<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PIMCO COMMERCIAL MORTGAGE SECURITIES TRUST, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________________
[ ] Fee paid previously with preliminary materials:
________________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
________________________________________________________________________________
(2) Form, Schedule or Registration Statement no.:
________________________________________________________________________________
(3) Filing Party:
________________________________________________________________________________
(4) Date Filed:
________________________________________________________________________________
<PAGE>
PACIFIC INVESTMENT MANAGEMENT COMPANY
840 Newport Center Drive
Newport Beach, California 92660
January __, 2000
Dear PIMCO Commercial Mortgage Securities Trust, Inc. Shareholders:
On behalf of the Board of Trustees of PIMCO Commercial Mortgage Securities
Trust, Inc.(the "Fund"), we are pleased to invite you to the annual meeting of
the shareholders of the Fund to be held at 800 Newport Center Drive, 6th Floor,
Newport Beach, California, 92660 on [March 3], 2000 at [time], Pacific Time.
As discussed in more detail in the enclosed proxy statement, Pacific
Investment Management Company ("PIMCO"), the Fund's investment adviser and a
subsidiary partnership of PIMCO Advisors, L.P., ("PIMCO Advisors"), will undergo
a "change in control" as a result of the consummation of an agreement entered
into by PIMCO Advisors, its two general partners, PIMCO Advisors Holdings L.P.
and PIMCO Partners, G.P., certain of their affiliates, Allianz of America, Inc.,
and certain other parties named pursuant to which Allianz of America will
acquire approximately 70% of the outstanding partnership interests in PIMCO
Advisors in a series of transactions (the "Transaction"). At the meeting, you
will be asked to consider the following proposals:
. Election of four Directors to the Board of Directors.
. Approval of a new investment advisory agreement between the Fund and
PIMCO. The new investment advisory agreement provides that following
the Transaction, PIMCO will continue to provide investment advisory
services to the Fund on the same terms and with the same compensation
structure under which it currently operates.
. Ratification of Ernst & Young LLP as independent public accountant of
the Fund for its fiscal year ending December 31, 2000.
Your vote is important. After reviewing these proposals, your Board of
Directors unanimously agreed that they are in the best interests of the Fund's
shareholders and voted to approve them, as more fully described in the
accompanying proxy statement. Now it is your turn to review the proposals and
vote. For more information about the issues requiring your vote, please refer to
the accompanying proxy statement.
No matter how many shares you own, your timely vote is important. If you
are not able to attend the meeting, then please complete, sign, date and mail
the enclosed proxy promptly in order to avoid the expense of additional mailing
or having our proxy solicitor, DF King & Co., Inc., telephone you.
Thank you in advance for your participation in this important event.
Sincerely,
[___________]
Executive Vice President
<PAGE>
PIMCO Commercial Mortgage Securities Trust, Inc.
840 Newport Center Drive
Suite 300
Newport Beach, California 92660
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held
[March 3], 2000
To the Shareholders of PIMCO Commercial Mortgage Securities Trust:
Notice is hereby given that the annual meeting of shareholders of the PIMCO
Commercial Mortgage Securities Trust, Inc. (the "Fund") will be held at 800
Newport Center Drive, 6th Floor, Newport Beach, California, 92660 on [March 3,]
2000 at [time], Pacific Time, or as adjourned from time to time (the "Meeting"),
for the following purposes:
I. To elect Directors to the Board of Directors of the Fund;
II. To approve a new investment management contract;
III. To ratify selection of Ernst & Young LLP as independent public
accountant of the Fund for its fiscal year ending December 31, 2000;
and
IV. To transact such other business as may properly come before the
Meeting.
After careful consideration, the Directors of the Fund unanimously approved
each of the proposals and recommend that shareholders vote "FOR" each proposal.
The matters referred to above are discussed in detail in the proxy
statement attached to this notice. The Board of Directors has fixed the close of
business on December 20, 1999 as the record date for determining shareholders
entitled to notice of and to vote at the Meeting. Each share of the Fund is
entitled to one vote, with fractional votes for fractional shares.
Regardless of whether you plan to attend the Meeting, which you are
cordially invited to attend, PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, SO THAT YOU WILL BE REPRESENTED AT
THE MEETING. If you have returned a proxy card and are present
<PAGE>
at the Meeting, you may change the vote specified in the proxy at that time.
However, attendance in person at the Meeting, by itself, will not revoke a
previously tendered proxy.
By Order of the Board of Directors,
Garlin G. Flynn , Secretary
Newport Beach, California
_____, 2000
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. IN
ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
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<PAGE>
PRELIMINARY PROXY MATERIALS FOR SEC USE ONLY
PROXY STATEMENT
PIMCO Commercial Mortgage Securities Trust, Inc.
840 Newport Center Drive
Suite 300
Newport Beach, California 92660
Annual Meeting of Shareholders
To be held
[March 3], 2000
This proxy statement and enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Directors (the
"Board" or "Directors") of the PIMCO Commercial Mortgage Securities Trust, Inc.
(the "Fund"), for use at the annual meeting of shareholders of the Fund to be
held at 800 Newport Center Drive, 6th Floor, Newport Beach, California 92660 on
[March 3,] 2000, at [time], Pacific Time, or as adjourned from time to time (the
"Meeting"), for the purposes set forth in the accompanying notice. It is
anticipated that the first mailing of proxies and proxy statements to
shareholders will be on or about [January __], 2000.
Shareholder Reports. Shareholders can find important information about the
Fund in the annual report dated December 31, 1998 and the semi-annual report
dated June 30, 1999, each of which previously has been furnished to
shareholders. Shareholders may request another copy of these reports by writing
to the Fund at the above address, or by calling the telephone number above.
The Board is soliciting proxies from shareholders of the Fund with respect
to the following:
I. To elect Directors to the Board of Directors of the Fund;
II. To approve a new investment management contract;
III. To ratify selection of Ernst & Young LLP as independent public
accountant of the Fund for its fiscal year ending December 31, 2000;
and
IV. To transact such other business as may properly come before the
Meeting.
I. ELECTION OF DIRECTORS
Because of the transaction discussed below in Proposal II, the Board has
concluded that it is in the best interests of the Fund that at least 75% of the
Board members be Directors who are not "interested persons," as that term is
defined in the Investment Company Act of 1940, as
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<PAGE>
amended (the "1940 Act"), of the Fund or its investment adviser, Pacific
Investment Management Company ("PIMCO"). To that end, at the Meeting, four
Trustees are proposed for election to the Fund's Board, including two new
Directors who are not "interested persons" of the Fund or PIMCO.
The Fund's Articles of Incorporation provide that the Fund's Board of
Directors shall be divided into three classes, as nearly equal in number as
possible, which shall be designated as Class I, Class II, and Class III. The
current terms of the Class III Directors will expire this year. The current
terms of the Class I and Class II Directors will expire in 2001 and 2002,
respectively, when their respective successors are elected and qualify. The
effect of these staggered terms is to limit the ability of other entities or
persons to acquire control of the Fund by delaying for up to two years the
replacement of a majority of the Board of Directors.
The Nominating Committee, composed of Guilford Babcock, Vern Curtis, Thomas
Kemp, and William Popejoy, each of whom are not "interested persons" of the Fund
or PIMCO, is responsible for the selection, nomination for appointment, and
election of candidates to serve as Directors of the Fund. During the fiscal year
ended December 31, 1999 there were _____ meetings of the Nominating Committee at
which there was [100%] attendance.
The Nominating Committee, advised by special independent counsel, met on
December 1, 1999 to consider possible candidates to the Board. On December 16,
1999, the Chairperson of the Nominating Committee reported to the Board that the
Nominating Committee had approved the nominations of Mr. E. Philip Cannon and
Mr. J. Michael Hagan; recommended to the Board that they be elected; and that
the nominations be submitted to shareholders for approval. Mr. R. Wesley Burns
and Mr. Brent R. Harris, the current Class III Directors, were also nominated by
the Board to serve another term, which would expire in 2002. Mr. Cannon's term
would expire 2001 and Mr. Hagan's term would expire 2002 (Messrs. Burns, Cannon,
Hagan and Harris collectively are the "Nominees").
In evaluating the Nominees, the Nominating Committee and Board noted that
Mr. Cannon and Mr. Hagan have the background and experience necessary to make
them very valuable additions to the Board as independent Directors. In addition,
the Board noted that Mr. Burns and Mr. Harris each previously were elected to,
and served on, the Board and that each has the background, experience and
working knowledge of the Funds, as well as the professional experience, to be
effective members of the Board.
The Board of the Fund currently includes four additional Directors, none of
whom are standing for election at the Meeting. These four current Directors,
described below, previously have been elected by shareholders and will continue
to serve on the Board following the Meeting. If the Nominees are elected at the
Meeting, there will be a total of eight Directors on the Board, all of whom will
have been elected by shareholders.
The Nominees have indicated their willingness to serve as Directors. The
Board knows of no reason why the Nominees would be unable to serve, but in the
event of any such unavailability, the proxies received will be voted for such
substituted nominee as the Board may recommend.
The persons named as proxies on the enclosed proxy card will vote your
shares for the election of the Nominees unless you withhold authority to vote
for the Nominees in your proxy. If elected by shareholders, the Nominees will
continue to serve as Directors of the Fund until the next meeting of
shareholders, if any, called for the purpose of electing Directors, unless an
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<PAGE>
individual or individuals is sooner succeeded as provided in the Fund's Articles
of Incorporation. It is proposed, and the Board recommends, that shareholders
elect the Nominees.
-5-
<PAGE>
The following table sets forth certain information concerning each of the
Directors of the Fund including the Nominees. However, only the Nominees are
standing for election.
-6-
<PAGE>
The Class I Directors are:
<TABLE>
<CAPTION>
Class I (Term Expiring in 2001)
Length of Current
Service on Position Principal Occupation(s)
Name and Age the Board with the Fund During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guilford C. Babcock 4/87 - Present Director Associate Professor of Finance,
1500 Park Place University of Southern California;
San Marino, California 91108 Director, PIMCO Commercial Mortgage
Age 68 Securities Trust, Inc.; Trustee, PIMCO
Variable Insurance Trust; Director,
Growth Fund of America and Fundamental
Investors Fund of the Capital Group;
Director, Good Hope Medical Foundation.
E. Philip Cannon 12/99-Present Director Proprietor, Cannon & Company, an
3838 Olympia affiliate of Inverness Management
Houston, Texas 77019 LLC, a private equity investment
Age 59 firm; and Trustee of PIMCO Funds:
Multi-Manager Series. Formerly,
Headmaster, St. John's School,
Houston, Texas; Trustee of Cash
Accumulation Trust ("CAT"); General
Partner, J.B. Poindexter & Co.,
Houston, Texas, a private
partnership; and Partner, Iberia
Petroleum Company, an oil and gas
production company. Mr. Cannon was a
director of WNS Inc., a retailing
company which filed a petition in
bankruptcy within the last five years.
