PIMCO VARIABLE INSURANCE TRUST, 497, 1999-05-03

PIMCO VARIABLE INSURANCE TRUST
497, 1999-05-03

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<PAGE>

PIMCO
Variable
Insurance
Trust

Short Duration Bond Portfolios
Money Market Portfolio
Short-Term Bond Portfolio
Low Duration Bond Portfolio

Intermediate Duration Bond Portfolios
Real Return Bond Portfolio
Total Return Bond Portfolio
Total Return Bond Portfolio II
High Yield Bond Portfolio

Long Duration Bond Portfolios
Long-Term U.S. Government Bond Portfolio

International Bond Portfolios
Global Bond Portfolio
Foreign Bond Portfolio
Emerging Markets Bond Portfolio

Stock and Bond Portfolios
Strategic Balanced Portfolio

Stock Portfolios
StocksPLUS Growth and Income Portfolio
Equity Income Portfolio
Capital Appreciation Portfolio
Mid-Cap Growth Portfolio
Small-Cap Value Portfolio

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO Variable Insurance Trust

Prospectus

April 30, 1999

PIMCO Variable Insurance Trust (the "Trust"), consisting of seventeen separate
investment portfolios (the "Portfolios"), is designed to provide access to the
professional investment management services offered by Pacific Investment Man-
agement Company ("PIMCO") and PIMCO Advisors L.P. ("PIMCO Advisors")(each an
"Adviser"). Each Portfolio has its own investment objective and strategies and
its own risk/reward profile, which are described in this Prospectus. The in-
vestments made by the Portfolios at any given time are not expected to be the
same as those made by other mutual funds for which PIMCO or PIMCO Advisors
acts as investment adviser, including mutual funds with investment objectives
and strategies similar to those of the Portfolios. Accordingly, the perfor-
mance of the Portfolios can be expected to vary from that of the other mutual
funds.

This Prospectus gives vital information you should know before investing in
the Portfolios. For your own benefit and protection, please read it before you
invest and keep it for future reference.

Shares of the Portfolios currently are sold to segregated asset accounts
("Separate Accounts") of insurance companies which fund variable annuity con-
tracts and variable life insurance policies ("Variable Contracts"). Assets in
the Separate Account are invested in shares of the Portfolios in accordance
with allocation instructions received from owners of the Variable Contracts
("Variable Contract Owners"). Variable Contract Owners do not deal directly
with the Portfolios to purchase or redeem shares. The allocation rights of
Variable Contract Owners are described in the accompanying Separate Account
prospectus. Shares of the Portfolios also may be sold to qualified pension and
retirement plans outside of the separate account context.

This Prospectus should be read in conjunction with the prospectus of the
Separate Account. Both prospectuses should be read carefully and retained for
future reference.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW.................................................................... 3

Portfolios at a Glance.................................................... 3
Investment Strategies and Risk Factors.................................... 4
Fixed Income Instruments.................................................. 5
Ratings of Debt Securities................................................ 5

DESCRIPTION OF PORTFOLIOS................................................... 7

PIMCO Money Market Portfolio.............................................. 7
PIMCO Short-Term Bond Portfolio........................................... 9
PIMCO Low Duration Bond Portfolio......................................... 10
PIMCO Real Return Bond Portfolio.......................................... 11
PIMCO Total Return Bond Portfolio......................................... 13
PIMCO Total Return Bond Portfolio II...................................... 15
PIMCO High Yield Bond Portfolio........................................... 17
PIMCO Long-Term U.S. Government Bond Portfolio............................ 19
PIMCO Global Bond Portfolio............................................... 21
PIMCO Foreign Bond Portfolio.............................................. 23
PIMCO Emerging Markets Bond Portfolio..................................... 25
PIMCO Strategic Balanced Portfolio........................................ 27
PIMCO StocksPLUS Growth and Income Portfolio.............................. 29
PIMCO Equity Income Portfolio............................................. 31
PIMCO Capital Appreciation Portfolio...................................... 33
PIMCO Mid-Cap Growth Portfolio............................................ 35
PIMCO Small-Cap Value Portfolio........................................... 37

MANAGEMENT OF THE TRUST..................................................... 39

Advisers and Administrator................................................ 39
Advisory and Administrative Fees.......................................... 42
Portfolio Transactions.................................................... 42

PURCHASE OF SHARES.......................................................... 43

REDEMPTION OF SHARES........................................................ 43

NET ASSET VALUE............................................................. 44

TAXES....................................................................... 44

RISK FACTORS AND SPECIAL CONSIDERATIONS..................................... 45

FINANCIAL HIGHLIGHTS........................................................ 51

OTHER INFORMATION........................................................... 52

Portfolio Names........................................................... 52
Total Return and Real Return.............................................. 52
Performance Information of Similar Funds.................................. 53

APPENDIX A.................................................................. A-1

APPENDIX B.................................................................. B-1
</TABLE>
Prospectus
2
<PAGE>

OVERVIEW
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------------
Portfolios at a Glance

Short Duration
Bond Portfolios Primary Investments Duration Credit Quality(1)
- --------------- ------------------------------------------ -------------------------- ---------------------------------
<S> <C> <C> <C>
Money Market Money market instruments (less than or =)90 days Min 95% Aaa or
dollar-weighted Prime 1; (less than or =)5% Aa or
average maturity Prime 2
Short-Term Bond Money market instruments and short 0-1 year B to Aaa; max 10%
maturity fixed income securities below Baa
Low Duration Short and intermediate maturity fixed 1-3 years B to Aaa; max 10%
Bond income securities below Baa
<CAPTION>
Intermediate
Duration Bond
Portfolios
- -------------
<S> <C> <C> <C>
Real Return Bond Inflation-indexed fixed income securities N/A, but see B to Aaa; max 10%
Description of Portfolio below Baa
Total Return Intermediate maturity fixed income 3-6 years B to Aaa; max 10%
Bond securities below Baa
Total Return Same as Total Return Bond, except 3-6 years Baa to Aaa
Bond II quality and foreign issuer restrictions
High Yield Bond Higher yielding fixed income securities 2-6 years B to Aaa; min 65%
below Baa
<CAPTION>
Long Duration
Bond Portfolios
- ---------------
<S> <C> <C> <C>
Long-Term U.S. Long-term maturity fixed income securities (greater than or =)8 years A to Aaa
Government
<CAPTION>
International
Bond Portfolios
- ---------------
<S> <C> <C> <C>
Global Bond Intermediate maturity U.S. and foreign 3-7 years B to Aaa; max 10%
fixed income securities below Baa
Foreign Bond Intermediate maturity hedged foreign 3-7 years B to Aaa; max 10%
fixed income securities below Baa
Emerging Markets Emerging market fixed income 0-8 years B to Aaa
Bond securities
<CAPTION>
Stock and Bond
Portfolios
- --------------
<S> <C> <C> <C>
Strategic Same as Total Return and StocksPLUS 0-6 years B to Aaa; max 10%
Balanced Growth and Income Portfolios according to below Baa
PIMCO's allocation strategy
<CAPTION>
Stock Portfolios
- ----------------
<S> <C> <C> <C>
StocksPLUS S&P 500 stock index derivatives backed 0-1 year B to Aaa; max 10%
Growth and by a portfolio of short-term fixed income below Baa
Income securities
<CAPTION>
Short Duration
Bond Portfolios Foreign(2)
- --------------- ----------------------
<S> <C>
Money Market 0%
Short-Term Bond 0-5%
Low Duration 0-20%
Bond
<CAPTION>
Intermediate
Duration Bond
Portfolios
- -------------
<S> <C>
Real Return Bond 0-35%
Total Return 0-20%
Bond
Total Return 0%
Bond II
High Yield Bond 0%
<CAPTION>
Long Duration
Bond Portfolios
- ---------------
<S> <C>
Long-Term U.S. 0%
Government
<CAPTION>
International
Bond Portfolios
- ---------------
<S> <C>
Global Bond 25-75%
Foreign Bond (greater than or =)85%
Emerging Markets (greater than or =)80%
Bond
<CAPTION>
Stock and Bond
Portfolios
- --------------
<S> <C>
Strategic 0-20%
Balanced
<CAPTION>
Stock Portfolios
- ----------------
<S> <C>
StocksPLUS 0-20%
Growth and
Income
</TABLE>
--------
(1) As rated by Moody's Investors Service, Inc., or if unrated, determined
to be of comparable quality. For specific information concerning the
credit quality of the securities held by each Portfolio, see that
Portfolio's description of Main Investment Strategies.

(2) Percentage limitations relate to foreign currency-denominated
securities for all Portfolios except the Global Bond, Foreign Bond and
Emerging Markets Bond Portfolios. Percentage limitations for these
three Portfolios relate to securities of foreign issuers, denominated
in any currency. Each Portfolio (except the Total Return Bond II and
Long-Term U.S. Government Portfolios) may invest beyond these limits
in U.S. dollar-denominated securities of foreign issuers.
- --------------------------------------------------------------------------------

3 PIMCO Variable Insurance Trust

<PAGE>

OVERVIEW (continued)
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------
Portfolios at a Glance (continued)
Approximate
Approximate Number of
Capitalization of Securities
Stock Portfolios Primary Investments Investments Held Foreign(2)
- ---------------- ----------------------------------------------- ---------------------- ----------- ----------
<S> <C> <C> <C> <C>
Equity Income Common stocks with below-average price > $200 million 50 0%
to earnings ratios and higher dividend yields
relative to their industry groups

Capital Appreciation Common stocks of companies that have > $1 billion 60-100 0%
improving fundamentals and whose stock
is reasonably valued

Mid-Cap Growth Common stocks of middle capitalization > $500 million 60-100 0%
companies that have improving fundamentals
and whose stock is reasonably valued

Small-Cap Value Common stocks of companies with $50 million-$1 billion 100 0%
below-average price to earnings ratios relative
to their industry groups
</TABLE>
- --------
(2) Percentage limitations relate to foreign currency-denominated
securities for all Portfolios except the Global Bond, Foreign Bond and
Emerging Markets Bond Portfolios. Percentage limitations for these
three Portfolios relate to securities of foreign issuers, denominated
in any currency. Each Portfolio (except the Total Return Bond II and
Long-Term U.S. Government Portfolios) may invest beyond these limits
in U.S. dollar-denominated securities of foreign issuers.

Investment Strategies and Risk Factors

Investment Strategies. Each Portfolio has specific strategies that it may use
to pursue its investment objective, and specific types of securities in which
the Portfolio may invest, which are described under the heading "Main Invest-
ment Strategies" in the Description of Portfolios. Percentage limitations de-
scribed in this Prospectus apply at the time of investment, and may vary with
fluctuations in the value of a Portfolio's investment portfolio.

Risk Factors. The major risks associated with investing in each Portfolio are
described under the heading "Risk Factors" in the Description of Portfolios.
Please be sure to read all risk disclosures carefully before investing. This
Prospectus does not describe all of the risks of every security or technique
that the Portfolios may use. For such information, please refer to the State-
ment of Additional Information.

- --------------------------------------------------------------------------------
Prospectus 4
<PAGE>

OVERVIEW (continued)

- -------------------------------------------------------------------------------

Fixed Income Instruments

The "Fixed Income Portfolios" are the Money Market, Short-Term Bond, Low Du-
ration Bond, Real Return Bond, Total Return Bond, Total Return Bond II, High
Yield Bond, Long-Term U.S. Government, Global Bond, Foreign Bond and Emerging
Markets Bond Portfolios. Each of the Fixed Income Portfolios differs from the
others primarily in the length of the Portfolio's duration or the proportion of
its investments in certain types of fixed income securities.

"Fixed Income Instruments" as used in this Prospectus means:

. securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government securities");

. corporate debt securities, including convertible securities and
corporate commercial paper;

. mortgage-backed and other asset-backed securities;

. inflation-indexed bonds issued both by governments and corporations;

. structured notes, including hybrid or "indexed" securities, catastrophe
bonds and loan participations;

. delayed funding loans and revolving credit facilities;

. bank certificates of deposit, fixed time deposits and bankers'
acceptances;

. repurchase agreements and reverse repurchase agreements;

. obligations of foreign governments or their subdivisions, agencies and
instrumentalities; and

. obligations of international agencies or supranational entities.

Fixed Income Instruments may have fixed, variable, or floating rates of in-
terest, including rates of interest that vary inversely at a multiple of a des-
ignated or floating rate, or that vary according to changes in relative values
of currencies. Each of the Fixed Income Portfolios may hold different percent-
ages of its assets in these various types of securities.

Ratings of Debt Securities

In this Prospectus, references are made to the ratings of Fixed Income In-
struments. To aid in your understanding of the use of these terms, the follow-
ing is a brief description of the ratings categories applicable to such securi-
ties. For a further description of ratings, see "Appendix B--Description of Se-
curities Ratings."

High Quality Debt Securities are those receiving ratings from at least one
nationally recognized statistical rating organization ("NRSRO"), such as Stan-
dard & Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc.
("Moody's"), in one of the two highest rating categories (the highest category
for commercial paper) or, if unrated by any NRSRO, deemed comparable by PIMCO.

Investment Grade Debt Securities are those receiving ratings from at least
one NRSRO in one of the four highest rating categories or, if unrated by any
NRSRO, deemed comparable by PIMCO.

Lower-Rated, High Yield Securities ("'High Yield Bonds") are those rated
lower than Baa by Moody's or BBB by S&P and comparable securities. High yield
securities, which are commonly known as "junk bonds," are considered to be pre-
dominately speculative with respect to the issuer's ability to pay interest and
repay principal. For more information on the risks of investing in high yield
securities, see "High Yield Securities ("Junk Bonds")" in "Risk Factors and
Special Considerations."

- --------------------------------------------------------------------------------
5 PIMCO Variable Insurance Trust

<PAGE>

(This page intentionally left blank)

Prospectus
6
<PAGE>

DESCRIPTION OF PORTFOLIOS

PIMCO MONEY MARKET PORTFOLIO

Investment Objective

The Money Market Portfolio seeks to obtain maximum current income consistent
with preservation of capital and daily liquidity. The Portfolio also attempts
to maintain a stable net asset value of $1.00 per share, although there is no
assurance that it will be successful in doing so.

Main Investment Strategies

The Money Market Portfolio invests at least 95% of its total assets in a di-
versified portfolio of money market securities that are in the highest rating
category for short-term obligations. The Portfolio also may invest up to 5% of
its total assets in money market securities that are in the second-highest
rating category for short-term obligations. The Portfolio's investments in se-
curities will be limited to U.S. dollar-denominated securities that mature in
397 days or less from the date of purchase. The dollar-weighted average port-
folio maturity of the Portfolio will not exceed 90 days.

The Portfolio may invest in the following: obligations of the U.S. Govern-
ment (including its agencies and instrumentalities); short-term corporate debt
securities of domestic and foreign corporations; obligations of domestic and
foreign commercial banks, savings banks, and savings and loan associations;
and commercial paper. The Portfolio may invest more than 25% of its total as-
sets in securities or obligations issued by U.S. banks. The Portfolio may lend
its portfolio securities to brokers, dealers and other financial institutions
in order to earn income.

The Portfolio's investments will comply with applicable rules governing the
quality, maturity and diversification of securities held by money market
funds.

Risk Factors

An investment in the Money Market Portfolio is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency. Al-
though the Portfolio seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Portfolio.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Money Market
Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.30 %
Administrative Fee 0.20 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.52 %
Expense Reduction* (0.02)%
-------
Net Portfolio Operating
Expenses 0.50 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.50% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.
PIMCO Variable Insurance Trust
7
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$51 $ 160
</TABLE>
Prospectus
8
<PAGE>

PIMCO SHORT-TERM BOND PORTFOLIO

Investment Objective

The Short-Term Bond Portfolio seeks to obtain maximum current income consis-
tent with preservation of capital and daily liquidity.

Main Investment Strategies

The Short-Term Bond Portfolio invests under normal circumstances at least 65%
of its assets in a diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Portfolio will normally not
exceed one year. See "Appendix A--Description of Duration."

The Portfolio may invest up to 10% of its assets in high yield bonds rated B
or higher by Moody's or S&P, or, if unrated, determined by the Adviser to be of
comparable quality. The Portfolio may invest up to 5% of its assets in securi-
ties denominated in foreign currencies, and may invest beyond this limit in
U.S. dollar-denominated securities of foreign issuers.

The Portfolio may invest all of its assets in derivative instruments, such as
options, futures contracts and swap agreements, or in mortgage- or asset-backed
securities. The Portfolio may lend its portfolio securities to brokers, dealers
and other financial institutions to earn income. The Portfolio may enter into a
series of purchase and sale contracts or use other investment techniques to ob-
tain market exposure to the securities in which it primarily invests.

Risk Factors

An investment in the Short-Term Bond Portfolio is subject to investment risk,
including possible loss of the principal amount invested. The Portfolio is
subject to interest rate risk. Generally, the value of fixed income securities
will change inversely with changes in interest rates. As interest rates rise,
market value tends to decrease. This risk will be greater for long-term
securities than for short-term securities. Derivative instruments may be
particularly sensitive to changes in prevailing interest rates. The Portfolio
also is subject to credit risk, which is the possibility that an issuer of a
security, or a counterparty to a derivative contract, will default or become
unable to meet a financial obligation. High yield bonds carry a high degree of
credit risk. Securities of foreign issuers may be subject to additional risk
factors, including foreign currency exchange rate fluctuations, adverse
regulatory conditions, foreign taxes, or political or economic uncertainty. For
a further explanation, see "Risk Factors and Special Considerations," which you
should read carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other govern-
ment agency.

Performance

Performance information for this Portfolio is not provided because this Port-
folio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Short-Term Bond
Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.35 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.62 %
Expense Reduction* (0.02)%
-------
Net Portfolio Operating
Expenses 0.60 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.60% of average daily net as-
sets. "Other Expenses" are based on estimates for the current fiscal year.

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$61 $ 192
</TABLE>
PIMCO Variable Insurance Trust
9
<PAGE>

PIMCO LOW DURATION BOND PORTFOLIO

Investment Objective

The Low Duration Bond Portfolio seeks to maximize total return, consistent
with preservation of capital and prudent investment management.

Main Investment Strategies

The Low Duration Bond Portfolio invests under normal circumstances at least
65% of its assets in a diversified portfolio of Fixed Income Instruments of va-
rying maturities. The average portfolio duration of this Portfolio will nor-
mally vary within a one- to three-year time frame based on the Adviser's fore-
cast for interest rates. See "Appendix A--Description of Duration."

The Portfolio may invest up to 10% of its assets in high yield bonds rated B
or higher by Moody's or S&P, or, if unrated, determined by the Adviser to be of
comparable quality. The Portfolio may invest up to 20% of its assets in securi-
ties denominated in foreign currencies, and may invest beyond this limit in
U.S. dollar-denominated securities of foreign issuers. The Portfolio will hedge
at least 75% of its exposure to foreign currency.

The Portfolio may invest all of its assets in derivative instruments, such as
options, futures contracts or swap agreements, or in mortgage- or asset-backed
securities. The Portfolio may lend its portfolio securities to brokers, dealers
and other financial institutions to earn income. The Portfolio may enter into a
series of purchase and sale contracts or use other investment techniques to ob-
tain market exposure to the securities in which it primarily invests. The total
rate of return for this Portfolio is expected to exhibit less volatility than
that of the Total Return Bond Portfolio (discussed below) because its duration
will be shorter.

Risk Factors

An investment in the Low Duration Bond Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to interest rate risk. Generally, the value of fixed income securi-
ties will change inversely with changes in interest rates. As interest rates
rise, market value tends to decrease. This risk will be greater for long-term
securities than for short-term securities. Derivative instruments may be par-
ticularly sensitive to changes in prevailing interest rates. The Portfolio also
is subject to credit risk, which is the possibility that an issuer of a securi-
ty, or a counterparty to a derivative contract, will default or become unable
to meet a financial obligation. High yield bonds carry a high degree of credit
risk. Securities of foreign issuers may be subject to additional risk factors,
including foreign currency exchange rate fluctuations, adverse regulatory con-
ditions, foreign taxes, or political or economic uncertainty. For a further ex-
planation, see "Risk Factors and Special Considerations," which you should read
carefully before investing.

Performance

Performance information for this Portfolio is not provided because it has not
been in operation for a full calendar year.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Low Duration
Bond Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.40 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.67 %
Expense Reduction* (0.02)%
-------
Net Portfolio Operating
Expenses 0.65 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.65% of average daily net as-
sets. "Other Expenses" are based on estimates for the current fiscal year.

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
Prospectus
10
<PAGE>

PIMCO REAL RETURN BOND PORTFOLIO

Investment Objective

The Real Return Bond Portfolio seeks to realize maximum real return, consis-
tent with the preservation of real capital and prudent investment management.

Main Investment Strategies

The Real Return Bond Portfolio invests under normal circumstances at least
65% of its net assets in inflation-indexed bonds. Inflation-indexed bonds are
Fixed Income Instruments whose principal value is periodically adjusted ac-
cording to the rate of inflation. Such bonds generally are issued at an inter-
est rate lower than non-inflation related bonds, but are expected to retain
their value against inflation over time.

Because of the unique features of inflation-indexed bonds, the Adviser uses
a modified form of duration for the Portfolio ("modified real duration"). Al-
though there is no limit on the modified real duration of the Portfolio, it is
expected that the average modified real duration of the Portfolio will nor-
mally vary approximately with the range of the average modified real duration
of all inflation-indexed bonds issued by the U.S. Treasury in the aggregate.

Portfolio securities may be issued by governments and their agencies or in-
strumentalities, and corporations. The Portfolio may invest up to 10% of its
assets in high yield bonds rated B or higher by Moody's or S&P, or, if
unrated, determined by the Adviser to be of comparable quality. The Portfolio
may invest assets not invested in inflation-indexed bonds in other types of
Fixed Income Instruments. The Portfolio may invest up to 35% of its assets in
securities denominated in foreign currencies, and may invest beyond this limit
in U.S. dollar-denominated securities of foreign issuers. The Portfolio will
hedge at least 75% of its exposure to foreign currency.

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may en-
ter into a series of purchase and sale contracts or use other investment tech-
niques to obtain market exposure to the securities in which it primarily in-
vests.

Risk Factors

An investment in the Real Return Bond Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is "non-diversified," meaning that it may invest a greater percentage of its
assets in the securities of one issuer than many of the other Portfolios. Be-
cause it is "non-diversified," the Portfolio may be more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
diversified portfolio might be.

The Portfolio is subject to deflation risk. If the periodic adjustment rate
measuring inflation falls, the principal value of inflation-indexed bonds will
be adjusted downward, and consequently the interest payable on these securi-
ties will be reduced. The Portfolio is also subject to real interest rate
risk. If nominal interest rates increase at a faster rate than inflation, real
interest rates may rise, leading to a decrease in value of inflation-indexed
bonds. Short-term increases in inflation may lead to a decline in value. The
Portfolio also is subject to credit risk, which is the possibility that an is-
suer of a security, or a counterparty to a derivative contract, will default
or become unable to meet a financial obligation. High yield bonds carry a high
degree of credit risk. Securities of foreign issuers may be subject to addi-
tional risk factors, including foreign currency exchange rate fluctuations,
adverse regulatory conditions, foreign taxes, or political or economic uncer-
tainty. For a further explanation, see "Risk Factors and Special Considera-
tions," which you should read carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.
PIMCO Variable Insurance Trust
11
<PAGE>

Performance

Performance information for this Portfolio is not provided because this Port-
folio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Real Return Bond
Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.65% of average daily net as-
sets. "Other Expenses" are based on estimates for the current fiscal year.

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
Prospectus
12
<PAGE>

PIMCO TOTAL RETURN BOND PORTFOLIO

Investment Objective

The Total Return Bond Portfolio seeks to maximize total return, consistent
with preservation of capital and prudent investment management.

Main Investment Strategies

The Total Return Bond Portfolio invests under normal circumstances at least
65% of its assets in a diversified portfolio of Fixed Income Instruments of va-
rying maturities. The average portfolio duration of this Portfolio will nor-
mally vary within a three- to six-year time frame based on the Adviser's fore-
cast for interest rates. See "Appendix A--Description of Duration." Portfolio
holdings will be concentrated in areas of the bond market (based on quality,
sector, coupon or maturity) which the Adviser believes to be relatively under-
valued.

The Portfolio may invest up to 10% of its assets in high yield bonds rated B
or higher by Moody's or, if unrated, determined by the Adviser to be of compa-
rable quality. The Portfolio also may invest up to 20% of its assets in securi-
ties denominated in foreign currencies, and may invest beyond this limit in
U.S. dollar-denominated securities of foreign issuers. The Portfolio will hedge
at least 75% of its exposure to foreign currency.

Risk Factors

An investment in the Total Return Bond Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to interest rate risk. Generally, the value of fixed income securi-
ties will change inversely with changes in interest rates. As interest rates
rise, market value tends to de-crease. This risk will be greater for long-term
securities than for short-term securities. Derivative instruments may be par-
ticularly sensitive to changes in prevailing interest rates. The Portfolio also
is subject to credit risk, which is the possibility that an issuer of a securi-
ty, or a counterparty to a derivative contract, will default or become unable
to meet a financial obligation. High yield bonds carry a high degree of credit
risk. Securities of foreign issuers may be subject to additional risk factors,
including foreign currency exchange rate fluctuations, adverse regulatory con-
ditions, foreign taxes, or political or economic uncertainty. For a further ex-
planation, see "Risk Factors and Special Considerations," which you should read
carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other govern-
ment agency.

Performance

The bar chart below shows the actual performance of the Portfolio from incep-
tion. It provides some indication of the variability of the Portfolio's returns
from year to year. The table below shows how the Portfolio's average annual re-
turns for the period indicated compare to those of the Portfolio's benchmark,
the Lehman Brothers Aggregate Bond Index. This is a widely recognized, unman-
aged market index representative of the U.S. taxable fixed income universe. The
bar chart and table do not reflect Variable Contract fees and expenses. If they
did, performance would have been lower. The Portfolio's past performance does
not necessarily indicate how the Portfolio will perform in the future.

[PERFORMANCE CHART APPEARS HERE]

Year to date total return through 3/31/99: -0.85%
Best quarter: Q3 '98 5.43%, worst quarter: Q1 '99 -0.85%

- --------------------------------------------------------------------------------
Average Annual Total Returns
for the year ended December 31, 1998

<TABLE>
<S> <C> <C> <C>
1 Year 5 Years 10 Years
Total Return Bond 8.61% N/A N/A
Lehman Brothers Aggregate Bond Index 8.69% N/A N/A
</TABLE>
PIMCO Variable Insurance Trust
13
<PAGE>

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Total Return
Bond Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.40 %
Administrative Fee 0.25 %
Other Expenses 0.10 %
------
Total Portfolio Operating
Expenses 0.75 %
Expense Reduction* (0.10)%
------
Net Portfolio Operating
Expenses 0.65 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.65% of average daily net as-
sets.

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$ 66 $ 208 $ 362 $ 810
</TABLE>
Prospectus
14
<PAGE>

PIMCO TOTAL RETURN BOND PORTFOLIO II

Investment Objective

The Total Return Bond Portfolio II seeks to maximize total return, consis-
tent with preservation of capital and prudent investment management.

Main Investment Strategies

The Total Return Bond Portfolio II invests under normal circumstances at
least 65% of its assets in a diversified portfolio of Fixed Income Instruments
of varying maturities. The average portfolio duration of this Portfolio will
normally vary within a three- to six-year time frame based on the Adviser's
forecast for interest rates. See "Appendix A--Description of Duration." Port-
folio holdings will be concentrated in areas of the bond market (based on
quality, sector, coupon or maturity) which the Adviser believes to be rela-
tively undervalued.

The Portfolio's investments in Fixed Income Instruments are limited to those
of U.S. dollar-denominated securities of domestic (U.S.) issuers that are
rated at least Baa by Moody's or BBB by S&P or, if unrated, determined by the
Adviser to be of comparable quality. The Portfolio may invest all of its as-
sets in derivative instruments, such as options, futures contracts or swap
agreements, or in mortgage- or asset-backed securities. The Portfolio may lend
its portfolio securities to brokers, dealers and other financial institutions
to earn income. The Portfolio may enter into a series of purchase and sale
contracts or use other investment techniques to obtain market exposure to the
securities in which it primarily invests.

Risk Factors

An investment in the Total Return Bond Portfolio II is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to interest rate risk. Generally, the value of fixed income securi-
ties will change inversely with changes in interest rates. As interest rates
rise, market value tends to decrease. This risk will be greater for long-term
securities than for short-term securities. Derivative instruments may be par-
ticularly sensitive to changes in prevailing interest rates. The Portfolio
also is subject to credit risk, which is the possibility that an issuer of a
security, or a counterparty to a derivative contract, will default or become
unable to meet a financial obligation. For a further explanation, see "Risk
Factors and Special Considerations," which you should read carefully before
investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Total Return
Bond Portfolio II.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.65% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.
PIMCO Variable Insurance Trust
15
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
Prospectus
16
<PAGE>

PIMCO HIGH YIELD BOND PORTFOLIO

Investment Objective

The High Yield Bond Portfolio seeks to maximize total return, consistent
with preservation of capital and prudent investment management.

Main Investment Strategies

The High Yield Bond Portfolio invests under normal circumstances at least
65% of its assets in a diversified portfolio of high yield bonds rated at
least B by Moody's or S&P, or, if unrated, determined by the Adviser to be of
comparable quality. The remainder of the Portfolio's assets may be invested in
investment grade Fixed Income Instruments. The average portfolio duration of
this Portfolio will normally vary within a two- to six-year time frame depend-
ing on the Adviser's view of the potential for total return offered by a par-
ticular duration strategy. See "Appendix A--Description of Duration." The
Portfolio may invest in securities of foreign issuers only if the securities
are U.S. dollar-denominated. The Portfolio also may engage in hedging strate-
gies involving equity options.

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may en-
ter into a series of purchase and sale contracts or use other investment tech-
niques to obtain market exposure to the securities in which it primarily in-
vests.

Risk Factors

An investment in the High Yield Bond Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to credit risk. Investments in high yield securities, while gener-
ally providing greater potential opportunity for capital appreciation and
higher yields than investments in higher rated securities, also entail greater
credit risk, including the possibility of default or bankruptcy of the issuer
of the securities. Risk of default or bankruptcy may be greater in periods of
economic uncertainty or recession. The Adviser seeks to reduce credit risk
through diversification, credit analysis and attention to current developments
and trends in both the economy and financial markets. For a further discussion
of the special risks of investing in lower rated securities, see "Risk Factors
and Special Considerations--High Yield Securities ("Junk Bonds")" and "Appen-
dix B--Description of Securities Ratings."

The Portfolio also is subject to interest rate risk. Generally, the value of
fixed income securities will change inversely with changes in interest rates.
As interest rates rise, market value tends to decrease. This risk will be
greater for long-term securities than for short-term securities. Derivative
instruments may be particularly sensitive to changes in prevailing interest
rates. For a further explanation, see "Risk Factors and Special Considera-
tions," which you should read carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because it has
not been in operation for a full calendar year.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the High Yield Bond
Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.50 %
Administrative Fee 0.25 %
Other Expenses 0.06 %
-------
Total Portfolio Operating
Expenses 0.81 %
Expense Reduction* (0.06)%
-------
Net Portfolio Operating
Expenses 0.75 %
</TABLE>

- -------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
17
<PAGE>

- --------------------------------------------------------------------------------
Example: Expenses on a $ 10,000 Investment

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$ 77 $ 240 $ 417 $ 930
</TABLE>
Prospectus
18
<PAGE>

PIMCO LONG-TERM U.S. GOVERNMENT BOND PORTFOLIO

Investment Objective

The Long-Term U.S. Government Bond Portfolio seeks to maximize total return,
consistent with the preservation of capital and prudent investment management.

Main Investment Strategies

The Long-Term U.S. Government Bond Portfolio invests under normal circum-
stances at least 65% of its net assets in a diversified portfolio of primarily
U.S. Government securities, which may be represented by futures contracts (in-
cluding related options) with respect to such securities, and options on such
securities, when the Adviser deems it appropriate to do so. Assets not in-
vested in U.S. Government securities may be invested in other types of Fixed
Income Instruments. The Portfolio will normally have a minimum average portfo-
lio duration of eight years.

The Portfolio's investments in Fixed Income Instruments are limited to those
of U.S. dollar-denominated securities of domestic (U.S.) issuers that are
rated at least A by Moody's or S&P, or, if unrated, determined by the Adviser
to be of comparable quality. In addition, the Portfolio will not acquire a se-
curity if, as a result, more than 10% of the Portfolio's assets would be in-
vested in securities rated below Aa by Moody's or below AA by S&P, or if more
than 25% of the Portfolio's assets would be invested in securities rated Aa by
Moody's or AA by S&P.

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may en-
ter into a series of purchase and sale contracts or use other investment tech-
niques to obtain market exposure to the securities in which it primarily in-
vests.

Risk Factors

An investment in the Long-Term U.S. Government Bond Portfolio is subject to
investment risk, including possible loss of the principal amount invested. The
Portfolio is subject to interest rate risk. Generally, the value of fixed
income securities will change inversely with changes in interest rates. As
interest rates rise, market value tends to decrease. This risk will be greater
for long-term securities than for short-term securities. Derivative
instruments may be particularly sensitive to changes in prevailing interest
rates. The Portfolio also is subject to credit risk, which is the possibility
that an issuer of a security, or a counterparty to a derivative contract, will
default or become unable to meet a financial obligation. For a further
explanation, see "Risk Factors and Special Considerations," which you should
read carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this portfolio is not provided because this
portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Long-Term U.S.
Government Bond Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.40 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.67 %
Expense Reduction* (0.02)%
-------
Net Annual Portfolio
Operating Expenses 0.65 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.65% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.

- -------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
19
<PAGE>

- --------------------------------------------------------------------------------
Example:

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
Prospectus
20
<PAGE>

PIMCO GLOBAL BOND PORTFOLIO

Investment Objective

The Global Bond Portfolio seeks to maximize total return, consistent with
preservation of capital and prudent investment management.

Main Investment Strategies

The Global Bond Portfolio invests under normal circumstances at least 65% of
its assets in Fixed Income Instruments of issuers located in at least three
countries (one of which may be the United States), which may be represented by
futures contracts (including related options) with respect to such securities,
and options on such securities, when the Adviser deems it appropriate to do
so. Such securities may be denominated in major foreign currencies, baskets of
foreign currencies (such as the euro), or the U.S. dollar.

The Adviser will select the Portfolio's foreign country and currency compo-
sitions based on an evaluation of relative interest rates, exchange rates,
monetary and fiscal policies, trade and current account balances, and any
other specific factors the Adviser believes to be relevant. Investments in the
securities of issuers located outside the United States will normally vary be-
tween 25% and 75% of the Portfolio's assets. The average portfolio duration of
this Portfolio will normally vary within a three- to seven-year time frame.
See "Appendix A--Description of Duration." The Portfolio may invest up to 10%
of its assets in high yield bonds rated B or higher by Moody's or S&P, or, if
unrated, determined by the Adviser to be of comparable quality.

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may en-
ter into a series of purchase and sale contracts or use other investment tech-
niques to obtain market exposure to the securities in which it primarily in-
vests.

Risk Factors

An investment in the Global Bond Portfolio is subject to investment risk,
including possible loss of the principal amount invested. The Portfolio is
"non-diversified," meaning that it may invest a greater percentage of its as-
sets in the securities of one issuer than many of the other Portfolios. Be-
cause it is "non-diversified," the Portfolio may be more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
diversified portfolio might be.

The Portfolio is subject to interest rate risk. Generally, the value of
fixed income securities will change inversely with changes in interest rates.
As interest rates rise, market value tends to decrease. This risk will be
greater for long-term securities than for short-term securities. Derivative
instruments may be particularly sensitive to changes in prevailing interest
rates. The Portfolio also is subject to credit risk, which is the possibility
that an issuer of a security, or a counterparty to a derivative contract, will
default or become unable to meet a financial obligation. High yield bonds
carry a high degree of credit risk. Securities of foreign issuers may be sub-
ject to additional risk factors, including foreign currency exchange rate
fluctuations, adverse regulatory conditions, foreign taxes, or political or
economic uncertainty. For a further explanation, see "Risk Factors and Special
Considerations," which you should read carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this portfolio is not provided because this
portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Global Bond
Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.60 %
Administrative Fee 0.30 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.92 %
Expense Reduction* (0.02)%
-------
Net Annual Portfolio
Operating Expenses 0.90 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.90% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.

- -------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
21
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 92 $ 287
</TABLE>
Prospectus
22
<PAGE>

PIMCO FOREIGN BOND PORTFOLIO

Investment Objective

The Foreign Bond Portfolio seeks to maximize total return, consistent with
preservation of capital and prudent investment management.

Main Investment Strategies

The Foreign Bond Portfolio invests under normal circumstances at least 85% of
its assets in Fixed Income Instruments of issuers located outside the United
States, representing at least three foreign countries, which may be represented
by futures contracts (including related options) with respect to such securi-
ties, and options on such securities, when the Adviser deems it appropriate to
do so. Such securities normally are denominated in major foreign currencies or
baskets of foreign currencies (such as the euro). The Portfolio will hedge at
least 75% of its exposure to foreign currency.

The Adviser will select the Portfolio's foreign country and currency composi-
tions based on an evaluation of relative interest rates, exchange rates, mone-
tary and fiscal policies, trade and current account balances, and any other
specific factors the Adviser believes to be relevant. The average portfolio du-
ration of this Portfolio will normally vary within a three- to seven-year time
frame. See "Appendix A--Description of Duration." The Portfolio may invest up
to 10% of its assets in high yield bonds rated B or higher by Moody's or S&P,
or, if unrated, determined by the Adviser to be of comparable quality.

The Foreign Bond Portfolio differs from the Global Bond Portfolio primarily
in the extent to which assets are invested in the securities of issuers located
outside the United States.

Risk Factors

An investment in the Foreign Bond Portfolio is subject to investment risk,
including possible loss of the principal amount invested. The Portfolio is
"non-diversified," meaning that it may invest a greater percentage of its as-
sets in the securities of one issuer than many of the other Portfolios. Because
it is "non-diversified," the Portfolio may be more susceptible to risks associ-
ated with a single economic, political or regulatory occurrence than a diversi-
fied portfolio might be.

