
Although investment decisions for the Portfolios are made independently
from those of other accounts managed by the Advisers, investments of the
type that the Portfolios may make also may be made by those other ac-
counts. When a Portfolio and one or more other accounts managed by an Ad-
viser are prepared to invest in, or desire to dispose of, the same secu-
rity, available investments or opportunities for sales will be allocated
in a manner believed by the Adviser to be equitable to each. In some
cases, this procedure may adversely affect the size of the position ac-
quired for or disposed of by the Portfolio or the price paid or received
by the Portfolio.
To the extent consistent with applicable provision of the 1940 Act and the
rules and exemptions adopted by the Securities and Exchange Commission
under the 1940 Act, the Board of Trustees had determined that transactions
for the Trust may be executed through Smith Barney and other affiliated
broker-dealers if, in the judgment of the Adviser, the use of an affili-
ated broker-dealer is likely to result in price and execution at least as
favorable as those of other qualified broker-dealers, and if, in the
transaction, the affiliated broker-dealer charges the Fund a fair and rea-
sonable rate.
Neither of the Portfolios will purchase any security, including U.S. gov-
ernment securities, during the existence of any underwriting or selling
group relating to the security of which Smith Barney is a member, except
to the extent permitted by the SEC.
The Board periodically reviews the commissions paid by the Trust to deter-
mine if the commissions paid over representative periods of time were rea-
sonable in relation to the benefits inuring to the Trust. During the fis-
cal year ended August 31, 1994, the Portfolios incurred total brokerage
commissions on portfolio transactions of $3,674,520, of which $204,799, or
5.57% of the aggregate, was paid to Smith Barney. During the Portfolios' last
fiscal year, 7.40% of the Portfolios' aggregate dollar amount of transactions
involving the payment of commissions were effected through Smith Barney .
Such brokerage commissions were incurred with respect to each of the Port-
folios as follows:
<TABLE>
<CAPTION>
% OF
TOTAL
TRANSACTIONS
% OF TOTAL INVOLVING
COMMISSIONS COMMISSIONS
COMMISSIONS
TOTAL PAID TO PAID TO PAID TO
PORTFOLIO COMMISSIONS SMITH BARNEY SMITH BARNEY SMITH
BARNEY
<S> <C> <C> <C> <C>
Large Capitaliza-
tion Value Equity
Investments $2,649,739 $189,140 7.14% 8.65%
Small Capitaliza-
tion Value Equity
Investments $1,024,781 $15,659 1.53% 1.21%
</TABLE>
SUBMISSION OF SHAREHOLDER PROPOSALS
As a Massachusetts business trust, the Trust does not hold annual share-
holders' meetings. Shareholders wishing to submit proposals for inclusion
in a proxy statement for a subsequent meeting of shareholders must submit
their written proposals to the Secretary of the Trust at the address set
forth on the cover of this Proxy Statement.
SHAREHOLDERS' REQUEST FOR SPECIAL MEETING
Shareholders holding more than 10% of the Trust's outstanding voting secu-
rities (as defined in the 1940 Act) may require the calling of a meeting
of shareholders for the purposes of voting on the removal of any Trustee
of the Trust. Meetings of shareholders for any other purpose also shall be
called by the Trustees when requested in writing by shareholders holding
at least 10% of the shares then outstanding, or if the Trustees shall fail
to call or give notice of any meeting of shareholders for a period of 30
days after such application, then shareholders holding at least 10% of the
shares then outstanding may call and give notice of such meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
The Trustees do not intend to present any other business at the Meeting,
nor are they aware that any shareholder intends to do so. If, however, any
other matters are properly brought before the Meeting, the persons named
in the accompanying form of proxy will vote thereon in accordance with
their judgment.
September 29, 1994
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
EXHIBIT LIST
<TABLE>
<S> <C>
EXHIBIT A More information about the Consolidation.
EXHIBIT B Proposed Form of Investment Advisory Agreement.
EXHIBIT C Information about Parametric Portfolio
Associates, Inc. ("Parametric").
EXHIBIT D Audited balance sheet of Parametric as of
December 31, 1993.
EXHIBIT E Information about NFJ Investment Group, Inc.
("NFJ").
EXHIBIT F Audited balance sheet of NFJ as of
December 31, 1993.
</TABLE>
EXHIBIT A
MORE INFORMATION ABOUT THE CONSOLIDATION
The following is a discussion of more detailed information about the Con-
solidation for those shareholders seeking such information.
The Consolidation Agreement provides that the business of Parametric, NFJ,
and certain other subsidiaries of PFAMCo will be transferred to TAG in re-
turn for 24,575,000 newly issued units of partner interest, of which
400,000 will be units of general partner interest ("GP units") and
24,175,000 will be units of limited partner interest, divided into two
classes -- Class A and Class B. In connection with its assuming the role
of general partner of PIMCO Advisors, PIMCO Partners, G.P. also will ac-
quire common stock of TAG Inc., the current general partner of TAG, for
approximately $130 million. The current common stockholders of TAG Inc.
will retain economic interests in TAG Inc. through preferred stock repre-
senting approximately 34% of the Class A and Class B partnership units
owned by TAG Inc. Class A units will have the same rights as the currently
outstanding public units of TAG; Class B units will be subordinated to
Class A units with respect to certain distribution rights. In connection
with the consolidation and recapitalization of TAG Inc., the Board of Di-
rectors of TAG Inc. has approved a conversion ratio of 1 limited partner
unit and/or GP unit held by TAG Inc. for 1.4 Class B units. Effective Jan-
uary 1, 1998, or earlier in the event of a restructuring of PIMCO Advisors
that may be undertaken by PIMCO Partners, G.P. in connection with changes
in the tax status of PIMCO Advisors, it is anticipated that Class B units
will convert to Class A units. The average of the high and low prices for
TAG units quoted on the New York Stock Exchange on August 29, 1994 was
$40.1875.
