<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
SEC FILE NUMBER 811-07384
Filed By Registrant [X]
Filed By Party Other Than Registrant [ ]
Check Appropriate Box
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Name of Registrant: Nicholas-Applegate Institutional Funds
Name of Person Filing Proxy Statement: Charles H. Field, Assistant Secretary
Payment of Filing Fee
[X] No fee required
<PAGE>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
November 27, 2000
Dear Fellow Shareholder:
On behalf of the Board of Trustees of the Nicholas-Applegate Institutional
Funds (the "Trust"), I am pleased to invite you to a special meeting of the
shareholders of the Trust to be held at 10:00 a.m., San Diego time, on
January 12, 2001, at 600 West Broadway, San Diego, California 92101.
As discussed in more detail in the enclosed Proxy Statement,
Nicholas-Applegate Capital Management ("Nicholas-Applegate"), Allianz of
America, Inc. ("Allianz of America") and certain other affiliated parties
entered into a Merger Agreement pursuant to which Allianz of America will
acquire all of the partnership interests in Nicholas-Applegate (the
"Transaction"). Allianz of America is a subsidiary of Allianz AG, a leading
global financial services company. At the meeting, shareholders will be asked to
approve the following proposals:
- Approval of a new investment advisory agreement between each series of the
Trust and Nicholas-Applegate. The new investment advisory agreement
provides that following the Transaction, Nicholas-Applegate will continue
to provide investment advisory services to each series of the Trust (each,
a "Fund") on the same terms and for the same compensation under which it
currently operates.
- Approval of a new subadvisory agreement between Nicholas-Applegate and
Criterion Investment Management LLC ("Criterion") for the Short
Intermediate Fund and the High Quality Bond Fund. The new subadvisory
agreement provides that following the Transaction, Criterion will continue
to provide subadvisory services to the two Funds on the same terms and
with the same compensation under which they currently operate.
Your vote is important.
After reviewing these proposals, your Board of Trustees unanimously voted to
approve them and to recommend approval by shareholders, as more fully described
in the accompanying Proxy Statement. Now it is your turn to review the proposals
and vote. For more information about the issues requiring your vote, please
refer to the accompanying Proxy Statement.
No matter how many shares you own, your timely vote is important. Even if
you plan to attend the meeting, please complete, sign, date and mail the
enclosed proxy card(s) promptly in order to avoid the expense of additional
mailings or having our proxy solicitor, DF King & Co., Inc. ("DF King"),
telephone you. If you have any questions regarding the proxy statement, please
call DF King at 1-800-207-3159.
Thank you in advance for your participation in this important event.
Sincerely,
/s/ ARTHUR E. NICHOLAS
Arthur E. Nicholas
Chairman of the Board
<PAGE>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
<TABLE>
<S> <C>
Nicholas-Applegate Large Cap Growth Fund Nicholas-Applegate Mini Cap Growth Fund
Nicholas-Applegate Mid Cap Growth Fund Nicholas-Applegate Convertible Fund
Nicholas-Applegate Small Cap Growth Fund Nicholas-Applegate Short Intermediate Fund
Nicholas-Applegate Value Fund Nicholas-Applegate International Core Growth
Fund
Nicholas-Applegate High Quality Bond Fund Nicholas-Applegate Global Technology Fund
Nicholas-Applegate High Yield Bond Fund Nicholas-Applegate Global Health Care Fund
Nicholas-Applegate Worldwide Growth Fund Nicholas-Applegate Global Growth & Income Fund
Nicholas-Applegate International Small Cap Nicholas-Applegate Latin America Fund
Growth Fund Nicholas-Applegate Pacific Rim Fund
Nicholas-Applegate Global Blue Chip Fund
Nicholas-Applegate Emerging Countries Fund
</TABLE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR 10:00 A.M. (SAN DIEGO TIME), JANUARY 12, 2001
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
This is the formal agenda for the special shareholder meeting of the Trust.
It tells you the matters on which you will be asked to vote and the time and
place of the meeting, in case you want to attend in person. Unless otherwise
noted, you will be asked to vote on the following proposals.
1. FOR SHAREHOLDERS OF EACH FUND: A proposal to approve a new investment
advisory agreement between each Fund and Nicholas-Applegate, the Trust's
investment adviser. This new investment advisory agreement will take effect only
if the proposed acquisition of Nicholas-Applegate by Allianz of America is
consummated.
2. FOR SHAREHOLDERS OF SHORT INTERMEDIATE AND HIGH QUALITY BOND FUNDS ONLY:
A proposal to approve a new subadvisory agreement between Nicholas-Applegate and
Criterion for the two Funds. This new subadvisory agreement will take effect
only if the proposed acquisition of Nicholas-Applegate by Allianz of America is
consummated.
3. To consider any other business that may properly come before the
meeting.
YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF ALL THE PROPOSALS.
APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT AND THE NEW SUBADVISORY
AGREEMENT IS REQUIRED BECAUSE OF THE CHANGE IN CONTROL OF NICHOLAS-APPLEGATE.
APPROVAL OF THE PROPOSALS WILL NOT INCREASE THE INVESTMENT ADVISORY FEE PAYABLE
BY ANY FUND OR OTHERWISE CHANGE THE SUBSTANTIVE TERMS OF THE EXISTING
AGREEMENTS.
Shareholders of record as of the close of business on November 10, 2000 are
entitled to vote at the meeting and any related follow-up meetings.
By Order of the Board of Trustees,
/s/ E. BLAKE MOORE, JR.
E. Blake Moore, Jr., Secretary
San Diego, California
November 30, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN
THE ENCLOSED PROXY.
<PAGE>
PROXY STATEMENT
OF
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
SPECIAL MEETING OF SHAREHOLDERS
This Proxy Statement contains the information you should know before voting
on the proposals summarized below.
THE TRUST WILL FURNISH WITHOUT CHARGE A COPY OF ITS MOST RECENT ANNUAL REPORT
AND ANY MORE RECENT SEMIANNUAL REPORT TO ANY SHAREHOLDER UPON REQUEST.
SHAREHOLDERS WHO WANT TO OBTAIN A COPY OF THE TRUST'S REPORTS SHOULD DIRECT ALL
REQUESTS TO THE ATTENTION OF THE TRUST, AT THE ADDRESS LISTED ABOVE, OR STATE
STREET BANK, THE TRUST'S TRANSFER AGENT, AT 1-800-551-8643.
INTRODUCTION
This Proxy Statement is being used by the Board of Trustees to solicit
proxies to be voted at a special meeting of shareholders of the Trust. The
special meeting is expected to be held at the offices of Nicholas-Applegate, 600
West Broadway, San Diego, California, at 10:00 a.m., San Diego time on
January 12, 2001, and at any adjournments of the meeting to a later date, for
the purposes as set forth in the accompanying notice of special meeting of
shareholders.
This Proxy Statement and the enclosed proxy card are being mailed to
shareholders on or about November 30, 2000. The Annual Report for the Trust for
its most recently completed fiscal year was previously mailed to shareholders.
The special shareholder meeting is being called to consider, among other
things, proposals related to the acquisition of all of the partnership interests
in Nicholas-Applegate by Allianz of America (the "Transaction"). If Proposal 1,
regarding the approval of the proposed advisory agreement (as discussed below),
is adopted by the Funds and the Transaction is consummated, Nicholas-Applegate
will continue as the investment adviser to each Fund. If Proposal 2, regarding
the approval of the proposed subadvisory agreement (as discussed below), is
adopted by the Short Intermediate and High Quality Bond Funds, Criterion will
continue as the subadviser to these two Funds. The Transaction and the terms of
the proposed advisory agreement (the "Proposed Advisory Agreement") and the
proposed subadvisory agreement (the "Proposed Subadvisory Agreement") are
discussed below.
WHO IS ELIGIBLE TO VOTE
Shareholders of record as of the close of business on November 10, 2000 (the
"Record Date") are entitled to vote on all of the business at the special
shareholder meeting and any adjournments thereof. Each share is entitled to one
vote. Shares represented by properly executed proxies, unless revoked before or
at the meeting, will be voted according to the shareholder's instructions. If
you sign a proxy, but do not fill in a vote, your shares will be voted to
approve the proposals. If any other business comes before the special
shareholder meeting, your shares will be voted at the discretion of the persons
named as proxies.
<PAGE>
As of the Record Date the Funds had the following shares outstanding:
<TABLE>
<CAPTION>
NAME OF FUND SHARES OUTSTANDING
------------ ------------------
<S> <C>
Large Cap Growth............................................ 3,290,866.5720
Mid Cap Growth.............................................. 6,066,578.0430
Small Cap Growth............................................ 11,383,589.7650
Mini Cap Growth............................................. 2,617,975.0000
Value....................................................... 1,967,966.3450
Convertible................................................. 4,592,728.3080
Worldwide Growth............................................ 4,771,513.5300
International Core Growth................................... 11,166,814.1090
International Small Cap Growth.............................. 6,711,874.5420
Global Blue Chip............................................ 740,407.7090
Global Growth & Income...................................... 228,451.2530
Global Technology........................................... 2,420,643.8880
Global Health Care.......................................... 3,988,665.8200
Emerging Countries.......................................... 15,701,551.3070
Pacific Rim................................................. 109,478.7660
Latin America............................................... 257,621.1880
Short Intermediate.......................................... 1,662,886.1080
High Quality Bond........................................... 2,637,202.6970
High Yield Bond............................................. 1,933,825.3350
</TABLE>
On the Record Date, the following shareholders owned more than 5% of the
outstanding shares of a Fund:
<TABLE>
<CAPTION>
SHARES OWNED % OF FUND
-------------- ---------
<S> <C> <C>
LARGE CAP GROWTH FUND
Fidelity Investments FBO Certain Employee Benefit Plans... 944,077.264 28.69
CNA Trust Corporation Trustee FBO Fund Advisor............ 828,148.97 25.17
Bidwell & Company......................................... 177,496,1610 5.39
San Diego Museum of Art Endowment Fund.................... 170,256.4440 5.17
University of Dallas...................................... 164,955.0630 5.01
MID CAP GROWTH FUND
Consumers Energy Co. Employees Savings & Incentive Plan... 2,688,320.9480 44.31
Pacificorp Veba Trust..................................... 762,233.6970 12.56
Mac & Co.................................................. 313,104.5980 5.16
SMALL CAP GROWTH FUND
Northern Trust Company Custodian FBO Advocate............. 2,883,517.7480 25.33
KPMG Peat Marwick......................................... 2,083,722.5490 18.30
Consumers Energy Co. Employees Savings & Incentive Plan... 709,417.6700 6.23
Northern Trust Co. Custodian FBO Ford Family Foundation... 632,761.9070 5.56
MINI CAP GROWTH FUND
Charles Schwab & Co....................................... 906,100.7590 34.61
The Lynde & Harry Bradley Foundation, Inc................. 402,628.0520 15.38
Northern Trust Co. Custodian FBO Ford Family Foundation... 385,796.1020 14.74
Arthur E. Nicholas........................................ 137,807.7770 5.26
VALUE FUND
The Investment Committee FBO Short Brothers Pension
Scheme.................................................. 555,252.0500 28.21
CNA Trust Corporation Trustee FBO Fund Advisor............ 374,112.816 19.01
Pension Fund Trust Co. Trustee FBO Bombardier Trust
(Canada)................................................ 346,249.2940 17.59
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED % OF FUND
-------------- ---------
<S> <C> <C>
Baker Botts LLP........................................... 208,379.8740 10.59
Key Trust Co. Trustee FBO Bombardier Trust (US)........... 176,875.8210 8.99
CONVERTIBLE FUND
Northern Trust Co. Trustee FBO Motion Picture Industry.... 1,294,439.9190 28.18
Austin Fire Fighters Relief & Retirement Fund............. 816,912.0330 17.79
Northern Trust Trustee FBO Screen Actors Guild............ 591,265.8910 12.87
Directors Guild of America Producer Health Plan........... 338,287.2620 7.37
WORLDWIDE GROWTH FUND
The Investment Committee Trustee FBO Short Brothers
Pension
Scheme.................................................. 1,887,936.7050 39.57
Pension Fund Trust Co. Trustee FBO Bombardier Trust
(Canada)................................................ 1,177,356.8370 24.68
Key Trust Company Trustee FBO Bombardier Trust (US)....... 601,463.2210 12.61
Royal Trust Co. Trustee FBO Foundation J Armand Bombardier
Trust................................................... 315,560.9710 6.61
City of Pointe-Claire Pension Plan........................ 270,925.7860 5.68
INTERNATIONAL CORE GROWTH FUND
Chase Manhattan Bank Trustee FBO Avon Products Inc. &
Subsidiaries Master Retirement Trust.................... 774,417.2580 6.93
Bankers Trust Co Trustee FBO Super Value Inc. 401(k)
Trust................................................... 695,404.6000 6.23
State Street Bank & Trust Co. Trustee FBO Health Partners
401(k).................................................. 615,081.7720 5.51
Jim Goad Trustee FBO Les Schwab Profit Sharing Retirement
Trust................................................... 610,500.6110 5.47
INTERNATIONAL SMALL CAP GROWTH FUND
First Tennessee Bank NA Reinvest Account.................. 604,107.6860 9.00
The University of North Carolina at Chapel Hill Foundation
Investment Fund, Inc.................................... 564,249.4970 8.41
University of British Columbia Endowment Fund............. 479,183.2000 7.14
Lor Pooled Investment Partnership......................... 471,490.4910 7.02
Austin fire Fighters Relief & Retirement Fund............. 388,616.0130 5.79
US Bank National Association Custodian FBO Medtronic, Inc.