The Portfolio is subject to interest rate risk. Generally, the value of fixed
income securities will change inversely with changes in interest rates. As in-
terest rates rise, market value tends to decrease. This risk will be greater
for long-term securities than for short-term securities. Derivative instruments
may be particularly sensitive to changes in prevailing interest rates. Unex-
pected changes in interest rates may adversely affect the value of a Portfo-
lio's investments in particular derivative instruments. The Portfolio also is
subject to credit risk, which is the possibility that an issuer of a security,
or a counterparty to a derivative contract, will default or become unable to
meet a financial obligation. High yield bonds carry a high degree of credit
risk. Securities of foreign issuers may be subject to additional risk factors,
including foreign currency exchange rate fluctuations, adverse regulatory con-
ditions, foreign taxes, or political or economic uncertainty. For a further ex-
planation, see "Risk Factors and Special Considerations," which you should read
carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other govern-
ment agency.
PIMCO Variable Insurance Trust
23
<PAGE>

Performance

Performance information for this Portfolio is not provided because it has not
been in operation for a full calendar year.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Foreign Bond
Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.60 %
Administrative Fee 0.30 %
Other Expenses* 0.02 %
-----
Total Portfolio Operating
Expenses 0.92 %
Expense Reduction* (0.02)%
-----
Net Portfolio Operating
Expenses 0.90 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.90% of average daily net as-
sets. "Other Expenses" are based on estimates for the current fiscal year.

- --------------------------------------------------------------------------------
Example:

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 92 $ 287
</TABLE>
Prospectus
24
<PAGE>

PIMCO EMERGING MARKETS BOND PORTFOLIO

Investment Objective

The Emerging Markets Bond Portfolio seeks to maximize total return, consis-
tent with preservation of capital and prudent investment management.

Main Investment Strategies

The Emerging Markets Bond Portfolio invests under normal market conditions at
least 80% of its assets in Fixed Income Instruments of issuers that economi-
cally are tied to countries with emerging securities markets. Such securities
may be denominated in foreign currencies or the U.S. dollar. The Portfolio also
may invest up to 10% of its assets in shares of investment companies that in-
vest primarily in emerging market debt securities. The average portfolio dura-
tion of the Portfolio will vary based on the Adviser's view of the potential
for total return offered by a particular duration strategy and, under normal
market conditions, is not expected to exceed eight years. See "Appendix A--De-
scription of Duration."

The Adviser has broad discretion to identify and invest in countries that it
considers to qualify as emerging securities markets. However, the Adviser gen-
erally considers an emerging securities market to be one located in any country
that is defined as an emerging or developing economy by the World Bank or its
related organizations, or the United Nations or its authorities. The Portfolio
emphasizes countries with relatively low gross national product per capita and
with the potential for rapid economic growth. The Adviser will select the Port-
folio's country and currency composition based on its evaluation of relative
interest rates, inflation rates, exchange rates, monetary and fiscal policies,
trade and current account balances, and any other specific factors the Adviser
believes to be relevant. The Portfolio likely will concentrate its investments
in Asia, Africa, the Middle East, Latin America and the developing countries of
Europe. The Portfolio's investments in emerging market fixed income securities
may be represented by securities on which the return is derived primarily from
emerging securities markets, when the Adviser deems it appropriate to do so.

The Portfolio may invest substantially all of its assets in high yield bonds
rated B or higher by Moody's or S&P, or, if unrated, determined by the Adviser
to be of comparable quality.

Risk Factors

An investment in the Emerging Markets Bond Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is "non-diversified," meaning that it may invest a greater percentage of its
assets in the securities of one issuer than many of the other Portfolios. Be-
cause it is "non-diversified," the Portfolio may be more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
diversified portfolio might be.

Foreign securities are subject to certain additional risks, including foreign
currency exchange rate fluctuations, adverse regulatory conditions, foreign
taxes, or political or economic uncertainty. These risks may be greater with
respect to emerging market securities. The Portfolio will be particularly sus-
ceptible to the effects of political and economic developments in the regions
in which it invests. This effect may be increased by a relative scarcity of is-
suers in certain of these markets, which may result in the Portfolio being
highly concentrated in a small number of issuers. For a further discussion of
the special risks of investing in foreign and emerging market countries, see
"Risk Factors and Special Considerations--Foreign Securities."

While high yield securities generally provide greater potential opportunity
for capital appreciation and higher yields than investments in higher rated se-
curities,
PIMCO Variable Insurance Trust
25
<PAGE>

they also entail greater risk, including the possibility of default or bank-
ruptcy of the issuer of the securities. Risk of default or bankruptcy may be
greater in periods of economic uncertainty or recession, as the issuers may be
less able to withstand general economic downturns affecting the regions in
which the Portfolio invests. The Adviser seeks to reduce risk through diversi-
fication, credit analysis and attention to current developments and trends in
emerging market economies and markets. For a further discussion of the special
risks of investing in lower rated securities, see "Risk Factors and Special
Considerations--High Yield Securities ("Junk Bonds")."

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Emerging Mar-
kets Bond Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.65 %
Administrative Fee 0.35 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 1.02 %
Expense Reduction* (0.02)%
------
Net Portfolio Operating
Expenses 1.00 %

</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 1.00% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.

- -------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 102 $ 318
</TABLE>
Prospectus
26
<PAGE>

PIMCO STRATEGIC BALANCED PORTFOLIO

Investment Objective

The Strategic Balanced Portfolio has as its investment objective the maximi-
zation of total return, consistent with preservation of capital and prudent
investment management.

Main Investment Strategies

The Strategic Balanced Portfolio invests in the securities eligible for pur-
chase by the StocksPLUS Growth and Income Portfolio and the Total Return Bond
Portfolio. The percentage of the Portfolio's assets invested in equity or fixed
income exposure will vary according to a methodology developed by the Adviser.
The methodology is based upon the Adviser's long-standing process of economic
forecasting of business cycle stages and consideration of the risk and reward
potential of equity and fixed income securities. The Portfolio's equity expo-
sure will vary between 45% and 75% of its total assets, and its fixed income
exposure will vary between 25% and 55% of its total assets. There is no assur-
ance that the Adviser's methodology for selecting the optimal blend of equity
and fixed income exposure will be successful. The Portfolio may invest all of
its assets in derivative instruments, such as options, futures contracts or
swap agreements. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income.

Risk Factors

An investment in the Strategic Balanced Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to market risk, which is the risk that the market value of securi-
ties may move up and down, sometimes rapidly and unpredictably. The Portfolio
also is subject to interest rate risk. Generally, the value of fixed income se-
curities will change inversely with changes in interest rates. As interest
rates rise, market value tends to decrease. This risk will be greater for long-
term securities than for short-term securities. Derivative instruments may be
particularly sensitive to changes in prevailing interest rates. Unexpected
changes in interest rates may adversely affect the value of a Portfolio's in-
vestments in particular derivative instruments.

A large number of investors use S&P 500 derivatives for both hedging and
speculative purposes, and although generally this helps guarantee a liquid mar-
ket in those instruments, at times liquidity may be limited. The Portfolio also
is subject to credit risk, which is the possibility that an issuer of a securi-
ty, or a counterparty to a derivative contract, will default or become unable
to meet a financial obligation. High yield bonds carry a high degree of credit
risk. Securities of foreign issuers may be subject to additional risk factors,
including foreign currency exchange rate fluctations, adverse regulatory condi-
tions, foreign taxes, or political or economic uncertainty. For a further ex-
planation, see "Risk Factors and Special Considerations," which you should read
carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other govern-
ment agency.

Performance

Performance information for this Portfolio is not provided because this Port-
folio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Strategic Bal-
anced Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.50 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-----
Total Portfolio Operating
Expenses 0.77 %
Expense Reduction* (0.02)%
-----
Net Portfolio Operating
Expenses 0.75 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.75% of average daily net as-
sets. "Other Expenses" are based on estimates for the current fiscal year.
PIMCO Variable Insurance Trust
27
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 77 $ 240
</TABLE>
Prospectus
28
<PAGE>

PIMCO STOCKSPLUS GROWTH AND INCOME PORTFOLIO

Investment Objective

The StocksPLUS Growth and Income Portfolio seeks to achieve a total return
which exceeds the total return performance of the S&P 500.

Main Investment Strategies

The StocksPLUS Growth and Income Portfolio invests in common stocks, op-
tions, futures, options on futures and swaps. Under normal market conditions,
the Portfolio invests substantially all of its assets in S&P 500 derivatives,
backed by a portfolio of Fixed Income Instruments. The Portfolio uses S&P 500
derivatives in addition to or in place of S&P 500 stocks to attempt to equal
or exceed the performance of the S&P 500. The Adviser actively manages the
fixed income assets held by the Portfolio, with a view to enhancing the Port-
folio's total return investment performance, subject to an overall portfolio
duration which is normally not expected to exceed one year. See "Appendix A--
Description of Duration."

The S&P 500 is composed of 500 selected common stocks that represent approx-
imately two-thirds of the total market value of all U.S. common stocks. The
Portfolio is neither sponsored by nor affiliated with S&P. The Portfolio will
seek to remain invested in S&P 500 derivatives or S&P 500 stocks even when the
S&P 500 is declining.

When S&P 500 derivatives appear to be overvalued relative to the S&P 500,
the Portfolio may invest up to 100% of its assets in a "basket" of S&P 500
stocks. The composition of this basket will be determined by standard statis-
tical techniques that analyze the historical correlation between the return of
every stock currently in the S&P 500 and the return on the S&P 500 itself. The
Adviser may employ fundamental stock analysis only to choose among stocks that
have already satisfied the statistical correlation tests. Stocks chosen for
the Portfolio are not limited to those with any particular weighting in the
S&P 500.

Assets not invested in equity securities may be invested in securities eli-
gible for purchase by the Fixed Income Portfolios. The Portfolio may invest up
to 10% of its assets in high yield bonds rated B or higher by Moody's or S&P,
or, if unrated, determined by the Adviser to be of comparable quality. In ad-
dition, the Portfolio may lend its portfolio securities to brokers, dealers
and other financial institutions to earn income. The Portfolio may invest up
to 20% of its assets in securities of foreign issuers, may purchase and sell
options and futures on foreign currencies, and may enter into forward currency
contracts. The Portfolio may invest all of its assets in derivative instru-
ments, such as options, futures contracts or swap agreements.

Risk Factors

An investment in the StocksPLUS Growth and Income Portfolio is subject to
investment risk, including possible loss of the principal amount invested. The
Portfolio is subject to market risk, which is the risk that the market value
of securities may move up and down, sometimes rapidly and unpredictably. The
Portfolio also is subject to interest rate risk. Generally, the value of fixed
income securities will change inversely with changes in interest rates. As in-
terest rates rise, market value tends to decrease. This risk will be greater
for long-term securities than for short-term securities. Derivative instru-
ments may be particularly sensitive to changes in prevailing interest rates.
Unexpected changes in interest rates may adversely affect the value of the
Portfolio's investments in particular derivative instruments.

To the extent that the Fund invests in S&P 500 derivatives backed by a port-
folio of Fixed Income Instruments, under certain conditions, generally in a
market where the value of both S&P 500 derivatives and Fixed Income Instru-
ments are declining, the Fund may experience greater losses than would be the
case if it were to invest directly in a portfolio of S&P 500 stocks.

A large number of investors use S&P 500 derivatives for both hedging and
speculative purposes, and although generally this helps guarantee a liquid
market in those instruments, at times liquidity may be limited.
PIMCO Variable Insurance Trust
29
<PAGE>

From time to time, requirements of the Internal Revenue Code or an unantici-
pated inability to close out positions when it would be most advantageous to do
so may limit the Adviser's ability to use S&P 500 derivatives.

The Portfolio also is subject to credit risk, which is the possibility that
an issuer of a security, or a counterparty to a derivative contract, will
default or become unable to meet a financial obligation. High yield bonds carry
a high degree of credit risk. Securities of foreign issuers may be subject to
additional risk factors, including foreign currency exchange rate fluctuations,
adverse regulatory conditions, foreign taxes, or political or economic
uncertainty. For a further explanation, see "Risk Factors and Special
Considerations," which you should read carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other govern-
ment agency.

Performance

The bar chart below shows the actual performance of the Portfolio from incep-
tion. It provides some indication of the variability of the Portfolio's returns
from year to year. The table below shows how the Portfolio's average annual re-
turns for the period indicated compare to those of the Portfolio's benchmark,
the S&P 500 Index. This is a widely recognized, unmanaged market index gener-
ally considered representative of the stock market as a whole. The bar chart
and table do not reflect Variable Contract fees and expenses. If they did, per-
formance would have been lower. The Portfolio's past performance does not nec-
essarily indicate how the Portfolio will perform in the future.

[PERFORMANCE CHART APPEARS HERE]
Year to date total return through 3/31/99: 4.07%
Best quarter: Q4 '98 21.95%, worst quarter: Q3 '98 -8.82%

- --------------------------------------------------------------------------------
Average Annual Total Returns
for the year ended December 31, 1998

<TABLE>
<S> <C> <C> <C>
1 Year 5 Years 10 Years
StocksPLUS Growth and Income 30.11% N/A N/A
S&P 500 Index 28.58% N/A N/A
</TABLE>

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the StocksPLUS
Growth and Income Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.40 %
Administrative Fee 0.25 %
Other Expenses 0.07 %
-----
Total Portfolio Operating
Expenses 0.72 %
Expense Reduction* (0.07)%
-----
Net Portfolio Operating
Expenses 0.65 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.65% of average daily net as-
sets.

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$ 66 $ 208 $ 362 $ 810
</TABLE>
Prospectus
30
<PAGE>

PIMCO EQUITY INCOME PORTFOLIO

Investment Objective

The Equity Income Portfolio seeks current income as a primary investment ob-
jective, and long-term growth of capital as a secondary objective.

Main Investment Strategies

The Equity Income Portfolio invests under normal circumstances at least 65%
of its assets in common stock. The Portfolio invests primarily in common
stocks that have below-average price to earnings ("P/E") ratios and higher
dividend yields relative to their industry groups. In selecting securities,
the Portfolio Manager classifies a universe of approximately 2,000 stocks by
industry, each of which has a minimum market capitalization of $200 million at
the time of investment. The Portfolio Manager then screens the universe to
find the lowest P/E ratios in each industry, subject to application of quality
and price momentum screens. From this group, the Portfolio Manager selects ap-
proximately 25 stocks with the highest yields. The universe is then rescreened
to find the highest yielding stock in each industry, subject to application of
quality and price momentum screens. From this group, approximately 25 stocks
with the lowest P/E ratios are added to the Portfolio. Although the Portfo-
lio's holdings are generally rebalanced quarterly, holdings are replaced when-
ever an alternative stock within the same industry has a significantly lower
P/E ratio or higher dividend yield than the current holding.

The Portfolio may maintain a portion of its assets, which will usually not
exceed 10%, in high quality Fixed Income Instruments (whose maturity or re-
maining maturity will not exceed five years), money market obligations, and in
cash to provide for payment of the Portfolio's expenses and to meet redemption
requests. It is the policy of the Portfolio to be as fully invested in common
stocks as practicable at all times. This policy precludes the Portfolio from
investing in Fixed Income Instruments as a defensive investment posture.

Risk Factors

An investment in the Equity Income Portfolio is subject to investment risk,
including possible loss of the principal amount invested. The Portfolio is
subject to market risk, which is the risk that the market value of a security
may move up and down, sometimes rapidly and unpredictably. Because the Portfo-
lio may not invest in Fixed Income Instruments as a defensive investment pos-
ture, the Portfolio's market risk cannot be lessened by investment in Fixed
Income Instruments. Securities of foreign issuers may be subject to additional
risk factors, including political risks. For a further explanation, see "Risk
Factors and Special Considerations," which you should read carefully before
investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Equity Income
Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

Advisory Fee 0.60 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.87 %
Expense Reduction* (0.02)%
-------
Net Portfolio Operating
Expenses 0.85 %

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.85% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.
PIMCO Variable Insurance Trust
31
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 87 $ 271
</TABLE>
Prospectus
32
<PAGE>

PIMCO CAPITAL APPRECIATION PORTFOLIO

Investment Objective

The Capital Appreciation Portfolio seeks growth of capital.

Main Investment Strategies

The Capital Appreciation Portfolio invests under normal circumstances at
least 65% of its assets in common stock. The Portfolio invests primarily in
common stocks of companies that have improving fundamentals (such as growth of
earnings and dividends) and whose stock is reasonably valued by the market.
Stocks for the Portfolio are selected from a universe of the approximately
1,000 largest market capitalization stocks, all of which are those of compa-
nies with market capitalizations of at least $1 billion at the time of invest-
ment. The Portfolio usually invests in approximately 60 to 100 common stocks.
The Portfolio Manager screens and ranks each issue using five distinct comput-
erized models, including: (i) a dividend growth screen, (ii) an equity growth
screen, (iii) an earnings growth screen, (iv) an earnings momentum screen, and
(v) an earnings surprise screen. The Portfolio Manager believes that the mod-
els identify the stocks in the universe exhibiting growth characteristics with
reasonable valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor relative price
performance. The Portfolio Manager rescreens the universe frequently to obtain
a favorable composition of growth and value characteristics for the entire
Portfolio.

Risk Factors

An investment in the Capital Appreciation Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to market risk, which is the risk that the market value of a secu-
rity may move up and down, sometimes rapidly and unpredictably. Because the
Portfolio may not invest in Fixed Income Instruments as a defensive investment
posture, the Portfolio's market risk cannot be lessened by investment in Fixed
Income Instruments. Securities of foreign issuers may be subject to additional
risk factors, including political risks. For a further explanation, see "Risk
Factors and Special Considerations," which you should read carefully before
investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Capital Appre-
ciation Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

Advisory Fee 0.60 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.87 %
Expense Reduction* (0.02)%
-------
Net Portfolio Operating
Expenses 0.85 %

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.85% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.
PIMCO Variable Insurance Trust
33
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 87 $ 271
</TABLE>
Prospectus
34
<PAGE>

PIMCO MID-CAP GROWTH PORTFOLIO

Investment Objective

The Mid-Cap Growth Portfolio seeks growth of capital.

Main Investment Strategies

The Mid-Cap Growth Portfolio invests under normal circumstances at least 65%
of its assets in common stock. The Portfolio invests primarily in common
stocks of middle capitalization companies that have improving fundamentals
(such as growth of earnings and dividends) and whose stock is reasonably val-
ued by the market. Stocks for the Portfolio are selected from a universe of
companies with market capitalizations in excess of $500 million at the time of
investment, excluding the 200 companies with the highest market capitaliza-
tion. The Portfolio usually invests in approximately 60 to 100 common stocks.
The Portfolio Manager screens and ranks each issue using five distinct comput-
erized models, including: (i) a dividend growth screen, (ii) an equity growth
screen, (iii) an earnings growth screen, (iv) an earnings momentum screen, and
(v) an earnings surprise screen. The Portfolio Manager believes that the mod-
els identify the stocks in the universe exhibiting growth characteristics with
reasonable valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor relative price
performance. The Portfolio Manager rescreens the universe frequently to obtain
a favorable composition of growth and value characteristics for the entire
Portfolio.

Risk Factors

An investment in the Mid-Cap Growth Portfolio is subject to investment risk,
including possible loss of the principal amount invested. The Portfolio is
subject to market risk, which is the risk that the market value of a security
may move up and down, sometimes rapidly and unpredictably. Securities of
smaller companies are generally subject to greater market volatility than
larger companies, and may have limited liquidity. Because the Portfolio may
not invest in Fixed Income Instruments as a defensive investment posture, the
Portfolio's market risk cannot be lessened by investment in Fixed Income In-
struments. Securities of foreign issuers may be subject to additional risk
factors, including political risks. For a further explanation, see "Risk Fac-
tors and Special Considerations," which you should read carefully before in-
vesting.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Mid-Cap Growth
Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.60 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.87 %
Expense Reduction* (0.02)%
-------
Net Portfolio Operating
Expenses 0.85 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.85% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.
PIMCO Variable Insurance Trust
35
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 87 $ 271
</TABLE>
Prospectus
36
<PAGE>

PIMCO SMALL-CAP VALUE PORTFOLIO

Investment Objective

The Small-Cap Value Portfolio seeks long-term growth of capital and income.

Main Investment Strategies

The Small-Cap Value Portfolio invests under normal circumstances at least
65% of its assets in common stock. The Portfolio invests primarily in common
stocks of companies with market capitalizations between $50 million and $1
billion at the time of investment. In selecting securities, the Portfolio Man-
ager divides a universe of up to approximately 2,000 stocks into quartiles
based upon P/E ratio. The Portfolio Manager screens the lowest quartile in P/E
ratio for market capitalizations between $50 million and $1 billion, subject
to application of quality and price momentum screens. Approximately 100 stocks
with the lowest P/E ratios are selected for the Portfolio, subject to limits
on the weighting for any one industry. Although Portfolio holdings are gener-
ally rebalanced quarterly, the Portfolio Manager will replace a holding when
it achieves a higher P/E ratio than the S&P 500's P/E ratio or its industry
average P/E ratio, or when an alternative stock within the same industry has a
significantly lower P/E ratio than the current holding. The Portfolio is in-
tended for aggressive investors seeking above-average gains and willing to ac-
cept the greater risks associated therewith.

Risk Factors

An investment in the Small-Cap Value Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to market risk, which is the risk that the market value of a secu-
rity may move up and down, sometimes rapidly and unpredictably. Securities of
smaller companies are generally subject to greater market volatility than
larger companies, and may have limited liquidity. Because the Portfolio may
not invest in Fixed Income Instruments as a defensive investment posture, the
Portfolio's market risk cannot be lessened by investment in Fixed Income In-
struments. Securities of foreign issuers may be subject to additional risk
factors, including political risks. For a further explanation, see "Risk Fac-
tors and Special Considerations," which you should read carefully before in-
vesting.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Small-Cap Value
Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.70 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.97 %
Expense Reduction* (0.02)%
-------
Net Portfolio Operating
Expenses 0.95 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.95% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.
PIMCO Variable Insurance Trust
37
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 97 $ 303
</TABLE>
Prospectus
38
<PAGE>

MANAGEMENT OF THE TRUST

Advisers and Administrator

PIMCO serves as investment adviser to the Fixed Income Portfolios and the
Strategic Balanced and StocksPLUS Growth and Income Portfolios. PIMCO manages
the investment of the assets of these Portfolios, and places orders for the
purchase and sale of each Portfolio's investments directly with brokers or
dealers selected by it in its discretion. See "Portfolio Transactions." PIMCO
is one of the premier fixed income investment management firms in the United
States. PIMCO was founded in 1971, and had over $165 billion in assets under
management as of March 31, 1999. PIMCO invests in all sectors of the fixed in-
come market using its total return philosophy -- seeking capital appreciation
as well as yield. PIMCO is a subsidiary partnership of PIMCO Advisors. PIMCO's
address is 840 Newport Center Drive, Suite 300, Newport Beach, California
92660. PIMCO is registered as an investment adviser with the Securities and
Exchange Commission ("SEC") and as a commodity trading advisor with the CFTC.

In selecting fixed income securities, PIMCO uses economic forecasting, in-
terest rate anticipation, credit and call risk analysis, foreign currency ex-
change rate forecasting, and other securities selection techniques. The pro-
portion of each Portfolio's assets committed to investment in securities with
particular characteristics (such as maturity, type and coupon rate) will vary
based on PIMCO's outlook for the U.S. and foreign economies, the financial
markets, and other factors. The management of duration, a measure of a fixed
income security's expected life that incorporates its yield, coupon interest
payments, final maturity and call features into one measure, is one of the
fundamental tools used by PIMCO. For a discussion of the concept of duration,
see "Appendix A--Description of Duration."

PIMCO Advisors serves as investment adviser to the Equity Income, Capital
Appreciation, Mid-Cap Growth, and Small-Cap Value Portfolios. PIMCO Advisors
is one of the largest investment management firms in the U.S. As of March 31,
1999, PIMCO Advisors and its subsidiary partnerships had over $248 billion in
assets under management. The general partners of PIMCO Advisors are PIMCO
Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH"). PIMCO Partners, G.P.
is a general partnership between PIMCO Holding LLC, a Delaware limited liabil-
ity company and an indirect wholly-owned subsidiary of Pacific Life Insurance
Company, and PIMCO Partners LLC, a California limited liability company con-
trolled by the current Managing Directors and two former Managing Directors of
PIMCO. PIMCO Partners, G.P. is the sole general partner of PAH.

PIMCO Advisors is responsible for the investment program for the Equity In-
come, Capital Appreciation, Mid-Cap Growth, and Small-Cap Value Portfolios.
For each such Portfolio, PIMCO Advisors has engaged its affiliates to serve as
Portfolio Managers. These affiliated Portfolio Managers, each of which is a
subsidiary partnership of PIMCO Advisors, are Cadence Capital Management ("Ca-
dence"), and NFJ Investment Group ("NFJ"). PIMCO Advisors (and not the Portfo-
lios or the Trust) compensates the Portfolio Managers from its advisory fee.
Under the supervision of PIMCO Advisors, the Portfolio Managers make determi-
nations with respect to the purchase and sale of portfolio securities, and
they place orders for execution of the Portfolios' transactions.

Cadence manages the Capital Appreciation and Mid-Cap Growth Portfolios. Ca-
dence is a general partnership, the two partners of which are PIMCO Advisors
as the supervisory partner, and Cadence Capital Management Inc. as the manag-
ing partner. Accounts managed by Cadence had combined assets as of March 31,
1999 of approximately $7 billion. Cadence's address is Exchange Place, 53
State Street, Boston, Massachusetts 02109.
PIMCO Variable Insurance Trust
39
<PAGE>

Cadence's investment philosophy is to participate in the long-term growth of
the equity markets by constructing fully-invested portfolios. Cadence special-
izes in a "growth-at-a-reasonable price" style of equity management by identi-
fying companies with above-average current earnings momentum, attractive
growth prospects, and rising expectations that are selling at reasonable mul-
tiples of earnings, cash flow and book value. Portfolios consist of approxi-
mately 80-100 issues equally weighted at the time of purchase and diversified
across all sectors of the market.

NFJ manages the Equity Income and Small-Cap Value Portfolios. NFJ is a gen-
eral partnership, the two partners of which are PIMCO Advisors as the supervi-
sory partner, and NFJ Management Inc. as the managing partner. Accounts man-
aged by NFJ had combined assets as of March 31, 1999 of approximately $2 bil-
lion. NFJ's address is 2121 San Jacinto, Suite 1840, Dallas, Texas 75201.

NFJ is a disciplined, value-oriented equity manager specializing in a diver-
sified, low P/E approach that selects stocks on a bottoms-up basis. The firm's
philosophy is based on research which has shown that portfolios of low P/E
stocks have substantially outperformed market indices throughout all capital-
ization levels over extended periods. NFJ's research has also identified yield
as a major residual contributor to performance and is an important factor in
selecting stocks. Another aspect of NFJ's philosophy is the belief that diver-
sification is a crucial discipline. Portfolios are diversified across numerous
industry groups to avoid heavy concentration in particular industries.

The table below provides information about the individual portfolio managers
responsible for management of the Trust's Portfolios, including their occupa-
tions for the past five years.

<TABLE>
<CAPTION>
Portfolio Manager And Business
Portfolio Experience (Past Five Years)
--------- ------------------------------
<C> <S>
Money Market Portfolio Leslie Barbi, Senior Vice President,
PIMCO. A Fixed Income Portfolio
Manager, Ms. Barbi has managed the
PIMCO Money Market Fund for the PIMCO
Funds: Pacific Investment Management
Series since November 1, 1995. Prior to
joining PIMCO in 1993, Ms. Barbi was
associated with Salomon Brothers as a
proprietary Portfolio Manager.

Short-Term Bond Portfolio William H. Gross, Managing Director,
Low Duration Bond Portfolio PIMCO. A Fixed Income Portfolio
Total Return Bond Portfolio Manager, Mr. Gross is one of the
Total Return Bond Portfolio II founders of PIMCO and has managed the
Strategic Balanced Portfolio PIMCO Low Duration, Low Duration II,
StocksPLUS Growth and Income Portfolio Low Duration III, Total Return, Total
Return II and Total Return III Funds
for the PIMCO Funds: Pacific Investment
Management Series since their
inceptions on May 11, 1987, November 1,
1991, December 31, 1996, May 11, 1987,
December 30, 1991, and May 1, 1991,
respectively. Mr. Gross is the leader
of a team which has managed the PIMCO
Short-Term, Strategic Balanced and
StocksPLUS Funds for the PIMCO Funds:
Pacific Investment Management Series
since January 6, 1998.

Real Return Bond Portfolio John Brynjolfsson, Vice President,
PIMCO. A Fixed Income Portfolio
Manager, Mr. Brynjolfsson joined PIMCO
in 1989, and has managed the PIMCO Real
Return Bond Fund for the PIMCO Funds:
Pacific Investment Management Series
since its inception, January 29, 1997.

High Yield Bond Portfolio Benjamin Trosky, Managing Director,
PIMCO. A Fixed Income Portfolio
Manager, Mr. Trosky joined PIMCO in
1990 and has managed the PIMCO High
Yield Fund for the PIMCO Funds: Pacific
Investment Management Series since its
inception on December 16, 1992.
</TABLE>
Prospectus
40
<PAGE>

<TABLE>
<CAPTION>
Portfolio Manager And Business
Portfolio Experience (Past Five Years)
--------- ------------------------------
<C> <S>
Long-Term U.S. Government Bond Portfolio Pasi Hamalainen, Executive Vice
President, PIMCO. A Fixed Income
Portfolio Manager, Mr. Hamalainen
joined PIMCO in 1994 and has managed
the PIMCO Long-Term U.S. Government
Fund since July 1, 1997 and the Total
Return Mortgage Fund since its
inception, July 31, 1997. Both Funds
are series of PIMCO Funds: Pacific
Investment Management Series.

Foreign Bond Portfolio Lee R. Thomas, III, Managing Director
Global Bond Portfolio and Senior International Portfolio
Manager, PIMCO. A Fixed Income
Portfolio Manager, Mr. Thomas has
managed the PIMCO Funds: Pacific
Investment Management Series' Foreign
Bond, Global Bond and International
Bond Funds since July 13, 1995, and
the PIMCO Global Bond Fund II since
October 1, 1995. Prior to joining
PIMCO in 1995, Mr. Thomas was
associated with Investcorp as a
member of the management committee
responsible for global securities and
foreign exchange trading.

Emerging Markets Bond Portfolio Michael J. Rosborough, Senior Vice
President, PIMCO. A Fixed Income
Portfolio Manager, Mr. Rosborough was
associated with RBC Dominion in Tokyo
as a Vice President and Manager in
foreign fixed income prior to joining
PIMCO in 1994. Mr. Rosborough has
managed the PIMCO Emerging Markets
Bond Fund for the PIMCO Funds:
Pacific Investment Management Series
since its inception on July 31, 1997.

Capital Appreciation Portfolio David B. Breed, William B. Bannick,
Mid-Cap Growth Portfolio Katherine A. Burdon, each Managing
Directors, Cadence; and Peter B.
McManus, Director of Portfolio
Management, Cadence. Mr. Breed is one
of the founders of Cadence and has
managed the Capital Appreciation and
Mid-Cap Growth Funds of the PIMCO
Funds: Multi-Manager Series since
each Fund's inception on March 8,
1991 and August 26, 1991,
respectively. Mr. Bannick joined the
predecessor of Cadence in 1992 and
has co-managed the Capital
Appreciation and Mid-Cap Growth Funds
since 1993. Ms. Burdon joined the
predecessor of Cadence in 1993 and
has co-managed the Capital
Appreciation and Mid-Cap Growth Funds
since 1996. Mr. McManus previously
served as a Vice President of the
Bank of Boston and joined Cadence in
1994. He has co-managed the Capital
Appreciation and Mid-Cap Growth Funds
since 1996.

Equity Income Portfolio Chris Najork, Managing Director, NFJ;
Small-Cap Value Portfolio and Benjamin Fischer, Managing
Director, NFJ. Mr. Najork and Mr.
Fischer are founding partners of NFJ
and have managed the Equity Income
and Small-Cap Value Funds of the
PIMCO Funds: Multi-Manager Series
since each Fund's inception on March
8, 1991 and October 1, 1991,
respectively.
</TABLE>

PIMCO also serves as administrator to the Portfolios. PIMCO provides admin-
istrative services to the Portfolios which include clerical help, accounting,
bookkeeping, internal audit services, preparation of reports to the Portfo-
lios' shareholders or other appropriate parties, regulatory filings and cer-
tain other services required by the Portfolios. PIMCO has hired PIMCO Advisors
to provide certain services to the Equity Income, Capital Appreciation, Mid-
Cap Growth and Small-Cap Value Portfolios as sub-administrator.

PIMCO and PIMCO Advisors may use their assets and resources, including their
profits from advisory or administrative fees paid by a Portfolio, to pay in-
surance companies for services rendered to current and prospective owners of
PIMCO Variable Insurance Trust
41
<PAGE>

Variable Contracts, including the provision of support services such as pro-
viding information about the Trust and the Portfolios, the delivery of Trust
documents, and other services. Any such payments are made by PIMCO or PIMCO
Advisors, and not by the Trust, and PIMCO and PIMCO Advisors do not receive
any separate fees for such expenses.

Advisory and Administrative Fees

The Portfolios feature fixed advisory and administrative fee rates. For in-
vestment advisory and administrative services as described below, each Portfo-
lio pays monthly fees at an annual rate based on the average daily net assets
of the Portfolio as follows:

<TABLE>
<CAPTION>
Advisory Fee
Portfolio Rate
--------- --------------
<S> <C>
Money Market Portfolio.................................... 0.30%
Short-Term Bond Portfolio................................. 0.35%
Low Duration Bond, Real Return Bond, Total Return Bond,
Total Return Bond II, Long-Term U.S. Government Bond and
StocksPLUS Growth and Income Portfolios.................. 0.40%
High Yield Bond and Strategic Balanced Portfolios......... 0.50%
Global Bond, Foreign Bond, Equity Income, Capital
Appreciation and Mid-Cap Growth Portfolios............... 0.60%
Emerging Markets Bond Portfolio........................... 0.65%
Small-Cap Value Portfolio................................. 0.70%
<CAPTION>
Administrative
Portfolio Fee Rate
--------- --------------
<S> <C>
Money Market Portfolio.................................... 0.20%
Global Bond and Foreign Bond Portfolios................... 0.30%
Emerging Markets Bond Portfolio........................... 0.35%
All other Portfolios...................................... 0.25%
</TABLE>

The administrative fee covers most of the expenses of the Portfolios, in-
cluding legal, audit, custody, transfer agency and certain other services, and
is responsible for the costs of registration of the Trust's shares and the
printing of prospectuses and shareholder reports for current shareholders or
other appropriate parties.

The Portfolios are responsible for bearing certain expenses associated with
their operations that are not provided or procured by PIMCO. While it is ex-
pected that these expenses generally will not have a material effect on the
Portfolio expense ratios, they may have a material effect in certain circum-
stances, such as when the average net assets of a Portfolio are lower than an-
ticipated. PIMCO has contractually undertaken to waive some or all of its ad-
ministrative fee, subject to potential future reimbursement within three years
from the date such fee was waived, as described above in "Description of Port-
folios."

Portfolio Transactions

The Advisers and Portfolio Managers have discretion to select the brokers
and dealers with which it places orders for the purchase and sale of portfolio
investments. In doing so, the Adviser or Portfolio Manager will seek the best
price and execution of the Portfolios' orders. A Portfolio may pay higher com-
mission rates than the lowest available when the Adviser or Portfolio Manager
believes it is reasonable in light of the value of the brokerage and research
services provided by the broker effecting the transaction.

The Advisers and Portfolio Managers manage the Portfolios without regard
generally to restrictions on portfolio turnover. The use of derivative instru-
ments with relatively short maturities may tend to exaggerate the portfolio
turnover
Prospectus
42
<PAGE>

rate for some of the Portfolios. Trading in fixed income securities does not
generally involve the payment of brokerage commissions, but does involve indi-
rect transaction costs. The use of futures contracts may involve the payment
of commissions to futures commission merchants. A Portfolio with a higher rate
of portfolio turnover will generally incur higher transaction costs.

Some securities considered for investment by the Portfolios also may be ap-
propriate for other clients served by the Advisers or Portfolio Managers. If a
purchase or sale of securities consistent with the investment policies of a
Portfolio and one or more of these clients served by the Adviser or Portfolio
Manager is considered at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser or Portfolio Manager. The Adviser or Portfolio
Manager may aggregate orders for the Portfolios with simultaneous transactions
entered into on behalf of other clients of the Adviser or Portfolio Manager.

PURCHASE OF SHARES

As of the date of this Prospectus, shares of the Portfolios are offered for
purchase by Separate Accounts to serve as an investment medium for Variable
Contracts issued by life insurance companies, and to qualified pension and re-
tirement plans outside of the separate account context.

While the Portfolios currently do not foresee any disadvantages to Variable
Contract Owners if the Portfolios serve as an investment medium for both vari-
able annuity contracts and variable life insurance policies, due to differ-
ences in tax treatment or other considerations, it is theoretically possible
that the interest of owners of annuity contracts and insurance policies for
which the Portfolios served as an investment medium might at some time be in
conflict. However, the Trust's Board of Trustees and each insurance company
with a separate account allocating assets to the Portfolios are required to
monitor events to identify any material conflicts between variable annuity
contract owners and variable life insurance policy owners, and would have to
determine what action, if any, should be taken in the event of such a con-
flict. If such a conflict occurred, an insurance company participating in the
Portfolios might be required to redeem the investment of one or more of its
separate accounts from the Portfolios, which might force the Portfolios to
sell securities at disadvantageous prices.

The Trust is "open for business" on each day the New York Stock Exchange
(the "Exchange") is open for trading. A purchase order, together with payment
in proper form, received before the close of regular trading on the Exchange
(normally 4:00 p.m., Eastern time) on a day the Trust is open for business
will be effected at that day's net asset value. In order to facilitate effi-
cient operation of the StocksPLUS Growth and Income and Strategic Balanced
Portfolios, the Trust requests that all purchase orders for these Portfolios
be received at least one hour prior to the close of regular trading on the Ex-
change (normally 3:00 p.m., Eastern time). An order received after the close
of regular trading on the Exchange generally will be effected at the net asset
value determined on the next business day.