Giving effect to the Consolidation, but prior to any secondary offering,
PIMCO Partners, G.P. will own approximately 60.5% of all outstanding units
of PIMCO Advisors. PFAMCo and its other affiliates will separately own ap-
proximately 7.4% of all outstanding units. TAG Inc. will own approximately
19.6% of all outstanding units, and the public will own approximately
12.2% of all outstanding units. Pacific Mutual and its affiliates would
hold a majority interest in PIMCO Advisors, New Parametric and New NFJ
through direct or indirect ownership of units of PIMCO Advisors.
In connection with the Consolidation, PIMCO Advisors will adopt a stock
option plan to provide incentives and rewards to key employees of PIMCO
Advisors, and its subsidiary partnerships, which may include officers and
directors of New Parametric and New NFJ. The aggregate number of Class B
units with respect to which options may be granted under the plan is
2,800,000 and the terms of the Consolidation Agreement provide for the
grant of options with respect to up to 2,675,000 units at the closing of
the Consolidation. Each subsidiary partnership of PIMCO Advisors will es-
tablish a profit sharing plan in which its Managing Directors and certain
designated employees may participate.
PIMCO Partners, L.P., a California limited partnership, will be the manag-
ing general partner of PIMCO Partners, G.P. All of the ownership interest
in PIMCO Partners, L.P. will be held directly or indirectly by the PIMCO
Managing Directors. PIMCO Partners, L.P. will have a profits interest of
approximately 37.3% in PIMCO Partners, G.P. As of the Consolidation, but
prior to any secondary offering of units that may be made at or about that
time, William H. Gross, a Managing Director of PIMCO, will hold approxi-
mately 41.9% of the ownership interests in PIMCO Partners, L.P. (repre-
senting an indirect economic interest in approximately 15.6% of the units
owned by PIMCO Partners, G.P., or 12.5% of the outstanding units of PIMCO
Advisors after the Consolidation). Under the terms of the Amended and Re-
stated Agreement of Limited Partnership of PIMCO Advisors under the Con-
solidation, the Chief Executive Officer of PIMCO Partners, L.P. will be a
member of the Equity Board of PIMCO Advisors, and PIMCO Partners, L.P.
will have the right to appoint two other members to the Equity Board,
which is described below.
Pursuant to a registration rights agreement among TAG Inc., certain cur-
rent stockholders of TAG Inc., certain individuals affiliated with TAG or
PFAMCo, PIMCO Partners, G.P., and PFAMCo, and certain affiliates of
PFAMCo, holders of rights may cause PIMCO Advisors to register Class A
units held by such individuals and entities for public sale under the Se-
curities Act of 1933 (the "Secondary Offering"). It is presently contem-
plated that approximately 4,000,000 Class A units may be registered and
sold in this manner contemporaneously with the closing of the Consolida-
tion. The terms of any secondary offering of units are subject to negotia-
tion among the parties and whether such offering will occur will depend on
many factors, including prevailing market conditions. It is not possible
to predict whether such an offering will occur. Depending on the number of
units sold, the secondary offering would impact the indirect interest of
PFAMCO in PIMCO Advisors and the secondary offering may change the rela-
tive percentage interests in PIMCO Partners, L.P. of the individual PIMCO
Managing Directors. Certain units received by the Managing Directors of
Parametric and NFJ will be effectively restricted as to sale or other dis-
position until January 1, 1998.
The Amended and Restated Partnership Agreement of PIMCO Advisors will pro-
vide that a person or group that owns more than 20% of the combined voting
power of the outstanding units of the partnership shall have the right to
vote not more than 20% of the outstanding units entitled to vote, and the
remaining units owned by such person or group shall have no voting rights
and shall not be counted for quorum or unitholder approval purposes. These
provisions do not apply to entities controlled by Pacific Mutual, PFAMCo,
or the PIMCO Managing Directors, to certain savings, profit-sharing, unit
or stock bonus and employee incentive or stock ownership plans established
by PIMCO Advisors or certain of its subsidiaries, or to other persons or
groups approved by PIMCO Partners, G.P. The intention of this provision
is to reduce the possibility that a future sale of units by a significant
holder of units would cause a "change in control" of the PIMCO Advisors
for purposes of the 1940 Act or Investment Advisers Act of 1940.
On September 8, 1994, TAG announced a 106% distribution on TAG's outstand-
ing units, payable on October 9, 1994 to unitholders of record as of the
close of business on October 1, 1994, with holders of limited partner
units receiving limited partner units and holders of general partner units
receiving general partner units. The effect of the unit distribution will
be to double approximately the number of TAG units outstanding, as well as
the gross number of TAG units issued in return for the PFAMCo businesses
in the Consolidation. However, the unit distribution will not have a mate-
rial impact on the relative percentage ownership interests of the parties
to the Consolidation as discussed herein.
PIMCO Partners, G.P., the general partner of PIMCO Advisors, will delegate
management and supervisory functions for PIMCO Advisors to an Operating
Board and an Equity Board. The Operating Board and Equity Board are in-
tended to constitute the functional and legal equivalent of a board of di-
rectors after the Consolidation. The Operating Board will exercise sub-
stantially all of the governance powers of the general partner except for
those powers specifically delegated to the Equity Board, and will delegate
day-to-day operational issues to the Operating Committee. The Equity Board
will have the authority to approve certain transactions and other material
matters involving PIMCO Advisors, including an amendment to the partner-
ship agreement of PIMCO Advisors or a subsidiary partnership, incurring
large amounts of debt or making material acquisitions or dispositions, is-
suing additional units, and others.
The Operating Board will initially be composed of 12 members as follows:
the Chief Executive Officer of New PIMCO, initially William S. Thompson,
Jr. (who will also serve as Chairperson of the Operating Board), six other
persons designated by the Managing Directors of New PIMCO (initially
William H. Gross, Brent R. Harris, Dean S. Meiling, James F. Muzzy,
William F. Podlich, III and William C. Powers), three persons designated
by the Managing Directors of the successor of Columbus Circle Investors
("New CCI"), (initially Irwin F. Smith, Donald A. Chiboucas and Daniel S.
