<PAGE>
As filed with the Securities and Exchange Commission
on January 8, 1998
Registration No. 33-56094
811-7428
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
(Check appropriate box or boxes)
------------------
NICHOLAS-APPLEGATE MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Address of Principal Executive Offices, including Zip Code)
ARTHUR E. NICHOLAS
C/O NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Name and Address of Agent for Service)
COPY TO: MICHAEL GLAZER
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 S. FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE FOLLOWING EFFECTIVE DATE.
------------------
It is proposed that this filing shall become effective
in accordance with Rule 485(a).
------------------
Title of Securities Being Registered: Shares of Beneficial Interest.
------------------
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
FORM N-14 CROSS REFERENCE SHEET
Part A. Item No Proxy Statement/Prospectus
and Caption Statement Caption
---------------- --------------------------
1. Beginning of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Fee Table, Synopsis Information and Purpose of Meeting; Background
Risk Factors of the Proposed
Reorganization; Proposal 2.
Approval of the Proposed
Reorganization; Comparison of
the Portfolios and the Funds;
Risk Factors
4. Information About the Transaction Cover Page; Purpose of
Meeting; Background of the
Proposed Reorganization;
Proposal 1. Amendment of the
Declaration of Trust; Proposal
2. Approval of the Proposed
Reorganization; Description of
the Proposed Reorganization;
Comparison of the Portfolios
and the Funds
5. Information About the Registrant Purpose of Meeting; Background
of the Proposed
Reorganization; Comparison of
the Portfolios and the Funds;
Further Information about the
Portfolios and the Funds
6. Information About the Company Purpose of Meeting; Background
Being Acquired of the Proposed
Reorganization; Comparison of
the Portfolios and the Funds;
Further Information about the
Portfolios and the Funds
7. Voting Information Shares and Voting; Election of
Trustees; Appendix A
8. Interest of Certain Persons and Experts Not Applicable
9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to be
Underwriters
Part B. Item No. Statement of Additional
And Caption Information Caption
----------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Not Applicable
12. Additional Information About Further information about
the Registrant the Portfolios and the
Funds
13. Additional Information About Further information about
the Company Being Acquired the Portfolios and the
Funds
14. Financial Statements Further information about
the Portfolios and the
Funds
<PAGE>
Part C
------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
600 West Broadway
San Diego, California 92101
January 12, 1998
Dear Shareholder:
A special meeting of shareholders of Nicholas-Applegate Mutual Funds (the
"Trust") will be held to determine important organizational issues affecting
your portfolio. The meeting will begin at 9:00 a.m. local time on February 27,
1998, at the offices of the Trust, 600 West Broadway, 30th Floor, San Diego,
California 92101.
At the meeting shareholders of the Trust will be asked to approve a
reorganization in which the Trust will move from a complex "master-feeder"
structure to a simpler and more economical "multi-class" structure. The
reorganization is administrative in nature and, while it is very important for
the efficient and cost-effective long-term administration of the Trust, it will
not affect the objectives, policies or risks of your investment. You may
benefit, however, from the reduced cost of administering the Trust.
Shareholders will also be asked to elect Trustees to take office when the
reorganization is concluded and to ratify the selection of Ernst & Young L.L.P.
as independent public accountants of the Trust.
The proposals have been carefully reviewed by your Board of Trustees, which
recommends that you approve them. Please read the enclosed materials carefully,
and sign, date and mail the enclosed proxy card(s) promptly in the enclosed
return envelope. Your vote is important for the proper administration of the
Trust.
Thank you for your attention to this matter. If you have any questions on
voting of proxies or the proposals to be considered at the meeting, please call
us toll free at 1-800-551-8045.
[/S/ JOHN D. WYLIE]
John D. Wylie
PRESIDENT
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
800/ 551-8045
------------------------
COMBINED PROXY STATEMENT AND PROSPECTUS
(FOR ALL PORTFOLIOS EXCEPT GOVERNMENT INCOME PORTFOLIOS)
------------------------
This Combined Proxy Statement and Prospectus, which includes a Notice of
Special Meeting of Shareholders, a Proxy Statement and a form of Proxy, is being
furnished in connection with the special meeting of shareholders of
Nicholas-Applegate Mutual Funds (the "Trust") to be held on February 27, 1998,
and any adjournment thereof (the "Meeting"). It is being furnished to the
shareholders of all portfolios of the Trust other than the Government Income
portfolios (the "Portfolios"). Shareholders of the Government Income portfolios
are being asked to approve their reorganization into another portfolio, and are
receiving a separate Combined Proxy Statement and Prospectus in connection with
the Meeting.
The various A, B, C, Qualified and Institutional Portfolios of the Trust and
the Money Market Portfolio of the Trust currently invest all of their assets in
corresponding "master funds" of Nicholas-Applegate Investment Trust. At the
Meeting the shareholders of these Portfolios will be asked to approve a
reorganization in which the Trust will move from this "master-feeder" structure
to a "multi-class" structure. As a result of the reorganization, each Portfolio
will invest directly in portfolio securities rather than through the master
funds, and each shareholder of an A, B, C, Qualified or Institutional Portfolio
will receive Class A, B, C, Q or I shares of a corresponding multi-class series
of the Trust having the same aggregate net asset value as the shares of the
Portfolio held by such shareholder at the time of closing of the reorganization.
The investment objectives, policies and risks of each multi-class series will be
identical to the investment objectives, policies and risks of the corresponding
Portfolios.
The shareholders of the Trust also will be asked to elect Trustees of the
Trust and to ratify the selection of Ernst & Young L.L.P. as independent
accountants.
The Trust is an open-end, management investment company comprised of a
number of diversified portfolios. This Combined Proxy Statement and Prospectus
sets forth concisely the information that a shareholder of the Portfolios should
know before voting on the proposed reorganization and related actions. It should
be read and retained for future reference.
The most recent Prospectuses and Statements of Additional Information
relating to each A, B, C, Qualified and Institutional Portfolio of the Trust are
on file with the Securities and Exchange Commission and are incorporated by
reference herein. They are available without charge by writing or calling the
Trust at its address and telephone number above. The Preliminary Prospectus
relating to the corresponding Class A, B, C, Q or I shares of the Trust to be
distributed to the shareholders pursuant to the reorganization accompanies this
document. The Preliminary Statements of Additional Information relating to the
Class A, B, C, Q and I shares of the Trust are also incorporated herein by
reference and are available without charge by writing or calling the Trust at
its address and telephone number above.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
DATE: JANUARY 12, 1998
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 27, 1998
(FOR ALL PORTFOLIOS EXCEPT GOVERNMENT INCOME PORTFOLIOS)
------------------------
A Special Meeting of shareholders (the "Meeting") of Nicholas-Applegate
Mutual Funds (the "Trust") will be held at the offices of the Trust, 600 West
Broadway, 30th Floor, San Diego, California 92101 at 9:00 a.m. local time on
February 27, 1998.
For shareholders of all portfolios of the Trust other than the Government
Income portfolios (the "Portfolios"), the purpose of the Meeting is:
1. For shareholders of the Institutional Portfolios to vote upon an
amendment to the Declaration of Trust of the Trust authorizing the Board
of Trustees of the Trust to create classes of shares of the Institutional
Portfolios, to rename the Institutional Portfolios as the "Funds" and to
designate the existing Institutional Portfolio shares as "Class I" shares
of the Funds.
2. For shareholders of the Institutional Portfolios and the Money Market
Portfolio to authorize the Board of Trustees to eliminate each such
Portfolio's current policy of investing all of its assets in a
corresponding portfolio of Nicholas-Applegate Investment Trust.
3. For shareholders of the A, B, C, and Qualified Portfolios to vote upon
the proposed reorganization of the A, B, C, and Qualified Portfolios
pursuant to an Agreement and Plan of Reorganization providing for (i) the
receipt by each A, B, C, and Qualified Portfolio of its pro rata portion
of the assets of the corresponding series of Nicholas-Applegate
Investment Trust, upon dissolution of such series; (ii) the transfer by
the A, B, C and Qualified Portfolios of such assets to the corresponding
Fund of the Trust in exchange for Class A, B, C and Q shares of such
Fund; (iii) the receipt by each shareholder of an A, B, C or Qualified
Portfolio of Class A, B, C or Q shares of the corresponding Fund in
exchange for shares of such Portfolio; and (iv) the termination of the A,
B, C and Qualified Portfolios.
4. For all shareholders to elect Trustees of the Trust to hold office until
their successors are elected and qualified.
5. For all shareholders to ratify the selection of Ernst & Young L.L.P. as
independent accountants for the Trust for the fiscal year ended March 31,
1998.
Shareholders of record of the Trust at the close of business on December 19,
1997 will be entitled to notice of and to vote at the Meeting or any adjournment
thereof. Each shareholder is requested to sign, date and return the enclosed
proxy card(s) without delay, even if such shareholder now plans to attend the
Meeting. A postage-paid envelope is enclosed for this purpose. Any shareholder
present at the Meeting may vote personally on all matters brought before the
Meeting and in that event such shareholder's proxy will not be used.
E. Blake Moore, Jr.,
SECRETARY
Nicholas-Applegate Mutual Funds
January 12, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION.............................................................. 1
SHARES AND VOTING......................................................... 2
BACKGROUND OF THE PROPOSED REORGANIZATION................................. 3
PROPOSAL 1. AMENDMENT OF THE DECLARATION OF TRUST......................... 4
PROPOSAL 2. AMENDMENT OF INVESTMENT POLICY................................ 5
PROPOSAL 3. APPROVAL OF THE PROPOSED REORGANIZATION....................... 5
PROPOSAL 4. ELECTION OF TRUSTEES.......................................... 12
PROPOSAL 5. SELECTION OF INDEPENDENT ACCOUNTANTS.......................... 17
OTHER MATTERS............................................................. 17
NEXT MEETING OF SHAREHOLDERS.............................................. 18
APPENDIX A--SHARES AND 5% SHAREHOLDERS BY SERIES AS OF RECORD DATE
APPENDIX B--AGREEMENT AND PLAN OF REORGANIZATION
</TABLE>
<PAGE>
INTRODUCTION
SOLICITATION OF PROXIES
This Combined Proxy Statement and Prospectus (the "Proxy Statement") is
being furnished to the shareholders of Nicholas-Applegate Mutual Funds (the
"Trust") in connection with the solicitation of proxies by the Board of Trustees
of the Trust for use at a special meeting of shareholders to be held on February
27, 1998, and any adjournment thereof (the "Meeting"). It is being furnished to
the shareholders of all portfolios of the Trust other than the Government Income
portfolios (the "Portfolios"). Shareholder of the Government Income portfolios
are being asked to approve their reorganization into another portfolio, and are
receiving a separate Combined Proxy Statement and Prospectus in connection with
the Meeting.
The Meeting will be held at the offices of the Trust, 600 West Broadway,
30th Floor, San Diego, California 92101, for the purposes set forth in the
Notice of Special Meeting of Shareholders and more fully described below. This
Proxy Statement and the enclosed form of proxy (the "Proxy") were first mailed
to shareholders of the Portfolios entitled to vote at the Meeting on or about
January 12, 1998.
PURPOSE OF MEETING
The Meeting has been called for the purpose of considering a reorganization
in which the Trust will move from a "master-feeder" structure to a "multi-class"
structure (the "Reorganization"). Currently, the A, B, C, Qualified and
Institutional Portfolios of the Trust and the Money Market Portfolio of the
Trust, known as "feeder funds," invest all of their assets in shares of
corresponding funds, known as "master funds," of Nicholas-Applegate Investment
Trust (the "Master Trust"). As a result of the Reorganization the Trust will
manage its assets directly rather than through the Master Trust, and each
shareholder of an A, B, C, Qualified or Institutional Portfolio will receive
Class A, B, C, Q or I shares of a corresponding portfolio of the Trust. The
Money Market Portfolio will not have multiple classes, and the series of the
Trust created after August 1, 1997 (the Global Blue Chip Bond Fund, Emerging
Markets Bond Fund, Pacific Rim Fund, Greater China Fund and Latin America Fund)
are not part of the master-feeder structure and will not be affected by the
Reorganization. The Board of Trustees and management of the Trust believe that
the Reorganization will result in substantial economies for the Trust. The
Reorganization will not affect the net asset value of the shares held by any
shareholder; the investment objectives, policies or risks of any Portfolio; or
the basic arrangements for management of the Trust. Legal counsel has advised
the Trust that under the Internal Revenue Code the Reorganization will not
result in taxable income to the Portfolios or their shareholders. Except for the
minor differences described below, shareholders will notice little difference in
the investment represented by their Class A, B, C, Q or I shares or Money Market
shares as compared to the Portfolio shares they now hold.
To accomplish the Reorganization, the shareholders of the Portfolios will be
asked to vote on three matters. First, the shareholders of the Institutional
Portfolios will be asked to approve an amendment to the Declaration of Trust
authorizing the Board of Trustees to create classes of shares of the
Institutional Portfolios (Proposal 1). As described more fully below, the
Institutional Portfolios will be renamed as the "Funds" and the existing
Institutional Portfolio shares will be designated as "Class I" shares of the
Funds. Second, the shareholders of each of the Institutional Portfolios and the
Money Market Portfolio will be asked to authorize the Board of Trustees to
eliminate such Portfolio's current policy of investing all of its assets in the
corresponding portfolio of the Master Trust (Proposal 2). Third, the
shareholders of the A, B, C, and Qualified Portfolios will be asked to approve a
Reorganization Agreement, pursuant to which (i) the A, B, C and Qualified
Portfolios will receive their pro rata portions of the assets of the
corresponding master funds upon the dissolution of the Master Trust; (ii) the A,
B, C and Qualified Portfolios will transfer their assets to the corresponding
Fund in exchange for Class A, B, C and Q shares of such Fund; (iii) the
shareholders of the A, B, C and Qualified Portfolios will receive shares of
1
<PAGE>
corresponding Classes of the Funds in exchange for their current shares, and
(iv) the Portfolios will be terminated (Proposal 3).
All shareholders of the Trust will also be asked to act on two other
matters--the election of Trustees to take office when the Reorganization is
concluded (Proposal 4) and ratification of the selection of Ernst & Young L.L.P.
as independent public accountants to the Trust (Proposal 5).
The following chart summarizes the Proposals on which the shareholders of
the Portfolios will be asked to vote:
<TABLE>
<CAPTION>
INSTITUTIONAL MONEY MARKET A, B, C, AND
PORTFOLIOS PORTFOLIO QUALIFIED PORTFOLIOS
----------------- ------------------- -----------------------
<S> <C> <C> <C>
Proposal 1 (Amend Declaration of Trust)...... X
Proposal 2 (Amend Investment Policy)......... X X
Proposal 3 (Approve Reorganization
Agreement).................................. X
Proposal 4 (Elect Trustees).................. X X X
Proposal 5 (Ratify Independent
Accountants)................................ X X X
<CAPTION>
GLOBAL BLUE CHIP,
EMERGING MARKETS
BOND, AND
PACIFIC RIM FUNDS
-----------------------
<S> <C>
Proposal 1 (Amend Declaration of Trust)......
Proposal 2 (Amend Investment Policy).........
Proposal 3 (Approve Reorganization
Agreement)..................................
Proposal 4 (Elect Trustees).................. X
Proposal 5 (Ratify Independent
Accountants)................................ X
</TABLE>
Nicholas-Applegate Capital Management (the "Investment Adviser") will bear
50% of the cost of solicitation of proxies, including the cost of printing,
preparing, assembling and mailing the Notice of Meeting, Proxy Statement and
form of Proxy, and the balance will be paid by the Trust (allocated among the
various series of the Trust in proportion to their net assets). In addition to
solicitations by mail, proxies may be solicited by officers and regular
employees of the Trust and the Investment Adviser by personal interview, by
telephone or by facsimile. Tritech will also be retained to provide professional
proxy solicitation services. The cost of solicitation, including specified
expenses, is not expected to exceed $275,000.
SHARES AND VOTING
The presence in person or by proxy of more than one-third of the outstanding
shares of beneficial interest of the Trust entitled to vote at the Meeting will
constitute a quorum. If a quorum is not present at the Meeting, sufficient votes
in favor of the Proposals set forth in the Notice of Meeting are not received by
the time scheduled for the Meeting, or the holders of shares present in person
or by proxy determine to adjourn the Meeting for any other reason, the
shareholders present in person or by proxy may adjourn the Meeting from time to
time, without notice other than announcement at the Meeting. Any such
adjournment will require the affirmative vote of shareholders holding a majority
of the shares present in person or by proxy at the Meeting. The persons named in
the Proxy will vote in favor of adjournment those shares which they represent if
adjournment is necessary to obtain a quorum or to obtain a favorable vote on any
Proposal. Business may be conducted once a quorum is present and may continue
until adjournment of the Meeting notwithstanding the withdrawal or temporary
absence of sufficient shares to reduce the number present to less than a quorum.
Each shareholder is entitled to one vote for each full share and a
fractional vote for each fractional share outstanding on the books of the Trust
in the name of the shareholder or his or her nominee on the Record Date. The
Record Date and time for determining those entitled to notice of and to vote at
the Meeting has been fixed at the close of business on December 19, 1997.
At the Record Date, the Trust had 60 series of shares and 236,442,334.025
total shares outstanding, and each series had the number of outstanding shares
indicated in Appendix A. Appendix A also indicates the persons who owned of
record more than 5% of the outstanding shares of each series at the Record
2
<PAGE>
Date. The Trust has no information regarding the beneficial owners of such
shares. Except as indicated in Appendix A, the officers and Trustees of the
Trust as a group beneficially owned less than 1% of the outstanding shares of
each series at the Record Date.
All shares represented by each properly signed Proxy received prior to the
Meeting will be voted at the Meeting. If a shareholder specifies how the Proxy
is to be voted on a Proposal to be considered at the Meeting, it will be voted
as specified. If no direction is made on the Proxy, the Proxy will be voted FOR
the Proposals described in this Proxy Statement. Shareholders voting to ABSTAIN
on a Proposal will be treated as present for purposes of achieving a quorum and
in determining the votes cast on the Proposal. A properly signed Proxy on which
a broker has indicated that it has no authority to vote on a Proposal on behalf
of the beneficial owner (a "broker non-vote") will be treated as present for
purposes of achieving a quorum but will not be counted in determining the votes
cast on the Proposal.
A Proxy may be revoked by a shareholder at any time prior to its use by
written notice to the Trust, by submission of a later dated proxy or by voting
in person at the Meeting. If any other matters come before the Meeting, Proxies
will be voted by the persons named in the Proxy in accordance with their best
judgement.
Shareholders of each Institutional Portfolio will vote separately with
respect to Proposal 1. Shareholders of the Money Market Portfolio and each
Institutional Portfolio will vote separately with respect to Proposal 2.
Shareholders of each A, B, C, and Qualified Portfolio will vote separately with
respect to Proposal 3. All of the shareholders of the Trust will vote in the
aggregate with respect to Proposals 4 and 5.
BACKGROUND OF THE PROPOSED REORGANIZATION
Unlike other mutual funds that acquire their securities directly, the
Portfolios of the Trust created prior to August 1, 1997 invest their assets in
funds of the Master Trust. This two-tier structure is known as a "master-feeder"
structure and it permits one or more feeder funds that have the same investment
objectives but different operating characteristics (such as sales charges,
expenses and investment minimums) to invest in the same master fund.
When the Board of Trustees of the Trust established the master-feeder
structure in 1993, it believed this form of organization would achieve certain
efficiencies of operation and economies of scale. However, since the
establishment of the master-feeder structure, the number of portfolios organized
by the Trust using that structure has increased significantly, to 57.
Furthermore, regulatory developments have occurred enabling mutual fund
complexes to more easily achieve, through the use of multiple classes of shares,
the benefits at one time expected of the master-feeder approach without the
operating costs and technical complexities of a two-tiered structure.
The purpose of the Reorganization is to eliminate the cost and complexity of
a master-feeder structure that has not yielded and is no longer expected to
yield long-term efficiencies of operation and economies of scale. Management of
the Trust expects the Reorganization to save the Trust approximately $1,000,000
per year in fees currently paid to the company which provides day-to-day
accounting services to the Trust. In addition, the number of tax returns
currently filed annually by the Trust and the Master Trust would be reduced from
129 to 38 and separate audits for the master funds would no longer be necessary,
with an annual savings of approximately $180,000. Over time the Trust would also
benefit from the fewer number of required SEC filings and other legal and
administrative cost savings.
As Investment Adviser to the Master Trust, Nicholas-Applegate Capital
Management has to date voluntarily agreed to defer its management fees and to
absorb other operating expenses payable by the Trust and the Master Trust, to
the extent necessary to ensure that the expenses for each Portfolio (other than
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses) do not exceed certain levels.
Accordingly, the shareholders of the Trust have in the past not borne the full
cost of the master-feeder structure. However, the Board of Trustees believes
3
<PAGE>
that the Reorganization will benefit the shareholders of the Trust. Any expenses
in excess of the current expense caps may be borne by the shareholders in the
future, as in subsequent years each Portfolio will reimburse the Investment
Adviser when operating expenses (before recoupment) for the Portfolio are less
than the expense cap. Furthermore, although the Investment Adviser has
maintained these expense caps since the Portfolios commenced operation and has
agreed to maintain them through March 31, 1999, there can be no assurance it
will do so indefinitely in the future.
In addition, the proposed Reorganization will permit the Trust to provide
for the automatic conversion of its current Portfolio B shares to Portfolio A
shares seven years after purchase. Although Portfolio B shares may currently be
exchanged voluntarily for the corresponding Portfolio A shares seven years after
purchase, the exchange is treated as a redemption and purchase for tax purposes.
In the proposed multi-class structure, the Trust will be able to provide for
automatic conversion without adverse federal income tax consequences. Such an
exchange is beneficial for long-term shareholders, as Portfolio A shares have
lower annual distribution-related fees than Portfolio B shares.
The proposed Amendment to the Trust's Declaration of Trust (Proposal 1), the
proposed amendments to the policies of the Money Market Portfolio and
Institutional Portfolios (Proposal 2), the proposed Reorganization (Proposal 3),
and the proposed election of Trustees (Proposal 4) are related parts of a plan
to achieve future operating economies. Neither Proposal 1, Proposal 2 nor
Proposal 3 will be adopted unless all are approved by the shareholders. Proposal
4 will not be adopted unless Proposals 1, 2 and 3 are approved by the
shareholders.
PROPOSAL 1. AMENDMENT OF DECLARATION OF TRUST
At the Meeting, shareholders of the Institutional Portfolios will be asked
to approve an amendment to the Trust's Declaration of Trust to permit the Board
of Trustees to create multiple classes of the Institutional Portfolios.
Section 6.1(b) of the Declaration of Trust currently permits the Board of
Trustees to create multiple classes of a Portfolio only if the Portfolio was
organized after August 1, 1997. The proposed amendment would expand this to
include all of the Institutional Portfolios. The language proposed to be added
to the first sentence of Section 6.1(b) is indicated below by underlining:
The Trustees may, without Holder approval, divide Interests of any
series created after the Effective Date [August 1, 1997], or any
Institutional Portfolio series created prior to the Effective Date, into
two or more classes, Interests of each such class having such
preferences and special or relative rights and privileges (including
conversion rights, if any) as the Trustees may determine.
