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:
[_] Preliminary Proxy Statement [_] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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PACIFIC INVESTMENT MANAGEMENT COMPANY
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
January 12, 2000
Dear Shareholder:
On behalf of the Board of Directors 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 10:30 a.m., 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 Allianz of America, Inc. acquiring
approximately 70% of the outstanding partnership interests in PIMCO Advisors
(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 management agreement between the Fund and
PIMCO. The new investment management agreement provides that, following
the Transaction, PIMCO will continue to provide investment management
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 card promptly in order to avoid the expense of additional
mailing or having our proxy solicitor, D.F. King & Co., Inc. ("D.F. King")
telephone you. If you have any questions regarding the proxy statement, please
call D.F. King at 1-800-758-5880.
Thank you in advance for your participation in this important event.
Sincerely,
/s/ R. WESLEY BURNS
R. Wesley Burns
Managing Director
PIMCO Commercial Mortgage Securities Trust, Inc.
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
For proxy information call:
(800) 758-5880
For account information call:
(800) 213-3606
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held March 3, 2000
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To the Shareholders of PIMCO Commercial Mortgage Securities Trust, Inc.:
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 10:30 a.m., 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 agreement;
III. To ratify the 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, 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 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
January 12, 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.
PIMCO Commercial Mortgage Securities Trust, Inc.
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
For proxy information call:
(800) 758-5880
For account information call:
(800) 213-3606
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PROXY STATEMENT
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Annual Meeting of Shareholders
To be held March 3, 2000
This proxy statement is 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 10:30 a.m.
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 12, 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 agreement;
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 amended (the "1940 Act"),
of the Fund or its investment adviser, Pacific Investment Management Company
("PIMCO"). To that end, at the Meeting, four Directors 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 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.
The Nominating Committee, composed of independent Directors Messrs.
Babcock, Curtis, Kemp, and Popejoy, is responsible for the selection and
nomination of candidates to serve as Directors of the Fund. During the fiscal
year ended December 31, 1999 there was one meeting 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 as Directors, and 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,
also are proposed for election to serve another term, which would expire in
2003. Mr. Cannon's term would expire in 2001 and Mr. Hagan's term would expire
in 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 valuable additions to the Board as independent Directors. The Board also
noted that Mr. Cannon currently serves on the board of another investment
company managed by affiliates of PIMCO. 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
Fund, 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,
six of whom will not be "interested persons" of the Fund or PIMCO.
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
sooner succeeded as provided in the Fund's Articles of Incorporation. It is
proposed, and the Board recommends, that shareholders elect the Nominees.
2
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.
The Class I Directors (Nominee) are:
Class I Directors (Term Expiring in 2001)
Length of Principal Occupation(s)
Service Current Position During the Past Five
Name, Address and Age on the Board with the Fund Years
--------------------- ------------ ---------------- ------------------------
Guilford C. Babcock............ 7/93-Present Director Associate Professor of
1500 Park Place Finance, University of
San Marino, California 91108 Southern California;
Age 68 Trustee, PIMCO Funds:
Pacific Investment
Management Series;
Trustee, PIMCO Variable
Insurance Trust;
Director, Growth Fund of
America and Fundamental
Investors Fund of the
American Funds;
Director, Good Hope
Medical Foundation.
E. Philip Cannon............... Nominee None Proprietor, Cannon &
3838 Olympia Company, an affiliate of
Houston, TX 77019 Inverness Management
Age 59 LLC, a private equity
investment firm; Trustee
of PIMCO Funds: Multi-
Manager Series.
Formerly, Headmaster,
St. John's School,
Houston, Texas; Trustee
of Cash Accumulation
Trust; General Partner,
J.B. Poindexter & Co.,
Houston, Texas, a
private equity
investment firm; and
Partner, Iberia
Petroleum Company, an
oil and gas production
company. Mr. Cannon was
a director of WNS Inc.,
a retailing company
which filed a petition
in bankruptcy within the
last five years.
William J. Popejoy............. 7/93-2/95 Director President, Pacific
29 Chatham Court and 8/95- Capital Investors;
Newport Beach, California Present Chairman, PacPro (vinyl
92660 assembly products;
Age 61 formerly Western
Printing);
Trustee, PIMCO Funds:
Pacific Investment
Management Series;
Trustee, PIMCO Variable
Insurance Trust.
Formerly Director,
California State
Lottery; Chief Executive
Officer, Orange County,
California.
3
The Class II Directors (Nominee) are:
Class II Directors (Term Expiring in 2002)
Length of Principal Occupation(s)
Service Current Position During the Past Five
Name, Address and Age on the Board with the Fund Years
--------------------- ------------ ---------------- ------------------------
J. Michael Hagan............... Nominee None Retired from Furon
6 Merced Company (manufacturing)
San Clemente, California 92673 where he served as
Age 60 Chairman and CEO from
June 1991 to November
1999, and in other
capacities 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
(manufacturing), Freedom
Communications, and
Remedy Temp (staffing).