Pickett), and one person selected by the vote of the successor of Cadence
Capital Management, Inc., New NFJ, and New Parametric, weighted by their
contribution to the income of PIMCO Advisors (initially David B. Breed).
The final initial member of the Operating Board shall be the Chief Execu-
tive Officer of the PIMCO Advisors, William D. Cvengros. Initially, the
members of the Operating Committee will be William D. Cvengros, William S.
Thompson and Irwin F. Smith. The Equity Board will initially be composed
of 12 members as follows: the Chairperson of the Operating Board (ini-
tially William S. Thompson), the Chief Executive Officer of PIMCO Advisors
(initially William D. Cvengros), three persons designated by PFAMCo (ini-
tially Walter B. Gerken, Thomas C. Sutton and Glenn S. Schafer), two per-
sons designated by PIMCO Partners, L.P. (initially William H. Gross and
William F. Podlich, III), two persons designated by the preferred stock-
holders of TAG Inc. (initially Irwin F. Smith and Donald K. Miller) and
three independent members designated by the other nine members of the Eq-
uity Board, initially Walter E. Auch, Sr., Donald R. Kurtz and a third
person to be selected. The Chairperson of the Equity Board will initially
be Walter B. Gerken.
Under the Consolidation, PIMCO Partners, G.P. will be given broad author-
ity to effect a restructuring of PIMCO Advisors to address certain tax
consequences associated with the potential loss of PIMCO Advisor's status
as a partnership for federal tax purposes. After any restructuring of
PIMCO Advisors, the members of the Operating Board (other than the Chief
Executive Officer of the partnership, who will serve ex officio) will be
selected by the advisory subsidiary partnerships based on their relative
contributions to the net income of the partnership, and the members of the
Equity Board (other than the Chairperson of the Operating Board and the
Chief Executive Officer of the partnership) will be selected by the exist-
ing members of the Equity Board in a manner reasonably determined to most
effectively represent the proportionate interests of all direct and indi-
rect beneficial holders of units, including public unitholders, with at
least three members of the Equity Board being independent.
The Amended and Restated Partnership Agreement of PIMCO Advisors provides
that PIMCO Partners, G.P. may choose the form and timing of any restruc-
turing of PIMCO Advisors. A restructuring may occur on or about the date
on which the partnership's exemption from corporate income tax expires,
which is expected to be December 31, 1997, or on such earlier or later
date as PIMCO Partners, G.P. may determine based on certain factors, in-
cluding certain tax considerations relating to PFAMCo.
EXHIBIT B
CONSULTING GROUP CAPITAL MARKETS FUNDS
FORM OF
INVESTMENT ADVISORY AGREEMENT
[DATE]
[Name and Address of Advisor]
DEAR SIRS:
Under an agreement (the "Management Agreement") between Consulting Group
Capital Markets Funds, a Massachusetts business trust (the "Trust"), and
Smith, Barney Advisers, Inc. (the "Manager"), the Manager serves as the
Trust's investment manager and has the responsibility of evaluating, rec-
ommending, supervising and compensating investment advisers to each series
of the Trust.
The Manager hereby confirms its agreement with [NAME OF ADVISER] (the "Ad-
visor") with respect to the Advisor's serving as an investment advisor of
[NAME OF PORTFOLIO] (the "Portfolio"), a series of the Trust, as follows:
SECTION 1. Investment Description; Appointment
(a) The Trust desires to employ the Portfolio's capital by investing and
reinvesting in investments of the kind and in accordance with the invest-
ment objectives, policies and limitations specified in its Master Trust
Agreement dated April 12, 1991, as amended from time to time (the "Trust
Agreement"), in the prospectus (the "Prospectus") and in the statement of
additional information (the "Statement of Additional Information") filed
with the Securities and Exchange Commission (the "SEC") as part of the
Trust's Registration Statement on Form N-1A, as amended from time to time
(the "Registration Statement"), and in the manner and to the extent as may
from time to time be approved in the manner set forth in the Trust Agree-
ment. Copies of the Trust's Prospectus, the Statement of Additional Infor-
mation and the Trust Agreement have been or will be submitted to the Advi-
sor.
(b) The Manager, with the approval of the Trust, hereby appoints the Ad-
visor to act as an investment advisor to the Portfolio for the periods and
on the terms set forth in this Agreement. The Advisor accepts such ap-
pointment and agrees to furnish the services herein set forth for the com-
pensation herein provided.
SECTION 2. Portfolio Management Duties
(a) Subject to the supervision of the Manager and the Trust's Board of
Trustees, the Advisor will (i) manage the portion of the Portfolio's as-
sets allocated to the Advisor upon the recommendation of the Manager and
the approval of the Board of Trustees ("Allocated Assets") in accordance
with the Portfolio's investment objectives, policies and limitations as
stated in the Trust's Prospectus and Statement of Additional Information;
(ii) make investment decisions with respect to Allocated Assets; and (iii)
place orders to purchase and sell securities and, where appropriate, com-
modity futures contracts with respect to Allocated Assets.
(b) The Advisor will keep the Trust and the Manager informed of develop-
ments materially affecting the Portfolio and shall, on the Advisor's own
initiative, furnish to the Trust and the Manager from time to time what-
ever information the Advisor believes appropriate for this purpose.
(c) The Advisor agrees that it will comply with the Investment Company
Act of 1940, as amended (the "Act"), and all rules and regulations there-
under, all applicable federal and state laws and regulations and with any
applicable procedures adopted by the Trust's Board of Trustees.