Vern O. Curtis 4/87 - 3/93 and Director Private Investor; Director, PIMCO
14158 N.W. Bronson Creek Drive 2/95 - Present Commercial Mortgage Securities Trust,
Portland, Oregon 97229 Inc.; Trustee, PIMCO Variable Insurance
Age 65 Trust; Director, Public Storage
Business Parks, Inc., a Real Estate
Investment Trust; Director, Fresh
Choice, Inc. (restaurant company);
Formerly charitable work, The Church of
Jesus Christ of Latter-day Saints.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
The Class II Directors are:
Class II Directors (Term Expiring in 2002)
Length of Current
Service on Position Principal Occupation(s)
Name and Age the Board with the Fund During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J. Michael Hagan 12/99-Present Director Retired from Furon Company where he
6 Merced served as Chairman and CEO from June
San Clemente, California 92673 1991 to 1999, and in other capacities
Age: 60 since 1967. He was previously
associated with Ross Laboratories and
Standard Oil of California. Mr.
Hagan serves on the Boards of
Directors for Ameron International,
Freedom Communications, Remedy Temp
and Saint-Gobain. He is also a
member of the Board of Regents at
Santa Clara University, the Board of
Taller San Jose, and the Board of
Trustees of the South Coast Repertory
Theater.
Thomas P. Kemp 4/87 - Present Director Private Investor; Director, PIMCO
1141 Marine Drive Commercial Mortgage Securities Trust,
Laguna Beach, California 92651 Inc.; Trustee, PIMCO Variable Insurance
Age 69 Trust; Formerly Co-Chairman, U.S.
Committee to Assist Russian Reform;
Director, Union Financial Corp.; Senior
Consultant, World Cup 1994 Organizing
Committee.
William J. Popejoy 7/93 - 2/95 and Director President, Pacific Capital Investors;
29 Chatham Court 8/95 - Present Chairman, PacPro (vinyl assembly
Newport Beach, California 92660 products; formerly Western Printing);
Age 61 Director, PIMCO Commercial Mortgage
Securities Trust, Inc.; Trustee, PIMCO
Variable Insurance Trust, Formerly
Director, California State Lottery;
Chief Executive Officer, Orange County,
California.
</TABLE>
The Class III Directors are:
Class III (Term Expiring in 2000)
<TABLE>
<CAPTION>
Length of Current
Service on Position Principal Occupation(s)
Name and Age the Board with the Fund During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brent R. Harris* 2/92 - Present Chairman of the Managing Director, PIMCO; Board of
840 Newport Center Drive Board and Director Governors, Investment Company
Newport Beach, California 92660 Institute; Chairman and Director, PIMCO
Age 40 Commercial Mortgage Securities Trust,
Inc.; Chairman and Trustee, PIMCO
Variable Insurance Trust.
R. Wesley Burns* 11/97 - Present President and Director Managing Director, Pacific Investment
840 Newport Center Drive Management Company; President and
Newport Beach, California 92660 Director, PIMCO Commercial Mortgage
Age 40 Securities Trust, Inc.; President and
Trustee, PIMCO Variable Insurance
Trust; Formerly Executive Vice
President, Pacific Investment
Management Company; Executive Vice
President, PIMCO Funds: Multi-Manager
Series.
</TABLE>
___________________
* Mr. Burns and Mr. Harris are "interested persons" of the Fund (as that
term is defined in the 1940 Act) because of their affiliations with PIMCO.
During the fiscal year ended December 31, 1999, there were five meetings of
the Board. There was 100% attendance by Directors at the meetings of the Board
throughout the period.
As of December 15, 1999, the Directors and officers of the Fund, as a
group, owned less than one percent of the outstanding shares of the Fund in the
aggregate.
Board of Directors - Committees. In addition to the Nominating Committee,
the Fund has a standing Audit Committee that currently consists of all of the
independent Directors (Messrs. Babcock, Curtis, Kemp and Popejoy). The Audit
Committee reviews both the audit and non-audit work of the Fund's independent
public accountants, submits a recommendation to the Board as to the selection of
independent public accountants, and reviews generally the maintenance of the
Fund's records and the safekeeping arrangements of the Fund's Custodian. During
the fiscal year ended December 31, 1999, the Audit Committee met three times.
Each member of the Audit Committee attended 100% of such meetings during the
period in which he was a member of the Audit Committee.
Remuneration of Directors and Officers. The Fund pays each Director who is
not an "interested person" of the Fund an annual retainer of $6,000 plus $1,000
for each regular Board meeting attended in person and $500 for each meeting
attended telephonically, plus
-8-
<PAGE>
reimbursement of related expenses. In addition, a Director serving as a
Committee Chair, other than those affiliated with PIMCO or its affiliates,
receives an additional annual retainer of $1,500. For the fiscal year ended
December 31, 1999, the Directors who are not "interested persons" of the Fund,
as a group, received compensation in the amount of $42,500.
The following table sets forth the compensation paid to each of the current
Directors of the Fund for the year ended December 31, 1999. Directors who are
"interested persons" of the Fund do not receive any compensation from the Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Aggregate Compensation Total Compensation from
from Fund Fund and Fund Complex*
- --------------------------------------------------------------------------------
<S> <C> <C>
Guilford C. Babcock $[ ] $78,500
- --------------------------------------------------------------------------------
Vern O. Curtis $[ ] $81,000
- --------------------------------------------------------------------------------
Thomas P. Kemp $[ ] $78,500
- --------------------------------------------------------------------------------
William J. Popejoy $[ ] $78,500
- --------------------------------------------------------------------------------
</TABLE>
___________________
* Fund complex includes the Fund, PIMCO Funds: Pacific Investment Management
Series, a registered open-end management investment company, and PIMCO
Variable Insurance Trust, a registered open-end management investment
company. For their services as Trustees of the PIMCO Funds: Pacific
Investment Management Series, the Directors listed above receive an annual
retainer of $45,000 plus $3,000 for each Board of Trustees, committee, or
special meeting attended in person ($500 for each such meeting attended
telephonically), an annual retainer of $1,500 for a Committee Chairmanship,
plus reimbursement of related expenses. For the year ended December 31,
1999, these Trustees, as a group, received compensation in the amount of
$233,500 from PIMCO Funds: Pacific Investment Management Series.
For their services as Trustees of PIMCO Variable Insurance Trust, the
Directors listed above receive an annual retainer of $4,000 plus $1,500 for
each Board of Trustees, committee, or special meeting attended in person
($500 for each such meeting attended telephonically), an annual retainer of
$500 for a Committee Chairmanship, plus reimbursement of related expenses.
For the one year period ended December 31, 1999, these Trustees, as a
group, received compensation in the amount of $40,500 from PIMCO Variable
Insurance Trust.
Material Interests of Directors and Nominees. Messrs. Burns and Harris each
has a direct material interest in the transaction described below in
Proposal II, pursuant to which Allianz of America, Inc. ("Allianz of
America") will acquire majority ownership of PIMCO Advisors, L.P. ("PIMCO
Advisors") and certain of its affiliates. Messrs. Burns and Harris, as
managing directors of PIMCO, will receive employment related compensation
and other benefits as a result of the transaction. For a complete
discussion of the transaction, see Proposal II.
-9-
<PAGE>
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NOMINEES UNDER PROPOSAL I. UNMARKED PROXIES WILL BE
SO VOTED.
II. APPROVAL OF A NEW INVESTMENT
MANAGEMENT CONTRACT
Introduction. PIMCO, located at 840 Newport Center Drive, Suite 300,
Newport Beach, California, 92660 has served as investment manager to the Fund
since its inception in 1993. PIMCO currently serves as the adviser to the Fund
pursuant an investment management contract dated November __, 1994 (the
"Management Contract"). In addition, PIMCO serves as the administrator of the
Fund pursuant to an amended and restated administration services agreement
adopted on November __, 1994 (the "Administration Agreement").
PIMCO is a subsidiary partnership of PIMCO Advisors, L.P. The general
partners of PIMCO Advisors are PIMCO Partners, G.P. ("Partners G.P.") and PIMCO
Advisors Holdings L.P. ("PAH"). Partners G.P. is a general partnership between
PIMCO Holding LLC, a Delaware limited liability company and an indirect wholly-
owned subsidiary of Pacific Life Insurance Company ("Pacific Life"), and PIMCO
Partners LLC ("Partners LLC"), a California limited liability company controlled
by the current managing directors and two former managing directors of PIMCO
(the "Managing Directors"). PAH is a publicly traded Delaware limited
partnership and its primary source of income is its proportionate share of the
net income of PIMCO Advisors. Partners G.P. is the sole general partner of PAH.
The address of all of the above entities, with the exception of Pacific Life, is
800 Newport Center Drive, Newport Beach, California 92660. Pacific Life is
located at 700 Newport Center Drive, Newport Beach, California 92660.
PIMCO will undergo a "change in control" as a result of the consummation of
the transaction described below, resulting in the assignment, and therefore
automatic termination of the Management Contract. It is proposed that PIMCO
continue to serve as the manager of the Fund following completion of the
transaction. Therefore, in connection with the transaction and as required by
the 1940 Act, shareholders of the Fund are being asked in Proposal II to approve
a new investment contract between the Fund and PIMCO which is substantially
identical to the current Management Contract (the "New Management Contract").
The Board recommends that shareholders approve the New Management Contract. If
the New Management Contract is approved, PIMCO will continue to serve as
administrator under the Administration Agreement. Forms of the New Management
Contract and Administration Agreement are attached as Appendix A.
Information about PIMCO, its officers and directors, the executive officers
of the Fund, PIMCO's investment company clients, and PIMCO's brokerage policies
is presented in Appendix B.
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<PAGE>
Description of the Transaction. On October 31, 1999, PIMCO Advisors, PAH,
Partners G.P., certain of their affiliates, Allianz of America and certain other
parties named therein entered into an Implementation and Merger Agreement (the
"Merger Agreement") pursuant to which Allianz of America will acquire majority
ownership of PIMCO Advisors (the "Transaction").