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................. 7/93-Present Director Private Investor;
1141 Marine Drive Trustee, PIMCO Funds:
Laguna Beach, California 92651 Pacific Investment
Age 69 Management Series;
Trustee, PIMCO Variable
Insurance Trust;
Formerly Co-Chairman,
U.S. Committee to Assist
Russian Reform;
Director, Union
Financial Corp. (savings
and loan); Senior
Consultant, World Cup
1994 Organizing
Committee.
Vern O. Curtis................. 2/95-Present Director Private Investor;
14158 N.W. Bronson Creek Drive Trustee, PIMCO Funds:
Portland, Oregon 97229 Pacific Investment
Age 65 Management Series;
Trustee, PIMCO Variable
Insurance 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.
4
The Class III Directors (Nominees) are:
Class III Directors (Term Expiring in 2003)
Length of Principal Occupation(s)
Service Current Position During the Past Five
Name, Address and Age on the Board with the Fund Years
--------------------- ------------ ---------------- ------------------------
Brent R. Harris*......... 6/93-Present Chairman of Managing Director,
840 Newport Center Drive the Board and PIMCO; Board of
Newport Beach, Director Governors, Investment
California Company Institute;
Age 40 Chairman and Trustee,
PIMCO Funds: Pacific
Investment Management
Series; Chairman and
Trustee, PIMCO Variable
Insurance Trust.
R. Wesley Burns*......... 11/97-Present President and Managing Director,
840 Newport Center Drive (since 2/94 as Director PIMCO; President and
Newport Beach, President) Trustee, PIMCO Funds:
California Pacific Investment
Age 40 Management Series;
President and Trustee,
PIMCO Variable Insurance
Trust; Formerly
Executive Vice
President, PIMCO;
Executive Vice
President, PIMCO Funds:
Multi-Manager Series.
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* 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. Messrs. Curtis and Hagan formerly held units issued by PIMCO
Advisors L.P., the parent of PIMCO.
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 accountant, submits a recommendation to the Board as to the selection
of an independent public accountant, 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 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 $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 $42,786.
5
The following table sets forth the compensation paid to each of the current
Directors of the Fund for the fiscal year ended December 31, 1999. Directors
who are "interested persons" of the Fund do not receive any compensation from
the Fund.
Aggregate Compensation Total Compensation from
Name from Fund Fund and Fund Complex*
---- ---------------------- -----------------------
Guilford C. Babcock .......... $10,500 $78,750
Vern O. Curtis................ $11,286 $82,619
Thomas P. Kemp ............... $10,500 $78,750
William J. Popejoy............ $10,500 $78,750
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* 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 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 fiscal year ended March 31, 1999, these Trustees,
as a group, received compensation in the amount of $234,297 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 meeting attended in person ($250 for each such meeting
attended telephonically), an annual retainer of $500 for a Committee
Chairmanship, plus reimbursement of related expenses. For the fiscal year
ended December 31, 1999, these Trustees, as a group, received compensation in
the amount of $41,786 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"), the
parent of PIMCO, and certain of its affiliates. Messrs. Burns and Harris, as
managing directors of PIMCO, the investment manager and administrator of the
Fund, will receive employment-related compensation and other benefits as a
result of the transaction. For a complete discussion of the transaction, see
Proposal II.
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 AGREEMENT
Introduction. PIMCO, located at 840 Newport Center Drive, Suite 300,
Newport Beach, California 92660 has served as investment manager of the Fund
since its inception in 1993. PIMCO currently serves as the investment manager
of the Fund pursuant to an investment management agreement dated November 15,
1994 (the "Management Agreement"). In addition, PIMCO serves as the
administrator of the Fund pursuant to an administrative services agreement
adopted on November 15, 1994 (the "Administrative Services Agreement").
PIMCO is a subsidiary partnership of PIMCO Advisors. 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
6
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 Agreement. 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 management agreement between the Fund and PIMCO which
is substantially identical to the current management agreement (the "New
Management Agreement"). The Board recommends that shareholders approve the New
Management Agreement. If the New Management Agreement is approved, PIMCO will
continue to serve as administrator under a new Administrative Services
Agreement. Forms of the New Management Agreement and Administrative Services
Agreement are attached as Appendix A.
Information about PIMCO, its directors and principal executive officer, the
officers of the Fund, PIMCO's investment company clients, and PIMCO's
brokerage policies is presented in Appendix B.