Retirement Plan......................................... 356,463.8780 5.31
Northern Trust Custodian FBO Christel Dehaan Trust........ 351,281.1500 5.23
GLOBAL BLUE CHIP FUND
Arthur E. Nicholas........................................ 205,838.0390 27.80
City National Bank Trustee FBO Nicholas-Applegate 401(k)
Profit Sharing Plan..................................... 97,744.8010 13.20
Bidwell & Company......................................... 91,584.6180 12.37
Sherryl A. Nicholas Trustee FBO Sherryl A. Nicholas
Revocable Trust......................................... 69,021.4990 9.32
Solvay Co................................................. 50,708.2270 6.85
GLOBAL GROWTH & INCOME FUND
Arthur E. Nicholas........................................ 94,669.1620 41.44
Sherryl A. Nicholas Trustee FBO Sherryl A Nicholas
Revocable Trust......................................... 80,656.6610 35.31
Casten Family Foundation, Inc. Charitable Foundation...... 17,487.1340 7.65
GLOBAL TECHNOLOGY FUND
Wake Forest University.................................... 222,865.7500 9.21
Clarence L Elder & Barbara K Elder........................ 151,531.2380 6.26
GLOBAL HEALTHCARE FUND
The Investment Committee Trustee FBO Short Brothers
Pension
Scheme.................................................. 561,255.3040 14.07
Wake Forest University.................................... 386,529.3950 9.69
Pension Fund Trust Co. Trustee Bombardier Trust
(Canada)................................................ 350,095.7380 8.78
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED % OF FUND
-------------- ---------
<S> <C> <C>
PACIFIC RIM FUND
Arthur E. Nicholas........................................ 91,752.1410 83.81
LATIN AMERICA FUND
Arthur E. Nicholas........................................ 241,216.5060 93.63
EMERGING COUNTRIES FUND
Lauer & Co C/O The Glenmede Trust Co...................... 3,467,927.7870 22.09
Blue Cross & Blue Shield of Florida, Inc.................. 3,322,836.8020 21.16
University of Notre Dame.................................. 1,916,084.3330 12.20
Northern Trust Co. Trustee FBO Knight-Ridder Master
Retirement Trust........................................ 787,555.8150 5.02
HIGH YIELD BOND FUND
Austin Fire Fighters Relief & Retirement Fund............. 778,505.6000 40.26
Sherryl A. Nicholas Trustee FBO Sherryl A. Nicholas
Revocable Trust......................................... 480,328.3200 24.84
Strafe & Co. FAO Wuesthoff Memorial Hospital Funded
Depreciation Plan....................................... 299,304.9200 15.48
Wuesthoff Memorial Hospital Pension Plan Master Trust..... 103,995.7980 5.38
SHORT INTERMEDIATE FUND
Indiana State Council of Carpenters Health & Welfare
Fund.................................................... 789,992.1430 47.51
Community Hospital Foundation............................. 336,236.8240 20.22
State Street Bank & Trust Co. Custodian FBO Leslie G
McCraw Jr............................................... 166,459.0170 10.01
</TABLE>
The following chart summarizes the Proposals on which the shareholders of
each Fund will be asked to vote:
<TABLE>
<CAPTION>
APPROVAL OF APPROVAL OF
PROPOSAL 1 PROPOSAL 2
FUNDS ADVISORY AGREEMENT SUBADVISORY AGREEMENT
----- ------------------ ---------------------
<S> <C> <C>
Large Cap Growth........................................ X
Mid Cap Growth.......................................... X
Small Cap Growth........................................ X
Mini Cap Growth......................................... X
Value................................................... X
Convertible............................................. X
Worldwide Growth........................................ X
International Core Growth............................... X
International Small Cap Growth.......................... X
Global Blue Chip........................................ X
Global Growth & Income.................................. X
Global Technology....................................... X
Global Health Care...................................... X
Pacific Rim............................................. X
Latin America........................................... X
Emerging Countries...................................... X
High Yield Bond......................................... X
Short Intermediate...................................... X X
High Quality Bond....................................... X X
</TABLE>
<PAGE>
DESCRIPTION OF THE TRANSACTION
Nicholas-Applegate Capital Management Holdings LP ("NACM Holdings LP") is
the general partner and Nicholas-Applegate Capital Management Global Holding Co.
LP ("Global Holding LP") is a limited partner of Nicholas-Applegate. Their
combined interest comprises 100% ownership of Nicholas-Applegate. On
October 17, 2000, Nicholas-Applegate, NACM Holdings LP and Global Holding, and
certain of their affiliates and Allianz of America and a subsidiary thereof
entered into a Merger Agreement (the "Merger Agreement") pursuant to which
Allianz of America will acquire Nicholas-Applegate. As a result of the
Transaction, Nicholas-Applegate will become an indirect wholly owned subsidiary
of Allianz of America. The total consideration consists of an initial payment of
$980 million and contingent payments of up to approximately $1.6 billion based
upon achievement of certain revenue growth targets. The parties expect to
complete the Transaction by the end of the first quarter of 2001, although there
is no assurance that the Transaction will be completed.
Nicholas-Applegate serves as investment adviser to the Funds.
Nicholas-Applegate will undergo a change of control as a result of the
consummation of the Transaction, resulting in the automatic termination of the
existing advisory agreement with respect to the Funds, and the existing
subadvisory agreement with respect to the Short Intermediate and High Quality
Bond Funds. Following completion of the Transaction, it is expected that
Nicholas-Applegate and Criterion will continue to serve as investment adviser
and/or sub-adviser, as the case may be. Therefore, in connection with the
Transaction and as required by the Investment Company Act of 1940, as amended
(the "1940 Act"), shareholders of each Fund are being asked in Proposal 1 to
approve the Proposed Advisory Agreement between the Trust, on behalf of each
Fund, and Nicholas-Applegate that is substantially identical to the existing
advisory agreement for such Fund (the "Existing Advisory Agreement"). Likewise,
shareholders of the Short Intermediate Fund and the High Quality Bond Fund for
which Nicholas-Applegate has retained Criterion as sub-adviser are being asked
in Proposal 2 to approve the Proposed Subadvisory Agreement that is
substantially identical to the existing subadvisory agreement for such Funds
(the "Existing Subadvisory Agreement"). If the Transaction is not completed for
any reason, the Existing Advisory Agreement and Existing Subadvisory Agreement
will remain in effect.
Completion of the Transaction is subject to a number of conditions,
including, among others, (i) achievement by Nicholas-Applegate of client
consents equal to not less than 80% of the revenue run-rate as of October 14,
2000; and (ii) the receipt of certain regulatory approvals. Nicholas-Applegate
has agreed to use its reasonable best efforts to obtain, prior to completion of
the Transaction, the approval of the Proposed Advisory Agreement by the
shareholders of each Fund. In the event shareholders of a Fund do not approve
the Proposed Advisory Agreement and the Transaction is completed, the Board of
Trustees of the Trust will consider appropriate action as explained more fully
under "Factors Considered by the Trustees" below.
Arthur E. Nicholas, John J.P. McDonnell, E. Blake Moore, Jr., C. William
Maher and Charles H. Field serve as Chairman, President, Secretary, Treasurer,
and Assistant Secretary, respectively, of the Trust and are also partners of
Global Holding and employees of Nicholas-Applegate. Mr. Nicholas is the Managing
Partner of Nicholas-Applegate, Mr. McDonnell the Chief Operating Officer,
Mr. Moore the General Counsel, Mr. Maher the Chief Financial Officer, and
Mr. Field the Deputy General Counsel. They will receive a portion of the merger
consideration in exchange for their interest as partners in Global Holding and
/or NACM Holdings LP, as the case may be. As a result of the direct and indirect
interests in the Transaction and in Nicholas-Applegate and its affiliates, as
well as the employment arrangements with Nicholas-Applegate, each of these
persons may be deemed to have a substantial interest in shareholder approval of
the matters set forth in this Proxy Statement.
For additional information concerning affiliations and certain other matters
pertaining to Nicholas-Applegate, see APPENDIX A.
POST-TRANSACTION STRUCTURE AND OPERATIONS
Upon completion of the Transaction, Allianz of America will control
Nicholas-Applegate and its affiliates. Allianz of America is a holding company
that owns several insurance and financial service companies and is a wholly
owned subsidiary of Allianz AG. Allianz of America will control Nicholas-
<PAGE>
Applegate through its controlling interest in MacIntosh LLC, the entity which
will own Nicholas-Applegate and all of its affiliates following the merger.
Operationally, Nicholas-Applegate is expected to become a unit of Allianz
Asset Management ("AAM"), the division of Allianz AG that coordinates its global
asset management activities. Nicholas-Applegate and its affiliates are currently
expected to continue to operate under their existing names. A representative of
AAM assured the Board of Trustees that Nicholas-Applegate would maintain its
operational autonomy and continuity of management. The Board is confident that
Allianz of America is committed to the people and process that have led to
Nicholas-Applegate's success over the years. Accordingly, the Transaction should
have no immediate impact on the management services that Nicholas-Applegate
currently provides, and the Funds should continue to receive the same high
quality of service after the Transaction.
Arthur E. Nicholas, a Trustee and Chairman of the Board of the Trust, and
the Managing Partner of Nicholas-Applegate, John J.P. McDonnell, President of
the Trust, and Chief Operating Officer of Nicholas-Applegate, and Catherine
Somhegyi, Chief Investment Officer of Nicholas-Applegate, will continue with
Nicholas-Applegate in their respective managerial roles: Mr. Nicholas will
continue to direct the operations of Nicholas-Applegate as Chief Executive
Officer, Mr. McDonnell as Chief Operating Officer and Ms. Somhegyi as Chief
Investment Officer. As part of the Transaction, Mr. Nicholas, Mr. McDonnell and
Ms. Somhegyi have entered into employment agreements, effective upon
consummation of the Transaction, for a term of 5 years. In addition,
Nicholas-Applegate has entered into employment agreements, to become effective
upon the consummation of the Transaction, with 31 other key employees of
Nicholas-Applegate and will provide retention and incentive arrangements for a
number of the employees of Nicholas-Applegate, including the three officers
named above. Each of the above named persons would also have a role with AAM
through serving on various AAM executive committees.
No change in any Fund's portfolio manager(s) or portfolio management teams
is anticipated to occur in connection with the Transaction. Nicholas-Applegate
has entered into new employment agreements and has agreed to provide certain
additional financial incentives to certain Nicholas-Applegate personnel in order
that there be no change in the quality of services provided to shareholders of
the Funds, or in the key personnel providing those services, in connection with
the Transaction. However, there can be no assurance that any particular
Nicholas-Applegate employee will choose to remain employed by
Nicholas-Applegate.