The Merger Agreement provides for the acquisition of PAH by Allianz of
America through a merger of an indirect subsidiary of Allianz of America with
and into PAH. In the merger, each of the outstanding limited partnership and
general partner units in PAH will be converted into the right to receive,
without interest, an amount in cash equal to $38.75 per unit, subject to a
potential downward adjustment if PIMCO Advisors' investment advisory revenue
base, expressed as a "revenue run rate," declines (excluding market-based
changes) below a specified level (the "Unit Transaction Price"). In no event
will the Unit Transaction Price be reduced below $31.00 per unit. As a result of
the merger, PAH will become an indirect wholly owned subsidiary of Allianz of
America.
Immediately following the merger, subsidiaries of Allianz of America will,
in a series of transactions, acquire approximately 70% of the outstanding
partnership interests in PIMCO Advisors, including the approximately 44%
interest held by PAH. As part of the Transaction, a subsidiary of Allianz of
America will acquire Partners GP through an acquisition of the managing general
partner interest in Partners GP from the assets of Partners LLC (the managing
general partner of Partners GP) for approximately $5.5 million. Pacific Life,
which through subsidiaries owns approximately a 30% interest in PIMCO Advisors,
will retain an indirect interest in PIMCO Advisors following the closing. In
connection with the closing, Allianz of America will enter into a put/call
arrangement for the possible disposition of Pacific Life's indirect interest in
PIMCO Advisors.
The Transaction is expected to be completed by the end of the first quarter
of 2000, although there is no assurance that the Transaction will be completed.
Completion of the Transaction is subject to a number of conditions, including,
among others, (i) the approval of the public unitholders of PAH, (ii) the
receipt of certain regulatory approvals and (iii) PIMCO Advisors' revenue run-
rate (excluding market-based changes) for all accounts managed by PIMCO Advisors
and its subsidiaries being at least 75% of the September 30, 1999 amount.
Approval of the New Advisory Contract by the shareholders of the Funds will
count toward satisfaction of condition (iii) described in the preceding
sentence. If the Transaction is not completed for any reason, the Advisory
Contract will remain in effect. In the event the New Advisory Contract is not
approved by the Funds' shareholders and the Transaction is completed, the Board
will consider appropriate action.
Post-Transaction Structure and Operations. Upon completion of the
Transaction, PIMCO Advisors and its subsidiaries, including PIMCO, will be
controlled by Allianz of America. Allianz of America is a holding company that
owns several insurance and financial service companies and is a subsidiary of
Allianz AG, which, together with its subsidiaries, comprise the world's second
largest insurance group as measured by premium income. Allianz of America will
control PIMCO Advisors through its managing member interest in PacPartners LLC,
which will be the sole general partner of PIMCO Advisors following the
Transaction. While Allianz of America will control PacPartners LLC,
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<PAGE>
Pacific Life will hold a portion of its continuing interest in PIMCO Advisors
through an interest in PacPartners LLC.
Operationally, PIMCO is expected to become a unit of Allianz Asset
Management ("AAM"), the division of Allianz AG that coordinates global Allianz
AG asset management activities. PIMCO is expected to remain operationally
independent, and to become the global fixed income investment management
division of Allianz AG, and is currently expected to continue to operate in the
United States under its existing name.
Both William S. Thompson Jr., the current Chief Executive Officer of PIMCO,
and William H. Gross, the current Chief Investment Officer of PIMCO, will have
roles on the Executive Committee of AAM, with Mr. Thompson serving as the
Executive Committee's Deputy Chairman. In the Transaction, Messrs. Thompson and
Gross will enter into employment contracts with a term of seven years following
the Transaction. Other key employees, including the Managing Directors, have
also contractually agreed to remain with PIMCO for significant periods following
the Transaction.
Description of Allianz AG and Its Affiliates. Allianz AG, the parent of
Allianz of America, is a publicly traded German Aktiengesellschaft and which,
together with its subsidiaries, comprise the world's second largest insurance
group as measured by premium income. Allianz AG is a leading provider of
financial services, particularly in Europe, and is represented in 68 countries
world-wide through subsidiaries, branch and representative offices, and other
affiliated entities. The Allianz group currently has assets under management of
more than $390 billion, and in its last fiscal year wrote approximately $50
billion in gross insurance premiums. After completion of the Transaction, PIMCO
and the Allianz group combined will have over $650 billion in assets under
management. Allianz AG's address is: Allianz Aktiengesellschaft, Koniginstrasse
28, D-80802, Munich, Germany.
Significant institutional shareholders of Allianz currently include,
without limit, Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and
HypoVereinsbank. Dresdner Bank AG and Deutsche Bank AG, as well as certain
broker-dealers controlled by or affiliated with these entities, such as Bankers
Trust Company, BT Alex Brown, Inc., Morgan Grenfell and Kleinwort Benson
(collectively, the "Affiliated Brokers"), may be considered to be affiliated
persons of PIMCO. Once the Transaction is completed, absent an SEC exemption or
other relief, the Fund generally would be precluded from effecting principal
transactions with the Affiliated Brokers, and its ability to purchase securities
being underwritten by an Affiliated Broker or to utilize the Affiliated Brokers
for agency transactions would be subject to restrictions. PIMCO does not believe
that applicable restrictions on transactions with the Affiliated Brokers
described above will materially adversely affect its ability, post-closing, to
provide services to the Fund, the Fund's ability to take advantage of market
opportunities, or the Fund's overall performance.
Anticipated Impact of the Transaction on Management of the Fund. PIMCO has
received structural and contractual protections as terms of the Transaction that
ensure PIMCO's operational autonomy and continuity of management. PIMCO is
confident that Allianz AG is
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<PAGE>
committed to the people and process that have led to PIMCO's success over the
years. Accordingly, the Transaction should have no immediate impact, other than
as already noted above, on the management of the Fund or PIMCO's capacity to
provide the type, quality, or quantity of services that it currently provides,
and the Fund should continue to receive the same high quality of service after
the Transaction. As discussed below, however, PIMCO believes that the
Transaction offers the potential to enhance significantly its future ability to
deliver quality investment advisory services.
The Benefits of the Transaction. PIMCO anticipates that the Transaction
with Allianz AG will benefit PIMCO and the Fund in a variety of ways, including
the following:
. PIMCO's investment expertise will be enhanced because of the business
experience and relationships that Allianz AG has built around the globe,
particularly in Europe. PIMCO's access to European markets and business
opportunities will be greatly enhanced by Allianz AG's experience and
relationships. The combined global resources of PIMCO and Allianz AG will
allow PIMCO to take advantage of the growth in international markets and
the explosive potential for premier money managers in the global
marketplace.
. Allianz AG has a team of fixed income professionals in place that currently
manage more than $100 billion in assets. Integration of these professionals
and assets with PIMCO provides an excellent opportunity for furthering
PIMCO's global fixed income expertise.
. The rotation of many of PIMCO's key investment professionals through
international offices and overseas personnel through PIMCO's offices will
result in more-seasoned professionals with global experience.
. The combination will provide additional career opportunities for PIMCO
professionals, furthering PIMCO's ability to attract and retain the best
people.
. Allianz AG has a stated growth strategy to be among the top five providers
of its services in the world's key markets, which is a key factor in
PIMCO's decision to go ahead with the Transaction. The combined entity will
be the sixth-largest investment manager in the world. The Transaction will
significantly increase assets under PIMCO's management, and will offer the
opportunity for continued growth in the future. Strong relative investment
results depend on a sound, disciplined investment process and effective
execution; size can be a benefit to both.
Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe
harbor for an investment adviser or any affiliated persons to receive any amount
or benefit in connection with a "change in control" of the investment adviser
to an investment company as long as two conditions are satisfied. First, an
"unfair burden" must not be imposed on investment company clients of the adviser
as a result of the transaction, or any express or implied terms, conditions or
understandings applicable to the transaction. The term "unfair burden" (as
defined in the 1940 Act) includes any arrangement during the two-year period
after the transaction whereby the
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investment adviser (or predecessor or successor adviser), or any "interested
person" (as defined in the 1940 Act) of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly, from such an
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any other person in connection
with the purchase or sale of securities or other property to, from or on behalf
of such investment company. The Board has been advised that PIMCO is aware of no
circumstances arising from the Transaction that might result in an unfair burden
being imposed on the Trust. The second condition of Section 15(f) is that during
the three-year period after the transaction, at least 75% of each such
investment company's board of directors must not be "interested persons" (as
defined on the 1940 Act) of the investment adviser (or predecessor or successor
adviser). Allianz AG and each of the other parties to the Agreement have agreed
to use their reasonable best efforts to ensure compliance with Section 15(f) as
it applies to the Transaction during such two-year period.
The Contracts. The Management Contract. PIMCO, has served as investment
manager to the Fund since the Fund's commencement of investment operations. The
Management Contract was last submitted for approval by shareholders of the Fund
at a meeting held on [date] for the purpose of implementing the Fund's current
service arrangements with respect to investment management services.
Under the terms of the Management Contract, PIMCO is responsible for making
investment decisions and placing orders for the purchase and sale of Fund
investments directly with the issuers or with brokers or dealers selected by it
at its discretion. PIMCO also furnishes to the Board, which has overall
responsibility for the business and affairs of the Fund, periodic reports on the
investment performance of the Fund.
PIMCO is obligated to manage the Fund in accordance with applicable laws
and regulations. The investment management services of PIMCO to the Fund are not
exclusive under the terms of the Management Contract. PIMCO is free to, and
does, render investment management services to others.
Consistent with the requirements of the 1940 Act, the Management Contract
provides that PIMCO generally is not liable to the Fund for any mistake in
judgment, or otherwise, except by reason of willful misfeasance, bad faith or
gross negligence in the performance of PIMCO's duties or by reason of its
reckless disregard of its obligations and duties under the Management Contract.
The Management Contract may be terminated by the Fund without penalty upon
not fewer than 60 days' notice by the Board or by a vote of the holders of a
majority of the Fund's outstanding shares voting as a single class, or upon not
fewer than 60 days' notice by PIMCO. As noted above, the Management Contract
terminates automatically in the event of its "assignment" (as defined in the
1940 Act).
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Information about investment management fees and administrative fees paid
to PIMCO, including aggregate investment management and administrative fees by
the Fund during its last fiscal year, is set forth in Appendix C.
The New Management Contract. The New Management Contract is substantially
identical to the Management Contract. As previously noted, PIMCO does not
anticipate that the Transaction will cause any reduction in the quality or types
of services now provided to the Fund or have any adverse effect on PIMCO's
ability to fulfill its obligations to the Fund. No change is anticipated in the
investment philosophies and practices currently followed by the Fund. There will
be no change in management fees for the Fund.
At the December 1, 1999 meeting of the Board, the New Management Contract
was approved unanimously by the Board, including all of the Directors who are
not parties to the New Management Contract or "interested persons" (as defined
in the 1940 Act) of any such party (other than as Directors of the Fund). The
New Management Contract, as approved by the Board, is submitted for approval by
the shareholders of the Fund.