As described above, upon approval of the proposed amendment, and provided
that Proposal 2 is approved, the Board of Trustees will rename each
Institutional Portfolio of the Trust as a "Fund," will classify the current
shareholders of the Institutional Portfolio as Class I shareholders of the Fund,
and will create Class A, B, C, and Q shares of the Fund to permit the
Reorganization to be implemented.
Approval of the proposed amendment will not have any impact on the
shareholders of the Portfolios other than to permit the tax-free conversion of
Portfolio B shares for Portfolio A shares seven years after their purchase. Each
share of each Portfolio currently is entitled to one vote on each matter
presented to the shareholders of the Portfolio--for matters that affect the
rights and privileges of a Portfolio differently from the rights and privileges
of other series of the Trust, the shareholders of the Portfolio vote separately;
for matters that affect the master fund in which the Portfolio invests (such as
a change in fundamental investment restrictions), the shareholders of the
Portfolio vote together with the shareholders of all other portfolios investing
in the corresponding master fund; and for matters that affect the Trust
generally (such as the election of Trustees), all shareholders vote together.
Similarly each share of each Class of a Fund will be entitled to one vote on
each matter presented to the shareholders of the Class--for matters that affect
the rights and privileges of a Class differently from the rights and privileges
of other Classes of the Fund,
4
<PAGE>
the shareholders of the affected Class will vote separately; for matters that
affect a Fund, the shareholders of each Class will vote together with the
shareholders of all other Classes of the Fund; and for matters that affect the
Trust generally, the shareholders of all Classes of all Funds will vote
together. As is the case for shares of the Portfolios, shares of the Classes
will have no preemptive or subscription rights and no other conversion rights,
and will be freely transferrable.
VOTE REQUIRED
Approval of the proposed amendment requires the affirmative votes of
shareholders holding more than 50% of the outstanding shares of each
Institutional Portfolio voting separately. Approval of this Proposal is
contingent upon approval of Proposals 2 and 3. If shareholders of all the
Institutional Portfolios do not approve this Proposal or it is not implemented
for any other reason, then the Trust will continue its current operation under a
master-feeder structure until the Board of Trustees determines what further
action, if any, to recommend to the shareholders.
PROPOSAL 2. AMENDMENT OF INVESTMENT POLICY
At the meeting, shareholders of the Money Market Portfolio and the
Institutional Portfolios will be asked to authorize the Board of Trustees to
eliminate each such Portfolio's current policy of investing all of its assets in
the corresponding master fund of the Master Trust.
The policies of the Money Market Portfolio and the Institutional Portfolios
currently require them to operate under the "master-feeder" structure, and the
Trust has undertaken to obtain approval of their shareholders before eliminating
the master-feeder structure. As discussed in Proposal 1 and further described in
Proposal 3, upon completion of the Reorganization the Trust will move to a
"multi-class" structure, and all of the shareholders of the A, B, C and
Qualified Portfolios will become shareholders of corresponding Classes of the
Institutional Portfolios (which will be renamed as the "Funds" and will invest
their assets directly rather than through the Master Trust).
Approval of this proposed change in policy will have the impacts discussed
in Proposal 3.
VOTE REQUIRED
Approval of the proposed change in policy requires the affirmative votes of
shareholders holding more than 50% of the outstanding shares of the Money Market
Portfolio and each Institutional Portfolio voting seperately. Approval of this
Proposal is contingent upon approval of Proposals 1 and 3. If shareholders of
the Money Market Portfolio and all the Institutional Portfolios do not approve
this Proposal or it is not implemented for any other reason, then the Trust will
continue its current operation under a master-feeder structure until the Board
of Trustees determines what further action, if any, to recommend to the
shareholders.
PROPOSAL 3. APPROVAL OF THE PROPOSED REORGANIZATION
At the Meeting, shareholders of the A, B, C, and Qualified Portfolios will
be asked to approve the proposed Reorganization.
DESCRIPTION OF THE PROPOSED REORGANIZATION
THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization will be completed
are set forth in the Agreement and Plan of Reorganization (the "Reorganization
Agreement") attached as Appendix B. The following is a summary of the
Reorganization Agreement.
5
<PAGE>
The Reorganization Agreement provides for the completion of the
Reorganization (the "Closing") in several steps:
First, each Institutional Portfolio and the Money Market Portfolio will be
renamed a "Fund." For example, the Core Growth Institutional Portfolio will
be renamed the Core Growth Fund.
Second, the Board of Trustees will create multiple Classes of shares of each
Fund (other than the Money Market Fund). The current Institutional Portfolio
shares will be renamed the "Class I" shares. For example, the shares of the
Core Growth Institutional Portfolio will be renamed the Class I shares of
the Core Growth Fund. The Board of Trustees will also create new Class A, B,
C and Q shares of each Fund.
Third, each master fund will dissolve and distribute its assets in kind
(i.e., in the form of the stocks, bonds and other investments held by the
master fund) to the corresponding A, B, C and Qualified Portfolios. The
Money Market Fund and each Fund which was previously named an Institutional
Portfolio will also receive assets in kind from the corresponding master
fund of the Master Trust.
Fourth, the A, B, C and Qualified Portfolios will transfer their assets to
the corresponding Fund. For example, the portfolio assets of Core Growth
Portfolio A will be received from the Core Growth master fund and
transferred to the Core Growth Fund of the Trust. In exchange, Core Growth
Portfolio A will receive a similar number of Class A shares of the Core
Growth Fund.
Fifth, each A, B, C and Qualified Portfolio will distribute the Fund shares
it receives to its shareholders, and will dissolve. For example, Core Growth
Portfolio A will distribute the Class A shares of the Core Growth Fund to
its shareholders. Each former shareholder of Core Growth Portfolio A will
then hold Class A shares of the Core Growth Fund with the same net asset
value as his Core Growth Portfolio A shares.
Finally, Nicholas-Applegate Capital Management, which currently acts as
investment adviser to the Master Trust, will enter into an Investment
Advisory Agreement with the Trust with provisions identical in all material
respects to those of its current investment advisory agreement with the
Master Trust.
The Closing is subject to various conditions, including approval of
Proposals 1 and 2, approval of the Reorganization by a majority of shares of
each A, B, C, and Qualified Portfolio, dissolution of the master funds,
completion of all filings with, and receipt of all necessary orders and
approvals from, the Securities and Exchange Commission (the "SEC"), delivery of
legal opinions regarding the Federal tax consequences of the Reorganization, and
other customary corporate and securities matters. Any conditions may be waived
by the Board of Trustees of the Trust if, in its judgment, such waiver will not
have a material adverse effect on the interests of the shareholders. The
Reorganization Agreement may be terminated at any time if the Board of Trustees
determines in good faith that the Reorganization is not in the best interests of
the shareholders.
FEDERAL TAX CONSEQUENCES
The Trust has received an opinion from Paul, Hastings, Janofsky & Walker
LLP, the legal counsel to the Trust, to the effect that under the Internal
Revenue Code the Reorganization will not result in any taxable income to the
Portfolios or their shareholders. This legal opinion is not binding on the
Internal Revenue Service or any other taxing authority, and the Trust does not
intend to seek a private letter ruling or advisory opinion from the Internal
Revenue Service with respect to the tax effects of the Reorganization.
6
<PAGE>
CHANGE OF FUND NAMES
After the Reorganization is completed, the names of certain of the Funds
will be changed to better reflect their investment objectives and policies, as
follows:
<TABLE>
<S> <C> <C>
The Emerging Growth Fund will become the Small Cap Growth Fund
The Core Growth Fund will become the Mid Cap Growth Fund
The Income & Growth Fund will become the Convertible Fund
The Fully Discretionary Fund will become the High Quality Bond Fund
</TABLE>
COMPARISON OF THE PORTFOLIOS AND THE FUNDS
The Trust is an open-end management investment company currently offering a
number of separate diversified portfolios with differing sales load, shareholder
services plan and distribution plan arrangements. The Trust was organized in
December 1992 as a business trust under the laws of the State of Delaware. If
the Reorganization is approved and completed, shareholders of each Institutional
Portfolio series of the Trust will become Class I shareholders of the same
series (which will be renamed a "Fund"), and shareholders of each A, B, C and
Qualified Portfolio series of the Trust will become shareholders of the similar
Class of the corresponding Fund. The net asset value of the shares of each Class
of a Fund held by a shareholder immediately after the Reorganization will be the
same as the net asset value of the shares of the corresponding Portfolio held by
the shareholder immediately prior to the Reorganization.
A brief comparison of the Portfolios with the new Funds is set forth below:
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objectives, policies and restrictions under which the assets
of the Portfolios presently are managed will not be affected by the proposed
Reorganization, except that, rather than investing all of its investible assets
in a corresponding master fund of the Master Trust, each Fund will seek to
achieve the same investment objectives by engaging an investment adviser to
directly manage its assets. The investment objectives, policies and restrictions
of the Funds will be the same as those in effect for the Portfolios and the
master fund of the Master Trust immediately prior to the Reorganization.
INVESTMENT ADVISER
The assets of the Master Trust are managed by Nicholas-Applegate Capital
Management (the "Investment Adviser"). The Portfolios currently invest their
assets in the master funds of the Master Trust managed by the Investment
Adviser, and the Portfolios do not themselves engage the services of the
Investment Adviser or any other investment manager. Upon completion of the
Reorganization, the Trust will enter into a new investment advisory agreement
with the Investment Adviser on behalf of each Fund, on terms and conditions
substantially identical to the terms and conditions of the current investment
advisory agreement between the Investment Adviser and the Master Trust.
Accordingly, there will be no separate shareholder vote on the new agreement.
ADMINISTRATIVE SERVICES
Investment Company Administration Corporation ("ICAC") serves as principal
administrator of the Trust and the Master Trust and, pursuant to Administration
Agreements with the Trust and the Master Trust, is responsible for performing
all administrative services required for the daily business operations of the
Trust and the Master Trust, subject to the supervision of the Board of Trustees
of the Trust and the Master Trust. After the Reorganization, the Master Trust's
Administration Agreement will be terminated and the Trust will enter into a new
Administration Agreement on terms and conditions substantially identical to
those applicable to the Portfolios immediately prior to the Reorganization
except for the fee adjustment described below.
7
<PAGE>
The total fees paid to ICAC with respect to the Portfolios and the
corresponding master funds for the fiscal year ended March 31, 1997 were
$554,625 (.04% of the Portfolios' average net assets). Under its new
Administration Agreement with the Trust, ICAC will receive annual fees from each
Fund equal to the Fund's pro rata portion (based on its net assets compared to
the Trust's net assets) of a fee equal to 0.05% of the first $100 million of the
Trust's average net assets, 0.04% of the next $150 million, 0.03% of the next
$300 million, 0.02% of the next $300 million and 0.01% thereafter, subject to a
$40,000 annual minimum. If this fee arrangement had been in effect for the year
ended March 31, 1997, the total fees paid to ICAC with respect to the Portfolios
would have been unchanged -- $554,625 (.04% of the Portfolios' average net
assets).
Pursuant to an Administrative Services Agreement with the Trust, the
Investment Adviser is currently responsible for providing all administrative
services to the Trust which are not provided by ICAC or by the Trust's
distributor, transfer agents, accounting agents, independent accountants and
legal counsel. The Administrative Services Agreement will be amended to add the
Funds as parties on terms and conditions substantially identical to the terms
and conditions applicable to the Portfolios immediately prior to the
Reorganization.
PFPC Inc. currently provides day-to-day accounting services to the Trust and
the Master Trust pursuant to Accounting Services Agreement with the Trust and
the Master Trust. After the Reorganization, the Master Trust's Accounting
Services Agreement will be terminated, and the fee schedule for the Trust's
Accounting Services Agreement will be amended.
Under its current Accounting Services Agreement with the Trust, PFPC
receives annual fees from each Portfolio of $31,200 and from each corresponding
master fund equal to $6,250 plus 0.03% of average daily net assets from $100
million to $250 million, 0.02% of the next $250 million, and 0.15% thereafter.
The total fees paid to PFPC with respect to the Portfolios and the corresponding
master funds for the fiscal year ended March 31, 1997 were $2,205,940 (.166% of
the Portfolios' average net assets). Under its new fee schedule with the Trust,
PFPC will receive annual fees from each Fund equal to its pro rata portion
(based on its net assets compared to the Trust's net assets) of a fee equal to
$6,250 per Fund plus 0.03% of each Fund's average daily net assets from $100
million to $250 million, 0.02% of the next $250 million, and 0.15% over $500
million. If this arrangement had been in effect for the year ended March 31,
1997, the total fees paid to PFPC with respect to the Portfolios would have been
$1,284,340 (.10% of the Portfolios' average net assets).
DISTRIBUTOR, TRANSFER AGENT AND CUSTODIAN
Nicholas-Applegate Securities serves as the principal underwriter and
distributor for the Trust pursuant to a Distribution Agreement with the Trust.
State Street Bank and Trust Company serves as the transfer agent for the Trust
pursuant to a Transfer Agency and Services Agreement with the Trust. PNC Bank
serves as the custodian for the Trust pursuant to a Custodian Services Agreement
with the Trust. The Distribution Agreement, the Transfer Agency and Service
Agreement and the Custodian Services Agreement will be amended to incorporate
the multi-class Funds on terms and conditions substantially identical to the
terms and conditions applicable to the Portfolios immediately prior to the
Reorganization. The Master Trust has similar arrangements for which it pays
nominal fees, which will be terminated upon completion of the Reorganization.
In addition, securities of many foreign issuers currently owned by the
master funds are held by The Chase Manhattan Bank and certain foreign
sub-custodians, pursuant to a Sub-Custodian Agreement with the Master Trust and
PNC Bank. Upon completion of the Reorganization, the Trust will enter into a
sub-custodian agreement on substantially the same terms.
8
<PAGE>
PRO FORMA EXPENSES
As discussed above, the Board of Trustees believes that the Reorganization
will result in substantial expense savings. The following table indicates the
current total annual operating expenses for each Portfolio as a percentage of
average net assets for the fiscal year ended March 31, 1997 (and, for Portfolios
not then in operation, estimated expenses for their first twelve months of
operation), and the pro forma operating expenses for each corresponding Class
assuming the Reorganization had been implemented on that date. It also indicates
the current expense limitations voluntarily imposed by Nicholas-Applegate
Capital Management through March 31, 1999, which would not be changed by the
Reorganization.
<TABLE>
<CAPTION>
TOTAL ANNUAL PRO FORMA CURRENT
OPERATING OPERATING VOLUNTARY
EXPENSES EXPENSES EXPENSE LIMITS
------------ ---------- --------------
<S> <C> <C> <C>
Balanced Growth Portfolio - A.......................................... 3.00% 2.64% 1.60%
Balanced Growth Portfolio - B.......................................... 6.44 5.18 2.25
Balanced Growth Portfolio - C.......................................... 2.83 2.71 2.25
Balanced Growth Portfolio - I.......................................... 7.37 4.00 1.00
Balanced Growth Portfolio - Q.......................................... 126.75 53.56 1.25
Core Growth Portfolio - A.............................................. 1.56 1.53 1.60
Core Growth Portfolio - B.............................................. 2.66 2.57 2.25
Core Growth Portfolio - C.............................................. 2.17 2.16 2.25
Core Growth Portfolio - I.............................................. 1.02 1.01 1.00
Core Growth Portfolio - Q.............................................. 1.84 1.63 1.25
Emerging Countries Portfolio - A....................................... 3.08 2.95 2.25
Emerging Countries Portfolio - B....................................... 3.66 3.47 2.90
Emerging Countries Portfolio - C....................................... 3.12 2.97 2.90
Emerging Countries Portfolio - I....................................... 1.67 1.80 1.65
Emerging Countries Portfolio - Q....................................... 4.20 3.07 1.90
Emerging Growth Portfolio - A.......................................... 1.72 1.71 1.95
Emerging Growth Portfolio - B.......................................... 2.73 2.64 2.60
Emerging Growth Portfolio - C.......................................... 2.35 2.34 2.60
Emerging Growth Portfolio - I.......................................... 1.26 1.25 1.17
Emerging Growth Portfolio - Q.......................................... 10.79 7.46 1.50
Fully Discretionary Fixed Income Portfolio - I......................... 3.74 3.25 0.45
High Yield Bond Portfolio - I.......................................... 1.95 1.35 0.75
Income & Growth Portfolio - A.......................................... 1.75 1.68 1.60
Income & Growth Portfolio - B.......................................... 3.19 2.88 2.25
Income & Growth Portfolio - C.......................................... 2.29 2.26 2.25
Income & Growth Portfolio - I.......................................... 1.37 1.25 1.00
Income & Growth Portfolio - Q.......................................... 2.90 2.19 1.25
International Core Growth Portfolio - A................................ 4,579.78 3,405.35 1.95
International Core Growth Portfolio - B................................ 16,000.25 14,163.12 2.60
International Core Growth Portfolio - C................................ 25.55 17.21 2.60
International Core Growth Portfolio - I................................ 3.14 2.33 1.40
International Core Growth Portfolio - Q................................ 2,667.07 885.65 1.65
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
TOTAL ANNUAL PRO FORMA CURRENT
OPERATING OPERATING VOLUNTARY
EXPENSES EXPENSES EXPENSE LIMITS
------------ ---------- --------------
<S> <C> <C> <C>
International Small Cap Growth Portfolio - A........................... 3.76 3.00 1.95
International Small Cap Growth Portfolio - B........................... 4.89 4.18 2.60
International Small Cap Growth Portfolio - C........................... 3.95 3.16 2.60
International Small Cap Growth Portfolio - I........................... 1.68 1.62 1.40
International Small Cap Growth Portfolio - Q........................... 151.33 73.99 1.65
Large Cap Growth Portfolio - I......................................... 4.99 3.51 1.00
Mini-Cap Portfolio - I................................................. 1.99 1.92 1.56
Money Market Portfolio................................................. 1.73 1.61 1.10
Short-Intermediate Fixed Income Portfolio - I.......................... 2.86 2.54 0.35
Strategic Income Portfolio - I......................................... 1.66 1.66 0.75
Value Portfolio - I.................................................... 3.34 2.48 1.00
Worldwide Growth Portfolio - A......................................... 2.17 2.08 1.85
Worldwide Growth Portfolio - B......................................... 4.81 4.24 2.50
Worldwide Growth Portfolio - C......................................... 2.61 2.58 2.50
Worldwide Growth Portfolio - I......................................... 3.05 2.20 1.35
Worldwide Growth Portfolio - Q......................................... 34.99 18.40 1.60
Global Growth and Income Portfolio - I................................. 4.55 3.36 1.35
Large Cap Growth Portfolio - A......................................... 3.40 2.76 1.60
Large Cap Growth Portfolio - B......................................... 3.60 3.14 2.25
Large Cap Growth Portfolio - C......................................... 3.60 2.90 2.25
Large Cap Growth Portfolio - Q......................................... 3.90 3.13 1.25
</TABLE>
See the accompanying Fund prospectuses for further fee and expense tables
with respect to the Funds, which are unchanged from the current tables for the
various Portfolios as a result of the current voluntary expense limitations. Pro
forma capitalization information has not been included for the various
Portfolios as it would not change from the current information.
PURCHASES AND REDEMPTIONS
Following the Reorganization, shareholders of the Money Market Portfolio and
shareholders of the other Portfolios who receive shares of corresponding Classes
of the Funds in the Reorganization will be able to purchase and redeem shares in
the Funds in substantially the same manner and subject to substantially the same
conditions as shares in the Portfolios presently are purchased and redeemed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Following the Reorganization, the Funds will declare and pay dividends and
calculate and make distributions of net capital gains, if any, in a manner
identical to that of the Portfolios.
The Trust has elected to qualify each Portfolio as a regulated investment
company under Subchapter M of the Code, and intends that each Fund will remain
so qualified. As a regulated investment
10
<PAGE>
company, upon consummation of the Reorganization each Fund will be entitled to
the same benefits and subject to the same tax regulations as the Portfolios
immediately prior to the Reorganization.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Investment Adviser will execute the portfolio transactions and allocate
the brokerage business of the Funds subject to policies established by the Board
of Trustees of the Trust which are substantially identical to those in effect
with respect to the master funds of the Master Trust immediately prior to the
Reorganization.
SHAREHOLDERS' RIGHTS
The rights of shareholders of the Funds will be identical in all material
respects to those of shareholders of the Portfolios, except that Class B shares
will convert automatically to Class A shares seven years after purchase. As was
the case before the Reorganization, the shareholders of the Trust will vote in
the aggregate on all matters except those affecting only a particular Fund or
Class, in which case only the shareholders of the affected Fund or Class will
vote. Because the Reorganization will increase the size of the Funds, the voting
power of individual shareholders will be diluted with respect to matters on
which shareholders vote on a Fund-wide basis rather than on an individual Class
basis.
RISK FACTORS
The Funds will have investment objectives, policies and restrictions which
are identical to those of the Portfolios and the corresponding master funds of
the Master Trust, except that the Funds will invest their assets directly rather
than through the Master Trust. In addition, the Funds will be administered in
every material respect in a substantially identical manner to the Portfolios.
Consequently, the risks associated with investing in the Funds will be no
different than those associated with investing in the Portfolios.
FURTHER INFORMATION ABOUT THE PORTFOLIOS AND THE FUNDS
Further information about the Portfolios and the Funds is contained in their
current prospectuses and statements of additional information, which are
incorporated herein by reference. Copies of the relevant Fund prospectuses
accompany this Proxy Statement. The Trust will also provide its most recent
annual reports to shareholders with respect to the Portfolios for the year ended
March 31, 1997, and its semiannual reports to shareholders for the six months
ended September 30, 1997, upon request. These documents are available without
charge by writing to the Trust at 600 West Broadway, San Diego, California
92101, or by calling (800) 551-8045.
The Trust is subject to the information requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, and as required by
those Acts file reports, proxy statements and other information with the
Securities and Exchange Commission. Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Room maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C., and at the SEC's
regional offices at 219 South Dearborn Street, Chicago, Illinois and 75 Park
Place, New York, New York. They may also be viewed on the Internet at
www.sec.gov. Copies of such materials can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information Services
of the SEC, Washington, D.C. 20549.
APPROVAL OF THE BOARD OF TRUSTEES
In reviewing the proposed Reorganization, the Board of Trustees of the Trust
inquired into a number of matters and considered the following factors, among
others: (1) the identity of objectives, policies and restrictions of the Funds
with those of the Portfolios; (2) the cash savings that potentially may be
achieved by collapsing the master-feeder structure into a single, multi-class
fund structure through the elimination of duplicate expenses; (3) the reduced
expenses that potentially may result from the Reorganization;
11
<PAGE>
(4) the greater likelihood of asset growth that potentially may result from a
more competitive expense ratio, and the greater economies of scale that can be
achieved from such asset growth; (5) the tax-free nature of the Reorganization;
(6) the benefits to Class B shareholders of the automatic conversion of their
shares after seven years to Class A shares without adverse federal tax
consequences; and (7) the terms and conditions of the Reorganization Agreement,
including the agreement of Nicholas-Applegate Capital Management to pay 50% of
the expenses of the Reorganization.