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 a subsidiary of Allianz of America with and into
PAH. In the merger, each of the outstanding limited partnership and general
partner units in PAH will be converted into the right to receive cash in an
amount per unit equal to $38.75, subject to a downward adjustment if the
aggregate annualized advisory and subadvisory fees for all accounts managed by
PIMCO Advisors and its subsidiaries, expressed as a "revenue run-rate,"
declines (excluding market-based changes) below a specified level (the "Unit
Transaction Price"). In no event will the Unit Transaction Price be reduced
below $31.00 per unit. As a result of the merger, PAH will become an indirect
wholly-owned subsidiary of Allianz of America.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire for cash additional partnership interests in PIMCO
Advisors, bringing its ownership interest in PIMCO Advisors to approximately
70%, including the approximately 44% interest held through PAH. As part of the
Transaction, a subsidiary of Allianz of America will acquire Partners G.P.
through an acquisition of the managing general partner interest in Partners
G.P. from the assets of Partners LLC (the managing general partner of Partners
G.P.) for approximately $5.5 million and of the member interests in Partners
G.P. that are indirectly owned by Pacific Life. Pacific Life, which through
subsidiaries owns approximately a 30% interest in PIMCO Advisors, will retain
an indirect interest in PIMCO Advisors following the closing. As a result of
the Transaction, Allianz of America will control PIMCO Advisors, having
acquired approximately 70% of the outstanding partnership interests in PIMCO
Advisors for a total consideration of approximately $3.3 billion, while the
remainder will continue to be indirectly owned by Pacific Life.
In connection with the closing, Allianz of America will enter into a
put/call arrangement for the possible disposition of Pacific Life's indirect
interest in PIMCO Advisors. The put option held by Pacific Life will allow it
to require Allianz of America, on the last business day of each calendar
quarter following the closing of the Transaction, to purchase at a formula-
based price all of the PIMCO Advisors units owned directly or indirectly by
Pacific Life. The call option held by Allianz of America will allow it,
beginning January 31, 2003 or upon a change in control of Pacific Life, to
require Pacific Life to sell or cause to be sold to Allianz of America, at the
same price, all of the PIMCO Advisors units owned directly or indirectly by
Pacific Life.
The Transaction is expected to be completed by the end of the first quarter
of 2000, although there is no assurance that the Transaction will be
completed. Completion of the Transaction is subject to a number of
7
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 revenue run-rate amount. Approval of the New Management
Agreement by the shareholders of the Fund will help satisfy condition (iii)
described in the preceding sentence by maintaining PIMCO's advisory
relationship with the Fund. If the Transaction is not completed for any
reason, the Management Agreement will remain in effect. In the event the New
Management Agreement 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. Allianz of America will control PIMCO Advisors through its
managing member interest in Pacific-Allianz Partners LLC ("PacPartners LLC"),
which will be the sole general partner of PIMCO Advisors following the
Transaction. While Allianz of America will control PacPartners LLC, Pacific
Life will hold a portion of its continuing interest in PIMCO Advisors through
an interest in PacPartners LLC. Allianz of America, through subsidiaries, will
be the managing member of PacPartners LLC and will have the full authority and
control over all actions taken by PacPartners LLC as the general partner of
PIMCO Advisors, provided that Pacific Life's consent is required for certain
extraordinary actions.
Operationally, PIMCO is expected to remain independent and to lead the
global fixed income investment efforts of Allianz AG. In this regard, PIMCO
will coordinate its activities with Allianz Asset Management ("AAM"), a
subsidiary of Allianz AG that coordinates global Allianz asset management
activities. To permit the provision of advisory services to non-U.S. clients
of Allianz AG, PIMCO personnel, including personnel with portfolio management
responsibility for certain of the Funds, may become affiliated with AAM or
other Allianz-controlled advisory firms. PIMCO also may call upon the research
capabilities and resources of Allianz AG and its advisory affiliates in
connection with providing investment advice to its clients. PIMCO 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 (a German
publicly-traded company) which, together with its subsidiaries, comprises 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:
Koniginstrasse 28, D-80802, Munich, Germany.
Significant institutional shareholders of Allianz AG currently include,
among others, Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and
HypoVereinsbank. Following completion of the Transaction, Dresdner Bank AG and
Deutsche Bank AG, as well as certain broker-dealers that might be deemed to be
affiliated with these entities, such as Bankers Trust Company, BT Alex Brown,
Inc., Deutsche Bank Securities, Inc. and Dresdner Kleinwort Benson North
America LLC. (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
8
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 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 manages 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 proceed 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 to an investment company or any affiliated
persons to receive any amount or benefit in connection with a "change in
control" of the investment adviser as long as two conditions are satisfied.
First, an "unfair burden" must not be imposed on investment company clients of
the adviser as a result of the transaction, or any express or implied terms,
conditions or understandings applicable to the transaction. The term "unfair
burden" (as defined in the 1940 Act) includes any arrangement during the two-
year period after the transaction whereby the investment adviser (or
predecessor or successor adviser), or any "interested person" (as defined in
the 1940 Act) 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
9
investment company's board of directors must not be "interested persons" (as
defined in the 1940 Act) of the investment adviser (or predecessor or
successor adviser). Allianz of America and each of the other parties to the
Agreement have agreed to use their reasonable best efforts to ensure
compliance with Section 15(f) as it applies to the Transaction during the
applicable time periods.
The Agreements. The Management Agreements. PIMCO has served as investment
manager to the Fund since the Fund's commencement of investment operations.
The Management Agreement was last submitted for approval by shareholders of
the Fund at a meeting held on August 25, 1993 for the purpose of implementing
the Fund's current service arrangements with respect to investment management
services. If the Transaction is not consummated, PIMCO will continue to serve
as manager for the Fund under the current Management Agreement.