The Trust and its distributor each reserves the right, in its sole discre-
tion, to suspend the offering of shares of the Portfolios or to reject any
purchase order, in whole or in part, or to redeem shares, in whole or in part,
when, in the judgment of management, such suspension or rejection is in the
best interests of the Trust. The sale of shares will be suspended during any
period in which the Exchange is closed for other than weekends or holidays, or
if permitted by the rules of the SEC, when trading on the Exchange is re-
stricted or during an emergency which makes it impracticable for the Portfo-
lios to dispose of their securities or to determine fairly the value of their
net assets, or during any other period as permitted by the SEC for the protec-
tion of investors. In the event that a Portfolio ceases offering its shares,
any investments allocated to the Portfolio will, subject to any necessary reg-
ulatory approvals, be invested in another Portfolio.
PIMCO Variable Insurance Trust
43
<PAGE>

REDEMPTION OF SHARES

Shares may be redeemed without charge on any day that the net asset value is
calculated. All redemption orders are effected at the net asset value per
share next determined after a redemption request is received. Payment for
shares redeemed normally will be made within seven days.

The Trust may suspend the right of redemption or postpone the payment date
at times when the Exchange is closed, or during certain other periods as per-
mitted under the federal securities laws. In consideration of the best inter-
ests of the remaining shareholders, the Trust reserves the right to pay re-
demption proceeds in whole or in part by a distribution in kind of securities
held by a Portfolio in lieu of cash. It is highly unlikely that shares would
ever be redeemed in kind. If shares are redeemed in kind, however, the redeem-
ing shareholder should expect to incur transaction costs upon the disposition
of the securities received in the distribution.

NET ASSET VALUE

The net asset value per share of each Portfolio is determined once each day
as of 4:00 p.m. Eastern time, or as of such other time designated by the New
York Stock Exchange (the "Exchange") as the close of trading for that day
("closing"). Net asset value will not be determined on any day on which the
New York Stock Exchange is closed. Net asset value is determined by dividing
the total value of a Portfolio's investments and other assets, less any lia-
bilities, by the total outstanding shares of the Portfolio.

In determining their daily net asset values, the Portfolios use price data
received shortly after 4:00 p.m. Eastern time believed to reflect the current
market value of securities held by the Portfolios as of the closing of the Ex-
change. The Portfolios intend to use these prices regardless of the impact of
any post-closing adjustments to securities prices, as long as, in the view of
the Portfolios, such prices represent the current market value of the securi-
ties as of the time selected by the Portfolios for the calculation of net as-
set value. Portfolios that invest in securities traded in foreign securities
markets may trade such securities on days when the Exchange is not open, and
the net asset value per share of these Portfolios may be affected signifi-
cantly on days when investors do not have access to the Portfolios.

For all Portfolios other than the Money Market Portfolio, portfolio securi-
ties and other assets for which market quotations are readily available are
stated at market value. Fixed income securities are normally valued on the ba-
sis of quotations obtained from brokers and dealers or pricing services.
Short-term investments having a maturity of 60 days or less may be valued at
current market value or at amortized cost, when the Board of Trustees deter-
mines that amortized cost is their fair value. Certain fixed income securities
for which daily market quotations are not readily available may be valued,
pursuant to guidelines established by the Board of Trustees, with reference to
fixed income securities whose prices are more readily obtainable and whose du-
rations are comparable to the securities being valued. Subject to the forego-
ing, other securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Board of Trustees.

The Money Market Portfolio's securities are valued using the amortized cost
method of valuation. This involves valuing a security at cost on the date of
acquisition and thereafter assuming a constant accretion of a discount or am-
ortization of a premium to maturity, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method pro-
vides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument.
Prospectus
44
<PAGE>

TAXES

Each Portfolio intends to qualify as a regulated investment company annually
and to elect to be treated as a regulated investment company for federal in-
come tax purposes. As such, a Portfolio generally will not pay federal income
tax on the income and gains it pays as dividends to its shareholders. In order
to avoid a 4% federal excise tax, each Portfolio intends to distribute each
year substantially all of its net income and gains.

The Portfolios also intend to comply with diversification requirements im-
posed by regulations under Section 817(h) of the Internal Revenue Code, as
amended. Compliance with these diversification rules generally will limit the
ability of a Portfolio to invest greater than 55% of its total assets in di-
rect obligations of the U.S. Treasury (or any other issuer), or to invest pri-
marily in securities issued by a single agency or instrumentality of the U.S.
Government.

If a Portfolio fails to meet the diversification requirement under Section
817(h), income with respect to Variable Contracts invested in the Portfolio at
any time during the calendar quarter in which the failure occurred could be-
come currently taxable to the owners of the Variable Contracts and income for
prior periods with respect to such contracts also could be taxable, most
likely in the year of the failure to achieve the required diversification.
Other adverse tax consequences could also ensue.

Please refer to the prospectus for the Separate Account and Variable Con-
tract for information regarding the federal income tax treatment of distribu-
tions to the Separate Account. See "Additional Information--Additional Tax In-
formation" in the Portfolios' Statement of Additional Information for more in-
formation on taxes.

RISK FACTORS AND SPECIAL CONSIDERATIONS

A Portfolio's risk profile is largely defined by the Portfolio's principal
securities and the investment practices that it uses. You can find a concise
description of each Portfolio's risk profile in the section captioned "De-
scription of Portfolios" in this Prospectus. As with any mutual fund, there is
no guarantee that a Portfolio will earn income or show a positive total return
over any period of time, and you could lose money by investing in the Portfo-
lio.

The Portfolios are permitted to use, within limits established by the Trust-
ees and imposed by applicable laws, a wide variety of securities and invest-
ment practices, each of which has certain risks and opportunities associated
with it. To the extent that a Portfolio uses these securities or practices,
its overall performance may be affected, either positively or negatively. The
following pages describe certain of the securities in which the Portfolios may
invest and certain of investment practices in which the Portfolios may engage,
along with the risks associated with them. Additional information about these
and other investments and investment practices may be found in the Statement
of Additional Information, which you may obtain free of charge by calling
(888) 746-2688.

U.S. Government Securities

U.S. Government securities are obligations of and, in certain cases, guaran-
teed by, the U.S. Government, its agencies or instrumentalities. The U.S. Gov-
ernment does not guarantee the net asset value of the Portfolios' shares. U.S.
Government securities may include zero coupon securities, which do not dis-
tribute interest on a current basis and tend to be subject to greater market
risk than interest-paying securities of similar maturities.

Corporate Debt Securities

on some debt obligations may be linked or indexed to the level of exchange
rates between the U.S. dollar and a foreign currency or currencies. Invest-
ments in corporate debt securities that are rated below investment grade are
described below in "High Yield Securities ("Junk Bonds")." See also, "Appendix
B--Description of Securities Ratings."

Convertible Securities and Equity Securities

A convertible security is a fixed income security that may be converted into
a prescribed amount of common stock at a specified formula. The price of the
convertible security will normally vary in some proportion to changes in the
price of the underlying common stock because of the conversion feature, and as
such is subject to risks relating to the activities of the issuer and/or gen-
eral market and economic conditions. The income component of convertible secu-
rities causes fluctuations based upon changes in interest rates and the credit
quality of the issuer. In addition, convertible securities are often lower-
rated securities. A Portfolio may be required to permit the issuer of a con-
vertible security to redeem the security, convert it into the underlying com-
mon stock, or sell it to a third party, which could have an adverse effect on
a Portfolio's ability to achieve its investment objective.

Although the Fixed Income Portfolios intend to invest primarily in fixed in-
come securities, each may invest in convertible securities or equity securi-
ties. While some countries or companies may be regarded as favorable invest-
ments, pure fixed income opportunities may be unattractive or limited due to
insufficient supply, or legal or technical restrictions. In such cases, a
Portfolio may consider equity securities or convertible securities to gain ex-
posure to such investments.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. Each of the Fixed Income Portfolios
may invest in floating rate debt instruments ("floaters") and (except for the
Money Market Portfolio) engage in credit spread trades. The interest rate on a
floater is a variable rate which is tied to another interest rate, such as a
money-market index or Treasury bill rate, and resets periodically. While vari-
able and floating rate securities provide a Portfolio with a certain degree of
protection against rises in interest rates, a Portfolio will participate in
any declines in interest rates as well.

Inflation-Indexed Bonds

Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted according to the rate of inflation. Such bonds generally
are issued at an interest rate lower than typical bonds, but are expected to
retain their principal value over time. The interest rate on these bonds is
fixed at issuance, but over the life of the bond this interest may be paid on
an increasing principal value, which has been adjusted for inflation. If a
guarantee of principal is not provided, the adjusted principal value of the
bond repaid at maturity may be less than the original principal. While these
securities are expected to be protected from long-term inflationary trends,
short-term increases in inflation may lead to a decline in value.

Mortgage-Related and Other Asset-Backed Securities

Each of the Fixed Income Portfolios (except the Money Market Portfolio) and
the Strategic Balanced and StocksPLUS Growth and Income Portfolios may invest
all of its assets in mortgage- or other asset-backed securities. The value of
some mortgage- or asset-backed securities in which the Portfolios invest may
be particularly sensitive to changes in prevailing interest rates, and, like
other fixed income investments, the ability of a Portfolio to successfully use
these instruments may depend in part upon the ability of the Adviser to fore-
cast interest rates and other economic factors correctly.

Prospectus
46
<PAGE>

Mortgage Pass-Through Securities represent interests in "pools" of mortgage
loans secured by residential or commercial real property. Early repayment of
principal on some mortgage-related securities may expose a Portfolio to a
lower rate of return upon reinvestment of principal. Like other fixed income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates are declining, the value
of mortgage-related securities with prepayment features may not increase as
much as other fixed income securities. The rate of prepayments on underlying
mortgages will affect the price and volatility of a mortgage-related security,
and may have the effect of shortening or extending the effective maturity of
the security.

Commercial Mortgage-Backed Securities include securities that reflect an in-
terest in, and are secured by, mortgage loans on commercial real property.
Many of the risks of investing in commercial mortgage-backed securities re-
flect the risks of investing in the real estate securing the underlying mort-
gage loans. These risks reflect the effects of local and other economic condi-
tions on real estate markets, the ability of tenants to make loan payments,
and the ability of a property to attract and retain tenants. Commercial mort-
gage-backed securities may be less liquid and exhibit greater price volatility
than other types of mortgage-related or asset-backed securities.

Mortgage-Related Securities include securities other than those described
above that directly or indirectly represent a participation in, or are secured
by and payable from, mortgage loans on real property.

Other Asset-Backed Securities. The Portfolios may invest in other asset-
backed securities that have been or may be offered to investors. For a discus-
sion of the characteristics of some of these instruments, see the Statement of
Additional Information.

Foreign Securities

Each of the Fixed Income Portfolios (except the Total Return Bond II and
Long-Term U.S. Government Portfolios) may invest directly in fixed income se-
curities of non-U.S. issuers. The Money Market and High Yield Bond Portfolios
may only invest in U.S. dollar-denominated fixed income securities of non-U.S.
issuers. The StocksPLUS Growth and Income Portfolio may invest directly in
foreign equity securities.

The Equity Income, Capital Appreciation, Mid-Cap Growth, and Small-Cap Value
Portfolios may invest in American Depositary Receipts ("ADRs"). ADRs are dol-
lar-denominated receipts issued generally by domestic banks and representing
the deposit with the bank of a security of a foreign issuer, and are publicly
traded on exchanges or over-the-counter in the United States.

Investing in the securities of issuers in any foreign country involves spe-
cial risks and considerations not typically associated with investing in U.S.
companies. These risks include: differences in accounting, auditing and finan-
cial reporting standards; generally higher commission rates on foreign portfo-
lio transactions; the possibility of nationalization, expropriation or confis-
catory taxation; adverse changes in investment or exchange control regulations
(which may include suspension of the ability to transfer currency from a coun-
try); and political instability which could affect U.S. investments in foreign
countries. Additionally, foreign securities and dividends and interest payable
on those securities may be subject to foreign taxes, including taxes withheld
from payments on those securities. Foreign securities often trade with less
frequency and volume than domestic securities and therefore may exhibit
greater price volatility. Additional costs associated with an investment in
foreign securities may include higher custodial fees than apply to domestic
custodial arrangements and transaction costs of foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities de-
nominated or quoted in currencies other than the U.S. dollar.

PIMCO Variable Insurance Trust
47
<PAGE>

Certain of the Portfolios, and particularly the Emerging Markets Bond Port-
folio, may invest in the securities of issuers based in countries with devel-
oping economies. Investing in developing (or "emerging market") countries in-
volves certain risks not typically associated with investing in U.S. securi-
ties, and imposes risks greater than, or in addition to, risks of investing in
foreign, developed countries. These risks are detailed in the Statement of Ad-
ditional Information.

Foreign Currency Transactions

Foreign currency exchange rates may fluctuate significantly over short peri-
ods of time. All Portfolios that may invest in securities denominated in for-
eign currencies may buy and sell foreign currencies on a spot and forward ba-
sis to reduce the risks of adverse changes in foreign exchange rates. A for-
ward foreign currency exchange contract reduces a Portfolio's exposure to
changes in the value of the currency it will deliver and increases its expo-
sure to changes in the value of the currency it will exchange into. Contracts
to sell foreign currency would limit any potential gain which might be real-
ized by a Portfolio if the value of the hedged currency increases. A Portfolio
may enter into these contracts for the purpose of hedging against foreign ex-
change risk arising from the Portfolio's investment or anticipated investment
in securities denominated in foreign currencies. A Portfolio also may enter
into these contracts for purposes of increasing exposure to a foreign currency
or to shift exposure to foreign currency fluctuations from one country to an-
other.

All Portfolios that may invest in securities denominated in foreign curren-
cies may invest in options on foreign currencies and foreign currency futures
and options thereon. The Portfolios also may invest in foreign currency ex-
change-related securities, such as foreign currency warrants and other instru-
ments whose return is linked to foreign currency exchange rates. Each Portfo-
lio that may invest in securities denominated in foreign currencies, except
the Global Bond and Emerging Markets Bond Portfolios, will use these tech-
niques to hedge at least 75% of its exposure to foreign currency. For a de-
scription of these instruments, see "Derivative Instruments" below and the
Statement of Additional Information.

Significant uncertainty surrounds the recent introduction of the euro (a
common currency for the European Union) in January 1999 and its effect on the
value of securities denominated in local European currencies. These and other
currencies in which the Portfolios' assets are denominated may be devalued
against the U.S. dollar, resulting in a loss to the Portfolios.

High Yield Securities ("Junk Bonds")

Investing in high yield securities involves special risks in addition to the
risks associated with investments in higher rated fixed income securities.
High yield securities may be regarded as predominately speculative with re-
spect to the issuer's continuing ability to meet principal and interest pay-
ments. For more information, see "Appendix B--Description of Securities Rat-
ings." Analysis of the creditworthiness of issuers of high yield securities
may be more complex than for issuers of higher quality debt securities.

High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to inter-
est rate changes than more highly rated investments, but more sensitive to ad-
verse economic downturns or individual corporate developments. If the issuer
of high yield securities defaults, a Portfolio may incur additional expenses
to seek recovery.

The secondary markets on which high yield securities are traded may be less
liquid than the market for higher grade securities, which may adversely affect
and cause large fluctuations in the daily net asset value of a Portfolio's
shares. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of high yield se-
curities, especially in a thinly traded market.

Prospectus
48
<PAGE>

PIMCO seeks to minimize the risks of investing in high yield securities
through diversification, in-depth credit analysis and attention to current de-
velopments in interest rates and market conditions.

Derivative Instruments

To the extent permitted by the investment objectives and policies of the
Portfolios, the Portfolios (except the Money Market Portfolio) may purchase
and write call and put options on securities, securities indexes and foreign
currencies, and enter into futures contracts and use options on futures con-
tracts. The Portfolios also may enter into swap agreements with respect to
foreign currencies, interest rates, and securities indexes. The Portfolios may
use these techniques to hedge against changes in interest rates, foreign cur-
rency exchange rates or securities prices or as part of their overall invest-
ment strategies.

The Fixed Income Portfolios (except the Money Market Portfolio) and the
Strategic Balanced and StocksPLUS Growth and Income Portfolios may invest all
of their assets in derivative instruments, subject only to the Portfolio's in-
vestment objective and policies and any restrictions imposed by applicable
law. The use of these strategies involves certain special risks, including a
possible imperfect correlation, or even no correlation, between price move-
ments of derivative instruments and price movements of related investments.
While some strategies involving derivative instruments can reduce the risk of
loss, they can also reduce the opportunity for gain or even result in losses
by offsetting favorable price movements in related investments or otherwise,
due to the possible inability of a Portfolio to purchase or sell a portfolio
security at a time that otherwise would be favorable, or the possible need to
sell a portfolio security at a disadvantageous time because the Portfolio is
required to maintain asset coverage or offsetting positions in connection with
transactions in derivative instruments, and the possible inability of a Port-
folio to close out or to liquidate its derivatives positions. The value of
some derivative instruments in which the Portfolios invest may be particularly
sensitive to changes in prevailing interest rates, and, like the other invest-
ments of the Portfolios, the ability of a Portfolio to successfully use these
instruments may depend in part upon the ability of the Adviser to forecast in-
terest rates and other economic factors correctly. If the Adviser incorrectly
forecasts such factors and has taken positions in derivative instruments con-
trary to prevailing market trends, the Portfolios could be exposed to the risk
of loss.

Small and Medium Capitalization Stocks

The Equity Income, Capital Appreciation, Mid-Cap Growth, and Small-Cap Value
Portfolios may invest in small or medium capitalization stocks. Generally,
small market capitalization is considered to be less than $1.5 billion and
large market capitalization is considered to be more than $5 billion. Under
normal market conditions, the Small-Cap Value Portfolio will invest primarily
in companies with market capitalizations of $1 billion or less. Investments in
smaller, less seasoned companies may involve greater risks than customarily
are associated with more established companies. The securities of smaller com-
panies may be subject to abrupt or erratic market movements, and their securi-
ties may have limited liquidity. A Portfolio may have to sell portfolio secu-
rities at disadvantageous times and prices if redemptions require the Portfo-
lio to liquidate its securities positions.

Many of the Portfolios may also invest in stocks of companies with medium
market capitalizations. Generally, issuers with market capitalizations within
the range of $100 million to $5 billion may be regarded as being issuers with
medium market capitalizations. Such investments share some of the risk charac-
teristics of investments in stocks of companies with small market capitaliza-
tions described above, although their stocks tend to be more liquid and less
volatile than those of smaller capitalization issuers.

PIMCO Variable Insurance Trust
49
<PAGE>

Catastrophe Bonds

Each of the Fixed Income Portfolios (except the Money Market Portfolio) and
the StockPLUS Growth and Income Portfolio may invest in "catastrophe bonds."
Catastrophe bonds are fixed income securities, for which the return of princi-
pal and payment of interest is contingent on the non-occurrence of a specific
"trigger" event, such as a hurricane or an earthquake. If a trigger event
causes losses exceeding a specific amount in the geographic region and time
period specified in a bond, a Portfolio investing in the bond may lose a por-
tion or all of its principal invested in the bond. If no trigger event occurs,
the Portfolio will recover its principal plus interest. Catastrophe bonds may
also expose the Portfolio to certain unanticipated risks including but not
limited to issuer (credit) default, adverse regulatory or jurisdictional in-
terpretation, and adverse tax consequences.

Temporary Defensive Positions

For temporary, defensive or emergency purposes, the Fixed Income Portfolios
and the Strategic Balanced and StocksPLUS Growth and Income Portfolios may in-
vest without limit in U.S. debt securities, including short-term money market
securities, when in the opinion of PIMCO it is appropriate to do so. This may
cause a Portfolio to miss investment opportunities and may limit the Portfo-
lio's ability to meet its investment objective. It is impossible to predict
for how long such alternative strategies will be utilized.

The Equity Income, Capital Appreciation, Mid-Cap Growth, and Small-Cap Value
Portfolios may temporarily not be invested primarily in equity securities im-
mediately following the commencement of operations or after receipt of signif-
icant new monies. While attempting to identify suitable investments, the Port-
folios may hold assets in cash, short-term U.S. Government securities, and
other money market instruments.

Illiquid Securities

The Portfolios may invest up to 15% of their net assets in illiquid securi-
ties (10% in the case of the Money Market Portfolio). "Illiquid Securities"
for this purpose means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at which a
Portfolio has valued the securities. The Adviser or Portfolio Manager may be
subject to significant delays in disposing of illiquid securities and may not
be able to dispose of these securities at the desired time and price. Transac-
tions in illiquid securities may entail additional registration expenses and
other transaction costs.

Year 2000 Readiness Disclosure

Many of the services provided to the Portfolios depend on the smooth func-
tioning of computer systems. Many systems in use today cannot distinguish be-
tween the year 1900 and the year 2000. Should any of the service systems fail
to process information properly, that could have an adverse impact on the
Portfolios' operations and services provided to shareholders. PIMCO, PIMCO Ad-
visors, Custodian, and certain other service providers to the Portfolios have
reported that each is working toward mitigating the risks associated with the
so-called "year 2000 problem." However, there can be no assurance that the
problem will be corrected in all respects and that the Portfolios' operations
and services provided to shareholders will not be adversely effected, nor can
there be any assurance that the year 2000 problem will not have an adverse ef-
fect on the entities whose securities are held by the Portfolios or on domes-
tic or global markets or economies, generally.

Prospectus
50
<PAGE>

FINANCIAL HIGHLIGHTS

This financial highlights table is intended to help you understand the Port-
folios' financial performance for the period of their operations. Information
is presented for each Portfolio that had investment operations during the re-
porting period. Certain information reflects financial results for a single
portfolio share. The total returns in the table represent the rate that an in-
vestor would have earned or lost on an investment in the Portfolio (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, the Portfolios' independent auditors.
Their report, along with full financial statements, appears in the Trust's An-
nual Report, which is available upon request.

<TABLE>
<CAPTION>
Total Return High Yield
Selected Per Share Data Bond Bond StocksPLUS Growth
for the Period Ended: Portfolio(a) Portfolio(b) and Income Portfolio(c)
December 31, 1998 ------------ ------------ -----------------------
<S> <C> <C> <C>
Net asset value, beginning
of period................... $10.00 $10.00 $10.00
Income from Investment
Operations
Net investment income(d)..... 0.56 0.51 0.30
Net gains or losses on
securities (both realized
and unrealized)(d).......... 0.28 (0.34) 2.68
Total from investment
operations.................. 0.84 0.17 2.98
Less Distributions
Dividends (from net
investment income).......... (0.56) (0.50) (0.29)
Distributions (from capital
gains)...................... (0.19) 0.00 (0.11)
Total distributions.......... (0.75) (0.50) (0.40)
Net asset value, end of
period...................... $10.09 $9.67 $12.58
Total return (%)............. 8.61% 1.80% 30.11%
Ratios/Supplemental Data
Net assets, end of period
(000's)..................... $3,259 $49,761 $58,264
Ratio of expenses to average
net assets (%)(e)........... 0.65% 0.75%* 0.65%
Ratio of net investment
income to average net
assets (%)(e)............... 5.55% 7.90%* 5.30%
Portfolio turnover rate (%).. 138.72% 12.94% 60.64%
</TABLE>

*Annualized

(a) Commenced operations on December 31, 1997.

(b) Commenced operations on April 30, 1998.

(d) Per share amounts based on average number of shares outstanding during the
period.

(e) Prior to the waiver and reimbursement of expenses, the ratios of expenses
to average net assets were 0.75%, 0.81% and 0.72% and the ratios of net
investment income to average net assets were 5.45%, 7.84% and 5.23% for
the Total Return Bond, High Yield Bond and StocksPLUS Growth and Income
Portfolios, respectively.
PIMCO Variable Insurance Trust
51
<PAGE>

OTHER INFORMATION

Portfolio Names

Each of the Fixed Income Portfolios (other than the Money Market Portfolio)
considers the various types of debt or fixed income securities in which it in-
vests, as specifically described in this Prospectus, to be "bonds" as refer-
enced in that Portfolio's name. The use of this name is not meant to restrict
a Portfolio's investment to the narrow category of debt securities that are
formally called "bonds."

Total Return and Real Return

The "total return" sought by certain of the Portfolios will consist of in-
terest and dividends from underlying securities, capital appreciation re-
flected in unrealized increases in value of portfolio securities, or realized
from the purchase and sale of securities and use of futures and options, or
gains from favorable changes in foreign currency exchange rates. Generally,
over the long term, the total return obtained by a portfolio investing primar-
ily in fixed income securities is not expected to be as great as that obtained
by a portfolio that invests primarily in equity securities. At the same time,
the market risk and price volatility of a fixed income portfolio is expected
to be less than that of an equity portfolio, so that a fixed income portfolio
is generally considered to be a more conservative investment. The change in
market value of fixed income securities (and therefore their capital apprecia-
tion or depreciation) is largely a function of changes in the current level of
interest rates. Generally, when interest rates are falling, a portfolio with a
shorter duration will not generate as high a level of total return as a port-
folio with a longer duration. See "Appendix A--Description of Duration." Con-
versely, when interest rates are rising, a portfolio with a shorter duration
will generally outperform longer duration portfolios. When interest rates are
flat, shorter duration portfolios generally will not generate as high a level
of total return as longer duration portfolios (assuming that long-term inter-
est rates are higher than short-term rates, which is commonly the case). With
respect to the composition of any fixed income portfolio, the longer the dura-
tion of the portfolio, the greater the anticipated potential for total return,
with, however, greater attendant market risk and price volatility than for a
portfolio with a shorter duration. The market value of fixed income securities
denominated in currencies other than the U.S. dollar also may be affected by
movements in foreign currency exchange rates.

The change in market value of equity securities (and therefore their capital
appreciation or depreciation) may depend upon a number of factors, including:
conditions in the securities markets, the business success of the security's
issuer, changing interest rates, real or perceived economic and competitive
industry conditions, and foreign currency exchange rates. Historically, the
total return performance of equity-oriented portfolios has generally been
greater over the long term than fixed income portfolios. However, the market
risk and price volatility of an equity portfolio is generally greater than
that of a fixed income portfolio, and is generally considered to be a more ag-
gressive investment.

"Real Return," or "Inflation Adjusted Return," as referenced in the name and
investment objective of the Real Return Bond Portfolio, is a measure of the
change in purchasing power of money invested in a particular instrument after
adjusting for inflation. An investment in a security generating a high nominal
return (such as a typical U.S. Government Treasury bond) may not generate a
high real return once inflation is considered. For example, an instrument gen-
erating a 9% nominal return at a time when inflation is 6% has a real return
of approximately 3%; that is, the purchasing power of the money invested in
that instrument would only increase by approximately 3%. On the other hand, an
inflation-indexed instrument generating a 5% real return would generate a 5%
increase in purchasing power regardless of the rate of inflation. As stated
above, the investment objective of the Portfolio is to seek to achieve maximum
real return. The total return (not adjusted for inflation) attained by this
Portfolio may be less than the total return attained by other of the PIMCO
Funds that do not invest primarily in inflation-indexed securities. In the
case of inflation-indexed bonds,
Prospectus
52
<PAGE>

changes in market value are tied to the relationship between nominal interest
rates and the rate of inflation. If inflation were to rise at a faster rate
than nominal interest rates, real interest rates might decline, leading to an
increase in value of inflation-indexed bonds. In contrast, if nominal interest
rates increase at a faster rate than inflation, real interest rates might in-
crease, leading to a decrease in value of inflation-indexed bonds.

Performance Information of Similar Funds

The following table provides information concerning the historical total re-
turn performance of the Institutional Class shares of certain series of PIMCO
Funds: Pacific Investment Management Series ("PIMS") and PIMCO Funds: Multi-
Manager Series ("MMS"). Each PIMS and MMS series has investment objectives,
policies and strategies substantially similar to those of its respective Port-
folio and is currently managed by the same portfolio manager. While the in-
vestment objectives and policies of each PIMS or MMS series and its respective
Portfolio are similar, they are not identical and the performance of the PIMS
or MMS series and the Portfolio will vary. The data is provided to illustrate
the past performance of the respective Adviser or Portfolio Manager in manag-
ing a substantially similar investment portfolio and does not represent the
past performance of any of the Portfolios or the future performance of any
Portfolio or its portfolio manager. Consequently, potential investors should
not consider this performance data as an indication of the future performance
of any Portfolio or of its portfolio manager.

The performance data shown below reflects the operating expenses of each
PIMS or MMS series, which for all series except the StocksPLUS Fund are lower
than the expenses of the corresponding Portfolio. Performance would have been
lower for those series if the Portfolios' expenses were used. In addition, the
PIMS and MMS series, unlike the Portfolios, are not sold to Separate Accounts
to fund Variable Contracts. As a result, the performance results presented be-
low do not take into account charges or deductions against a Separate Account
or Variable Contract for cost of insurance charges, premium loads, administra-
tive fees, maintenance fees, premium taxes, mortality and expense risk
charges, or other charges that may be incurred under a Variable Contract for
which the Portfolio serves as an underlying investment vehicle. By contrast,
Variable Contract Owners with contract value allocated to the Portfolios will
be subject to charges and expenses relating to the Variable Contracts and Sep-
arate Accounts.

Each PIMS and MMS series' performance data shown below is calculated in ac-
cordance with standards prescribed by the SEC for the calculation of average
annual total return information. The investment results of the PIMS and MMS
series presented below are unaudited and are not intended to predict or sug-
gest results that might be experienced by the PIMS series or the Portfolios.
Share prices and investment returns will fluctuate reflecting market condi-
tions, as well as changes in company-specific fundamentals of portfolio secu-
rities. The performance data for the benchmark indices identified below does
not reflect the fees or expenses of the PIMS or MMS series or the Portfolios.
PIMCO Variable Insurance Trust
53
<PAGE>

Average Annual Total Return for Similar Series of PIMS or MMS
and for Benchmark Indices for Periods Ended December 31, 1998

<TABLE>
<CAPTION>
PIMS or MMS Series Fund / Benchmark 1 3 5 Since Inception
Index Year Years Years Inception Date
- ----------------------------------- ------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
PIMCO Money Market Fund/1/........... 5.34% 5.32% 5.19% 4.70% 3/1/91
Lipper Money Market/2/.............. 5.07 5.07 4.90
PIMCO Short-Term Fund................ 5.74 6.42 6.25 6.52 10/7/87
Lipper Money Market/2/.............. 5.07 5.07 4.90
PIMCO Low Duration Fund.............. 7.16 7.18 6.76 8.31 5/11/87
Merrill Lynch 1-3 yr. Treasury/3/... 7.00 6.21 5.99
PIMCO Real Return Bond Fund.......... 5.21 N/A N/A 4.83 1/29/97
Lehman Inflation Linked Treasury/4/. 3.95 N/A N/A
PIMCO Total Return Fund.............. 9.77 8.18 7.89 9.89 5/11/87
Lehman Aggregate Bond/5/............ 8.69 7.29 7.27
PIMCO Total Return Fund II........... 9.63 7.79 7.82 8.49 12/30/91
Lehman Aggregate Bond/5/............ 8.69 7.29 7.27
PIMCO High Yield Fund................ 6.54 10.44 10.73 11.97 12/16/92
Lehman BB Int. Corporate/6/......... 5.74 8.77 9.09
PIMCO Long-Term U.S. Government Fund. 13.40 9.52 9.87 13.05 7/1/91
Lehman Int. & 20+ Treas. Blend/7/... 12.75 8.64 8.95
PIMCO Global Bond Fund/8/............ 12.50 7.14 8.25 8.84 11/23/93
J. P. Morgan Global (Unhedged)/9/... 15.30 6.87 8.08
PIMCO Foreign Bond Fund/10/.......... 10.03 12.76 10.01 11.17 12/3/92
J. P. Morgan Non-U.S. (Hedged)/11/.. 12.09 11.86 9.45
PIMCO Emerging Markets Bond Fund..... -11.76 N/A N/A -10.26 7/31/97
J.P. Morgan Emerging Markets/12/.... -14.35 N/A N/A
PIMCO Strategic Balanced Fund........ 19.66 N/A N/A 21.78 6/28/96
Lipper Balanced/13/................. 15.03 N/A N/A
PIMCO StocksPLUS Fund................ 28.32 28.02 24.85 23.61 5/14/93
S & P 500/14/....................... 28.58 28.23 24.06
PIMCO Equity Income Fund............. 8.37 20.04 17.83 16.49 3/8/91
S & P 500/14/....................... 28.58 28.23 24.06
PIMCO Capital Appreciation Fund...... 17.59 26.02 21.32 19.72 3/8/91
S & P 500/14/....................... 28.58 28.23 24.06
PIMCO Mid-Cap Growth Fund............ 7.93 21.34 19.08 18.21 8/26/91
S & P 400 Mid-Cap/15/............... 18.25 23.08 18.67
PIMCO Small-Cap Value Fund........... -9.16 16.14 13.62 14.77 10/1/91
Russell 2000 Small Stock/16/........ -2.55 11.58 11.86
</TABLE>
- --------
(Footnotes on following page)
Prospectus
54
<PAGE>

/1/Prior to November 1, 1995, the Money Market Fund was managed by a differ-
ent portfolio manager.

/2/The Lipper Money Market Index consists of the performance returns of the
30 largest Money Market Funds equally weighted as compiled by Lipper
Analytical Services, Inc. The Index reflects performance which is net of
fees charged by each respective Fund in the index and assumes reinvestment
of dividends and capital gain distributions, if any.

/3/The Merrill Lynch 1-3 Year Treasury Index consists of all public U.S.
Treasury obligations having maturities from one to 2.99 years. The Index
includes income and distributions but does not reflect fees, brokerage
commissions or other expenses of investing.

/4/The Lehman Brothers Inflation Linked Treasury Index is an unmanaged market
index consisting of the U.S. Treasury Inflation Protected Securities
("TIPS") universe. The Index includes income and distributions but does
not reflect fees, brokerage commissions or other expenses of investing.

/5/The Lehman Brothers Aggregate Bond Index consists of the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Mortgage-Backed
Securities Index, and the Lehman Brothers Asset-Backed Securities Index.
The Government/Corporate Bond Index consists of the Lehman Brothers
Government Bond Index and the Lehman Brothers Corporate Bond Index. The
Government Bond Index includes all public obligations of the U.S. Treasury
(excluding flower bonds and foreign-targeted issues), its agencies and
quasi-federal corporations, and corporate debt guaranteed by the U.S.
Government. The Corporate Bond Index includes all publicly issued, fixed
rate, non-convertible investment grade U.S. dollar denominated corporate
debt registered with the SEC; it also includes debt issued or guaranteed
by foreign sovereign governments, municipalities, and governmental or
international agencies. The Mortgage-Backed Securities Index consists of
15- and 30-year fixed rate securities backed by mortgage pools of the
Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association (excluding
buydowns, manufactured homes and graduated equity mortgages). The Asset-
Backed Securities Index consists of credit card, auto and home equity
loans (excluding subordinated tranches) with an average life of one year.
Each Index includes income and distributions but does not reflect fees,
brokerage commissions or other expenses of investing.

/6/The Lehman Brothers BB Intermediate Corporate Index is an unmanaged market
index comprised of various fixed income securities rated BB. The Index
includes income and distributions but does not reflect fees, brokerage
commissions or other expenses of investing.

/7/The index used for the Long-Term U.S. Government Fund is a blend of the
Lehman Intermediate Treasury Index and the Lehman 20+ Year Treasury Index,
proportionally weighted to equal a 10 year duration. The Lehman 20+ Year
Treasury Index is composed of U.S. Treasury issues with 20 years or more
to maturity, and the Lehman Intermediate Treasury Index is composed of
U.S. Treasury issues maturing between 5 and 10 years. Each index includes
income and distributions but does not reflect fees, brokerage commissions
or other expenses of investing.

/8/Prior to July 13, 1995, the Global Bond Fund was managed by a different
portfolio manager.

/9/The J.P. Morgan Global Index (Unhedged) is an unmanaged market index
representative of the total return performance in U.S. dollars on an
unhedged basis of major world bond markets. The Index includes income and
distributions but does not reflect fees, brokerage commissions or other
expenses of investing.

/10/Prior to July 13, 1995, the Foreign Bond Fund was managed by a different
portfolio manager.

/11/The J.P. Morgan Non-U.S. Index (Hedged) is an unmanaged market index
representative of the total return performance in U.S. dollars of major
non-U.S. bond markets. The Index includes income and distributions but
does not reflect fees, brokerage commissions or other expenses of
investing.

/12/The J.P. Morgan Emerging Markets Bond Index is an unmanaged market index
which tracks the total returns for Brady Bonds. The Index includes income
and distributions but does not reflect fees, brokerage commissions or
other expenses of investing.

/13/The Lipper Balanced Index consists of the performance returns of the 30
largest Balanced Funds equally weighted as compiled by Lipper Analytical
Services, Inc. The Index reflects performance which is net of fees charged
by each respective Fund in the index and assumes reinvestment of dividends
and capital gain distributions, if any.

/14/The Standard & Poor's 500 Composite Stock Price Index is an unmanaged
index containing common stocks of 500 industrial, transportation, utility
and financial companies, regarded as generally representative of the U.S.
stock market. The Index reflects income and distributions, if any, but
does not reflect fees, brokerage commissions, or other expenses of
investing.

/15/The S&P 400 Mid-Cap Index is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 400 stocks of
companies whose capitalization range from $100 million to over $5 billion
and which represent a wide range of industries. The Index reflects income
and distributions but does not reflect fees, brokerage commissions or
other expenses of investing.

/16/The Russell 2000 Small Stock Index is an unmanaged index of the 2000
smallest securities in the Russell 3000 Index, representing approximately
7% of the Russell 3000 Index. The Russell 3000 Index represents
approximately 98% of the U.S. equity market by capitalization. The Index
reflects income and distributions but does not reflect fees, brokerage
commissions or other expenses of investing.
PIMCO Variable Insurance Trust
55
<PAGE>

APPENDIX A

DESCRIPTION OF DURATION

Duration is a measure of the expected life of a fixed income security that
was developed as a more precise alternative to the concept of "term to maturi-
ty." Traditionally, a fixed income security's "term to maturity" has been used
as a proxy for the sensitivity of the security's price to changes in interest
rates (which is the "interest rate risk" or "volatility" of the security).
However, "term to maturity" measures only the time until a fixed income secu-
rity provides its final payment, taking no account of the pattern of the
security's payments before maturity. In contrast, duration incorporates a
bond's yield, coupon interest payments, final maturity and call features into
one measure. Duration management is one of the fundamental tools used by the
Adviser.