The Board of Trustees of the Trust approved the Reorganization on August 15,
1997, subject to shareholder approval. The Board of Trustees determined that the
proposed new structure will eliminate the cost and complexity of maintaining the
master-feeder structure and benefit the shareholders of the Portfolios by
reducing the expense ratios of the Portfolios. In addition to that immediate
benefit to existing shareholders, the Board of Trustees believes this more
competitive expense ratio will make investment in shares of the Funds more
attractive to investors, and will increase the opportunity for further asset
growth. Any such asset growth potentially will enable shareholders of the Funds
to obtain economies of scale by spreading certain expenses over a larger asset
base and, with respect to certain Funds, by potentially reaching an asset
breakpoint in the rate of the investment advisory fee payable to the Investment
Adviser. There can be no assurance, however, that such asset growth and
economies of scale will be realized.
VOTE REQUIRED
Approval of the Reorganization requires the affirmative votes of
shareholders holding more than 50% of the outstanding shares of each of the A,
B, C and Qualified Portfolios. Approval of this Proposal is contingent upon
approval of Proposals 1 and 2. If the shareholders of all the A, B, C and
Qualified Portfolios do not approve the proposed Reorganization, or the
Reorganization is not completed for any other reason, then the Trust will
continue its current form of operation until the Board of Trustees determines
what further action, if any, to recommend to the shareholders.
PROPOSAL 4. ELECTION OF TRUSTEES
At the Meeting, shareholders will be asked to elect Trustees of the Trust to
hold office until their successors are elected.
The Proxy holders intend to vote for the election of the nominees named
below, all of whom are currently Trustees of the Trust or the Master Trust. All
of the nominees have consented to be named and have indicated their intent to
serve if elected. If any nominee is unavailable for any reason, the Proxy
holders will consult with the Board of Trustees of the Trust in determining how
to vote the shares represented by them.
The following table indicates, as to each of the nominees for election as a
Trustee, his or her name, position with the Trust or Master Trust, age,
principal occupation during the past five years, other directorships held in
public companies and the number of shares of the Trust beneficially owned at the
Record Date. Unless otherwise indicated and subject to applicable community
property and similar laws, each nominee has sole voting and investment power
with respect to the shares of the Trust beneficially
12
<PAGE>
owned. Trustees whose names are followed by an asterisk are "interested persons"
of the Trust (as defined by the Investment Company Act of 1940, as amended).
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND
NAME, POSITION AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ------------------------------- ---------------------------------------------------------------- --------------
<S> <C> <C>
FRED C. APPLEGATE, Private investor (since January 1992); formerly President,
Trustee and Chairman of the Nicholas-Applegate Capital Management (from August 1984 to
Board of Trustees (__) (2) December 1991). Director of Nicholas-Applegate Fund, Inc. (since
1987). Mr. Applegate's interests in Nicholas-Applegate Capital
Management, Inc., the general partner of the Investment Adviser,
were acquired by Mr. Nicholas in 1991 and 1992.
ARTHUR B. LAFFER, Chairman, A.B. Laffer, V.A. Canto & Associates, an economic
Trustee (__)*(3) consulting firm (since 1979); Chairman, Laffer Advisors
Incorporated, economic consultants (since 1981); Director,
Nicholas-Applegate Fund, Inc. (since 1987), U.S. Filter
Corporation (since 1991), MasTec, Inc. (construction) (since
1994), and Coinmach Laundry Corporation (since 1996); Chairman,
Calport Asset Management, Inc. (since 1992); formerly
Distinguished University Professor and Director, Pepperdine
University (from September 1985 to May 1988) and Professor of
Business Economics, University of Southern California (1976 to
1984).
CHARLES E. YOUNG, Chancellor, University of California at Los Angeles (1968-1997);
Trustee (__) (2) Director, Nicholas-Applegate Fund, Inc. (since 1992); Director,
Intel Corp. (since 1974), Academy of Television Arts and
Sciences Foundation (since 1988), Los Angeles World Affairs
Council (since 1977) and Town Hall of California (since 1982).
ARTHUR E. NICHOLAS, Trustee and Chairman of the Board of Trustees of the Master
Trustee (__)* Trust; Managing Partner and Chief Investment Officer,
Nicholas-Applegate Capital Management, (since 1984), and
Chairman/President, Nicholas-Applegate Securities (since 1992).
Director and Chairman of the Board of Directors of
Nicholas-Applegate Fund, Inc., a registered open-end investment
company, (since 1987).
DANN V. ANGELOFF, Trustee of the Master Trust; President, The Angeloff Company,
Trustee (__) corporate financial advisers (since 1976); Director,
Nicholas-Applegate Fund, Inc. (since 1987); Trustee (1979 to
1987) and University Counselor to the President (since 1987),
University of Southern California; Director, Public Storage,
Inc., a real estate investment trust (since 1980), Storage
Properties, a real estate investment trust (since 1989),
Datametrics Corporation, a producer of computer peripherals and
communication products (since 1993), SEDA Specialty Packaging,
Inc. (since 1993), and Leslies Poolmart, a distributor of
swimming pool services and products (since 1996).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND
NAME, POSITION AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ------------------------------- ---------------------------------------------------------------- --------------
<S> <C> <C>
WALTER E. AUCH, Trustee of the Master Trust; Director, Geotech Communications,
Trustee (__)*(4) Inc., a mobile radio communications company (since 1987), Fort
Dearborn Fund (since 1987), Brinson Funds (since 1994), Smith
Barney Trak Fund (since 1992), registered investment companies;
Director, Pimco Advisors L.P., an investment manager (since
1994), Banyan Realty Fund (since 1987), Banyan Strategic Land
Fund (since 1987), Banyan Strategic Land Fund II (since 1988),
and Banyan Mortgage Fund (since 1988), real estate investment
trusts. Formerly Chairman and Chief Executive Officer, Chicago
Board Options Exchange (1979 to 1986) and Senior Executive Vice
President, Director and Member of the Executive Committee,
PaineWebber, Inc. (until 1979).
THEODORE J. COBURN, Trustee of the Master Trust; Partner, Brown, Coburn & Co., an
Trustee (__) investment banking firm (since 1991); research associate,
Harvard Graduate School of Education (since 1996); Director,
Nicholas-Applegate Fund, Inc. (since 1987), Emerging Germany
Fund (since 1991), Moovies, Inc. (since 1995). Formerly Managing
Director of Global Equity Transactions Group, and member of
Board of Directors, Prudential Securities (1986 to June 1991).
DARLENE DEREMER, Trustee of the Master Trust; President and Founder, DeRemer
Trustee (--)*(5) Associates, a marketing consultant for the financial services
industry (since 1987); Vice President, PBNG Funds, Inc. (since
1995); formerly Vice President and Director, Asset Management
Division, State Street Bank and Trust Company (from 1982 to
1987), and Vice President, T. Rowe Price & Associates (1979 to
1982); Director, Jurika & Voyles Fund Group (since 1994), and
King's Wood Montessori School (since 1995); Member of Advisory
Board, Financial Women's Association (since 1995).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND
NAME, POSITION AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ------------------------------- ---------------------------------------------------------------- --------------
<S> <C> <C>
GEORGE F. KEANE, Trustee of the Master Trust; President Emeritus and
Trustee (__) Senior Investment Adviser, The Common Fund, a
non-profit investment management organization
representing educational institutions (since 1993),
after serving as its President (from 1971 to 1992);
Member of Investment Advisory Committee, New York
State Common Retirement Fund (since 1982); Director
and Chairman of the Investment Committee, United
Negro College Fund (since 1987); Director, Investor
Responsibility Research Center (since 1987), United
Educators Risk Retention Group (since 1989), RCB
Trust Company (since 1991), School, College and
University Underwriters Ltd. (since 1986), The
Bramwell Funds, Inc. (since 1994), Universal
Stainless & Alloy Products, Inc. (since 1994),
Chairman of the Board, Trigen Energy Corporation
(since 1994); Trustee, Fairfield University (since
1993). Formerly President, Endowment Advisers, Inc.
(from August 1987 to December 1992).
</TABLE>
- - ------------------------
(1)Trust Shares beneficially owned by the person constitute less than 1% of the
outstanding shares of each series.
(2) Member of the Trust's Audit Committee and Nominating Committee.
(3) Mr. Laffer will be considered to be an "interested person" of the Trust
because A.B. Laffer, V.A. Canto & Associates has received substantial
compensation from the Investment Adviser for consulting services provided
from time to time to the Investment Adviser, and because during the last two
fiscal years his son was an employee of the Investment Adviser.
(4) Mr. Auch will be considered to be an "interested person" of the Trust
because he is on the board of a company a subsidiary of which is a
broker-dealer.
(5) Ms. DeRemer will be considered to be an "interested person" of the Trust
because DeRemer Associates has received substantial compensation from the
Investment Adviser for consulting services provided in connection with its
institutional business.
The Board of Trustees of the Trust met four times during the fiscal year
ended March 31, 1997. All of the Trustees attended at least 75% of the meetings.
The members of the Audit Committee of the Board of Trustees of the Trust,
neither of whom is affiliated with the Investment Advisor, oversee and review
the audit procedures of the Trust and assist the Board in fulfilling its
responsibilities relating to Trust accounting and reporting practices. During
the fiscal year ended March 31, 1997, the Audit Committee held two meetings. The
same persons serve as members of the Nominating Committee of the Board of
Trustees, and are responsible for nominating persons to fill vacancies on the
Board. The Nominating Committee did not meet during the fiscal year ended March
31, 1997.
15
<PAGE>
OFFICERS OF THE TRUST
The following table indicates, as to each executive officer of the Trust,
his or her name, position with the Trust, principal occupational during the past
five years, other directorships held in public companies and the number of
shares of the Trust beneficially owned at the Record Date.
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY AND
NAME AND POSITION PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ----------------------------- ------------------------------------------------------------------ -------------------
<S> <C> <C>
JOHN D. WYLIE President of the Master Trust; Partner (since January 1994), Chief
President Investment Officer--Investor Services Group (since December
1995), and Portfolio Manager (since January 1990),
Nicholas-Applegate Capital Management.
THOMAS PINDELSKI Chief Financial Officer of the Master Trust; Partner (since
Chief Financial Officer January 1996) and Chief Financial Officer, Nicholas-Applegate
Capital Management (since January 1993), and Chief Financial
Officer, Nicholas-Applegate Securities (since January 1993);
formerly Chief Financial Officer, Aurora Capital Partners/WSGP
Partners L.P., an investment partnership (from November 1988 to
January 1993), and Vice President and Controller, Security
Pacific Merchant Banking Group (from November 1986 to November
1988).
PETER J. JOHNSON Vice President of the Master Trust; Partner, Nicholas- Applegate
Vice President Capital Management (since January 1992) and Vice President,
Nicholas-Applegate Securities (since December 1995); formerly
Marketing Director, Pacific Financial Asset Management Company,
an investment management firm (from July 1989 to December 1991),
and Senior Marketing Representative, Fidelity Investments
Institutional Services (from August 1987 to July 1989).
E. BLAKE MOORE, JR. Secretary of the Master Trust; Partner (since January 1998),
Secretary General Counsel and Secretary, Nicholas-Applegate Capital
Management and Nicholas-Applegate Securities (since 1993);
formerly Attorney, Luce, Forward, Hamilton & Scripps (from 1989
to 1993).
</TABLE>
- - ------------------------
(1) Shares beneficially owned constitute less than 1% of the outstanding shares
of each series.
16
<PAGE>
REMUNERATION OF TRUSTEES AND OFFICERS
Each Trustee of the Trust and the Master Trust who is not an officer or
affiliate of the Trust or the Master Trust, the Investment Adviser or the
Distributor receives an aggregate annual fee of $14,000 for services rendered as
a Trustee, and $1,000 for each meeting attended ($2,000 per committee meeting
for committee chairmen). Each Trustee is also reimbursed for out-of-pocket
expenses incurred as a Trustee.
The following table sets forth the aggregate compensation paid by the Trust
and the Master Trust for the fiscal year ended March 31, 1997, to the Trustees
who are not affiliated with the Investment Adviser and the aggregate
compensation paid to such Trustees for service on the Trust's or Master Trust's
board and that of all other funds in the "Trust complex" (as defined in Schedule
14A under the Securities Exchange Act of 1934):
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED TOTAL
AGGREGATE BENEFITS ANNUAL COMPENSATION
COMPENSATION ACCRUED AS BENEFITS FROM TRUST
FROM TRUST OR PART OF TRUST UPON COMPLEX PAID
NAME MASTER TRUST EXPENSES RETIREMENT TO TRUSTEE
- - ------------------------------------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Fred C. Applegate...................................... $ 10,635 None N/A $ 36,250(47*)
Arthur B. Laffer....................................... $ 9,558 None N/A $ 31,750(47*)
Charles E. Young....................................... $ 9,827 None N/A $ 31,750(47*)
Dann V. Angeloff....................................... $ 10,635 None N/A $ 36,750(16*)
Walter E. Auch......................................... $ 9,827 None N/A $ 18,250(15*)
Theodore J. Coburn..................................... $ 9,827 None N/A $ 34,250(16*)
Darlene DeRemer........................................ $ 9,558 None N/A $ 17,250(15*)
George F. Keane........................................ $ 9,827 None N/A $ 18,250(15*)
</TABLE>
- - ------------------------
* Indicates number of funds in Trust complex.
VOTE REQUIRED
A plurality of votes cast at the Meeting, in person or by proxy, will elect
a Trustee. Election of Trustees is contingent upon completion of the
Reorganization. If for any reason the Reorganization is not completed, the
current Trustees of the Trust will remain in office.
PROPOSAL 5. SELECTION OF INDEPENDENT ACCOUNTANTS
At the meeting, shareholders will be asked to ratify the selection by the
Board of Trustees of the Trust of Ernst & Young L.L.P. as the independent
accountants to the Trust for the fiscal year ended March 31, 1998. Ernst & Young
L.L.P. has acted as independent accountants to the Trust since 1996.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Trust present in
person or by proxy at the Meeting is required to ratify the selection of Ernst &
Young L.L.P. as independent accountants for the Trust. If for any reason this
Proposal is not approved, the Board of Trustees of the Trust will take such
action as they deem appropriate, which may include retention of another
accounting firm or re-proposal of Ernst & Young L.L.P. to the shareholders of
the Trust.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, management has not
been informed of any matters that will be presented for action at the Meeting
other than the Proposals listed in the Notice of Meeting. If other matters are
properly presented to the Meeting for action, the persons named in the Proxy
will vote or refrain from voting in accordance with their best judgment on those
matters.
17
<PAGE>
NEXT MEETING OF SHAREHOLDERS
The Trust is not required to hold annual or other periodic meetings of
shareholders except as required by the Investment Company Act, and does not
intend to do so. The next meeting of shareholders will be held at such time as
the Board of Trustees of the Trust may determine or at such time as may be
legally required. Any shareholder proposal intended to be presented at such
meeting must be received by the Trust at its office a reasonable time prior to
the meeting, as determined by the Board of Trustees, to be included in the
Trust's proxy statement and form of proxy relating to such meeting, and must
satisfy all other federal and state legal requirements.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE
18
<PAGE>
APPENDIX A
5% SHAREHOLDERS BY SERIES AS OF RECORD DATE
<PAGE>
APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made as of
the 1st day of January, 1998, by and among Nicholas-Applegate Mutual Funds, a
Delaware business trust (the "Trust") on behalf of the A, B, C and Qualified
Portfolio series of the Trust other than the Government Income A, B, C and
Qualified Portfolios (each a "Portfolio" and, collectively, the "Portfolios"),
and the Trust on behalf of the corresponding Institutional Portfolio series of
the Trust (each an "Institutional Portfolio" and, collectively, the
"Institutional Portfolios" or "Funds").
BACKGROUND
WHEREAS, the Portfolios and the Institutional Portfolios are series of the
Trust, a registered open-end management investment company that invests all of
the assets of each Portfolio and Institutional Portfolio in corresponding series
(each such series, a "Master Fund") of Nicholas-Applegate Investment Trust, a
Delaware business trust (the "Master Trust").
WHEREAS, the series of the Master Trust will dissolve and distribute their
assets in kind to the corresponding series of the Trust immediately prior to the
transactions contemplated by this Agreement.
WHEREAS, the parties wish to enter into a plan of reorganization (the
"Plan") which will consist of (i) the change by the Board of Trustees of the
Trust (the "Board of Trustees") of the name of each Institutional Portfolio to
replace the phrase "Institutional Portfolio" with the phrase "Fund", (ii)
creation by the Board of Trustees of an "A", "B", "C" and "Q" Class of shares of
each Fund and designation of the existing Institutional Portfolio shares as the
"I" Class shares of the corresponding Fund, (iii) the transfer of the assets of
the Portfolios to the corresponding Fund in exchange for a similar number of A,
B, C or Q Class shares of the Fund (the "Fund Shares"), (iv) distribution by
each of the Portfolios of the Fund Shares to its shareholders and dissolution of
the A, B, C and Qualified Portfolios, and (v) execution of an Investment
Advisory Agreement between the Trust and Nicholas-Applegate Capital Management
("NACM" or the "Investment Adviser") with respect to the Funds.
WHEREAS, the Board of Trustees, including a majority of the Trustees who are
not "interested persons" of the Trust as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), has determined that the Plan is in the
best interests of the shareholders of each of the Portfolios and Institutional
Portfolios and that their interests would not be diluted as a result of the
transactions contemplated thereby.
AGREEMENT
NOW THEREFORE, in consideration of the agreements contained in this
Agreement, the parties agree as follows:
ARTICLE 1.
MULTIPLE CLASSES OF SHARES
SECTION 1.1 CREATION OF MULTIPLE CLASSES OF SHARES. Effective on the
Closing Date, as defined in Article 4, the Board of Trustees shall (a) divide
each Institutional Portfolio into five Classes of shares designated Class A, B,
C, Q and I shares, and (b) classify the shares of each Institutional Portfolio
outstanding immediately prior to the Closing Date as Class I shares.
SECTION 1.2 CHANGE IN THE NAME OF INSTITUTIONAL PORTFOLIOS. Effective on
the Closing Date, the Board of Trustees shall revise the name of each
Institutional Portfolio to replace the phrase "Institutional Portfolio" with the
phrase "Fund".
B-1
<PAGE>
ARTICLE 2.
TRANSFER OF ASSETS AND LIABILITIES
Subject to the terms and conditions set forth herein, on the Closing Date
the Trust shall cause the Portfolios to transfer all of their assets, including
all assets received from the corresponding Master Fund of the Master Trust, to
the corresponding Fund, and shall cause each Fund to assume all of the
liabilities of the corresponding Portfolios. In exchange therefor, the Trust
shall cause each Fund to deliver to each such Portfolio a number of the Fund's
Class A, B, C or Q shares, as applicable, which is equal to (i) the aggregate
net asset value of the corresponding Portfolio determined at the close of
business on the day prior to the Closing Date, divided by (ii) the net asset
value per share of the respective A, B, C or Q Class of shares of the
corresponding Institutional Portfolio outstanding as of the Closing Date.
ARTICLE 3.
SHARES OF THE FUNDS
SECTION 3.1 LIQUIDATION OF A, B, C AND QUALIFIED PORTFOLIOS. Subject to
the terms and conditions set forth herein, on the Closing Date the Trust shall
liquidate each Portfolio and shall distribute pro rata to the shareholders of
record of each Portfolio, determined as of the Closing Date, the Fund Shares
received by such Portfolio pursuant to Article 2.
SECTION 3.2 ISSUANCE OF SHARE CERTIFICATES. The Trust shall accomplish the
liquidation and distribution provided for herein by opening accounts on the
books of the corresponding Fund in the names of each Portfolio's shareholders
and transferring the Fund Shares credited to the account of the Portfolio on the
books of the Fund. As promptly as practicable after the Closing, each holder of
any outstanding certificate evidencing shares of a Portfolio or Institutional
Portfolio shall be entitled to surrender the same to the Trust's transfer agent
and request in exchange therefor a certificate or certificates representing the
number of shares of beneficial interest of the Class into which the shares of
beneficial interest theretofore represented by the certificate or certificates
so surrendered shall have been converted. Certificates for fractional shares of
beneficial interests of a Fund shall not be issued, but shall be continued to be
carried by the Funds for the open account of such shareholder. Until so
surrendered, each outstanding certificate which, prior to the Closing,
represented shares of beneficial interest of a Portfolio or Institutional
Portfolio, shall be deemed for all purposes to evidence ownership of the number
of shares of the Class of shares of beneficial interest of the Fund into which
the shares of beneficial interest of such Portfolio or Institutional Portfolio
have been converted.
SECTION 3.3 TIME AND DATE OF VALUATION. The number of shares to be issued
by each Fund to each Portfolio shall be computed as of 4:00 p.m. (Eastern time)
on the Closing Date in accordance with the regular practices of the Trust.
ARTICLE 4.
CLOSING AND CLOSING DATE
SECTION 4.1 CLOSING TIME AND PLACE. The Closing Date shall be the date on
which all of the conditions set forth in Article 5 have been fulfilled or
otherwise waived by the parties hereto but, in any event, not later than March
31, 1998, or such later date as the parties may mutually agree. All acts taking
place on the Closing Date shall be deemed to be taking place simultaneously as
of the close of business on the Closing Date, unless otherwise provided. The
closing shall be held at 4:30 p.m. (Eastern time) at the offices of the Trust,
600 West Broadway, San Diego, California 92101, or such other time and/or place
as the parties may mutually agree.
SECTION 4.2 DELAY OF VALUATION. If on the Closing Date (a) the primary
trading market for portfolio securities of any Portfolio is closed to trading or
trading thereon is restricted, or (b) trading or the reporting of trading is
disrupted so that an accurate appraisal of the value of the net assets of the
Portfolio
B-2
<PAGE>
and an accurate calculation of the number of shares held by each shareholder is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
ARTICLE 5.
CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THE REORGANIZATION
The respective obligations of each party to effect the reorganization
contemplated by this Agreement is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
SECTION 5.1 SHAREHOLDER APPROVAL. On or prior to the Closing Date, the
following matters shall have been approved by the following shareholders of the
Trust in accordance with the provisions of the Trust's Declaration of Trust and
the 1940 Act: (a) the shareholders of each of the Institutional Portfolios shall
have approved an amendment to the Declaration of Trust of the Trust to permit
the Board of Trustees to create multiple classes of shares of the Institutional
Portfolios; (b) the shareholders of the Institutional Portfolios and the Money
Market Portfolio of the Trust shall have authorized the Board of Trustees to
eliminate their current policy of investing all of their assets in the Master
Trust; and (c) the shareholders of each of the Portfolios of the Trust shall
have approved the transactions contemplated by this Agreement and Plan of
Reorganization.
SECTION 5.2 DISSOLUTION OF MASTER FUNDS. Each Master Fund shall have
dissolved and distributed all of its assets in kind to the corresponding
Portfolios and Institutional Portfolios, respectively.
SECTION 5.3 NO INJUNCTIONS OR RESTRAINTS. On the Closing Date, no action,
suit or other proceeding shall be pending before any court or government agency
which seeks to restrain or prohibit or obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby.