DESCRIPTION OF ALLIANZ AND ITS AFFILIATES
Allianz AG, the parent of Allianz of America, is a publicly traded German
Aktiengesellschaft (a German publicly traded company) which, together with its
subsidiaries, is one of the world's leading financial services companies (the
"Allianz Group"). The Allianz Group is a leading provider of financial services
and is represented in 77 countries worldwide through subsidiaries, branch and
representative offices, and other affiliated entities. The Allianz Group
currently has assets under management of approximately $650 billion, and in its
last fiscal year wrote approximately $50 billion in gross insurance premiums.
After completion of the Transaction, Allianz AG and its subsidiaries will have
approximately $690 billion in assets under management. Allianz AG's address is:
Koeniginstrasse 28, D-80802, Munich, Germany.
Significant institutional shareholders of Allianz AG currently include,
among others, Dresdner Bank AG, Deutsche Bank AG, Munich Re, and
HypoVereinsbank. The affiliates of these entities, including Bankers Trust
Company, BT Alex. Brown Incorporated, Deutsche Bank Securities, Inc. and
Dresdner Kleinwort Benson North America LLC, may be considered "Affiliated
Brokers". Once the Transaction is completed, absent an exemption from the
Securities and Exchange Commission or other relief, each Fund would generally be
precluded from effecting principal transactions with any Affiliated Broker, and
its ability to purchase securities from underwriting syndicates that include an
Affiliated Broker would be subject to restrictions. Nicholas-Applegate does not
believe that applicable restrictions on transactions with the Affiliated Broker
described above will materially adversely affect its ability,
<PAGE>
post-closing, to provide services to the Funds, the Funds' ability to take
advantage of market opportunities, or any Fund's overall performance.
ANTICIPATED BENEFITS OF THE TRANSACTION
Nicholas-Applegate believes that the Transaction and the resulting
affiliation with the Allianz Group will benefit Nicholas-Applegate and the Funds
in a number of ways, including the following:
- Expanded product offerings.
- Solidifying Nicholas-Applegate's position as a global company in an
increasingly global industry.
- Greater access to resources to retain its information edge and to provide
for continued innovation.
- Additional opportunities for Nicholas-Applegate's employees, with the
benefits of being part of a larger, financially stronger company.
- Allianz's commitment to its asset management business as a key goal of its
business plan ensures Nicholas-Applegate will continue to expand its
business, attract more assets, and maintain the high level of services
provided to the Funds.
PROPOSAL 1
APPROVAL OF A NEW ADVISORY AGREEMENT
SUMMARY
Nicholas-Applegate has served as investment adviser for the Trust on behalf
of each of the Funds, since their respective inceptions. Nicholas-Applegate, a
registered investment adviser under the Investment Advisers Act of 1940, is
located at 600 West Broadway, San Diego, California 92101.
At a meeting of the Board of Trustees held on November 15, 2000, the
Trustees, including all of the Trustees who are not "interested persons" of the
Trust, Nicholas-Applegate or the Allianz Group, unanimously approved that it was
in the best interest of shareholders, and voted to recommend that the
shareholders of each Fund approve, a proposal to adopt the Proposed Advisory
Agreement with Nicholas-Applegate effective upon consummation of the
Transaction.
Shareholders of each Fund are being asked to approve the Proposed Advisory
Agreement with Nicholas-Applegate. The consummation of the Transaction will
constitute an "assignment" (as defined in the 1940 Act) of each Fund's Existing
Advisory Agreement with Nicholas-Applegate. As required by the 1940 Act, the
Existing Advisory Agreement provides for its automatic termination in the event
of an assignment. Accordingly, the Existing Advisory Agreement will terminate
upon the consummation of the Transaction. This Proposed Advisory Agreement is
being proposed to enable Nicholas-Applegate to continue to manage the Funds. The
dates that the Existing Advisory Agreements for the Funds were last submitted
for shareholder approval were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER
FUNDS CONTRACT DATE APPROVAL DATE PURPOSE
----- --------------- --------------- ----------------
<S> <C> <C> <C>
Mid Cap Growth, Small Cap Growth, Large Cap
Growth, Emerging Countries, International
Core Growth, Value, Worldwide Growth,
Convertible, High Yield Bond, High
Quality Bond and International Small Cap
Growth................................... May 7, 1999 July 24, 1998 Reorganization
Mini Cap Growth, Global Blue Chip, Global
Growth & Income, Global Technology,
Pacific Rim, Latin America and Short
Intermediate............................. May 7, 1999 May 7, 1999 Reorganization
Global Health Care......................... August 31, 1999 August 31, 1999 Initial Approval
</TABLE>
<PAGE>
TERMS OF PROPOSED AND EXISTING ADVISORY AGREEMENTS
The terms of each Trust's Proposed Advisory Agreement are substantively
identical to the terms of that Fund's Existing Advisory Agreement. The stated
investment advisory fees to be paid by the Funds are identical under the
Proposed Advisory Agreement and the Existing Advisory Agreement. The following
summary of the Proposed Advisory Agreement is qualified by reference to the
representative form of Proposed Advisory Agreement attached to this Proxy
Statement as EXHIBIT I.
DESCRIPTION OF THE PROPOSED ADVISORY AGREEMENT
The Proposed Advisory Agreement provides that, subject to the general
supervision of the Trustees, Nicholas-Applegate shall provide a continuous
investment program for each of the Funds and determine what securities and other
investments will be purchased, retained or sold by the Funds. During the term of
the Proposed Advisory Agreement, Nicholas-Applegate will pay all expenses
incurred by it and its staff for its activities in connection with their duties
under the Proposed Advisory Agreement. Under the Proposed Advisory Agreement,
Nicholas-Applegate is required to provide such services in accordance with each
Fund's investment objectives, investment policies and investment restrictions as
stated in the Trust's registration statement filed with the Securities and
Exchange Commission, as supplemented from time to time. The services of
Nicholas-Applegate to the Funds will not be exclusive under the terms of the
Proposed Advisory Agreement and Nicholas-Applegate will be free to, and will,
render services to others.
The Trust has also entered into an administration agreement with
Nicholas-Applegate pursuant to which the Trust authorizes Nicholas-Applegate to
provide certain administration, operational and legal services that
Nicholas-Applegate is not required to provide under the Existing and Proposed
Advisory Agreements. Under the administration agreement, Nicholas-Applegate is
reimbursed for the allocable portion of its costs of such services. The
allocable portion of such costs is based upon the approximate time worked by
Nicholas-Applegate's employees rendering such services for the Funds as a
percentage of the total hours worked by such employees. Nicholas-Applegate's
costs include any out-of-pocket expenses incurred by Nicholas-Applegate in
rendering such services, an allocable portion of the salaries and benefits of
the employees rendering such services and a reasonable allocation of overhead.
INVESTMENT ADVISORY FEES. For its services, Nicholas-Applegate is entitled
to an investment advisory fee as set out in the Proposed Advisory Agreement
attached as Schedule A to Exhibit I. The method and rate for calculating each
Fund's investment advisory fee will be the same under each Fund's Proposed
Advisory Agreement as under its Existing Advisory Agreement. If each Proposed
Advisory Agreement had been in effect for each Fund's most recently completed
fiscal year, the amount of investment advisory fees payable to
Nicholas-Applegate by each Fund would have been identical to those payable under
the Existing Advisory Agreement.
THERE WILL BE NO INCREASE IN THE INVESTMENT ADVISORY FEE RATES IN CONNECTION
WITH THE TRANSACTION.
EXPENSE LIMITATION AND REIMBURSEMENT AGREEMENTS. Each Fund has executed an
expense limitation and reimbursement agreement with Nicholas-Applegate that will
continue in effect without change following the consummation of the Transaction.
Under the terms of this agreement, Nicholas-Applegate has agreed to reduce its
investment advisory fees or reimburse the Funds for ordinary expenses to limit
the total expenses of the Funds (excluding brokerage, taxes,
<PAGE>
interest, extraordinary expenses, and expenses incurred in organizing and
operating the Mauritius subsidiary) so that they do not exceed the amounts set
forth below.
<TABLE>
<CAPTION>
FUND I SHARES R SHARES
---- -------- --------
<S> <C> <C>
Large Cap Growth........................................... 1.00% 1.25%
Mid Cap Growth............................................. 1.00% 1.25%
Small Cap Growth........................................... 1.17% 1.42%
Value...................................................... 1.00% 1.25%
High Quality Bond.......................................... 0.45% 0.70%
International Core Growth.................................. 1.40% 1.65%
Emerging Countries......................................... 1.65% 1.90%
High Yield Bond............................................ 0.75% 1.00%
Mini Cap Growth............................................ 1.56% NA
Convertible................................................ 1.00% NA
International Small Cap.................................... 1.40% NA
Worldwide Growth........................................... 1.35% NA
Global Blue Chip........................................... 1.20% NA
Global Growth & Income..................................... 1.35% NA
Global Technology.......................................... 1.40% NA
Global Health Care......................................... 1.40% NA
Pacific Rim................................................ 1.40% NA
Latin America.............................................. 1.65% NA
Short Intermediate......................................... 0.35% NA
</TABLE>
If Nicholas-Applegate waives any fee or reimburses any expenses, and the
expenses of the Funds are subsequently less than the expense limitation set
forth above, the Fund will reimburse Nicholas-Applegate for such waived fees or
reimbursed expenses provided that such reimbursement does not cause the Fund's
expenses to exceed the expense limitation set forth above. No Fund will
reimburse Nicholas-Applegate for such waived fees or reimbursed expenses more
than three years after such fees were waived or such expenses were incurred. The
aggregate amount of investment advisory fees
<PAGE>
incurred by each Fund for its most recently completed fiscal year, and the
amount of any reimbursements resulting from the expense limitation (if any) then
in effect, are set forth below.
<TABLE>
<CAPTION>
FOR YEAR ENDED
MARCH 31, 2000
-----------------------------------------------
FEE REDUCTIONS AND EXPENSE
FUND FUND ADVISORY FEES (REIMBURSEMENT)/RECOUPMENT
---- ------------------ --------------------------
<S> <C> <C>
Global Blue Chip.................................... 128,590 78,076
International Core Growth........................... 1,730,163 (35,051)
Worldwide Growth.................................... 1,391,630 73,822
International Small Cap Growth...................... 1,315,748 56,558
Global Growth & Income.............................. 57,511 113,801
Emerging Countries.................................. 2,497,173 207,942
Pacific Rim......................................... 25,526 118,122
Latin America....................................... 47,846 83,077
Global Health Care.................................. 271,020 11,443
Large Cap Growth.................................... 344,335 73,763
Mid Cap Growth...................................... 1,172,637 131,914
Value............................................... 246,907 79,755
Small Cap Growth.................................... 2,019,763 388,726
Mini Cap Growth..................................... 880,167 130,916
Convertible......................................... 417,743 134,536
Short Intermediate.................................. 55,899 113,807
High Quality Bond................................... 84,863 126,523
High Yield Bond..................................... 85,360 71,322
Global Technology................................... 1,390,764 2,985
</TABLE>
OTHER PROVISIONS UNDER THE EXISTING AND PROPOSED ADVISORY AGREEMENT
STANDARD OF CARE. Under the Existing and Proposed Advisory Agreements,
Nicholas-Applegate "will not be liable for any error of judgment or mistake of
law or for any loss suffered by a Fund or the Trust in connection with matters
to which this Agreement relates, except for liability resulting from willful
misfeasance, bad faith or gross negligence in the performance of [its] duties,
or by reason of its reckless disregard of its obligations and duties. . . . ."
NICHOLAS-APPLEGATE'S AUTHORITY. The Existing and Proposed Advisory
Agreements provide that Nicholas-Applegate shall determine what securities and
other investments will be purchased, retained or sold, subject only to the
declaration of trust, bylaws, currently effective registrations under the 1940
Act and the Securities Act of 1933, as amended, investment objective, policies
and restrictions of the Fund in effect from time to time, and specific policies
and instructions established from time to time by the Trustees.
PORTFOLIO TRADING. The Existing and Proposed Advisory Agreements expressly
permit Nicholas-Applegate to engage in portfolio trading. For a more detailed
description of Nicholas-Applegate's existing portfolio brokerage practices, see
APPENDIX A to this Proxy Statement.