If the New Management Contract is approved by shareholders, it will take
effect immediately after the closing of the Transaction. The New Management
Contract will remain in effect for two years from the date it takes effect, and,
unless earlier terminated, will continue from year to year thereafter, provided
that each such continuance is approved annually with respect to the New
Management Contract (i) by the Board or by the vote of a majority of the
outstanding voting securities of the Fund, and, in either case, (ii) by a
majority of the Fund's Directors who are not parties to the New Management
Contract or interested persons of any such party (other than as Directors of the
Fund).
If the shareholders of the Fund should fail to approve the New Management
Contract, the Transaction may not be consummated. If the Transaction is not
consummated, PIMCO will continue to serve as manager for the Fund under the
current Management Contract.
The Administration Agreement. Under the terms of the Administration
Agreement, PIMCO provides administrative services to each Fund, including
administrative and clerical functions, certain shareholder servicing functions
and supervision of the services rendered to the Funds by other persons,
including the custodian and transfer agent. In approving the New Management
Contract, the Board considered that PIMCO receives fees for the services it
provides under the Administration Agreement.
The Administration Agreement may be terminated by the Fund without penalty
upon not fewer than 60 days' notice by the Board or by a vote of the holders of
a majority of the Fund's outstanding shares voting as a single class, or upon
not fewer than 60 days notice by PIMCO. The Administration Agreement terminates
automatically in the event of its "assignment" (as defined in the 1940 Act).
Interests of Certain Persons in the Transaction. The Managing Directors,
each of which is a member of Partners LLC, will receive new employment and
consulting agreements. The initial term of the employment agreements
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<PAGE>
will be five years from the closing of the Transaction (seven years for Messrs.
Gross and Thompson). Each Managing Director will receive an annual salary, and
will be entitled to participate in PIMCO's Non-Qualified Profit Sharing Plan and
Class B Unit Purchase Plan, as well as the PIMCO Advisors Retention Plan for
Executives of PIMCO.
Under PIMCO's current profit sharing plan, the Managing Directors and other
executive employees of PIMCO share in a pool equal to 45% of the adjusted net
profit of PIMCO. After the Transaction, the profit sharing plan will be amended
to reduce the profit sharing percentage from 45% to 30% of adjusted net profit
over a five-year period. Under the amended profit sharing plan, the pool from
which the profits are calculated will include profits from certain other fixed
income advisors owned by Allianz AG and its affiliates. For the first two years
after the Transaction, the profit sharing pool will be guaranteed at least $10
million per year from PIMCO's management of insurance assets from affiliates of
Allianz AG.
Under the Class B Unit Purchase Plan, participants will be able to purchase
Class B Units of PIMCO, which, in the aggregate, will entitle the holders to
distributions equal to 15% of the adjusted net profit of PIMCO. The Retention
Plan provides fixed and variable retention arrangements for each of the Managing
Directors and other key employees of PIMCO. The 14 managing directors of PIMCO
who were managing directors on the date of the Merger Agreement will in the
aggregate receive retention payments of $85.8 million per year for each of the
five years following the Transaction, subject to continued employment.
In addition to the foregoing, pursuant to 1994 Employment Termination
Agreements, PIMCO Holding LLC must pay to the current and former Managing
Directors who are parties to those contracts noncompete payments equal to
distribution on, or sales proceeds of, an aggregate of 17,402,107 Class A units
of limited partnership in PIMCO Advisors. Eight of the current Managing
Directors--Messrs. Gross, Hague, Harris, Meiling, Muzzy, Podlich, Powers and
Thompson--have agreed to amend their 1994 Employment Termination Agreements.
Under the amendments, these eight Managing Directors will receive payments in
satisfaction of the noncompete payments due under the 1994 Employment
Termination Agreements. Payments will be made 84% in cash and 16% in stock of
Allianz AG, the parent of Allianz of America, with an assumed value of $273.99
per share, the average trading price for the stock of Allianz AG for the 30 days
prior to October 4, 1999, the date of public announcement of discussions between
Allianz AG and PIMCO Advisors. Two of the eight current Managing Directors, who
are not full-time employees of PIMCO but who will continue as consultants, will
receive their payments solely in cash. The aggregate payment at the closing of
the Transaction to the eight current Managing Directors whose 1994 Employment
Termination Agreements will be amended will have a value of $603.6 million
(based on 15,575,835 Advisors Class A Units and a price of $38.75 per unit).
Upon completion of the Transaction, all outstanding unit options under the
1998 Unit Incentive Plan, whether exercisable or not, will be cancelled and
terminated and will represent the right to receive a cash payment equal to the
excess of the Unit Transaction Price over the exercise price per unit of the
option, together with interest on such amount at 8% per annum through the date
such payment is made. The Managing Directors hold unit option awards for an
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aggregate of 2,080,000 units of PIMCO Advisors, at an average exercise price of
$16.13 per unit, which will result in payments of approximately $47 million
in the aggregate at the closing of the Transaction. The Managing Directors, as
well as certain executive officers of PIMCO, will also participate in the
Deferred Compensation Plan, under which units of PIMCO Advisors held in trust
under the plan will be exchanged by the plan's trustee for cash in an amount per
unit equal to the Unit Transaction Price. Any unvested account balances
reflecting discount investment or reinvestment of deferred compensation will
vest.
Certain executive officers of PIMCO will also receive additional benefits
resulting from the Transaction. Any options for units of PIMCO Advisors held by
these persons will be converted to a right to receive the difference between the
exercise price for such options and the Unit Transaction Price, together with
interest on such amount at 8% per annum through the date such payment is made.
In addition, certain officers of the Trust who are executive officers of PIMCO
Advisors will be eligible to receive payments during the five year period
following the Transaction pursuant to employment retention plans.
As a result of the direct and indirect interests in the Transaction and in
PIMCO and its affiliates, including any employment arrangements with PIMCO and
its affiliates, each of the Managing Directors and executive officers of PIMCO
identified in Appendix B may be deemed to have a substantial interest in
shareholder approval of the New Management Contract.
Evaluation by the Board. The Board, advised by special independent counsel,
has determined that, in approving the New Management Contract on behalf of the
Fund, the Fund can best assure itself that the services currently provided to
the Fund by PIMCO, its officers, and employees, will continue without
interruption after the Transaction. The Board believes that, like the Management
Contract, the New Management Contract will enable the Fund to obtain services of
high quality at a cost deemed appropriate, reasonable, and in the best interests
of the Fund and its shareholders.
In determining whether or not it was appropriate to approve the New
Management Contract and to recommend approval to shareholders, the Board,
including the Directors who are not parties to the New Management Contract or
interested persons of such parties, considered various materials and
representations provided by PIMCO and considered a report provided by Allianz
AG, and was advised by independent legal counsel with respect to these matters.
Information considered by the Directors included, among other things, the
following: (1) PIMCO's representation that the same persons responsible for
management of the Fund currently are expected to continue to manage the Fund
under the New Management Contract, thus helping to ensure continuity of
management; (2) that the compensation to be received by PIMCO under the New
Management Contract is the same as the compensation paid under the Management
Contract, which the Board previously has determined to be fair and reasonable;
(3) PIMCO's representation that it will not seek to increase the rate of
management fees paid by the Fund for a period of at least two years following
the Transaction; (4) the commonality of the terms and provisions of the New
Management Contract with the terms of the Management Contract; (5)
representations made by PIMCO concerning potential impact of affiliated
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brokerage relationships on its ability to provide services to the Funds, and on
the Funds' ability to engage in portfolio transactions; (6) the representations
by PIMCO and Allianz AG that integration of Allianz AG's and PIMCO's operations
could produce benefits to shareholders through economies of scale, expansion of
PIMCO's investment expertise through the addition of Allianz AG fixed income
investment business expertise and global relationships, the expansion of PIMCO's
investment research capabilities, and the ability to enhance the quality of
services provided to shareholders; (7) the nature and quality of the services
rendered by PIMCO under the Management Contract; (8) the fairness of the
compensation payable to PIMCO under the Management Contract; (9) the results
achieved by PIMCO for the Fund; and (10) the high quality of the personnel,
operations and financial condition, and investment management capabilities,
methodologies, and performance of PIMCO.
Based upon its review, the Board determined that, by approving the New
Management Contract, the Fund can best be assured that services from PIMCO will
be provided without interruption. The Board also determined that the New
Management Contract is in the best interest of the Fund and its shareholders.
Accordingly, after consideration of the above factors, and such other factors
and information it considered relevant, the Board unanimously approved the New
Management Contract and voted to recommend its approval by the Fund's
shareholders.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW MANAGEMENT CONTRACT AS PROVIDED
UNDER PROPOSAL II. UNMARKED PROXIES WILL BE SO VOTED.
III. SELECTION OF INDEPENDENT PUBLIC ACCOUNTANT
The Board of Directors has selected Ernst & Young LLP as independent public
accountant to examine the financial statements of the Fund for the fiscal year
ending December 31, 2000. Audit services performed by Ernst & Young LLP during
the most recent fiscal year included examination of the financial statements of
the Fund, review of filings with the Securities and Exchange Commission and
preparation of tax returns. The Fund knows of no direct or indirect interest of
such firm in the Fund. A representative of Ernst & Young LLP, if requested by
any shareholder, will be present at the Meeting and have the opportunity to
respond to appropriate questions from shareholders.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP
AS INDEPENDENT PUBLIC ACCOUNTANT. UNMARKED PROXIES WILL BE SO VOTED.
IV. OTHER BUSINESS
The Directors do not know of any matters to be presented at the Meeting
other than those set forth in this proxy statement. If other business should
properly come before the Meeting, proxies will be voted in accordance with the
judgment of the persons named in the accompanying proxy.
VOTING INFORMATION
Proxy Solicitation. The costs of the Meeting, including the solicitation of
proxies, will be paid by PIMCO Advisors and Allianz of America. The principal
solicitation will be by mail, but proxies also may be solicited by telephone,
telegraph, the internet or personal interview by officers or agents of the Fund.
[D.F. King] has been retained to assist with proxy solicitation activities
(including assembly and mailing of materials to shareholders). To obtain the
necessary representation at the Meeting, supplementary solicitations may be made
at a cost not expected to exceed $_____. The Fund will forward to record owners
proxy materials for any beneficial owners that such record owners may represent.
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Shareholder Voting. Shareholders of record at the close of business on
December 20, 1999 (the "Record Date") are entitled to notice of, and to vote at,
the Meeting. Each shareholder is entitled to one vote for each full share and an
appropriate fraction of a vote for each fractional share held.