Duration is a measure of the expected life of a fixed income security on a
present value basis. Duration takes the length of the time intervals between
the present time and the time that the interest and principal payments are
scheduled or, in the case of a callable bond, expected to be received, and
weights them by the present values of the cash to be received at each future
point in time. For any fixed income security with interest payments occurring
before the payment of principal, duration is always less than maturity. In
general, all other things being equal, the lower the stated or coupon rate of
interest of a fixed income security, the longer the duration of the security;
conversely, the higher the stated or coupon rate of interest of a fixed income
security, the shorter the duration of the security.

Futures, options and options on futures have durations which, in general,
are closely related to the duration of the securities which underlie them.
Holding long futures or call option positions (backed by a segregated account
of cash and cash equivalents) will lengthen a Portfolio's duration by approxi-
mately the same amount that holding an equivalent amount of the underlying se-
curities would.

Short futures or put option positions have durations roughly equal to the
negative duration of the securities that underlie these positions, and have
the effect of reducing portfolio duration by approximately the same amount
that selling an equivalent amount of the underlying securities would.

There are some situations where even the standard duration calculation does
not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or
more years; however, their interest rate exposure corresponds to the frequency
of the coupon reset. For inflation-indexed bonds, duration is calculated on
the basis of modified real duration, which measures price changes of infla-
tion-indexed bonds on the basis of changes in real, rather than nominal, in-
terest rates. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage pass-through securities. The
stated final maturity of such securities is generally 30 years, but current
prepayment rates are more critical in determining the securities' interest
rate exposure. Finally, the duration of a fixed income security may vary over
time in response to changes in interest rates and other market factors. In
these and other similar situations, the Adviser will use more sophisticated
analytical techniques that incorporate the anticipated economic life of a se-
curity into the determination of its interest rate exposure.
Prospectus
A-1
<PAGE>

APPENDIX B

DESCRIPTION OF SECURITIES RATINGS

A Portfolio's investments may range in quality from securities rated in the
lowest category in which the Portfolio is permitted to invest to securities
rated in the highest category (as rated by Moody's or S&P or, if unrated, de-
termined by the Adviser to be of comparable quality). The percentage of a
Portfolio's assets invested in securities in a particular rating category will
vary. Following is a description of Moody's and S&P's ratings applicable to
fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent that make the long-term risks appear somewhat larger than with Aaa securi-
ties.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving secu-
rity to principal and interest are considered adequate but elements may be
present that suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest pay-
ments and principal security appear adequate for the present but certain pro-
tective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteris-
tics and in fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position char-
acterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of a desirable in-
vestment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Prospectus
B-1
<PAGE>

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked shortcom-
ings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classified from Aa through B in its corporate bond rating system. The modifier
1 indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3 in-
dicates that the issue ranks in the lower end of its generic rating category.

Corporate Short-Term Debt Ratings

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as let-
ters of credit and bonds of indemnity are excluded unless explicitly rated.

Moody's employs the following three designations, all judged to be invest-
ment grade, to indicate the relative repayment ability of rated issuers:

PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return
on funds employed; conservative capitalization structure with moderate reli-
ance on debt and ample asset protection; broad margins in earnings coverage of
fixed financial charges and high internal cash generation; and well-estab-
lished access to a range of financial markets and assured sources of alternate
liquidity.

PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will nor-
mally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an accept-
able ability for repayment of senior short-term obligations. The effect of in-
dustry characteristics and market compositions may be more pronounced. Vari-
ability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial lever-
age. Adequate alternate liquidity is maintained.

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rat-
ing categories.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

B-2
PIMCO Variable Insurance Trust
<PAGE>

AA: Debt rated AA has a very strong capacity to pay interest and repay prin-
cipal and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay inter-
est and repay principal. Whereas it normally exhibits adequate protection pa-
rameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

Speculative Grade

Debt rated BB, B, CCC, CC, and C is regarded as having predominantly specu-
lative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse con-
ditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to in-
adequate capacity to meet timely interest and principal payments. The BB rat-
ing category also is used for debt subordinated to senior debt that is as-
signed an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category also is used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions
to meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category also
is used for debt subordinated to senior debt that is assigned an actual or im-
plied B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating will also be used
upon the filing of a bankruptcy petition if debt service payments are jeopar-
dized.
Prospectus
B-3
<PAGE>

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the ad-
dition of a plus or minus sign to show relative standing within the major rat-
ing categories.

Provisional ratings: The letter "p" indicates that the rating is provision-
al. A provisional rating assumes the successful completion of the project be-
ing financed by the debt being rated and indicates that payment of debt serv-
ice requirements is largely or entirely dependent upon the successful and
timely completion of the project. This rating, however, while addressing
credit quality after completion of the project, makes no comment on the like-
lihood of, or the risk of default upon failure of, such completion. The in-
vestor should exercise his own judgment with respect to such likelihood and
risk.

r: The "r" is attached to highlight derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high variabil-
ity in expected returns due to non-credit risks. Examples of such obligations
are: securities whose principal or interest return is indexed to equities,
commodities, or currencies; certain swaps and options; and interest only and
principal only mortgage securities.

The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into ac-
count currency exchange and related uncertainties.

Commercial Paper Rating Definitions

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded into several categories, ranging from A for
the highest quality obligations to D for the lowest. These categories are as
follows:

A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

B: Issues rated B are regarded as having only speculative capacity for
timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.

A commercial paper rating is not a recommendation to purchase, sell or hold
a security inasmuch as it does not comment as to market price or suitability
for a particular investor. The ratings are based on current information fur-
nished to Standard & Poor's by the issuer or obtained from other sources it
considers reliable. Standard & Poor's does not perform an audit in connection
with any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended, or withdrawn as a result of changes in
or unavailability of such information.

B-4
PIMCO Variable Insurance Trust
<PAGE>

PIMCO
Variable
Insurance
Trust

For More Information

The following documents are available that offer further information on the
Portfolios of PIMCO Variable Insurance Trust.

Annual/Semi-Annual Reports to Shareholders The Trust's annual and semi-annual
reports include a discussion of the market conditions and investment strategies
that significantly affected the Portfolios' performance during its last fiscal
year or other period.

Statement of Additional Information (SAI) The SAI contains additional
information about the Portfolios. A current SAI has been filed with the
Securities and Exchange Commission, and is incorporated into this prospectus by
reference.

To request a free copy of these documents or to make inquiries about the
Portfolios, please write or call:

PIMCO Variable Insurance Trust
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

Telephone:
1-888-746-2688

Information about the Trust (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information on the operation of the public reference room may
be obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Trust are available on the Commission's Internet site at
www.sec.gov, and copies of that information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009.

SEC File Number: 811-8399 Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO Variable Insurance Trust

Intermediate Duration Bond Portfolio
High Yield Bond Portfolio

Stock Portfolio
StocksPLUS Growth and Income Portfolio

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO Variable Insurance Trust

Prospectus

April 30, 1999

The PIMCO High Yield and StocksPLUS Growth and Income Portfolios (the "Portfo-
lios"), which are series of PIMCO Variable Insurance Trust (the "Trust"), are
designed to provide access to the professional investment management services
offered by Pacific Investment Management Company ("PIMCO" or the "Adviser").
Each Portfolio has its own investment objective and strategies and its own
risk/reward profile, which are described in this Prospectus. The investments
made by the Portfolios at any given time are not expected to be the same as
those made by other mutual funds for which PIMCO acts as investment adviser,
including mutual funds with investment objectives and strategies similar to
those of the Portfolios. Accordingly, the performance of the Portfolios can be
expected to vary from that of the other mutual funds.

This Prospectus gives vital information you should know before investing in
the Portfolios. For your own benefit and protection, please read it before you
invest and keep it for future reference.

This Prospectus should be read in conjunction with the prospectus of the
Separate Account. Both prospectuses should be read carefully and retained for
future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW.................................................................... 3

Portfolios at a Glance.................................................... 3
Investment Strategies and Risk Factors.................................... 3
Fixed Income Instruments.................................................. 4
Ratings of Debt Securities................................................ 5

DESCRIPTION OF PORTFOLIOS................................................... 5

PIMCO High Yield Bond Portfolio........................................... 5
PIMCO StocksPLUS Growth and Income Portfolio.............................. 7

MANAGEMENT OF THE TRUST..................................................... 9

Adviser and Administrator................................................. 9
Advisory and Administrative Fees.......................................... 10
Portfolio Transactions.................................................... 10

PURCHASE OF SHARES.......................................................... 11

REDEMPTION OF SHARES........................................................ 11

NET ASSET VALUE............................................................. 12

TAXES....................................................................... 12

RISK FACTORS AND SPECIAL CONSIDERATIONS..................................... 13

FINANCIAL HIGHLIGHTS........................................................ 18

OTHER INFORMATION........................................................... 19

Portfolio Names........................................................... 19
Total Return.............................................................. 19
Performance Information of Similar Funds.................................. 19

APPENDIX A.................................................................. A-1

APPENDIX B.................................................................. B-1

</TABLE>
PIMCO Variable Insurance Trust
2
<PAGE>

OVERVIEW

Portfolios at a Glance

<TABLE>
<CAPTION>
Intermediate Duration
Bond Portfolio Primary Investments Duration Credit Quality(1) Foreign(2)
--------------------- ----------------------------------------- --------- ----------------- ----------
<S> <C> <C> <C> <C>
High Yield Bond Higher yielding fixed income securities 2-6 years B to Aaa; min 65% 0%
below Baa
<CAPTION>
Stock Portfolio
---------------
<S> <C> <C> <C> <C>
StocksPLUS Growth and S&P 500 stock index derivatives backed 0-1 year B to Aaa; max 10% 0-20%
Income by a portfolio of short-term fixed income below Baa
securities
</TABLE>
--------
(1) As rated by Moody's Investors Service, Inc., or if unrated, determined
to be of comparable quality. For specific information concerning the
credit quality of the securities held by each Portfolio, see that
Portfolio's description of Main Investment Strategies.

(2) Percentage limitations relate to foreign currency-denominated
securities. Each Portfolio may invest beyond these limits in U.S.
dollar denominated securites of foreign issues.

Investment Strategies and Risk Factors

Investment Strategies. Each Portfolio has specific strategies that it
may use to pursue its investment objective, and specific types of securi-
ties in which the Portfolio may invest, which are described under the
heading "Main Investment Strategies" in the Description of Portfolios.
Percentage limitations described in this Prospectus apply at the time of
investment, and may vary with fluctuations in the value of a Portfolio's
investment portfolio.

Risk Factors. The major risks associated with investing in each Portfo-
lio are described under the heading "Risk Factors" in the Description of
Portfolios. Please be sure to read all risk disclosures carefully before
investing. This Prospectus does not describe all of the risks of every se-
curity or technique that the Portfolios may use. For such information,
please refer to the Statement of Additional Information.
Prospectus
3
<PAGE>

OVERVIEW (continued)

Fixed Income Instruments

"Fixed Income Instruments" as used in this Prospectus means:

. securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities");

. corporate debt securities, including convertible securities and
corporate commercial paper;

. mortgage-backed and other asset-backed securities;

. inflation-indexed bonds issued both by governments and
corporations;

. structured notes, including hybrid or "indexed" securities,
catastrophe bonds and loan participations;

. delayed funding loans and revolving credit facilities;

. bank certificates of deposit, fixed time deposits and bankers'
acceptances;

. repurchase agreements and reverse repurchase agreements;

. obligations of foreign governments or their subdivisions, agencies
and instrumentalities; and

. obligations of international agencies or supranational entities.

Ratings of Debt Securities

In this Prospectus, references are made to the ratings of Fixed Income
Instruments. To aid in your understanding of the use of these terms, the
following is a brief description of the ratings categories applicable to
such securities. For a further description of ratings, see "Appendix B--
Description of Securities Ratings."

High Quality Debt Securities are those receiving ratings from at least
one nationally recognized statistical rating organization ("NRSRO"), such
as Standard & Poor's Ratings Services ("S&P") or Moody's Investors Serv-
ice, Inc. ("Moody's"), in one of the two highest rating categories (the
highest category for commercial paper) or, if unrated by any NRSRO, deemed
comparable by PIMCO.

Investment Grade Debt Securities are those receiving ratings from at
least one NRSRO in one of the four highest rating categories or, if
unrated by any NRSRO, deemed comparable by PIMCO.

Lower-Rated, High Yield Securities ("'High Yield Bonds") are those rated
lower than Baa by Moody's or BBB by S&P and comparable securities. High
yield securities, which are commonly known as "junk bonds," are considered
to be predominately speculative with respect to the issuer's ability to
pay interest and repay principal. For more information on the risks of in-
vesting in high yield securities, see "High Yield Securities ("Junk
Bonds")" in "Risk Factors and Special Considerations."
PIMCO Variable Insurance Trust
4
<PAGE>

DESCRIPTION OF PORTFOLIOS

PIMCO HIGH YIELD BOND PORTFOLIO

Investment Objective

The High Yield Bond Portfolio seeks to maximize total return, consistent
with preservation of capital and prudent investment management.

Main Investment Strategies

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may en-
ter into a series of purchase and sale contracts or use other investment tech-
niques to obtain market exposure to the securities in which it primarily in-
vests.

Risk Factors

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because it has
not been in operation for a full calendar year.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the High Yield Bond
Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.75% of average daily
net assets.
Prospectus
5
<PAGE>

- --------------------------------------------------------------------------------
Example: Expenses on a $ 10,000 Investment

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$ 77 $ 240 $ 417 $ 930
</TABLE>
PIMCO Variable Insurance Trust
6
<PAGE>

PIMCO STOCKSPLUS GROWTH AND INCOME PORTFOLIO

Investment Objective

The StocksPLUS Growth and Income Portfolio seeks to achieve a total return
which exceeds the total return performance of the S&P 500.

Main Investment Strategies

Risk Factors

A large number of investors use S&P 500 derivatives for both hedging and
speculative purposes, and although generally this helps guarantee a liquid
market in
Prospectus
7
<PAGE>

those instruments, at times liquidity may be limited. From time to time, re-
quirements of the Internal Revenue Code or an unanticipated inability to close
out positions when it would be most advantageous to do so may limit the Advis-
er's ability to use S&P 500 derivatives.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other govern-
ment agency.

Performance

The bar chart below shows the actual performance of the Portfolio from incep-
tion. It provides some indication of the variability of the Portfolio's returns
from year to year. The table below shows how the Portfolio's average annual re-
turns for the period indicated compare to those of the Portfolio's benchmark,
the S&P 500 Index. This is a widely recognized, unmanaged market index gener-
ally considered representative of the stock market as a whole. The bar chart
and table do not reflect Variable Contract fees and expenses. If they did, per-
formance would have been lower. The Portfolio's past performance does not nec-
essarily indicate how the Portfolio will perform in the future.

[PERFORMANCE CHART APPEARS HERE]
Year to date total return through 3/31/99: 4.07%
Best quarter: Q4 '98 21.95%, worst quarter: Q3 '98 -8.82%

- --------------------------------------------------------------------------------
Average Annual Total Returns
for the year ended December 31, 1998

<TABLE>
<S> <C> <C> <C>
1 Year 5 Years 10 Years
StocksPLUS Growth and Income 30.11% N/A N/A
S&P 500 Index 28.58% N/A N/A
</TABLE>

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the StocksPLUS
Growth and Income Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.40 %
Administrative Fee 0.25 %
Other Expenses 0.07 %
-------
Total Portfolio Operating
Expenses 0.72 %
Expense Reduction* (0.07)%
------
Net Portfolio Operating
Expenses 0.65 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.65% of average daily net as-
sets.

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$ 66 $ 208 $ 362 $ 810
</TABLE>

PIMCO Variable Insurance Trust
8
<PAGE>

MANAGEMENT OF THE TRUST

Adviser and Administrator

PIMCO serves as investment adviser to the Portfolios. PIMCO manages the in-
vestment of the assets of these Portfolios, and places orders for the purchase
and sale of each Portfolio's investments directly with brokers or dealers se-
lected by it in its discretion. See "Portfolio Transactions." PIMCO is one of
the premier fixed income investment management firms in the United States.
PIMCO was founded in 1971, and had over $165 billion in assets under manage-
ment as of March 31, 1999. PIMCO invests in all sectors of the fixed income
market using its total return philosophy -- seeking capital appreciation as
well as yield. PIMCO is a subsidiary partnership of PIMCO Advisors. The gen-
eral partners of PIMCO Advisors are PIMCO Partners, G.P. and PIMCO Advisors
Holdings L.P. ("PAH"). PIMCO Partners, G.P. is a general partnership between
PIMCO Holding LLC, a Delaware limited liability company and an indirect whol-
ly-owned subsidiary of Pacific Life Insurance Company, and PIMCO Partners LLC,
a California limited liability company controlled by the current Managing Di-
rectors and two former Managing Directors of PIMCO. PIMCO Partners, G.P. is
the sole general partner of PAH. PIMCO's address is 840 Newport Center Drive,
Suite 300, Newport Beach, California 92660. PIMCO is registered as an invest-
ment adviser with the Securities and Exchange Commission ("SEC") and as a com-
modity trading advisor with the CFTC.

The table below provides information about the individual portfolio managers
responsible for management of the Portfolios, including their occupations for
the past five years.

<TABLE>
<CAPTION>
Portfolio Manager And Business
Portfolio Experience (Past Five Years)
--------- ------------------------------
<C> <S>
StocksPLUS Growth and Income Portfolio William H. Gross, Managing Director,
PIMCO. A Fixed Income Portfolio
Manager, Mr. Gross is one of the
founders of PIMCO and has led the team
which has managed the StocksPLUS Fund
for the PIMCO Funds: Pacific Investment
Management Series since January 6,
1998. The same team, led by Mr. Gross,
has managed the StocksPLUS Growth and
Income Portfolio since January 13,
1998. Mr. Trosky has managed the High
Yield Bond Portfolio since its
inception on April 30, 1998.

High Yield Bond Portfolio Benjamin Trosky, Managing Director,
PIMCO. A Fixed Income Portfolio
Manager, Mr. Trosky joined PIMCO in
1990 and has managed the High Yield
Fund for the PIMCO Funds: Pacific
Investment Management Series since its
inception on December 16, 1992. Mr.
Trosky has managed the High Yield Bond
Portfolio since its inception on April
30, 1998.
</TABLE>

Prospectus
9
<PAGE>

PIMCO may use its assets and resources, including its profits from advisory
or administrative fees paid by a Portfolio, to pay insurance companies for
services rendered to current and prospective owners of Variable Contracts, in-
cluding the provision of support services such as providing information about
the Trust and the Portfolios, the delivery of Trust documents, and other serv-
ices. Any such payments are made by PIMCO, and not by the Trust, and PIMCO
does not receive any separate fees for such expenses.

Advisory and Administrative Fees

<TABLE>
<CAPTION>
Advisory Fee
Portfolio Rate
--------- --------------
<S> <C>
High Yield Bond Portfolio.................................. 0.50%
StocksPLUS Growth and Income Portfolio..................... 0.40%
<CAPTION>
Administrative
Portfolio Fee Rate
--------- --------------
<S> <C>
High Yield Bond Portfolio.................................. 0.25%
StocksPLUS Growth and Income Portfolio..................... 0.25%
</TABLE>

Portfolio Transactions

The Adviser has discretion to select the brokers and dealers with which it
places orders for the purchase and sale of portfolio investments. In doing so,
the Adviser will seek the best price and execution of the Portfolios' orders.
A Portfolio may pay higher commission rates than the lowest available when the
Adviser believes it is reasonable in light of the value of the brokerage and
research services provided by the broker effecting the transaction.

The Adviser manages the Portfolios without regard generally to restrictions
on portfolio turnover. The use of derivative instruments with relatively short
maturities may tend to exaggerate the portfolio turnover rate for some of the
Portfolios. Trading in fixed income securities does not generally involve the
payment of brokerage commissions, but does involve indirect transaction costs.
The use of futures contracts may involve the payment of commissions to futures
commission merchants. A Portfolio with a higher rate of portfolio turnover
will generally incur higher transaction costs.

among the Portfolio and clients in a manner deemed fair and reasonable by the
Adviser. The Adviser may aggregate orders for the Portfolios with simultaneous
transactions entered into on behalf of other clients of the Adviser.

PURCHASE OF SHARES

The Trust is "open for business" on each day the New York Stock Exchange
(the "Exchange") is open for trading. A purchase order, together with payment
in proper form, received before the close of regular trading on the Exchange
(normally 4:00 p.m., Eastern time) on a day the Trust is open for business
will be effected at that day's net asset value. In order to facilitate effi-
cient operation of the StocksPLUS Growth and Income Portfolio, the Trust re-
quests that all purchase orders for this Portfolio be received at least one
hour prior to the close of regular trading on the Exchange (normally 3:00
p.m., Eastern time). An order received after the close of regular trading on
the Exchange generally will be effected at the net asset value determined on
the next business day.

REDEMPTION OF SHARES

remaining shareholders, the Trust reserves the right to pay redemption pro-
ceeds in whole or in part by a distribution in kind of securities held by a
Portfolio in lieu of cash. It is highly unlikely that shares would ever be re-
deemed in kind. If shares are redeemed in kind, however, the redeeming share-
holder should expect to incur transaction costs upon the disposition of the
securities received in the distribution.

NET ASSET VALUE

Portfolio securities and other assets for which market quotations are read-
ily available are stated at market value. Fixed income securities are normally
valued on the basis of quotations obtained from brokers and dealers or pricing
services. Short-term investments having a maturity of 60 days or less may be
valued at current market value or at amortized cost, when the Board of Trust-
ees determines that amortized cost is their fair value. Certain fixed income
securities for which daily market quotations are not readily available may be
valued, pursuant to guidelines established by the Board of Trustees, with ref-
erence to fixed income securities whose prices are more readily obtainable and
whose durations are comparable to the securities being valued. Subject to the
foregoing, other securities for which market quotations are not readily avail-
able are valued at fair value as determined in good faith by the Board of
Trustees.

TAXES

currently taxable to the owners of the Variable Contracts and income for prior
periods with respect to such contracts also could be taxable, most likely in
the year of the failure to achieve the required diversification. Other adverse
tax consequences could also ensue.

RISK FACTORS AND SPECIAL CONSIDERATIONS

U.S. Government Securities

Corporate Debt Securities

The rate of interest paid on a corporate debt security may be fixed, float-
ing or variable, and may vary inversely with respect to a reference rate. See
"Variable and Floating Rate Securities" below. The rate of return or return of
principal on some debt obligations may be linked or indexed to the level of
exchange rates between the U.S. dollar and a foreign currency or currencies.
Investments in corporate debt securities that are rated below investment grade
are described below in "High Yield Securities ("Junk Bonds")." See also, "Ap-
pendix B--Description of Securities Ratings."

Convertible Securities and Equity Securities

redeem the security, convert it into the underlying common stock, or sell it
to a third party, which could have an adverse effect on a Portfolio's ability
to achieve its investment objective.

Although the High Yield Bond Portfolio intends to invest primarily in fixed
income securities, it may invest in convertible securities or equity securi-
ties. While some countries or companies may be regarded as favorable invest-
ments, pure fixed income opportunities may be unattractive or limited due to
insufficient supply, or legal or technical restrictions. In such cases, the
Portfolio may consider equity securities or convertible securities to gain ex-
posure to such investments.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The High Yield Bond Portfolio may
invest in floating rate debt instruments ("floaters") and engage in credit
spread trades. The interest rate on a floater is a variable rate which is tied
to another interest rate, such as a money-market index or Treasury bill rate,
and resets periodically. While variable and floating rate securities provide a
Portfolio with a certain degree of protection against rises in interest rates,
a Portfolio will participate in any declines in interest rates as well.

Inflation-Indexed Bonds

Mortgage-Related and Other Asset-Backed Securities

Each Portfolio may invest all of its assets in mortgage- or other asset-
backed securities. The value of some mortgage- or asset-backed securities in
which the Portfolios invest may be particularly sensitive to changes in pre-
vailing interest rates, and, like other fixed income investments, the ability
of a Portfolio to successfully use these instruments may depend in part upon
the ability of the Adviser to forecast interest rates and other economic fac-
tors correctly.

property to attract and retain tenants. Commercial mortgage-backed securities
may be less liquid and exhibit greater price volatility than other types of
mortgage-related or asset-backed securities.

Foreign Securities

The High Yield Bond Portfolio may only invest in U.S. dollar-denominated
fixed income securities of non-U.S. issuers. The StocksPLUS Growth and Income
Portfolio may invest directly in foreign equity securities.

The StocksPLUS Growth and Income Portfolio may invest in the securities of
issuers based in countries with developing economies. Investing in developing
(or "emerging market") countries involves certain risks not typically associ-
ated with investing in U.S. securities, and imposes risks greater than, or in
addition to, risks of investing in foreign, developed countries. These risks
are detailed in the Statement of Additional Information.

Foreign Currency Transactions

Foreign currency exchange rates may fluctuate significantly over short peri-
ods of time. The StocksPLUS Growth and Income Portfolio may buy and sell for-
eign currencies on a spot and forward basis to reduce the risks of adverse
changes in foreign exchange rates. A forward foreign currency exchange con-
tract reduces the Portfolio's exposure to changes in the value of the currency
it will deliver and increases its exposure to changes in the value of the cur-
rency it will exchange into. Contracts to sell foreign currency would limit
any potential gain which might be realized by the Portfolio if the value of
the hedged currency increases. The Portfolio may enter into these contracts
for the purpose of hedging against foreign exchange risk arising from the
Portfolio's investment or anticipated investment in securities denominated in
foreign currencies. The Portfolio also may enter into these contracts for pur-
poses of increasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one country to another.

The StocksPLUS Growth and Income Portfolio may invest in options on foreign
currencies and foreign currency futures and options thereon. The Portfolio
also may invest in foreign currency exchange-related securities, such as for-
eign
Prospectus
15
<PAGE>

currency warrants and other instruments whose return is linked to foreign cur-
rency exchange rates. The Portfolio will use these techniques to hedge at
least 75% of its exposure to foreign currency. For a description of these in-
struments, see "Derivative Instruments" below and the Statement of Additional
Information.

High Yield Securities ("Junk Bonds")

Derivative Instruments

To the extent permitted by the investment objectives and policies of the
Portfolios, the Portfolios may purchase and write call and put options on se-
curities, securities indexes and foreign currencies, and enter into futures
contracts and use options on futures contracts. The Portfolios also may enter
into swap agreements with respect to foreign currencies, interest rates, and
securities indexes. The Portfolios may use these techniques to hedge against
changes in interest rates, foreign currency exchange rates or securities
prices or as part of their overall investment strategies.

Each Portfolio may invest all of its assets in derivative instruments, sub-
ject only to the Portfolio's investment objective and policies and any re-
strictions imposed by applicable law. The use of these strategies involves
certain special risks, including a possible imperfect correlation, or even no
correlation, between price movements of derivative instruments and price move-
ments of related investments. While some strategies involving derivative in-
struments can reduce the risk of loss, they can also reduce the opportunity
for gain or even result in losses by offsetting favorable price movements in
related investments or otherwise, due to the possible inability of a Portfolio
to purchase or sell a portfolio security at a time that otherwise would be fa-
vorable, or the possible need to sell a portfolio security at a disadvanta-
geous
PIMCO Variable Insurance Trust
16
<PAGE>

time because the Portfolio is required to maintain asset coverage or offset-
ting positions in connection with transactions in derivative instruments, and
the possible inability of a Portfolio to close out or to liquidate its deriva-
tives positions. The value of some derivative instruments in which the Portfo-
lios invest may be particularly sensitive to changes in prevailing interest
rates, and, like the other investments of the Portfolios, the ability of a
Portfolio to successfully use these instruments may depend in part upon the
ability of the Adviser to forecast interest rates and other economic factors
correctly. If the Adviser incorrectly forecasts such factors and has taken po-
sitions in derivative instruments contrary to prevailing market trends, the
Portfolios could be exposed to the risk of loss.

Catastrophe Bonds

Each Portfolio may invest in "catastrophe bonds." Catastrophe bonds are
fixed income securities, for which the return of principal and payment of in-
terest is contingent on the non-occurrence of a specific "trigger" event, such
as a hurricane or an earthquake. If a trigger event causes losses exceeding a
specific amount in the geographic region and time period specified in a bond,
a Portfolio investing in the bond may lose a portion or all of its principal
invested in the bond. If no trigger event occurs, the Portfolio will recover
its principal plus interest. Catastrophe bonds may also expose the Portfolio
to certain unanticipated risks including but not limited to issuer (credit)
default, adverse regulatory or jurisdictional interpretation, and adverse tax
consequences.

Temporary Defensive Positions

For temporary, defensive or emergency purposes, the Portfolios may invest
without limit in U.S. debt securities, including short-term money market secu-
rities, when in the opinion of PIMCO it is appropriate to do so. This may
cause a Portfolio to miss investment opportunities and may limit the Portfo-
lio's ability to meet its investment objective. It is impossible to predict
for how long such alternative strategies will be utilized.

Illiquid Securities

The Portfolios may invest up to 15% of their net assets in illiquid securi-
ties. "Illiquid Securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at approxi-
mately the amount at which a Portfolio has valued the securities. The Adviser
may be subject to significant delays in disposing of illiquid securities and
may not be able to dispose of these securities at the desired time and price.
Transactions in illiquid securities may entail additional registration ex-
penses and other transaction costs.

Year 2000 Readiness Disclosure

Prospectus
17
<PAGE>

FINANCIAL HIGHLIGHTS

This financial highlights table is intended to help you understand the Port-
folios' financial performance for the period of their operations. Certain in-
formation reflects financial results for a single portfolio share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by
PricewaterhouseCoopers LLP, the Portfolios' independent auditors. Their re-
port, along with full financial statements, appears in the Trust's Annual Re-
port, which is available upon request.

<TABLE>
<CAPTION>
High Yield
Bond StocksPLUS Growth
Selected Per Share Data for the Period Portfolio(a) and Income Portfolio(b)
Ended: December 31, 1998 ------------ -----------------------
<S> <C> <C>
Net asset value, beginning of period..... $10.00 $10.00
Income from Investment Operations
Net investment income(c)................. 0.51 0.30
Net gains or losses on securities (both
realized and unrealized)(c)............. (0.34) 2.68
Total from investment operations......... 0.17 2.98
Less Distributions
Dividends (from net investment income)... (0.50) (0.29)
Distributions (from capital gains)....... 0.00 (0.11)
Total distributions...................... (0.50) (0.40)
Net asset value, end of period........... $9.67 $12.58
Total return (%)......................... 1.80% 30.11%
Ratios/Supplemental Data
Net assets, end of period (000's)........ $49,761 $58,264
Ratio of expenses to average net assets
(%)(d).................................. 0.75%* 0.65%
Ratio of net investment income to average
net assets (%)(d)....................... 7.90%* 5.30%
Portfolio turnover rate (%).............. 12.94% 60.64%
</TABLE>

*Annualized

(a) Commenced operations on April 30, 1998.

(b) Commenced operations on December 31, 1997.

(d) Prior to the waiver and reimbursement of expenses, the ratios of expenses
to average net assets were 0.81% and 0.72% and the ratios of net
investment income to average net assets were 7.84% and 5.23% for the High
Yield Bond and StocksPLUS Growth and Income Portfolios, respectively.
PIMCO Variable Insurance Trust
18
<PAGE>

OTHER INFORMATION

Portfolio Names

The High Yield Bond Portfolio considers the various types of debt or fixed
income securities in which it invests, as specifically described in this Pro-
spectus, to be "bonds" as referenced in that Portfolio's name. The use of this
name is not meant to restrict a Portfolio's investment to the narrow category
of debt securities that are formally called "bonds."

Total Return

The "total return" sought by the Portfolios will consist of interest and
dividends from underlying securities, capital appreciation reflected in
unrealized increases in value of portfolio securities, or realized from the
purchase and sale of securities and use of futures and options, or gains from
favorable changes in foreign currency exchange rates. Generally, over the long
term, the total return obtained by a portfolio investing primarily in fixed
income securities is not expected to be as great as that obtained by a portfo-
lio that invests primarily in equity securities. At the same time, the market
risk and price volatility of a fixed income portfolio is expected to be less
than that of an equity portfolio, so that a fixed income portfolio is gener-
ally considered to be a more conservative investment. The change in market
value of fixed income securities (and therefore their capital appreciation or
depreciation) is largely a function of changes in the current level of inter-
est rates. Generally, when interest rates are falling, a portfolio with a
shorter duration will not generate as high a level of total return as a port-
folio with a longer duration. See "Appendix A--Description of Duration." Con-
versely, when interest rates are rising, a portfolio with a shorter duration
will generally outperform longer duration portfolios. When interest rates are
flat, shorter duration portfolios generally will not generate as high a level
of total return as longer duration portfolios (assuming that long-term inter-
est rates are higher than short-term rates, which is commonly the case). With
respect to the composition of any fixed income portfolio, the longer the dura-
tion of the portfolio, the greater the anticipated potential for total return,
with, however, greater attendant market risk and price volatility than for a
portfolio with a shorter duration. The market value of fixed income securities
denominated in currencies other than the U.S. dollar also may be affected by
movements in foreign currency exchange rates.

Performance Information of Similar Funds

The following table provides information concerning the historical total re-
turn performance of the Institutional Class shares of certain series of PIMCO
Funds: Pacific Investment Management Series ("PIMS"). Each PIMS series has in-
vestment objectives, policies and strategies substantially similar to those of
its respective Portfolio and is currently managed by the same portfolio manag-
er. While the investment objectives and policies of each PIMS series and its
respective Portfolio are similar, they are not identical and the performance
of the PIMS series and the Portfolio will vary. The data is provided to illus-
trate the past performance of the Adviser in managing a substantially similar
investment portfolio and does not represent the past performance of the Port-
folios or the future performance of any Portfolio or its portfolio manager.
Consequently, potential investors should not consider this performance data as
an indication of the future performance of any Portfolio or of its portfolio
manager.
Prospectus
19
<PAGE>

The performance data shown below reflects the operating expenses of each
PIMS series, which in the case of the PIMCO High Yield Bond Fund are lower
than the expenses of the corresponding Portfolio. Performance would have been
lower for the PIMCO High Yield Bond Fund if the Portfolio's expenses were
used. In addition, the PIMS series, unlike the Portfolios, are not sold to
Separate Accounts to fund Variable Contracts. As a result, the performance re-
sults presented below do not take into account charges or deductions against a
Separate Account or Variable Contract for cost of insurance charges, premium
loads, administrative fees, maintenance fees, premium taxes, mortality and ex-
pense risk charges, or other charges that may be incurred under a Variable
Contract for which the Portfolio serves as an underlying investment vehicle.
By contrast, Variable Contract Owners with contract value allocated to the
Portfolios will be subject to charges and expenses relating to the Variable
Contracts and Separate Accounts.

Each PIMS series' performance data shown below is calculated in accordance
with standards prescribed by the SEC for the calculation of average annual to-
tal return information. The investment results of the PIMS series presented
below are unaudited and are not intended to predict or suggest results that
might be experienced by the PIMS series or the Portfolios. Share prices and
investment returns will fluctuate reflecting market conditions, as well as
changes in company-specific fundamentals of portfolio securities. The perfor-
mance data for the benchmark indices identified below does not reflect the
fees or expenses of the PIMS series or the Portfolios.

Average Annual Total Return for Similar Series of PIMS
and for Benchmark Indices for Periods Ended December 31, 1998

/1/ The Lehman Brothers BB Intermediate Corporate Index is an unmanaged market
index comprised of various fixed income securities rated BB. The Index
includes income and distributions but does not reflect fees, brokerage
commissions or other expenses of investing.

/2/ The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
containing common stocks of 500 industrial, transportation, utility and
financial companies, regarded as generally representative of the U.S. stock
market. The Index reflects income and distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.

PIMCO Variable Insurance Trust
20
<PAGE>

APPENDIX A

DESCRIPTION OF DURATION

APPENDIX B

DESCRIPTION OF SECURITIES RATINGS

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Prospectus
B-1
<PAGE>

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked shortcom-
ings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Corporate Short-Term Debt Ratings

Moody's employs the following three designations, all judged to be invest-
ment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rat-
ing categories.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

B-2
PIMCO Variable Insurance Trust
<PAGE>

AA: Debt rated AA has a very strong capacity to pay interest and repay prin-
cipal and differs from the highest rated issues only in small degree.

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the ad-
dition of a plus or minus sign to show relative standing within the major rat-
ing categories.

The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for
timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

B-4
PIMCO Variable Insurance Trust
<PAGE>

PIMCO
Variable
Insurance
Trust

For More Information

The following documents are available that offer further information on the
Portfolios of PIMCO Variable Insurance Trust.

To request a free copy of these documents or to make inquiries about the
Portfolios, please write or call:

PIMCO Variable Insurance Trust
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

Telephone:
1-888-746-2688

SEC File Number: 811-8399

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO
PIMCO
Variable
Insurance
Trust

Short Duration Bond Portfolio
Low Duration Bond Portfolio

International Bond Portfolio
Foreign Bond Portfolio

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO Variable Insurance Trust

Prospectus

April 30, 1999

The PIMCO Low Duration and Foreign Bond Portfolios (the "Portfolios"), which
are some of PIMCO Variable Insurance Trust (the "Trust"), are designed to pro-
vide access to the professional investment management services offered by Pa-
cific Investment Management Company ("PIMCO" or the "Adviser"). Each Portfolio
has its own investment objective and strategies and its own risk/reward pro-
file, which are described in this Prospectus. The investments made by the
Portfolios at any given time are not expected to be the same as those made by
other mutual funds for which PIMCO acts as investment adviser, including mu-
tual funds with investment objectives and strategies similar to those of the
Portfolios. Accordingly, the performance of the Portfolios can be expected to
vary from that of the other mutual funds.