MISCELLANEOUS
The Proposed Advisory Agreement provides that it will, unless sooner
terminated as described below, continue in effect for a period of two years from
the effective date and shall continue from year to year thereafter with respect
to each Fund, so long as such continuance is approved at least annually (1) by
vote of a majority of the Board of Trustees of the Trust, or (2) by the vote of
a majority of the outstanding voting securities of the relevant Fund, and
provided it is also approved by the vote of a majority of the independent
Trustees of the Trust (as defined in the 1940 Act). The Proposed Advisory
Agreement provides that it may not be amended without the majority vote of
outstanding voting securities of the relevant Fund and that it terminates
automatically in the event of its assignment.
<PAGE>
ADMINISTRATOR AND PRINCIPAL UNDERWRITER
Brown Brothers Harriman & Co., Private Bankers, whose principal offices are
located at 40 Water Street, Boston, Massachusetts 02109, is the principal
administrator of the Trust. Nicholas-Applegate Securities, whose principal
offices are located at 600 West Broadway, San Diego, California 92101, is the
principal underwriter of the Funds' shares.
INFORMATION ABOUT NICHOLAS-APPLEGATE
Nicholas-Applegate serves as investment adviser to each Fund pursuant to the
Existing Advisory Agreement. Nicholas-Applegate is a California limited
partnership that was founded in 1984. Nicholas-Applegate provides investment
advisory services to private accounts of institutional and individual clients,
private investment companies, and to other mutual funds. Total assets under
management by Nicholas-Applegate as of October 31, 2000 were approximately
$40 billion. Until the consummation of the Transaction, the sole general partner
of Nicholas-Applegate will be NACM Holdings LP, a California limited
partnership. Following the consummation of the Transaction, the sole general
partner of Nicholas-Applegate will be MacIntosh LLC, a Delaware limited
liability company whose principal offices are located at 777 San Marin Drive,
Novato, California 94998. MacIntosh LLC will be owned and controlled by Allianz
of America. Subject to the general partner's discretion and control, Nicholas-
Applegate is currently managed by an Executive Committee, which exercises
substantially all of the governance powers of Nicholas-Applegate and serves as
the functional equivalent of a board of directors. The members of the Executive
Committee are currently Arthur E. Nicholas, Managing Partner, John J.P.
McDonnell, Chief Operating Officer, Catherine Somhegyi, Chief Investment
Officer, Eric S. Sagerman, Head of Global Marketing and Jill Jordon, Head of
Global Client Service and Sales.
Nicholas-Applegate and NACM Holdings LP are located at 600 West Broadway,
San Diego California 92101. The principal occupation of Messrs. Nicholas,
McDonnell, Sagerman and Ms. Jordon and Ms. Somhegyi are their positions with
Nicholas-Applegate. Their business address is 600 West Broadway, San Diego,
California 92101.
FACTORS CONSIDERED BY THE TRUSTEES
The Trustees determined that the terms of the Proposed Advisory Agreement
are fair and reasonable and that approval of the Proposed Advisory Agreement on
behalf of each Fund is in the best interests of the Trust and its shareholders.
The Trustees also determined that the continuity and efficiency of investment
advisory services after the consummation of the Transaction can best be assured
by approving the Proposed Advisory Agreement. The Trustees believe that the
Proposed Advisory Agreement will enable each Fund to continue to enjoy high
quality investment advisory services at costs that they deem appropriate,
reasonable and in the best interests of each Fund and its shareholders.
In evaluating the Proposed Advisory Agreement, the Trustees reviewed
materials furnished by Nicholas-Applegate and the Allianz Group regarding their
personnel, operations and financial condition. The Trustees also reviewed the
terms of the Transaction and its possible effects on the Funds and their
shareholders. Representatives of Nicholas-Applegate and the Allianz Group
discussed with the Trustees the anticipated effects of the Transaction and
indicated their belief that, as a consequence of the proposed transaction, the
operations of the Funds and the capabilities of Nicholas-Applegate to provide
advisory and other services to the Funds would not be adversely affected and
should benefit from the resources of the Allianz Group, although there could be
no assurance as to any particular benefits that may result. The Trustees also
reviewed information regarding the investment performance of the Funds on an
absolute basis and compared to investment companies with similar investment
objectives and policies (the "peer group"), the fees and expenses incurred by
the Funds compared to their peer group.
The Trustees also specifically considered the following as relevant to their
recommendations: (1) that the terms of the Proposed Advisory Agreement are
substantially identical to those of the Existing Advisory Agreement, except for
different execution dates, effective dates, termination dates
<PAGE>
and certain conforming changes; (2) the favorable history, reputation,
qualification and background of Nicholas-Applegate and the Allianz Group, as
well as the qualifications of their personnel and their respective financial
conditions; (3) that the fee and expense ratios of the Funds are reasonable
given the quality of services expected to be provided and are comparable to the
fee and expense ratios of similar mutual funds; (4) the relative performance of
the Funds to comparable mutual funds and unmanaged indices; (5) the commitment
of Nicholas-Applegate to pay the expenses of the Funds in connection with the
Transaction so that shareholders of the Funds would not have to bear such
expenses; (6) the possibility of benefits that may be realized by the Funds as a
result of Nicholas-Applegate's affiliation with the Allianz Group, including
resources of the Allianz Group anticipated to be available to
Nicholas-Applegate; (7) assurances by a representative of AAM that
Nicholas-Applegate will maintain operational autonomy and continuity of
management; and (8) other factors deemed relevant by the Trustees.
SECTION 15(f) OF THE 1940 ACT
The Allianz Group and its affiliates have agreed to use their best efforts
to assure compliance with the conditions of Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment adviser or
any affiliated persons thereof to receive any amount or benefit in connection
with a transaction that results in a change in control of or identity of the
investment adviser to an investment company as long as two conditions are met.
First, no "unfair burden" may be imposed on the investment company as a result
of the transaction relating to the change of control, or any express or implied
terms, conditions or understandings applicable thereto. As defined in the 1940
Act, the term "unfair burden" includes any arrangement during the two-year
period after the change in control whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the investment company or its security holders (other than fees for bona
fide investment advisory or other services), or from any person in connection
with the purchase or sale of securities or other property to, from, or on behalf
of the investment company (other than bona fide ordinary compensation as
principal underwriter of the investment company). Second, during the three year
period immediately following the change of control, at least 75% of an
investment company's board of trustees must not be "interested persons" of the
investment adviser or the predecessor investment adviser within the meaning of
the 1940 Act.
The Board of Trustees has not been advised by Nicholas-Applegate and the
Allianz Group of any circumstances arising from the Transaction that might
result in the imposition of an "unfair burden" being imposed on the Funds.
Moreover, it is expected that the composition or membership of the Board of
Trustees will not change as a direct result of the Transaction.
TRUSTEES' RECOMMENDATION
The independent Trustees of each Fund held meetings to consider the Proposed
Advisory Agreement and the Transaction on November 14 - 15, 2000, and the entire
Board of Trustees considered the proposal at a meeting held on November 15,
2000. Based on their evaluation of the information presented and by the advice
of independent counsel at the meeting and other information made available to
them, and based on their experience with Nicholas-Applegate, and Allianz's
assurances that there were no planned changes in the advisory personnel and that
the management of Nicholas-Applegate would have operational autonomy, the
Trustees, including all the Trustees who are not "interested persons" of the
Trust, Nicholas-Applegate or the Allianz Group, unanimously concluded that the
terms of the Proposed Advisory Agreement for each Fund are reasonable, fair and
in the best interests of such Fund and its shareholders, and that the fees
provided therein are fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality. The
Trustees, by a vote cast at the meeting, unanimously approved and voted to
recommend to the shareholders of each Fund that they approve the Proposed
Advisory Agreement.
If the shareholders of a Fund do not approve the Proposed Advisory Agreement
and the Transaction is consummated, the Trustees will consider what further
action to take consistent with their
<PAGE>
fiduciary duties to the Fund. Such actions may include obtaining for the Fund
interim investment advisory services at cost or at the existing fee rate either
from Nicholas-Applegate or from another advisory organization. Thereafter, the
Trustees would either negotiate a new investment advisory agreement with an
advisory organization selected by the Trustees or make other appropriate
arrangements. In the event the Transaction is not consummated,
Nicholas-Applegate would continue to serve as investment adviser of the Funds
pursuant to the terms of the Existing Advisory Agreement.
REQUIRED VOTE
As provided under the 1940 Act, approval of the Proposed Advisory Agreement
will require the affirmative vote of a majority of the outstanding voting
securities of the applicable Fund. In accordance with the 1940 Act and as used
in this Proposal 1 and Proposal 2, a "majority of the outstanding voting
securities" of a Fund means the lesser of (1) 67% or more of the shares of the
Fund present at a shareholder meeting if the owners of more than 50% of the
shares of the Fund then outstanding are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Fund entitled to vote at the
shareholder meeting.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE IN FAVOR OF THE PROPOSED ADVISORY AGREEMENT.
PROPOSAL 2
APPROVAL OF A NEW SUBADVISORY AGREEMENT
(SHORT INTERMEDIATE AND HIGH QUALITY BOND FUNDS ONLY)
SUMMARY
As investment adviser, Nicholas-Applegate is responsible for furnishing
investment advisory services to the Short Intermediate and High Quality Bond
Funds. Consistent with its responsibility, Nicholas-Applegate has retained the
services of Criterion as the subadviser to the Short Intermediate and High
Quality Bond Funds.
Criterion was organized in April 1999 and is a wholly owned subsidiary of
Westdeutsche Landesbank Girzozentrale ("WestLB"). Criterion provides investment
advice to mutual funds and approximately 80 other separate institutional clients
with approximately $9.1 billion in assets under management. Prior to July 1999,
the personnel of Criterion and the assets they managed constituted the fixed
income division of Nicholas-Applegate. In July 1999, Nicholas-Applegate
transferred the assets of its fixed income division to Criterion and West LB for
approximately $48 million. Fred S. Robertson, III and James E. Kellerman have
led the portfolio management team for the two Funds since inception.
At a meeting of the Board of Trustees held on November 15, 2000, the
Trustees, including all of the Trustees who are not "interested persons" of the
Trust, Nicholas-Applegate, Criterion or West LB, unanimously approved as in the
best interest of shareholders, and voted to recommend that the shareholders of
each Fund approve, a proposal to adopt the Proposed Subadvisory Agreement
effective upon consummation of the Transaction.
Shareholders of Short Intermediate and High Quality Bond Funds are being
asked to approve the Proposed Subadvisory Agreement. The consummation of the
Transaction will constitute an "assignment" (as defined in the 1940 Act) of
Nicholas-Applegate's Existing Subadvisory Agreement with Criterion. As required
by the 1940 Act, the Existing Subadvisory Agreement provides for its automatic
termination in the event of an assignment. Accordingly, the Existing Subadvisory
Agreement will terminate upon the consummation of the Transaction and the
approval of the Proposed Subadvisory Agreement is being proposed to enable
Criterion to continue to manage the Short Intermediate and High Quality Bond
Funds' investments.
<PAGE>
TERMS OF THE EXISTING SUBADVISORY AGREEMENT AND PROPOSED SUBADVISORY AGREEMENT
The terms of Short Intermediate and High Quality Bond Funds' Proposed
Subadvisory Agreement are substantially identical to the terms of the Existing
Subadvisory Agreement. Nicholas-Applegate pays a portion of the fee it receives
from each Fund to Criterion as compensation for subadvisory services to the
Funds. The stated subadvisory fee to be paid by Nicholas-Applegate is identical
under the Proposed Subadvisory Agreement and the Existing Subadvisory Agreement.
Nicholas-Applegate will pay Criterion a subadvisory fee at the annual rate of
.25% of each of the Funds' average daily net assets. The Existing Subadvisory
Agreement dated July 16, 1999 was most recently submitted to shareholders for
initial approval on July 15, 1999.
The following summary of the Proposed Subadvisory Agreement is qualified by
reference to the form of Proposed Subadvisory Agreement attached to this Proxy
Statement as EXHIBIT II.
SUBADVISORY SERVICES. The subadvisory services to be provided by Criterion
to Short Intermediate and High Quality Bond Funds under the Proposed Subadvisory
Agreement are identical to those provided by Criterion under the Existing
Subadvisory Agreement. Pursuant to the terms of the Existing Subadvisory
Agreement, Criterion serves as subadviser for each Fund.