As of the Record Date, shares of the Fund, representing ________ votes were
outstanding.
As of December 20, 1999, the persons owning of record or beneficially 5% or
more of the shares of the Fund are set forth in Appendix D.
Timely, properly executed proxies will be voted as instructed by
shareholders. A shareholder may revoke his or her proxy at any time prior to its
exercise by written notice addressed to the Secretary of the Fund at 840 Newport
Center Drive, Suite 300, Newport Beach, California 92660 or by voting in person
at the Meeting. However, attendance in person at the Meeting, by itself, will
not revoke a previously tendered proxy.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Fund is required to constitute a quorum at the
Meeting. Shares held by shareholders present in person or represented by proxy
at the Meeting will be counted both for the purposes of determining the presence
of a quorum and for calculating the votes cast on the issues before the Meeting.
Abstentions will also be counted for quorum purposes.
Broker "non-votes" (that is, proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owner or
other persons entitled to vote shares on a particular matter with respect to
which the brokers or nominees do not have discretionary power) will have the
same effect as abstentions in determining whether an issue has received the
requisite approval. Where the broker or nominee has no discretion to vote the
shares as to a proposal before the Meeting, the non-voted shares will be
excluded from the pool of shares voted on the proposal. Thus, abstentions and
non-votes will have the same effect as a negative vote on issues requiring the
affirmative vote of a specified portion of the Fund's outstanding shares, but
will not be considered votes cast and thus will have no effect on matters
requiring approval of a specified percentage of votes cast.
In the event that a quorum is present at the Meeting but sufficient votes
to approve any proposal are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies or to obtain the vote required for approval of one or more proposals.
Any such adjournment will require the affirmative vote of a majority of those
shares represented at the Meeting in person or by proxy. If a quorum is present,
the persons named as proxies will vote those proxies which they are entitled to
vote FOR the proposal in favor of such an adjournment and will vote those
proxies required to be voted AGAINST the proposal against any such adjournment.
A shareholder vote may be taken prior to any adjournment of the Meeting on any
proposal for which there are sufficient votes for approval, even though the
Meeting is adjourned as to other proposals.
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Required Vote. Approval of Proposal I requires the vote of a majority of
the shareholders entitled to vote. Approval of Proposal II requires the vote of
a "majority of the outstanding voting securities" entitled to vote on the
Proposal, as defined in the 1940 Act, which means that the vote of 67% or more
of the voting securities entitled to vote on the proposal that are present at
the Meeting, if the holders of more than 50% of the outstanding shares are
present or represented by proxy, or the vote of more than 50% of the outstanding
voting securities entitled to vote on the Proposal, whichever is less.
Shareholder Proposals. The Fund holds annual meetings of shareholders. A
shareholder's proposal intended to be presented at the Fund's Annual Meeting of
Shareholders in 2000 must have been received by the Fund a reasonable time
before the mailing of the proxy statement, in order to be included in the Fund's
proxy statement and form of proxy relating to the meeting. A shareholder who
wishes to make a proposal at the 2000 annual meeting of shareholders without
including the proposal in the Fund's proxy statement must notify the Fund in
writing, at the Fund's offices, of such proposal by January 18, 2000. If a
shareholder fails to give timely notice, then the persons named as proxies in
the proxies solicited by the Board for the 2000 annual meeting of shareholders
may exercise discretionary voting power with respect to any such proposal.
To ensure the presence of a quorum at the Meeting, prompt execution and
return of the enclosed proxy is requested. A self-addressed, postage-paid
envelope is enclosed for your convenience.
By Order of the Board of Directors
____________________________
Garlin G. Flynn, Secretary
Newport Beach, California
__________, 2000
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APPENDIX A
----------
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT executed this __th day of ______, 2000 between PIMCO Commercial
Mortgage Securities Trust, Inc. (the "Company"), a Maryland corporation, and
Pacific Investment Management Company (the "Investment Manager"), a
_______________________.
WHEREAS, the Company is a closed-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Company engages in the business of investing and reinvesting
its assets in the manner and in accordance with its stated investment objectives
and restrictions; and
WHEREAS, the Company hereby appoints the Investment Manager to provide the
investment advisory services specified below with regard to the Company, and the
Investment Manager hereby accepts such appointment;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Duties
------
1.1. The Investment Manager shall, at its expense, (i) employ or associate
with itself such persons as it believes appropriate to assist it in performing
its obligations under this Agreement and (ii) provide all services, equipment
and facilities necessary to perform its obligations under this Agreement.
1.2. The Investment Manager shall provide to the Company investment
guidance and policy direction in connection with the management of the Company,
including oral and written research, analysis, advice, and statistical and
economic data and information.
(a) Consistent with the Company's investment objectives, policies and
restrictions, the Investment Manager will determine the securities and other
assets to be purchased or sold by the Company and will determine what portion of
the Company shall be invested in securities or other assets, and what portion,
if any, should be held uninvested.
(b) The Company will have the benefit of the investment analysis and
research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to investment
advisory clients of the Investment Manager. It is understood that the Investment
Manager will not use any inside information pertinent to investment decisions
undertaken in connection with this Agreement that may be in
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its possession or in the possession of any of its affiliates, nor will the
Investment Manager seek to obtain any such information.
1.3. The Investment Manager also shall provide to the officers of the
Company administrative assistance in connection with the operation of the
Company, which shall include (i) compliance with all reasonable requests of the
Company for information, including information required in connection with the
Company's filings with the Securities and Exchange Commission and any state
securities commissions, and (ii) such other services as the Investment Manager
shall from time to time determine, upon consultation with the Administrator, to
be necessary or useful to the administration of the Company.
1.4. As manager of the assets of the Company, the Investment Manager shall
make investments for the account of the Company in accordance with the
Investment Manager's best judgment and within the investment objectives,
policies, and restrictions set forth in the Prospectus, the 1940 Act and the
provisions of the Internal Revenue Code of 1986, as amended, relating to real
estate investment trusts, subject to policy decisions adopted by the Company's
Board of Directors.
1.5. The Investment Manager shall furnish to the Company's Board of
Directors periodic reports on the investment performance of the Company and on
the performance of its obligations under this Agreement and shall supply such
additional reports and information as the Company's officers or Board of
Directors shall reasonably request.
2. Expenses
--------
2.1. The Investment Manager shall be responsible for all expenses and
liabilities incurred in connection with the services it renders hereunder,
including expenses involved in furnishing office space for officers and
employees of the Company connected with investment and economic research,
trading and investment management of the Company, as well as compensation of the
Directors of the Company who are affiliated with the Investment Manager, or any
of its affiliates.
2.2. The Company shall be responsible for all other expenses incurred in
connection with the operation of the Company, including, among other things,
compensation of all Directors who are not affiliated with the Investment
Manager, the Administrator or any of their affiliates; taxes and governmental
fees; interest charges; fees and expenses of the Company's independent
accountants and legal counsel; listing fees; trade association membership dues;
fees and expenses of any custodian (including maintenance of books and accounts
and calculation of the net asset value of shares of the Company), transfer
agent, registrar and dividend disbursing agent of the Company; expenses of
issuing, selling, redeeming, registering and qualifying for sale shares in the
Company; expenses of preparing and printing share certificates, prospectuses and
reports to shareholders, notices, proxy statements and reports to regulatory
agencies; the cost of office supplies, including stationery; travel expenses of
all officers, Directors and employees; insurance
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premiums; brokerage and other expenses of executing portfolio transactions;
expenses of shareholders' meetings; mailing expenses; organizational expenses;
and extraordinary expenses.
3. Execution of Portfolio Transactions
-----------------------------------
3.1. The Investment Manager shall place orders for the purchase or sale of
the Company's investments directly with brokers or dealers selected by it in its
discretion. On occasions when the Investment Manager deems the purchase or sale
of a security to be in the best interest of the Company as well as other of its
clients, the Investment Manager, to the extent permitted by applicable law, may
aggregate the securities to be so sold or purchased in order to obtain the best
execution of the order or lower brokerage commissions, if any. The Investment
Manager may also on occasion purchase or sell a particular security for one or
more clients in different amounts. On either occasion, and to the extent
permitted by applicable law and regulations, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by the Investment Manager in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Company and to
such other customers.
3.2. The Investment Manager may cause the Company to pay a broker which
provides brokerage and research services to the Investment Manager a commission
for effecting a securities transaction in excess of the amount another broker
might have charged. Such higher commissions may not be paid unless the
Investment Manager determines in good faith that the amount paid is reasonable
in relation to the services received in terms of the particular transaction or
the Investment Manager's overall responsibilities to the Company and any other
of the Investment Manager's clients.
4. Standard of Care
----------------
4.1. The Investment Manager shall give the Company the benefit of the
Investment Manager's best judgment and efforts in rendering services under this
Agreement. As an inducement to the Investment Manager's undertaking to render
these services, the Company agrees that the Investment Manager shall not be
liable under this Agreement for any mistake in judgment or in any other event
whatsoever, provided that nothing in this Agreement shall be deemed to protect
--------
or purport to protect the Investment Manager against any liability to the
Company or its shareholders to which the Investment Manager would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Investment Manager's duties under this Agreement or by reason
of the Investment Manager's reckless disregard of its obligations and duties
hereunder.
5. Compensation
------------
5.1. In consideration of the services to be rendered by the Investment
Manager under this Agreement, the Company shall, on the first business day of
each quarter, pay the Investment Manager a quarterly fee at the annual rate of
0.725% of the Company's average weekly net
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assets, calculated at the end of each quarter on the basis of the average net
assets of the Company for each week during the respective quarter.
5.2. If the fees payable to the Investment Manager pursuant to this Section
5 begin to accrue before the end of any quarter or if this Agreement terminates
before the end of any quarter, the fees for the period from that date to the end
of that quarter or from the beginning of that quarter to the date of
termination, as the case may be, shall be prorated according to the proportion
which the period bears to the full quarter in which the effectiveness or
termination occurs. For purposes of calculating the quarterly fees, the value of
the net assets of the Company shall be computed in the manner specified in the
Prospectus for the computation of net asset value.
6. Effective Date; Termination; Assignment
---------------------------------------
6.1. This Agreement shall become effective with respect to the Company on
_________, 2000 and shall continue in effect with respect to the Company for a
period of more than two years from that date only so long as the continuance is
specifically approved at least annually (i) by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) or by the vote of a
majority of the Company's Board of Directors and (ii) by the vote, cast in
person at a meeting called for the purpose, of a majority of the Company's
directors who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party.
6.2. This Agreement may be terminated at any time, without the payment of
any penalty, by a vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Company or by a vote of a majority of the
Company's entire Board of Directors on 60 days' written notice to the Investment
Manager or by the Investment Manager on 60 days' written notice to the Company.