Under the terms of the Management Agreement, 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 Agreement. PIMCO is free to,
and does, render investment management services to others.
Consistent with the requirements of the 1940 Act, the Management Agreement
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
Agreement.
The Management Agreement may be terminated by the Fund without penalty upon
60 days' notice by the Board or by a vote of the holders of a majority of the
Fund's outstanding shares, or upon 60 days' notice by PIMCO. As noted above,
the Management Agreement terminates automatically in the event of its
"assignment" (as defined in the 1940 Act).
Information about investment management and administrative fee rates and
aggregate investment management and administrative fees paid to PIMCO by the
Fund during the fiscal year ended December 31, 1999, is set forth in Appendix
C.
The New Management Agreement. The New Management Agreement is substantially
identical to the Management Agreement. 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. The New
Management Contract recognizes that PIMCO may, from time to time, seek
research assistance and rely on other investment management resources of its
affiliated companies, and the Fund will disclose that a portion of the
advisory or administrative fees received by PIMCO from the Fund may be paid to
those affiliates in return for such services provided. These arrangements will
have no impact on PIMCO's continuing responsibility for the management of the
Fund and will not cause any increase in the overall fees or expenses borne by
the Fund.
At the December 1, 1999 meeting of the Board, the New Management Agreement
was approved unanimously by the Board, including all of the Directors who are
not parties to the New Management Agreement or "interested persons" (as
defined in the 1940 Act) of any such party (other than as Directors of the
Fund). The New Management Agreement, as approved by the Board, is submitted
for approval by the shareholders of the Fund.
If the New Management Agreement is approved by shareholders, it will take
effect immediately after the closing of the Transaction. The New Management
Agreement will remain in effect for two years from the date it
10
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 Agreement (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 Agreement or "interested persons" of any such party (other than
as Directors of the Fund).
The Administrative Services Agreement. Under the terms of the
Administrative Services Agreement, PIMCO provides administrative services to
the Fund, including administrative and clerical functions, certain shareholder
servicing functions and supervision of the services rendered to the Fund by
other persons, including the custodian and transfer agent. In approving the
New Management Agreement, the Board considered that PIMCO receives fees for
the services it provides under the Administrative Services Agreement.
The Administrative Services Agreement may be terminated by the Fund without
penalty upon 60 days' notice by the Board or by a vote of the holders of a
majority of the Fund's outstanding shares, or upon 60 days' notice by PIMCO.
The Administrative Services Agreement terminates automatically in the event of
its "assignment" (as defined in the 1940 Act). A new Administration Agreement,
substantially identical to the current Administration Agreement, will be
implemented upon completion of the Transaction.
Interests of Certain Persons in the Transaction. The Managing Directors,
each of whom is a member of Partners LLC, will receive new employment and
consulting agreements. The initial term of the employment agreements 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 advisers 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 PIMCO
Advisors' Retention Plan for Executives 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
distributions 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
11
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
aggregate of 2,080,000 Class A 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, based on a Unit
Transaction Price of $38.75. The Managing Directors, as well as certain
executive officers of PIMCO, will also participate in the Deferred
Compensation Plan, under which Class A 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. At the closing of the Transaction, 193,252 Class A units of PIMCO
Advisors, having a value of $7,488,515 based on a Unit Transaction Price of
$38.75, attributable to unvested subaccounts of the Managing Directors under
the Deferred Compensation Plan will vest.
Upon completion of the Transaction, Mr. Harris will enter into an
employment agreement with PIMCO for an initial term of five years, beginning
January 1, 2000, with automatic renewal for successive two-year periods. Mr.
Harris will receive an annual salary and bonus, and will be eligible to
participate in certain benefit plans and programs. In addition, pursuant to a
new PIMCO Advisors LP Transition and Retention Plan, Mr. Harris will receive a
retention payment of $6 million per year for five years, conditioned on
continued employment with PIMCO. Additionally, approximately 8,661 (as of
November 30, 1999) units of PIMCO Advisors ("PA Units") attributable to Mr.
Harris' unvested account balance with PIMCO Advisors Executive Deferred
Compensation Plan will fully vest and the PA Units owned by that Plan will be
exchanged for cash at the Unit Transaction Price (estimated to be $38.75) for
an aggregate payment of $335,614. Options for 230,000 PA Units previously
granted to Mr. Harris pursuant to PIMCO Advisors 1998 Unit Incentive Plan will
be converted into the right to receive cash for the difference between the
exercise price for these options (which $13.53) and the Unit Transaction Price
(for an aggregate payment of approximately $5,800,600).