SUBADVISORY FEES. For its services, Criterion is entitled to a subadvisory
fee from Nicholas-Applegate. The Short Intermediate and High Quality Bond Funds
have no responsibility to pay any fee to Criterion. The method and rate for
calculating the subadvisory fee will be the same under the Proposed Subadvisory
Agreement as under the Existing Subadvisory Agreement. Under both the Existing
and Proposed Subadvisory Agreements, Nicholas-Applegate pays Criterion a fee at
an annual rate of .25% of each of the Fund's average daily net assets.
THERE WILL BE NO INCREASE IN THE SUBADVISORY FEE RATE IN CONNECTION WITH THE
TRANSACTION.
If the Existing Subadvisory Agreement had been in effect for Short
Intermediate and High Quality Bond Funds' most recently completed fiscal year,
the amount of subadvisory fees payable to Criterion would have been identical to
those payable under the Proposed Subadvisory Agreement.
The aggregate amount of investment subadvisory fees paid by
Nicholas-Applegate to Criterion for the Short Intermediate and High Quality Bond
Funds' most recently completed fiscal year is set forth below.
<TABLE>
<CAPTION>
FUND FEE PAID
---- --------
<S> <C>
Short Intermediate.......................................... $31,106
High Quality Bond........................................... $33,636
</TABLE>
OTHER PROVISIONS UNDER THE EXISTING AND PROPOSED SUBADVISORY AGREEMENTS
STANDARD OF CARE. Under the Existing and Proposed Subadvisory Agreement,
Criterion "will not be liable for any error of judgment or mistake of law or for
any loss suffered by a Fund or the Trust in connection with the matters to which
this Agreement relates, except for liability resulting from willful misfeasance,
bad faith or gross negligence on the part of the subadviser in the performance
of its duties, or by reason of the subadviser's reckless disregard of its
obligations and duties under this agreement."
OTHER PROVISIONS. The Existing and Proposed Subadvisory Agreement include
provisions that provide that: (i) the law of the State of California shall be
the governing law of the agreement; (ii) Criterion is an independent contractor
and not an employee of Nicholas-Applegate or the Funds; (iii) the agreement is
the entire agreement between the parties with respect to the matters described
therein; (iv) the agreement may be executed using counterpart signature pages;
and (v) invalid or unenforceable provisions of the agreement are severable and
do not render the entire agreement invalid or unenforceable.
<PAGE>
MISCELLANEOUS
If approved by shareholders, the Proposed Subadvisory Agreement will become
effective upon the consummation of the Transaction and will continue in effect
for an initial period of two years and thereafter will continue from year to
year subject to annual approval by the Board of Trustees or a majority of the
outstanding voting securities of the Funds in the same manner as the Existing
Subadvisory Agreement. The Proposed Subadvisory Agreement terminates if assigned
(as defined in the 1940 Act) and may be terminated without penalty by either
party, by vote of its board or by a vote of a majority of the outstanding voting
securities of the Fund and upon 60 days' written notice.
MORE INFORMATION ABOUT CRITERION AND WESTLB
Listed below are the names, ages and principal occupations of the principal
executive officers of Criterion. The principal address of each is 1990 Post Oak
Blvd., Suite 1100, Houston, Texas 77056.
<TABLE>
<CAPTION>
NAME AND AGE POSITION WITH CRITERION
------------ -----------------------
<S> <C>
Frederick S. Robertson (49).................. President, Chief Investment Officer
John R. Pipkin (54).......................... Executive Vice President, Client Services
Richard E. Graf (54)......................... Senior Vice President, Client Services
James E. Kellerman (48)...................... Director of Portfolio Management
</TABLE>
WestLB provides commercial and investment banking services to public,
corporate and bank customers. It is the largest of the Landesbanken and the
fourth largest bank in Germany. At December 31, 1999, WestLB had total assets of
approximately $396 billion. It operates through a branch network in Germany and
an extensive network of banking subsidiaries, branches and representative
offices to provide a range of financial services to clients in over 35 countries
worldwide.
FACTORS CONSIDERED BY THE TRUSTEES
The Trustees determined that the terms of the Proposed Subadvisory Agreement
are fair and reasonable and that approval of the Proposed Subadvisory Agreement
on behalf of the Fund is in the best interests of the Fund. The Trustees also
determined that the continuity and efficiency of management services after the
consummation of the Transaction can best be assured by approving the Proposed
Subadvisory Agreement on behalf of the Fund. The Trustees believe that the
Proposed Subadvisory Agreement will enable the Fund to continue to enjoy high
quality investment subadvisory services with regard to its fixed income
investments at costs that they deem appropriate, reasonable and in the best
interests of the Fund and its shareholders.
In evaluating the Proposed Subadvisory Agreement, the Trustees reviewed
materials furnished by Nicholas-Applegate, Criterion, and WestLB including
information regarding their respective affiliates and their personnel,
operations and financial condition. The Trustees also reviewed the terms of the
Transaction and its possible effects on the Fund and its shareholders.
Representatives of Nicholas-Applegate discussed with the Trustees the
anticipated effects of the Transaction and indicated their belief that as a
consequence of the Transaction, the operations of the Short Intermediate and
High Quality Bond Funds and the capabilities of Criterion to provide subadvisory
and other services to the Short Intermediate and High Quality Bond Funds would
not be materially adversely affected.
The Trustees also specifically considered the following as relevant to their
recommendations: (1) that the terms of the Proposed Subadvisory Agreement are
substantially identical to those of the Existing Subadvisory Agreement, except
for different execution dates, effective dates and termination dates; (2) the
favorable history, reputation, qualification and background of Criterion and
WestLB, as well as the qualifications of their personnel and its financial
condition; (3) that the fee and expense ratios of the Short Intermediate and
High Quality Bond Funds are reasonable given the quality of services expected to
be provided and are comparable to the fee and expense ratios of similar mutual
funds; (4) the relative performance of the Short Intermediate and High Quality
Bond Funds since commencement of operations to comparable mutual funds and
unmanaged indices; (5) the commitment of Nicholas-Applegate to pay the expenses
of the Short Intermediate and High Quality Bond Funds in
<PAGE>
connection with the Transaction so that shareholders of the Fund would not have
to bear such expenses; and (6) other factors deemed relevant by the Trustees.
TRUSTEES' RECOMMENDATION
The independent Trustees held a meeting to consider the Proposed Subadvisory
Agreement and the Transaction on November 14 - 15, 2000, and the entire Board of
Trustees considered the proposal at a meeting held on November 15, 2000. Based
on their evaluation of the issues, on the basis of the materials presented and
assisted by the advice of independent counsel at the meeting and based on their
experience with Criterion and the representation that there was no planned
change in advisory personnel, and other information available to them, the
Trustees at the meeting including all the Trustees who are not "interested
persons" of the Trust, Nicholas-Applegate, Criterion, WestLB, or the Allianz
Group, unanimously concluded that the terms of the Proposed Subadvisory
Agreement for the Funds are reasonable, fair and in the best interests of the
Funds and their shareholders, and that the fees provided therein are fair and
reasonable in light of the usual and customary charges made by others for
services of the same nature and quality. The Trustees, by a vote cast at the
meeting, unanimously approved and voted to recommend to the shareholders of the
Short Intermediate and High Quality Bond Funds that they approve the Proposed
Subadvisory Agreement.
If the shareholders of the Short Intermediate and High Quality Bond Funds do
not approve the Proposed Subadvisory Agreement and the Transaction is
consummated, the Trustees would consider what further action to take consistent
with their fiduciary duties to each Fund. Such actions may include obtaining for
the Fund interim subadvisory services at cost or at the existing fee rate either
from Criterion or from another subadviser. Thereafter, the Trustees would
recommend that Nicholas-Applegate either negotiate a new subadvisory agreement
with another subadviser approved by the Trustees or make other appropriate
arrangements. In the event the Transaction is not consummated, Criterion would
continue to serve as subadviser of the Funds pursuant to the terms of the
Existing Subadvisory Agreement.
REQUIRED VOTE
As provided under the 1940 Act, approval of the Proposed Subadvisory
Agreement will require the affirmative vote of a "majority of the outstanding
voting securities" of Short Intermediate and High Quality Bond Funds, as
described in Proposal 1.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE IN FAVOR OF THE PROPOSED SUBADVISORY AGREEMENT.
INFORMATION CONCERNING THE MEETING
SHAREHOLDER PROPOSALS
The Funds are not required to hold annual meetings of shareholders and do
not currently intend to hold meetings of shareholders in 2001. Shareholder
proposals to be presented at the next meeting of shareholders, whenever held,
must be received at the Trust's offices, 600 West Broadway, San Diego,
California 92101, at a reasonable time prior to the Trustees' solicitation of
proxies for the meeting. The submission by a shareholder of a proposal for
inclusion in a proxy statement does not guarantee that it will be included.
Shareholder proposals are subject to certain regulations under the federal
securities laws.
SHARES HELD IN RETIREMENT PLANS
The trustee or custodian of certain retirement plans is permitted to vote
any shares held in such plans in proportion to the percentages voted by
shareholders in person and by proxy, in some cases, if necessary to obtain a
quorum.
<PAGE>
PROXIES, QUORUM AND VOTING AT THE MEETING
Any shareholder who has given his or her proxy to someone has the power to
revoke that proxy at any time prior to its exercise by executing a superseding
proxy or by submitting a notice of revocation to the secretary of the Funds. In
addition, although mere attendance at the shareholder meeting will not revoke a
proxy, a shareholder present at the shareholder meeting may withdraw his or her
proxy and vote in person. All properly executed and unrevoked proxies received
in time for the shareholder meeting will be voted in accordance with the
instructions contained in the proxies. If no instruction is given, the persons
named as proxies will vote the shares represented thereby in favor of the
proposals described above and will use their best judgment in connection with
the transaction of such other business as may properly come before the
shareholder meeting or any adjournment thereof.
Holders of one-third of the interests in the Trust (or Fund thereof),
present in person or represented by proxy, constitute a quorum for the
transaction of business with respect to any proposal. In the event that, at the
time any session of the shareholder meeting for a Fund is called to order, a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the shareholder meeting
with respect to that Fund to a later date. In the event that a quorum is present
but sufficient votes in favor of any of the proposals have not been received,
the persons named as proxies may propose one or more adjournments of the
shareholder meeting with respect to that Fund to permit further solicitation of
proxies with respect to such proposal. Any such adjournment will require the
affirmative vote of more than one half of the shares of the applicable Fund
present in person or by proxy at the session of the shareholder meeting to be
adjourned. The persons named as proxies will vote those proxies that they are
entitled to vote in favor of 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. A shareholder vote may be taken on one or more of
the proposals in the proxy statement prior to such adjournment if sufficient
votes for its approval have been received and it is otherwise appropriate. Such
vote will be considered final regardless of whether the meeting is adjourned to
permit additional solicitation with respect to any other proposal.
Shares of each Fund represented in person or by proxy, including shares that
abstain or do not vote with respect to a proposal, will be counted for purposes
of determining whether there is a quorum at the shareholder meeting.
Accordingly, an abstention from voting has the same effect as a vote AGAINST a
proposal. However, if a broker or nominee holding shares in "street name"
indicates on the proxy card that it does not have discretionary authority to
vote on a proposal, those shares will NOT be considered present and entitled to
vote on that proposal. Thus, a "broker non-vote" has no effect in determining
whether a proposal has been adopted by 67% or more of a Fund's shares present at
the shareholder meeting, if more than 50% of the outstanding shares (excluding
the "broker non-votes") of that Fund are present or represented. However, for
purposes of determining whether a proposal has been adopted by more than 50% of
the outstanding shares of a Fund, a "broker non-vote" has the same effect as a
vote against that proposal because shares represented by a "broker non-vote" are
considered to be outstanding shares.
OTHER BUSINESS
While the shareholder meeting has been called to transact any business that
may properly come before it, the only matters that the Trustees intend to
present are those matters stated in the attached notice of special meeting of
shareholders. However, if any additional matters properly come before the
shareholder meeting, and on all matters incidental to the conduct of the
meeting, it is the intention of the persons named in the enclosed proxy to vote
the proxy in accordance with their judgment on such matters unless instructed to
the contrary.
METHOD OF SOLICITATION AND EXPENSE
The cost of preparing, assembling and mailing this proxy statement and the
attached notice of special meeting of shareholders and the accompanying proxy
card will be borne by Nicholas-Applegate.