6.3. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
7. Non-Exclusivity
---------------
7.1. Except to the extent necessary to perform the Investment Manager's
obligations under this Agreement, nothing herein shall be deemed to limit or
restrict the right of the Investment Manager, or any affiliate of the Investment
Manager, or any employee of the Investment Manager, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or association.
7.2. The investment management services of the Investment Manager to the
Company under this contract are not to be deemed exclusive as to the Investment
Manager and the Investment Manager will be free to render similar services to
others.
A-4
<PAGE>
8. Miscellaneous
-------------
8.1. The Investment Manager has consented to the use of its name ("Pacific
Investment Management Company" or "PIMCO") by the Company for so long as this
Agreement remains in effect. In the event that this Agreement shall be
terminated for any reason, and in the event a new or successor Agreement with
the Investment Manager or any successor is not concluded, the Company
understands that it will take all steps necessary to delete the name "Pacific
Investment Management Company" or "PIMCO" from its name.
8.2. This Agreement shall be construed in accordance with the laws of the
State of California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act.
8.3. The captions in this Agreement are included for convenience only and
in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect.
8.4. Nothing herein shall be construed as constituting the Investment
Manager an agent of the Company.
8.5. If any provisions of this Agreement or the application thereof to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such person or circumstance,
other than those as to which it is so determined to be invalid or unenforceable,
shall not be affected thereby, and each provision hereof shall be valid and
shall be enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
A-5
<PAGE>
PIMCO COMMERCIAL MORTGAGE
SECURITIES TRUST, INC.
By: __________________________
Title:
PACIFIC INVESTMENT MANAGEMENT
COMPANY
By: __________________________
Title:
A-6
<PAGE>
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made this ____ day of November __, 1994, between PIMCO Commercial
Mortgage Securities Trust, Inc. (the "Company"), a Maryland corporation, and
Pacific Investment Management Company, a California corporation (the
"Administrator").
WHEREAS, the Company is registered as a closed-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company has entered into an Investment Management Agreement
(the "Management Agreement") with Pacific Investment Management Company (the
"Investment Manager") pursuant to which the Investment Manager will provide
investment advisory and management services to the Company;
WHEREAS, the Company has entered into a Custody Agreement and a Transfer
Agency Agreement with Investors Fiduciary Trust Company ("IFTC") pursuant to
which IFTC will provide custodian and transfer agency services to the Company;
and
WHEREAS, the Company wishes to retain the Administrator to render
administrative and other services to the Company, and the Administrator is
willing to render such services to the Company.
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties as follows:
1. Appointment
-----------
1.1. The Company hereby appoints Pacific Investment Management Company to
serve as Administrator to the Company for the periods and on the terms set forth
herein. The Administrator accepts this appointment and agrees to furnish the
services set forth herein for the compensation provided herein.
2. Services as Administrator
-------------------------
2.1. The Administrator shall provide all management and administrative
services reasonably necessary for the operation of the Company, other than those
management and administrative services which are to be provided by the
Investment Manager pursuant to the Management Agreement, or by IFTC pursuant to
the Custody Agreement or the Transfer Agency Agreement. The Administrator shall
make periodic reports to the Company's Board of Directors on the performance of
its obligations under this Agreement.
2.2. The Administrator (or an affiliate of the Administrator) shall, at its
expense, (i) provide the Company with office space and office facilities
reasonably necessary for the
A-7
<PAGE>
operation of the Company, (ii) employ or associate with itself such persons as
it believes appropriate to assist it in performing its obligations under this
Agreement and (iii) provide the Company with persons satisfactory to the
Company's Board of Directors to serve as officers and employees of the Company.
The Administrator (or an affiliate of the Administrator) shall pay the entire
compensation of all of the Company's officers and employees and the entire
compensation of the Directors of the Company who are affiliated persons of the
Administrator and the compensation shall not be deemed to be expenses of the
Company for purposes of Section 5 hereof.
2.3. Except as provided in subparagraph 2.2. and in the Management
Agreement, the Company shall be responsible for all of its expenses and
liabilities, including compensation of its Directors who are not affiliated with
the Administrator, the Investment Manager or any of their affiliates; taxes and
governmental fees; interest charges; fees and expenses of the Company's
independent accountants and legal counsel; listing fees; trade association
membership dues; fees and expenses of any custodian (including maintenance of
books and accounts and calculation of the net asset value of shares of the
Company), transfer agent, registrar and dividend disbursing agent of the
Company; expenses of issuing, redeeming, registering and qualifying for sale
shares in the Company; expenses of preparing and printing share certificates,
prospectuses and reports to shareholders, notices, proxy statements and reports
to regulatory agencies; the cost of office supplies, including stationery;
travel expenses of all officers, directors and employees; insurance premiums;
brokerage and other expenses of executing portfolio transactions; expenses of
shareholders' meetings; mailing expenses; organizational expenses; and
extraordinary expenses.
3. Standard of Care
----------------
3.1. The Administrator shall give the Company the benefit of the
Administrator's best judgment and efforts in rendering services under this
Agreement. As an inducement to the Administrator's undertaking to render these
services, the Company agrees that the Administrator shall not be liable under
this Agreement for any mistake in judgment or in any other event whatsoever
except for lack of good faith, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Administrator against any liability
to the Company or its shareholders to which the Administrator would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Administrator's duties under this Agreement or by reason of
the Administrator's reckless disregard of its obligations and duties hereunder.
4. Compensation
------------
4.1. In consideration of the services to be rendered by the Administrator
under this Agreement, the Company shall, on the first business day of each
quarter, pay the Administrator a quarterly fee equal to 0.10% (on an annual
basis) of the average weekly value of the Company's net assets, during the
preceding quarter. If the fees payable to the Administrator pursuant to this
Section 4 begin to accrue before the end of any quarter or if this Agreement
terminates before the end of any quarter, the fees for the period from that date
to the end of that quarter or from the beginning of that quarter to the date of
termination, as the case may be, shall be prorated
A-8
<PAGE>
according to the proportion that the period bears to the full quarter in which
the effectiveness or termination occurs. For purposes of calculating the
quarterly fees, the value of the net assets of the Company shall be computed in
the manner specified in the Prospectus for the computation of net asset value.
5. Effective Date; Termination; Assignment
---------------------------------------
5.1. This Agreement shall become effective only when approved by vote of a
majority of (i) the Board of Directors of the Company, and (ii) the Directors
who are not "interested persons" (as defined in the 1940 Act) of the Company and
who have no direct or indirect financial interest in this Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement shall continue in effect for two years following the date of execution
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by a vote
of a majority of (i) the Company's Board of Directors and (ii) the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company and who
have no direct or indirect financial interest in the Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
5.2. This Agreement may be terminated at any time, without payment of any
penalty, by a vote of a majority of the outstanding voting securities of the
Company (as defined in the 1940 Act) or by a vote of a majority of the Directors
of the Company who are not "interested persons" (as defined in the 1940 Act) and
who have no direct or indirect financial interest in this Agreement on 60 days'
written notice to the Administrator or by the Administrator on 60 days' written
notice to the Company.
5.3. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
6. Non-Exclusivity
---------------
6.1. Except to the extent necessary to perform the Administrator's
obligations under this Agreement, nothing herein shall be deemed to limit or
restrict the right of the Administrator, or any affiliate of the Administrator,
or any employee of the Administrator, to engage in any other business or to
devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other corporation, firm, individual or association.
6.2. The administrative services of the Administrator to the Company under
this Agreement are not to be deemed exclusive as to the Company, and the
Administrator, or any affiliate thereof, shall be free to render similar
services to other investment companies and other clients (whether or not their
investment objectives and policies are similar to those of the Company) and to
engage in other activities, so long as its services hereunder are not impaired
thereby.
7. Miscellaneous
-------------
A-9
<PAGE>
7.1. This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
7.2. Titles or captions of Sections contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provisions thereof.
7.3. This Agreement may be executed in several counterparts, all of which
together shall for all purposes constitute one Agreement, binding on all the
parties.
7.4. This Agreement and the rights and obligations of the parties hereunder
shall be governed by, and interpreted, construed and enforced in accordance with
the laws of the State of California.
7.5. If any provisions of this Agreement or the application thereof to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such person or circumstance,
other than those as to which it is so determined to be invalid or unenforceable,
shall not be affected thereby, and each provision hereof shall be valid and
shall be enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
PIMCO COMMERCIAL MORTGAGE
SECURITIES TRUST, INC.
By: ____________________
____________________
Title
PACIFIC INVESTMENT MANAGEMENT
COMPANY
By: ____________________
____________________
Title
A-10
<PAGE>
APPENDIX B
----------
Information About PIMCO
The address of PIMCO is 840 Newport Center Drive, Suite 300, Newport Beach,
California 92660. PIMCO is registered as an investment adviser under the
Investment Advisers Act of 1940 and is registered as a commodity trading advisor
with the Commodity Futures Trading Commission.
PIMCO's directors and principal executive officer, their principal
occupations and dates of service are shown below. The address of each director
and officer is 840 Newport Center Drive, Suite 300, Newport Beach, California
92660.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Name Position and Principal Occupation
Length of Service
- -------------------------------------------------------------------------------------------------------
<S> <C>
William S. Thompson Managing Director, Chief Executive Officer and Management Committee
April 1993 to Present Member, PIMCO and PIMCO Management, Inc.; Member of Management Board
and Executive Committee, PIMCO Advisors L.P.; President and Chief
Executive Officer, PIMCO Partners G.P.; President, Chief Executive
Officer and Member, PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
William R. Benz, II Managing Director, PIMCO; Director and Managing Director, PIMCO
June 1986 to Present Management, Inc.; Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
Robert Wesley Burns Managing Director and Management Committee Member, PIMCO. Managing
February 1987 to Present Director, PIMCO Management, Inc.
- -------------------------------------------------------------------------------------------------------
Chris P. Dialynas Managing Director, PIMCO and PIMCO Management, Inc.
March 1983 to Present
- -------------------------------------------------------------------------------------------------------
Mohamed A. El-Erian Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -------------------------------------------------------------------------------------------------------
William H. Gross Managing Director, PIMCO; Director and Managing Director, PIMCO
June 1971 to Present Management, Inc.; Director and Vice President, StocksPLUS Management,
Inc.; Member of Management Board, PIMCO Advisors; Member of PIMCO
Partners LLC.