SECTION 3. Brokerage
(a) The Advisor agrees that it will place orders pursuant to its invest-
ment determinations with respect to Allocated Assets either directly with
the issuer or with brokers or dealers selected by it in accordance with
the standards specified in paragraphs (b) and (c) of this Section 3. The
Advisor may place orders with respect to Allocated Assets with Smith Bar-
ney Inc. or its affiliates in accordance with Section 11(a) of the Securi-
ties Exchange Act of 1934 and Rule 11a2-2(T) thereunder, Section 17(e) of
the Act and Rule 17e-1 thereunder and other applicable laws and regula-
tions.
(b) In placing orders with brokers and dealers, the Advisor will use its
best efforts to seek the best overall terms available. In assessing the
best overall terms available for any portfolio transaction, the Advisor
will consider all factors it deems relevant including, but not limited to,
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and
the reasonableness of any commission for the specific transaction and on a
continuing basis.
(c) In selecting brokers or dealers to execute a particular transaction
and in evaluating the best overall terms available, the Advisor may con-
sider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the
Trust and/or other accounts over which the Advisor or an affiliate exer-
cise investment discretion.
SECTION 4. Information Provided to the Manager and the Trust
(a) The Advisor agrees that it will make available to the Manager and the
Trust promptly upon their request copies of all of its investment records
and ledgers with respect to the Portfolio to assist the Manager and the
Trust in monitoring compliance with the Act and the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), as well as other applicable
laws. The Advisor will furnish the Trust's Board of Trustees with respect
to the Portfolio such periodic and special reports as the Manager and the
Board of Trustees may reasonably request.
(b) The Advisor agrees that it will immediately notify the Manager and
the Trust in the event that the Advisor or any of its affiliates: (i) be-
comes subject to a statutory disqualification that prevents the Advisor
from serving as investment advisor pursuant to this Agreement; or (ii) is
or expects to become the subject of an administrative proceeding or en-
forcement action by the SEC or other regulatory authority. The Advisor has
provided the information about itself set forth in the Registration State-
ment and has reviewed the description of its operations, duties and re-
sponsibilities as stated therein and acknowledges that they are true and
correct and contain no material misstatement or omission, and it further
agrees to notify the Manager and the Trust's Administrator immediately of
any material fact known to the Advisor respecting or relating to the Advi-
sor that is not contained in the Prospectus or Statement of Additional In-
formation of the Trust, or any amendment or supplement thereto, or any
statement contained therein that becomes untrue in any material respect.
(c) The Advisor represents that it is an investment adviser registered
under the Advisers Act and other applicable laws and that the statements
contained in the Advisor's registration under the Advisers Act on Form
ADV, as of the date hereof, are true and correct and do not omit to state
any material fact required to be stated therein or necessary in order to
make the statement therein not misleading. The Advisor agrees to maintain
the completeness and accuracy of its registration on Form ADV in accor-
dance with all legal requirements relating to that Form. The Advisor ac-
knowledges that it is an "investment adviser" to the Portfolio within the
meaning of the Act and the Advisers Act.
SECTION 5. Books and Records
In compliance with the requirements of Rule 31a-3 under the Act, the Advi-
sor hereby agrees that all records that it maintains for the Trust are the
property of the Trust and further agrees to surrender promptly to the
Trust copies of any such records upon the Trust's request. The Advisor
further agrees to preserve for the periods prescribed by Rule 31a-2 under
the Act the records required to be maintained by Rule 31a-1 under the Act
and to preserve the records required by Rule 204-2 under the Advisers Act
for the period specified in that Rule.
SECTION 6. Compensation
(a) In consideration of services rendered pursuant to this Agreement, the
Manager will pay the Advisor a fee that is computed daily and paid monthly
at the annual rate of * of the average daily net assets of the Portfolio,
multiplied by a fraction, the numerator of which is the average daily
value of Allocated Assets and the denominator of which is the average
daily value of the Portfolio's total assets (the "Portfolio Advisory
Fee"). The Portfolio Advisory Fee payable to the Advisor shall be reduced
in the same proportion as the Portfolio Advisory Fee bears to the Manag-
er's fee from the Portfolio to the extent, in any fiscal year of the Port-
folio, the aggregate expenses of the Portfolio (including fees pursuant to
this Agreement and the Trust's Administration Agreement with the Adminis-
trator, but excluding interest, taxes, brokerage fees, and, if permitted
by state securities commissions, extraordinary expenses) exceed the ex-
pense limitation of any state having jurisdiction over the Portfolio.
(b) The Portfolio Advisory Fee for the period from the date this Agree-
ment becomes effective to the end of the month during which this Agreement
becomes effective shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to
the full monthly period and shall be payable upon the date of termination
of this Agreement.
(c) For the purpose of determining fees payable to the Advisor, the value
of the Portfolio's net assets shall be computed at the time and in the
manner specified in the Trust's Prospectus and/or the Statement of Addi-
tional Information.
SECTION 7. Costs and Expenses
During the term of this Agreement, the Advisor will pay all expenses in-
curred by it and its staff in connection with the performance of its ser-
vices under this Agreement, including the payment of salaries of all of-
ficers and employees who are employed by it and the Trust.
SECTION 8. Standard of Care
The Advisor shall exercise its best judgment in rendering the services
provided by it under this Agreement. The Advisor shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Manager or the Trust in connection with the matter to which this Agreement
relates, provided any liability to the Manager or the Trust or to holders
of the Trust's shares representing interests in the Portfolio to which the
Advisor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
by reason of the Advisor's reckless disregard of its obligations and du-
ties under this Agreement.
* Parametric Portfolio Associates: 0.20% of the first $300 million, 0.15%
thereafter.
NFJ Investment Group: 0.30%.
SECTION 9. Services to Other Companies or Accounts
(a) It is understood that the services of the Advisor are not exclusive,
and nothing in this Agreement shall prevent the Advisor from providing
similar services to other investment companies (whether or not their in-
vestment objectives and policies are similar to those of the Trust) or
from engaging in other activities; provided, however, that the Advisor
agrees that neither it nor any of its affiliated persons (as defined in
the Act) shall accept retention as investment adviser, investment manager
or similar service provider during the pendency of this Agreement and for
the period of one (1) year after the termination of this Agreement with or
for the benefit of any investment company registered under the Act that
seeks as a primary market for its shares asset allocation programs similar
in nature or market to Consulting Group Personalized Investment Advisory
Service.