Upon completion of the Transaction, Mr. Burns will enter into an employment
agreement with PIMCO for an initial term of five years, beginning January 1,
2000, with automatic renewal for successive two-year periods. Mr. Burns will
receive an annual salary and bonus, and will be eligible to participate in
certain benefit plans and programs. In addition, pursuant to a new PIMCO
Advisors LP Transition and Retention Plan, Mr. Burns will receive a retention
payment of $700,000 per year for five years, conditioned on continued
employment with PIMCO. Additionally, approximately 4,474 (as of November 30,
1999) PA Units attributable to Mr. Burns' unvested account balance with PIMCO
Advisors Executive Deferred Compensation Plan will fully vest and the PA Units
owned by that Plan will be exchanged for cash at the Unit Transaction Price
(estimated to be $38.75) for an aggregate payment of $173,368. Options for
80,000 PA Units previously granted to Mr. Burns pursuant to PIMCO Advisors
1998 Unit Incentive Plan will be converted into the right to receive cash for
the difference between the exercise price for these options (which averages
$27.2338) and the Unit Transaction Price (for an aggregate payment of
$921,300).
Separately, Messrs. Harris and Burns each has an interest of less than 6%
and 1%, respectively, in PIMCO Partners LLC, which owns 142,480 PA Units
(which would have in the aggregate a value of approximately $5,521,100 at the
Unit Transaction Price).
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 Fund 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.
12
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 Agreement.
Evaluation by the Board. The Board, advised by special independent counsel,
has determined that, in approving the New Management Agreement 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 Agreement, the New Management Agreement 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 it was appropriate to approve the New Management
Agreement and to recommend approval to shareholders, the Board, including the
Directors who are not parties to the New Management Agreement or interested
persons of such parties, considered various materials and representations
provided by PIMCO, including information concerning compensation and
employment arrangements to be implemented in connection with the Transaction
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 Agreement, thus helping to ensure continuity of
management; (2) the compensation to be received by PIMCO under the New
Management Agreement is the same as the compensation paid under the Management
Agreement, 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 Agreement with the terms of the Management Agreement; (5)
representations made by PIMCO concerning potential impact of affiliated
brokerage relationships on its ability to provide services to the Fund, and on
the Fund's 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
Agreement; (8) the fairness of the compensation payable to PIMCO under the
Management Agreement; (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 Agreement, the Fund can best be assured that services from PIMCO
will be provided without interruption. The Board also determined that the New
Management Agreement is in the best interests 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 Agreement 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.
13
III. SELECTION OF INDEPENDENT PUBLIC ACCOUNTANT
Ernst & Young LLP is proposed 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 & Co., Inc. ("D.F. King") has been retained to assist with
proxy solicitation activities. The Fund will forward to record owners proxy
materials for any beneficial owners that such record owners may represent.
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, 11,009,586 shares of the Fund, representing the same
number of votes, were outstanding. As of December 20th, 1999, no persons owned
of record or beneficially 5% or more of the shares of the Fund.
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.
Proxies that reflect abstentions or broker "non-votes" (that is, shares
held by brokers or nominees as to which (a) instructions have not been
received from the beneficial owner or other persons entitled to vote and
(b) the brokers or nominees do not have discretionary voting power on a
particular matter) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Assuming the
presence of a quorum, abstentions and broker non-votes have the effect of a
negative vote on Proposal II, and will have no effect on Proposals I and III.
Pursuant to the rules and policies of the New York Stock Exchange
14
(the "Exchange"), members of the Exchange may vote on the proposals to be
considered at the meeting without instructions from the beneficial owners of
the Fund's shares.
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 is
sufficient votes for approval, even though the Meeting is adjourned as to
other proposals.
Voting. To vote, shareholders may sign and mail the proxy card received
with the proxy statement or attend the Meeting in person.
Required Vote. Approval of Proposals I and III require the vote of a
majority of the Fund's shares present (or represented by proxy) and voting at
the Meeting. 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 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 2001 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 2001 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 no
later than 60 days before the meeting. If a shareholder fails to give timely
notice, then the persons named as proxies in the proxies solicited by the
Board for the 2001 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
January 12, 2000
15
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. The
Investment Manager may from time to time seek research assistance and rely on
investment management resources available to it through its affiliated
companies, but in no case shall reliance relieve the Investment Manager of any
of its obligations hereunder, nor shall the Company be responsible for any
additional fees or expenses hereunder as a result.
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 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.
A-1
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 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.
A-2
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 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-3
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.
PIMCO COMMERCIAL MORTGAGE SECURITIES
TRUST, INC.
By:___________________________________
___________________________________
Title
PACIFIC INVESTMENT MANAGEMENT COMPANY
By:___________________________________
___________________________________
Title
A-4
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made this th day of , 2000, 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 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
A-5
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 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).
A-6
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
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-7
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.
Name
Length of Service with
PIMCO Position and Principal Occupation
---------------------- ---------------------------------
William S. Thompson, Jr... Managing Director, Chief Executive Officer and
April 1993 to Present Executive Committee Member, PIMCO; Managing
Director, Chief Executive Officer and Director,
PIMCO Management, Inc.; Member of Management Board
and Executive Committee, PIMCO Advisors L.P.;
President, Chief Executive Officer and Member,
PIMCO Partners LLC.
William R. Benz, II....... Managing Director, PIMCO; Managing Director and
June 1986 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Robert Wesley Burns....... Managing Director and Executive Committee Member,
February 1987 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc.; Member of PIMCO Partners LLC.