- -------------------------------------------------------------------------------------------------------
John L. Hague Managing Director and Management Committee Member, PIMCO. Director and
September 1987 to Present Managing Director, PIMCO Management, Inc. Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
Pasi M. Hamalainen Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -------------------------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Name Position and Principal Occupation
Length of Service
- -------------------------------------------------------------------------------------------------------
<S> <C>
Brent R. Harris Managing Director and Management Committee Member, PIMCO. Director and
June 1985 to Present Managing Director, PIMCO Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of Management Board and Executive
Committee, PIMCO Advisors; Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
Brent L. Holden Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -------------------------------------------------------------------------------------------------------
Margaret E. Isberg Managing Director, PIMCO and PIMCO Management, Inc.
August 1983 to Present
- -------------------------------------------------------------------------------------------------------
John S. Loftus Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -------------------------------------------------------------------------------------------------------
Dean S. Meiling Managing Director, PIMCO. Director and Managing Director, PIMCO
December 1976 to Present Management, Inc.; Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
James F. Muzzy Managing Director and Management Committee Member, PIMCO; Director and
September 1971 to Present Managing Director, PIMCO Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
William F. Podlich, III Managing Director, PIMCO; Director and Managing Director, PIMCO
June 1966 to Present Management, Inc.; Member of Management Board, PIMCO Advisors; Member of
PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
William C. Powers Managing Director, PIMCO; Director and Managing Director, PIMCO
January 1991 to Present Management, Inc.; Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
Ernest L. Schmider Managing Director, PIMCO and PIMCO Management, Inc. [confirm]
December 1999 to Present
- -------------------------------------------------------------------------------------------------------
Lee R. Thomas Director and Managing Director, PIMCO and PIMCO Management, Inc.;
April 1995 to Present Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
Benjamin L. Trosky Managing Director and Management Board Member, PIMCO; Director and
October 1990 to Present Managing Director, PIMCO Management, Inc.; Member of Management Board,
PIMCO Advisors; Member of PIMCO Partners LLC.
- -------------------------------------------------------------------------------------------------------
</TABLE>
The following are the executive officers of the Fund who are not Directors,
their ages, positions with the Fund and principal occupations during the past
five years. The address of all officers is 840 Newport Center Drive, Suite 300,
Newport Beach, California, 92660.
B-2
<PAGE>
<TABLE>
<CAPTION>
Length of Position with Principal Occupation(s)
Name and Age Service the Company During the Past Five Years
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael G. Dow 8/95 - Present Senior Vice President Senior Vice President, PIMCO. Formerly
Age 36 Fixed Income Specialist, Salomon
Brothers, Inc.; Vice President
Operations, Citibank NA Global Consumer
Banking Group.
William H. Gross 4/87 - Present Senior Vice President Managing Director, PIMCO; Senior Vice
Age 55 President, PIMCO Variable Insurance
Trust.
Margaret Isberg 4/87 - Present Senior Vice President Managing Director, PIMCO.
Age 43
Jeffrey M. Sargent 2/93 - Present Senior Vice President Vice President and Manager of
Age 36 Investment Operations Shareholder
Services, PIMCO; Senior Vice President,
PIMCO Commercial Mortgage Securities
Trust, Inc. and PIMCO Variable
Insurance Trust; Vice President, PIMCO
Funds: Multi-Manager Series.
Leland T. Scholey 2/96 - Present Senior Vice President Senior Vice President, PIMCO. Formerly
Age 47 Vice President, PIMCO.
Raymond C. Hayes 2/95 - Present Vice President Vice President, PIMCO. Formerly
Age 54 Marketing Director, Pacific Financial
Asset Management Corporation.
Thomas J. Kelleher, III 3/96 - Present Vice President Vice President, PIMCO. Previously
Age 49 associated with Delaware Trust, Mellon
Bank and Girard Trust (bank trust
departments).
Henrik P. Larsen 2/99 - Present Vice President Manager, Fund Administration, PIMCO;
Age 29 Vice President, PIMCO Commercial
Mortgage Securities Trust, Inc. and
PIMCO Variable Insurance Trust.
Formerly Supervisor, PIMCO.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
Length of Position with Principal Occupation(s)
Name and Age Service the Company During the Past Five Years
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Daniel T. Ludwig 2/99 - Present Vice President Account Manager, PIMCO. Formerly Vice
Age 41 President, Fidelity Investments;
Institutional Sales Representative, CS
First Boston.
Andre Mallegol 3/97 - Present Vice President Vice President, PIMCO. Formerly
Age 33 associated with Fidelity Investments
Institutional Services Company.
James F. Muzzy 4/87 - Present Vice President Managing Director, PIMCO; Senior Vice
Age 60 President, PIMCO Variable Insurance
Trust.
Douglas J. Ongaro 8/95 - Present Vice President Vice President, PIMCO. Formerly
Age 38 Regional Marketing Manager, Charles
Schwab & Co., Inc.
David J. Pittman 7/97 - Present Vice President Vice President, PIMCO. Formerly a
Age 51 senior executive with Bank of America,
the Northern Trust Co. and NationsBank.
Mark A. Romano 11/97 - Present Vice President Vice President, PIMCO. Previously
Age 41 associated with Wells Fargo's
institutional money management group
and First Interstate's Pacifica family
of mutual funds.
William S. Thompson, Jr. 11/93 - Present Vice President Chief Executive Officer and Managing
Age 54 Director, PIMCO; Senior Vice President,
PIMCO Variable Insurance Trust; Vice
President, PIMCO Commercial Mortgage
Securities Trust, Inc. Formerly
Managing Director, Salomon Brothers,
Inc.
John P. Hardaway 8/90 - Present Treasurer Senior Vice President and Manager of
Age 42 Investment Operations Accounting,
PIMCO; Treasurer, PIMCO Commercial
Mortgage Securities Trust, Inc., PIMCO
Funds: Multi-Manager Series and PIMCO
Variable Insurance Trust. Formerly
Vice President, PIMCO.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
Length of Position with Principal Occupation(s)
Name and Age Service the Company During the Past Five Years
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Garlin G. Flynn 8/95 - Present Secretary Specialist, PIMCO; Secretary, PIMCO
Age 53 Commercial Mortgage Securities Trust,
Inc. and PIMCO Variable Insurance
Trust; Assistant Secretary, PIMCO
Funds: Multi-Manager Series. Formerly
Senior Fund Administrator, PIMCO;
Senior Mutual Fund Analyst, PIMCO
Advisors Institutional Services.
Joseph D. Hattesohl 2/95 - Present Assistant Treasurer Vice President and Manager of Financial
Age 35 Reporting and Taxation, PIMCO;
Assistant Treasurer, PIMCO Funds:
Multi-Manager Series, PIMCO Commercial
Mortgage Securities Trust, Inc. and
PIMCO Variable Insurance Trust.
Formerly, Manager of Fund Taxation,
PIMCO; Director of Financial Reporting,
Carl J. Brown & Co.; Tax Manager, Price
Waterhouse LLP.
Michael J. Willemsen 11/88 - Present Assistant Secretary Manager, PIMCO; Assistant Secretary,
Age 39 PIMCO Commercial Mortgage Securities
Trust, Inc. and PIMCO Variable
Insurance Trust. Formerly Project
Lead, PIMCO.
</TABLE>
Other Investment Company Clients
PIMCO also serves as investment adviser or subadviser to the following
investment companies, at the fee rates set forth below, which had the indicated
net assets as of September 30, 1999.
<TABLE>
<CAPTION>
Approximate
Name of Fund Advisory Fee Rate Assets
- ------------ ----------------- ------
<S> <C> <C>
PIMCO FUNDS
- --------------------------------------------------------------------------------------------------------
Total Return Fund Annual rate of 0.25% of average $29,440,986,644
daily net assets
- --------------------------------------------------------------------------------------------------------
International Bond Fund Annual rate of 0.25% of average 980,741,511
daily net assets
- --------------------------------------------------------------------------------------------------------
Low Duration Fund Annual rate of 0.25% of average 4,627,238,397
daily net assets
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Foreign Bond Fund Annual rate of 0.25% of average 582,390,389
daily net assets
- --------------------------------------------------------------------------------------------------------
High Yield Fund Annual rate of 0.25% of average 3,567,156,990
daily net assets
- --------------------------------------------------------------------------------------------------------
Low Duration Fund II Annual rate of 0.25% of average 467,793,234
daily net assets
- --------------------------------------------------------------------------------------------------------
Total Return Fund III Annual rate of 0.25% of average 597,124,044
daily net assets
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Short-Term Fund Annual rate of 0.25% of average 636,452,542
daily net assets
- --------------------------------------------------------------------------------------------------------
Strategic Balanced Fund Annual rate of 0.40% of average 165,930,717
daily net assets
- --------------------------------------------------------------------------------------------------------
Low Duration Fund III Annual rate of 0.25% of average 25,506,132
daily net assets
- --------------------------------------------------------------------------------------------------------
Moderate Duration Fund Annual rate of 0.25% of average 334,051,187
daily net assets
- --------------------------------------------------------------------------------------------------------
Long-Term US Government Fund Annual rate of 0.25% of average 369,273,712
daily net assets
- --------------------------------------------------------------------------------------------------------
Global Bond Fund Annual rate of 0.25% of average 290,651,430
daily net assets
- --------------------------------------------------------------------------------------------------------
StocksPLUS Fund Annual rate of 0.40% of average 1,389,882,447
daily net assets
- --------------------------------------------------------------------------------------------------------
Money Market Fund Annual rate of 0.15% of average 562,867,363
daily net assets
- --------------------------------------------------------------------------------------------------------
Total Return Fund II Annual rate of 0.25% of average 1,024,091,669
daily net assets
- --------------------------------------------------------------------------------------------------------
Global Bond Fund II Annual rate of 0.25% of average 43,066,006
daily net assets
- --------------------------------------------------------------------------------------------------------
Real Return Bond Fund Annual rate of 0.25% of average 116,842,557
daily net assets
- --------------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund Annual rate of 0.45% of average 17,303,393
daily net assets
- --------------------------------------------------------------------------------------------------------
Emerging Markets Bond Fund II Annual rate of 0.45% of average 218,383,188
daily net assets
- --------------------------------------------------------------------------------------------------------
Total Return Mortgage Fund Annual rate of 0.25% of average 4,011,811
daily net assets
- --------------------------------------------------------------------------------------------------------
Low Duration Mortgage Fund Annual rate of 0.25% of average 4,193,256
daily net assets
- --------------------------------------------------------------------------------------------------------
Municipal Bond Fund Annual rate of 0.25% of average 55,650,611
daily net assets
- --------------------------------------------------------------------------------------------------------
Convertible Bond Fund Annual rate of 0.40% of average 38,427,016
daily net assets
- --------------------------------------------------------------------------------------------------------
Short Duration Municipal Income Fund Annual rate of 0.20% of average 10,555,541
daily net assets
- --------------------------------------------------------------------------------------------------------
California Intermediate Municipal Annual rate of 0.25% of average 3,112,763
Bond Fund daily net assets
- --------------------------------------------------------------------------------------------------------
New York Intermediate Municipal Annual rate of 0.25% of average 3,011,717
Bond Fund daily net assets
- --------------------------------------------------------------------------------------------------------