SECTION 5.4 CONSENTS. All consents of the other parties and all other
consents, orders and permits of Federal, state and local regulatory authorities
deemed necessary by the Trust to permit consummation, in all material respects,
of the transactions contemplated herein shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of any Portfolio or
Institutional Portfolio.
SECTION 5.5 EFFECTIVE REGISTRATION STATEMENTS. The N-14 Registration
Statement of the Trust with respect to the reorganization provided for herein
and the N-1A Registration Statement of the Trust with respect to the Fund Shares
shall have become effective and no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the parties hereto,
no investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated.
SECTION 5.6 TAX OPINIONS. The Trust shall have received an opinion of
Paul, Hastings, Janofsky & Walker LLP substantially to the effect that for
Federal income tax purposes:
1. No gain or loss will be recognized by any Portfolio upon the receipt by
the Portfolio of substantially all of the assets of the corresponding
Master Fund;
2. The transfer of substantially all of the assets and liabilities of each
Portfolio to the corresponding Fund in exchange for Fund Shares, and the
distribution of those Fund Shares to the Portfolio shareholders in
liquidation of the Portfolio, will constitute a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended;
3. No gain or loss will be recognized by any Fund upon the receipt of the
assets of a Portfolio solely in exchange for Fund Shares;
4. No gain or loss will be recognized by any Portfolio upon the transfer of
its assets to its corresponding Fund in exchange for Fund Shares or upon
the distribution of Fund Shares to Portfolio shareholders in exchange for
their Portfolio shares;
B-3
<PAGE>
5. No gain or loss will be recognized by any Portfolio shareholders upon
exchange of their Portfolio shares for Fund Shares;
6. The tax basis of the assets of each Portfolio acquired by each Fund will
be the same as the tax basis of such assets to the Portfolio immediately
prior to the reorganization provided for herein;
7. The tax basis of Fund Shares received by each shareholder of each
Portfolio pursuant to the reorganization provided for herein will be the
same as the tax basis of the Portfolio shares held by such shareholder
immediately prior to the reorganization provided for herein;
8. The holding period of the assets of each Portfolio by each Fund will
include the period during which those assets were held by the Portfolio
and the corresponding Master Fund; and
9. The holding period of the Fund Shares to be received by each Portfolio
shareholder will include the period during which the Portfolio shares
exchanged therefor were held by such shareholder.
SECTION 5.7 INVESTMENT ADVISORY AGREEMENT. The Trust shall have entered
into an Investment Advisory Agreement with NACM on substantially the same terms
as the current agreement between NACM and the Master Trust.
SECTION 5.8 COVENANTS, REPRESENTATIONS AND WARRANTIES. Each party shall
have performed all of its covenants set forth in Article 7, and its
representations and warranties set forth in Article 6 shall be true and correct
and in all materials respects on and as of the Closing Date as if made on such
date.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
The parties represent and warrant as follows:
SECTION 6.1 STRUCTURE AND STANDING. The Trust represents and warrants that
it is a business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets.
SECTION 6.2 POWER. The Trust represents and warrants that it has full
power and authority to enter into and perform its obligations under this
Agreement; the execution, delivery and performance of this Agreement has been
duly authorized by all necessary action of its Board of Trustees; and this
Agreement constitutes its valid and binding contract enforceable in accordance
with its terms, subject to the effects of bankruptcy, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto.
SECTION 6.3 LITIGATION. The Trust represents and warrants that no
litigation or administrative proceeding or investigation of or before any court
or governmental body is currently pending against it and, to the best of its
knowledge, none is threatened against it or any of its properties or assets,
which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business, it knows of no facts which
might form the basis for the institution of such proceedings, and it is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated.
SECTION 6.4 SEC DOCUMENTS. The Trust represents and warrants, on behalf of
each Fund, that its N-14 Registration Statement, on its effective date, insofar
as it relates to such Fund (i) will comply in all material respects with the
provisions of the Securities Act of 1933 and the 1940 Act, and (ii) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
B-4
<PAGE>
SECTION 6.5 ASSETS AND LIABILITIES. The Trust represents and warrants, on
behalf of each Fund, that, prior to the date hereof the Fund has had, and prior
to the Closing Date the Fund will have, no assets or liabilities and no
operations except as contemplated by this Agreement.
SECTION 6.6 CAPITAL STRUCTURE. The Trust represents and warrants that all
of its issued and outstanding shares are, and on the Closing Date will be, duly
and validly issued and outstanding, fully paid and non-assessable.
ARTICLE 7.
COVENANTS
SECTION 7.1 COVENANTS RELATING TO THE CONDUCT OF BUSINESS. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing Date, the Trust shall operate its
business in the ordinary course.
SECTION 7.2 PREPARATION OF N-14 REGISTRATION STATEMENT. As soon as
reasonably practicable after the execution of this Agreement, the Trust shall
file an N-14 Registration Statement with respect to the reorganization
contemplated hereby with the United States Securities and Exchange Commission,
and shall use its best efforts to provide that the N-14 Registration Statement
becomes effective as promptly as practicable. As soon as reasonably practicable,
the Trust shall also prepare and file any other filings required under
applicable state securities laws.
SECTION 7.3 AMENDMENT OF N-1A REGISTRATION STATEMENT. As soon as
reasonably practicable after the execution of this Agreement, the Trust shall
amend its N-1A Registration Statement with respect to the Fund Shares with the
United States Securities and Exchange Commission, and shall use its best efforts
to provide that the amendment becomes effective as promptly as practicable. As
soon as reasonably practicable, the Trust shall also prepare and file any other
filings required under applicable state securities laws.
SECTION 7.4 SHAREHOLDERS MEETING. As soon as practicable after the
effective date of the N-14 Registration Statement the Trust shall call a special
meeting of the shareholders of the Trust for the purpose of considering the
reorganization contemplated by this Agreement.
SECTION 7.5 FEES AND EXPENSES. Whether or not this Agreement is
consummated, the Trust shall cause fifty percent (50%) of all costs and expenses
incurred in connection with this Agreement and the transactions contemplated to
be paid by NACM, and the balance by the Portfolios and Institutional Portfolios
pro rata in proportion to their respective net assets at the Closing.
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated by resolution of
the Board of Trustees of the Trust at any time prior to the Closing Date,
whether before or after approval by the shareholders of the Trust, if (a)
circumstances develop that, in the opinion of such Board of Trustees, make
proceeding with the Plan inadvisable; or (b) any approval of the shareholders of
the Trust required for the consummation of the Plan shall not have been
obtained; or (c) any governmental body shall have issued an order, decree or
ruling having the effect of permanently enjoining, restraining or otherwise
prohibiting the consummation of this Agreement.
SECTION 8.2 EFFECT OF TERMINATION. In the event of any termination
pursuant to Section 8.1, there shall be no liability for damage on the part of
the Trust or the Board of Trustees.
SECTION 8.3 AMENDMENT. This Agreement may be amended prior to the Closing
Date by the parties at any time before or after approval hereof by the
shareholders of the Trust; provided, however,
B-5
<PAGE>
that after such shareholder approval there shall not be any amendment that by
law requires further approval by the shareholders without obtaining such further
approval.
SECTION 8.4 WAIVER. At any time prior to the Closing Date, any of the
terms or conditions of this Agreement may be waived by the Board of Trustees of
the Trust, if, in its judgment after consultation with legal counsel, such
action or waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Trust.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Nicholas-Applegate Mutual Funds on
behalf of each Portfolio
Attest: /s/ E. BLAKE MOORE, JR. By: /s/ JOHN WYLIE
-------------------------------- --------------------------------
E. Blake Moore, Jr. John Wylie
SECRETARY PRESIDENT
Nicholas-Applegate Mutual Funds on
behalf of each Institutional
Portfolio
Attest: /s/ E. BLAKE MOORE, JR. By: /s/ JOHN WYLIE
-------------------------------- --------------------------------
E. Blake Moore, Jr. John Wylie
SECRETARY PRESIDENT
B-6
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
600 West Broadway
San Diego, California 92101
January 12, 1998
Dear Shareholder:
A special meeting of shareholders of Nicholas-Applegate Mutual Funds (the
"Trust") will be held to determine important organizational issues affecting
your portfolio. The meeting will begin at 9:00 a.m. local time on February 27,
1998, at the offices of the Trust, 600 West Broadway, 30th Floor, San Diego,
California 92101.
At the meeting shareholders of the Trust, other than shareholders of the
Government Income Portfolios, will be asked to consider a reorganization in
which the Trust will move from a complex "master-feeder" structure to a simpler
and more economical "multi-class" structure.
At the same time, shareholders of the Government Income A, B, C and
Qualified Portfolios of the Trust will be asked to consider a reorganization in
which they will receive corresponding Class A, B, C and Q shares of the Fully
Discretionary Fixed Income Fund of the Trust. The goal of the reorganization is
to produce a higher level of income for you from a portfolio comprised
principally of investment grade debt securities. The reorganization should
produce this increased income by spreading overhead costs over a substantially
larger asset base and by giving you the opportunity to benefit from the higher
level of income associated with the Fully Discretionary Fixed Income Fund.
After the reorganization, your shares in the Fully Discretionary Fixed
Income Fund will have exactly the same value as the shares of the Government
Income Portfolio you owned immediately prior to the reorganization. In the
opinion of the Trust's tax counsel, the proposed transaction with have no tax
implications for you.
In addition, shareholders of the Trust will be asked to elect Trustees to
take office when the reorganization is concluded and to ratify the selection of
Ernst & Young L.L.P. as independent public accountants of the Trust.
The proposals have been carefully reviewed by your Board of Trustees, which
recommends that you approve them. Please read the enclosed materials carefully,
and sign, date and mail the enclosed proxy card(s) promptly in the enclosed
return envelope. Your vote is important for the proper administration of the
Trust.
Thank you for your attention to this matter. If you have any questions on
voting of proxies or the proposals to be considered at the meeting, please call
us toll free at 1-800-551-8045.
/s/ John D. Wylie
John D. Wylie
PRESIDENT
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
800/ 551-8045
------------------------
COMBINED PROXY STATEMENT AND PROSPECTUS
(FOR THE GOVERNMENT INCOME PORTFOLIOS)
------------------------
This Combined Proxy Statement and Prospectus, which includes a Notice of
Special Meeting of Shareholders, a Proxy Statement and a form of Proxy, is being
furnished in connection with the special meeting of shareholders of
Nicholas-Applegate Mutual Funds (the "Trust") to be held on February 27, 1998,
and any adjournment thereof (the "Meeting"). It is being furnished to the
shareholders of the Government Income Portfolios of the Trust. Shareholders of
the other portfolios of the Trust are being asked to approve certain related
matters described below, and are being provided with a separate Combined Proxy
Statement and Prospectus in connection with the Meeting.
The various portfolios of the Trust currently invest all of their assets in
corresponding "master funds" of Nicholas-Applegate Investment Trust. At the
Meeting the shareholders of the Trust, other than shareholders of the Government
Income Portfolios, will be asked to approve a reorganization in which the Trust
will move from this "master-feeder" structure to a "multi-class" structure. As a
result of the reorganization, each portfolio of the Trust will invest directly
in portfolio securities rather than through the master funds, and each
shareholder of an A, B, C Qualified or Institutional portfolio (other than the
Government Income Portfolios) will receive Class A, B, C, Q or I shares of a
corresponding multi-class series of the Trust.
At the Meeting, the shareholders of the Government Income A, B, C, and
Qualified Portfolios will be asked to approve a reorganization in which they
will receive corresponding Class A, B, C and Q shares of the Fully Discretionary
Fixed Income Fund of the Trust.
The shareholders of the Trust also will be asked to elect Trustees of the
Trust and to ratify the selection of Ernst & Young L.L.P. as independent
accountants.
The Trust is an open-end, management investment company comprised of a
number of diversified portfolios. This Combined Proxy Statement and Prospectus
sets forth concisely the information that shareholders of the Government Income
Portfolios of the Trust should know before voting on the proposed reorganization
of those Portfolios and the other matters to be considered at the meeting. It
should be read and retained for future reference.
The most recent Prospectus and Statement of Additional Information relating
to each A, B, C and Qualified Government Income Portfolio of the Trust are on
file with the Securities and Exchange Commission and are incorporated by
referenced herein. They are available without charge by writing or calling the
Trust at its address and telephone number above. The Prospectus relating to the
corresponding Class A, B, C, and Q shares of the Fully Discretionary Fixed
Income Fund to be distributed to the shareholders pursuant to the proposed
reorganization accompanies this document. The Statement of Additional
Information relating to the Class A, B, C, and Q shares of the Fully
Discretionary Fixed Income Fund is also incorporated herein and is available
without charge by writing or calling the Trust at its address and telephone
number above.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
DATE: JANUARY 12, 1998
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 27, 1998
(FOR THE GOVERNMENT INCOME PORTFOLIOS)
------------------------
A Special Meeting of shareholders (the "Meeting" ) of Nicholas-Applegate
Mutual Funds (the "Trust") will be held at the offices of the Trust, 600 West
Broadway, 30th Floor, San Diego, California 92101 at 9:00 a.m. local time on
February 27, 1998.
For shareholders of the Government Income Portfolios, the purpose of the
Meeting is:
1. To vote upon the proposed reorganization of the A, B, C, and Qualified
Government Income Portfolios pursuant to an Agreement and Plan of
Reorganization in which the shareholders of the Portfolios will receive
corresponding shares of the Fully Discretionary Fixed Income Fund of the
Trust in exchange for their Portfolio shares.
2. To elect Trustees of the Trust to hold office until their successors are
elected and qualified.
3. To ratify the selection of Ernst & Young L.L.P. as independent
accountants for the Trust for the fiscal year ended March 31, 1998.
Shareholders of record of the Trust at the close of business on December 19,
1997 will be entitled to notice of and to vote at the Meeting or any adjournment
thereof. Each shareholder is requested to sign, date and return the enclosed
proxy card(s) without delay, even if such shareholder now plans to attend the
Meeting. A postage-paid envelope is enclosed for this purpose. Any shareholder
present at the Meeting may vote personally on all matters brought before the
Meeting and in that event such shareholder's proxy will not be used.
E. Blake Moore, Jr.,
SECRETARY
Nicholas-Applegate Mutual Funds
January 12, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION.............................................................. 1
SHARES AND VOTING......................................................... 2
BACKGROUND OF THE PROPOSED GOVERNMENT INCOME PORTFOLIOS REORGANIZATION.... 3
PROPOSAL 1. AMENDMENT OF DECLARATION OF TRUST............................. 7
PROPOSAL 2. AMENDMENT OF INVESTMENT POLICY................................ 7
PROPOSAL 3. APPROVAL OF THE PROPOSED GOVERNMENT INCOME PORTFOLIOS
REORGANIZATION................................................ 7
PROPOSAL 4. ELECTION OF TRUSTEES.......................................... 15
PROPOSAL 5. SELECTION OF INDEPENDENT ACCOUNTANTS.......................... 20
OTHER MATTERS............................................................. 20
NEXT MEETING OF SHAREHOLDERS.............................................. 21
APPENDIX A--AGREEMENT AND PLAN OF REORGANIZATION
</TABLE>
<PAGE>
INTRODUCTION
SOLICITATION OF PROXIES
This Combined Proxy Statement and Prospectus (the "Proxy Statement") is
being furnished to the shareholders of the Government Income A, B, C and
Qualified Portfolios (the "Government Income Portfolios") of Nicholas-Applegate
Mutual Funds (the "Trust") in connection with the solicitation of proxies by the
Board of Trustees of the Trust for use at a Special Meeting of Shareholders of
the Trust to be held on February 27, 1998, and any adjournment thereof (the
"Meeting"). Shareholders of the other portfolios of the Trust are being asked to
approve certain related matters described below, and are receiving a separate
combined proxy statement and prospectus in connection with the Meeting.
The Meeting will be held at the offices of the Trust, 600 West Broadway,
30th Floor, San Diego, California 92101, for the purposes set forth in the
Notice of Special Meeting of Shareholders and more fully described below. This
Proxy Statement and the enclosed form of proxy (the "Proxy") were first mailed
to shareholders entitled to vote at the Meeting on or about January 12, 1998.
PURPOSE OF MEETING
One of the purposes of the Meeting is to permit the shareholders of the
portfolios of the Trust, other than the Government Income Portfolios, to
consider a reorganization (the "Multi-Class Reorganization") in which the
portfolios will move from a "master-feeder" structure to a "multi-class"
structure (Proposal 1). Currently, the A, B, C, Qualified and Institutional
portfolios of the Trust and the Money Market portfolio of the Trust, known as
"feeder funds," invest all of their assets in shares of corresponding funds,
known as "master funds," of Nicholas-Applegate Investment Trust (the "Master
Trust"). As a result of the Multi-Class Reorganization the Trust will manage its
assets directly rather than through the Master Trust, and each shareholder of a
Nicholas-Applegate A, B, C, Qualified or Institutional portfolio (other than the
Government Income Portfolios) will receive Class A, B, C, Q or I shares of a
corresponding multi-class series of the Trust. The Money Market portfolio of the
Trust will not have multiple classes, and the series of the Trust created after
August 1, 1997 (the Global Blue Chip Bond Fund, Emerging Markets Bond Fund,
Pacific Rim Fund, Greater China Fund and Latin America Fund) are not part of the
master-feeder structure and will not be affected by the Multi-Class
Reorganization. The Board of Trustees and management of the Trust believe that
the Multi-Class Reorganization will result in substantial economies for the
Trust.
As a related matter, the shareholders of the Institutional portfolios and
the Money Market portfolio will be asked to authorize the Board of Trustees to
eliminate each such portfolio's current policy of investing substantially all of
its assets in the corresponding master fund (Proposal 2).
Another purpose of the Meeting is to permit the shareholders of the
Government Income A, B, C and Qualified Portfolios of the Trust to consider a
reorganization (the "Government Income Portfolios Reorganization") in which they
will receive corresponding Class A, B, C and Q shares of the Fully Discretionary
Fixed Income Fund series of the Trust (Proposal 3). The Board of Trustees and
management of the Trust believe that the Government Income Portfolios
Reorganization will result in a higher level of income for shareholders of the
Government Income Portfolios from a portfolio comprised principally of
investment grade debt securities.
All shareholders of the Trust will also be asked to act on two other
matters--the election of Trustees to take office when the Multi-Class
Reorganization is concluded (Proposal 4) and ratification of the selection of
Ernst & Young L.L.P. as independent public accountants to the Trust (Proposal
5).
Nicholas-Applegate Capital Management (the "Investment Adviser") will bear
50% of the cost of solicitation of proxies, including the cost of printing,
preparing, assembling and mailing the Notice of Meeting, Proxy Statement and
form of Proxy, and the balance will be paid by the Trust (allocated among the
various series of the Trust in proportion to their net assets). In addition to
solicitations by mail, proxies
1
<PAGE>
may be solicited by officers and regular employees of the Trust and the
Investment Adviser by personal interview, by telephone or by facsimile. Tritech
will also be retained to provide professional proxy solicitation services. The
cost of solicitation, including specified expenses, is not expected to exceed
$20,000.
SHARES AND VOTING
The presence in person or by proxy of more than one-third of the outstanding
shares of beneficial interest of the Trust entitled to vote at the Meeting will
constitute a quorum. If a quorum is not present at the Meeting, sufficient votes
in favor of the Proposals set forth in the Notice of Meeting are not received by
the time scheduled for the Meeting, or the holders of shares present in person
or by proxy determine to adjourn the Meeting for any other reason, the
shareholders present in person or by proxy may adjourn the Meeting from time to
time, without notice other than announcement at the Meeting. Any such
adjournment will require the affirmative vote of shareholders holding a majority
of the shares present in person or by proxy at the Meeting. The persons named in
the Proxy will vote in favor of adjournment those shares which they represent if
adjournment is necessary to obtain a quorum or to obtain a favorable vote on any
Proposal. Business may be conducted once a quorum is present and may continue
until adjournment of the Meeting notwithstanding the withdrawal or temporary
absence of sufficient shares to reduce the number present to less than a quorum.
Each shareholder is entitled to one vote for each full share and a
fractional vote for each fractional share outstanding on the books of the Trust
in the name of the shareholder or his or her nominee on the Record Date. The
Record Date and time for determining those entitled to notice of and to vote at
the Meeting has been fixed at the close of business on December 19, 1997.
At the Record Date, the Trust had 60 series of shares and 236,442,334,025
total shares outstanding, of which 738,324,661 were shares of the Government
Income Portfolios. At the Record Date, the following persons owned of record
more than 5% of the outstanding shares of the Government Income Portfolios and
of the Trust as a whole:
The Trust has no information regarding the beneficial owners of such shares
at the Record Date. Except as indicated above, the officers and Trustees of the
Trust as a group beneficially owned less than 1% of the outstanding shares of
each of the Government Income Portfolios and the Trust as a whole at the Record
Date.
All shares represented by each properly signed Proxy received prior to the
Meeting will be voted at the Meeting. If a shareholder specifies how the Proxy
is to be voted on a Proposal to be considered at the Meeting, it will be voted
as specified. If no direction is made on the Proxy, the Proxy will be voted FOR
the Proposals described in this Proxy Statement. Shareholders voting to ABSTAIN
on a Proposal will be treated as present for purposes of achieving a quorum and
in determining the votes cast on the Proposal. A properly signed Proxy on which
a broker has indicated that it has no authority to vote on a Proposal on behalf
of the beneficial owner (a "broker non-vote") will be treated as present for
purposes of achieving a quorum but will not be counted in determining the votes
cast on the Proposal.
A Proxy may be revoked by a shareholder at any time prior to its use by
written notice to the Trust, by submission of a later dated proxy or by voting
in person at the Meeting. If any other matters come before the Meeting, Proxies
will be voted by the persons named in the Proxy in accordance with their best
judgement.
Proposals 1 and 2 affect only the shareholders of the Institutional and
Money Market portfolios of the Trust and will not be submitted to the
shareholders of the Government Income Portfolios. Shareholders of each A, B, C,
and Qualified Government Income Portfolio will vote separately with respect to
Proposal 3. All of the shareholders of the Trust will vote in the aggregate with
respect to Proposals 4 and 5.
2
<PAGE>
BACKGROUND OF THE PROPOSED GOVERNMENT INCOME
PORTFOLIOS REORGANIZATION
THE MULTI-CLASS REORGANIZATION
Unlike other mutual funds that acquire their securities directly, the
portfolios of the Trust created prior to August 1, 1997 invest their assets in
funds of the Master Trust. This two-tier structure is known as a "master-feeder"
structure and it permits one or more feeder funds that have the same investment
objectives but different operating characteristics (such as sales charges,
expenses and investment minimums) to invest in the same master fund.
When the Board of Trustees of the Trust established the master-feeder
structure in 1993, it believed this form of organization would achieve certain
efficiencies of operation and economies of scale. However, since the
establishment of the master-feeder structure, the number of portfolios organized
by the Trust using that structure has increased significantly, to 57.
Furthermore, regulatory developments have occurred enabling mutual fund
complexes to more easily achieve, through the use of multiple classes of shares,
the benefits at one time expected of the master-feeder approach without the
operating costs and technical complexities of a two-tiered structure.