This Prospectus gives vital information you should know before investing in
the Portfolios. For your own benefit and protection, please read it before you
invest and keep it for future reference.

This Prospectus should be read in conjunction with the prospectus of the
Separate Account. Both prospectuses should be read carefully and retained for
future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW.................................................................... 3

Portfolios at a Glance.................................................... 3
Investment Strategies and Risk Factors.................................... 3
Fixed Income Instruments.................................................. 3
Ratings of Debt Securities................................................ 4

DESCRIPTION OF PORTFOLIOS................................................... 5

PIMCO Low Duration Bond Portfolio......................................... 5
PIMCO Foreign Bond Portfolio.............................................. 7

MANAGEMENT OF THE TRUST..................................................... 9

PURCHASE OF SHARES.......................................................... 11

REDEMPTION OF SHARES........................................................ 11

NET ASSET VALUE............................................................. 12

TAXES....................................................................... 12

RISK FACTORS AND SPECIAL CONSIDERATIONS..................................... 13

OTHER INFORMATION........................................................... 17

Portfolio Names........................................................... 17
Total Return ............................................................. 17
Performance Information of Similar Funds.................................. 18

APPENDIX A.................................................................. A-1

APPENDIX B.................................................................. B-1
</TABLE>
Prospectus
2
<PAGE>

OVERVIEW
- -------------------------------------------------------------------------------
Portfolios at a Glance

<TABLE>
<CAPTION>
Short Duration
Bond Portfolio Primary Investments Duration Credit Quality(1) Foreign(2)
-------------- ------------------------------------- --------- ----------------- ----------------------
<S> <C> <C> <C> <C>
Low Duration Bond Short and intermediate maturity fixed 1-3 years B to Aaa; max 10% 0-20%
income securities below Baa
<CAPTION>
International
Bond Portfolio
--------------
<S> <C> <C> <C> <C>
Foreign Bond Intermediate maturity hedged foreign 3-7 years B to Aaa; max 10% (greater than or =)85%
fixed income securities below Baa
</TABLE>

--------
(1) As rated by Moody's Investors Service, Inc., or if unrated, determined
to be of comparable quality. For specific information concerning the
credit quality of the securities held by each Portfolio, see that
Portfolio's description of Main Investment Strategies.

(2) The percentage limitation for the Low Duration Bond Portfolio relates
to foreign currency-denominated securities. The Portfolio may invest
beyond this limit in U.S. dollar-denominated securities of foreign
issuers. The percentage limitation for the Foreign Bond Portfolio
relates to securities of foreign issuers denominated in any currency.

Investment Strategies and Risk Factors

Fixed Income Instruments

"Fixed Income Instruments" as used in this Prospectus means:

. securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities");

. corporate debt securities, including convertible securities and
corporate commercial paper;

. mortgage-backed and other asset-backed securities;

. inflation-indexed bonds issued both by governments and
corporations;

. structured notes, including hybrid or "indexed" securities,
catastrophe bonds and loan participations;

. delayed funding loans and revolving credit facilities;

. bank certificates of deposit, fixed time deposits and bankers'
acceptances;

. repurchase agreements and reverse repurchase agreements;

. obligations of foreign governments or their subdivisions, agencies
and instrumentalities; and

. obligations of international agencies or supranational entities.

Fixed Income Instruments may have fixed, variable, or floating rates of
interest, including rates of interest that vary inversely at a multiple of
a designated or floating rate, or that vary according to changes in rela-
tive values of currencies. Each Portfolio may hold different percentages
of its assets in these various types of securities.
- --------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
3
<PAGE>

OVERVIEW (continued)
- -------------------------------------------------------------------------------
Ratings of Debt Securities

Investment Grade Debt Securities are those receiving ratings from at least
one NRSRO in one of the four highest rating categories or, if unrated by any
NRSRO, deemed comparable by PIMCO.

DESCRIPTION OF PORTFOLIOS

PIMCO LOW DURATION BOND PORTFOLIO

Investment Objective

The Low Duration Bond Portfolio seeks to maximize total return, consistent
with preservation of capital and prudent investment management.

Main Investment Strategies

The Low Duration Bond Portfolio invests under normal circumstances at least
65% of its assets in a diversified portfolio of Fixed Income Instruments of
varying maturities. The average portfolio duration of this Portfolio will nor-
mally vary within a one- to three-year time frame based on the Adviser's fore-
cast for interest rates. See "Appendix A--Description of Duration."

The Portfolio may invest up to 10% of its assets in high yield bonds rated B
or higher by Moody's or S&P, or, if unrated, determined by the Adviser to be
of comparable quality. The Portfolio may invest up to 20% of its assets in se-
curities denominated in foreign currencies, and may invest beyond this limit
in U.S. dollar-denominated securities of foreign issuers. The Portfolio will
hedge at least 75% of its exposure to foreign currency.

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may en-
ter into a series of purchase and sale contracts or use other investment tech-
niques to obtain market exposure to the securities in which it primarily in-
vests. The total rate of return for this Portfolio is expected to exhibit less
volatility than that of the Total Return Bond Portfolio (discussed below) be-
cause its duration will be shorter.

Risk Factors

An investment in the Low Duration Bond Portfolio is subject to investment
risk, including possible loss of the principal amount invested. The Portfolio
is subject to interest rate risk. Generally, the value of fixed income securi-
ties will change inversely with changes in interest rates. As interest rates
rise, market value tends to decrease. This risk will be greater for long-term
securities than for short-term securities. Derivative instruments may be par-
ticularly sensitive to changes in prevailing interest rates. The Portfolio
also is subject to credit risk, which is the possibility that an issuer of a
security, or a counterparty to a derivative contract, will default or become
unable to meet a financial obligation. High yield bonds carry a high degree of
credit risk. Securities of foreign issuers may be subject to additional risk
factors, including foreign currency exchange rate fluctuations, adverse regu-
latory conditions, foreign taxes, or political or economic uncertainty. For a
further explanation, see "Risk Factors and Special Considerations," which you
should read carefully before investing.

Performance

Performance information for this Portfolio is not provided because it has
not been in operation for a full calendar year.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Low Duration
Bond Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.65% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.

- -------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
5
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
Prospectus
6
<PAGE>

PIMCO FOREIGN BOND PORTFOLIO

Investment Objective

The Foreign Bond Portfolio seeks to maximize total return, consistent with
preservation of capital and prudent investment management.

Main Investment Strategies

The Foreign Bond Portfolio invests under normal circumstances at least 85%
of its assets in Fixed Income Instruments of issuers located outside the
United States, representing at least three foreign countries, which may be
represented by futures contracts (including related options) with respect to
such securities, and options on such securities, when the Adviser deems it ap-
propriate to do so. Such securities normally are denominated in major foreign
currencies or baskets of foreign currencies (such as the euro). The Portfolio
will hedge at least 75% of its exposure to foreign currency.

The Adviser will select the Portfolio's foreign country and currency compo-
sitions based on an evaluation of relative interest rates, exchange rates,
monetary and fiscal policies, trade and current account balances, and any
other specific factors the Adviser believes to be relevant. The average port-
folio duration of this Portfolio will normally vary within a three- to seven-
year time frame. See "Appendix A--Description of Duration." The Portfolio may
invest up to 10% of its assets in high yield bonds rated B or higher by
Moody's or S&P, or, if unrated, determined by the Adviser to be of comparable
quality.

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage-or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may
enter into a series of purchase and sale contracts or use other investment
techniques to obtain market exposure to the securities in which it primarily
invests.

Risk Factors

An investment in the Foreign Bond Portfolio is subject to investment risk,
including possible loss of the principal amount invested. The Portfolio is
"non-diversified," meaning that it may invest a greater percentage of its as-
sets in the securities of one issuer than many of the other Portfolios. Be-
cause it is "non-diversified," the Portfolio may be more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
diversified portfolio might be.

The Portfolio is subject to interest rate risk. Generally, the value of
fixed income securities will change inversely with changes in interest rates.
As interest rates rise, market value tends to decrease. This risk will be
greater for long-term securities than for short-term securities. Derivative
instruments may be particularly sensitive to changes in prevailing interest
rates. Unexpected changes in interest rates may adversely affect the value of
a Portfolio's investments in particular derivative instruments. The Portfolio
also is subject to credit risk, which is the possibility that an issuer of a
security, or a counterparty to a derivative contract, will default or become
unable to meet a financial obligation. High yield bonds carry a high degree of
credit risk. Securities of foreign issuers may be subject to additional risk
factors, including foreign currency exchange rate fluctuations, adverse regu-
latory conditions, foreign taxes, or political or economic uncertainty. For a
further explanation, see "Risk Factors and Special Considerations," which you
should read carefully before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because it has
not been in operation for a full calendar year.
PIMCO Variable Insurance Trust
7
<PAGE>

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Foreign Bond
Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.60 %
Administrative Fee 0.30 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.92 %
Expense Reduction* (0.02)%
------
Net Portfolio Operating
Expenses 0.90 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.90% of average daily net as-
sets. "Other Expenses" are based on estimates for the current fiscal year.

- --------------------------------------------------------------------------------
Example:

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 92 $ 287
</TABLE>
Prospectus
8
<PAGE>

MANAGEMENT OF THE TRUST

Adviser and Administrator

The table below provides information about the individual portfolio managers
responsible for management of the Trust's Portfolios, including their occupa-
tions for the past five years.

<TABLE>
<CAPTION>
Portfolio Manager And Business Experience (Past
Portfolio Five Years)
--------- -----------------------------------------------
<C> <S>
Low Duration Bond Portfolio William H. Gross, Managing Director, PIMCO. A
Fixed Income Portfolio Manager, Mr. Gross is one
of the founders of PIMCO and has managed the PIMCO
Low Duration Fund for the PIMCO Funds: Pacific
Investment Management Series since its inception
on May 11, 1987.

Foreign Bond Portfolio Lee R. Thomas, III, Managing Director and Senior
International Portfolio Manager, PIMCO. A Fixed
Income Portfolio Manager, Mr. Thomas has managed
the PIMCO Funds: Pacific Investment Management
Series' Foreign Bond Fund since July 13, 1995.
Prior to joining PIMCO in 1995, Mr. Thomas was
associated with Investcorp as a member of the
management committee responsible for global
securities and foreign exchange trading.
</TABLE>

provision of support services such as providing information about the Trust
and the Portfolios, the delivery of Trust documents, and other services. Any
such payments are made by PIMCO or and not by the Trust, and PIMCO does not
receive any separate fees for such expenses.

Advisory and Administrative Fees

<TABLE>
<CAPTION>
Advisory Fee
Portfolio Rate
--------- --------------
<S> <C>
Low Duration Bond Portfolio................................ 0.40%
Foreign Bond Portfolio..................................... 0.60%
<CAPTION>
Administrative
Portfolio Fee Rate
--------- --------------
<S> <C>
Low Duration Bond Portfolio................................ 0.25%
Foreign Bond Portfolio..................................... 0.30%
</TABLE>

Portfolio Transactions

Some securities considered for investment by the Portfolios also may be ap-
propriate for other clients served by the Adviser. If a purchase or sale of
securities consistent with the investment policies of a Portfolio and one or
more of these clients served by the Adviser is considered at or about the same
time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. The Adviser
may aggregate orders for the Portfolios with simultaneous transactions entered
into on behalf of other clients of the Adviser.

Prospectus
10
<PAGE>

PURCHASE OF SHARES

REDEMPTION OF SHARES

PIMCO Variable Insurance Trust
11
<PAGE>

NET ASSET VALUE

TAXES

RISK FACTORS AND SPECIAL CONSIDERATIONS

U.S. Government Securities

Corporate Debt Securities

Convertible Securities and Equity Securities

Although the Portfolios intend to invest primarily in fixed income securi-
ties, each may invest in convertible securities or equity securities. While
some countries or companies may be regarded as favorable investments, pure
fixed income opportunities may be unattractive or limited due to insufficient
supply, or legal or technical restrictions. In such cases, a Portfolio may
consider equity securities or convertible securities to gain exposure to such
investments.
PIMCO Variable Insurance Trust
13
<PAGE>

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. Each of the Portfolio may invest in
floating rate debt instruments ("floaters") and engage in credit spread
trades. The interest rate on a floater is a variable rate which is tied to an-
other interest rate, such as a money-market index or Treasury bill rate, and
resets periodically. While variable and floating rate securities provide a
Portfolio with a certain degree of protection against rises in interest rates,
a Portfolio will participate in any declines in interest rates as well.

Inflation-Indexed Bonds

Mortgage-Related and Other Asset-Backed Securities

Prospectus
14
<PAGE>

Foreign Securities

Each Portfolio may invest directly in fixed income securities of non-U.S.
issuers. Investing in the securities of issuers in any foreign country in-
volves special risks and considerations not typically associated with invest-
ing in U.S. companies. These risks include: differences in accounting, audit-
ing and financial reporting standards; generally higher commission rates on
foreign portfolio transactions; the possibility of nationalization, expropria-
tion or confiscatory taxation; adverse changes in investment or exchange con-
trol regulations (which may include suspension of the ability to transfer cur-
rency from a country); and political instability which could affect U.S. in-
vestments in foreign countries. Additionally, foreign securities and dividends
and interest payable on those securities may be subject to foreign taxes, in-
cluding taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and there-
fore may exhibit greater price volatility. Additional costs associated with an
investment in foreign securities may include higher custodial fees than apply
to domestic custodial arrangements and transaction costs of foreign currency
conversions. Changes in foreign exchange rates also will affect the value of
securities denominated or quoted in currencies other than the U.S. dollar.

The Portfolios may invest in the securities of issuers based in countries
with developing economies. Investing in developing (or "emerging market")
countries involves certain risks not typically associated with investing in
U.S. securities, and imposes risks greater than, or in addition to, risks of
investing in foreign, developed countries. These risks are detailed in the
Statement of Additional Information.

Foreign Currency Transactions

The Portfolios may invest in options on foreign currencies and foreign cur-
rency futures and options thereon. The Portfolios also may invest in foreign
currency exchange-related securities, such as foreign currency warrants and
other instruments whose return is linked to foreign currency exchange rates.
Each Portfolio will use these techniques to hedge at least 75% of its exposure
to foreign currency. For a description of these instruments, see "Derivative
Instruments" below and the Statement of Additional Information.

High Yield Securities ("Junk Bonds")

Derivative Instruments

The Portfolios may invest all of their assets in derivative instruments,
subject only to the Portfolio's investment objective and policies and any re-
strictions imposed by applicable law. The use of these strategies involves
certain special risks, including a possible imperfect correlation, or even no
correlation, between price movements of derivative instruments and price move-
ments of related investments. While some strategies involving derivative in-
struments can reduce the risk of loss, they can also reduce the opportunity
for gain or even result in losses by offsetting favorable price movements in
related investments or otherwise, due to the possible inability of a Portfolio
to purchase or sell a portfolio security at a time that otherwise would be fa-
vorable, or the possible need to sell a portfolio security at a disadvanta-
geous time because the Portfolio is required to maintain asset coverage or
offsetting positions in connection with transactions in derivative instru-
ments, and the possible inability of a Portfolio to close out or to liquidate
its derivatives positions. The value of some derivative instruments in which
the Portfolios invest may be particularly sensitive to changes in prevailing
interest rates, and, like the other investments of the Portfolios, the ability
of a Portfolio to successfully use these instruments may depend in part upon
the ability of the Adviser to forecast interest rates and other economic fac-
tors correctly. If the Adviser incorrectly forecasts such factors and has
taken positions in derivative instruments contrary to prevailing market
trends, the Portfolios could be exposed to the risk of loss.
Prospectus
16
<PAGE>

Catastrophe Bonds

Temporary Defensive Positions

Illiquid Securities

Year 2000 Readiness Disclosure

OTHER INFORMATION

Portfolio Names

Each Portfolio considers the various types of debt or fixed income securi-
ties in which it invests, as specifically described in this Prospectus, to be
"bonds" as referenced in that Portfolio's name. The use of this name is not
meant to restrict a Portfolio's investment to the narrow category of debt se-
curities that are formally called "bonds."

Total Return

Generally, over the long term, the total return obtained by a portfolio in-
vesting primarily in fixed income securities is not expected to be as great as
that obtained by a portfolio that invests primarily in equity securities. At
the same time, the market risk and price volatility of a fixed income portfo-
lio is expected to be less than that of an equity portfolio, so that a fixed
income portfolio is generally considered to be a more conservative investment.
The change in market value of fixed income securities (and therefore their
capital appreciation or depreciation) is largely a function of changes in the
current level of interest rates. Generally, when interest rates are falling, a
portfolio with a shorter duration will not generate as high a level of total
return as a portfolio with a longer duration. See "Appendix A--Description of
Duration." Conversely, when interest rates are rising, a portfolio with a
shorter duration will generally outperform longer duration portfolios. When
interest rates are flat, shorter duration portfolios generally will not gener-
ate as high a level of total return as longer duration portfolios (assuming
that long-term interest rates are higher than short-term rates, which is com-
monly the case). With respect to the composition of any fixed income portfo-
lio, the longer the duration of the portfolio, the greater the anticipated po-
tential for total return, with, however, greater attendant market risk and
price volatility than for a portfolio with a shorter duration. The market
value of fixed income securities denominated in currencies other than the U.S.
dollar also may be affected by movements in foreign currency exchange rates.

Performance Information of Similar Funds

The following table provides information concerning the historical total re-
turn performance of the Institutional Class shares of certain series of PIMCO
Funds: Pacific Investment Management Series ("PIMS"). Each PIMS series has in-
vestment objectives, policies and strategies substantially similar to those of
its respective Portfolio and is currently managed by the same portfolio manag-
er. While the investment objectives and policies of each PIMS series and its
respective Portfolio are similar, they are not identical and the performance
of the PIMS series and the Portfolio will vary. The data is provided to illus-
trate the past performance of the Adviser in managing a substantially similar
investment portfolio and does not represent the past performance of any of the
Portfolios or the future performance of any Portfolio or its portfolio manag-
er. Consequently, potential investors should not consider this performance
data as an indication of the future performance of any Portfolio or of its
portfolio manager.

The performance data shown below reflects the operating expenses of each
PIMS series, which are lower than the expenses of the corresponding Portfolio.
Performance would have been lower for those series if the Portfolios' expenses
were used. In addition, the PIMS series, unlike the Portfolios, are not sold
to Separate Accounts to fund Variable Contracts. As a result, the performance
results presented below do not take into account charges or deductions against
a Separate Account or Variable Contract for cost of insurance charges, premium
loads, administrative fees, maintenance fees, premium taxes, mortality and ex-
pense risk charges, or other charges that may be incurred under a Variable
Contract for which the Portfolio serves as an underlying investment vehicle.
By contrast, Variable Contract Owners with contract value allocated to the
Portfolios will be subject to charges and expenses relating to the Variable
Contracts and Separate Accounts.

Portfolios. Share prices and investment returns will fluctuate reflecting mar-
ket conditions, as well as changes in company-specific fundamentals of portfo-
lio securities. The performance data for the benchmark indices identified be-
low does not reflect the fees or expenses of the PIMS series or the Portfo-
lios.

Average Annual Total Return for Similar Series of PIMS
and for Benchmark Indices for Periods Ended December 31, 1998

<TABLE>
<CAPTION>
PIMS or MMS Series Fund / Benchmark Index 1 3 5 Since Inception
Year Years Years Inception Date
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
PIMCO Low Duration Fund................. 7.16 7.18 6.76 8.31 5/11/87
Merrill Lynch 1-3 yr. Treasury/1/...... 7.00 6.21 5.99
PIMCO Foreign Bond Fund/2/.............. 10.03 12.76 10.01 11.17 12/3/92
J. P. Morgan Non-U.S. (Hedged)/3/...... 12.09 11.86 9.45
</TABLE>
- --------

/1/The Merrill Lynch 1-3 Year Treasury Index consists of all public U.S.
Treasury obligations having maturities from one to 2.99 years. The Index
includes income and distributions but does not reflect fees, brokerage
commissions or other expenses of investing.

/2/Prior to July 13, 1995, the Foreign Bond Fund was managed by a different
portfolio manager.

/3/The J.P. Morgan Non-U.S. Index (Hedged) is an unmanaged market index
representative of the total return performance in U.S. dollars of major non-
U.S. bond markets. The Index includes income and distributions but does not
reflect fees, brokerage commissions or other expenses of investing.

PIMCO Variable Insurance Trust
19
<PAGE>

APPENDIX A

DESCRIPTION OF DURATION

APPENDIX B

DESCRIPTION OF SECURITIES RATINGS

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Prospectus
B-1
<PAGE>

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked shortcom-
ings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Corporate Short-Term Debt Ratings

Moody's employs the following three designations, all judged to be invest-
ment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rat-
ing categories.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

B-2
PIMCO Variable Insurance Trust
<PAGE>

AA: Debt rated AA has a very strong capacity to pay interest and repay prin-
cipal and differs from the highest rated issues only in small degree.

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the ad-
dition of a plus or minus sign to show relative standing within the major rat-
ing categories.

The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for
timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

B-4
PIMCO Variable Insurance Trust
<PAGE>

PIMCO
PIMCO
Variable
Insurance
Trust

For More Information

The following documents are available that offer further information on the
Portfolios of PIMCO Variable Insurance Trust.

To request a free copy of these documents or to make inquiries about the
Portfolios, please write or call:

PIMCO Variable Insurance Trust
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

Telephone:

1-888-746-2688
Information about the Trust (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information on the operation of the public reference room may
be obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Trust are available on the Commission's Internet site at
www.sec.gov, and copies of that information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009.

SEC File Number: 811-8399
Prospectus

- --------------------------------------------------------------------------------

April 30, 1999

<PAGE>

PIMCO

PIMCO
Variable
Insurance
Trust

Intermediate Duration Bond Portfolio
Total Return Bond Portfolio II

Long Duration Bond Portfolio
Long-Term U.S. Government Bond Portfolio

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO Variable Insurance Trust

Prospectus

April 30, 1999

The Total Return Bond II and Long-Term U.S. Government Portfolios (the "Port-
folios"), which are series of PIMCO Variable Insurance Trust (the "Trust") are
designed to provide access to the professional investment management services
offered by Pacific Investment Management Company ("PIMCO" or the "Adviser").
Each Portfolio has its own investment objective and strategies and its own
risk/reward profile, which are described in this Prospectus. The investments
made by the Portfolios at any given time are not expected to be the same as
those made by other mutual funds for which PIMCO acts as investment adviser,
including mutual funds with investment objectives and strategies similar to
those of the Portfolios. Accordingly, the performance of the Portfolios can be
expected to vary from that of the other mutual funds.

This Prospectus gives vital information you should know before investing in
the Portfolios. For your own benefit and protection, please read it before you
invest and keep it for future reference.

This Prospectus should be read in conjunction with the prospectus of the
Separate Account. Both prospectuses should be read carefully and retained for
future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW.................................................................... 3

Portfolios at a Glance.................................................... 3
Investment Strategies and Risk Factors.................................... 3
Fixed Income Instruments.................................................. 3
Ratings of Debt Securities................................................ 4

DESCRIPTION OF PORTFOLIOS................................................... 5

PIMCO Total Return Bond Portfolio II...................................... 5
PIMCO Long-Term U.S. Government Bond Portfolio............................ 6

MANAGEMENT OF THE TRUST..................................................... 8

Adviser and Administrator................................................. 8
Advisory and Administrative Fees.......................................... 9
Portfolio Transactions.................................................... 9

PURCHASE OF SHARES.......................................................... 9

REDEMPTION OF SHARES........................................................ 10

NET ASSET VALUE............................................................. 10

TAXES....................................................................... 11

RISK FACTORS AND SPECIAL CONSIDERATIONS..................................... 11

OTHER INFORMATION........................................................... 15

Portfolio Names........................................................... 15
Total Return.............................................................. 15
Performance Information of Similar Funds.................................. 16

APPENDIX A.................................................................. A-1

APPENDIX B.................................................................. B-1
</TABLE>
Prospectus
2
<PAGE>

OVERVIEW

Portfolios at a Glance

<TABLE>
<CAPTION>
Intermediate
Duration Bond Credit
Portfolio Primary Investments Duration Quality(1) Foreign
------------- ------------------------------------------ --------- ---------- -------
<S> <C> <C> <C> <C>
Total Return Bond II Intermediate maturity fixed income 3-6 years Baa to Aaa 0%
securities
<CAPTION>
Long Duration Bond
Portfolio
------------------
<S> <C> <C> <C> <C>
Long-Term U.S. Long-term maturity fixed income securities 2-8 years A to Aaa 0%
Government
</TABLE>
--------
(1) As rated by Moody's Investors Service, Inc., or if unrated, determined
to be of comparable quality. For specific information concerning the
credit quality of the securities held by each Portfolio, see that
Portfolio's description of Main Investment Strategies.

Investment Strategies and Risk Factors

Fixed Income Instruments

"Fixed Income Instruments" as used in this Prospectus means:

. securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities");

. corporate debt securities, including convertible securities and
corporate commercial paper;

. mortgage-backed and other asset-backed securities;

. inflation-indexed bonds issued both by governments and
corporations;

. structured notes, including hybrid or "indexed" securities,
catastrophe bonds and loan participations;

. delayed funding loans and revolving credit facilities;

. bank certificates of deposit, fixed time deposits and bankers'
acceptances;

. repurchase agreements and reverse repurchase agreements;

. obligations of foreign governments or their subdivisions, agencies
and instrumentalities; and

. obligations of international agencies or supranational entities.

OVERVIEW (continued)
- -------------------------------------------------------------------------------
Ratings of Debt Securities

Investment Grade Debt Securities are those receiving ratings from at
least one NRSRO in one of the four highest rating categories or, if
unrated by any NRSRO, deemed comparable by PIMCO.

Lower-Rated, High Yield Securities ("'High Yield Bonds") are those rated
lower than Baa by Moody's or BBB by S&P and comparable securities. High
yield securities, which are commonly known as "junk bonds," are considered
to be predominately speculative with respect to the issuer's ability to
pay interest and repay principal.
- -------------------------------------------------------------------------------
Prospectus
4
<PAGE>

DESCRIPTION OF PORTFOLIOS

PIMCO TOTAL RETURN BOND PORTFOLIO II

Investment Objective

The Total Return Bond Portfolio II seeks to maximize total return, consis-
tent with preservation of capital and prudent investment management.

Main Investment Strategies

Risk Factors

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Total Return
Bond Portfolio II.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.65% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.

- -------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
PIMCO Variable Insurance Trust
5
<PAGE>

PIMCO LONG-TERM U.S. GOVERNMENT BOND PORTFOLIO

Investment Objective

The Long-Term U.S. Government Bond Portfolio seeks to maximize total return,
consistent with the preservation of capital and prudent investment management.

Main Investment Strategies

The Portfolio may invest all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Portfolio may en-
ter into a series of purchase and sale contracts or use other investment tech-
niques to obtain market exposure to the securities in which it primarily in-
vests.

Risk Factors

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this portfolio is not provided because this
portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Long-Term U.S.
Government Bond Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.65% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.

- -------------------------------------------------------------------------------
Prospectus
6
<PAGE>

- --------------------------------------------------------------------------------
Example:

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
PIMCO Variable Insurance Trust
7
<PAGE>

MANAGEMENT OF THE TRUST

Adviser and Administrator

The table below provides information about the individual portfolio managers
responsible for management of the Trust's Portfolios, including their occupa-
tions for the past five years.

<TABLE>
<CAPTION>
Portfolio Manager And Business
Portfolio Experience (Past Five Years)
--------- ------------------------------
<C> <S>
Total Return Bond Portfolio II William H. Gross, Managing Director,
PIMCO. A Fixed Income Portfolio
Manager, Mr. Gross is one of the
founders of PIMCO and has managed the
PIMCO Total Return Fund II for the
PIMCO Funds: Pacific Investment
Management Series since its inception
on December 30, 1991.

Long-Term U.S. Government Bond Portfolio Pasi Hamalainen, Executive Vice
President, PIMCO. A Fixed Income
Portfolio Manager, Mr. Hamalainen
joined PIMCO in 1994 and has managed
the PIMCO Long-Term U.S. Government
Fund since July 1, 1997 for the PIMCO
Funds: Pacific Investment Management
Series.
</TABLE>

Advisory and Administrative Fees

<TABLE>
<S> <C>
Advisory Fee Rate................................................... 0.40%
Administrative Fee Rate............................................. 0.25%
</TABLE>

Portfolio Transactions

Some securities considered for investment by the Portfolios also may be ap-
propriate for other clients served by the Adviser. If a purchase or sale of
securities consistent with the investment policies of a Portfolio and one or
more of these clients served by the Adviser or Portfolio Manager is considered
at or about the same time, transactions in such securities will be allocated
among the Portfolio and clients in a manner deemed fair and reasonable by the
Adviser. The Adviser may aggregate orders for the Portfolios with simultaneous
transactions entered into on behalf of other clients of the Adviser.

PURCHASE OF SHARES

insurance policies for which the Portfolios served as an investment medium
might at some time be in conflict. However, the Trust's Board of Trustees and
each insurance company with a separate account allocating assets to the Port-
folios are required to monitor events to identify any material conflicts be-
tween variable annuity contract owners and variable life insurance policy own-
ers, and would have to determine what action, if any, should be taken in the
event of such a conflict. If such a conflict occurred, an insurance company
participating in the Portfolios might be required to redeem the investment of
one or more of its separate accounts from the Portfolios, which might force
the Portfolios to sell securities at disadvantageous prices.

REDEMPTION OF SHARES

NET ASSET VALUE

TAXES

RISK FACTORS AND SPECIAL CONSIDERATIONS

U.S. Government Securities

Corporate Debt Securities

Convertible Securities and Equity Securities

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. Each Portfolio may invest in float-
ing rate debt instruments ("floaters") and engage in credit spread trades. The
interest rate on a floater is a variable rate which is tied to another inter-
est rate, such as a money-market index or Treasury bill rate, and resets peri-
odically. While variable and floating rate securities provide a Portfolio with
a certain degree of protection against rises in interest rates, a Portfolio
will participate in any declines in interest rates as well.
Prospectus
12
<PAGE>

Inflation-Indexed Bonds

Mortgage-Related and Other Asset-Backed Securities

Derivative Instruments

Catastrophe Bonds

Temporary Defensive Positions

Illiquid Securities

Year 2000 Readiness Disclosure

working toward mitigating the risks associated with the so-called "year 2000
problem." However, there can be no assurance that the problem will be cor-
rected in all respects and that the Portfolios' operations and services pro-
vided to shareholders will not be adversely effected, nor can there be any as-
surance that the year 2000 problem will not have an adverse effect on the en-
tities whose securities are held by the Portfolios or on domestic or global
markets or economies, generally.

OTHER INFORMATION

Portfolio Names

Total Return

Performance Information of Similar Funds

The following table provides information concerning the historical total re-
turn performance of the Institutional Class shares of certain series of PIMCO
Funds: Pacific Investment Management Series ("PIMS"). Each PIMS series has in-
vestment objectives, policies and strategies substantially similar to those of
its respective Portfolio and is currently managed by the same portfolio manag-
er. While the investment objectives and policies of each PIMS series and its
respective Portfolio are similar, they
PIMCO Variable Insurance Trust
15
<PAGE>

are not identical and the performance of the PIMS series and the Portfolio
will vary. The data is provided to illustrate the past performance of the Ad-
viser in managing a substantially similar investment portfolio and does not
represent the past performance of any of the Portfolios or the future perfor-
mance of any Portfolio or its portfolio manager. Consequently, potential in-
vestors should not consider this performance data as an indication of the fu-
ture performance of any Portfolio or of its portfolio manager.

Average Annual Total Return for Similar Series of PIMS
and for Benchmark Indices for Periods Ended December 31, 1998

<TABLE>
<CAPTION>
1 3 5 Since Inception
PIMS Series Fund / Benchmark Index Year Years Years Inception Date
- ---------------------------------- ----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
PIMCO Total Return Fund II............... 9.63 7.79 7.82 8.49 12/30/91
Lehman Aggregate Bond/1/................ 8.69 7.29 7.27
PIMCO Long-Term U.S. Government Fund..... 13.40 9.52 9.87 13.05 7/1/91
Lehman Int. & 20+ Treas. Blend/2/....... 12.75 8.64 8.95
</TABLE>
- --------
/1/The Lehman Brothers Aggregate Bond Index consists of the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Mortgage-Backed
Securities Index, and the Lehman Brothers Asset-Backed Securities Index. The
Government/Corporate Bond Index consists of the Lehman Brothers Government
Bond Index and the Lehman Brothers Corporate Bond Index. The Government Bond
Index includes all public obligations of the U.S. Treasury (excluding flower
bonds and foreign-targeted issues), its agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. Government. The
Corporate Bond Index includes all publicly issued, fixed rate, non-
convertible investment grade U.S. dollar denominated corporate debt
registered with the SEC; it also includes debt issued or guaranteed by
foreign sovereign governments, municipalities, and governmental or
international agencies. The Mortgage-Backed Securities Index consists of 15-
and 30-year fixed rate securities backed by mortgage pools of the Government
National Mortgage Association, the Federal Home Loan Mortgage Corporation and
the Federal National Mortgage Association (excluding buydowns, manufactured
homes and graduated equity mortgages). The Asset-Backed Securities Index
consists of credit card, auto and home equity loans (excluding subordinated
tranches) with an average life of one year. Each Index includes income and
distributions but does not reflect fees, brokerage commissions or other
expenses of investing.

/2/The index used for the Long-Term U.S. Government Fund is a blend of the
Lehman Intermediate Treasury Index and the Lehman 20+ Year Treasury Index,
proportionally weighted to equal a 10 year duration. The Lehman 20+ Year
Treasury Index is composed of U.S. Treasury issues with 20 years or more to
maturity, and the Lehman Intermediate Treasury Index is composed of U.S.
Treasury issues maturing between 5 and 10 years. Each index includes income
and distributions but does not reflect fees, brokerage commissions or other
expenses of investing.

Prospectus
16
<PAGE>

APPENDIX A

DESCRIPTION OF DURATION

APPENDIX B

DESCRIPTION OF SECURITIES RATINGS

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Prospectus
B-1
<PAGE>

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked shortcom-
ings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Corporate Short-Term Debt Ratings

Moody's employs the following three designations, all judged to be invest-
ment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rat-
ing categories.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

B-2
PIMCO Variable Insurance Trust
<PAGE>

AA: Debt rated AA has a very strong capacity to pay interest and repay prin-
cipal and differs from the highest rated issues only in small degree.

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the ad-
dition of a plus or minus sign to show relative standing within the major rat-
ing categories.

The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for
timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

B-4
PIMCO Variable Insurance Trust
<PAGE>

PIMCO
Variable
Insurance
Trust

For More Information

The following documents are available that offer further information on the
Portfolios of PIMCO Variable Insurance Trust.

To request a free copy of these documents or to make inquiries about the
Portfolios, please write or call:

PIMCO Variable Insurance Trust
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

Telephone:
1-888-746-2688

SEC File Number: 811-8399
Prospectus

- --------------------------------------------------------------------------------

April 30, 1999

<PAGE>

PIMCO
PIMCO
Variable
Insurance
Trust Stock Portfolio

Capital Appreciation Portfolio

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO Variable Insurance Trust

Prospectus

April 30, 1999

The PIMCO Capital Appreciation Portfolio (the "Portfolio"), which is a series
of PIMCO Variable Insurance Trust (the "Trust"), is designed to provide access
to the professional investment management services offered by PIMCO Advisors
L.P. ("PIMCO Advisors" or the "Adviser"). The investments made by the Portfo-
lio at any given time are not expected to be the same as those made by other
mutual funds for which PIMCO Advisors acts as investment adviser, including
mutual funds with investment objectives and strategies similar to those of the
Portfolio. Accordingly, the performance of the Portfolio can be expected to
vary from that of the other mutual funds.

This Prospectus gives vital information you should know before investing in
the Portfolio. For your own benefit and protection, please read it before you
invest and keep it for future reference.

Shares of the Portfolio currently are sold to segregated asset accounts ("Sep-
arate Accounts") of insurance companies which fund variable annuity contracts
and variable life insurance policies ("Variable Contracts"). Assets in the
Separate Account are invested in shares of the Portfolio in accordance with
allocation instructions received from owners of the Variable Contracts ("Vari-
able Contract Owners"). Variable Contract Owners do not deal directly with the
Portfolio to purchase or redeem shares. The allocation rights of Variable Con-
tract Owners are described in the accompanying Separate Account prospectus.
Shares of the Portfolio also may be sold to qualified pension and retirement
plans outside of the separate account context.

This Prospectus should be read in conjunction with the prospectus of the
Separate Account. Both prospectuses should be read carefully and retained for
future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
DESCRIPTION OF PORTFOLIO.................................................... 3

PIMCO Capital Appreciation Portfolio...................................... 3

MANAGEMENT OF THE TRUST..................................................... 5

Adviser and Administrator................................................. 5
Advisory and Administrative Fees.......................................... 6
Portfolio Transactions.................................................... 6

PURCHASE OF SHARES.......................................................... 6

REDEMPTION OF SHARES........................................................ 7

NET ASSET VALUE............................................................. 7

TAXES....................................................................... 8

RISK FACTORS AND SPECIAL CONSIDERATIONS..................................... 8

OTHER INFORMATION........................................................... 11
Performance Information of Similar Fund................................... 11
</TABLE>
Prospectus
2
<PAGE>

DESCRIPTION OF PORTFOLIO

PIMCO CAPITAL APPRECIATION PORTFOLIO

Investment Objective

The Capital Appreciation Portfolio seeks growth of capital.

Main Investment Strategies

Risk Factors

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other gov-
ernment agency.

Performance

Performance information for this Portfolio is not provided because this
Portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Capital Appre-
ciation Portfolio.

- -------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

<TABLE>
<S> <C>
Advisory Fee 0.60 %
Administrative Fee 0.25 %
Other Expenses* 0.02 %
-------
Total Portfolio Operating
Expenses 0.87 %
Expense Reduction* (0.02)%
------
Net Portfolio Operating
Expenses 0.85 %
</TABLE>

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses
would exceed, due to organizational expenses and the payment by the Portfolio
of its pro rata portion of the Trust's Trustees' fees, 0.85% of average daily
net assets. "Other Expenses" are based on estimates for the current fiscal
year.