<PAGE>
In addition to soliciting proxies by mail, Nicholas-Applegate or Criterion may,
at their expense, have one or more of the Trust's officers, representatives or
compensated third-party agents aid in the solicitation of proxies by personal
interview or telephone and telegraph and may request brokerage houses and other
custodians, nominees and fiduciaries to forward proxy soliciting material to the
beneficial owners of the shares held of record by such persons. Additionally,
Nicholas-Applegate has retained DF King to assist in the solicitation of
proxies. Shareholders who have not voted their proxies in a timely manner may
receive a telephone call from a representative of DF King in an effort to urge
them to vote.
The Funds may also arrange to have votes recorded by telephone, the internet
or other electronic means. The voting procedures used in connection with such
voting methods are designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been properly recorded.
If these procedures were subject to a successful legal challenge, such votes
would not be counted at the shareholder meeting. The Funds are unaware of any
such challenge at this time. Shareholders would be called at the phone number
the Trust has in its records for their accounts, and would be asked for their
Social Security number or other identifying information. The shareholders would
then be given an opportunity to authorize proxies to vote their shares at the
meeting in accordance with their instructions. To ensure that the shareholders'
instructions have been recorded correctly, they will also receive a confirmation
of their instructions in the mail. In the case of automated telephone and
internet voting, shareholders would be required to provide their Social Security
number or other identifying information and will receive a confirmation of their
instructions. A special toll-free number will be available in case the
information contained in the confirmation is incorrect.
Persons holding shares, as nominees will be reimbursed by
Nicholas-Applegate, upon request, for the reasonable expenses of mailing
soliciting materials to the principals of the accounts.
November 30, 2000
<PAGE>
APPENDIX A
ADDITIONAL INFORMATION PERTAINING TO NICHOLAS-APPLEGATE
NICHOLAS-APPLEGATE'S PORTFOLIO TRANSACTION POLICY
Nicholas-Applegate is a discretionary investment adviser. Accordingly,
Nicholas-Applegate generally determines the securities and quantities to be
bought and sold. In selecting a broker/dealer for a specific transaction,
Nicholas-Applegate chooses the broker/dealer deemed most capable of providing
the services necessary to obtain the best available price and most favorable
execution. Best available price and most favorable execution is generally
understood to mean the most favorable total cost or net proceeds reasonably
obtainable under the circumstances. The full range of brokerage services
applicable to a particular transaction may be considered when making this
judgment, which may include, but is not limited to, capable floor brokers or
traders, competent block trading coverage, ability to position, capital strength
and stability, reliable and accurate communications and settlement processing,
use of automation, knowledge of other buyers or sellers, arbitrage skills,
administrative ability, underwriting and provision of information on the
particular security or market in which the transaction is to occur. The
applicability of specific criteria will vary depending upon the nature of the
transaction, the market in which it is executed, and the extent to which it is
possible to select from among multiple broker/dealers.
In selecting broker/dealers, Nicholas-Applegate may consider selecting those
broker/dealers that assist Nicholas-Applegate in fulfilling its investment
management responsibilities by providing research and other services.
Research services that may be considered include information on the economy,
industries, group of securities, individual companies, statistical information,
accounting and tax law, interpretations, political developments, legal
developments affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement analysis, performance
analysis and analysis of corporate responsibility issues. Such research services
are provided by broker/dealers in the form of written reports, telephone
contacts and personal meetings with security analysts. In addition, such
research services may be provided by broker/dealers in the form of access to
various computer generated data, computer hardware and software, support and
backup systems and related maintenance costs for such computer generated data,
computer hardware and software. Research services may also be provided by way of
meetings arranged with corporate and industry spokespersons, economists,
academicians, and government representatives. Services and equipment which
facilitate the execution and monitoring of securities transactions, for example,
by providing rapid communications with financial markets and broker/dealers, or
by providing real-time tracking of orders, settlements, investment positions and
relevant investment criteria and restrictions applicable to the execution of
securities transactions, are also provided by broker/dealers. In many cases,
brokerage and research services are generated by third parties but are provided
to Nicholas-Applegate by or through broker/ dealers. As a result, commissions
paid may be higher than those commissions that may be obtained from other
broker/dealers.
To the extent that brokerage and research services of value are provided by
broker/dealers, Nicholas-Applegate may be relieved of expenses that it might
otherwise bear. Nicholas-Applegate may allocate brokerage for research services
that are also available for cash, where appropriate and permitted by law.
Nicholas-Applegate has adopted a brokerage allocation policy embodying the
concepts of Section 28(e) of the Securities Exchange Act of 1934. Section 28(e)
permits an investment adviser to cause the Trust to pay commission rates in
excess of those another broker/dealer would have charged for effecting the same
transaction ("soft dollars"), if Nicholas-Applegate determines, in good faith,
that the commission paid is reasonable in relation to the value of the brokerage
and research services provided. The determination may be viewed in terms of
either the particular transaction involved or the overall responsibilities of
Nicholas-Applegate as the Trust's investment adviser. Such brokerage and
research services furnished by broker/dealers may be used to service any and all
of Nicholas-
<PAGE>
Applegate's clients, including those other than the Trust, and/or may be used in
connection with clients other than those that pay the commissions.
In circumstances where Nicholas-Applegate receives such brokerage and
research services in return for research and for administrative and other
non-investment purposes, Nicholas-Applegate allocates the value of the brokerage
and research service used in making investment decisions to the Trust and the
value attributable to administrative functions is paid in cash by
Nicholas-Applegate.
SERVICES PROVIDED TO THE TRUST BY AFFILIATES OF NICHOLAS-APPLEGATE
The Trust has entered into an administrative services agreement with
Nicholas-Applegate pursuant to which certain operational, administrative and
legal services are performed by Nicholas-Applegate in exchange for the lesser of
(i) 0.10% of the Trust's average net assets or (ii) Nicholas-Applegate's costs
in providing such services. The fees below, which represent 0.10% of each Fund's
average net assets, are as of the Trust's most recently completed fiscal year
and were less than Nicholas-Applegate's cost.
<TABLE>
<CAPTION>
FUND FEE
---- --------
<S> <C>
Large Cap Growth............................................ $ 45,911
Mid Cap Growth.............................................. $156,352
Small Cap Growth............................................ $201,977
Mini Cap Growth............................................. $ 64,713
Value....................................................... $ 32,920
Convertible................................................. $ 55,699
Worldwide Growth............................................ $139,164
International Core Growth................................... $173,017
International Small Cap Growth.............................. $131,575
Global Blue Chip............................................ $ 14,949
Global Growth & Income...................................... $ 6,193
Global Technology........................................... $136,095
Global Health Care.......................................... $ 27,098
Emerging Countries.......................................... $199,774
Pacific Rim................................................. $ 2,430
Latin America............................................... $ 3,570
Short Intermediate.......................................... $ 16,608
High Quality Bond........................................... $ 18,814
High Yield Bond............................................. $ 14,227
</TABLE>
Nicholas-Applegate Securities serves as distributor of the Trust. In
addition, the Class R Shares of eight of the Funds have a shareholder servicing
plan pursuant to which they compensate Nicholas-Applegate Securities at the rate
of 0.25% of average net assets for expenses in connection with non-distribution
shareholder services provided by it and other institutions. The shareholder
service fees below are of the Trust's most recently completed fiscal year on
March 31, 2000.
<TABLE>
<S> <C>
Large Cap Growth............................................ $82,300
Mid Cap Growth.............................................. $ 1
Small Cap Growth............................................ $ 7,358
Value....................................................... $16,338
International Core Growth................................... $19,059
Emerging Countries.......................................... $ 1
High Quality Bond........................................... $ 5,930
</TABLE>
<PAGE>
EXHIBIT I
FORM OF PROPOSED INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as , 2001, between
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS, a Delaware business trust (the "Trust"),
and NICHOLAS-APPLEGATE CAPITAL MANAGEMENT, a California limited partnership (the
"Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act");
WHEREAS, the Trust currently offers shares of nineteen series (each a "Fund"
and collectively the "Funds"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory services to the Trust and each of its Funds;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
(a) The Trust hereby appoints the Investment Adviser to serve as investment
adviser to each of the Funds for the period and on the terms set forth in this
Agreement. The Investment Adviser accepts such appointment and agrees to furnish
the services herein set forth for the compensation herein provided.
(b) In the event that the Trust establishes one or more series other than
the Funds with respect to which it desires to retain the Investment Adviser to
serve as investment adviser hereunder, it will notify the Investment Adviser in
writing. If the Investment Adviser is willing to render such services under this
Agreement it will so notify the Trust in writing, whereupon such series will
become a "Fund" (as defined hereunder) and will be subject to the provisions of
this Agreement to the same extent as the Funds except to the extent that such
provisions (including those relating to the compensation payable by the Fund to
the Investment Adviser) are modified with respect to such Fund in writing by the
Trust and the Adviser at the time.
2. SERVICES.
(a) Subject to the supervision of the Trust's Board of Trustees (the
"Board"), the Investment Adviser will provide a continuous investment program
for each of the Funds, including investment research and management with respect
to all securities and investments and cash equivalents in the Funds. The
Investment Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Trust with respect to
each Fund. The Investment Adviser will provide the services under this Agreement
in accordance with each Fund's investment objective, policies and restrictions
as stated in the Fund's prospectus and statement of additional information, as
currently in effect and as from time to time amended (collectively, the
"Prospectus"), and resolutions of the Board. The Investment Adviser further
agrees that it:
(b) Will conform with all applicable rules and regulations of the Securities
and Exchange Commission and will in addition conduct its activities under this
Agreement in accordance with other applicable law.
(c) Will place all orders for the purchase and sale of portfolio securities
for the account of each Fund with brokers or dealers selected by the Investment
Adviser. In executing portfolio transactions and selecting brokers or dealers,
the Investment Adviser will use its best efforts to seek on behalf of the Trust
and each Fund the best available price and execution. In assessing the best
overall terms available for any transaction, the Investment Adviser will
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the size of the order, the difficulty
and risk of execution, the financial condition and execution capability of the
broker or dealer,
<PAGE>
and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis.
In evaluating the best overall terms available, and in selecting the broker
or dealer to execute a particular transaction, the Investment Adviser may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
any Fund and/or other accounts over which the Investment Adviser or any
affiliate of the Investment Adviser exercises investment discretion. The
Investment Adviser is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission or spread for executing a portfolio
transaction for any Fund which is in excess of the amount of commission or
spread another broker or dealer would have charged for effecting that
transaction if, but only if, the Investment Adviser determines in good faith
that such commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer viewed in terms of that
particular transaction or in terms of the overall responsibilities of the
Investment Adviser to the particular Fund and to the Trust. The Investment
Adviser may also select brokers who sell shares of the various series of
Nicholas-Applegate Institutional Funds to execute portfolio transactions. The
extent and continuation of these practices will be subject to periodic review by
the Board.
In executing portfolio transactions for any Fund, the Investment Adviser
may, but will not be obligated to, aggregate the securities to be sold or
purchased with those of other Funds and its other clients where such aggregation
is not inconsistent with the policies set forth in the Prospectus, to the extent
permitted by applicable laws and regulations. In such event, the Investment
Adviser will allocate the securities so purchased or sold, and the expenses
incurred in the transaction, in the manner it considers to be the most equitable
and consistent with its fiduciary obligations to the Funds and such other
clients.
(d) Will maintain all books and records with respect to the securities
transactions of the Funds, keep books of account with respect to the Funds and
furnish the Board with such periodic and special reports as the Board may
request.
(e) Will treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and shareholders of the
Trust ("Investors") or those persons or entities who respond to inquiries
concerning investment in the Trust, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder or under any other agreement with the Trust except after prior
notification to and approval in writing by the Trust, which approval will not be
unreasonably withheld and may not be withheld where the Investment Adviser may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust. Nothing contained herein, however, will prohibit the
Investment Adviser from advertising to or soliciting the public generally with
respect to other products or services, including, but not limited to, any
advertising or marketing via radio, television, newspapers, magazines or direct
mail solicitation, regardless of whether such advertisement or solicitation may
coincidentally include prior or present Investors or those persons or entities
who have responded to inquiries regarding the Trust.