(b) The proviso set forth in paragraph (a) of this Section 9 shall not
apply to the continuation of any contractual relationship to which the Ad-
visor is a party that is in effect on the date of this Agreement.
(c) When the Advisor recommends the purchase or sale of a security for
other investment companies and other clients, and at the same time the Ad-
visor recommends the purchase or sale of the same security for the Trust,
it is understood that in light of its fiduciary duty to the Trust such
transactions will be executed on a basis that is fair and equitable to the
Trust.
(d) The Trust and the Manager understand and acknowledge that the persons
employed by the Advisor to assist in the performance of its duties under
this Agreement will not devote their full time to that service; nothing
contained in this Agreement will be deemed to limit or restrict the right
of the Advisor or any affiliate of the Advisor to engage in and devote
time and attention to other businesses or to render services of whatever
kind or nature, subject to the proviso set forth in paragraph (a) of this
Section 9.
SECTION 10. Duration and Termination
(a) This Agreement shall become effective on the later of the closing
date of the Consolidation Agreement entered into by the Advisor and others
with Thompson Advisory Group L.P., or the date it is approved by share-
holders of the Portfolio, and shall continue for two years from that date,
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by
(i) the Trust's Board of Trustees or (ii) a vote of a majority of the
Portfolio's outstanding voting securities (as defined in the Act), pro-
vided that the continuance is also approved by a majority of the Trustees
who are not "interested persons" (as defined in the Act) of the Trust, by
vote cast in person at a meeting called for the purpose of voting on such
approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated (i)
by the Manager at any time without penalty, upon notice to the Advisor and
the Trust, (ii) at any time without penalty by the Trust, upon the vote of
a majority of the Trust's Trustees or by vote of the majority of the
Trust's outstanding voting securities, upon notice to the Manager and the
Trust or (iii) by the Advisor at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust.
(c) This Agreement will terminate automatically in the event of its as-
signment (as defined in the Act and in rules adopted under the Act).
SECTION 11. Amendments
No provision of this Agreement may be changed, waived, discharged or ter-
minated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination
is sought, and no amendment of this Agreement shall be effective until ap-
proved in accordance with applicable law.
SECTION 12. Miscellaneous
(a) This Agreement shall be governed by the laws of the State of New
York, provided that nothing herein shall be construed in a manner incon-
sistent with the 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 thereof or otherwise af-
fect their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agree-
ment shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Advisor as an
agent of the Trust or the Manager.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by sign-
ing and returning to us the enclosed copy of this Agreement.
SMITH, BARNEY ADVISERS, INC.
By:
Name:
Title:
Accepted:
[Name of Advisor]
By:
Name:
Title:
EXHIBIT C
INFORMATION ABOUT PARAMETRIC
PORTFOLIO ASSOCIATES, INC.
("Parametric")
DIRECTORS AND EXECUTIVE OFFICERS
Parametric's directors and principal executive officers and their princi-
pal occupations are shown below. Unless otherwise indicated, the business
address of each such person is 701 Fifth Avenue, Seattle, Washington
98104.
<TABLE>
<CAPTION>
POSITION WITH PARAMETRIC
NAME AND PRINCIPAL OCCUPATION(S)
<S> <C>
William D. Cvengros ............ Chairman of the Board and Director,
700 Newport Center Drive Parametric, PFAMCo, PMRealty
Advisors,
Newport Beach, CA 92660 Inc.; Director, Vice Chairman and
Chief
Investment Officer, Pacific Mutual
Life
Insurance Company; Chairman of the
Board
and Director, Pacific Investment
Management Company, Cadence Capital
Management Corporation; Director,
President, and Chief Executive
Office,
NJF Investment Group, Inc.; Chairman
of
the Board of Trustees and Trustee,
PFAMCo
Funds; Director, Mutual Service
Corporation, Pacific Equities
Network,
Pacific U.K. Limited, Blairlogie
Capital
Management Limited, Pacific
Corinthian
Life Insurance Company; Director,
Furon
Company.
William E. Cornelius, Jr. ...... Director and managing Director,
Parametric.
Mark W. England-Markun Director, Managing Director and Chief
Executive Officer, Parametric.
Steven T. Bailey ............... Director, Parametric; Managing
Director,
700 Newport Center Drive PFAMCo; President, PFAMCo Funds;
Newport Beach, CA 92660 Director, PFAMCo U.K. Limited,
PMRealty
Advisors, Inc., Cadence Capital
Management Corporation, NFJ
Investment
Group, Inc., Blairlogie Capital
Management
Limited.
Audrey L. Milfs ................ Director and Secretary, Parametric;
700 Newport Center Drive Director, PFAMCo U.K. Limited,
Blairlogie
Newport Beach, CA 92660 Capital Management Limited; Vice
President and Secretary, Pacific
Mutual
Life Insurance Company; Director and
Secretary, Cadence Capital
Management
Corporation, PFAMCo, Pacific
Financial
Holding Company, NJF Investment
Group,
Inc., PMRealty Advisors, Inc., PM
Group
Life Insurance Company, Pacific
Mutual
Realty Finance, Inc., Alliance
Health Plan
Network, Inc., Group Holding
Company,
Employee Benefits America
Administration
Corporation; Secretary, PFAMCo
Funds,
Pacific Investment Administrative
Services Co., Pacific Mutual Realty
Investors, Inc., Pacific Corinthian
Life
Insurance Company, Stocksplus
Manage-
ment, Inc., Mutual Service
Corporation,
United Planners' Group, Inc.,
Pacific
Select Fund, Pacific Equities
Network,
Pacific Investment Management
Company.