Chris P. Dialynas......... Managing Director, PIMCO; Managing Director and
July 1983 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Mohamed A. El-Erian....... Managing Director, PIMCO; Managing Director and
May 1999 to Present Director, PIMCO Management, Inc.
William H. Gross.......... Managing Director, PIMCO; Managing Director and
June 1971 to Present Director, PIMCO Management, Inc.; Director and Vice
President, StocksPLUS Management, Inc.; Member of
Management Board, PIMCO Advisors L.P.; Member of
PIMCO Partners LLC.
John L. Hague............. Managing Director and Executive Committee Member,
September 1987 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc; Member of PIMCO Partners LLC.
Pasi M. Hamalainen........ Managing Director, PIMCO; Managing Director and
January 1994 to Present Director, PIMCO Management, Inc.
Brent R. Harris........... Managing Director and Executive Committee Member,
June 1985 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of Management
Board and Executive Committee, PIMCO Advisors L.P.;
Member of PIMCO Partners LLC.
Brent L. Holden........... Managing Director, PIMCO; Managing Director and
December 1989 to Present Director, PIMCO Management, Inc.
Margaret E. Isberg........ Managing Director, PIMCO; Managing Director and
August 1983 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
John S. Loftus............ Managing Director, PIMCO; Managing Director and
August 1986 to Present Director, PIMCO Management, Inc.
B-1
Name
Length of Service with
PIMCO Position and Principal Occupation
---------------------- ---------------------------------
Dean S. Meiling........... Managing Director, PIMCO; Managing Director and
December 1976 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
James F. Muzzy............ Managing Director and Executive Committee Member,
September 1971 to Present PIMCO; Managing Director and Director, PIMCO
Management, Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Member of PIMCO
Partners LLC.
William F. Podlich, III... Managing Director, PIMCO; Managing Director and
June 1966 to Present Director, PIMCO Management, Inc.; Member of
Management Board, PIMCO Advisors L.P.; Member of
PIMCO Partners LLC.
William C. Powers......... Managing Director, PIMCO; Managing Director and
January 1991 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Ernest L. Schmider........ Managing Director and Secretary, PIMCO; Managing
March 1994 to Present Director, Director and Secretary, PIMCO Management,
Inc.; Director and Assistant Secretary, StocksPLUS
Management, Inc.; Senior Vice President, PIMCO
Advisors, L.P.; Secretary, PIMCO Partners LLC.
Lee R. Thomas............. Managing Director, PIMCO; Managing Director and
April 1995 to Present Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Benjamin L. Trosky........ Managing Director, PIMCO; Managing Director and
October 1990 to Present Director, PIMCO Management, Inc.; Member of
Management Board, PIMCO Advisors L.P.; Member of
PIMCO Partners LLC.
B-2
The following are the 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.
Length of Principal Occupation(s)
Service with Position with During the Past Five
Name and Age the Fund the Company Years
------------ ------------ --------------------- ------------------------
William C. Powers......... 7/93-Present Senior Vice President Managing Director,
Age 41 PIMCO.
Jeffrey M. Sargent........ 6/93-Present Senior Vice President Vice President and
Age 36 Manager of Investment
Operations Shareholder
Services, PIMCO; Senior
Vice President, PIMCO
Funds: Pacific
Investment Management
Series and PIMCO
Variable Insurance
Trust; Vice President,
PIMCO Funds: Multi-
Manager Series.
Benjamin L. Trosky........ 7/93-Present Senior Vice President Managing Director,
Age 39 PIMCO. Formerly
Executive Vice
President, PIMCO.
Henrik P. Larsen.......... 2/99-Present Vice President Manager, Fund
Age 29 Administration, PIMCO;
Vice President, PIMCO
Funds: Pacific
Investment Management
Series and PIMCO
Variable Insurance
Trust. Formerly
Supervisor, PIMCO.
William S. Thompson, Jr... 7/93-Present Vice President Chief Executive Officer
Age 54 and Managing Director,
PIMCO; Senior Vice
President, PIMCO
Variable Insurance
Trust; Vice President,
PIMCO Funds: Pacific
Investment Management
Series.
John P. Hardaway.......... 6/93-Present Treasurer Senior Vice President
Age 42 and Manager of
Investment Operations
Accounting, PIMCO;
Treasurer, PIMCO Funds:
Pacific Investment
Management Series, PIMCO
Funds: Multi-Manager
Series and PIMCO
Variable Insurance
Trust. Formerly Vice
President, PIMCO.
Garlin G. Flynn........... 8/95-Present Secretary Specialist, PIMCO;
Age 53 Secretary, PIMCO Funds:
Pacific Investment
Management Series 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.
B-3
Length of Principal Occupation(s)
Service with Position with During the Past Five
Name and Age the Fund the Company Years
------------ ------------ ------------------- ------------------------
Joseph D. Hattesohl... 2/95-Present Assistant Treasurer Vice President and
Age 35 Manager of Financial
Reporting and Taxation,
PIMCO; Assistant
Treasurer, PIMCO Funds:
Multi-Manager Series,
PIMCO Funds: Pacific
Investment Management
Series and PIMCO
Variable Insurance
Trust. Formerly, Manager
of Fund Taxation, PIMCO;
Director of Financial
Reporting, Carl I. Brown
& Co.