The purpose of the Multi-Class Reorganization is to eliminate the cost and
complexity of a master-feeder structure that has not yielded and is no longer
expected to yield long-term efficiencies of operation and economies of scale.
Management of the Trust expects the Multi-Class Reorganization to save the Trust
approximately $1,000,000 per year in fees currently paid to the company which
provides day-to-day accounting services to the Trust. In addition, the number of
tax returns currently filed annually by the Trust and the Master Trust would be
reduced from 129 to 38 and separate audits for the master funds would no longer
be necessary, with an annual savings of approximately $180,000. Over time the
Trust would also benefit from the fewer number of required SEC filings and other
legal and administrative cost savings.
As Investment Adviser to the Master Trust, Nicholas-Applegate Capital
Management has to date voluntarily agreed to defer its management fees and to
absorb other operating expenses payable by the Trust and the Master Trust, to
the extent necessary to ensure that the expenses for each portfolio (other than
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses) do not exceed certain levels.
Accordingly, the shareholders of the Trust have in the past not borne the full
cost of the master-feeder structure. However, the Board of Trustees believes
that the Multi-Class Reorganization will benefit the shareholders of the Trust.
Any expenses in excess of the current expense caps may be borne by the
shareholders in the future, as in subsequent years each portfolio will reimburse
the Investment Adviser when operating expenses (before recoupment) for the
portfolio are less than the expense cap. Furthermore, although the Investment
Adviser has maintained these expense caps since the portfolios commenced
operation and has agreed to maintain them through March 31, 1999 there can be no
assurance it will do so indefinitely in the future.
In addition, the proposed Multi-Class Reorganization will permit the Trust
to provide for the automatic conversion of its current portfolio B shares to
portfolio A shares seven years after purchase. Although portfolio B shares may
currently be exchanged voluntarily for the corresponding portfolio A shares
seven years after purchase, the exchange is treated as a redemption and purchase
for tax purposes. In the proposed multi-class structure, the Trust will be able
to provide for automatic conversion without adverse federal income tax
consequences. Such an exchange is beneficial for long-term shareholders, as
portfolio A shares have lower annual distribution-related fees than portfolio B
shares.
Upon completion of the Multi-Class Reorganization, the current Fully
Discretionary Fixed Income Institutional Portfolio of the Trust will be renamed
the "Fully Discretionary Fixed Income Fund," the shareholders of the Portfolio
will become Class I shareholders of the Fund, and the Board of Trustees will
create Class A, B, C and Q shares of the Fund to enable the Government Income
Portfolios Reorganization to be completed.
3
<PAGE>
THE GOVERNMENT INCOME PORTFOLIOS REORGANIZATION
The Board of Trustees of the Trust believes that, at their current sizes
(ranging from $4,283,869 to $17,075 as of October 31, 1997), the Government
Income A, B, C and Qualified Portfolios, and the corresponding Government Income
master fund in which the Government Income Portfolios invest, are too small to
operate in a cost effective manner. The Government Income Portfolios incur
substantial overhead expenses, directly and through their investment in the
Government Income master fund, for accounting services, legal services,
printing, insurance, and custodial, transfer agency, advisory and administrative
services. To date, Nicholas-Applegate Capital Management has been voluntarily
subsidizing the Government Income Portfolios' operations by reducing its
management fees to the Government Income master fund and by absorbing some of
the other expenses of the master fund and the Portfolios, in order that the
Government Income Portfolios can provide competitive yields to their
shareholders. Management of the Trust does not foresee any significant increases
in the assets of the Government Income Portfolios or the Government Income
master fund in the near future, and Nicholas-Applegate Capital Management has
informed the Board that it is unwilling to continue subsidizing the Government
Income Portfolios' operations in the future despite any economies achieved in
connection with the Multi-Class Reorganization.
The Fully Discretionary master fund had aggregate assets of $14,665,285
million as of October 31, 1997, compromised principally of assets of the Fully
Discretionary Fixed Income Institutional Portfolio of the Trust. The Fully
Discretionary Fixed Income Institutional Portfolio and the corresponding Fully
Discretionary Fixed Income master fund currently incur expenses similar to those
of the Government Income Portfolios and the Government Income master fund.
However, management believes that as a result of the proposed Multi-Class
Reorganization and the proposed Government Income Portfolios Reorganization, the
combined asset base of the Fully Discretionary Fund will permit the Fund to
spread reduced expenses over a larger asset base, with reasonable prospects for
further increases in assets in the future. Because the investment objectives of
the Government Income Portfolios and the Fully Discretionary Fixed Income Fund
are similar, the Board of Trustees believes that shareholders of the Government
Income Portfolios should be able to continue to meet their primary goal of
current income from a portfolio comprised principally of high quality fixed
income securities after completion of the Government Income Portfolios
Reorganization.
The Board of Trustees believes that the only practical alternative to the
proposed Government Income Portfolios Reorganization would be a taxable
liquidation of the Portfolios, which would not be preferable to the proposed
tax-free reorganization with the Fully Discretionary Fund.
4
<PAGE>
INVESTOR EXPENSES
Investors pay various expenses, either directly or indirectly. The figures
below are expenses for each Government Income Portfolio (including their shares
of the expenses of the corresponding Government Income master fund) for the
fiscal year ended March 31, 1997. No Fully Discretionary Fixed Income A, B, C or
Qualified Portfolios currently exist, so the figures set forth below for the A,
B, C and Q Classes of the Fully Discretionary Fund are expected expenses for the
first year of operation of the Fund.
<TABLE>
<CAPTION>
GOVERNMENT INCOME PORTFOLIOS
-------------------------------------------------------------
QUALIFIED
PORTFOLIO A PORTFOLIO B PORTFOLIO C PORTFOLIO
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a
percentage of offering price)............... 4.75% None None None
Sales charge on reinvested dividends.......... None None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)............... None(1) 5.00% 1.00% None
Redemption fee................................ None None None None
Exchange Fee.................................. None None None None
ANNUAL PORTFOLIO OPERATING EXPENSES AS A
PERCENTAGE OF AVERAGE NET ASSETS (AFTER
EXPENSE DEFERRAL):..........................
Management fees............................... 0.40% 0.40% 0.40% 0.40%
12b-1 expenses................................ 0.25% 0.50% 0.50% 0.25%
Other expenses (after expense deferral) (2)... 0.25% 0.40% 0.40% 0.15%
Total operating expenses (after expense
deferral) (2)............................... 0.90% 1.30% 1.30% 0.80%
<CAPTION>
FULLY DISCRETIONARY
FIXED INCOME FUND
---------------------------------------------
CLASS A CLASS B CLASS C CLASS Q
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a
percentage of offering price)............... 4.75% None None None
Sales charge on reinvested dividends.......... None None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)............... None(1) 5.00% 1.00% None
Redemption fee................................ None None None None
Exchange Fee.................................. None None None None
ANNUAL PORTFOLIO OPERATING EXPENSES AS A
PERCENTAGE OF AVERAGE NET ASSETS (AFTER
EXPENSE DEFERRAL):..........................
Management fees............................... 0.45% 0.45% 0.45% 0.45%
12b-1 expenses................................ 0.25% 0.50% 0.50% 0.25%
Other expenses (after expense deferral) (2)... 0.60% 0.75% 0.75% 0.18%
Total operating expenses (after expense
deferral) (2)............................... 1.30% 1.70% 1.70% 0.88%
</TABLE>
- - ------------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase.
(2) The Investment Adviser has voluntarily agreed to defer its management fees
and to absorb other operating expenses payable by the master funds and the
Portfolios through March 31, 1999, and will do so for the various Classes of
the Fully Discretionary Fixed Income fund through March 31, 1999. For the
Government Income A, B, C and Qualified Portfolios, Total operating expenses
would have been 7.67%, 8.33%, 4.98% and 2,789.64%, respectively, and Other
expenses would have been 7.02%, 7.43%, 4.08%, and 2,788.99%, respectively,
absent the deferral. For the Class A, B, C and Q shares of the Fully
Discretionary Fixed Income Fund, expected Total operating expenses are
6.18%, 4.35%, 3.92% and 268.01%, respectively, and estimated Other expenses
are 5.53%, 3.45%, 3.02%, and 267.36%, respectively, absent the deferral.
Because of the 12b-1 fees, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
5
<PAGE>
EXAMPLE:
The following table shows what an investor would pay if he invested in a
Government Income Portfolio or a Class of the Fully Discretionary Fund over the
various time frames involved. The table assumes continuation of the expenses
levels indicated above, that all dividends are reinvested, and that the average
annual return is 5%. The example is for comparison purposes only and is not a
representation of actual expenses and returns, either past or future.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Government Income Portfolios
Portfolio A................................................................
Portfolio B
Assuming redemption at end of time period (1)............................
Assuming no redemption...................................................
Portfolio C
Assuming redemption at end of time period (1)............................
Assuming no redemption...................................................
Qualified Portfolio........................................................
Fully Discretionary Fixed Income Fund
Class A..................................................................
Class B (2)..............................................................
Class C (2)..............................................................
Class Q..................................................................
</TABLE>
- - ------------------------
(1) Assumes deduction of a contingent deferred sales charge and no exchange of
Portfolio B shares for Portfolio A shares seven or more years after
purchase.
(2) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Portfolio B shares for Portfolio A shares seven years after
purchase.
6
<PAGE>
PROPOSAL 1. AMENDMENT OF DECLARATION OF TRUST
At the Meeting, shareholders of the Institutional Portfolios of the Trust
(including the Fully Discretionary Fixed Income Institutional Portfolio) will be
asked to approve an amendment to the Trust's Declaration of Trust to permit the
Board of Trustees to create multiple classes of the Institutional Portfolios. As
this Proposal affects only the Institutional Portfolios, it is not being
submitted to the shareholders of the Government Income Portfolios.
PROPOSAL 2. AMENDMENT OF INVESTMENT POLICIES
At the Meeting, shareholders of the Money Market portfolio and the
Institutional portfolios will be asked to authorize the Board of Trustees to
eliminate each such portfolio's current policy of investing all of its assets in
the corresponding master fund of the Master Trust. As this Proposal affects only
the Money Market and Institutional portfolios, it is not being submitted to the
shareholders of the Government Income Portfolios.
PROPOSAL 3. APPROVAL OF THE PROPOSED GOVERNMENT INCOME
PORTFOLIOS REORGANIZATION
At the Meeting, shareholders of the A, B, C, and Qualified Government Income
Portfolios will be asked to approve the proposed Government Income Portfolios
Reorganization.
DESCRIPTION OF THE PROPOSED GOVERNMENT INCOME PORTFOLIOS
REORGANIZATION
THE REORGANIZATION AGREEMENT
The terms and conditions under which the proposed Government Income
Portfolios Reorganization will be completed are set forth in the Agreement and
Plan of Reorganization (the "Reorganization Agreement") attached as Appendix A.
The following is a summary of the Reorganization Agreement.
The Reorganization Agreement provides for the completion of the Government
Income Portfolios Reorganization (the "Closing") in several steps:
First, upon completion of the Multi-Class Reorganization, the Fully
Discretionary Fixed Income Institutional Portfolio will be renamed the
"Fully Discretionary Fixed Income Fund," and its existing shares will be
designated Class I shares of the Fund.
Second, the Government Income master fund will dissolve and distribute
its assets in kind (i.e., in the form of the bonds or other investment
securities held by the master fund) to the A, B, C and Qualified Government
Income Portfolios.
Third, the A, B, C and Qualified Government Income Portfolios will
transfer their assets to the Fully Discretionary Fixed Income Fund, which
assets will be managed in the same manner as other Fund investments. In
exchange, each Government Income Portfolio will receive Class A, B, C or Q
shares of the Fully Discretionary Fixed Income Fund with the same total net
asset value as the assets being transferred.
Finally, each A, B, C and Qualified Government Income Portfolio will
distribute the Fully Discretionary Fixed Income Fund shares it receives to
its shareholders, and will dissolve. For example, Government Income
Portfolio A will distribute the Class A shares of the Fully Discretionary
Fixed Income Fund to its shareholders. Each former shareholder of Government
Income Portfolio A will then hold Class A shares of the Fully Discretionary
Fixed Income Fund with the same net asset value as the shares of the
Government Income Portfolio A he previously held.
7
<PAGE>
The Closing is subject to various conditions, including the completion of
the Multi-Class Reorganization, approval of the Government Income Portfolios
Reorganization by a majority of shares of each A, B, C, and Qualified Government
Income Portfolio, dissolution of the Government Income master fund, completion
of all filings with, and receipt of all necessary orders and approvals from, the
Securities and Exchange Commission (the "SEC"), delivery of legal opinions
regarding the Federal tax consequences of the Government Income Portfolios
Reorganization, and other customary corporate and securities matters. Any
conditions may be waived by the Board of Trustees of the Trust if, in its
judgment, such waiver will not have a material adverse effect on the interests
of the shareholders. The Reorganization Agreement may be terminated at any time
if the Board of Trustees determines in good faith that the Government Income
Portfolios Reorganization is not in the best interests of the shareholders of
the Government Income Portfolios or the Fully Discretionary Fixed Income Fund.
FEDERAL TAX CONSEQUENCES
The Trust has received an opinion from Paul, Hastings, Janofsky & Walker
LLP, the legal counsel to the Trust, to the effect that under the Internal
Revenue Code the Government Income Portfolios Reorganization will not result in
any taxable income to the Government Income Portfolios or their shareholders.
This legal opinion is not binding on the Internal Revenue Service or any other
taxing authority, and the Trust does not intend to seek a private letter ruling
or advisory opinion from the Internal Revenue Service with respect to the tax
effects of the Government Income Portfolios Reorganization.
CHANGE OF FUND NAME
After the Multi-Class Reorganization and the Government Income Portfolios
Reorganization are completed, the Fully Discretionary Fixed Income Fund will be
renamed the High Quality Bond Fund, to better reflect its investment objective
and policies.
COMPARISON OF THE GOVERNMENT INCOME PORTFOLIOS AND THE FULLY
DISCRETIONARY FIXED INCOME FUND
The Trust is an open-end management investment company currently offering a
number of separate diversified portfolios with differing sales load, shareholder
services plan and distribution plan arrangements. The Trust was organized in
December 1992 as a business trust under the laws of the State of Delaware. If
the Multi-Class Reorganization is approved and completed, shareholders of each
Institutional portfolio series of the Trust will become Class I shareholders of
the same series (which will be renamed a "Fund"), and shareholders of each A, B,
C and Qualified portfolio series of the Trust will become Class A, B, C and Q
shareholders of the corresponding Fund.
Pursuant to the Multi-Class Reorganization, the Fully Discretionary Fixed
Income Institutional Portfolio of the Trust will be renamed the "Fully
Discretionary Fixed Income Fund" of the Trust, and its existing shareholders
will hold Class I shares of the Fully Discretionary Fixed Income Fund. As a
result of the proposed Government Income Portfolios Reorganization, each
shareholder of an A, B, C, or Qualified Government Income Portfolio will hold
Class A, B, C or Q shares of the Fully Discretionary Fixed Income Fund with the
same net asset value as his current shares.
A brief comparison of the Government Income Portfolios with the Fully
Discretionary Fixed Income Fund is set forth below:
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The Government Income Portfolios seek, as their investment objective,
current income consistent with prudent investment risk and preservation of
capital. They invest (through the Government Income master fund) primarily in
intermediate term government bonds. The Fully Discretionary Fixed Income Fund
seeks to maximize total return through an actively managed diversified portfolio
of debt securities.
8
<PAGE>
Under normal conditions, the Government Income Portfolios, through the
Government Income master fund, invest at least 75% of their total assets in
securities issued by the U.S. Government and its agencies and instrumentalities.
They invest the remainder primarily in non-agency mortgage-related securities,
domestic and foreign investment grade debt obligations and short-term
investments. The Fully Discretionary Fixed Income Fund, under normal conditions,
invests at least 65% of its total assets in investment grade debt securities
issued by U.S. and foreign corporations and U.S. and foreign governments and
their agencies and instrumentalities. In addition, unlike the Government Income
Portfolios, the Fully Discretionary Fixed Income Fund may invest in municipal
debt securities and may invest up to 20% of its assets in debt securities rated
below investment grade.
The investment policies of the Government Income Portfolios and the Fully
Discretionary Fixed Income Fund also differ in certain other significant
respects. Both the Government Income Portfolios and the Fully Discretionary
Fixed Income Fund may enter into interest rate or financial futures contracts
and into foreign currency futures contracts (and options on those futures
contracts) as hedging techniques. However, the Fully Discretionary Fixed Income
Fund may also write covered call and secured put options on securities and
securities indexes and may enter into interest rate and currency swaps as
hedging techniques, subject to the limitation that it may not enter into such
hedging transactions if as a result more than 25% of its net assets would be
hedged or more than 25% of its net assets would be used as cover for options it
has written. In addition to hedging transactions, the Fully Discretionary Fixed
Income Fund may enter into options, futures and swap transactions to enhance
potential gains in circumstances where hedging is not involved, provided that
its net loss exposure from such transactions does not exceed 5% of its net
assets at any time.
RISK FACTORS
As noted above, the investment objectives, policies and restrictions of the
Government Income Portfolios and the Fully Discretionary Fund differ in some
respects. As a result of these differences, an investment in the Fully
Discretionary Fixed Income Fund involves greater risk than an investment in a
Government Income Portfolio.
The values of both the Government Income Portfolios' and the Fully
Discretionary Fixed Income Fund's portfolios fluctuate in response to movements
in interest rates. However, the average duration of the Fully Discretionary
Fixed Income Fund's portfolio will range from two to eight years, compared to
three to six years for the Government Income Portfolios. Although longer
maturity securities generally have higher yields, they also have greater
fluctuations in price. In addition, by including in its portfolio a greater
portion of securities issued by domestic and foreign companies, states and
municipalities, the Fully Discretionary Fixed Income Fund incurs market and
credit risks, in addition to interest rate risks, that are greater than those
incurred by the Government Income Portfolios, which have investment portfolios
consisting primarily of securities issued by the U.S. Government and its
agencies and instrumentalities. Although at least 65% of the Fully Discretionary
Fixed Income Fund's total assets will be comprised of investment grade
securities, the prices of such securities are likely to change more than those
of U.S. Government securities, and thus the net asset values of the Fund's
shares are likely to move more in price than those of the Government Income
Portfolios. Furthermore, credit ratings of portfolio securities are heavily
weighted by past developments and do not necessarily reflect probable future
conditions, securities in the lower investment grades have speculative
characteristics, and changes in economic conditions or other circumstances may
be more likely to lead to the issuers' weakened capacity to pay interest and
principal than would be the case with higher rated investment grade securities.
In addition, the Fully Discretionary Fixed Income Fund may invest up to 20%
of its assets in debt and convertible securities rated below investment grade.
Securities rated below investment grade, commonly referred to as "junk bonds" or
"high-yield, high risk bonds," are subject to greater risk of loss of income and
principal than higher rated bonds and are considered to be predominantly
speculative. The issuers' capacity to pay interest and repay principal may
decline during sustained periods of deteriorating
9
<PAGE>
economic conditions or rising interest rates, and such bonds are subject to
wider market and yield fluctuations than higher-rated securities. The markets
for such securities may be thinner and less active than higher-rated securities,
which can adversely affect the prices at which the securities can be sold and
the Fund's ability to accurately price the securities. The Fund may purchase
securities with any rating (or comparable unrated securities), including
securities currently in payment default. Although Nicholas-Applegate Capital
Management (the "Investment Adviser") will attempt to identify those issuers of
high-yielding securities whose financial condition is adequate to meet future
obligations, there can be no assurance that losses will not occur.
Furthermore, the Fully Discretionary Fixed Income Fund may invest an
unlimited portion of its portfolio in securities of foreign companies and
governments, compared to a limit of 35% for the Government Income Portfolios.
Such investments bear special risks, including fluctuations in foreign exchange
rates, political or economic instability in the country of issue, and the
possible imposition of exchange controls or other laws or restrictions. In
addition, securities prices in foreign markets are generally subject to
different economic, financial, political, and social factors than are the prices
of securities in the United States markets. With respect to some foreign
countries there may be the possibility of expropriation or confiscatory
taxation, limitations on liquidity of securities or political or economic
developments which could affect foreign investments. Moreover, securities of
foreign issuers generally will not be registered with the Securities and
Exchange Commission and such issuers generally will not be subject to the
Commission's reporting requirements. Accordingly, there is likely to be less
publicly available information concerning certain of the foreign issuers of
securities than is available concerning U.S. companies. Foreign companies are
also generally not subject to uniform accounting, auditing and financial
reporting standards or to practices and requirements comparable to those
applicable to U.S. companies. There may also be less government supervision and
regulation of foreign broker-dealers, financial institutions and listed
companies than exists in the United States. Neither the Government Income
Portfolios nor the Fully Discretionary Fixed Income Fund will invest in
securities denominated in a foreign currency unless, at the time of investment,
such currency is considered by the Investment Adviser to be fully exchangeable
into United States dollars without significant legal restriction; if such
restrictions develop after an investment is made, the Investment Adviser will
take such actions as it concludes are appropriate under the circumstances.
The Fully Discretionary Fixed Income Fund may invest in securities issued by
state and local governments, territories and possessions of the U.S., regional
government authorities, and their agencies and instrumentalities ("municipal
securities"), including general obligation and revenue bonds. The issuers of
municipal securities may become subject to laws enacted in the future by state
or local legislative bodies or referenda extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of the issuers to levy taxes. Furthermore, as a
result of legislation or other conditions, the power or ability of any issuer to
pay, when due, the principal of or interest on its municipal obligations may be
materially affected.
The Fully Discretionary Fixed Income Fund may use options on securities and
securities indexes for hedging purposes and in non-hedging transactions to
enhance potential gain. There is a risk that the prices of the options may not
correlate perfectly with the prices of the securities in its portfolio. This may
cause the options to react differently than the Fund's portfolio securities to
market changes. In addition, the Investment Adviser could be incorrect in its
expectations about the direction or extent of market movements, in which case
the Fund could lose money on an option. The Fund may also use dealer options,
which lack the liquidity of exchange traded options and involve the risk that
the securities dealers participating in the transactions will fail to meet their
obligations. Although the Investment Adviser will consider liquidity before
entering into options transactions, there is no assurance that a liquid
secondary market will exist for these instruments, which could prevent the Fund
from liquidating an unfavorable position.
10
<PAGE>
Interest rate and currency swap transactions in which the Fully
Discretionary Fixed Income Fund may invest require the Fund to rely on the other
party to the transaction to perform its obligations pursuant to the swap
agreement. In the event of a default by the other party, the Fund would have
contractual remedies against the defaulting party but there is no assurance that
the Fund would be able to obtain the expected benefit from the transaction.
INVESTMENT ADVISER
All of the Portfolios of the Trust, including the Government Income
Portfolios, currently invest their assets in the corresponding series of the
Master Trust managed by the Investment Adviser, and the Portfolios do not
themselves engage the services of the Investment Adviser or any other investment
manager. Upon completion of the Multi-Class Reorganization, the Trust will enter
into a new investment advisory agreement with the Investment Adviser on behalf
of all of its portfolios, including the Fully Discretionary Fixed Income Fund,
on terms and conditions identical in all material respects to the terms and
conditions of the current investment advisory agreement between the Investment
Adviser and the Master Trust.