</TABLE>
OTHER INVESTMENT COMPANY CLIENTS
Parametric also acts as investment adviser to the registered investment
companies listed below. The following table sets forth the name of each
such investment company, its approximate net assets at June 30, 1994, and
the annual advisory fee charged by Parametric (as a percentage of average
daily net assets).
<TABLE>
<CAPTION>
APPROXIMATE
NAME OF NET ASSETS
INVESTMENT COMPANY AT JUNE 30, 1994 ANNUAL ADVISORY FEES
<S> <C> <C>
PFAMCo Funds
Enhanced Equity Portfolio $59,231,000 .45% of average daily net
assets
International Equity Portfolio 9,425,000 .45% of average daily net
assets
Balanced Portfolio 78,049,000 .45% of average daily net
assets
(Equity Segment) allocated to Equity
Segment of
Balanced Portfolio
Pacific Corinthian Variable Fund 4,930,535 .50% of average daily net
assets
Balanced Portfolio (Common of Common Stock Segment up
to
Stock Segment) $25 million; .375% of
average
daily net assets of Common
Stock
Segment on next $25
million; and
.30% of average daily net
assets
of Common Stock Segment
thereafter.
</TABLE>
EXHIBIT D
[Logo]
INDEPENDENT AUDITORS' REPORT
To the Stockholder and Board of Directors of
Parametric Portfolio Associates Inc.:
We have audited the accompanying statement of financial position of Para-
metric Portfolio Associates, Inc. as of December 31, 1993. This financial
statement is the responsibility of the Company's management. Our responsi-
bility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of financial posi-
tion is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the state-
ment of financial position. An audit also includes assessing the account-
ing principles used and significant estimates made by management, as well
as evaluating the overall statement of financial position presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of financial position presents fairly, in
all material respects, the financial position of Parametric Portfolio As-
sociates, Inc. as of December 31, 1993, in conformity with generally ac-
cepted accounting principles.
[INSERT SIG.]
February 25, 1994, except
for Note 7, as to which the
date is July 11, 1994
[Logo]
PARAMETRIC PORTFOLIO ASSOCIATES, INC.
STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 1993
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash
$1,383,077
Accounts receivable
1,189,810
Prepaid expenses
9,171
Total current assets
2,582,058
Tax receivable from affiliate
335,546
Property, net
128,874
Other asset
1,598,542
TOTAL ASSETS
$4,645,020
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accrued liabilities
$572,824
Payable to affiliates
452,932
Total current liabilities
1,025,756
Other liabilities
2,723,845
TOTAL LIABILITIES
3,749,601
STOCKHOLDER'S EQUITY:
Common stock, $1 par value; 1,000,000 shares authorized; 1,000
shares issued and outstanding
1,000
Paid-in capital
1,199,000
Accumulated deficit
(304,581)
TOTAL STOCKHOLDER'S EQUITY
895,419
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$4,645,020
</TABLE>
See Notes to Statement of Financial Position
PARAMETRIC PORTFOLIO ASSOCIATES, INC.
NOTES TO STATEMENT OF FINANCIAL POSITION
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Parametric Portfolio Associates, Inc. ("Parametric") is a wholly-owned,
third- tier subsidiary of Pacific Mutual Life Insurance Company ("PM").
The intermediate companies are Pacific Financial Holding Company and Pa-
cific Financial Asset Management Corporation ("PFAMCo"). Parametric pro-
vides investment management services to its clients using quantitative
analysis techniques.
2. PROPERTY
Property is recorded at cost and is depreciated using the straight-line
method over the estimated useful lives of the individual assets.
The components of property as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Furniture and equipment $235,010
Computer equipment 108,120
Total property 343,130
Less accumulated depreciation (214,256)
Property, net $128,874
</TABLE>
3. INCOME TAXES
Parametric's operations are included in the consolidated Federal income
tax return of PM. Parametric files a separate Washington state excise tax
return. Parametric is allocated Federal income tax expense based princi-
pally on the effect of including its operations in the consolidated provi-
sion. Such expense includes an allocation for deferred taxes resulting
principally from differences between book and tax accounting for a long-
term compensation plan, depreciation and state excise tax. Included in
payable to affiliates on the accompanying statement of financial position
is a current tax liability of $379,963 as of December 31, 1993. Tax re-
ceivable from affiliate on the accompanying statement of financial posi-
tion includes deferred taxes resulting primarily from a long-term compen-
sation plan.
4. PROFT-SHARING AND COMPENSATION PLANS
Parmetric has a nonqualified profit-sharing plan (the "Profit-Sharing
Plan") covering certain key employees. The Profit-Sharing Plan provides
for awards based on the profitability of Parametric, as defined in the em-
ployment agreements. All profit-sharing awards fully vest at the end of
each year and are payable by March 15 of the following year.
Parametric has a long-term compensation plan granted to certain key em-
ployees in connection with programs designed to retain their employment.
Compensation under this plan is based upon profitability. Upon certain
criteria being met, as defined in the agreement, eligible employees will
be paid out over a seven-year period. Eligible employees may leave Para-
metric's employment and collect such amounts over the period, subject to
not-to-compete terms. Other assets and other liabilities included on the
accompanying statement of financial position primarily relate to deferred
compensation expense and accrued compensation. No payments have been made
under this plan.
5. LEASES
Parametric leases office space and certain office equipment under operat-
ing lease agreements expiring at various dates through 1999. Future aggre-
gate minimum rent payments on noncancelable leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31:
<S> <C>
1994 $115,478
1995 115,478
1996 115,478
1997 115,478
1998 115,478
Thereafter 57,739
Total $635,129
</TABLE>
6. RELATED PARTY TRANSACTIONS
PM provides certain support services to Parametric and the related liabil-
ity is included in payable to affiliates on the accompanying statement of
financial position. Services provided include employee participation in a
pension plan maintained by PM.