(f) Will obtain the prior written approval of the Board before retaining the
services of any subadviser to manage the assets and portfolio investments of any
Fund
3. SERVICES NOT EXCLUSIVE. The Investment Adviser will for all purposes
herein be deemed to be an independent contractor and will, unless otherwise
expressly provided herein or authorized by the Board from time to time, have no
authority to act for or represent the Trust in any way or otherwise be deemed
its agent. The investment management services furnished by the Investment
Adviser hereunder are not deemed exclusive, and the Investment Adviser will be
free to furnish similar services to others so long as its services under this
Agreement are not impaired thereby.
4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request.
<PAGE>
In addition, the Investment Adviser agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
5. EXPENSES. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Trust.
6. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee, computed
daily and paid monthly (in arrears), at the annual rates set forth in
Schedule A hereto. Such fee as is attributable to each Fund will be a separate
charge to each such Fund and will be the several (and not joint or joint and
several) obligation of each such Fund. The Investment Adviser may also from time
to time agree to reduce its fees or absorb other operating expenses to ensure
that the expenses of a Fund do not exceed certain limitations.
7. REPRESENTATIONS AND WARRANTIES.
(a) The Trust represents and warrants to the Investment Adviser that:
(i) it is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware and is duly qualified to conduct its
business in the State of Delaware and in such other jurisdictions wherein the
nature of its activities or its properties owned or leased makes such
qualification necessary; (ii) it is a registered open-end management investment
company under the 1940 Act; (iii) a registration statement on Form N-lA under
the Securities Act of 1933, as amended, on behalf of the Funds is effective and
will remain effective, and appropriate state securities law filings have been
made and will continue to be made, with respect to all shares of the Funds being
offered for sale; (iv) it is empowered under applicable laws and by its
Declaration of Trust and Bylaws to enter into and perform this Agreement; and
(v) all requisite trust proceedings have been taken to authorize it to enter
into and perform this Agreement.
(b) The Investment Adviser represents and warrants to the Trust that:
(i) it is a limited partnership duly organized and existing and in good standing
under the laws of the State of California and is duly qualified to conduct its
business in the State of California and in such other jurisdictions wherein the
nature of its activities or its properties owned or leased makes such
qualification necessary; (ii) it is empowered under applicable laws and by its
partnership agreement to enter into and perform this Agreement; (iii) all
requisite partnership proceedings have been taken to authorize it to enter into
and perform this Agreement; and (iv) it is a registered investment adviser under
the Investment Advisers Act of 1940 and applicable state laws.
8. LIMITATION OF LIABILITY; INDEMNIFICATION.
(a) The Investment Adviser will not be liable for any error of judgment or
mistake of law or for any loss suffered by a Fund or the Trust in connection
with the matters to which this Agreement relates, except for liability resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Investment Adviser in the performance of its duties, or by reason of the
Investment Adviser's reckless disregard of its obligations and duties under this
Agreement.
The Trust will indemnify and hold harmless the Investment Adviser from and
against all liabilities, damages, costs and expenses that the Investment Adviser
may incur in connection with any action, suit, investigation or proceeding
arising out of or otherwise based on any action actually or allegedly taken or
omitted to be taken by the Investment Adviser with respect to the performance of
its duties or obligations hereunder or otherwise as an investment adviser of the
Trust and the Funds; provided, however, that the Investment Adviser will not be
entitled to indemnification with respect to any liability to the Trust or the
Investors by reason of willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties, or by reason of
the Investment Adviser's reckless disregard of its obligations and duties under
this Agreement.
(b) No trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever, in his or her official or individual
capacity, to any person, including the Investment
<PAGE>
Adviser, other than the Trust or its shareholders, in connection with Trust
property or the affairs of the Trust, save only that arising from his or her bad
faith, willful misfeasance, gross negligence or reckless disregard of his or her
duty to such person; and all such persons shall look solely to the Trust
property for satisfaction of claims of any nature against a trustee, officer,
employee or agent of the Trust arising in connection with the affairs of the
Trust. Moreover, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a Fund shall be enforceable
against the assets and property of the Fund only, and not against the assets and
property of any other series of the Trust.
9. DURATION AND TERMINATION. This Agreement will become effective with
respect to each Fund (currently in existence) on the date first written above.
This Agreement will become effective with respect to any additional Fund on the
date of receipt by the Trust of notice from the Investment Adviser in accordance
with Section l(b) hereof that the Investment Adviser is willing to serve as
investment adviser with respect to such Fund.
Unless sooner terminated as provided herein, this Agreement will continue in
effect for a period of two years from the date hereof. Thereafter, if not
terminated, this Agreement will continue in effect as to a particular Fund for
successive annual periods, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Board who
are not interested persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the Board
or by vote of a majority of the outstanding voting securities of such Fund.
Notwithstanding the foregoing, this Agreement may be terminated as to any Fund
at any time, without the payment of any penalty, by the Trust (by vote of the
Board or by vote of a majority of the outstanding voting securities of such
Fund), or by the Investment Adviser, upon not less than 60 days' written notice.
This Agreement will immediately terminate in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" have the same meaning as the
meaning of such terms in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement will be
effective as to a particular Fund until approved by vote of a majority of the
outstanding voting securities of such Fund.
11. NOTIFICATION OF CHANGE OF PARTNERS. During the term of this Agreement,
the Investment Adviser will notify the Trust of any change in the membership of
the Investment Adviser's partnership within a reasonable time after such change.
12. NOTICES. Notices of any kind to be given to the Investment Adviser
hereunder by the Trust will be in writing and will be duly given if mailed,
delivered or communicated by answer back facsimile transmission to the
Investment Adviser at 600 West Broadway, 30th Floor, San Diego, California
92101, Facsimile: (619) 687-8138, Attention: General Counsel, or at such other
address or to such individual as will be so specified by the Investment Adviser.
Notices of any kind to be given to the Trust hereunder by the Investment Adviser
will be in writing and will be duly given if mailed or delivered to the Trust at
600 West Broadway, 30th Floor, San Diego, California 92101, Facsimile:
(619) 687-8138, Attention: Secretary, or at such other address or to such
individual as will be so specified by the Trust to the Investment Adviser.
13. MISCELLANEOUS.
(a) This Agreement constitutes the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(b) The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
<PAGE>
(c) If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
(d) This Agreement will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and will be governed by the
internal laws, and not the law of conflicts of laws, of the state of California;
provided that nothing herein will be construed in a manner inconsistent with the
1940 Act, the Investment Advisers Act of 1940, as amended, or any rule or
regulation of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date first above written.
<TABLE>
<S> <C> <C> <C>
NICHOLAS-APPLEGATE NICHOLAS-APPLEGATE
INSTITUTIONAL FUNDS CAPITAL MANAGEMENT
By: By:
--------------------------------------- ---------------------------------------
E. Blake Moore, Jr. E. Blake Moore, Jr.
ITS SECRETARY ITS GENERAL COUNSEL
</TABLE>
<PAGE>
SCHEDULE A
INVESTMENT ADVISORY FEES
The Investment Adviser will be compensated for its services under the
Agreement with respect to the Funds at the following annual rates:
1. For the WORLDWIDE GROWTH FUND, INTERNATIONAL SMALL CAP GROWTH FUND AND
INTERNATIONAL CORE GROWTH FUND, 1.00% of the first $500 million of the Fund's
average daily net assets, 0.90% of the next $500 million and 0.85% of the Fund's
average daily net assets in excess of $1 billion.
2. For the MID CAP GROWTH FUND AND CONVERTIBLE FUND, 0.75% of the first
$500 million of each such Fund's average daily net assets, 0.675% of the next
$500 million and 0.65% of the each such Fund's average daily net assets in
excess of $1 billion.
3. For the HIGH QUALITY BOND FUND, 0.45% on the first $500 million of the
Fund's average daily net assets, 0.40% on the next $250 million and 0.35% on net
assets in excess of $750 million.
4. For the SHORT INTERMEDIATE FUND, 0.30% on the first $250 million of the
Fund's average daily net assets and 0.25% on average daily net assests in excess
of $250 million.
5. For the HIGH YIELD BOND FUND,0.60% of the Fund's average daily net asset
value.
6. For the LARGE CAP FUND AND VALUE FUND, 0.75% of the first $500 million
of each Fund's average daily net assets, 0.675 on the next $500 million, and
0.65% of net assets in excess of $1 billion.
7. For the GLOBAL BLUE CHIP FUND,0.80% of the Fund's average daily net
assets.
8. For the GLOBAL GROWTH & INCOME FUND, 0.85% of the Fund's average net
assets.
9. For the SMALL CAP GROWTH FUND, PACIFIC RIM FUND, GLOBAL TECHNOLOGY FUND,
GLOBAL HEALTH CARE FUND, 1.00% of each Fund's average daily net assets.
10. For MINI CAP GROWTH FUND, LATIN AMERICA FUND, AND EMERGING COUNTRIES
FUND, 1.25% of each Fund's average net assets.
<PAGE>
EXHIBIT II
FORM OF PROPOSED SUBADVISORY AGREEMENT
This Subadvisory Agreement (the "Agreement") is entered into as of
, 2001 between NICHOLAS-APPLEGATE CAPITAL MANAGEMENT, a California
limited partnership (the "Manager"), and CRITERION INVESTMENT MANAGEMENT LLC, a
Delaware limited liability company (the "Subadviser").
WHEREAS Nicholas-Applegate Institutional Funds, a Delaware business trust
(the "Trust"), an open-end management company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), is a series type investment
company that is comprised of various series, each of which is a separate
investment portfolio having its own investment objectives and investment
policies;
WHEREAS the Manager has entered into an investment advisory agreement with
the Trust dated , 2001 (the "Management Agreement") pursuant to
which the Manager has been retained to furnish investment advisory services to
the Trust and each of its series;
WHEREAS the Subadviser is engaged in business as an investment adviser and
is registered as an investment adviser under the Investment Advisers Act of
1940, as amended (the "Advisers Act");
WHEREAS pursuant to the approval of the Trust and the authority granted to
the Manager in the Management Agreement, the Manager wishes to retain the
Subadviser to furnish investment advisory services to one or more series of the
Trust, and the Subadviser is willing to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. SERVICES TO BE RENDERED BY SUBADVISER TO THE TRUST.
a. Subject always to the supervision of the trustees of the Trust (the
"Trustees"), the Subadviser will provide a continuous investment program
for each of the series listed on Schedule A (each such series, a "Fund"),
including investment research and management with respect to all
securities and investments and cash equivalents in a Fund. The Subadviser
will determine from time to time what securities and other investments
will be purchased, retained or sold with respect to a Fund. In the
performance of its duties, the Subadviser (i) will provide services under
this Agreement in accordance with a Fund's investment objectives,
policies and restrictions as set forth in its Existing prospectus and
statement of additional information as provided to the Subadviser by the
Trust, (ii) will comply with the 1940 Act and all rules and regulations
thereunder, and all other applicable law, and will comply with other
written directions which the Trustees or the Manager, as the case may be,
may from time to time provide, and (iii) shall exercise the same care and
diligence as required of the Manager pursuant to the terms of the
Management Agreement in the form provided by the Manager to the
Subadviser. The Subadviser and the Manager shall each make its officers
and employees available to the other from time to time at reasonable
times to review investment policies of each Fund and to consult with each
other regarding the investment affairs of each Fund.
b. In the event that the Manager designates one or more series with respect
to which it and the Trust wish to retain the Subadviser to render
investment advisory services hereunder, it shall notify the Subadviser in
writing. If the Subadviser is willing to render such services, it shall
notify the Manager in writing, whereupon such series shall become a Fund
hereunder, and be subject to this Agreement.
c. The Subadviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel,
required for it to execute its duties hereunder in a professional manner
and (ii) administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of the
investment affairs of each Fund, including assistance in obtaining and
verifying prices for portfolio securities.
<PAGE>
d. The Subadviser will place all orders for the purchase and sale of
portfolio securities for the account of a Fund with brokers or dealers
selected by the Subadviser. In executing portfolio transactions and
selecting brokers or dealers, the Subadviser will use its best efforts to
seek on behalf of a Fund the best available price and execution. In
assessing the best overall terms available for any transaction, the
Subadviser will consider all factors it deems relevant, including the
breadth of the market in the security, the price of the security, the
size of the order, the difficulty and risk of execution, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis.