The investment advisory fees currently paid by the Government Income
Portfolios will increase slightly as a result of the proposed Government Income
Portfolios Reorganization. As compensation for the services it provides to the
Government Income master fund, the Investment Adviser receives a monthly fee at
the rate of 0.40% of the first $500 million of the master fund's net assets, and
0.35% of net assets in excess of $500 million. As compensation for the services
it provides to the Fully Discretionary Fixed Income Fund, the Investment Adviser
will receive a monthly fee at the rate of 0.45% of the first $500 million of the
Fund's average net assets, 0.40% of the next $250 million of average net assets,
and 0.35% of average net assets in excess of $750 million.
The expense cap voluntarily applied by the Investment Adviser to the Fully
Discretionary Fixed Income Fund will be higher than the expense cap currently
voluntarily applied to the Government Income Portfolios. To limit the expenses
of the Government Income Portfolios, the Investment Adviser has voluntarily
agreed to defer its fees payable by the Government Income master fund, and to
absorb other operating expenses payable by the master fund and the Government
Income Portfolios, through March 31, 1999, to ensure that the expenses allocable
to each Portfolio (excluding interest, taxes, brokerage commission and other
portfolio transaction expenses, capital expenditures and extraordinary expenses,
but including the Portfolio's proportionate share of the master fund's similar
operating expenses) do not exceed the following respective percentages of the
Portfolios' average net assets on an annual basis: Portfolio A--0.90%; Portfolio
B--1.30%; Portfolio C--1.30%; Qualified Portfolio--0.80%. To limit the expenses
of the various Classes of the Fully Discretionary Fixed Income Fund, the
Investment Adviser has voluntarily agreed to similar expense deferrals through
March 31, 1999, as follows: Class A--1.30%; Class B--1.70%; Class C--1.70%,
Class Q--0.88%. As was the case with the Government Income Portfolios, each
Class of the Fully Discretionary Fixed Income Fund will reimburse the Investment
Adviser for fees deferred or other expenses paid in later years in which
operating expenses for the Class are less than the applicable percentage
limitation for any such year. In both cases, no interest, carrying or finance
charge will be paid with respect to any amounts representing fees deferred or
other expenses paid by the Investment Adviser. In addition, in both cases
unreimbursed amounts will not be payable upon termination or non-renewal of the
investment advisory agreement. Although the limitations are voluntary, they have
been in effect since the inception of the Government Income Portfolios and Fully
Discretionary Fixed Income Institutional portfolio, and the Investment Adviser
has no current intention of terminating the limitations applicable to the
Classes of the Fully Discretionary Fixed Income Fund.
ADMINISTRATIVE SERVICES
Investment Company Administration Corporation ("ICAC") currently serves as
the principal administrator of the Trust and the Master Trust and, pursuant to
Administration Agreements with the Trust and
11
<PAGE>
the Master Trust, is responsible for performing all administrative services
required for the daily business operations of the Trust and the Master Trust,
subject to the supervision of the Board of Trustees of the Trust and the Master
Trust. After the Multi-Class Reorganization, the Master Trust's Administration
Agreement will be terminated, and the Trust will enter into a new Administration
Agreement on terms and conditions substantially identical to those applicable to
the portfolios immediately prior to the Multi-Class Reorganization, except for
the fee adjustments described below.
The total fees paid to ICAC with respect to the Government Income Portfolios
and the Government Income master fund for the fiscal year ended March 31, 1997
were $27,846 (.58% of the Government Income Portfolios' average net assets).
Under its new Administration Agreement with the Trust, ICAC will receive annual
fees from the Fully Discretionary Fund equal to the Fully Discretionary Fund's
pro rata portion (based on its net assets compared to the Trust's total net
assets) of a fee equal to 0.05% of the first $100 million of the Trust's average
net assets, 0.04% of the next $150 million, 0.03% of the next $300 million,
0.02% of the next $300 million and 0.01% thereafter, subject to a $40,000 annual
minimum. If this fee arrangement had been in effect for the year ended March 31,
1997, the total fees paid to ICAC with respect to the Government Income
Portfolios would have been unchanged--$27,846 (.58% of average net assets).
Pursuant to an Administrative Services Agreement with the Trust, the
Investment Adviser is currently responsible for providing all administrative
services to the Trust which are not provided by ICAC or by the Trust's
distributor, transfer agents, accounting agents, independent accountants and
legal counsel. The Administrative Services Agreement will be amended to add the
Funds (including the Fully Discretionary Fixed Income Fund) as parties on terms
and conditions substantially identical to the terms and conditions applicable to
the portfolios immediately prior to the Multi-Class Reorganization.
PFPC Inc. currently provides day-to-day accounting services to the Trust and
the Master Trust pursuant to Accounting Services Agreement with the Trust and
the Master Trust. After the Multi-Class Reorganization, the Master Trust's
Accounting Services Agreement will be terminated, and the fee schedule for the
Trust's Accounting Services Agreement will be amended.
Under its current Accounting Services Agreement with the Trust, PFPC
receives annual fees from the Government Income Portfolios aggregating $50,664
and from the Government Income master fund equal to $6,250 plus 0.03% of average
daily net assets from $100 million to $250 million, 0.02% of the next $250
million, and 0.15% thereafter. The total fees paid to PFPC with respect to the
Government Income Portfolios and the Government Income master fund for the
fiscal year ended March 31, 1997 were $114,358 (2.4% of the Government Income
Portfolios' average net assets). Under its new fee schedule with the Trust, PFPC
will receive annual fees from the Fully Discretionary Fund equal to its pro rata
portion (based on its net assets compared to the Trust's total net assets) of a
fee equal to $6,250 per Fund plus 0.03% of each Fund's average daily net assets
from $100 million to $250 million, 0.02% of the next $250 million, and 0.15%
over $500 million. If this arrangement had been in effect for the year ended
March 31, 1997, the total fees paid to PFPC with respect to the Government
Income Portfolios would have been $75,497 (.82% of average net assets).
DISTRIBUTOR, TRANSFER AGENT AND CUSTODIAN
Nicholas-Applegate Securities currently serves as the principal underwriter
and distributor for the Trust pursuant to a Distribution Agreement with the
Trust, State Street Bank and Trust Company currently serves as the transfer
agent for the Trust pursuant to a Transfer Agency and Services Agreement with
the Trust, and PNC Bank currently serves as the custodian for the Trust pursuant
to a Custodian Services Agreement with the Trust. The Distribution Agreement,
the Transfer Agency and Service Agreement and the Custodian Services Agreement
will be amended to add the Funds (including the Fully Discretionary Fixed Income
Fund) as parties to each on terms and conditions substantially identical to the
terms and conditions applicable to the portfolios immediately prior to the
Multi-Class Reorganization. The Master
12
<PAGE>
Trust has similar arrangements for which it pays nominal fees, which will be
terminated upon completion of the Multi-Class Reorganization.
CAPITALIZATION
The following table shows the capitalization of the Fully Discretionary
Fixed Income Portfolio at October 31, 1997 (unaudited) and on a pro forma basis
giving effect to the Multi-Class Reorganization and the Government Income
Portfolios Reorganization:
CAPITALIZATION TABLE
<TABLE>
<CAPTION>
FULLY DISCRETIONARY FULLY DISCRETIONARY
GOVERNMENT INCOME FIXED INCOME FIXED INCOME FUND
PORTFOLIOS (1) PORTFOLIO (1) COMBINED PRO FORMA (2)
------------------ ------------------- -----------------------
<S> <C> <C> <C>
Portfolio A...................................... $ 1,103,818 None $ 1,103,818(Class A)
Portfolio B...................................... $ 1,924,564 None $ 1,924,564(Class B)
Portfolio C...................................... $ 4,283,869 None $ 4,283,869(Class C)
Qualified Portfolio.............................. $ 17,075 None $ 17,075(Class Q)
Institutional Portfolio.......................... None $ $ (Class I)
</TABLE>
- - ------------------------
(1) As of October 31, 1997.
(2) After giving effect to the Multi-Class Reorganization and the Government
Income Portfolios Reorganization.
PURCHASES AND REDEMPTIONS
Shareholders of the Government Income Portfolios who receive shares of
corresponding Classes of the Fully Discretionary Fixed Income Fund in the
Government Income Portfolios Reorganization will be able to purchase and redeem
shares in the Fund in substantially the same manner and subject to substantially
the same conditions as shares in the Portfolios presently are purchased and
redeemed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Government Income Portfolios currently pay monthly dividends of net
investment income and annual contributions of net capital gains, if any.
Following the Government Income Portfolios Reorganization, the Fully
Discretionary Fixed Income Fund will declare and pay dividends annually rather
than monthly, and will calculate and make annual distributions of net capital
gains, if any.
The Trust has elected to qualify each Government Income Portfolio and the
Fully Discretionary Fixed Income Institutional Portfolio as a regulated
investment company under Subchapter M of the Code, and intends that the Fully
Discretionary Fixed Income Fund will remain so qualified. As a regulated
investment company, the Fully Discretionary Fixed Income Fund will be entitled
to the same benefits and subject to the same tax regulations as the Government
Income Portfolios immediately prior to the Government Income Portfolios
Reorganization.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Investment Adviser will execute the portfolio transactions and allocate
the brokerage business of the Fully Discretionary Fixed Income Fund subject to
policies established by the Board of Trustees of the Trust which are
substantially identical to those in effect with respect to the Government Income
master fund immediately prior to the Multi-Class Reorganization.
13
<PAGE>
SHAREHOLDERS' RIGHTS
The rights of shareholders of the Classes of the Fully Discretionary Fixed
Income Fund will be identical in all material respects to those of shareholders
of the Government Income Portfolios, except that Class B shares will convert
automatically to Class A shares seven years after purchase. As was the case
before the Multi-Class Reorganization, the shareholders of the Trust will vote
in the aggregate on all matters except those affecting only a particular Fund or
Class, in which case only the shareholders of the affected Fund or Class will
vote. Because the Government Income Portfolios Reorganization will increase the
size of the Fully Discretionary Fixed Income Fund, the voting power of
individual shareholders will be diluted with respect to matters on which
shareholders vote on a Fund-wide basis rather than on an individual Class basis.
FURTHER INFORMATION ABOUT THE GOVERNMENT INCOME PORTFOLIOS AND THE FULLY
DISCRETIONARY FIXED INCOME FUND
Further information about the Government Income Portfolios and the Fully
Discretionary Fixed Income Institutional Portfolio is contained in their current
prospectuses and statements of additional information, which are incorporated
herein by reference. A copy of the Fully Discretionary Fixed Income Fund's
preliminary prospectus accompanies this Proxy Statement. The Trust will also
provide its most recent annual reports to shareholders with respect to the Fully
Discretionary Fixed Income Institutional Portfolio for the year ended March 31,
1997, and its semiannual report to shareholders for the six months ended
September 30, 1997, upon request. These documents are available without charge
by writing to the Trust at 600 West Broadway, San Diego, California 92101, or by
calling (800) 551-8045.
The Trust is subject to the information requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, and as required by
those Acts file reports, proxy statements and other information with the
Securities and Exchange Commission. Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Room maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C., and at the SEC's
regional offices at 219 South Dearborn Street, Chicago, Illinois and 75 Park
Place, New York, New York. They may also be viewed on the Internet at
www.sec.gov. Copies of such materials can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information Services
of the SEC, Washington, D.C. 20549.
APPROVAL OF THE BOARD OF TRUSTEES
As discussed above, the Board of Trustees believes that the proposed
Government Income Portfolios Reorganization will be advantageous to the
shareholders of the Portfolios. At their current sizes, the Government Income
Portfolios are too small to operate in a cost effective manner. Management of
the Trust does not foresee any significant increases in the assets of the
Government Income Portfolios or the Government Income master fund in the near
future which would change this situation. Although Nicholas-Applegate Capital
Management has been voluntarily subsidizing the Portfolios' operations, it is
not willing to continue to do so in the future, even after completion of the
Multi-Class Reorganization.
Although the Fully Discretionary Fixed Income Fund will have slightly higher
expenses than the Government Income Portfolios, management believes that, as a
result of the Multi-Class Reorganization and the Government Income Portfolios
Reorganization, the combined asset base of the Fund will permit it to spread
reduced expenses over a larger asset base, with reasonable prospects for further
increases in assets and correspondingly lower expenses in the future.
Furthermore, the investment objective of the Fully Discretionary Fixed Income
Fund is similar to that of the Government Income Portfolios, and a substantial
portion of the Fund's portfolio will be comprised of investment-grade
securities. Thus, the Board of Trustees believes that the shareholders of the
Government Income Portfolios should be able to continue to meet their primary
goal of current income from a portfolio comprised principally of high quality
fixed income securities after completion of the Government Income Portfolios
Reorganization.
14
<PAGE>
The Board of Trustees believes that the only practical alternative to the
proposed Government Income Portfolios Reorganization would be a taxable
liquidation of the Portfolios, which would not be preferable to the proposed
tax-free reorganization with the Fully Discretionary Fixed Income Fund. However,
if for any reason the proposed Government Income Portfolios Reorganization is
not completed, the Board of Trustees currently believes that its only option
will be such a liquidation.
VOTE REQUIRED
Approval of the Government Income Portfolios Reorganization requires the
affirmative votes of shareholders holding more than 50% of the outstanding
shares of each of the A, B, C and Qualified Government Income Portfolios. If the
shareholders of all the A, B, C and Qualified Government Income Portfolios do
not approve the proposed Government Income Portfolios Reorganization, or either
the Multi-Class Reorganization or the Government Income Portfolios
Reorganization is not completed for any other reason, then the Board of Trustees
intends to liquidate the Government Income Portfolios.
PROPOSAL 4. ELECTION OF TRUSTEES
At the Meeting, shareholders will be asked to elect Trustees of the Trust to
hold office until their successors are elected.
The Proxy holders intend to vote for the election of the nominees named
below, all of whom are currently Trustees of the Trust or the Master Trust. All
of the nominees have consented to be named and have indicated their intent to
serve if elected. If any nominee is unavailable for any reason, the Proxy
holders will consult with the Board of Trustees of the Trust in determining how
to vote the shares represented by them.
The following table indicates, as to each of the nominees for election as a
Trustee, his or her name, position with the Trust or Master Trust, age,
principal occupation during the past five years, other directorships held in
public companies, and the number of shares of the Trust beneficially owned at
the Record Date. Unless otherwise indicated and subject to applicable community
property and similar laws, each nominee has sole voting and investment power
with respect to the shares of the Trust beneficially owned. Trustees whose names
are followed by an asterisk are "interested persons" of the Trust (as defined by
the Investment Company Act of 1940, as amended).
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND
NAME, POSITION AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ------------------------------- ---------------------------------------------------------------- ---------------
<S> <C> <C>
FRED C. APPLEGATE, Trustee and Private investor (since January 1992); formerly President,
Chairman of the Board of Nicholas-Applegate Capital Management (from August 1984 to
Trustees (___) (2) December 1991). Director of Nicholas- Applegate Fund, Inc.
(since 1987). Mr. Applegate's interests in Nicholas-Applegate
Capital Management, Inc., the general partner of the Investment
Adviser, were acquired by Mr. Nicholas in 1991 and 1992.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND
NAME, POSITION AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ------------------------------- ---------------------------------------------------------------- ---------------
<S> <C> <C>
ARTHUR B. LAFFER, Trustee Chairman, A.B. Laffer, V.A. Canto & Associates, an economic
(___)*(3) consulting firm (since 1979); Chairman, Laffer Advisors
Incorporated, economic consultants (since 1981); Director,
Nicholas-Applegate Fund, Inc. (since 1987), U.S. Filter
Corporation (since 1991), MasTec, Inc. (construction) (since
1994), and Coinmach Laundry Corporation (since 1996); Chairman,
Calport Asset Management, Inc. (since 1992); formerly
Distinguished University Professor and Director, Pepperdine
University (from September 1985 to May 1988) and Professor of
Business Economics, University of Southern California (1976 to
1984).
CHARLES E. YOUNG, Trustee Chancellor, University of California at Los Angeles (1968-1997);
(___) (2) Director, Nicholas-Applegate Fund, Inc. (since 1992); Director,
Intel Corp. (since 1974), Academy of Television Arts and
Sciences Foundation (since 1988), Los Angeles World Affairs
Council (since 1977) and Town Hall of California (since 1982).
ARTHUR E. NICHOLAS, Trustee Trustee and Chairman of the Board of Trustees of the Master
(___)* Trust; Managing Partner and Chief Investment Officer,
Nicholas-Applegate Capital Management, (since 1984), and
Chairman/President, Nicholas-Applegate Securities (since 1992).
Director and Chairman of the Board of Directors of
Nicholas-Applegate Fund, Inc., a registered open-end investment
company, (since 1987).
DANN V. ANGELOFF, Trustee (___) Trustee of the Master Trust; President, The Angeloff Company,
corporate financial advisers (since 1976); Director,
Nicholas-Applegate Fund, Inc. (since 1987); Trustee (1979 to
1987) and University Counselor to the President (since 1987),
University of Southern California; Director, Public Storage,
Inc., a real estate investment trust (since 1980), Storage
Properties, a real estate investment trust (since 1989),
Datametrics Corporation, a producer of computer peripherals and
communication products (since 1993), SEDA Specialty Packaging,
Inc. (since 1993), and Leslies Poolmart, a distributor of
swimming pool services and products (since 1996).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND
NAME, POSITION AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ------------------------------- ---------------------------------------------------------------- ---------------
<S> <C> <C>
WALTER E. AUCH, Trustee Trustee of the Master Trust; Director, Geotech
(___)*(4) Communications, Inc., a mobile radio communications
company (since 1987), Fort Dearborn Fund (since
1987), Brinson Funds (since 1994), Smith Barney Trak
Fund (since 1992), registered investment companies;
Director, Pimco Advisors L.P., an investment manager
(since 1994), Banyan Realty Fund (since 1987),
Banyan Strategic Land Fund (since 1987), Banyan
Strategic Land Fund II (since 1988), and Banyan
Mortgage Fund (since 1988), real estate investment
trusts. Formerly Chairman and Chief Executive
Officer, Chicago Board Options Exchange (1979 to
1986) and Senior Executive Vice President, Director
and Member of the Executive Committee, PaineWebber,
Inc. (until 1979).
THEODORE J. COBURN, Trustee of the Master Trust; Partner, Brown, Coburn
Trustee (___) & Co., an investment banking firm (since 1991);
research associate, Harvard Graduate School of
Education (since 1996); Director, Nicholas-Applegate
Fund, Inc. (since 1987), Emerging Germany Fund
(since 1991), Moovies, Inc. (since 1995). Formerly
Managing Director of Global Equity Transactions
Group, and member of Board of Directors, Prudential
Securities (1986 to June 1991).
DARLENE DEREMER, Trustee Trustee of the Master Trust; President and Founder,
(--)*(5) DeRemer Associates, a marketing consultant for the
financial services industry (since 1987); Vice
President, PBNG Funds, Inc. (since 1995); formerly
Vice President and Director, Asset Management
Division, State Street Bank and Trust Company (from
1982 to 1987), and Vice President, T. Rowe Price &
Associates (1979 to 1982); Director, Jurika & Voyles
Fund Group (since 1994), and King's Wood Montessori
School (since 1995); Member of Advisory Board,
Financial Women's Association (since 1995).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
AND
NAME, POSITION AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION % OF SERIES
- - ------------------------- ---------------------------------------------------- -------------
<S> <C> <C> <C>
GEORGE F. KEANE, Trustee (___) Trustee of the Master Trust; President Emeritus and Senior
Investment Adviser, The Common Fund, a non-profit investment
management organization representing educational institutions
(since 1993), after serving as its President (from 1971 to
1992); Member of Investment Advisory Committee, New York State
Common Retirement Fund (since 1982); Director and Chairman of
the Investment Committee, United Negro College Fund (since
1987); Director, Investor Responsibility Research Center (since
1987), United Educators Risk Retention Group (since 1989), RCB
Trust Company (since 1991), School, College and University
Underwriters Ltd. (since 1986), The Bramwell Funds, Inc. (since
1994) Trustee, Fairfield University (since 1993), Universal
Stainless & Alloy Products, Inc. (since 1994), Chairman of the
Board, Trigen Energy Corporation (since 1994); Trustee,
Fairfield University (since 1993). Formerly President, Endowment
Advisers, Inc. (from August 1987 to December 1992).
</TABLE>
- - ------------------------
(1) Trust Shares beneficially owned by the person constitute less than 1% of the
outstanding shares of each series.
(2) Member of the Trust's Audit Committee and Nominating Committee.
(3) Mr. Laffer will be considered to be an "interested person" of the Trust
because A.B. Laffer, V.A. Canto & Associates has received substantial
compensation from the Investment Adviser for consulting services provided
from time to time to the Investment Adviser, and because during the last two
fiscal years his son was an employee of the Investment Adviser.
(4) Mr. Auch will be considered to be an "interested person" of the Trust
because he is on the board of a company a subsidiary of which is a
broker-dealer.
(5) Ms. DeRemer will be considered to be an "interested person" of the Trust
because DeRemer Associates has received substantial compensation from the
Investment Adviser for consulting services provided in connection with its
institutional business.
The Board of Trustees of the Trust met four times during the fiscal year
ended March 31, 1997. All of the Trustees attended at least 75% of the meetings.
The members of the Audit Committee of the Board of Trustees of the Trust,
neither of whom is affiliated with the Investment Advisor, oversee and review
the audit procedures of the Trust and assist the Board in fulfilling its
responsibilities relating to Trust accounting and reporting practices. During
the fiscal year ended March 31, 1997, the Audit Committee held two meetings. The
same persons serve as members of the Nominating Committee of the Board of
Trustees, and are responsible for nominating persons to fill vacancies on the
Board. The Nominating Committee did not meet during the fiscal year ended March
31, 1997.
18
<PAGE>
OFFICERS OF THE TRUST
The following table indicates, as to each executive officer of the Trust,
his or her name, position with the Trust, principal occupational during the past
five years, other directorships held in public companies and the number of
shares of the Trust beneficially owned at the Record Date.
<TABLE>
<CAPTION>
SHARES
OWNED
BENEFICIALLY
AND % OF
NAME AND POSITION AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION SERIES
- - ----------------------------- --- ---------------------------------------------------------------- -------------------
<S> <C> <C> <C>
JOHN D. WYLIE President of the Master Trust; Partner (since January 1994),
President Chief Investment Officer--Investor Services Group (since
December 1995), and Portfolio Manager (since January 1990),
Nicholas-Applegate Capital Management.
THOMAS PINDELSKI Chief Financial Officer of the Master Trust; Partner (since
Chief Financial Officer January 1996) and Chief Financial Officer, Nicholas-Applegate
Capital Management (since January 1993), and Chief Financial
Officer, Nicholas-Applegate Securities (since January 1993);
formerly Chief Financial Officer, Aurora Capital Partners/WSGP
Partners L.P., an investment partnership (from November 1988 to
January 1993), and Vice President and Controller, Security
Pacific Merchant Banking Group (from November 1986 to November
1988).