- -------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
3
<PAGE>

- --------------------------------------------------------------------------------
Example

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 87 $ 271
</TABLE>
Prospectus
4
<PAGE>

MANAGEMENT OF THE TRUST

Adviser and Administrator

PIMCO Advisors serves as investment adviser to the Portfolio. PIMCO Advisors
is one of the largest investment management firms in the U.S. As of March 31,
1999, PIMCO Advisors and its subsidiary partnerships had over $165 billion in
assets under management. The general partners of PIMCO Advisors are PIMCO
Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH"). PIMCO Partners, G.P.
is a general partnership between PIMCO Holding LLC, a Delaware limited liabil-
ity company and an indirect wholly-owned subsidiary of Pacific Life Insurance
Company, and PIMCO Partners LLC, a California limited liability company con-
trolled by the current Managing Directors and two former Managing Directors of
PIMCO. PIMCO Partners, G.P. is the sole general partner of PAH.

PIMCO Advisors is responsible for the investment program for the Portfolio.
PIMCO Advisors has engaged Cadence Capital Management ("Cadence") to serve as
Portfolio Manager. Cadence is a subsidiary partnership of PIMCO Advisors.
PIMCO Advisors (and not the Portfolio or the Trust) compensates the Portfolio
Manager from its advisory fee. Under the supervision of PIMCO Advisors, the
Portfolio Manager makes determinations with respect to the purchase and sale
of portfolio securities, and places orders for execution of the Portfolio's
transactions.

Cadence is a general partnership, the two partners of which are PIMCO Advi-
sors as the supervisory partner, and Cadence Capital Management Inc. as the
managing partner. Accounts managed by Cadence had combined assets as of March
31, 1999 of approximately $7 billion. Cadence's address is Exchange Place, 53
State Street, Boston, Massachusetts 02109.

The table below provides information about the individual portfolio managers
responsible for management of the Portfolio, including their occupations for
the past five years.

<TABLE>
<CAPTION>
Portfolio Manager And Business Experience (Past
Portfolio Five Years)
--------- -----------------------------------------------
<C> <S>
Capital Appreciation Portfolio David B. Breed, William B. Bannick,
Katherine A. Burdon, each Managing Directors,
Cadence; and Peter B. McManus, Director of
Portfolio Management, Cadence. Mr. Breed is one
of the founders of Cadence and has managed the
Capital Appreciation Fund of the PIMCO Funds:
Multi-Manager Series since inception on March
8, 1991. Mr. Bannick joined the predecessor of
Cadence in 1992 and has co-managed the Capital
Appreciation Fund since 1993. Ms. Burdon joined
the predecessor of Cadence in 1993 and has co-
managed the Capital Appreciation Fund since
1996. Mr. McManus previously served as a Vice
President of the Bank of Boston and joined
Cadence in 1994. He has co-managed the Capital
Appreciation Fund since 1996.
</TABLE>

Pacific Investment Management Company ("PIMCO") serves as administrator to
the Portfolio. PIMCO provides administrative services to the Portfolio which
include clerical help, accounting, bookkeeping, internal audit services, prep-
aration of reports to the Portfolio's shareholders or other appropriate par-
ties, regulatory filings and certain other services required by the Portfolio.
PIMCO has hired PIMCO Advisors to provide certain services to the Portfolio as
sub-administrator.

PIMCO and PIMCO Advisors may use their assets and resources, including their
profits from advisory or administrative fees paid by the Portfolio, to pay in-
surance companies for services rendered to current and prospective owners of
PIMCO Variable Insurance Trust
5
<PAGE>

Variable Contracts, including the provision of support services such as pro-
viding information about the Trust and the Portfolio, the delivery of Trust
documents, and other services. Any such payments are made by PIMCO or PIMCO
Advisors, and not by the Trust, and PIMCO and PIMCO Advisors do not receive
any separate fees for such expenses.

Advisory and Administrative Fees

The Portfolio features fixed advisory and administrative fee rates. For in-
vestment advisory and administrative services as described below, the Portfo-
lio pays monthly fees at an annual rate based on the average daily net assets
of the Portfolio as follows:

<TABLE>
<S> <C>
Advisory Fee Rate................................................... 0.60%
Administrative Fee Rate............................................. 0.25%
</TABLE>

The administrative fee covers most of the expenses of the Portfolio, includ-
ing legal, audit, custody, transfer agency and certain other services, and is
responsible for the costs of registration of the Trust's shares and the print-
ing of prospectuses and shareholder reports for current shareholders or other
appropriate parties.

The Portfolio is responsible for bearing certain expenses associated with
its operations that are not provided or procured by PIMCO. While it is ex-
pected that these expenses generally will not have a material effect on the
Portfolio expense ratio, they may have a material effect in certain circum-
stances, such as when the average net assets of the Portfolio are lower than
anticipated. PIMCO has contractually undertaken to waive some or all of its
administrative fee, subject to potential future reimbursement within three
years from the date such fee was waived, as described above in "Description of
Portfolio."

Portfolio Transactions

The Adviser and Portfolio Manager have discretion to select the brokers and
dealers with which it places orders for the purchase and sale of portfolio in-
vestments. In doing so, the Adviser or Portfolio Manager will seek the best
price and execution of the Portfolio's orders. The Portfolio may pay higher
commission rates than the lowest available when the Adviser or Portfolio Man-
ager believes it is reasonable in light of the value of the brokerage and re-
search services provided by the broker effecting the transaction.

The Adviser and Portfolio Manager manage the Portfolio without regard gener-
ally to restrictions on portfolio turnover. A Portfolio with a higher rate of
portfolio turnover will generally incur higher transaction costs.

Some securities considered for investment by the Portfolio also may be ap-
propriate for other clients served by the Adviser or Portfolio Manager. If a
purchase or sale of securities consistent with the investment policies of a
Portfolio and one or more of these clients served by the Adviser or Portfolio
Manager is considered at or about the same time, transactions in such securi-
ties will be allocated among the Portfolio and clients in a manner deemed fair
and reasonable by the Adviser or Portfolio Manager. The Adviser or Portfolio
Manager may aggregate orders for the Portfolio with simultaneous transactions
entered into on behalf of other clients of the Adviser or Portfolio Manager.

PURCHASE OF SHARES

As of the date of this Prospectus, shares of the Portfolio are offered for
purchase by Separate Accounts to serve as an investment medium for Variable
Contracts issued by life insurance companies, and to qualified pension and re-
tirement plans outside of the separate account context.
Prospectus
6
<PAGE>

While the Portfolio currently does not foresee any disadvantages to Variable
Contract Owners if the Portfolio serves as an investment medium for both vari-
able annuity contracts and variable life insurance policies, due to differ-
ences in tax treatment or other considerations, it is theoretically possible
that the interest of owners of annuity contracts and insurance policies for
which the Portfolio served as an investment medium might at some time be in
conflict. However, the Trust's Board of Trustees and each insurance company
with a separate account allocating assets to the Portfolio are required to
monitor events to identify any material conflicts between variable annuity
contract owners and variable life insurance policy owners, and would have to
determine what action, if any, should be taken in the event of such a con-
flict. If such a conflict occurred, an insurance company participating in the
Portfolio might be required to redeem the investment of one or more of its
separate accounts from the Portfolio, which might force the Portfolio to sell
securities at disadvantageous prices.

The Trust and its distributor each reserves the right, in its sole discre-
tion, to suspend the offering of shares of the Portfolio or to reject any pur-
chase order, in whole or in part, or to redeem shares, in whole or in part,
when, in the judgment of management, such suspension or rejection is in the
best interests of the Trust. The sale of shares will be suspended during any
period in which the Exchange is closed for other than weekends or holidays, or
if permitted by the rules of the SEC, when trading on the Exchange is re-
stricted or during an emergency which makes it impracticable for the Portfolio
to dispose of its securities or to determine fairly the value of its net as-
sets, or during any other period as permitted by the SEC for the protection of
investors. In the event that the Portfolio ceases offering its shares, any in-
vestments allocated to the Portfolio will, subject to any necessary regulatory
approvals, be invested in another series of the Trust.

REDEMPTION OF SHARES

NET ASSET VALUE

The net asset value per share of the Portfolio is determined once each day
as of 4:00 p.m. Eastern time, or as of such other time designated by the New
York Stock Exchange (the "Exchange") as the close of trading for that day
("closing"). Net asset value will not be determined on any day on which the
New York Stock Exchange is closed. Net asset value is determined by dividing
the total value of the Portfolio's investments and other assets, less any lia-
bilities, by the total outstanding shares of the Portfolio.
PIMCO Variable Insurance Trust
7
<PAGE>

In determining its daily net asset value, the Portfolio uses price data re-
ceived shortly after 4:00 p.m. Eastern time believed to reflect the current
market value of securities held by the Portfolio as of the closing of the Ex-
change. The Portfolio intends to use these prices regardless of the impact of
any post-closing adjustments to securities prices, as long as, in the view of
the Portfolio, such prices represent the current market value of the securi-
ties as of the time selected by the Portfolio for the calculation of net asset
value.

TAXES

The Portfolio intends to qualify as a regulated investment company annually
and to elect to be treated as a regulated investment company for federal in-
come tax purposes. As such, the Portfolio generally will not pay federal in-
come tax on the income and gains it pays as dividends to its shareholders. In
order to avoid a 4% federal excise tax, the Portfolio intends to distribute
each year substantially all of its net income and gains.

The Portfolio also intends to comply with diversification requirements im-
posed by regulations under Section 817(h) of the Internal Revenue Code, as
amended. Compliance with these diversification rules generally will limit the
ability of the Portfolio to invest greater than 55% of its total assets in di-
rect obligations of the U.S. Treasury (or any other issuer), or to invest pri-
marily in securities issued by a single agency or instrumentality of the U.S.
Government.

If the Portfolio fails to meet the diversification requirement under Section
817(h), income with respect to Variable Contracts invested in the Portfolio at
any time during the calendar quarter in which the failure occurred could be-
come currently taxable to the owners of the Variable Contracts and income for
prior periods with respect to such contracts also could be taxable, most
likely in the year of the failure to achieve the required diversification.
Other adverse tax consequences could also ensue.

Please refer to the prospectus for the Separate Account and Variable Con-
tract for information regarding the federal income tax treatment of distribu-
tions to the Separate Account. See "Additional Information--Additional Tax In-
formation" in the Portfolio's Statement of Additional Information for more in-
formation on taxes.

RISK FACTORS AND SPECIAL CONSIDERATIONS

The Portfolio's risk profile is largely defined by the Portfolio's principal
securities and the investment practices that it uses. You can find a concise
description of the Portfolio's risk profile in the section captioned "Descrip-
tion of Portfolio" in this Prospectus. As with any mutual fund, there is no
guarantee that the Portfolio will earn income or show a positive total return
over any period of time, and you could lose money by investing in the Portfo-
lio.

The Portfolio is permitted to use, within limits established by the Trustees
and imposed by applicable laws, a wide variety of securities and investment
practices, each of which has certain risks and opportunities associated with
it. To
Prospectus
8
<PAGE>

the extent that the Portfolio uses these securities or practices, its overall
performance may be affected, either positively or negatively. The following
pages describe certain of the securities in which the Portfolio may invest and
certain of investment practices in which the Portfolio may engage, along with
the risks associated with them. Additional information about these and other
investments and investment practices may be found in the Statement of Addi-
tional Information, which you may obtain free of charge by calling (888) 746-
2688.

Small and Medium Capitalization Stocks

The Portfolio may invest in small or medium capitalization stocks. General-
ly, small market capitalization is considered to be less than $1.5 billion and
large market capitalization is considered to be more than $5 billion. Invest-
ments in smaller, less seasoned companies may involve greater risks than cus-
tomarily are associated with more established companies. The securities of
smaller companies may be subject to abrupt or erratic market movements, and
their securities may have limited liquidity. The Portfolio may have to sell
portfolio securities at disadvantageous times and prices if redemptions re-
quire the Portfolio to liquidate its securities positions.

The Portfolio may also invest in stocks of companies with medium market cap-
italizations. Generally, issuers with market capitalizations within the range
of $100 million to $5 billion may be regarded as being issuers with medium
market capitalizations. Such investments share some of the risk characteris-
tics of investments in stocks of companies with small market capitalizations
described above, although their stocks tend to be more liquid and less vola-
tile than those of smaller capitalization issuers.

Convertible Securities

A convertible security is a fixed income security that may be converted into
a prescribed amount of common stock at a specified formula. The price of the
convertible security will normally vary in some proportion to changes in the
price of the underlying common stock because of the conversion feature, and as
such is subject to risks relating to the activities of the issuer and/or gen-
eral market and economic conditions. The income component of convertible secu-
rities causes fluctuations based upon changes in interest rates and the credit
quality of the issuer. In addition, convertible securities are often lower-
rated securities. The Portfolio may be required to permit the issuer of a con-
vertible security to redeem the security, convert it into the underlying com-
mon stock, or sell it to a third party, which could have an adverse effect on
the Portfolio's ability to achieve its investment objective.

U.S. Government Securities

U.S. Government securities are obligations of and, in certain cases, guaran-
teed by, the U.S. Government, its agencies or instrumentalities. The U.S. Gov-
ernment does not guarantee the net asset value of the Portfolio's shares. U.S.
Government securities may include zero coupon securities, which do not dis-
tribute interest on a current basis and tend to be subject to greater market
risk than interest-paying securities of similar maturities.

Corporate Debt Securities

Temporary Defense Positions

The Portfolio may temporarily not be invested primarily in equity securities
immediately following the commencement of operations or after receipt of sig-
nificant new monies. While attempting to identify suitable investments, the
Portfolios may hold assets in cash, short-term U.S. Government securities, and
other money market instruments.

Illiquid Securities

The Portfolio may invest up to 15% of its net assets in illiquid securities.
"Illiquid Securities" for this purpose means securities that cannot be dis-
posed of within seven days in the ordinary course of business at approximately
the amount at which the Portfolio has valued the securities. The Adviser or
Portfolio Manager may be subject to significant delays in disposing of illiq-
uid securities and may not be able to dispose of these securities at the de-
sired time and price. Transactions in illiquid securities may entail addi-
tional registration expenses and other transaction costs.

Year 2000 Readiness Disclosure

Many of the services provided to the Portfolio depend on the smooth func-
tioning of computer systems. Many systems in use today cannot distinguish be-
tween the year 1900 and the year 2000. Should any of the service systems fail
to process information properly, that could have an adverse impact on the
Portfolio's operations and services provided to shareholders. PIMCO, PIMCO Ad-
visors, Custodian, and certain other service providers to the Portfolio have
reported that each is working toward mitigating the risks associated with the
so-called "year 2000 problem." However, there can be no assurance that the
problem will be corrected in all respects and that the Portfolio's operations
and services provided to shareholders will not be adversely effected, nor can
there be any assurance that the year 2000 problem will not have an adverse ef-
fect on the entities whose securities are held by the Portfolio or on domestic
or global markets or economies, generally.
Prospectus
10
<PAGE>

OTHER INFORMATION

Performance Information of Similar Fund

The following table provides information concerning the historical total re-
turn performance of the Institutional Class shares of the PIMCO Capital Appre-
ciation Fund series of PIMCO Funds: Multi-Manager Series ("MMS"). The MMS se-
ries has investment objectives, policies and strategies substantially similar
to those of the Portfolio and is currently managed by the same portfolio man-
ager. While the investment objectives and policies of MMS series and the Port-
folio are similar, they are not identical and the performance of the MMS se-
ries and the Portfolio will vary. The data is provided to illustrate the past
performance of the Adviser or Portfolio Manager in managing a substantially
similar investment portfolio and does not represent the past performance of
the Portfolio or the future performance of the Portfolio or its portfolio man-
ager. Consequently, potential investors should not consider this performance
data as an indication of the future performance of the Portfolio or of its
portfolio manager.

The performance data shown below reflects the operating expenses of the MMS
series, which are lower than the expenses of the Portfolio. Performance would
have been lower for those series if the Portfolio's expenses were used. In ad-
dition, the MMS series, unlike the Portfolio, is not sold to Separate Accounts
to fund Variable Contracts. As a result, the performance results presented be-
low do not take into account charges or deductions against a Separate Account
or Variable Contract for cost of insurance charges, premium loads, administra-
tive fees, maintenance fees, premium taxes, mortality and expense risk
charges, or other charges that may be incurred under a Variable Contract for
which the Portfolio serves as an underlying investment vehicle. By contrast,
Variable Contract Owners with contract value allocated to the Portfolio will
be subject to charges and expenses relating to the Variable Contracts and Sep-
arate Accounts.

The MMS series' performance data shown below is calculated in accordance
with standards prescribed by the SEC for the calculation of average annual to-
tal return information. The investment results of the MMS series presented be-
low are unaudited and are not intended to predict or suggest results that
might be experienced by the MMS series or the Portfolio. Share prices and in-
vestment returns will fluctuate reflecting market conditions, as well as
changes in company-specific fundamentals of portfolio securities. The perfor-
mance data for the benchmark indices identified below does not reflect the
fees or expenses of the PIMS series or the Portfolio.

Average Annual Total Return for Similar Series of MMS
and for Benchmark Indices for Periods Ended December 31, 1998

<TABLE>
<CAPTION>
1 3 5 Since Inception
MMS Series Fund / Benchmark Index Year Years Years Inception Date
- --------------------------------- ----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
PIMCO Capital Appreciation Fund.......... 17.59 26.02 21.32 19.72 3/8/91
S & P 500/1/............................ 28.58 28.23 24.06
</TABLE>
- --------
/1/The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
containing common stocks of 500 industrial, transportation, utility and
financial companies, regarded as generally representative of the U.S. stock
market. The Index reflects income and distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
PIMCO Variable Insurance Trust
11
<PAGE>

PIMCO
Variable
Insurance
Trust

For More Information

The following documents are available that offer further information on the
Portfolio and PIMCO Variable Insurance Trust.

Annual/Semi-Annual Reports to Shareholders The Trust's annual and semi-annual
reports include a discussion of the market conditions and investment strategies
that significantly affected the Portfolio's performance during its last fiscal
year or other period.

Statement of Additional Information (SAI) The SAI contains additional
information about the Portfolio. A current SAI has been filed with the
Securities and Exchange Commission, and is incorporated into this prospectus by
reference.

To request a free copy of these documents or to make inquiries about the
Portfolio, please write or call:

PIMCO Variable Insurance Trust
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

Telephone:
1-888-746-2688

SEC File Number: 811-8399

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999

<PAGE>

PIMCO

PIMCO
Variable
Insurance
Trust
Long Duration Bond Portfolio

Long-Term U.S. Government Portfolio

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

PIMCO Variable Insurance Trust

Prospectus

April 30, 1999

The Long Term U.S. Government Portfolio (the "Portfolio"), which is a series
of PIMCO Variable Insurance Trust (the "Trust"), is designed to provide access
to the professional investment management services offered by Pacific Invest-
ment Management Company ("PIMCO" or the "Adviser"). The investments made by
the Portfolio at any given time are not expected to be the same as those made
by other mutual funds for which PIMCO acts as investment adviser, including
mutual funds with investment objectives and strategies similar to those of the
Portfolio. Accordingly, the performance of the Portfolio can be expected to
vary from that of the other mutual funds.

This Prospectus gives vital information you should know before investing in
the Portfolio. For your own benefit and protection, please read it before you
invest and keep it for future reference.

This Prospectus should be read in conjunction with the prospectus of the
Separate Account. Both prospectuses should be read carefully and retained for
future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW.................................................................... 3

Investment Strategies and Risk Factors.................................... 3
Fixed Income Instruments.................................................. 3
Ratings of Debt Securities................................................ 3

DESCRIPTION OF PORTFOLIO.................................................... 5

PIMCO Long-Term U.S. Government Bond Portfolio............................ 5

MANAGEMENT OF THE TRUST..................................................... 7

Adviser and Administrator................................................. 7
Advisory and Administrative Fees.......................................... 8
Portfolio Transactions.................................................... 8

PURCHASE OF SHARES.......................................................... 8

REDEMPTION OF SHARES........................................................ 9

NET ASSET VALUE............................................................. 9

TAXES....................................................................... 10

RISK FACTORS AND SPECIAL CONSIDERATIONS..................................... 10

OTHER INFORMATION........................................................... 14

Total Return.............................................................. 14
Performance Information of Similar Funds.................................. 14

APPENDIX A.................................................................. A-1

APPENDIX B.................................................................. B-1
</TABLE>
Prospectus
2
<PAGE>

OVERVIEW
- ------------------------------------------------------------------------------
Investment Strategies and Risk Factors

Investment Strategies. The Portfolio has specific strategies that it may use
to pursue its investment objective, and specific types of securities in which
the Portfolio may invest, which are described under the heading "Main Invest-
ment Strategies" in the Description of Portfolio. Percentage limitations de-
scribed in this Prospectus apply at the time of investment, and may vary with
fluctuations in the value of a Portfolio's investment portfolio.

Risk Factors. The major risks associated with investing in the Portfolio are
described under the heading "Risk Factors" in the Description of Portfolio.
Please be sure to read all risk disclosures carefully before investing. This
Prospectus does not describe all of the risks of every security or technique
that the Portfolio may use. For such information, please refer to the Statement
of Additional Information.

Fixed Income Instruments

"Fixed Income Instruments" as used in this Prospectus means:

. securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government securities");

. corporate debt securities, including convertible securities and
corporate commercial paper;

. mortgage-backed and other asset-backed securities;

. inflation-indexed bonds issued both by governments and corporations;

. structured notes, including hybrid or "indexed" securities, catastrophe
bonds and loan participations;

. delayed funding loans and revolving credit facilities;

. bank certificates of deposit, fixed time deposits and bankers'
acceptances;

. repurchase agreements and reverse repurchase agreements;

. obligations of foreign governments or their subdivisions, agencies and
instrumentalities; and

. obligations of international agencies or supranational entities.

Ratings of Debt Securities

OVERVIEW (continued)
- -------------------------------------------------------------------------------
Investment Grade Debt Securities are those receiving ratings from at least
one NRSRO in one of the four highest rating categories or, if unrated by any
NRSRO, deemed comparable by PIMCO.

Lower-Rated, High Yield Securities ("'High Yield Bonds") are those rated
lower than Baa by Moody's or BBB by S&P and comparable securities. High yield
securities, which are commonly known as "junk bonds," are considered to be pre-
dominately speculative with respect to the issuer's ability to pay interest and
repay principal.
- -------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
4
<PAGE>

DESCRIPTION OF THE PORTFOLIO

PIMCO LONG-TERM U.S. GOVERNMENT BOND PORTFOLIO

Investment Objective

The Long-Term U.S. Government Bond Portfolio seeks to maximize total return,
consistent with the preservation of capital and prudent investment management.

Main Investment Strategies

The Long-Term U.S. Government Bond Portfolio invests under normal circum-
stances at least 65% of its net assets in a diversified portfolio of primarily
U.S. Government securities, which may be represented by futures contracts (in-
cluding related options) with respect to such securities, and options on such
securities, when the Adviser deems it appropriate to do so. Assets not invested
in U.S. Government securities may be invested in other types of Fixed Income
Instruments. The Portfolio will normally have a minimum average portfolio dura-
tion of eight years.

The Portfolio's investments in Fixed Income Instruments are limited to those
of U.S. dollar-denominated securities of domestic (U.S.) issuers that are rated
at least A by Moody's or S&P, or, if unrated, determined by the Adviser to be
of comparable quality. In addition, the Portfolio will not acquire a security
if, as a result, more than 10% of the Portfolio's assets would be invested in
securities rated below Aa by Moody's or below AA by S&P, or if more than 25% of
the Portfolio's assets would be invested in securities rated Aa by Moody's or
AA by S&P.

Risk Factors

An investment in the Long-Term U.S. Government Bond Portfolio is subject to
investment risk, including possible loss of the principal amount invested. The
Portfolio is subject to interest rate risk. Generally, the value of fixed
income securities will change inversely with changes in interest rates. As
interest rates rise, market value tends to decrease. This risk will be greater
for long-term securities than for short-term securities. Derivative instruments
may be particularly sensitive to changes in prevailing interest rates. The
Portfolio also is subject to credit risk, which is the possibility that an
issuer of a security, or a counterparty to a derivative contract, will default
or become unable to meet a financial obligation. For a further explanation, see
"Risk Factors and Special Considerations," which you should read carefully
before investing.

An investment in the Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other govern-
ment agency.

Performance

Performance information for this portfolio is not provided because this
portfolio has not commenced operations as of the date of this Prospectus.

Fees and Expenses

The table below describes the fees and expenses (as a percentage of net as-
sets) that you may pay in connection with an investment in the Long-Term U.S.
Government Bond Portfolio.

- --------------------------------------------------------------------------------
Annual Portfolio Operating Expenses
(expenses deducted from Portfolio assets)

* PIMCO has agreed to reduce its administrative fee, subject to potential fu-
ture reimbursement, to the extent that total Portfolio operating expenses would
exceed, due to organizational expenses and the payment by the Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.65% of average daily net as-
sets. "Other Expenses" are based on estimates for the current fiscal year.

- --------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
5
<PAGE>

- --------------------------------------------------------------------------------
Example:

This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other portfolios. The example assumes:

. A $10,000 investment for the time periods shown;

. Redemption at the end of each period;

. A hypothetical 5% annual return; and

. Portfolio operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<S> <C>
1 Year 3 Years
$ 66 $ 208
</TABLE>
Prospectus
6
<PAGE>

MANAGEMENT OF THE TRUST

Adviser and Administrator

PIMCO serves as investment adviser to the Portfolio. PIMCO manages the in-
vestment of the assets of the Portfolio, and places orders for the purchase
and sale of the Portfolio's investments directly with brokers or dealers se-
lected by it in its discretion. See "Portfolio Transactions." PIMCO is one of
the premier fixed income investment management firms in the United States.
PIMCO was founded in 1971, and had over $165 billion in assets under manage-
ment as of March 31, 1999. PIMCO invests in all sectors of the fixed income
market using its total return philosophy -- seeking capital appreciation as
well as yield. PIMCO is a subsidiary partnership of PIMCO Advisors. The gen-
eral partners of PIMCO Advisors are PIMCO Partners, G.P. and PIMCO Advisors
Holdings L.P. ("PAH"). PIMCO Partners, G.P. is a general partnership between
PIMCO Holding LLC, a Delaware limited liability company and an indirect whol-
ly-owned subsidiary of Pacific Life Insurance Company, and PIMCO Partners LLC,
a California limited liability company controlled by the current Managing Di-
rectors and two former Managing Directors of PIMCO. PIMCO Partners, G.P. is
the sole general partner of PAH. PIMCO's address is 840 Newport Center Drive,
Suite 300, Newport Beach, California 92660. PIMCO is registered as an invest-
ment adviser with the Securities and Exchange Commission ("SEC") and as a com-
modity trading advisor with the CFTC.

In selecting fixed income securities, PIMCO uses economic forecasting, in-
terest rate anticipation, credit and call risk analysis, foreign currency ex-
change rate forecasting, and other securities selection techniques. The pro-
portion of the Portfolio's assets committed to investment in securities with
particular characteristics (such as maturity, type and coupon rate) will vary
based on PIMCO's outlook for the U.S. and foreign economies, the financial
markets, and other factors. The management of duration, a measure of a fixed
income security's expected life that incorporates its yield, coupon interest
payments, final maturity and call features into one measure, is one of the
fundamental tools used by PIMCO. For a discussion of the concept of duration,
see "Appendix A--Description of Duration."

The table below provides information about the individual portfolio manager
responsible for management of the Portfolio, including his occupation for the
past five years.

<TABLE>
<CAPTION>
Portfolio Manager And Business
Portfolio Experience (Past Five Years)
--------- ------------------------------
<C> <S>
Long-Term U.S. Government Bond Portfolio Pasi Hamalainen, Executive Vice
President, PIMCO. A Fixed Income
Portfolio Manager, Mr. Hamalainen
joined PIMCO in 1994 and has managed
the PIMCO Long-Term U.S. Government
Fund since July 1, 1997 for the PIMCO
Funds: Pacific Investment Management
Series.
</TABLE>

PIMCO also serves as administrator to the Portfolio. PIMCO provides adminis-
trative services to the Portfolio which include clerical help, accounting,
bookkeeping, internal audit services, preparation of reports to the Portfo-
lio's shareholders or other appropriate parties, regulatory filings and cer-
tain other services required by the Portfolio.

PIMCO may use its assets and resources, including its profits from advisory
or administrative fees paid by the Portfolio, to pay insurance companies for
services rendered to current and prospective owners of Variable Contracts, in-
cluding the provision of support services such as providing information about
the Trust and the Portfolio, the delivery of Trust documents, and other serv-
ices. Any such payments are made by PIMCO, and not by the Trust, and PIMCO
does not receive any separate fees for such expenses.
PIMCO Variable Insurance Trust
7
<PAGE>

Advisory and Administrative Fees

<TABLE>
<S> <C>
Advisory Fee Rate................................................... 0.40%
Administrative Fee Rate............................................. 0.25%
</TABLE>

The Portfolio is responsible for bearing certain expenses associated with
their operations that are not provided or procured by PIMCO. While it is ex-
pected that these expenses generally will not have a material effect on the
Portfolio expense ratio, they may have a material effect in certain circum-
stances, such as when the average net assets of the Portfolio are lower than
anticipated. PIMCO has contractually undertaken to waive some or all of its
administrative fee, subject to potential future reimbursement within three
years from the date such fee was waived, as described above in "Description of
Portfolio."

Portfolio Transactions

The Adviser has discretion to select the brokers and dealers with which it
places orders for the purchase and sale of portfolio investments. In doing so,
the Adviser will seek the best price and execution of the Portfolio's orders.
The Portfolio may pay higher commission rates than the lowest available when
the Adviser believes it is reasonable in light of the value of the brokerage
and research services provided by the broker effecting the transaction.

The Adviser manages the Portfolio without regard generally to restrictions
on portfolio turnover. The use of derivative instruments with relatively short
maturities may tend to exaggerate the portfolio turnover rate for the Portfo-
lio. Trading in fixed income securities does not generally involve the payment
of brokerage commissions, but does involve indirect transaction costs. The use
of futures contracts may involve the payment of commissions to futures commis-
sion merchants. A higher rate of portfolio turnover will generally incur
higher transaction costs.

Some securities considered for investment by the Portfolio also may be ap-
propriate for other clients served by the Adviser. If a purchase or sale of
securities consistent with the investment policies of the Portfolio and one or
more of these clients served by the Adviser is considered at or about the same
time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. The Adviser
may aggregate orders for the Portfolio with simultaneous transactions entered
into on behalf of other clients of the Adviser.

PURCHASE OF SHARES

insurance policies for which the Portfolio served as an investment medium
might at some time be in conflict. However, the Trust's Board of Trustees and
each insurance company with a separate account allocating assets to the Port-
folio are required to monitor events to identify any material conflicts be-
tween variable annuity contract owners and variable life insurance policy own-
ers, and would have to determine what action, if any, should be taken in the
event of such a conflict. If such a conflict occurred, an insurance company
participating in the Portfolio might be required to redeem the investment of
one or more of its separate accounts from the Portfolio, which might force the
Portfolio to sell securities at disadvantageous prices.

REDEMPTION OF SHARES

The Trust may suspend the right of redemption or postpone the payment date
at times when the Exchange is closed, or during certain other periods as per-
mitted under the federal securities laws. In consideration of the best inter-
ests of the remaining shareholders, the Trust reserves the right to pay re-
demption proceeds in whole or in part by a distribution in kind of securities
held by the Portfolio in lieu of cash. It is highly unlikely that shares would
ever be redeemed in kind. If shares are redeemed in kind, however, the redeem-
ing shareholder should expect to incur transaction costs upon the disposition
of the securities received in the distribution.

NET ASSET VALUE

In determining their daily net asset values, the Portfolio uses price data
received shortly after 4:00 p.m. Eastern time believed to reflect the current
market value of securities held by the Portfolio as of the closing of the Ex-
change. The Portfolio intends to use these prices regardless of the impact of
any post-closing adjustments to securities prices, as long as, in the view of
the Portfolio, such prices represent the current market value of the securi-
ties as of the time selected by the Portfolio for the calculation of net asset
value.

TAXES

Please refer to the prospectus for the Separate Account and Variable Con-
tract for information regarding the federal income tax treatment of distribu-
tions to the Separate Account. See "Additional Information--Additional Tax In-
formation" in the Portfolio's Statement of Additional Information for more in-
formation on taxes.

RISK FACTORS AND SPECIAL CONSIDERATIONS

U.S. Government Securities

Corporate Debt Securities

Convertible Securities and Equity Securities

A convertible security is a fixed income security that may be converted into
a prescribed amount of common stock at a specified formula. The price of the
convertible security will normally vary in some proportion to changes in the
price of the underlying common stock because of the conversion feature, and as
such is subject to risks relating to the activities of the issuer and/or gen-
eral market and economic conditions. The income component of convertible secu-
rities causes fluctuations based upon changes in interest rates and the credit
quality of the issuer. In addition, convertible securities are often lower-
rated securities. The Portfolio may be required to permit the issuer of a con-
vertible security to redeem the security, convert it into the underlying com-
mon stock, or sell it to a third party, which could have an adverse effect on
the Portfolio's ability to achieve its investment objective.

Although the Portfolio intends to invest primarily in fixed income securi-
ties, it may invest in convertible securities or equity securities. While some
countries or companies may be regarded as favorable investments, pure fixed
income opportunities may be unattractive or limited due to insufficient sup-
ply, or legal or technical restrictions. In such cases, the Portfolio may con-
sider equity securities or convertible securities to gain exposure to such in-
vestments.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The Portfolio may invest in float-
ing rate debt instruments ("floaters") and engage in credit spread trades. The
interest rate on a floater is a variable rate which is tied to another inter-
est rate, such as a money-market index or Treasury bill rate, and resets peri-
odically. While variable and floating rate securities provide the Portfolio
with a certain degree of protection against rises in interest rates, the Port-
folio will participate in any declines in interest rates as well.

Inflation-Indexed Bonds

their principal value over time. The interest rate on these bonds is fixed at
issuance, but over the life of the bond this interest may be paid on an in-
creasing principal value, which has been adjusted for inflation. If a guaran-
tee of principal is not provided, the adjusted principal value of the bond re-
paid at maturity may be less than the original principal. While these securi-
ties are expected to be protected from long-term inflationary trends, short-
term increases in inflation may lead to a decline in value.

Mortgage-Related and Other Asset-Backed Securities

The Portfolio may invest all of its assets in mortgage- or other asset-
backed securities. The value of some mortgage- or asset-backed securities in
which the Portfolio invests may be particularly sensitive to changes in pre-
vailing interest rates, and, like other fixed income investments, the ability
of a Portfolio to successfully use these instruments may depend in part upon
the ability of the Adviser to forecast interest rates and other economic fac-
tors correctly.

Mortgage Pass-Through Securities represent interests in "pools" of mortgage
loans secured by residential or commercial real property. Early repayment of
principal on some mortgage-related securities may expose the Portfolio to a
lower rate of return upon reinvestment of principal. Like other fixed income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates are declining, the value
of mortgage-related securities with prepayment features may not increase as
much as other fixed income securities. The rate of prepayments on underlying
mortgages will affect the price and volatility of a mortgage-related security,
and may have the effect of shortening or extending the effective maturity of
the security.

Other Asset-Backed Securities. The Portfolio may invest in other asset-
backed securities that have been or may be offered to investors. For a discus-
sion of the characteristics of some of these instruments, see the Statement of
Additional Information.

Derivative Instruments

To the extent permitted by the investment objectives and policies of the
Portfolio, the Portfolio may purchase and write call and put options on secu-
rities, securities indexes and foreign currencies, and enter into futures con-
tracts and use options on futures contracts. The Portfolio also may enter into
swap agreements with respect to foreign currencies, interest rates, and secu-
rities indexes. The Portfolio may use these techniques to hedge against
changes in interest rates or securities prices or as part of its overall in-
vestment strategies.

The Portfolio may invest all of its assets in derivative instruments, sub-
ject only to the Portfolio's investment objective and policies and any re-
strictions imposed by applicable law. The use of these strategies involves
certain special risks, including a possible imperfect correlation, or even no
correlation, between price movements of derivative instru-
Prospectus
12
<PAGE>

ments and price movements of related investments. While some strategies in-
volving derivative instruments can reduce the risk of loss, they can also re-
duce the opportunity for gain or even result in losses by offsetting favorable
price movements in related investments or otherwise, due to the possible in-
ability of the Portfolio to purchase or sell a portfolio security at a time
that otherwise would be favorable, or the possible need to sell a portfolio
security at a disadvantageous time because the Portfolio is required to main-
tain asset coverage or offsetting positions in connection with transactions in
derivative instruments, and the possible inability of the Portfolio to close
out or to liquidate its derivatives positions. The value of some derivative
instruments in which the Portfolio invest may be particularly sensitive to
changes in prevailing interest rates, and, like the other investments of the
Portfolio, the ability of the Portfolio to successfully use these instruments
may depend in part upon the ability of the Adviser to forecast interest rates
and other economic factors correctly. If the Adviser incorrectly forecasts
such factors and has taken positions in derivative instruments contrary to
prevailing market trends, the Portfolio could be exposed to the risk of loss.

Catastrophe Bonds

The Portfolio may invest in "catastrophe bonds." Catastrophe bonds are fixed
income securities, for which the return of principal and payment of interest
is contingent on the non-occurrence of a specific "trigger" event, such as a
hurricane or an earthquake. If a trigger event causes losses exceeding a spe-
cific amount in the geographic region and time period specified in a bond, the
Portfolio investing in the bond may lose a portion or all of its principal in-
vested in the bond. If no trigger event occurs, the Portfolio will recover its
principal plus interest. Catastrophe bonds may also expose the Portfolio to
certain unanticipated risks including but not limited to issuer (credit) de-
fault, adverse regulatory or jurisdictional interpretation, and adverse tax
consequences.

Temporary Defensive Positions

For temporary, defensive or emergency purposes, the Portfolio may invest
without limit in U.S. debt securities, including short-term money market secu-
rities, when in the opinion of PIMCO it is appropriate to do so. This may
cause the Portfolio to miss investment opportunities and may limit the Portfo-
lio's ability to meet its investment objective. It is impossible to predict
for how long such alternative strategies will be utilized.