Michael J. Willemsen.. 2/95-Present Assistant Secretary Manager, PIMCO;
Age 39 Assistant Secretary,
PIMCO Funds: Pacific
Investment Management
Series and PIMCO
Variable Insurance
Trust. Formerly Project
Lead, PIMCO.
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.
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
PIMCO FUNDS:
PACIFC INVESTMENT
MANAGEMENT SERIES
Money Market Fund......... Annual rate of 0.15% of average
daily net assets $ 560,587,313
Short-Term Fund........... Annual rate of 0.25% of average
daily net assets 633,444,433
Low Duration Fund......... Annual rate of 0.25% of average
daily net assets 4,612,199,034
Low Duration Fund II...... Annual rate of 0.25% of average
daily net assets 465,267,930
Low Duration Fund III..... Annual rate of 0.25% of average
daily net assets 25,361,958
Low Duration Mortgage
Fund..................... Annual rate of 0.25% of average
daily net assets 4,157,459
Moderate Duration Fund.... Annual rate of 0.25% of average
daily net assets 331,844,959
Real Return Bond Fund..... Annual rate of 0.25% of average
daily net assets 117,197,203
Total Return Fund......... Annual rate of 0.25% of average
daily net assets 29,253,953,837
Total Return Fund II...... Annual rate of 0.25% of average
daily net assets 1,196,259,061
Total Return Fund III..... Annual rate of 0.25% of average
daily net assets 593,041,215
Total Return Mortgage
Fund..................... Annual rate of 0.25% of average
daily net assets 4,011,669
High Yield Fund........... Annual rate of 0.25% of average
daily net assets 3,547,311,498
Long-Term US Government
Fund..................... Annual rate of 0.25% of average
daily net assets 367,846,155
Short Duration Municipal
Income Fund.............. Annual rate of 0.20% of average
daily net assets 10,504,759
Municipal Bond Fund....... Annual rate of 0.25% of average
daily net assets 55,389,116
California Intermediate
Municipal Bond Fund...... Annual rate of 0.25% of average
daily net assets 3,123,929
New York Intermediate
Municipal Bond Fund...... Annual rate of 0.25% of average
daily net assets 3,011,706
Global Bond Fund.......... Annual rate of 0.25% of average
daily net assets 289,770,362
Global Bond Fund II....... Annual rate of 0.25% of average
daily net assets 42,715,021
Foreign Bond Fund......... Annual rate of 0.25% of average
daily net assets 577,679,632
International Bond Fund... Annual rate of 0.25% of average
daily net assets 980,127,949
Emerging Markets Bond
Fund..................... Annual rate of 0.45% of average
daily net assets 17,340,723
B-4
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
Emerging Markets Bond
Fund II.................. Annual rate of 0.45% of average
daily net assets $ 217,093,611
Strategic Balanced Fund... Annual rate of 0.40% of average
daily net assets 167,190,375
Convertible Bond Fund..... Annual rate of 0.40% of average
daily net assets 753,114
StocksPLUS Fund........... Annual rate of 0.40% of average
daily net assets 1,385,857,599
PIMCO VARIABLE INSURANCE
TRUST
Money Market Portfolio.... Annual rate of 0.30% of average
daily net assets $ N/A
Short-Term Bond
Portfolio................ Annual rate of 0.35% of average
daily net assets N/A
Low Duration Bond
Portfolio................ Annual rate of 0.40% of average
daily net assets 5,098,362
Total Return Bond
Portfolio................ Annual rate of 0.40% of average
daily net assets 3,208,009
High Yield Bond
Portfolio................ Annual rate of 0.50% of average
daily net assets 131,180,580
Foreign Bond Portfolio.... Annual rate of 0.60% of average
daily net assets 5,031,932
StocksPLUS Growth & Income
Portfolio................ Annual rate of 0.40% of average
daily net assets 169,524,872
Long-Term US Government
Bond Portfolio........... Annual rate of 0.40% of average
daily net assets 6,906,274
Total Return II
Portfolio................ Annual rate of 0.40% of average
daily net assets 5,099,211
Real Return Portfolio..... Annual rate of 0.40% of average
daily net assets N/A
FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
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 $ 622,475,175
daily 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
PACIFIC SELECT FUND
Managed Bond Series....... Annual rate of 0.50% of average $1,053,024,408
daily net assets on first $25
million; 0.375% on next $25
million; 0.25% on remaining assets
B-5
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
Government Securities
Series................... Annual rate of 0.50% of average $ 397,265,729
daily 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 net assets $ 113,010,679
Total Return Bond
Portfolio................ Annual rate of 0.25% of average
daily net assets 66,889,600
Total Return Bond Fund.... Annual rate of 0.25% of average Not Open As
daily net assets of 9/30/99
AMERICAN SKANDIA TRUST
Total Return Bond
Portfolio................ Annual rate of 0.30% of average $1,035,861,299
daily 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 421,807,622
daily 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 net assets 170,012,653
FREMONT MUTUAL FUNDS, INC.