PETER J. JOHNSON Vice President of the Master Trust; Partner, Nicholas- Applegate
Vice President Capital Management (since January 1992) and Vice President,
Nicholas-Applegate Securities (since December 1995); formerly
Marketing Director, Pacific Financial Asset Management Company,
an investment management firm (from July 1989 to December 1991),
and Senior Marketing Representative, Fidelity Investments
Institutional Services (from August 1987 to July 1989).
E. BLAKE MOORE, JR. Secretary of the Master Trust; Partner (since January 1998),
Secretary General Counsel and Secretary, Nicholas-Applegate Capital
Management and Nicholas-Applegate Securities (since 1993);
formerly Attorney, Luce, Forward, Hamilton & Scripps (from 1989
to 1993).
</TABLE>
- - ------------------------
(1) Shares beneficially owned constitute less than 1% of the Trust's outstanding
shares.
REMUNERATION OF TRUSTEES AND OFFICERS
Each Trustee of the Trust and the Master Trust who is not an officer or
affiliate of the Trust or the Master Trust, the Investment Adviser or the
Distributor receives an aggregate annual fee of $14,000 for services rendered as
a Trustee, and $1,000 for each meeting attended ($2,000 per committee meeting
for committee chairmen). Each Trustee is also reimbursed for out-of-pocket
expenses incurred as a Trustee.
19
<PAGE>
The following table sets forth the aggregate compensation paid by the Trust
and the Master Trust for the fiscal year ended March 31, 1997, to the Trustees
who are not affiliated with the Investment Adviser and the aggregate
compensation paid to such Trustees for service on the Trust's or Master Trust's
board and that of all other funds in the "Trust complex" (as defined in Schedule
14A under the Securities Exchange Act of 1934):
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED AS ESTIMATED FROM TRUST
FROM TRUST OR PART OF TRUST ANNUAL BENEFITS COMPLEX PAID
NAME MASTER TRUST EXPENSES UPON RETIREMENT TO TRUSTEE
- - ---------------------------------------------------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Fred C. Applegate................................... $ 10,635 None N/A $ 36,250(47*)
Arthur B. Laffer.................................... $ 9,558 None N/A $ 31,750(47*)
Charles E. Young.................................... $ 9,827 None N/A $ 31,750(47*)
Dann V. Angeloff.................................... $ 10,635 None N/A $ 36,750(16*)
Walter E. Auch...................................... $ 9,827 None N/A $ 18,250(15*)
Theodore J. Coburn.................................. $ 9,827 None N/A $ 34,250(16*)
Darlene DeRemer..................................... $ 9,558 None N/A $ 17,250(15*)
George F. Keane..................................... $ 9,827 None N/A $ 18,250(15*)
</TABLE>
- - ------------------------
* Indicates number of funds in Trust complex.
VOTE REQUIRED
A plurality of votes cast at the Meeting, in person or by proxy, will elect
a Trustee. Election of Trustees is contingent upon completion of the
Reorganization. If for any reason the Reorganization is not completed, the
current Trustees of the Trust will remain in office.
PROPOSAL 5. SELECTION OF INDEPENDENT ACCOUNTANTS
At the meeting, shareholders will be asked to ratify the selection by the
Board of Trustees of the Trust of Ernst & Young L.L.P. as the independent
accountants to the Trust for the fiscal year ended March 31, 1998. Ernst & Young
L.L.P. has acted as independent accountants to the Trust since 1996.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Trust present in
person or by proxy at the Meeting is required to ratify the selection of Ernst &
Young L.L.P. as independent accountants for the Trust. If for any reason this
Proposal is not approved, the Board of Trustees of the Trust will take such
action as they deem appropriate, which may include retention of another
accounting firm or re-proposal of Ernst & Young L.L.P. to the shareholders of
the Trust.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, management has not
been informed of any matters that will be presented for action at the Meeting
other than the Proposals listed in the Notice of Meeting. If other matters are
properly presented to the Meeting for action, the persons named in the Proxy
will vote or refrain from voting in accordance with their best judgment on those
matters.
20
<PAGE>
NEXT MEETING OF SHAREHOLDERS
The Trust is not required to hold annual or other periodic meetings of
shareholders except as required by the Investment Company Act, and does not
intend to do so. The next meeting of shareholders will be held at such time as
the Board of Trustees of the Trust may determine or at such time as may be
legally required. Any shareholder proposal intended to be presented at such
meeting must be received by the Trust at its office a reasonable time prior to
the meeting, as determined by the Board of Trustees, to be included in the
Trust's proxy statement and form of proxy relating to such meeting, and must
satisfy all other federal and state legal requirements.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE
21
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made as of
the 1st day of January, 1998, by and among Nicholas-Applegate Mutual Funds, a
Delaware business trust (the "Trust") on behalf of the Government Income A, B, C
and Qualified Portfolio series of the Trust (each a "Government Income
Portfolio" and, collectively, the "Government Income Portfolios"), and the Trust
on behalf of the Fully Discretionary Fixed Income Institutional Portfolio series
of the Trust (the "Fully Discretionary Portfolio").
BACKGROUND
WHEREAS, the Government Income Portfolios and the Fully Discretionary
Portfolio are series of the Trust, a registered open-end management investment
company that invests all of the assets of each of its series in corresponding
series of Nicholas-Applegate Investment Trust, a Delaware business trust (the
"Master Trust").
WHEREAS, the series of the Master Trust, including the Government Income
Fund series (the "Government Income Master Fund") and the Fully Discretionary
Fixed Income Fund series (the "Fully Discretionary Master Fund"), will dissolve
and distribute their assets in kind to the corresponding series of the Trust,
including the Government Income Portfolios and the Fully Discretionary
Portfolio, respectively, immediately prior to the transactions contemplated by
this Agreement.
WHEREAS, the Board of Trustees of the Trust (the "Board of Trustees") has
approved and submitted to the shareholders of all A, B, C and Qualified
portfolios of the Trust other than the Government Income Portfolios (the
"Reorganizing Portfolios") a plan of reorganization (the "Multi-Class
Reorganization") pursuant to which the name of each corresponding Institutional
portfolio of the Trust will be changed to a "Fund" and the current shares of
such portfolio will be designated as Class I shares of the Fund; the assets of
the Reorganizing Portfolios will be transferred to the corresponding Funds in
exchange for Class A, B, C and Qualified shares of the Funds; the shareholders
of the Reorganizing Portfolios will receive (in exchange for their current
shares) shares of corresponding classes of the corresponding Funds; and the
assets of the Funds will be managed pursuant to an Investment Advisory Agreement
between the Trust and Nicholas-Applegate Capital Management (the "Investment
Adviser") rather than by the Master Trust.
WHEREAS, the parties wish to enter into a plan of reorganization (the
"Plan") which will consist, among other things, of a change in the name of the
Fully Discretionary Fixed Income Institutional Portfolio series of the Trust to
the Fully Discretionary Fixed Income Fund (the "Fully Discretionary Fund");
creation by the Board of Trustees of Class A, B, C and Q shares of the Fully
Discretionary Fund; the transfer of assets of the Government Income A, B, C and
Qualified Portfolios to the Fully Discretionary Fund in exchange for a similar
number of Class A, B, C or Q shares of the Fully Discretionary Fund (the "Fund
Shares"); and distribution by the Government Income Portfolios of the Fund
Shares to their shareholders and dissolution of the Government Income
Portfolios.
WHEREAS, the Board of Trustees, including a majority of the Trustees who are
not "interested persons" of the Trust as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), has determined that the Plan is in the
best interests of the shareholders of each Government Income Portfolio and of
the Fully Discretionary Portfolio and that their interests would not be diluted
as a result of the transactions contemplated thereby.
A-1
<PAGE>
AGREEMENT
NOW THEREFORE, in consideration of the agreements contained in this
Agreement, the parties agree as follows:
ARTICLE 1.
MULTIPLE CLASSES OF SHARES
SECTION 1.1 CREATION OF MULTIPLE CLASSES OF SHARES. Effective on the
Closing Date, as defined in Article IV, the Board of Trustees shall establish
four additional classes of shares of the Fully Discretionary Fund designated
Class A, B, C and Q shares.
SECTION 1.2 CHANGE IN NAME OF THE FULLY DISCRETIONARY PORTFOLIO. Effective
on the Closing Date, the Board of Trustees shall revise the name of the Fully
Discretionary Portfolio to replace the phrase "Institutional Portfolio" with the
phrase "Fund."
ARTICLE 2.
TRANSFER OF ASSETS AND LIABILITIES
Subject to the terms and conditions set forth herein, on the Closing Date
the Trust shall cause the Government Income Portfolios to transfer all of their
assets, including all assets received from the Government Income Master Fund, to
the Fully Discretionary Fund, and shall cause the Fully Discretionary Fund to
assume all of the liabilities of the Government Income Portfolios. In exchange
therefor, the Trust shall cause the Fully Discretionary Fund to deliver to each
Government Income Portfolio a number of the Fully Discretionary Fund's Class A,
B, C or Q shares, as applicable, which is equal to (i) the aggregate net asset
value of the corresponding Government Income Portfolio determined at the close
of business on the day prior to the Closing Date, divided by (ii) the net asset
value per share of the respective A, B, C or Q Class of shares of the Fully
Discretionary Fund outstanding as of the Closing Date.
ARTICLE 3.
SHARES OF THE FULLY DISCRETIONARY FUND
SECTION 3.1 LIQUIDATION OF A, B, C AND QUALIFIED PORTFOLIOS. Subject to
the terms and conditions set forth herein, on the Closing Date the Trust shall
liquidate the Government Income Portfolios and shall distribute pro rata to the
shareholders of record of each Government Income Portfolio, determined as of the
Closing Date, the Fund Shares received by such Government Income Portfolio
pursuant to Article 2.
SECTION 3.2 ISSUANCE OF SHARE CERTIFICATES. The Trust shall accomplish the
liquidation and distribution provided for herein by opening accounts on the
books of the Fully Discretionary Fund in the names of each Government Income
Portfolio's shareholders and transferring the Fund Shares credited to the
account of the Government Income Portfolio on the books of the Fully
Discretionary Fund. As promptly as practicable after the Closing, each holder of
any outstanding certificate evidencing shares of a Government Income Portfolio
shall be entitled to surrender the same to the Trust's transfer agent and
request in exchange therefor a certificate or certificates representing the
number of shares of beneficial interest of the Class of the Fully Discretionary
Fund into which the shares of beneficial interest theretofore represented by the
certificate or certificates so surrendered shall have been converted.
Certificates for fractional shares of beneficial interests of the Fully
Discretionary Fund shall not be issued, but shall be continued to be carried by
the Fully Discretionary Fund for the open account of such shareholder. Until so
surrendered, each outstanding certificate which, prior to the Closing,
represented shares of beneficial interest of a Government Income Portfolio shall
be deemed for all purposes to evidence ownership of the number of shares of the
Class of shares of beneficial interest of the Fully Discretionary Fund into
which the shares of beneficial interest of such Government Income Portfolio have
been converted.
A-2
<PAGE>
SECTION 3.3 TIME AND DATE OF VALUATION. The number of shares to be issued
by the Fully Discretionary Fund to each Government Income Portfolio shall be
computed as of 4:00 p.m. (Eastern time) on the Closing Date in accordance with
the regular practices of the Trust.
ARTICLE 4.
CLOSING AND CLOSING DATE
SECTION 4.1 CLOSING TIME AND PLACE. The Closing Date shall be the date on
which all of the conditions set forth in Article 5 have been fulfilled or
otherwise waived by the parties hereto but, in any event, not later than March
31, 1998, or such later date as the parties may mutually agree. All acts taking
place on the Closing Date shall be deemed to be taking place simultaneously as
of the close of business on the Closing Date, unless otherwise provided. The
closing shall be held at 4:30 p.m. (Eastern time) at the offices of the Trust,
600 West Broadway, San Diego, California 92101, or such other time and/or place
as the parties may mutually agree.
SECTION 4.2 DELAY OF VALUATION. If on the Closing Date (a) the primary
trading market for portfolio securities of any Government Income Portfolio or
the Fully Discretionary Portfolio is closed to trading or trading thereon is
restricted, or (b) trading or the reporting of trading is disrupted so that an
accurate appraisal of the value of the net assets of any Government Income
Portfolio or the Fully Discretionary Portfolio and an accurate calculation of
the number of shares held by each shareholder is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading shall
have been fully resumed and reporting shall have been restored.
ARTICLE 5.
CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THE REORGANIZATION
The respective obligations of each party to effect the reorganization
contemplated by this Agreement is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
SECTION 5.1 SHAREHOLDER APPROVAL. On or prior to the Closing Date, the
shareholders of each Government Income Portfolio shall have approved the
transactions contemplated by this Agreement in accordance with the provisions of
the Trust's Declaration of Trust and the 1940 Act.
SECTION 5.2 CREATION OF MULTIPLE CLASSES. The shareholders of the Trust
shall have taken such actions as may be required in accordance with the
provisions of the Trust's Declaration of Trust and the 1940 Act to permit the
creation of the Fund Shares, and the Board of Trustees shall have established
such shares.
SECTION 5.3 CLOSING OF MULTI-CLASS REORGANIZATION. The Multi-Class
Reorganization shall have been implemented in accordance with its terms.
SECTION 5.4 DISSOLUTION OF MASTER FUNDS. The Government Income Master Fund
and the Fully Discretionary Master Fund shall have dissolved and distributed all
of their assets in kind to the Government Income Portfolios and the Fully
Discretionary Portfolio, respectively.
SECTION 5.5 NO INJUNCTIONS OR RESTRAINTS. On the Closing Date, no action,
suit or other proceeding shall be pending before any court or government agency
which seeks to restrain or prohibit or obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby.
SECTION 5.6 CONSENTS. All consents of the other parties and all other
consents, orders and permits of Federal, state and local regulatory authorities
deemed necessary by the Trust to permit consummation, in all material respects,
of the transactions contemplated herein shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of any Government Income
Portfolio or the Fully Discretionary Fund.
A-3
<PAGE>
SECTION 5.7 EFFECTIVE REGISTRATION STATEMENTS. The N-14 Registration
Statement of the Trust with respect to the reorganization provided for herein
and the N-1A Registration Statement of the Trust with respect to the Fund Shares
shall have become effective and no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the parties hereto,
no investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated.
SECTION 5.8 TAX OPINIONS. The Trust shall have received an opinion of
Paul, Hastings, Janofsky & Walker LLP substantially to the effect that for
Federal income tax purposes:
(a) No gain or loss will be recognized by any Government Income Portfolio
or the Fully Discretionary Portfolio upon the receipt by the
Government Income Portfolio and the Fully Discretionary Portfolio of
substantially all of the assets of the corresponding Master Fund;
(b) The transfer of substantially all of the assets and liabilities of
each Government Income Portfolio to the Fully Discretionary Fund in
exchange for Fund Shares, and the distribution of those Fund Shares
to the Portfolio shareholders in liquidation of the Portfolio, will
constitute a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended;
(c) No gain or loss will be recognized by the Fully Discretionary Fund
upon the receipt of the assets of a Government Income Portfolio
solely in exchange for Fund Shares;
(d) No gain or loss will be recognized by any Government Income Portfolio
upon the transfer of its assets to the Fully Discretionary Fund in
exchange for Fund Shares or upon the distribution of Fund Shares to
Government Income Portfolio shareholders in exchange for their
Government Income Portfolio shares;
(e) No gain or loss will be recognized by any Government Income Portfolio
shareholders upon exchange of their Government Income Portfolio
shares for Fund Shares;
(f) The tax basis of the assets of each Government Income Portfolio
acquired by the Fully Discretionary Fund will be the same as the tax
basis of such assets to the Government Income Portfolio immediately
prior to the Reorganization;
(g) The tax basis of Fund Shares received by each shareholder of each
Government Income Portfolio pursuant to the Reorganization will be
the same as the tax basis of the Government Income Portfolio shares
held by such shareholder immediately prior to the Reorganization;
(h) The holding period of the assets of each Government Income Portfolio
by the Fully Discretionary Fund will include the period during which
those assets were held by the Government Income Portfolio and the
Government Income Master Fund; and
(i) The holding period of the Fund Shares to be received by each
Government Income Portfolio shareholder will include the period
during which the Government Income Portfolio shares exchanged
therefor were held by such shareholder.
SECTION 5.9 INVESTMENT ADVISORY AGREEMENT. The Trust shall have entered
into an Investment Advisory Agreement with the Investment Adviser with respect
to the Fully Discretionary Fund on substantially the same terms as the current
agreement between the Investment Adviser and the Master Trust.
SECTION 5.10 COVENANTS, REPRESENTATIONS AND WARRANTIES. Each party shall
have performed all of its covenants set forth in Article 7, and its
representations and warranties set forth in Article 6 shall be true and correct
in all material respects on and as of the Closing Date as if made on such date.
A-4
<PAGE>
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
The parties represent and warrant as follows:
SECTION 6.1 STRUCTURE AND STANDING. The Trust represents and warrants that
it is a business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets.
SECTION 6.2 POWER. The Trust represents and warrants that it has full
power and authority to enter into and perform its obligations under this
Agreement; the execution, delivery and performance of this Agreement has been
duly authorized by all necessary action of its Board of Trustees; and this
Agreement constitutes its valid and binding contract enforceable in accordance
with its terms, subject to the effects of bankruptcy, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto.
SECTION 6.3 LITIGATION. The Trust represents and warrants that no
litigation or administrative proceeding or investigation of or before any court
or governmental body is currently pending against it and, to the best of its
knowledge, none is threatened against it or any of its properties or assets,
which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business, it knows of no facts which
might form the basis for the institution of such proceedings, and is not a party
to or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated.
SECTION 6.4 SEC DOCUMENTS. The Trust represents and warrants, on behalf of
the Fully Discretionary Fund, that its N-14 Registration Statement, on its
effective date, insofar as it relates to the Fully Discretionary Fund (i) will
comply in all material respects with the provisions of the Securities Act of
1933 and the 1940 Act, and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
SECTION 6.5 THE PORTFOLIO ASSETS. The Trust represents and warrants, on
behalf of each Government Income Portfolio, that on the Closing Date the assets
received by such Government Income Portfolio from the Government Income Master
Fund will be delivered to the Fully Discretionary Fund as provided in Article 2
free and clear of all liens, pledges, security interests, charges or other
encumbrances of any nature whatsoever created by the Government Income Portfolio
and without any restriction upon the transfer thereof, except for such
liabilities assumed as provided in Article 2.
SECTION 6.6 THE FULLY DISCRETIONARY FUND SHARES. The Trust represents and
warrants, on behalf of the Fully Discretionary Fund, that on the Closing Date
(a) the Class I shares of the Fully Discretionary Fund will be the only
outstanding shares of the Fully Discretionary Fund, all of which will be duly
authorized, validly issued, fully paid and nonassessable; (b) the Fund Shares to
be delivered to the Government Income Portfolios as contemplated in this
Agreement will be duly authorized, validly issued, fully paid and nonassessable;
(c) no shareholder of the Fully Discretionary Fund or any other series of the
Trust has any preemptive right to subscription or purchase in respect thereof;
(d) each Government Income Portfolio will acquire its Fund Shares free and clear
of all liens pledges, security interests, charges or other encumbrances of any
nature whatsoever created by the Fully Discretionary Fund and without any
restriction on the transfer thereof; and (e) the Fund Shares will be duly
qualified for offering to the public in all of the states of the United States
in which such qualification is required or an exemption from such requirement
shall have been obtained.
A-5
<PAGE>
ARTICLE 7.
COVENANTS
SECTION 7.1 COVENANTS RELATING TO THE CONDUCT OF BUSINESS. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing Date, the Trust shall operate its
business in the ordinary course.
SECTION 7.2 PREPARATION OF N-14 REGISTRATION STATEMENT. As soon as
reasonably practicable after the execution of this Agreement, the Trust shall
file an N-14 Registration Statement with respect to the reorganization
contemplated hereby with the United States Securities and Exchange Commission,
and shall use its best efforts to provide that the N-14 Registration Statement
becomes effective as promptly as practicable. As soon as reasonably practicable,
the Trust shall also prepare and file any other related filings required under
applicable state securities laws.
SECTION 7.3 AMENDMENT OF N-1A REGISTRATION STATEMENT. As soon as
reasonably practicable after the execution of this Agreement, the Trust shall
amend its N-1A Registration Statement with respect to the Fund Shares
contemplated hereby with the United States Securities and Exchange Commission,
and shall use its best efforts to provide that the Amendment becomes effective
as promptly as practicable. As soon as reasonably practicable, the Trust shall
also prepare and file any other related filings required under applicable state
securities laws.
SECTION 7.4 SHAREHOLDERS MEETING. As soon as practicable after the
effective date of the N-14 Registration Statement the Trust shall call a special
meeting of the shareholders of the Government Income Portfolios for the purpose
of considering the reorganization contemplated by this Agreement.
SECTION 7.5 FEES AND EXPENSES. Whether or not this Agreement is
consummated, the Trust shall cause fifty percent (50%) of all costs and expenses
incurred in connection with this Agreement and the transactions contemplated to
be paid by Nicholas-Applegate Capital Management, and the balance by the
Government Income Portfolios pro rata in proportion to their respective net
assets at the Closing.
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated by resolution of
the Board of Trustees of the Trust at any time prior to the Closing Date,
whether before or after approval by the shareholders of the Government Income
Portfolios, if: (a) circumstances develop that, in the opinion of such Board of
Trustees, make proceeding with the Plan inadvisable; or (b) any approval of the
shareholders of the Trust required for the consummation of the Plan shall not
have been obtained; or (c) any governmental body shall have issued an order,
decree or ruling having the effect of permanently enjoining, restraining or
otherwise prohibiting the consummation of this Agreement.
SECTION 8.2 EFFECT OF TERMINATION. In the event of any termination
pursuant to Section 8.1, there shall be no liability for damage on the part of
the Trust or the Board of Trustees.
SECTION 8.3 AMENDMENT. This Agreement may be amended prior to the Closing
Date by the parties at any time before or after approval hereof by the
shareholders of the Trust; provided, however, that after such shareholder
approval there shall not be any amendment that by law requires further approval
by the shareholders without obtaining such further approval.
SECTION 8.4 WAIVER. At any time prior to the Closing Date, any of the
terms or conditions of this Agreement may be waived by the Board of Trustees of
the Trust, if, in their judgment after consultation with legal counsel, such
action or waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Trust.
A-6
<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Nicholas-Applegate Mutual Funds on
behalf of each Government Income
Portfolio
Attest: /s/ E. BLAKE MOORE, JR. By: /s/ JOHN WYLIE
-------------------------------- --------------------------------
E. Blake Moore, Jr. John Wylie
SECRETARY PRESIDENT
Nicholas-Applegate Mutual Funds on
behalf of the Fully Discretionary
Fund
Attest: /s/ E. BLAKE MOORE, JR. By: /s/ JOHN WYLIE
-------------------------------- --------------------------------
E. Blake Moore, Jr. John Wylie
SECRETARY PRESIDENT
A-7
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Relating to the Reorganization of
NICHOLAS-APPLEGATE MUTUAL FUNDS
600 West Broadway
San Diego, California 92101
Telephone: (800) 551-8045
This Statement of Additional Information, relating specifically to the
proposed reorganization of the A, B, C Qualified and Institutional Portfolios of
Nicholas-Applegate Mutual Funds, consists of this cover page and the following
described documents, each of which is incorporated by reference herein:
(1) The Preliminary Statement of Additional Information of
Nicholas-Applegate Mutual Funds Class A, B, and C Shares filed with the
Securities and Exchange Commission as part of Post-Effective Amendment No.