Illiquid Securities

The Portfolio may invest up to 15% its net assets in illiquid securities.
"Illiquid Securities" for this purpose means securities that cannot be dis-
posed of within seven days in the ordinary course of business at approximately
the amount at which the Portfolio has valued the securities. The Adviser may
be subject to significant delays in disposing of illiquid securities and may
not be able to dispose of these securities at the desired time and price.
Transactions in illiquid securities may entail additional registration ex-
penses and other transaction costs.

Year 2000 Readiness Disclosure

OTHER INFORMATION

Total Return

The "total return" sought by the Portfolio will consist of interest and div-
idends from underlying securities, capital appreciation reflected in
unrealized increases in value of portfolio securities, or realized from the
purchase and sale of securities and use of futures and options, or gains from
favorable changes in foreign currency exchange rates. Generally, over the long
term, the total return obtained by a portfolio investing primarily in fixed
income securities is not expected to be as great as that obtained by a portfo-
lio that invests primarily in equity securities. At the same time, the market
risk and price volatility of a fixed income portfolio is expected to be less
than that of an equity portfolio, so that a fixed income portfolio is gener-
ally considered to be a more conservative investment. The change in market
value of fixed income securities (and therefore their capital appreciation or
depreciation) is largely a function of changes in the current level of inter-
est rates. Generally, when interest rates are falling, a portfolio with a
shorter duration will not generate as high a level of total return as a port-
folio with a longer duration. See "Appendix A--Description of Duration." Con-
versely, when interest rates are rising, a portfolio with a shorter duration
will generally outperform longer duration portfolios. When interest rates are
flat, shorter duration portfolios generally will not generate as high a level
of total return as longer duration portfolios (assuming that long-term inter-
est rates are higher than short-term rates, which is commonly the case). With
respect to the composition of any fixed income portfolio, the longer the dura-
tion of the portfolio, the greater the anticipated potential for total return,
with, however, greater attendant market risk and price volatility than for a
portfolio with a shorter duration. The market value of fixed income securities
denominated in currencies other than the U.S. dollar also may be affected by
movements in foreign currency exchange rates.

Performance Information of Similar Fund

The following table provides information concerning the historical total re-
turn performance of the Institutional Class shares of the Long-Term U.S. Gov-
ernment Fund series of PIMCO Funds: Pacific Investment Management Series
("PIMS"). The PIMS series has investment objectives, policies and strategies
substantially similar to those of its respective Portfolio and is currently
managed by the same portfolio manager. While the investment objectives and
policies of PIMS series and the Portfolio are similar, they are not identical
and the performance of the PIMS series and the Portfolio will vary. The data
is provided to illustrate the past performance of the Adviser in managing a
substantially similar investment portfolio and does not represent the past
performance of the Portfolio or the future performance of the Portfolio or its
portfolio manager. Consequently, potential investors should not consider this
performance data as an indication of the future performance of the Portfolio
or of its portfolio manager.

The performance data shown below reflects the operating expenses of the PIMS
series, which are lower than the expenses of the Portfolio. Performance would
have been lower for those series if the Portfolio's expenses were used. In ad-
dition, the PIMS series, unlike the Portfolio, is not sold to Separate Ac-
counts to fund Variable Contracts. As a result, the performance results pre-
sented below do not take into account charges or deductions against a Separate
Account or Variable Contract for cost of insurance charges, premium loads, ad-
ministrative fees, maintenance fees, premium taxes,
Prospectus
14
<PAGE>

mortality and expense risk charges, or other charges that may be incurred un-
der a Variable Contract for which the
Portfolio serves as an underlying investment vehicle. By contrast, Variable
Contract Owners with contract value allocated to the Portfolio will be subject
to charges and expenses relating to the Variable Contracts and Separate Ac-
counts.

The PIMS series' performance data shown below is calculated in accordance
with standards prescribed by the SEC for the calculation of average annual to-
tal return information. The investment results of the PIMS series presented
below are unaudited and are not intended to predict or suggest results that
might be experienced by the PIMS series or the Portfolio. Share prices and in-
vestment returns will fluctuate reflecting market conditions, as well as
changes in company-specific fundamentals of portfolio securities. The perfor-
mance data for the benchmark indices identified below does not reflect the
fees or expenses of the PIMS series or the Portfolio.

Average Annual Total Return for Similar Series of PIMS
and for Benchmark Indices for Periods Ended December 31, 1998

<TABLE>
<CAPTION>
1 3 5 Since Inception
PIMS Series Fund / Benchmark Index Year Years Years Inception Date
- ---------------------------------- ----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
PIMCO Long-Term U.S. Government Fund..... 13.40 9.52 9.87 13.05 7/1/91
Lehman Int. & 20+ Treas. Blend/1/....... 12.75 8.64 8.95
</TABLE>
- --------
/1/The index used for the Long-Term U.S. Government Fund is a blend of the
Lehman Intermediate Treasury Index and the Lehman 20+ Year Treasury Index,
proportionally weighted to equal a 10 year duration. The Lehman 20+ Year
Treasury Index is composed of U.S. Treasury issues with 20 years or more
to maturity, and the Lehman Intermediate Treasury Index is composed of
U.S. Treasury issues maturing between 5 and 10 years. Each index includes
income and distributions but does not reflect fees, brokerage commissions
or other expenses of investing.
PIMCO Variable Insurance Trust
15
<PAGE>

APPENDIX A

DESCRIPTION OF DURATION

APPENDIX B

DESCRIPTION OF SECURITIES RATINGS

The Portfolio's investments may range in quality from securities rated in
the lowest category in which the Portfolio is permitted to invest to securi-
ties rated in the highest category (as rated by Moody's or S&P or, if unrated,
determined by the Adviser to be of comparable quality). The percentage of the
Portfolio's assets invested in securities in a particular rating category will
vary. Following is a description of Moody's and S&P's ratings applicable to
fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Prospectus
B-1
<PAGE>

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked shortcom-
ings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Corporate Short-Term Debt Ratings

Moody's employs the following three designations, all judged to be invest-
ment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rat-
ing categories.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

B-2
PIMCO Variable Insurance Trust
<PAGE>

AA: Debt rated AA has a very strong capacity to pay interest and repay prin-
cipal and differs from the highest rated issues only in small degree.

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the ad-
dition of a plus or minus sign to show relative standing within the major rat-
ing categories.

The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for
timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

B-4
PIMCO Variable Insurance Trust
<PAGE>

PIMCO
Variable
Insurance
Trust

For More Information

The following documents are available that offer further information on the
Portfolio and PIMCO Variable Insurance Trust.

Annual/Semi-Annual Reports to Shareholders The Trust's annual and semi-annual
reports include a discussion of the market conditions and investment strategies
that significantly affected the Portfolio's performance during its last fiscal
year or other period.

To request a free copy of these documents or to make inquiries about the
Portfolio, please write or call:

PIMCO Variable Insurance Trust
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

Telephone:
1-888-746-2688

SEC File Number: 811-8399

Prospectus

- --------------------------------------------------------------------------------

April 30, 1999

<PAGE>

PIMCO Variable Insurance Trust

Statement of Additional Information

PIMCO Variable Insurance Trust (the "Trust") is an open-end management
investment company ("mutual fund") currently consisting of sixteen separate
investment portfolios (the "Portfolios"): the PIMCO Money Market Portfolio; the
PIMCO Short-Term Bond Portfolio; the PIMCO Low Duration Bond Portfolio; the
PIMCO Real Return Bond Portfolio; the PIMCO High Yield Bond Portfolio; the PIMCO
Total Return Bond Portfolio; the PIMCO Total Return Bond Portfolio II; the PIMCO
Long-Term U.S. Government Bond Portfolio; the PIMCO Global Bond Portfolio; the
PIMCO Foreign Bond Portfolio; the PIMCO Emerging Markets Bond Portfolio
(together, the "Fixed Income Portfolios"); the PIMCO Strategic Balanced
Portfolio; the PIMCO Equity Income Portfolio; the PIMCO Capital Appreciation
Portfolio; the PIMCO Mid-Cap Growth Portfolio; the PIMCO Small-Cap Value
Portfolio; and the PIMCO StocksPLUS Growth and Income Portfolio.

Pacific Investment Management Company ("PIMCO"), 840 Newport Center Drive,
Suite 300, Newport Beach, California 92660, is investment adviser to the Fixed
Income Portfolios and to the PIMCO Strategic Balanced and StocksPLUS Growth and
Income Portfolios. PIMCO is a subsidiary partnership of PIMCO Advisors L.P.
("PIMCO Advisors"). PIMCO Advisors, 800 Newport Center Drive, Newport Beach,
California 92660, serves as investment adviser to the PIMCO Equity Income,
Capital Appreciation, Mid-Cap Growth, and Small-Cap Value Portfolios. For each
of the Portfolios for which PIMCO Advisors serves as investment adviser, PIMCO
Advisors has engaged its affiliates to serve as Portfolio Managers. These
affiliated Portfolio Managers, each of which is a subsidiary partnership of
PIMCO Advisors, are Cadence Capital Management ("Cadence"), and NFJ Investment
Group ("NFJ") (the "Portfolio Managers"). The term "Adviser" is used herein
to refer generally to PIMCO, PIMCO Advisors and/or the Portfolio Managers.

Shares of the Portfolios are currently sold to segregated asset accounts
("Separate Accounts") of insurance companies to serve as an investment medium
for variable annuity contracts and variable life insurance policies ("Variable
Contracts"). The Separate Accounts invest in shares of the Portfolios in
accordance with allocation instructions received from owners of the Variable
Contracts ("Variable Contract Owners"). Shares of the Portfolios also may be
sold to qualified pension and retirement plans outside the separate account
context.

This Statement of Additional Information is not a Prospectus, and should be
used in conjunction with a Prospectus for the Trust. The Portfolios' shares are
offered through a Prospectus dated April 30, 1999 (the "Prospectus"). A copy of
the Prospectus may be obtained free of charge at the address and telephone
number listed below.

PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Telephone: (888) 746-2688

The Trust's most recent Semi-Annual Report to shareholders, and the
financial statements appearing in the Semi-Annual Report, are incorporated by
reference into this Statement of Additional Information. A copy of the Semi-
Annual Report may be obtained free of charge at the address and telephone number
listed above.

April 30, 1999
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
<S> <C>
DESCRIPTION OF THE TRUST.................................................. 1

INVESTMENT OBJECTIVES AND POLICIES........................................ 1

U.S. Government Securities........................................... 1
Borrowing............................................................ 1
Corporate Debt Securities............................................ 2
Convertible Securities............................................... 3
Participation on Creditors Committees................................ 3
Variable and Floating Rate Securities................................ 4
Inflation-Indexed Bonds.............................................. 4
Mortgage-Related and Other Asset-Backed Securities................... 5
Foreign Securities................................................... 10
Foreign Currency Transactions........................................ 12
Foreign Currency Exchange-Related Securities......................... 14
Bank Obligations..................................................... 15
Loan Participations.................................................. 16
Delayed Funding Loans and Revolving Credit Facilities................ 17
Short Sales.......................................................... 18
Repurchase Agreements................................................ 18
Reverse Repurchase Agreements, Dollar Rolls and Sale-Buybacks........ 19
Loans of Portfolio Securities........................................ 20
When-Issued, Delayed Delivery, and Forward Commitment Transactions... 20
Derivative Instruments............................................... 21
Warrants to Purchase Securities...................................... 28
Hybrid Instruments................................................... 29
Investment in Investment Companies................................... 30
Illiquid Securities.................................................. 30

INVESTMENT RESTRICTIONS................................................... 30

Fundamental Investment Restrictions.................................. 30
Non-Fundamental Investment Restrictions.............................. 31

MANAGEMENT OF THE TRUST................................................... 32

Trustees and Officers................................................ 32
Compensation Table................................................... 35
Investment Adviser................................................... 36
Administrator........................................................ 37

DISTRIBUTION OF TRUST SHARES.............................................. 39

Distributor.......................................................... 39
Purchases and Redemptions............................................ 39

PORTFOLIO TRANSACTIONS AND BROKERAGE...................................... 40

Investment Decisions................................................. 40
</TABLE>
<PAGE>

<TABLE>

<S> <C>
Brokerage and Research Services...................................... 40
Portfolio Turnover................................................... 41

NET ASSET VALUE........................................................... 42

TAXATION.................................................................. 43

Distributions........................................................ 44
Sales of Shares...................................................... 44
Options, Futures and Forward Contracts, and Swap Agreements.......... 45
Passive Foreign Investment Companies................................. 45
Foreign Currency Transactions........................................ 46
Foreign Taxation..................................................... 46
Original Issue Discount.............................................. 47
Other Taxation....................................................... 48

OTHER INFORMATION......................................................... 48

Capitalization....................................................... 48
Performance Information.............................................. 49
Voting Rights........................................................ 55
Year 2000 Compliance Efforts......................................... 56
Custodian............................................................ 57
Independent Accountants.............................................. 57
Counsel.............................................................. 57
Registration Statement............................................... 57
Financial Statements................................................. 57
</TABLE>
<PAGE>

DESCRIPTION OF THE TRUST

The Trust is a Delaware business trust established under a Trust Instrument
dated October 3, 1997. The Trust is an open-end investment company comprised of
separate portfolios, each of which is treated as a separate portfolio. Each
Portfolio (except the PIMCO Real Return Bond, Global Bond, Foreign Bond, and
Emerging Markets Bond Portfolios) is diversified, which means that, with respect
to 75% of its total assets, the Fund will not invest more than 5% of its assets
in the securities of any single issuer.

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and general investment policies of each Portfolio
are described in the Prospectus. Additional information concerning the
characteristics of certain of the Portfolios' investments is set forth below.

U.S. Government Securities

U.S. Government securities are obligations of and, in certain cases,
guaranteed by, the U.S. Government, its agencies or instrumentalities. The U.S.
Government does not guarantee the net asset value of the Portfolios' shares.
Some U.S. Government securities, such as Treasury bills, notes and bonds, and
securities guaranteed by the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. U.S. Government securities may include zero
coupon securities, which do not distribute interest on a current basis and tend
to be subject to greater market risk than interest-paying securities of similar
maturities.

Borrowing

A Portfolio may borrow for temporary administrative purposes. This
borrowing may be unsecured. Provisions of the Investment Company Act of 1940
("1940 Act") require a Portfolio to maintain continuous asset coverage (that is,
total assets including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed, with an exception for borrowings not in excess of
5% of the Portfolio's total assets made for temporary administrative purposes.
Any borrowings for temporary administrative purposes in excess of 5% of the
Portfolio's total assets must maintain continuous asset coverage. If the 300%
asset coverage should decline as a result of market fluctuations or other
reasons, a Portfolio may be required to sell some of its portfolio holdings
within three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time. Borrowing will tend to exaggerate the effect on net
asset value of any increase or decrease in the market value of a Portfolio's
portfolio. Money borrowed will be subject to interest costs which may or may
not be recovered by appreciation of the securities purchased. A Portfolio also
may be required to maintain minimum average balances in connection with such
borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate.

In addition to borrowing for temporary purposes, a Portfolio may enter into
reverse repurchase agreements, mortgage dollar rolls, sale-buybacks, and
economically similar transactions, that can be viewed as constituting a form of
borrowing or financing transaction by the Portfolio. For a more detailed
discussion of such transactions, see "Reverse Repurchase Agreements, Dollar
Rolls and Sale-Buybacks," below. To the extent a Portfolio covers its
commitment under a reverse repurchase agreement (or economically similar
transaction) by the maintenance of a segregated account consisting of assets
determined in accordance with procedures adopted by the Trustees, equal in value
to the amount of the
<PAGE>

Portfolio's commitment to repurchase, such an agreement will not be considered a
"senior security" by the Portfolio and therefore will not be subject to the 300%
asset coverage requirement otherwise applicable to borrowings by the Portfolios.
To the extent that positions in reverse repurchase agreements, dollar rolls or
similar transactions are not covered through the maintenance of a segregated
account consisting of liquid assets at least equal to the amount of any forward
purchase commitment, such transactions would be subject to the Portfolios'
limitations on borrowings, which would restrict the aggregate of such
transactions (plus any other borrowings) to 33 1/3% of a Portfolio's total
assets. Apart from such transactions, a Portfolio will not borrow money, except
for temporary administrative purposes.

Corporate Debt Securities

A Portfolio's investments in U.S. dollar or foreign currency-denominated
corporate debt securities of domestic or foreign issuers are limited to
corporate debt securities (corporate bonds, debentures, notes and other similar
corporate debt instruments, including convertible securities) which meet the
minimum ratings criteria set forth for the Portfolio, or, if unrated, are in the
Adviser's opinion comparable in quality to corporate debt securities in which
the Portfolio may invest. The rate of return or return of principal on some
debt obligations may be linked or indexed to the level of exchange rates between
the U.S. dollar and a foreign currency or currencies. Debt securities may be
acquired with warrants attached. Corporate income-producing securities may also
include forms of preferred or preference stock.

Securities rated Baa and BBB are the lowest which are considered
"investment grade" obligations. Moody's Investor Service, Inc. ("Moody's")
describes securities rated Baa as "medium-grade" obligations; they are "neither
highly protected nor poorly secured . . . [i]nterest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well." Standard & Poor's Ratings Services ("S&P")
describes securities rated BBB as "regarded as having an adequate capacity to
pay interest and repay principal . . . [w]hereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal .
. . than in higher rated categories."

Investments in securities rated below investment grade that are eligible
for purchase by certain of the Portfolios (i.e., rated B or better by Moody's or
S&P), and in particular, by the PIMCO High Yield Bond Portfolio, are described
as "speculative" by both Moody's and S&P. Investment in lower rated corporate
debt securities ("high yield securities" or "junk bonds") generally provides
greater income and increased opportunity for capital appreciation than
investments in higher quality securities, but they also typically entail greater
price volatility and principal and income risk. These high yield securities are
regarded as predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments. Analysis of the
creditworthiness of issuers of debt securities that are high yield may be more
complex than for issuers of higher quality debt securities.

High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of high yield securities have been found to be less sensitive to
interest-rate changes than higher-rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection
of an economic downturn or of a period of rising interest rates, for example,
could cause a decline in high yield security prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If an issuer of high
yield securities defaults, in addition to risking payment of all or a portion of
interest and principal, the Portfolios investing in such securities may incur
additional expenses to seek recovery. In the case of high yield securities
structured as zero-coupon or pay-in-kind securities, their market prices are
affected to a greater extent by interest rate changes, and therefore tend to be
more volatile than securities which pay interest periodically and in cash.

2
<PAGE>

The secondary market on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which the
Portfolios could sell a high yield security, and could adversely affect the
daily net asset value of the shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high yield securities, especially in a thinly-traded
market. When secondary markets for high yield securities are less liquid than
the market for higher grade securities, it may be more difficult to value the
securities because such valuation may require more research, and elements of
judgment may play a greater role in the valuation because there is less
reliable, objective data available. The Adviser seeks to minimize the risks of
investing in all securities through diversification, in-depth credit analysis
and attention to current developments in interest rates and market conditions.

Convertible Securities

Each Portfolio may invest in convertible securities, which may offer higher
income than the common stocks into which they are convertible. The convertible
securities in which the Portfolios may invest consist of bonds, notes,
debentures and preferred stocks which may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common stock. A
convertible security entitles the holder to receive interest or dividends until
the convertible security matures or is redeemed, converted or exchanges.

Before conversion, convertible securities have characteristics similar to
non-convertible debt securities. Convertible securities rank senior to common
stock in a corporation's capital structure and, therefore, generally entail less
risk than the corporation's common stock, although the extent to which such risk
is reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security.

Because of the conversion feature, the price of the convertible security
will normally fluctuate in some proportion to changes in the price of the
underlying common stock, and as such is subject to risks relating to the
activities of the issuer and general market and economic conditions. The income
component of a convertible security may tend to cushion the security against
declines in the price of the underlying common stock. However, the income
component of convertible securities causes fluctuations based upon changes in
interest rates and the credit quality of the issuer. In addition, convertible
securities are often lower-rated securities.

A Portfolio may be required to permit the issuer of a convertible security
to redeem the security, convert it into the underlying common stock, or sell it
to a third party. Thus, a Portfolio may not be able to control whether the
issuer of a convertible security chooses to convert that security. If the issuer
chooses to do so, it could force conversion before the holder would otherwise
choose, and may have an adverse effect on a Portfolio's ability to achieve its
investment objectives. A Portfolio generally would invest in convertible
securities for their favorable price characteristics and total return potential
and would normally not exercise an option to convert.

Participation on Creditors Committees

A Portfolio (in particular, the PIMCO High Yield Bond Portfolio) may from
time to time participate on committees formed by creditors to negotiate with the
management of financially troubled issuers of securities held by the Portfolio.
Such participation may subject a Portfolio to expenses such as legal fees and
may make a Portfolio an "insider" of the issuer for purposes of the federal
securities laws, and therefore may restrict such Portfolio's ability to trade in
or acquire additional positions in a particular security when it might otherwise
desire to do so. Participation by a Portfolio on such committees also may expose
the Portfolio to potential liabilities under the federal bankruptcy laws or
other laws governing the rights of creditors and debtors. A Portfolio will
participate on such committees only when the Adviser believes that

3
<PAGE>

such participation is necessary or desirable to enforce the Portfolio's rights
as a creditor or to protect the value of securities held by the Portfolio.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be event
based, such as based on a change in the prime rate. The PIMCO Money Market
Portfolio may invest in a variable rate security having a stated maturity in
excess of 397 calendar days if the interest rate will be adjusted and the
Portfolio may demand payment of principal from the issuer within that period.

Each of the Fixed Income Portfolios may engage in credit spread trades and
invest in floating rate debt instruments ("floaters"). A credit spread trade is
an investment position relating to a difference in the prices or interest rates
of two securities or currencies, where the value of the investment position is
determined by movements in the difference between the prices or interest rates,
as the case may be, of the respective securities or currencies. The interest
rate on a floater is a variable rate which is tied to another interest rate,
such as a money-market index or Treasury bill rate. The interest rate on a
floater resets periodically, typically every six months. While, because of the
interest rate reset feature, floaters provide a Portfolio with a certain degree
of protection against rises in interest rates, a Portfolio will participate in
any declines in interest rates as well.

Each of the Fixed Income Portfolios may also invest in inverse floating
rate debt instruments ("inverse floaters"). The interest rate on an inverse
floater resets in the opposite direction from the market rate of interest to
which the inverse floater is indexed. An inverse floating rate security may
exhibit greater price volatility than a fixed rate obligation of similar credit
quality. The Portfolios have adopted a policy under which no Portfolio will
invest more than 5% of its net assets in any combination of inverse floater,
interest only ("IO"), or principal only ("PO") securities. See "Mortgage-Related
and Other Asset-Backed Securities" for a discussion of IOs and POs.

Inflation-Indexed Bonds

Inflation-indexed bonds are fixed income securities whose principal value
is periodically adjusted according to the rate of inflation. Two structures are
common. The U.S. Treasury and some other issuers use a structure that accrues
inflation into the principal value of the bond. Most other issuers pay out the
CPI accruals as part of a semiannual coupon.

Inflation-indexed securities issued by the U.S. Treasury have maturities of
five, ten or thirty years, although it is possible that securities with other
maturities will be issued in the future. The U.S. Treasury securities pay
interest on a semi-annual basis, equal to a fixed percentage of the inflation-
adjusted principal amount. For example, if a Portfolio purchased an inflation-
indexed bond with a par value of $1,000 and a 3% real rate of return coupon
(payable 1.5% semi-annually), and inflation over the first six months were 1%,
the mid-year par value of the bond would be $1,010 and the first semi-annual
interest payment would be $15.15 ($1,010 times 1.5%). If inflation during the
second half of the year resulted in the whole years' inflation equalling 3%, the
end-of-year par value of the bond would be $1,030 and the second semi- annual
interest payment would be $15.45 ($1,030 times 1.5%).

If the periodic adjustment rate measuring inflation falls, the principal
value of inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal upon
maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury
inflation-indexed bonds, even during a period of deflation. However, the current
market value of the bonds is not guaranteed, and will fluctuate. The Portfolios
may also invest in other inflation related bonds which may

4
<PAGE>

or may not provide a similar guarantee. If a guarantee of principal is not
provided, the adjusted principal value of the bond repaid at maturity may be
less than the original principal.

The value of inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds.

While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.

The U.S. Treasury has only recently begun issuing inflation-indexed bonds.
As such, there is no trading history of these securities, and there can be no
assurance that a liquid market in these instruments will develop, although one
is expected. Lack of a liquid market may impose the risk of higher transaction
costs and the possibility that a Portfolio may be forced to liquidate positions
when it would not be advantageous to do so. There also can be no assurance that
the U.S. Treasury will issue any particular amount of inflation-indexed bonds.
Certain foreign governments, such as the United Kingdom, Canada and Australia,
have a longer history of issuing inflation-indexed bonds, and there may be a
more liquid market in certain of these countries for these securities.

The periodic adjustment of U.S. inflation-indexed bonds is tied to the
Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated monthly
by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in
the cost of living, made up of components such as housing, food, transportation
and energy. Inflation-indexed bonds issued by a foreign government are generally
adjusted to reflect a comparable inflation index, calculated by that government.
There can be no assurance that the CPI-U or any foreign inflation index will
accurately measure the real rate of inflation in the prices of goods and
services. Moreover, there can be no assurance that the rate of inflation in a
foreign country will be correlated to the rate of inflation in the United
States.

Any increase in the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity. See "Taxation" below for information about the
possible tax consequences of investing in inflation-indexed bonds.

Mortgage-Related and Other Asset-Backed Securities

Mortgage-related securities are interests in pools of residential or
commercial mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations. See "Mortgage Pass-Through
Securities." The Portfolios may also invest in debt securities which are
secured with collateral consisting of mortgage-related securities (see
"Collateralized Mortgage Obligations"), and in other types of mortgage-related
securities.

Mortgage Pass-Through Securities. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect,
these payments are a "pass-through" of the monthly payments made by the
individual borrowers on their residential or commercial mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by repayments of principal resulting from the sale of the
underlying property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-related securities (such as securities

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issued by GNMA) are described as "modified pass-through." These securities
entitle the holder to receive all interest and principal payments owed on the
mortgage pool, net of certain fees, at the scheduled payment dates regardless of
whether or not the mortgagor actually makes the payment.

The rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment
on underlying mortgages increase the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.

Payment of principal and interest on some mortgage pass-through securities
may be guaranteed by the full faith and credit of the U.S. Government (in the
case of securities guaranteed by GNMA); or guaranteed by agencies or
instrumentalities of the U.S. Government (in the case of securities guaranteed
by FNMA or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are
supported only by the discretionary authority of the U.S. Government to purchase
the agency's obligations). Mortgage-related securities created by non-
governmental issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers) may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and letters of
credit, which may be issued by governmental entities, private insurers or the
mortgage poolers.

The principal governmental guarantor of mortgage-related securities is
GNMA. GNMA is a wholly owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of mortgages insured by the Federal Housing
Administration (the "FHA"), or guaranteed by the Department of Veterans Affairs
(the "VA").

Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government. FHLMC was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. It is a government-sponsored corporation
formerly owned by the twelve Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the United
States Government.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance and letters of credit. The

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insurance and guarantees are issued by governmental entities, private insurers
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of the issuers thereof will be considered in determining whether a mortgage-
related security meets the Trust's investment quality standards. There can be no
assurance that the private insurers or guarantors can meet their obligations
under the insurance policies or guarantee arrangements. The Portfolios may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the loan experience and practices of the originator/servicers and
poolers, the Adviser determines that the securities meet the Trust's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. No Portfolio will purchase mortgage-related securities or any other
assets which in the Adviser's opinion are illiquid if, as a result, more than
15% of the value of the Portfolio's net assets will be illiquid (10% in the case
of the PIMCO Money Market Portfolio.)

Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the
Portfolios' industry concentration restrictions, set forth below under
"Investment Restrictions," by virtue of the exclusion from that test available
to all U.S. Government securities. In the case of privately issued mortgage-
related securities, the Portfolios take the position that mortgage-related
securities do not represent interests in any particular "industry" or group of
industries. The assets underlying such securities may be represented by a
portfolio of first lien residential mortgages (including both whole mortgage
loans and mortgage participation interests) or portfolios of mortgage pass-
through securities issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans
underlying a mortgage-related security may in turn be insured or guaranteed by
the FHA or the VA. In the case of private issue mortgage-related securities
whose underlying assets are neither U.S. Government securities nor U.S.
Government-insured mortgages, to the extent that real properties securing such
assets may be located in the same geographical region, the security may be
subject to a greater risk of default than other comparable securities in the
event of adverse economic, political or business developments that may affect
such region and, ultimately, the ability of residential homeowners to make
payments of principal and interest on the underlying mortgages.

Collateralized Mortgage Obligations (CMOs). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Interest and prepaid
principal on a CMO is paid, in most cases, monthly. CMOs may be collateralized
by whole mortgage loans, but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and their
income streams.

CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding
the longer maturity classes receive principal only after the first class has
been retired. An investor is partially guarded against a sooner than desired
return of principal because of the sequential payments.

In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C
Bonds all bear current interest. Interest on the Series Z Bond is accrued and
added to principal and a like amount is paid as principal on the Series A, B, or
C Bond currently being paid off. When the Series A, B, and C Bonds are paid in
full, interest and principal on the Series Z Bond begins to be paid currently.
With some CMOs, the issuer serves as a conduit to allow loan originators
(primarily builders or savings and loan associations) to borrow against their
loan portfolios.

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CMOs that are issued or guaranteed by the U.S. Government or by any of its
agencies or instrumentalities will be considered U.S. Government securities by
the Portfolios, while other CMOs, even if collateralized by U.S. government
securities, will have the same status as other privately issued securities for
purposes of applying a Portfolio's diversification tests.

FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are
made semi-annually, as opposed to monthly. The amount of principal payable on
each semiannual payment date is determined in accordance with FHLMC's mandatory
sinking fund schedule, which, in turn, is equal to approximately 100% of FHA
prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes
of bonds in the order of their stated maturities. Payment of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum
sinking fund obligation for any payment date are paid to the holders of the CMOs
as additional sinking fund payments. Because of the "pass-through" nature of
all principal payments received on the collateral pool in excess of FHLMC's
minimum sinking fund requirement, the rate at which principal of the CMOs is
actually repaid is likely to be such that each class of bonds will be retired in
advance of its scheduled maturity date.

If collection of principal (including prepayments) on the mortgage loans
during any semi-annual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.

Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral
in the event of delinquencies and/or defaults.

Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
The market for commercial mortgage-backed securities developed more recently and
in terms of total outstanding principal amount of issues is relatively small
compared to the market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed securities reflect
the risks of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic conditions on
real estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage- or asset-backed securities.

Other Mortgage-Related Securities. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including mortgage dollar rolls, CMO residuals or stripped
mortgage-backed securities ("SMBS"). Other mortgage-related securities may be
equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.

CMO Residuals. CMO residuals are mortgage securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.

The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow

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resulting from a CMO will depend on, among other things, the characteristics of
the mortgage assets, the coupon rate of each class of CMO, prevailing interest
rates, the amount of administrative expenses and the prepayment experience on
the mortgage assets. In particular, the yield to maturity on CMO residuals is
extremely sensitive to prepayments on the related underlying mortgage assets, in
the same manner as an interest-only ("IO") class of stripped mortgage-backed
securities. See "Other Mortgage-Related Securities--Stripped Mortgage-Backed
Securities." In addition, if a series of a CMO includes a class that bears
interest at an adjustable rate, the yield to maturity on the related CMO
residual will also be extremely sensitive to changes in the level of the index
upon which interest rate adjustments are based. As described below with respect
to stripped mortgage-backed securities, in certain circumstances a Portfolio may
fail to recoup fully its initial investment in a CMO residual.

CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. Transactions in CMO residuals are generally completed only after
careful review of the characteristics of the securities in question. In
addition, CMO residuals may, or pursuant to an exemption therefrom, may not have
been registered under the Securities Act of 1933, as amended (the "1933 Act").
CMO residuals, whether or not registered under the 1933 Act, may be subject to
certain restrictions on transferability, and may be deemed "illiquid" and
subject to a Portfolio's limitations on investment in illiquid securities.

Stripped Mortgage-Backed Securities. SMBS are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose entities of the foregoing.

SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other
class will receive most of the interest and the remainder of the principal. In
the most extreme case, one class will receive all of the interest (the "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on a Portfolio's yield to maturity from these
securities. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, a Portfolio may fail to recoup some or all
of its initial investment in these securities even if the security is in one of
the highest rating categories. The Portfolios have adopted a policy under which
no Portfolio will invest more than 5% of its net assets in any combination of
IO, PO, or inverse floater securities.

Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to a Portfolio's limitations on investment in illiquid securities.

Other Asset-Backed Securities. Similarly, other asset-backed securities
(unrelated to mortgage loans) may be offered to investors in the future. Several
types of asset-backed securities have already been offered to investors,
including Certificates for Automobile Receivables/SM/ ("CARS/SM/"). CARS/SM/
represent undivided fractional interests in a trust whose assets consist of a
pool of motor vehicle retail installment sales contracts and security interests
in the vehicles securing the contracts. Payments of principal and interest on
CARS/SM/ are passed through monthly to certificate holders, and are guaranteed
up to certain amounts and for a certain time period by a letter of credit issued
by a financial institution unaffiliated with the trustee or originator of the
trust. An investor's return on CARS/SM/ may be affected by early prepayment of
principal on the underlying vehicle sales contracts. If the letter of credit is
exhausted, the trust may be prevented from realizing the full amount due on a
sales contract because of state law requirements and

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restrictions relating to foreclosure sales of vehicles and the obtaining of
deficiency judgments following such sales or because of depreciation, damage or
loss of a vehicle, the application of federal and state bankruptcy and
insolvency laws, or other factors. As a result, certificate holders may
experience delays in payments or losses if the letter of credit is exhausted.

Consistent with a Portfolio's investment objectives and policies, the
Adviser also may invest in other types of asset-backed securities (unrelated to
mortgage loans), such as rate reduction bonds, which are derived from utility-
generated revenue streams. Other asset-backed securities in which the
Portfolios may choose to invest may be based on revenue streams derived from,
but not limited to, student loans, credit card receivables, government
securities or corporate bonds.

Foreign Securities

The Fixed Income Portfolios (except the PIMCO Total Return Bond II and
Long-Term U.S. Government Portfolios) and the PIMCO Strategic Balanced and
StocksPLUS Growth and Income Portfolios may invest in corporate debt securities
of foreign issuers (including preferred or preference stock), certain foreign
bank obligations (see "Bank Obligations") and U.S. dollar- or foreign currency-
denominated obligations of foreign governments or their subdivisions, agencies
and instrumentalities, international agencies and supranational entities. The
PIMCO Money Market and High Yield Bond Portfolios may invest in securities of
foreign issuers only if they are U.S. dollar-denominated.

The PIMCO Equity Income, Capital Appreciation, Mid-Cap Growth and Small-Cap
Value Portfolios may invest in American Depositary Receipts ("ADRs"). ADRs are
dollar-denominated receipts issued generally by domestic banks and represent the
deposit with the bank of a security of a foreign issuer. ADRs may be issued as
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities trade in the form of ADRs. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program.

Except for the PIMCO Emerging Markets Bond Portfolio, each of the Fixed
Income Portfolios and the PIMCO Strategic Balanced and StocksPLUS Growth and
Income Portfolios will concentrate its investments in securities of issuers
based in developed countries. However, the PIMCO Short-Term Bond and Low
Duration Bond Portfolios may each invest up to 5% of its assets in securities of
issuers based in the emerging market countries in which the PIMCO Emerging
Markets Bond Portfolio may invest, and each of the remaining Fixed Income
Portfolios that may invest in foreign securities may invest up to 10% of its
assets in such securities.

Securities traded in certain emerging market countries, including the
emerging market countries in Eastern Europe, may be subject to risks in addition
to risks typically posed by international investing due to the inexperience of
financial intermediaries, the lack of modern technology, and the lack of a
sufficient capital base to expand business operations. A number of emerging
market countries restrict, to varying degrees, foreign investment in securities.
Repatriation of investment income, capital, and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some emerging
market countries. A number of the currencies of emerging market countries have
experienced significant declines against the U.S. dollar in recent years, and
devaluation may occur after investments in these currencies by a Portfolio.
Inflation and rapid fluctuations in inflation rates have had, and may continue
to have, negative effects on the economies and securities markets of certain
emerging market countries. Many of the emerging securities markets are
relatively small, have low trading volumes, suffer periods of relative
illiquidity, and are characterized by significant price volatility. There is a
risk in emerging market countries that a future economic or political crisis
could lead to price controls, forced mergers of companies, expropriation or
confiscatory taxation, seizure, nationalization, or creation of government
monopolies, any of which may have a detrimental effect on a Portfolio's
investment.

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Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the difference in, or
lack of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and significantly smaller market capitalization of securities markets.
Emerging securities markets may have different clearance and settlement
procedures, which may be unable to keep pace with the volume of securities
transactions or otherwise make it difficult to engage in such transactions.
Settlement problems may cause a Portfolio to miss attractive investment
opportunities, hold a portion of its assets in cash pending investment, or delay
in disposing of a portfolio security. Such a delay could result in possible
liability to a purchaser of the security. Any change in the leadership or
policies of Eastern European countries, or the countries that exercise a
significant influence over those countries, may halt the expansion of or reverse
the liberalization of foreign investment policies now occurring and adversely
affect existing investment opportunities. Additionally, former Communist regimes
of a number of Eastern European countries previously expropriated a large amount
of property, the claims on which have not been entirely settled. There can be
no assurance that a Portfolio's investments in Eastern Europe will not also be
expropriated, nationalized or otherwise confiscated.

Each of the Fixed Income Portfolios (except the PIMCO Total Return Bond II
and Long-Term U.S. Government Portfolios) may invest in Brady Bonds. Brady
Bonds are securities created through the exchange of existing commercial bank
loans to sovereign entities for new obligations in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan
debt restructurings have been implemented in a number of countries, including:
Argentina, Bolivia, Bulgaria, Costa Rica, the Dominican Republic, Ecuador,
Jordan, Mexico, Niger, Nigeria, the Philippines, Poland, Uruguay, and Venezuela.
In addition, Brazil has concluded a Brady-like plan. It is expected that other
countries will undertake a Brady Plan in the future.