7. SUBSEQUENT EVENT
On July 11, 1994, PFAMCo and Thompson Advisory Group L.P., a Delaware lim-
ited partnership with units traded on the New York Stock Exchange, entered
into a definitive agreement and plan of consolidation to merge the two en-
tities into a newly capitalized partnership named PIMCO Advisors L.P.
PFAMCo and certain subsidiaries, including Parametric, will contribute
substantially all of their operations into PIMCO Advisors L.P. in exchange
for the issuance of newly issued partnership units. The transaction is
subject to approval by a majority of the publicly traded limited partner-
ship units, as well as certain regulatory and other approvals.
EXHIBIT E
INFORMATION ABOUT NFJ INVESTMENT GROUP, INC.
("NFJ")
DIRECTORS AND EXECUTIVE OFFICERS
NFJ's directors and principal executive officers and their principal occu-
pations are shown below. Unless otherwise indicated, the business address
of each such person is 2121 San Jacinto, Suite 1440, Dallas, Texas 75201.
<TABLE>
<CAPTION>
POSITION WITH NFJ
NAME AND PRINCIPAL OCCUPATION(S)
<S> <C>
William D. Cvengros ............ Director, President and Chief
Executive
700 Newport Center Drive Officer, NFJ; see Exhibit C for
other
Newport Beach, CA 92660 occupations.
Benno J. Fischer Director and Managing Director, NFJ.
John L. Johnson Director and Managing Director, NFJ.
Jack C. Najork Director and Managing Director, NFJ.
Steven T. Bailey ............... Director, NFJ; see Exhibit C for
other
700 Newport Center Drive occupations
Newport Beach, CA 92660
Audrey L. Milfs ................ Director and Secretary, NFJ; see
Exhibit
700 Newport Center Drive C for other occupations.
Newport Beach, CA 92660
Thomas C. Sutton ............... Director, NFJ; President, Director
and
700 Newport Center Drive Chief Executive Officer, Pacific
Newport Beach, CA 92660 Financial Holding Company, Group
Holding
Company; Chairman, Chief Executive
Officer and Director, Pacific Mutual
Life
Insurance Company, Pacific
Corinthian
Life Insurance Company; Chairman of
the
Board of Trustees, President and
Trustee,
Pacific Select Fund; Chairman and
Director, PFAMCo, PM Group Life
Insurance,
Inc.; Director, United Planners'
Group,
Inc., Cadence Capital Management
Corporation, Pacific Investment
Manage-
ment Company, PMRealty Advisors,
Inc.,
Pacific Equities Network, Mutual
Service
Corporation, Blairlogie Capital
Manage-
ment Limited, Alliance Health Plan
Network, Inc., Employee Benefits
America
Administration Corporation, Pacific
Mutual Realty Finance, Inc., Newhall
Land
& Farming, Health Insurance
Association
of America.
</TABLE>
OTHER INVESTMENT COMPANY CLIENTS
NFJ also acts as investment adviser to the registered investment companies
listed below. The following table sets forth the name of each such invest-
ment company, its approximate net assets at June 30, 1994 and the annual
advisory fee charged by NFJ (as a percentage of average daily net assets).
<TABLE>
<CAPTION>
APPROXIMATE
NAME OF NET ASSETS
INVESTMENT COMPANY AT JUNE 30, 1994 ANNUAL ADVISORY FEES
<S> <C> <C>
PFAMCo Funds
Equity Income Portfolio $81,283,326 .45% of average daily net
assets
Diversified Low P/E Portfolio 17,509,835 .45% of average daily net
assets
Small Cap Value Portfolio 33,168,117 .60% of average daily net
assets
RSI Value Equity Fund 32,914,383 .60% of 1st $10 million;
.50%
Equity Income Portfolio of next $10 million; .40% of next
$20 million; .30% of next
$20
million; .20% of next $40
million; .15% of next $50
million; .10% over $150
million
thereafter.
Pacific Corinthian Variable Fund
Diversified Low P/E Series 13,718 .45% of total assets
</TABLE>
EXHIBIT F
[Logo]
INDEPENDENT AUDITORS' REPORT
To the Stockholder and Board of Directors of
NFJ Investment Group, Inc.:
We have audited the accompanying statement of financial position of NFJ
Investment Group, Inc. as of December 31, 1993. This financial statement
is the responsibility of the Company's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of financial posi-
tion is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the state-
ment of financial position. An audit also includes assessing the account-
ing principles used and significant estimates made by management, as well
as evaluating the overall statement of financial position presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of financial position presents fairly, in
all material respects, the financial position of NFJ Investment Group,
Inc. as of December 31, 1993, in conformity with generally accepted ac-
counting principles.
[INSERT SIG.]
February 25, 1994, except
for Note 7, as to which the
date is July 11, 1994
[Logo]
NFJ INVESTMENT GROUP, INC.
STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 1993
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash
$476,308
Accounts receivable
1,125,005
Prepaid expenses
5,233
Total current assets
1,606,546
Property, net
77,955
TOTAL ASSETS
$1,684,501
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accrued liabilities
$455,257
Payable to affiliates, net
88,257
Total current liabilities
543,514
Other liabilities
104,148
TOTAL LIABILITIES
647,662
STOCKHOLDER'S EQUITY:
Common stock, no par value; 25,000 shares authorized;
5,000 shares issued and outstanding
50,000
Paid-in capital
820,000
Retained earnings
166,839
TOTAL STOCKHOLDER'S EQUITY
1,036,839
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$1,684,501
</TABLE>
See Notes to Statement of Financial Position
NFJ INVESTMENT GROUP, INC.
NOTES TO STATEMENT OF FINANCIAL POSITION
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
NFJ Investment Group, Inc. ("NFJ") is a wholly-owned, third-tier subsid-
iary of Pacific Mutual Life Insurance Company ("PM"). The intermediate
companies are Pacific Financial Holding Company and Pacific Financial
Asset Management Corporation ("PFAMCo"). NFJ provides investment manage-
ment services to its clients using value-oriented stock management tech-
niques.