Total Return Fund......... Annual rate of 0.25% of average $ 187,068,687
daily net assets paid quarterly
Global Bond Fund.......... Annual rate of 0.30% of average 24,283,647
daily net assets paid quarterly
PAINEWEBBER MANAGED
INVESTMENTS TRUST
Low Duration US Government
Income Fund.............. Annual rate of 0.25% of average
daily net assets $ 122,967,595
PAINEWEBBER SERIES TRUST
Strategic Fixed Income.... Annual rate of 0.25% of average
daily net assets $ 7,298,286
PAINEWEBBER MANAGED
ACCOUNTS SERVICES
PORTFOLIO TRUST
PACE Government Securities
Fixed Income............. Annual rate of 0.25% of average
daily net assets $ 197,767,164
PACE Strategic Fixed
Income Investments....... Annual rate of 0.25% of average
daily net assets 230,222,525
JACKSON NATIONAL LIFE
SERIES TRUST
JNL/PIMCO Total Return
Bond Series ............. Annual rate of 0.25% of average $ 9,753,810
daily net assets excluding the
value of client contributed
capital
B-6
Approximate
Name of Fund Advisory Fee Rate Assets
------------ ----------------- -----------
FORWARD GLOBAL FUND
Forward Global Fund....... Annual rate of 0.35% of average $ 30,263,618
daily net assets on amounts under
$200 million and 0.30% on amounts
over $200 million
PRUDENTIAL INVESTMENTS
FUND MANAGEMENT LLC
Prudential Diversified
Moderate Growth.......... Annual rate of 0.25% of average $ 23,259,990
daily net assets computed daily and
paid monthly
Prudential Diversified
Conservative Growth...... Annual rate of 0.25% of average 28,956,072
daily net assets computed daily and
paid monthly
Prudential Diversified
Conservative Portfolio... Annual rate of 0.25% of average 30,034,833
daily net assets computed daily and
paid monthly
MANULIFE
Manulife Global Bond
Trust.................... Annual rate of 0.375% on first $161,197,318
$50 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
SALOMON SMITH
BARNEY/CONSULTING GROUPS
CAPITAL MARKET FUND
Intermediate Fixed Income
Investment Portfolio..... Annual rate of 0.25%, multiplied by $270,423,858
a fraction, the numerator of which
is the average daily value of
allocated assets and the denominator
of which is the average daily value
of the Portfolio's total assets
computed daily
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-7
APPENDIX C
PIMCO currently receives a monthly investment management 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 December 31, 1999, the aggregate amount of
management and administrative fees paid by the Fund was as follows:
Administrative
Investment Services Aggregate Aggregate
Management Agreement Fee Management Administrative
Fee Rate Rate Fees* Fees*
---------- -------------- ---------- --------------
0.725% 0.275% $1,061,995 $433,173
- --------
* Unaudited
C-1
PST01-PS-00
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
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PIMCO COMMERCIAL MORTGAGE SECURITIES TRUST, INC.
- -------------------------------------------------------------------------------
Mark box at right if an address change or comment has been noted on the [_]
reverse side of this card.
CONTROL NUMBER:
Please be sure to sign and date this Proxy. Date
- -------------------------------------------------------------------------------
___________ Shareholder sign here __________ Co-owner sign here _______________
The Board of Directors recommends that you vote FOR each of the
Nominees and FOR each of the following proposals:
1. To elect directors to the Board of Directors
of the Fund.
With-
For hold For
All Auth- All
Nominees ority Except
(01) R. Wesley Burns [_] [_] [_]
(02) E. Philip Cannon [_] [_] [_]
(03) J. Michael Hagan [_] [_] [_]
(04) Brent R. Harris [_] [_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"For All Except" box and strike a line through that nominee's name in the list
above.
For Against Abstain
2. To approve a new investment management [_] [_] [_]
agreement.
3. To ratify selection of Ernst & Young LLP [_] [_] [_]
as independent public accountant of the Fund
for its fiscal year ending December 31, 2000.
4. To transact such other business as may properly come before the Meeting.
RECORD DATE SHARES:
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[PST01 - PIMCO COMMERCIAL MORTGAGE SECURITIES TRUST, INC.] [FILE NAME:
PST011.ELX]
[VERSION - 3] [1/12/00 (1/5/00)]
PROXY PIMCO COMMERCIAL MORTGAGE SECURITIES TRUST, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - MARCH 3, 2000
The undersigned hereby appoints R. Wesley Burns, Jeffrey M. Sargent, Henrik P.
Larsen and Garlin G. Flynn 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 10:30 a.m. 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 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.
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
- -------------------------------------------------------------------------------
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- -----------------------------------
- --------------------------------- -----------------------------------
- --------------------------------- -----------------------------------
[PST01 - PIMCO COMMERCIAL MORTGAGE SECURITIES TRUST, INC.] [FILE NAME:
PST012.ELX]
[VERSION - 1] [1/5/00 (1/5/00)]