49 to Registrant's Form N-1A Registration Statement on December 23, 1997;
(2) The Preliminary Statement of Additional Information of
Nicholas-Applegate Mutual Funds Class Q Shares filed with the Securities
and Exchange Commission as part of Post-Effective Amendment No. 50 to
Registrant's Form N-1A Registration Statement on December 29, 1997;
(3) The Preliminary Statement of Additional Information of
Nicholas-Applegate Mutual Funds Class I Shares filed with the Securities
and Exchange Commission as part of Post-Effective Amendment No. 48 to
Registrant's Form N-1A Registration Statement on December 15, 1997;
(4) The Annual Report of Nicholas-Applegate Mutual Funds Portfolios A, B,
and C for the year ended March 31, 1997, together with the
Nicholas-Applegate Portfolios A, B and C Semi-Annual Report dated September
30, 1997, filed with the Securities and Exchange Commission;
(5) The Annual Report of Nicholas-Applegate Mutual Funds Qualified
Portfolios for the year ended March 31, 1997, together with the
Nicholas-Applegate Advisory Portfolios Semi-Annual Report dated September
30, 1997, filed with the Securities Exchange Commission; and
(6) The Annual Report of Nicholas-Applegate Institutional Portfolios for
the year ended March 31, 1997, together with the Nicholas-Applegate
Institutional Portfolios Semi-Annual Report dated September 30, 1997, filed
with the Securities Exchange Commission.
This Statement of Additional Information is not a prospectus. A Combined
Proxy Statement and Prospectus dated January 12, 1998 relating to the
above-referenced matter may be obtained from Nicholas-Applegate Mutual Funds at
the telephone number and address above. This Statement of Additional
Information relates to, and should be read in conjunction with, such Combined
Proxy Statement and Prospectus.
The date of this Statement of Additional Information is January 12, 1998.
<PAGE>
PART C
OTHER INFORMATION
Item 15. INDEMNIFICATION
Registrant's trustees, officers, employees and agents are indemnified
against liabilities incurred by them in connection with the defense or
disposition of any action or proceeding in which they may be involved or with
which they may be threatened, while in office or thereafter, by reason of being
or having been in such office, except with respect to matters as to which it has
been determined that they acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
office ("Disabling Conduct").
Section 8 of Registrant's Administration Agreement, filed herewith as
Exhibit 13.1, provides for the indemnification of Registrant's Administrator
against all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its Disabling Conduct.
Section 9 of Registrant's Distribution Agreement, filed herewith as Exhibit 7.1,
provides for the indemnification of Registrant's Distributor against all
liabilities incurred by it in performing its obligations under the Agreement,
except with respect to matters involving its Disabling Conduct. Section 4 of
the Shareholder Service Agreement, filed herewith as Exhibit 13.19, provides for
the indemnification of Registrant's Distributor against all liabilities incurred
by it in performing its obligations under the Agreement, except with respect to
matters involving its Disabling Conduct.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 16. EXHIBITS
(1.1) Certificate of Trust of Registrant (f).
(1.2) Certificate of Amendment to Certificate of Trust of
Registrant (f).
(1.3) Amended and Restated Declaration of Trust of Registrant (f).
(1.4) Certificate of Trustees dated August 6, 1993, establishing
Emerging Growth Portfolio series (f).
(1.5) Certificate of Trustees dated December 15, 1993,
establishing International Growth Portfolio series (f).
(1.6) Amendment No. 2 to Amended and Restated Declaration of Trust
(f).
(1.7) Amendment No. 3 to Amended and Restated Declaration of Trust
(f).
(1.8) Amendment No. 4 to Amended and Restated Declaration of Trust
(f).
(1.9) Amendment No. 5 to Amended and Restated Declaration of Trust
(f).
(1.10) Amendment No. 6 to Amended and Restated Declaration of Trust
(f).
(1.11) Amendment No. 7 to Amended and Restated Declaration of Trust
(f).
(1.12) Form of Amendment No. 8 to Amended and Restated Declaration
of Trust (f).
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(1.13) Amendment No. 9 to Amended and Restated Declaration of Trust
(f).
(1.14) Form of Amendment No. 10 to Amended and Restated Declaration
of Trust (b).
(1.15) Amendment No. 11 to Amended and Restated Declaration of
Trust (i).
(1.16) Form of Amendment No. 12 to Amended and Restated Declaration
of Trust) (i).
(1.17) Amendment No. 13 to Amended and Restated Declaration of
Trust (j).
(1.18) Form of Amendment No. 14 to Amended and Restated Declaration
of Trust (j).
(1.19) Form of Amendment No. 15 to Amended and Restated Declaration
of Trust (l).
(1.20) Form of Amendment No. 16 to Amended and Restated Declaration
of Trust (p).
(1.21) Form of Amendment No. 17 to Amended and Restated Declaration
of Trust (p).
(1.22) Form of Amendment No. 18 to Amended and Restated Declaration
of Trust (p).
(2.1) Amended Bylaws of Registrant (f).
(2.2) Amendment to Section 2.5 of Bylaws of Registrant (f).
(3) Not applicable.
(4) Agreement and Plan of Reorganization -- filed herewith as
Exhibit "A" to Part A.
(5) None.
(5.1) Form of Investment Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management, with respect to
Global Blue Chip Fund, Emerging Markets Bond Fund, Pacific
Rim Fund, Greater China Fund and Latin America Fund (n).
(5.2) Form of Sub-Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management-Hong Kong, with
respect to the Pacific Rim Fund and Greater China Fund (n).
(5.3) Form of Sub-Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management-Asia, with respect to
the Pacific Rim Fund and Greater China Fund (n).
(5.4) Amended form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding the Class
A, B, C, Q and I shares of Registrant's additional Funds to
Investment Advisory Agreement (q).
(7.1) Distribution Agreement between Registrant and
Nicholas-Applegate Securities dated as of April 19, 1993
(f).
(7.2) Letter agreement between Registrant and Nicholas-Applegate
Securities dated May 17, 1993, adding certain Institutional
(formerly Qualified) Portfolio series and Emerging Growth
Portfolio series to Distribution Agreement (f).
(7.3) Letter agreement between Registrant and Nicholas-Applegate
Securities dated December 15, 1993, adding International
Growth Portfolio series to Distribution Agreement (f).
(7.4) Letter agreement between Registrant and Nicholas-Applegate
Securities dated April 22, 1994, adding Qualified Portfolio
series to Distribution Agreement (f).
(7.5) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Emerging Countries Growth Portfolio
series, Global Growth & Income Portfolio series and Mini-Cap
Growth Portfolio series to Distribution Agreement (f).
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(7.6) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Series B Portfolios to Distribution
Agreement (f).
(7.7) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Fixed Income and Qualified Portfolio
series to Distribution Agreement (f).
(7.8) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding Value Institutional
Portfolio series to Distribution Agreement (a).
(7.9) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding High Yield Bond and
Strategic Income Institutional Portfolio series to
Distribution Agreement (b).
(7.10) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Large Cap Growth and
Core Growth International Portfolio series to Distribution
Agreement (i).
(7.11) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Core Growth
International Portfolio C series to Distribution Agreement
(i).
(7.12) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Large Cap Growth A, B,
C and Qualified Portfolio series to Distribution Agreement
(j).
(7.13) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding Global Blue Chip Fund,
Emerging Markets Bond Fund, Pacific Rim Fund, Greater China
Fund and Latin America Fund to Distribution Agreement (n).
(7.14) Amended form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding the Class A, B, C, Q
and I shares of Registrant's additional Funds to
Distribution Agreement (p).
(8) None.
(9.1) Custodian Services Agreement between Registrant and PNC Bank
dated as of April 1, 1993 (f).
(9.2) Letter agreement between Registrant and PNC Bank dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Custodian Services Agreement (f).
(9.3) Letter agreement between Registrant and PNC Bank dated
August 20, 1993, adding Emerging Growth Portfolio series to
Custodian Services Agreement (f).
(9.4) Letter agreement between Registrant and PNC Bank dated
December 15, 1993, adding International Growth Portfolio
series to Custodian Services Agreement (f).
(9.5) Letter agreement between Registrant and PNC Bank dated April
22, 1994, adding Core Growth Qualified Portfolio series to
Custodian Services Agreement (f).
(9.6) Letter agreement between Registrant and PNC Bank, adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Custodian Services Agreement (f).
(9.7) Letter agreement between Registrant and PNC Bank, adding
Series B Portfolios to Custodian Services Agreement (f).
(9.8) Letter agreement between Registrant and PNC Bank, adding
Fixed Income Portfolio series to Custodian Services
Agreement (f).
(9.9) Form of letter agreement between Registrant and PNC Bank
adding Value Institutional Portfolio series to Custodian
Services Agreement (a).
(9.10) Form of letter agreement between Registrant and PNC Bank
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Custodian Services Agreement (b).
(9.11) Form of letter agreement between Registrant and PNC Bank
adding Large Cap Growth and Core Growth International
Portfolio series to Custodian Services Agreement (i).
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(9.12) Form of letter agreement between Registrant and PNC Bank
adding Core Growth International Portfolio C series to
Custodian Services Agreement (i).
(9.13) Form of letter agreement between Registrant and PNC Bank
adding Large Cap Growth A, B, C and Qualified Portfolio
series to Custodian Services Agreement (j).
(9.14) Form of letter agreement between Registrant and PNC Bank,
adding Global Blue Chip Fund and Emerging Markets Bond Fund
to Custodian Services Agreement (l).
(9.15) Form of letter agreement between Registrant and PNC Bank
with respect to custodian services fees related to the
Global Blue Chip Fund and the Emerging Markets Bond Fund
(m).
(9.16) Form of letter agreement between Registrant and PNC Bank,
adding Pacific Rim Fund, Greater China Fund and Latin
America Fund to Custodian Services Agreement (n).
(9.17) Form of letter agreement between Registrant and PNC Bank,
adding the Class A, B, C, Q and I shares of Registrant's
additional Funds to Custodian Services Agreement (o).
(9.18) Form of Sub-Custodian Agreement among Registrant, PNC Bank
and Chase Manhattan Bank, with respect to Global Blue Chip
Fund, Emerging Markets Bond Fund, Greater China Fund,
Pacific Rim Fund and Latin America Fund (o).
(9.19) Amended form of letter agreement among Registrant, PNC Bank
and Chase Manhattan Bank, adding the Class A, B, C, Q and I
shares of Registrant's additional Funds to Sub-Custodian
Agreement (p).
(10.1) Amended Distribution Plan of Registrant (f).
(10.2) Form of further Amendment to Distribution Plan of Registrant
(o).
(11) Opinion and Consent of Counsel as to legality of the
securities being offered (o).
(12.1) Opinion and Consent of Counsel as to tax consequences
(Non-Government Income Portfolios) (o).
(12.2) Opinion and Consent of Counsel as to tax consequences
(Government Income Portfolios) (o).
(13.1) Administration Agreement between Registrant and Investment
Company Administration Corporation dated as of April 1, 1993
(f).
(13.2) Form of amended Administration Agreement between Registrant
and Investment Company Administration Corporation (o).
(13.3) Administrative Services Agreement between Registrant and
Nicholas-Applegate Capital Management dated as of November
18, 1996 (i).
(13.4) Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company dated as of April 1,
1993 (f).
(13.5) Letter agreement between Registrant and State Street Bank
and Trust Company dated July 19, 1993, adding certain
Institutional (formerly Qualified) Portfolio series to
Transfer Agency and Service Agreement (f).
(13.6) Letter agreement between Registrant and State Street Bank
and Trust Company dated August 20, 1993, adding Emerging
Growth Portfolio Series to Transfer Agency and Service
Agreement (f).
(13.7) Letter agreement between Registrant and State Street Bank
and Trust Company dated December 15, 1993, adding
International Growth Portfolio series to Transfer Agency and
Service Agreement (f).
(13.8) Letter agreement between Registrant and State Street Bank
and Trust Company dated April 22, 1994, adding Core Growth
Qualified Portfolio series to Transfer Agency and Service
Agreement (f).
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<PAGE>
(13.9) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Emerging Countries Growth
Portfolio series, Global Growth & Income Portfolio series
and Mini-Cap Growth Portfolio series to Transfer Agency and
Service Agreement (f).
(13.10) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Series B Portfolios to Transfer
Agency and Service Agreement (f).
(13.11) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Fixed Income Portfolio series
to Transfer Agency and Service Agreement (f).
(13.12) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Value Institutional Portfolio
series to Transfer Agency and Service Agreement (a).
(13.13) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding High Yield Bond and Strategic
Income Institutional Portfolio series to Transfer Agency and
Service Agreement (b).
(13.14) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Large Cap Growth and Core
Growth International Portfolio series to Transfer Agency and
Service Agreement (i).
(13.15) Form of letter agreement between Registrant and State Street
Bank and Trust Company adding Core Growth International
Portfolio C series to Transfer Agency and Service Agreement
(i).
(13.16) Form of letter agreement between Registrant and State Street
Bank and Trust Company adding Large Cap Growth A, B, C and
Qualified Portfolio series to Transfer Agency and Service
Agreement (j).
(13.17) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Global Blue Chip Fund and
Emerging Markets Bond Fund to Transfer Agency and Service
Agreement (l).
(13.18) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Pacific Rim Fund, Greater
China Fund and Latin America Fund to Transfer Agency and
Service Agreement (n).
(13.19) Amended form of letter agreement between Registrant and
State Street Bank and Trust Company, adding the Class A, B,
C, Q and I shares of Registrant's additional Funds to
Transfer Agency and Service Agreement (p).
(13.20) Shareholder Service Plan between Registrant and
Nicholas-Applegate Securities (f).
(13.21) Form of amended Shareholder Service Plan between Registrant
and Nicholas-Applegate Securities (o).
(13.22) License Agreement dated as of December 17, 1992, between
Registrant and Nicholas-Applegate Capital Management (f).
(13.23) Accounting Services Agreement between Registrant and PFPC
Inc. dated as of April 1, 1993 (f).
(13.24) Letter agreement between Registrant and PFPC Inc. dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Accounting Services Agreement (f).
(13.25) Letter agreement between Registrant and PFPC Inc. dated
August 20, 1993, adding Emerging Growth Portfolio series to
Accounting Services Agreement (f).
(13.26) Letter agreement between Registrant and PFPC Inc. dated
December 15, 1993, adding International Growth Portfolio
series to Accounting Services Agreement (f).
(13.27) Letter agreement between Registrant and PFPC Inc. dated
April 22, 1994, adding Core Growth Qualified Portfolio
series to Accounting Services Agreement (f).
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<PAGE>
(13.28) Letter agreement between Registrant and PFPC Inc., adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Accounting Services Agreement (f).
(13.29) Letter agreement between Registrant and PFPC Inc., adding
Series B Portfolios to Accounting Services Agreement (f).
(13.30) Letter agreement between Registrant and PFPC Inc., adding
Fixed Income Portfolio series to Accounting Services
Agreement (f).
(13.31) Form of letter agreement between Registrant and PFPC Inc.
adding Value Institutional Portfolio series to Accounting
Services Agreement (a).
(13.32) Form of letter agreement between Registrant and PFPC Inc.
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Accounting Services Agreement (b).
(13.33) Form of letter agreement between Registrant and PFPC Inc.
adding Large Cap Growth and Core Growth International
Portfolio series to Accounting Services Agreement (i).
(13.34) Form of letter agreement between Registrant and PFPC Inc.
adding Core Growth International Portfolio C series to
Accounting Services Agreement (i).
(13.35) Form of letter agreement between Registrant and PFPC Inc.
adding Large Cap Growth A, B, C and Qualified Portfolio
series to Accounting Services Agreement (j).
(13.36) Form of letter agreement between Registrant and PFPC Inc.,
adding Global Blue Chip Fund and Emerging Markets Bond Fund
to Accounting Services Agreement (l).
(13.37) Form of letter agreement between Registrant and PFPC Inc.
with respect to accounting services fees related to the
Global Blue Chip Fund and the Emerging Markets Bond Fund
(m).
(13.38) Form of letter agreement between Registrant and PFPC Inc.,
adding the Pacific Rim Fund, Greater China Fund and Latin
America Fund(n).
(13.39) Form of letter agreement between Registrant and PFPC Inc.
regarding fees for additional Funds under Accounting
Services Agreement (o).
(13.40) Amended form of letter agreement between Registrant and PFPC
Inc., adding the Class A, B, C, Q and I shares of
Registrant's additional Funds to Accounting Services
Agreement (p).
(13.41) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated September 27, 1993 regarding
expense reimbursements (f).
(13.42) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated December 15, 1993, adding
International Growth Portfolio series to agreement regarding
expense reimbursements (f).
(13.43) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated April 22, 1994, adding Qualified
Portfolio series to agreement regarding expense
reimbursements (f).
(13.44) Letter agreement between Registrant and Nicholas-Applegate
Capital Management, adding Emerging Growth Institutional
Portfolio series, Global Growth & Income Portfolio series
and Mini-Cap Growth Portfolio series to agreement regarding
expense reimbursements (f).
(13.45) Letter agreement between Registrant and Nicholas-Applegate
Capital Management, adding Series B Portfolios to agreement
regarding expense reimbursement (f).
(13.46) Letter agreement between Registrant and Nicholas-Applegate
Capital Management, adding Qualified and Fixed Income
Portfolio series to agreement regarding expense
reimbursement (f).
(13.47) Letter agreement between Registrant and Nicholas-Applegate
Capital Management revising expense reimbursement agreement
with respect to Government Income Portfolios (f).
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(13.48) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Value
Institutional Portfolio series to agreement regarding
expense reimbursement (a).
(13.49) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding High Yield
Bond and Strategic Income Institutional Portfolio series to
agreement regarding expense reimbursement (b).
(13.50) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Large Cap
Growth and Core Growth International Portfolio series to
agreement regarding expense reimbursement (i).
(13.51) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Core Growth
International Portfolio C series to agreement regarding
expense reimbursement (i).
(13.52) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Large Cap
Growth A, B, C and Qualified Portfolio series to agreement
regarding expense reimbursement (j).
(13.53) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Global Blue
Chip Fund, Emerging Markets Bond Fund, Pacific Rim Fund,
Greater China Fund and Latin America Fund to agreement
regarding expense reimbursement (n).
(13.54) Amended form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding the Class A,
B, C, Q and I shares of Registrant's additional Funds to
agreement regarding expense reimbursement (p).
(13.55) Credit Agreement among Registrant, Chemical Bank and certain
other banks dated April 10, 1996 (f).
(13.56) First Amendment Agreement to Credit Agreement dated as of
April 9, 1997 among Registrant, The Chase Manhattan Bank,
and certain other banks (l).
(13.57) Form of Second Amendment Agreement to Credit Agreement among
Registrant, The Chase Manhattan Bank, and certain other
banks (n).
(14) Not applicable.
(15) Not applicable.
(16.1) Limited Power of Attorney of Fred C. Applegate (o).
(16.2) Limited Power of Attorney of Arthur B. Laffer (o).
(16.3) Limited Power of Attorney of Charles E. Young (o).
(17.1) Declaration of Rule 24f-2 (o).
(17.2) Proxy Cards (o).
(18) Multi-Class Plan (o).
- - ------------------------------
(a) Filed as an Exhibit to Amendment No. 28 to Registrant's Form N-1A
Registration Statement on January 19, 1996 and incorporated herein by
reference.
(b) Filed as an Exhibit to Amendment No. 29 to Registrant's Form N-1A
Registration Statement on May 3, 1996 and incorporated herein by
reference.
(c) Filed as an Exhibit to Amendment No. 1 to Registrant's Form N-1A
Registration Statement on March 15, 1993 and incorporated herein by
reference.
(d) Filed as an Exhibit to Amendment No. 12 to Registrant's Form N-1A
Registration Statement on August 1, 1994 and incorporated herein by
reference.
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(e) Filed as an Exhibit to Amendment No. 14 to Registrant's Form N-1A
Registration Statement on September 26, 1994 and incorporated herein
by reference.
(f) Filed as an Exhibit to Amendment No. 32 to Registrant's Form N-1A
Registration Statement on June 3, 1996 and incorporated herein by
reference.
(g) Filed as an Exhibit to Amendment No. 37 to Registrant's Form N-1A
Registration Statement on October 15, 1996 and incorporated herein by
reference.
(h) Filed as an Exhibit to Amendment No. 38 to Registrant's Form N-1A
Registration Statement on October 25, 1996 and incorporated herein by
reference.
(i) Filed as an Exhibit to Amendment No. 40 to Registrant's Form N-1A
Registration Statement on January 3, 1997 and incorporated herein by
reference.
(j) Filed as an Exhibit to Amendment No. 42 to Registrant's Form N-1A
Registration Statement on May 1, 1997 and incorporated herein by
reference.
(k) Filed as an Exhibit to Amendment No. 44 to Registrant's Form N-1A
Registration Statement on May 22, 1997 and incorporated herein by
reference.
(l) Filed as an Exhibit to Amendment No. 45 to Registrant's Form N-1A
Registration Statement on July 14, 1997 and incorporated herein by
reference.
(m) Filed as an Exhibit to Amendment No. 47 to Registrant's Form N-1A
Registration Statement on July 28, 1997 and incorporated herein by
reference.
(n) Filed as an Exhibit to Amendment No. 49 to Registrant's Form N-1A
Registration Statement on September 2, 1997 and incorporated herein by
reference.
(o) Filed as an Exhibit to Registrant's Form N-14 Registration Statement
on December 5, 1997 and incorporated herein by reference.
(p) Filed as an Exhibit to Amendment No. 50 to Registrant's Form N-1A
Registration Statement on December 15, 1997 and incorporated herein by
Reference.
(q) Filed as an Exhibit to Amendment No. 52 to Registrant's Form N-1a
Registration Statement on December 29, 1997 and incorporated herein by
reference.
Item 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public
offering of the securities registered through the use of a
prospectus which is part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act of 1933, as amended,
the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial
bona fide offering of them.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on behalf of the Registrant in the City
of San Diego, State of California, on the 6th day of January, 1998.
NICHOLAS-APPLEGATE MUTUAL FUNDS
By S/ John D. Wylie
-------------------------------
John D. Wylie
President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
S/ John D. Wylie Principal Executive Officer January 6, 1998
- - -------------------------
John D. Wylie
S/ Thomas Pindelski Principal Financial and January 6, 1998
- - ------------------------- Accounting Officer
Thomas Pindelski
Fred C. Applegate* Trustee January 6, 1998
- - ------------------
Fred C. Applegate
Arthur B. Laffer* Trustee January 6, 1998
- - -----------------
Arthur B. Laffer
Charles E. Young* Trustee January 6, 1998
- - -----------------
Charles E. Young
*s/ E. Blake Moore, Jr.
- - ------------------------
By: E. Blake Moore, Jr.
Attorney In Fact
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