In evaluating the best overall terms available, and in selecting the
broker or dealer or execute a particular transaction, the Subadviser may
also consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") provided to a Fund and/or other accounts over
which the Subadviser or any affiliate of the Subadviser exercises
investment discretion. The Subadviser is authorized to pay a broker or
dealer who provides such brokerage and research services a commission or
spread for executing a portfolio transaction for a Fund which is in
excess of the amount of commission or spread another broker or dealer
would have charged for effecting that transaction if, but only if, the
Subadviser determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research services provided
by such broker or dealer viewed in terms of that particular transaction
or in terms of the overall responsibilities of the Subadviser to the
particular Fund and to the Trust. The Subadviser may also select brokers
who sell shares of the various series of Nicholas-Applegate
Institutional Funds to execute portfolio transactions. The extent and
continuation of these practices will be subject to periodic review of
the Trustees.
In executing portfolio transactions for any Fund, the Subadviser may,
but will not be obligated to, aggregate the securities to be sold or
purchased with those of other Funds and its other clients where such
aggregation is not inconsistent with the policies set forth in the
prospectus, to the extent permitted by applicable laws and regulations.
In such event, the Subadviser will allocate the securities so purchased
or sold, and the expenses incurred in the transaction, in the manner it
considers to be the most equitable and consistent with its fiduciary
obligations to a Fund and such other clients.
e. The Subadviser will make available to the Trust and the Manager,
promptly upon request, any of the Funds' investment records and ledgers
maintained by the Subadviser as are necessary to assist the Trust and the
Manager to comply with the requirements of the 1940 Act, the Advisers
Act, and other applicable laws. The Subadviser will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with such services in respect to each Fund which may be
requested in order to ascertain whether the operations of such Fund are
being conducted in a manner consistent with applicable laws and
regulations.
f. The Subadviser will provide reports to the Trustees for consideration at
meetings of the Trustees on the investment program for each Fund and the
issuers and securities represented in each Fund's portfolio, and will
furnish the Trustees with respect to each Fund such periodic and special
reports as the Trustees and/or the Manager may reasonably request.
g. The Subadviser shall not be obligated to pay any expenses of or for the
Trust or of or for a Fund not expressly assumed by the Subadviser
pursuant to this Section 1.
2. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUBADVISER.
The Manager will pay to the Subadviser as compensation for the Subadviser's
services rendered, for the facilities furnished and for the expenses borne by
the Subadviser pursuant to Section 1, a fee in accordance with Schedule A of
this Agreement.
<PAGE>
3. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate with respect to a Fund, without
the payment of any penalty, in the event of its assignment or in the event that
the Management Agreement between the Manager and the Trust, with respect to such
Fund, shall have terminated for any reason, and the Manager shall provide notice
of any such termination of the Management Agreement to the Subadviser.
4. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective on the first date written above, and
shall remain in full force and effect continuously thereafter with respect to
each Fund (unless terminated automatically as set forth in Section 3) until
terminated as follows:
a. The Trust may at any time terminate this Agreement by written notice
delivered or mailed by registered mail, postage prepaid, to the Manager
and the Subadviser, or
b. Unless sooner terminated as provided herein, this Agreement will
continue in effect for a period of two years from the date hereof.
Thereafter, if not terminated, this Agreement will continue in effect as
to a Fund for successive annual periods, provided such continuance is
specifically approved at least annually (i) by the vote of a majority of
those Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting
on such approval, and (ii) by the Trustees or by vote of a majority of
the outstanding voting securities of such Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to any Fund at any time,
without the payment of any penalty, by the Trust (by vote of the Trustees
or by vote of a majority of the outstanding voting securities of such
Fund), by the Manager or by the Subadviser, upon not less than 60 days'
written notice. This Agreement will immediately terminate in the event of
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment"
have the same meaning as the meaning of such terms in the 1940 Act).
5. PROVISION OF CERTAIN INFORMATION BY SUBADVISER.
The Subadviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Subadviser shall fail to be
registered as an investment adviser under the Advisers Act, (b) the Securities
and Exchange Commission (the "SEC") has censured the Subadviser, placed
limitations on its activities, functions, or operations; suspended its
registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions; (c) the Subadviser shall
have been served or otherwise have notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, public
board or body, involving the affairs of the Trust; (d) the Subadviser has a
reasonable basis for believing that a Fund has ceased to qualify or might not
qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended; (e) there is a change in control, or an agreement
contemplating a change in control, of the Subadviser or any parent of the
Subadviser within the meaning of the 1940 Act; or (f) there is a material
adverse change in the business or financial position of the Subadviser.
6. EXCULPATION OF SUBADVISER.
The Subadviser will not be liable for any error of judgment or mistake of
law or for any loss suffered by a Fund or the Trust in connection with the
matters to which this Agreement relates, except for liability resulting from
willful misfeasance, bad faith or gross negligence on the part of the Subadviser
in the performance of its duties, or by reason of the Subadviser's reckless
disregard of its obligations and duties under this Agreement.
The Manager will indemnify and hold harmless the Subadviser from and against
all liabilities, damages, costs and expenses that the Subadviser may incur in
connection with any action, suit, investigation or proceeding arising out of or
otherwise based on any action actually or allegedly taken
<PAGE>
or omitted to be taken by the Subadviser with respect to the performance of its
duties or obligations hereunder or otherwise as an investment adviser of the
Trust and Fund; PROVIDED, HOWEVER, that the Subadviser will not be entitled to
indemnification with respect to any liability to the Trust or the Manager by
reason of willful misfeasance, bad faith or gross negligence on the part of the
Subadviser in the performance of its duties, or by reason of the Subadviser's
reckless disregard of its obligations and duties under this Agreement.
7. EXERCISE OF VOTING RIGHTS.
Except with the agreement or on the specific instructions of the Trustees or
the Manager, the Subadviser shall exercise or procure the exercise of any voting
right attaching to investments of the Fund.
8. DISCLOSURE ABOUT SUBADVISER.
The Subadviser has reviewed Post-Effective Amendment No. 5 to the
Registration Statement for the Trust filed with the SEC that contains disclosure
about the Subadviser, and represents and warrants that, with respect to the
disclosure about the Subadviser or information relating directly or indirectly
to the Subadviser, such Registration Statement contains, as of the date hereof,
no untrue statement of a material fact, and does not omit any statement of a
material fact which was required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The Subadviser further represents and warrants that
it is registered as an investment adviser under the Advisers Act and will
maintain such registration as long as this Agreement remains in effect.
9. BOOKS AND RECORDS
The Subadviser hereby agrees that all records that it maintains for the
Funds are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's or the Manager's request in
compliance with the requirements of Rule 31a-3 under the 1940 Act. The
Subadviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any records required to be maintained by Rule 31a-1 under the
1940 Act.
10. CONFLICTS OF INTEREST
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Subadviser, and in any person
controlling, controlled by or under common control with the Subadviser, and that
the Subadviser and any person controlling, controlled by or under common control
with the Subadviser may have an interest in the Trust. It is also understood
that the Subadviser and persons controlling, controlled by or under common
control with the Subadviser have and may have advisory, management service,
distribution or other contracts with other organizations and persons, and may
have other interests and businesses.
11. SERVICES NOT EXCLUSIVE.
The Subadviser will for all purposes herein be deemed to be an independent
contractor and will, unless otherwise expressly provided herein or authorized by
the Trustees from time to time, have no authority to act for or represent the
Trust in any way or otherwise be deemed its agent. The investment management
services furnished by the Subadviser hereunder are not deemed exclusive, and the
Subadviser will be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby.
<PAGE>
12. NOTICES.
All notices, requests and consents shall be in writing and shall be
personally delivered or mailed by registered mail, postage prepaid, to the other
party at the address indicated below:
If to the Manager:
Nicholas-Applegate Capital Management
600 West Broadway
San Diego, California 92101
Fax: 619-687-8138
Attention: E. Blake Moore, Jr., General Counsel
If to the Subadviser:
Criterion Investment Management LLC
1990 Post Oak Boulevard
Suite 1100
Houston, Texas 77056
Fax: (713) 963-5213
Attention: Fred Robertson
13. GOVERNING LAW
This Agreement will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and will be governed by the
internal laws, and not the law of conflicts of laws, of the State of California;
provided that nothing herein will be construed in a manner inconsistent with the
1940 Act, the Investment Advisers Act of 1940, as amended, or any rule or
regulation of the Securities and Exchange Commission thereunder.
14. MISCELLANEOUS
This Agreement represents the entire agreement pertaining to the subject
matter hereof between the parties and supersedes all prior agreements and
understandings pertaining thereto. The headings of the sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof. Should any provision of this Agreement be held to be void in law or in
equity, the Agreement shall be construed, insofar as is possible, as if such
portion had never been contained herein. This Agreement may be executed in more
than one counterpart with the same effect as if the parties executing the
several counterparts had all executed one counterpart.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the 1940 Act and the rules and regulations thereunder,
subject, however, to such exemptions as may be granted by the SEC under the 1940
Act; the term "specifically approve at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder;
and the term "brokerage and research services" shall have the meaning given in
the 1934 Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, NICHOLAS-APPLEGATE CAPITAL MANAGEMENT and CRITERION
INVESTMENT MANAGEMENT LLC have each caused this instrument to be signed in
duplicate on its behalf by its duly authorized representative, all as of the day
and year first above written.
<TABLE>
<CAPTION>
<S> <C>
CRITERION INVESTMENT NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT LLC MANAGEMENT
By: By:
Name: E. Blake Moore, Jr.
Title: General Counsel
</TABLE>
<PAGE>
SCHEDULE A
1. The following series of the Trust are covered by this Agreement:
High Quality Bond Fund
Short-Intermediate Fund
2. The Subadviser fee for each Fund shall be paid monthly in U.S. dollars
in arrears. The fee shall be equal to an annual rate of 0.25% of the average
daily net asset value with respect to such Fund. For a month in which this
Agreement becomes effective or terminates with respect to a Fund, the portion of
the Subadviser fee due hereunder shall be prorated on the basis of the number of
days that the Agreement is in effect during the month.
<PAGE>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 12, 2001
VOTE VIA THE INTERNET: http://www.proxyvote.com
TOUCH-TONE VOTING: 1-800-690-6903
I (we), having received notice of the meeting and the Proxy Statement,
appoint E. Blake Moore, Jr., Charles H. Field, and Deborah Wussow, and each of
them, my (our) attorneys with full power of substitution in them and each of
them and in my (our) name(s) to attend the Meeting of Shareholders to be held on
January 12, 2001, at 10:00 a.m. (San Diego time) at the offices of
Nicholas-Applegate Capital Management, 600 West Broadway, San Diego, California
92101, and any adjourned session or sessions thereof, and there to vote and act
upon the following matters as more fully described in the accompanying Proxy
Statement in respect of all shares of the Fund which I (we) will be entitled to
vote or act upon, with all the powers I (we) would possess if personally
present.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PROPOSALS.
NOTE: In signing, please write name(s) exactly as appearing
hereon. When signing as attorney, executor, administrator or
other fiduciary, please give your full title as such. Joint
owners should each sign personally.
--------------------------------------------
Signature
--------------------------------------------
Signature
___________________________, 200_
Date
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND SHOULD
BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED. THE BOARD RECOMMENDS
THAT YOU VOTE IN FAVOR OF THE FOLLOWING PROPOSALS:
1. To approve a new investment advisory agreement between the
Trust, on behalf of each of the Funds, and Nicholas-Applegate
Capital Management. This Agreement will take effect only if
the proposed acquisition of Nicholas-Applegate Capital
Management by Allianz of America, Inc. is consummated.
____ FOR _____ AGAINST _____ ABSTAIN
2. FOR SHAREHOLDERS OF THE SHORT INTERMEDIATE FUND AND THE HIGH
QUALITY BOND FUND
To approve a new subadvisory agreement between
Nicholas-Applegate Capital Management and, Criterion
Investment Management, LLC for the two Funds listed above.
This Agreement will take effect only if the proposed
acquisition of Nicholas-Applegate Capital Management by
Allianz of America, Inc. is consummated.
____ FOR _____ AGAINST _____ ABSTAIN