Long Duration Fund Annual rate of 0.25% of average Not Open As of
daily net assets 9/30/99
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
FRANK RUSSELL
INVESTMENT
MANAGEMENT COMPANY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed Income I Fund Annual rate of 0.25% of net assets $ 158,880,504
based on the average of ending
monthly market values over 3 months,
paid in arrears
- --------------------------------------------------------------------------------------------------------
Diversified Bond Fund Annual rate of 0.25% of net assets 121,645,371
based on the average of ending
monthly market values over 3 months,
paid in arrears
- --------------------------------------------------------------------------------------------------------
Fixed Income III Fund Annual rate of 0.25% of net assets 158,140,598
based on the average of ending
monthly market values over 3 months,
paid in arrears
- --------------------------------------------------------------------------------------------------------
Multistrategy Bond Fund Annual rate of 0.25% of net assets 193,102,561
based on the average of ending
monthly market values over 3 months,
paid in arrears
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
RUSSELL INSURANCE FUNDS
- --------------------------------------------------------------------------------------------------------
Core Bond Fund Annual rate of 0.25% of net assets $ 33,478,757
based on the average of ending
monthly market values over 3 months,
paid in arrears
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
THE HARBOR GROUP
- --------------------------------------------------------------------------------------------------------
Harbor Bond Fund Annual rate of 0.50% of average daily $ 622,475,175
net assets on first $25 million;
0.375% of average daily net assets on
next $25 million; 0.25% of average
daily net assets over $50 million
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-8
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
PACIFIC SELECT SERIES
TRUST
- --------------------------------------------------------------------------------------------------------
Managed Bond Series Annual rate of 0.50% of average daily $ 1,053,024,408
net assets on first $25 million;
0.375% on next $25 million; 0.25% on
remaining assets
- --------------------------------------------------------------------------------------------------------
Government Securities Series Annual rate of 0.50% of average daily 397,265,729
net assets on first $25 million;
0.375% on next $25 million; 0.25% on
remaining assets
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PRUDENTIAL SECURITIES
TARGET PORTFOLIO TRUST
- --------------------------------------------------------------------------------------------------------
Intermediate Term Bond Portfolio Annual Rate of 0.25% of average daily $ 113,010,679
net assets
- --------------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.25% of average daily 66,889,600
net assets
- --------------------------------------------------------------------------------------------------------
Total Return Bond Fund Annual rate of 0.25% of average daily Not Open As of
net assets 9/30/99
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
AMERICAN SKANDIA TRUST
- --------------------------------------------------------------------------------------------------------
Total Return Bond Portfolio Annual rate of 0.30% of average daily $ 1,035,861,299
net assets on first $150 million;
0.25% of average daily net assets on
assets over $150 million paid monthly
- --------------------------------------------------------------------------------------------------------
Limited Maturity Bond Portfolio Annual rate of 0.30% of average daily 421,807,622
net assets on first $150 million;
0.25% of average daily net assets on
assets over $150 million paid monthly
- --------------------------------------------------------------------------------------------------------
Master Trust Total Return Annual rate of 0.25% of average daily 170,012,653
net assets
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-9
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
FREMONT MUTUAL FUNDS,
INC.
- --------------------------------------------------------------------------------------------------------
Total Return Fund Annual rate of 0.25% of average daily $ 187,068,687
net assets paid quarterly
- --------------------------------------------------------------------------------------------------------
Global Bond Fund Annual rate of 0.30% of average daily 24,283,647
net assets paid quarterly
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PAINEWEBBER MANAGED
INVESTMENTS TRUST
- --------------------------------------------------------------------------------------------------------
Low Duration US Government Income Annual rate of 0.25% of average daily $ 122,967,595
Fund net assets
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PAINEWEBBER SERIES
TRUST
- --------------------------------------------------------------------------------------------------------
Strategic Fixed Income Annual rate of 0.25% of average daily $ 7,298,286
net assets
- --------------------------------------------------------------------------------------------------------
PAINEWEBBER MANAGED
ACCOUNTS SERVICES
PORTFOLIO TRUST
- --------------------------------------------------------------------------------------------------------
PACE Government Securities Fixed Annual rate of 0.25% of average daily $ 197,767,164
Income net assets
- --------------------------------------------------------------------------------------------------------
PACE Strategic Fixed Income Annual rate of 0.25% of average daily 230,222,525
Investments net assets
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
JACKSON NATIONAL LIFE
SERIES TRUST
- --------------------------------------------------------------------------------------------------------
JNL/PIMCO Total Return Bond Series Annual rate of 0.25% of average daily $ 9,753,810
net assets excluding the value of
client contributed capital
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-10
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
FORWARD GLOBAL FUND
- --------------------------------------------------------------------------------------------------------
Forward Global Fund Annual rate of 0.35% of average daily $ 30,263,618
net assets on amounts under $200
million and 0.30% on amounts over
$200 million
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PRUDENTIAL INVESTMENTS
FUND MANAGEMENT LLC
- --------------------------------------------------------------------------------------------------------
Prudential Diversified Moderate 0.25% of 1% of average daily net $ 23,259,990
Growth assets computed daily and paid monthly
- --------------------------------------------------------------------------------------------------------
Prudential Diversified Conservative 0.25% of 1% of average daily net 28,956,072
Growth assets computed daily and paid monthly
- --------------------------------------------------------------------------------------------------------
Prudential Diversified Conservative 0.25% of 1% of average daily net 30,034,833
Portfolio assets computed daily and paid monthly
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
MANULIFE
- --------------------------------------------------------------------------------------------------------
Manulife Global Bond Trust Annual rate of 0.375% on first $50 $ 161,197,318
million; 0.35% on $50-200 million;
0.30% on $200-500 million; 0.25%
excess over $500 million of daily net
assets computed daily and paid
monthly
- --------------------------------------------------------------------------------------------------------
Manulife Total Return Trust Annual rate of 0.30% on first $50 190,550,262
million; 0.30% on $50-150 million;
0.25% on $150-200 million; 0.25% on
$200-500 million and over of daily
net assets computed daily and paid
monthly
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-11
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
SOLOMON SMITH
BARNEY/CONSULTING
GROUPS CAPITAL MARKET
FUND
- --------------------------------------------------------------------------------------------------------
Intermediate Fixed Income Annual rate of 0.25%, multiplied by a $ 270,423,858
Investment Portfolio fraction, the numerator of which is
the average daily value of allocated
assets and the denominator of which
is the average daily value of the
Portfolio's total assets computed
daily
- --------------------------------------------------------------------------------------------------------
</TABLE>
Brokerage Policies
PIMCO receives research services from many broker-dealers with which it places
portfolio transactions. Consistent with applicable law, PIMCO may cause the Fund
to pay a broker-dealer which provides brokerage and research services to PIMCO
an amount of disclosed commission for effecting a securities transaction for the
Fund in excess of the commission which another broker-dealer would have charged
for effecting that transaction. These research services, which in some cases
also may be purchased for cash, include such items as general economic and
securities market reviews, industry and company reviews, evaluations of
securities and recommendations as to the purchase and sale of securities. Some
of these services are of value to PIMCO in advising various of its clients
(including the Fund), although not all of these services are necessarily of
value in managing the Fund. The management fees paid by the Fund are not reduced
because PIMCO and its affiliates receive such services.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Directors may determine, PIMCO may also
consider sales of shares of the Fund as a factor in the selection of broker-
dealers to execute portfolio transactions for the Fund.
B-12
<PAGE>
APPENDIX C
----------
PIMCO currently receives a monthly investment advisory fee from the Fund at
an annual rate based on average daily net assets of the Fund, as set forth
below. For the fiscal year ended March 31, 1999, the aggregate amount of
advisory and administration fees paid by the Fund was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fee Aggregate Aggregate
Investment Advisory Administration
Advisory Rate Fees Fees
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
</TABLE>
C-1
<PAGE>
APPENDIX D
----------
As of December 15, 1999, the following persons owned of record or
beneficially 5% or more of the Fund:
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Owned Fund
-----------------------------
<S> <C> <C>
</TABLE>
* Entity owned 25% or more of the outstanding shares of Common Stock of the
Fund, and therefore may be presumed to "control" the Fund, as that term is
defined in the 1940 Act.
** Shares are believed to be held only as nominee.
D-1
<PAGE>
PROXY
PIMCO Commercial Mortgage Securities Trust, Inc.
ANNUAL MEETING OF SHAREHOLDERS
March 3, 2000
The undersigned hereby appoints ____________ and ___________ and each of
them, as his/her attorneys and proxies with full power of substitution to vote
and act with respect to all shares of PIMCO Commercial Mortgage Securities
Trust, Inc. (the "Fund") held by the undersigned at the Annual Meeting of
Shareholders of the Fund to be held at 800 Newport Center Drive, 6th Floor,
Newport Beach, California, 92660, on [March 3], 2000 at [time], Pacific Time, or
as adjourned from time to time (the "Meeting"), and instructs them to vote as
indicated on the matters referred to in the Proxy Statement for the Meeting,
receipt of which is hereby acknowledged, with discretionary power to vote upon
such other business as may properly come before the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE FUND. The Board
of Directors recommends that you vote FOR each of the Nominees and FOR each of
the following proposals:
I. To elect Directors to the Board of Directors of the Fund
[ ] FOR ALL [ ] AGAINST ALL [ ]
[ ] FOR ALL EXCEPT __________________________________________
(Only use to withhold authority to vote on individual Nominees)
II. To approve a new investment management contract
[ ] FOR [ ] AGAINST [ ] ABSTAIN
III. To ratify selection of Ernst & Young LLP as independent accountant of
the Fund for its fiscal year ending December 31, 2000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. To transact such other business as may properly come before the
Meeting
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL OF THE NOMINEES AND FOR ALL OF THE PROPOSALS.
<PAGE>
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Dated ____________________________, 2000
______________________________________________
Name of Shareholder(s) -- Please print or type
______________________________________________
Signature(s) of Shareholder(s)
______________________________________________
Signature(s) of Shareholder(s)
This proxy must be signed by the beneficial owner of Fund shares. If
signing as attorney, executor, guardian or in some representative capacity or as
an officer of a corporation, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
-2-