2. PROPERTY
Property is recorded at cost and is depreciated using the straight-line
method over the estimated useful lives of the individual assets.
The components of property as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Furniture and equipment $92,551
Computer equipment 80,163
Total property 172,714
Less accumulated depreciation (94,759)
Property, net $77,955
</TABLE>
3. INCOME TAXES
NFJ's operations are included in the consolidated Federal income tax re-
turn of PM. NFJ files a separate Texas state excise tax return. NFJ is al-
located Federal income tax expense based principally on the effect of in-
cluding its operations in the consolidated provision. Such expense con-
sists primarily of current taxes. Included in payable to affiliates, net,
on the accompanying statement of financial position are net tax liabili-
ties of $67,299 as of December 31, 1993.
4. PROFT-SHARING PLAN AND LONG-TERM INCENTIVE PLAN
NFJ has a nonqualified profit-sharing plan (the "Profit-Sharing Plan")
covering certain key employees ("Key Employees") and other employees. The
Profit-Sharing Plan provides for awards based on the profitability of NFJ,
as defined in the employment agreements. All profit-sharing awards fully
vest at the end of each year and are payable by March 15 of the following
year.
In addition, Key Employees participate in a Long-Term Incentive Plan that
provides compensation under the Profit-Sharing Plan for a specified period
of time subsequent to their termination of employment. Compensation under
this plan is determined based upon the profitability of NFJ in future
years and will be expensed as incurred. The plan requires, among other
things, that Key Employees comply with a covenant not-to-compete with NFJ.
5. LEASES
NFJ leases office space and certain office equipment under operating lease
agreements expiring at various dates through 1999. Future aggregate mini-
mum rent payments on noncancelable leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31:
<S> <C>
1994 $56,760
1995 56,760
1996 56,760
1997 58,281
1998 58,188
Thereafter 14,694
Total $301,443
</TABLE>
6. RELATED PARTY TRANSACTIONS
PM provides certain support services to NFJ and the related liability is
included in payable to affiliates, net, on the accompanying statement of
financial position. Services provided include employee participation in a
pension plan maintained by PM.
7. SUBSEQUENT EVENT
On July 11, 1994, PFAMCo and Thompson Advisory Group L.P., a Delaware lim-
ited partnership with units traded on the New York Stock Exchange, entered
into a definitive agreement and plan of consolidation to merge the two en-
tities into a newly capitalized partnership named PIMCO Advisors L.P.
PFAMCo and certain subsidiaries, including NFJ, will contribute substan-
tially all of their operations into PIMCO Advisors L.P. in exchange for
the issuance of newly issued partnership units. The transaction is subject
to approval by a majority of the publicly traded limited partnership
units, as well as certain regulatory and other approvals.
This proxy, if properly executed, will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSAL(S) LISTED BELOW. Please refer to the Proxy Statement for a
discussion of the Proposals. Please indicate your vote by an "X" in the
appropriate box below.
1. To approve for Large Capitalization FOR * AGAINST * ABSTAIN *
Value Equity Investments a new
investment advisory agreement with .
Parametric Portfolio Associates.
(Large Capitalization Value Equity
Investments only)
2. To approve for Small Capitalization FOR * AGAINST * ABSTAIN *
Value Equity Investments a new
investment advisory agreement
with NFJ Investment Group.
(Small Capitalization Value
Equity Investments only)
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..............................................................................
..............................................................................
.....
Consulting Group Capital Markets Funds (the "Trust") - Large Capitalization
Value Equity Investments
Special Meeting of Shareholders on October 31, 1994
The undersigned holder of shares of the above named portfolio (the
"Portfolio"), of Consulting Group Capital Markets Funds (the "Trust"), hereby
appoints Heath B. McLendon, Leonard Reinhart, Christina T. Sydor and Lee D.
Augsburger as attorneys and proxies for the undersigned, with full powers of
substitution and revocation, to represent the undersigned and to vote on
behalf of the undersigned all shares of the Portfolio that the undersigned is
entitled to vote at the meeting of shareholders of the Trust to be held at the
offices of the Trust, Two World Trade Center, New York, New York at 10:00 a.m.
on the date indicated above and any adjournments thereof (the "Meeting"). The
undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement, and hereby instructs said attorneys and proxies to vote said shares
as indicated hereon. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the Meeting. A majority
of the proxies present and acting at the Meeting in person or by substitute
(or, if only one shall be so present, then that one) shall have and may
exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy. If joint
owners, EITHER may sign this Proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer, please give your full
title.
DATE: ________________________________
________________________________
________________________________
Signature(s) (Title(s), if applicable)
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..............................................................................
..............................................................................
.....
Consulting Group Capital Markets Funds (the "Trust") - Small Capitalization
Value Equity Investments
Special Meeting of Shareholders on October 31, 1994
The undersigned holder of shares of the above named portfolio (the
"Portfolio"), of Consulting Group Capital Markets Funds (the "Trust"), hereby
appoints Heath B. McLendon, Leonard Reinhart, Christina T. Sydor and Lee D.
Augsburger as attorneys and proxies for the undersigned, with full powers of
substitution and revocation, to represent the undersigned and to vote on
behalf of the undersigned all shares of the Portfolio that the undersigned is
entitled to vote at the meeting of shareholders of the Trust to be held at the
offices of the Trust, Two World Trade Center, New York, New York at 10:00 a.m.
on the date indicated above and any adjournments thereof (the "Meeting"). The
undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement, and hereby instructs said attorneys and proxies to vote said shares
as indicated hereon. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the Meeting. A majority
of the proxies present and acting at the Meeting in person or by substitute
(or, if only one shall be so present, then that one) shall have and may
exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy. If joint
owners, EITHER may sign this Proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer, please give your full
title.
DATE: ________________________________
________________________________
________________________________
Signature(s) (Title(s), if applicable)
shared/sharsn2/TRAK/proxy/3-94crd4.doc