Brady Bonds do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (primarily
the U.S. dollar) and are actively traded in the over-the-counter secondary
market. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are generally collateralized in
full as to principal by U.S. Treasury zero coupon bonds having the same maturity
as the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest payments
but generally are not collateralized. Brady Bonds are often viewed as having
three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts constitute the
"residual risk").

Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and interest coupon payments
collateralized on an 18-month rolling-forward basis by funds held in escrow by
an agent for the bondholders. A significant portion of the Venezuelan Brady
Bonds and the Argentine Brady Bonds issued to date have principal repayments at
final maturity collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina)
rolling-forward basis by securities held by the Federal Reserve Bank of New York
as collateral agent.

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Brady Bonds are not considered to be U.S. Government securities. In light
of the residual risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and private entities in
countries issuing Brady Bonds, investments in Brady Bonds may be viewed as
speculative. There can be no assurance that Brady Bonds in which the Portfolios
may invest will not be subject to restructuring arrangements or to requests for
new credit, which may cause the Portfolios to suffer a loss of interest or
principal on any of its holdings.

Investment in sovereign debt can involve a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the principal and/or interest when due in accordance
with the terms of the debt. A governmental entity's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
governmental entity's policy toward the International Monetary Portfolio, and
the political constraints to which a governmental entity may be subject.
Governmental entities may also depend on expected disbursements from foreign
governments, multilateral agencies and others to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the governmental entity, which may further
impair such debtor's ability or willingness to service its debts in a timely
manner. Consequently, governmental entities may default on their sovereign
debt. Holders of sovereign debt (including the Portfolios) may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which sovereign
debt on which governmental entities have defaulted may be collected in whole or
in part.

The PIMCO Emerging Markets Bond Portfolio will consider an issuer to be
economically tied to a country with an emerging securities market if (1) the
issuer is organized under the laws of, or maintains its principal place of
business in, the country, (2) its securities are principally traded in the
country's securities markets, or (3) the issuer derived at least half of its
revenues or profits from goods produced or sold, investments made, or services
performed in the country, or has at least half of its assets in that country.

A Portfolio's investments in foreign currency denominated debt obligations
and hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Portfolio's
income distributions to constitute returns of capital for tax purposes or
require the Portfolio to make distributions exceeding book income to qualify as
a regulated investment company for federal tax purposes.

Foreign Currency Transactions

Foreign currency exchange rates may fluctuate significantly over short
periods of time. All Portfolios that may invest in foreign currency-denominated
securities also may purchase and sell foreign currency options and foreign
currency futures contracts and related options (see "Derivative Instruments"),
and may engage in foreign currency transactions either on a spot (cash) basis at
the rate prevailing in the currency exchange market at the time or through
forward currency contracts ("forwards") with terms generally of less than one
year. Portfolios may engage in these transactions in order to protect against
uncertainty in the level of future foreign exchange rates in the purchase and
sale of securities. The Portfolios may also use foreign currency options and
foreign currency forward contracts to increase exposure to a foreign currency or
to shift exposure to foreign currency fluctuations from one country to another.

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The Portfolios that may engage in foreign currency transactions also may
invest in foreign currency exchange-related securities, such as foreign currency
warrants and other instruments whose return is linked to foreign currency
exchange rates. As a non-fundamental, operating policy, PIMCO intends to use
foreign currency-related derivative instruments (currency futures and related
options, currency options, forward contracts and swap agreements) in an effort
to hedge foreign currency risk with respect to at least 75% of the assets of the
Fixed Income Portfolios (other than the PIMCO Global Bond and Emerging Markets
Bond Portfolios) denominated in currencies other than the U.S. dollar. There is
no assurance that PIMCO will be successful in doing so. The active use of
currency derivatives involves transaction costs which may adversely effect yield
and return. For a description of these instruments, see "Derivative
Instruments" below.

A forward involves an obligation to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts may be bought or sold to protect a Portfolio against a possible
loss resulting from an adverse change in the relationship between foreign
currencies and the U.S. dollar or to increase exposure to a particular foreign
currency. A Portfolio may use one currency (or a basket of currencies) to hedge
against adverse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are positively
correlated. By entering into a forward foreign currency exchange contract, the
Portfolio "locks in" the exchange rate between the currency it will deliver and
the currency it will receive for the duration of the contract. As a result, a
Portfolio reduces its exposure to changes in the value of the currency it will
deliver and increases its exposure to changes in the value of the currency it
will exchange into. Open positions in forwards used for non-hedging purposes
will be covered by the segregation with the Trust's custodian of assets
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees, and are marked to market daily. Although forwards are
intended to minimize the risk of loss due to a decline in the value of the
hedged currencies, at the same time, they tend to limit any potential gain which
might result should the value of such currencies increase. Forwards will be used
primarily to adjust the foreign exchange exposure of each Portfolio with a view
to protecting the outlook, and the Portfolios might be expected to enter into
such contracts under the following circumstances:

Lock In. When the Adviser desires to lock in the U.S. dollar price on the
purchase or sale of a security denominated in a foreign currency.

Cross Hedge. If a particular currency is expected to decrease against
another currency, a Portfolio may sell the currency expected to decrease and
purchase a currency which is expected to increase against the currency sold in
an amount approximately equal to some or all of the Portfolio's portfolio
holdings denominated in the currency sold.

Direct Hedge. If the Adviser wants to a eliminate substantially all of the
risk of owning a particular currency, and/or if the Adviser thinks that a
Portfolio can benefit from price appreciation in a given country's bonds but
does not want to hold the currency, it may employ a direct hedge back into the
U.S. dollar. In either case, a Portfolio would enter into a forward contract to
sell the currency in which a portfolio security is denominated and purchase U.S.
dollars at an exchange rate established at the time it initiated the contract.
The cost of the direct hedge transaction may offset most, if not all, of the
yield advantage offered by the foreign security, but a Portfolio would hope to
benefit from an increase (if any) in value of the bond.

Proxy Hedge. The Adviser might choose to use a proxy hedge, which may be
less costly than a direct hedge. In this case, a Portfolio, having purchased a
security, will sell a currency whose value is believed to be closely linked to
the currency in which the security is denominated. Interest rates prevailing in
the country whose currency was sold would be expected to be closer to those in
the U.S. and lower than those of securities denominated in the currency of the
original holding. This type of hedging entails greater risk than a direct hedge
because it is dependent on a stable relationship between the two currencies
paired as proxies and the relationships can be very unstable at times.

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Costs of Hedging. When a Portfolio purchases a foreign bond with a higher
interest rate than is available on U.S. bonds of a similar maturity, the
additional yield on the foreign bond could be substantially reduced or lost if
the Portfolio were to enter into a direct hedge by selling the foreign currency
and purchasing the U.S. dollar. This is what is known as the "cost" of hedging.
Proxy hedging attempts to reduce this cost through an indirect hedge back to the
U.S. dollar.

It is important to note that hedging costs are treated as capital
transactions and are not, therefore, deducted from a Portfolio's dividend
distribution and are not reflected in its yield. Instead such costs will, over
time, be reflected in a Portfolio's net asset value per share.

Tax Consequences of Hedging. Under applicable tax law, the Portfolios may
be required to limit their gains from hedging in foreign currency forwards,
futures, and options. Although the Portfolios are expected to comply with such
limits, the extent to which these limits apply is subject to tax regulations as
yet unissued. Hedging may also result in the application of the marked-to-
market and straddle provisions of the Internal Revenue Code. Those provisions
could result in an increase (or decrease) in the amount of taxable dividends
paid by the Portfolios and could affect whether dividends paid by the Portfolios
are classified as capital gains or ordinary income.

Foreign Currency Exchange-Related Securities

Foreign currency warrants. Foreign currency warrants such as Currency
Exchange Warrants/SM/ ("CEWs/SM/") are warrants which entitle the holder to
receive from their issuer an amount of cash (generally, for warrants issued in
the United States, in U.S. dollars) which is calculated pursuant to a
predetermined formula and based on the exchange rate between a specified foreign
currency and the U.S. dollar as of the exercise date of the warrant. Foreign
currency warrants generally are exercisable upon their issuance and expire as of
a specified date and time. Foreign currency warrants have been issued in
connection with U.S. dollar-denominated debt offerings by major corporate
issuers in an attempt to reduce the foreign currency exchange risk which, from
the point of view of prospective purchasers of the securities, is inherent in
the international fixed-income marketplace. Foreign currency warrants may
attempt to reduce the foreign exchange risk assumed by purchasers of a security
by, for example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese Yen or German Deutschmark. The formula used to determine the amount
payable upon exercise of a foreign currency warrant may make the warrant
worthless unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or depreciates
against the particular foreign currency to which the warrant is linked or
indexed). Foreign currency warrants are severable from the debt obligations with
which they may be offered, and may be listed on exchanges. Foreign currency
warrants may be exercisable only in certain minimum amounts, and an investor
wishing to exercise warrants who possesses less than the minimum number required
for exercise may be required either to sell the warrants or to purchase
additional warrants, thereby incurring additional transaction costs. In the case
of any exercise of warrants, there may be a time delay between the time a holder
of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case the
warrants were "out-of-the-money," in a total loss of the purchase price of the
warrants. Warrants are generally unsecured obligations of their issuers and are
not standardized foreign currency options issued by the Options Clearing
Corporation ("OCC"). Unlike foreign currency options issued by OCC, the terms of
foreign exchange warrants generally will not be amended in the event of
governmental or regulatory actions affecting exchange rates or in the event of
the imposition of other regulatory controls affecting the international currency
markets. The initial public offering price of foreign currency warrants is
generally considerably in excess of the price that a commercial user of foreign
currencies might pay in the interbank market for a comparable option

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involving significantly larger amounts of foreign currencies. Foreign currency
warrants are subject to significant foreign exchange risk, including risks
arising from complex political or economic factors.

Principal exchange rate linked securities. Principal exchange rate linked
securities ("PERLs/SM/") are debt obligations the principal on which is payable
at maturity in an amount that may vary based on the exchange rate between the
U.S. dollar and a particular foreign currency at or about that time. The return
on "standard" principal exchange rate linked securities is enhanced if the
foreign currency to which the security is linked appreciates against the U.S.
dollar, and is adversely affected by increases in the foreign exchange value of
the U.S. dollar; "reverse" principal exchange rate linked securities are like
the "standard" securities, except that their return is enhanced by increases in
the value of the U.S. dollar and adversely impacted by increases in the value of
foreign currency. Interest payments on the securities are generally made in U.S.
dollars at rates that reflect the degree of foreign currency risk assumed or
given up by the purchaser of the notes (i.e., at relatively higher interest
rates if the purchaser has assumed some of the foreign exchange risk, or
relatively lower interest rates if the issuer has assumed some of the foreign
exchange risk, based on the expectations of the current market). Principal
exchange rate linked securities may in limited cases be subject to acceleration
of maturity (generally, not without the consent of the holders of the
securities), which may have an adverse impact on the value of the principal
payment to be made at maturity.

Performance indexed paper. Performance indexed paper ("PIPs/SM/") is U.S.
dollar-denominated commercial paper the yield of which is linked to certain
foreign exchange rate movements. The yield to the investor on performance
indexed paper is established at maturity as a function of spot exchange rates
between the U.S. dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is below,
and a potential maximum rate of return that is above, market yields on U.S.
dollar-denominated commercial paper, with both the minimum and maximum rates of
return on the investment corresponding to the minimum and maximum values of the
spot exchange rate two business days prior to maturity.

Bank Obligations

Bank obligations in which the Portfolios may invest include certificates of
deposit, bankers' acceptances, and fixed time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. A Portfolio will not
invest in fixed time deposits which (1) are not subject to prepayment or (2)
provide for withdrawal penalties upon prepayment (other than overnight deposits)
if, in the aggregate, more than 15% of its net assets (10% in the case of the
PIMCO Money Market Portfolio) would be invested in such deposits, repurchase
agreements maturing in more than seven days and other illiquid assets.

Each Portfolio limits its investments in United States bank obligations to
obligations of United States banks (including foreign branches) which have more
than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the Federal Deposit Insurance Corporation. A
Portfolio also may invest in certificates of deposit of savings and loan
associations (federally or state chartered and federally insured) having total
assets in excess of $1 billion.

Each Fixed Income Portfolio (except the PIMCO Money Market and High Yield
Bond Portfolios) and the PIMCO Strategic Balanced and StocksPLUS Growth and
Income Portfolios limits its investments in

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foreign bank obligations to United States dollar- or foreign currency-
denominated obligations of foreign banks (including United States branches of
foreign banks) which at the time of investment (i) have more than $10 billion,
or the equivalent in other currencies, in total assets; (ii) in terms of assets
are among the 75 largest foreign banks in the world; (iii) have branches or
agencies (limited purpose offices which do not offer all banking services) in
the United States; and (iv) in the opinion of the Adviser, are of an investment
quality comparable to obligations of United States banks in which the Portfolios
may invest. The PIMCO Money Market and High Yield Bond Portfolios may invest in
the same types of bank obligations as the other Fixed Income Portfolios, but
they must be U.S. dollar-denominated. Subject to the Trust's limitation on
concentration of no more than 25% of its assets in the securities of issuers in
a particular industry, for Portfolios that may invest in foreign bank
obligations, there is no limitation on the amount of a Portfolio's assets which
may be invested in obligations of foreign banks which meet the conditions set
forth herein.

Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.

Loan Participations

Each Fixed Income Portfolio and the PIMCO Strategic Balanced and StocksPLUS
Growth and Income Portfolios may purchase participations in commercial loans.
Such indebtedness may be secured or unsecured. Loan participations typically
represent direct participation in a loan to a corporate borrower, and generally
are offered by banks or other financial institutions or lending syndicates.
When purchasing loan participations, a Portfolio assumes the credit risk
associated with the corporate borrower and may assume the credit risk associated
with an interposed bank or other financial intermediary. The participation
interests in which a Portfolio intends to invest may not be rated by any
nationally recognized rating service.

A loan is often administered by an agent bank acting as agent for all
holders. The agent bank administers the terms of the loan, as specified in the
loan agreement. In addition, the agent bank is normally responsible for the
collection of principal and interest payments from the corporate borrower and
the apportionment of these payments to the credit of all institutions which are
parties to the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Portfolio has direct recourse against the corporate borrower,
the Portfolio may have to rely on the agent bank or other financial intermediary
to apply appropriate credit remedies against a corporate borrower.

A financial institution's employment as agent bank might be terminated in
the event that it fails to observe a requisite standard of care or becomes
insolvent. A successor agent bank would generally be appointed to replace the
terminated agent bank, and assets held by the agent bank under the loan
agreement should remain available to holders of such indebtedness. However, if
assets held by the agent bank for the benefit of a Portfolio were determined to
be subject to the claims of the agent bank's general creditors, the Portfolio
might incur certain costs and delays in realizing payment on a loan or loan
participation and could suffer a loss of principal and/or interest. In
situations involving other interposed financial institutions (e.g., an insurance
company or governmental agency) similar risks may arise.

Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the corporate borrower for payment of principal and
interest. If a Portfolio does not receive scheduled interest or principal
payments on such indebtedness, the Portfolio's share price and yield

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could be adversely affected. Loans that are fully secured offer a Portfolio more
protection than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation of
collateral from a secured loan would satisfy the corporate borrower's
obligation, or that the collateral can be liquidated.

The Portfolios may invest in loan participations with credit quality
comparable to that of issuers of its securities investments. Indebtedness of
companies whose creditworthiness is poor involves substantially greater risks,
and may be highly speculative. Some companies may never pay off their
indebtedness, or may pay only a small fraction of the amount owed.
Consequently, when investing in indebtedness of companies with poor credit, a
Portfolio bears a substantial risk of losing the entire amount invested.

Each Portfolio limits the amount of its total assets that it will invest in
any one issuer or in issuers within the same industry (see "Investment
Restrictions"). For purposes of these limits, a Portfolio generally will treat
the corporate borrower as the "issuer" of indebtedness held by the Portfolio. In
the case of loan participations where a bank or other lending institution serves
as a financial intermediary between a Portfolio and the corporate borrower, if
the participation does not shift to the Portfolio the direct debtor-creditor
relationship with the corporate borrower, Securities and Exchange Commission
("SEC") interpretations require the Portfolio to treat both the lending bank or
other lending institution and the corporate borrower as "issuers" for the
purposes of determining whether the Portfolio has invested more than 5% of its
total assets in a single issuer. Treating a financial intermediary as an issuer
of indebtedness may restrict a Portfolios' ability to invest in indebtedness
related to a single financial intermediary, or a group of intermediaries engaged
in the same industry, even if the underlying borrowers represent many different
companies and industries.

Loans and other types of direct indebtedness may not be readily marketable
and may be subject to restrictions on resale. In some cases, negotiations
involved in disposing of indebtedness may require weeks to complete.
Consequently, some indebtedness may be difficult or impossible to dispose of
readily at what the Adviser believes to be a fair price. In addition, valuation
of illiquid indebtedness involves a greater degree of judgment in determining a
Portfolio's net asset value than if that value were based on available market
quotations, and could result in significant variations in the Portfolio's daily
share price. At the same time, some loan interests are traded among certain
financial institutions and accordingly may be deemed liquid. As the market for
different types of indebtedness develops, the liquidity of these instruments is
expected to improve. In addition, the Portfolios currently intend to treat
indebtedness for which there is no readily available market as illiquid for
purposes of the Portfolios' limitation on illiquid investments. Investments in
loan participations are considered to be debt obligations for purposes of the
Trust's investment restriction relating to the lending of funds or assets by a
Portfolio.

Investments in loans through a direct assignment of the financial
institution's interests with respect to the loan may involve additional risks to
the Portfolios. For example, if a loan is foreclosed, a Portfolio could become
part owner of any collateral, and would bear the costs and liabilities
associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, a Portfolio
could be held liable as co-lender. It is unclear whether loans and other forms
of direct indebtedness offer securities law protections against fraud and
misrepresentation. In the absence of definitive regulatory guidance, the
Portfolios rely on the Adviser's research in an attempt to avoid situations
where fraud or misrepresentation could adversely affect the Portfolios.

Delayed Funding Loans and Revolving Credit Facilities

The Fixed Income Portfolios (except the PIMCO Money Market Portfolio) may
enter into, or acquire participations in, delayed funding loans and revolving
credit facilities. Delayed funding loans and revolving credit facilities are
borrowing arrangements in which the lender agrees to make loans up to a maximum
amount upon demand by the borrower during a specified term. These commitments
may have the effect of requiring a Portfolio to increase its investment in a
company at a time when it might not otherwise decide to do so (including at a
time when the company's financial condition makes it unlikely

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that such amounts will be repaid). To the extent that a Portfolio is committed
to advance additional funds, it will at all times segregate assets, determined
to be liquid by the Adviser in accordance with procedures established by the
Board of Trustees, in an amount sufficient to meet such commitments. The Fixed
Income Portfolios may invest in delayed funding loans and revolving credit
facilities with credit quality comparable to that of issuers of its securities
investments. Delayed funding loans and revolving credit facilities may be
subject to restrictions on transfer, and only limited opportunities may exist to
resell such instruments. As a result, a Portfolio may be unable to sell such
investments at an opportune time or may have to resell them at less than fair
market value. The Fixed Income Portfolios currently intend to treat delayed
funding loans and revolving credit facilities for which there is no readily
available market as illiquid for purposes of the Portfolios' limitation on
illiquid investments. For a further discussion of the risks involved in
investing in loan participations and other forms of direct indebtedness see
"Loan Participations." Participation interests in revolving credit facilities
will be subject to the limitations discussed in "Loan Participations." Delayed
funding loans and revolving credit facilities are considered to be debt
obligations for purposes of the Trust's investment restriction relating to the
lending of funds or assets by a Portfolio.

Short Sales

Each of the Portfolios except for the PIMCO High Yield Bond Portfolio may
make short sales of securities as part of their overall portfolio management
strategies involving the use of derivative instruments and to offset potential
declines in long positions in similar securities. A short sale (other than a
short sale "against the box") is a transaction in which a Portfolio sells a
security it does not own in anticipation that the market price of that security
will decline.

When a Portfolio makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Portfolio may have to pay a fee to borrow particular securities and
is often obligated to pay over any accrued interest on such borrowed securities.

If the price of the security sold short increases between the time of the
short sale and the time and the Portfolio replaces the borrowed security, the
Portfolio will incur a loss; conversely, if the price declines, the Portfolio
will realize a capital gain. Any gain will be decreased, and any loss
increased, by the transaction costs described above. The successful use of
short selling may be adversely affected by imperfect correlation between
movements in the price of the security sold short and the securities being
hedged.

To the extent that a Portfolio engages in short sales, it will provide
collateral to the broker-dealer and (except in the case of short sales "against
the box") will maintain additional asset coverage in the form of assets
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees, in a segregated account. Each Portfolio does not
intend to enter into short sales (other than those "against the box") if
immediately after such sale the aggregate of the value of all collateral plus
the amount in such segregated account exceeds one-third of the value of the
Portfolio's net assets. This percentage may be varied by action of the
Trustees. A short sale is "against the box" to the extent that the Portfolio
contemporaneously owns, or has the right to obtain at no added cost, securities
identical to those sold short. The Portfolios will engage in short selling to
the extent permitted by the 1940 Act and rules and interpretations thereunder.

Repurchase Agreements

For the purpose of achieving income, each of the Portfolios may enter into
repurchase agreements, which entail the purchase of a portfolio-eligible
security from a bank or broker-dealer that agrees to repurchase the security at
the Portfolio's cost plus interest within a specified time (normally one day).
If the party agreeing to repurchase should default, as a result of bankruptcy or
otherwise, the

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Portfolio will seek to sell the securities which it holds, which action could
involve procedural costs or delays in addition to a loss on the securities if
their value should fall below their repurchase price. No Portfolio will invest
more than 15% of its net assets (10% in the case of the PIMCO Money Market
Portfolio) (taken at current market value) in repurchase agreements maturing in
more than seven days.

Reverse Repurchase Agreements, Dollar Rolls and Sale-Buybacks

A reverse repurchase agreement involves the sale of a security by a
Portfolio and its agreement to repurchase the instrument at a specified time and
price. Under a reverse repurchase agreement, the Portfolio continues to receive
any principal and interest payments on the underlying security during the term
of the agreement. The Portfolio generally will maintain a segregated account
consisting of assets determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees, equal (on a daily mark-to-
market basis) to its obligations under reverse repurchase agreements, to cover
its obligations under reverse repurchase agreements and, to this extent, a
reverse repurchase agreement (or economically similar transaction) will not be
considered a "senior security" subject to the 300% asset coverage requirements
otherwise applicable to borrowings by a Portfolio. However, reverse repurchase
agreements involve the risk that the market value of securities retained by the
Portfolio may decline below the repurchase price of the securities sold by the
Portfolio which it is obligated to repurchase.

A Portfolio may enter into dollar rolls, in which the Portfolio sells
mortgage-backed or other securities for delivery in the current month and
simultaneously contracts to purchase substantially similar securities on a
specified future date. In a "mortgage dollar roll" transaction a Portfolio sells
a mortgage-related security, such as a security issued by the Government
National Mortgage Association ("GNMA"), to a dealer and simultaneously agrees to
repurchase a similar security (but not the same security) in the future at a
pre-determined price. A "dollar roll" can be viewed, like a reverse repurchase
agreement, as a collateralized borrowing in which a Portfolio pledges a
mortgage-related security to a dealer to obtain cash. Unlike in the case of
reverse repurchase agreements, the dealer with which a Portfolio enters into a
dollar roll transaction is not obligated to return the same securities as those
originally sold by the Portfolio, but only securities which are "substantially
identical." To be considered "substantially identical," the securities returned
to a Portfolio generally must: (1) be collateralized by the same types of
underlying mortgages; (2) be issued by the same agency and be part of the same
program; (3) have a similar original stated maturity; (4) have identical net
coupon rates; (5) have similar market yields (and therefore price); and (6)
satisfy "good delivery" requirements, meaning that the aggregate principal
amounts of the securities delivered and received back must be within 2.5% of the
initial amount delivered.

A Portfolio's obligations under a dollar roll agreement must be covered by
liquid assets equal in value to the securities subject to repurchase by the
Portfolio, maintained in a segregated account. As with reverse repurchase
agreements, to the extent that positions in dollar roll agreements are not
covered through the maintenance of a segregated account consisting of liquid
assets at least equal to the amount of any forward purchase commitment, such
transactions would be subject to the Portfolios' limitations on borrowings.
Furthermore, because dollar roll transactions may be for terms ranging between
one and six months, dollar roll transactions may be deemed "illiquid" and
subject to a Portfolio's overall limitations on investments in illiquid
securities. The Portfolio forgoes principal and interest paid during the roll
period on the securities sold in a dollar roll, but the Portfolio is compensated
by the difference between the current sales price and the lower price for the
future purchase as well as by any interest earned on the proceeds of the
securities sold. The Portfolio also could be compensated through the receipt of
fee income equivalent to a lower forward price.

A Portfolio also may effect simultaneous purchase and sale transactions
that are known as "sale-buybacks". A sale-buyback is similar to a reverse
repurchase agreement, except that in a sale-buyback, the counterparty who
purchases the security is entitled to receive any principal or interest payments
make on the underlying security pending settlement of the Portfolio's repurchase
of the underlying security. A

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Portfolio's obligations under a sale-buyback typically would be offset by liquid
assets equal in value to the amount of the Portfolio's forward commitment to
repurchase the subject security.

To the extent that positions in reverse repurchase agreements, dollar
rolls, sale-buybacks or similar transactions are not covered through the
maintenance of a segregated account consisting of liquid assets at least equal
to the amount of any forward purchase commitment, such transactions would be
subject to the Portfolios' limitations on borrowings, which would restrict the
aggregate of such transactions (plus any other borrowings) to 33 1/3% of a
Portfolio's total assets.

Loans of Portfolio Securities

For the purpose of achieving income, the Portfolios may lend their
portfolio securities to brokers, dealers, and other financial institutions,
provided: (i) the loan is secured continuously by collateral consisting of U.S.
Government securities, cash or cash equivalents maintained on a daily mark-to-
market basis in an amount at least equal to the current market value of the
securities loaned; (ii) the Portfolio may at any time call the loan and obtain
the return of the securities loaned; (iii) the Portfolio will receive any
interest or dividends paid on the loaned securities; and (iv) the aggregate
market value of securities loaned will not at any time exceed 33 1/3% of the
total assets of the Portfolio. Each Portfolio's performance will continue to
reflect changes in the value of the securities loaned and will also reflect the
receipt of either interest through investment of cash collateral by the
Portfolio in permissible investments, or a fee, if the collateral is U.S.
Government securities. Securities lending involves the risk of loss of rights in
the collateral or delay in recovery of the collateral should the borrower fail
to return the securities loaned or become insolvent. The Portfolios may pay
lending fees to the party arranging the loan.

When-Issued, Delayed Delivery, and Forward Commitment Transactions

Each of the Portfolios may purchase or sell securities on a when-issued,
delayed delivery, or forward commitment basis. These transactions involve a
commitment by the Portfolio to purchase or sell securities for a predetermined
price or yield, with payment and delivery taking place more than seven days in
the future, or after a period longer than the customary settlement period for
that type of security. When such purchases are outstanding, the Portfolio will
set aside and maintain until the settlement date in a segregated account assets
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees, in an amount sufficient to meet the purchase price.
Typically, no income accrues on securities a Portfolio has committed to purchase
prior to the time delivery of the securities is made, although a Portfolio may
earn income on securities it has deposited in a segregated account. When
purchasing a security on a when-issued, delayed delivery, or forward commitment
basis, the Portfolio assumes the rights and risks of ownership of the security,
including the risk of price and yield fluctuations, and takes such fluctuations
into account when determining its net asset value. Because the Portfolio is not
required to pay for the security until the delivery date, these risks are in
addition to the risks associated with the Portfolio's other investments. If the
Portfolio remains substantially fully invested at a time when when-issued,
delayed delivery, or forward commitment purchases are outstanding, the purchases
may result in a form of leverage. When the Portfolio has sold a security on a
when-issued, delayed delivery, or forward commitment basis, the Portfolio does
not participate in future gains or losses with respect to the security. If the
other party to a transaction fails to deliver or pay for the securities, the
Portfolio could miss a favorable price or yield opportunity or could suffer a
loss. A Portfolio may dispose of or renegotiate a transaction after it is
entered into, and may sell when-issued, delayed delivery or forward commitment
securities before they are delivered, which may result in a capital gain or
loss. There is no percentage limitation on the extent to which the Portfolios
may purchase or sell securities on a when-issued, delayed delivery, or forward
commitment basis.

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Derivative Instruments

The Portfolios consider derivative instruments to consist of securities or
other instruments whose value is derived from or related to the value of some
other instrument or asset, and not to include those securities whose payment of
principal and/or interest depends upon cash flows from underlying assets, such
as mortgage-related or asset-backed securities. In pursuing their individual
objectives the Portfolios (except the PIMCO Money Market Portfolio) may, to the
extent permitted by their investment objectives and policies, purchase and sell
(write) both put options and call options on securities, securities indexes, and
foreign currencies, and enter into interest rate, foreign currency and index
futures contracts and purchase and sell options on such futures contracts
("futures options") for hedging purposes, except that those Portfolios that may
not invest in foreign currency-denominated securities may not enter into
transactions involving currency futures or options. To the extent permitted by
their investment objectives and policies, the Portfolios also may purchase and
sell foreign currency options for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one country
to another, and may enter into swap agreements with respect to foreign
currencies, interest rates and indexes of securities. The Portfolios may invest
in structured notes. If other types of financial instruments, including other
types of options, futures contracts, or futures options are traded in the
future, a Portfolio may also use those instruments, provided that the Trustees
determine that their use is consistent with the Portfolio's investment
objective. The Portfolios might not employ any of the strategies described
below, and no assurance can be given that any strategy used will succeed. If the
Adviser incorrectly forecasts interest rates, market values or other economic
factors in using a derivatives strategy for a Portfolio, the Portfolio might
have been in a better position if it had not entered into the transaction at
all. Also, suitable derivative instruments may not be available in all
circumstances. Each Portfolio will segregate assets determined to be liquid by
the Adviser in accordance with procedures established by the Board of Trustees
(or, as permitted by applicable regulation, enter into certain offsetting
positions) to cover its obligations under options, futures, and swaps to limit
leveraging of the Portfolio.

The use of these strategies involves certain special risks, including a
possible imperfect correlation, or even no correlation, between price movements
of derivative instruments and price movements of related investments. While some
strategies involving derivative instruments can reduce the risk of loss, they
can also reduce the opportunity for gain or even result in losses by offsetting
favorable price movements in related investments or otherwise due to the
possible inability of a Portfolio to purchase or sell a portfolio security at a
time that otherwise would be favorable, or the possible need to sell a portfolio
security at a disadvantageous time because the Portfolio is required to maintain
asset coverage or offsetting positions in connection with transactions in
derivative instruments, and the possible inability of a Portfolio to close out
or to liquidate its derivatives positions. In addition, a Portfolio's use of
such instruments may cause the Fund to realize higher amounts of short-term
capital gains (generally taxed at ordinary income tax rates) than if it had not
used such instruments.

Options on Securities and Indexes. A Portfolio may purchase and sell both
put and call options on fixed income or other securities or indexes in
standardized contracts traded on foreign or domestic securities exchanges,
boards of trade, or similar entities, or quoted on NASDAQ or on a regulated
foreign over-the-counter market, and agreements, sometimes called cash puts,
which may accompany the purchase of a new issue of bonds from a dealer. One
purpose of purchasing put options is to protect holdings in an underlying or
related security against a substantial decline in market value, while a purpose
of purchasing call options is to protect against substantial increases in prices
of securities the Portfolio intends to purchase pending its ability to invest in
such securities in an orderly manner. A Portfolio may sell put or call options
it has previously purchased, which could result in a net gain or loss depending
on whether the amount realized on the sale is more or less than the premium and
other transaction costs paid on the put or call option which is sold.

An option on a security (or index) is a contract that gives the holder of
the option, in return for a premium, the right to buy from (in the case of a
call) or sell to (in the case of a put) the writer of the option

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the security underlying the option (or the cash value of the index) at a
specified exercise price at any time during the term of the option. The writer
of an option on a security has the obligation upon exercise of the option to
deliver the underlying security upon payment of the exercise price or to pay the
exercise price upon delivery of the underlying security. Upon exercise, the
writer of an option on an index is obligated to pay the difference between the
cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect features of a
particular financial or securities market, a specific group of financial
instruments or securities, or certain economic indicators.)

A Portfolio will write call options and put options only if they are
"covered." In the case of a call option on a security, the option is "covered"
if the Portfolio owns the security underlying the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or, if additional cash consideration is required, cash or other assets
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees, in such amount are placed in a segregated account by
its custodian) upon conversion or exchange of other securities held by the
Portfolio. For a call option on an index, the option is covered if the
Portfolio maintains with its custodian assets determined to be liquid by the
Adviser in accordance with procedures established by the Board of Trustees, in
an amount equal to the contract value of the index. A call option is also
covered if the Portfolio holds a call on the same security or index as the call
written where the exercise price of the call held is (i) equal to or less than
the exercise price of the call written, or (ii) greater than the exercise price
of the call written, provided the difference is maintained by the Portfolio in
assets determined to be liquid by the Adviser in accordance with procedures
established by the Board of Trustees, in a segregated account with its
custodian. A put option on a security or an index is "covered" if the Portfolio
maintains assets determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees, equal to the exercise price in
a segregated account with its custodian. A put option is also covered if the
Portfolio holds a put on the same security or index as the put written where the
exercise price of the put held is (i) equal to or greater than the exercise
price of the put written, or (ii) less than the exercise price of the put
written, provided the difference is maintained by the Portfolio in assets
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees, in a segregated account with its custodian.

If an option written by a Portfolio expires unexercised, the Portfolio
realizes a capital gain equal to the premium received at the time the option was
written. If an option purchased by a Portfolio expires unexercised, the
Portfolio realizes a capital loss equal to the premium paid. Prior to the
earlier of exercise or expiration, an exchange traded option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price, and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when the Portfolio desires.

A Portfolio will realize a capital gain from a closing purchase transaction
if the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Portfolio will realize a capital loss. If
the premium received from a closing sale transaction is more than the premium
paid to purchase the option, the Portfolio will realize a capital gain or, if it
is less, the Portfolio will realize a capital loss. The principal factors
affecting the market value of a put or a call option include supply and demand,
interest rates, the current market price of the underlying security or index in
relation to the exercise price of the option, the volatility of the underlying
security or index, and the time remaining until the expiration date.

The premium paid for a put or call option purchased by a Portfolio is an
asset of the Portfolio. The premium received for an option written by a
Portfolio is recorded as a deferred credit. The value of an option purchased or
written is marked to market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or no closing
price is available, at the mean between the last bid and asked prices.

The Portfolios may write covered straddles consisting of a combination of a
call and a put written on the same underlying security. A straddle will be
covered when sufficient assets are deposited to meet the Portfolios' immediate
obligations. The Portfolios may use the same liquid assets to cover both the
call and put options where the exercise price of the call and put are the same,
or the exercise price of the call is

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<PAGE>

higher than that of the put. In such cases, the Portfolios will also segregate
liquid assets equivalent to the amount, if any, by which the put is "in the
money."

Risks Associated with Options on Securities and Indexes. There are several
risks associated with transactions in options on securities and on indexes. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.

There can be no assurance that a liquid market will exist when a Portfolio
seeks to close out an option position. If a Portfolio were unable to close out
an option that it had purchased on a security, it would have to exercise the
option in order to realize any profit or the option may expire worthless. If a
Portfolio were unable to close out a covered call option that it had written on
a security, it would not be able to sell the underlying security unless the
option expired without exercise. As the writer of a covered call option, a
Portfolio forgoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call option above the
sum of the premium and the exercise price of the call, but, as long as its
obligation as a writer continues, has retained the risk of loss should the price
of the underlying security decline. If a put or call option purchased by the
Portfolio is not sold when it has remaining value, and if the market price of
the underlying security remains equal to or greater than the exercise price (in
the case of a put), or remains less than or equal to the exercise price (in the
case of a call), the Portfolio will lose its entire investment in the option.
Also, where a put or call option on a particular security is purchased to hedge
against price movements in a related security, the price of the put or call
option may move more or less than the price of the related security.

If trading were suspended in an option purchased by a Portfolio, the
Portfolio would not be able to close out the option. If restrictions on
exercise were imposed, the Portfolio might be unable to exercise an option it
has purchased. Except to the extent that a call option on an index written by
the Portfolio is covered by an option on the same index purchased by the
Portfolio, movements in the index may result in a loss to the Portfolio;
however, such losses may be mitigated by changes in the value of the Portfolio's
securities during the period the option was outstanding.

Foreign Currency Options. A Portfolio that invests in foreign currency
denominated securities may buy or sell put and call options on foreign
currencies either on exchanges or in the over-the-counter market for purposes of
increasing exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one country to another. A put option on a foreign
currency gives the purchaser of the option the right to sell a foreign currency
at the exercise price until the option expires. A call option on a foreign
currency gives the purchaser of the option the right to purchase the currency at
the exercise price until the option expires. Currency options traded on U.S. or
other exchanges may be subject to position limits which may limit the ability of
a Portfolio to reduce foreign currency risk using such options. Over-the-counter
options in which certain Portfolios invest differ from traded options in that
they are two-party contracts with price and other terms negotiated between buyer
and seller, and generally do not have as much market liquidity as exchange-
traded options. The Portfolios may be required to treat as illiquid over-the-
counter options purchased and securities being used to cover certain written
over-the-counter options.

Futures Contracts and Options on Futures Contracts. Each of the Fixed
Income Portfolios (except the PIMCO Money Market Portfolio) may invest in
interest rate futures contracts and options thereon ("futures options"), and to
the extent it may invest in foreign currency-denominated securities, may also
invest in foreign currency futures contracts and options thereon. The PIMCO
StocksPLUS Growth and Income Portfolio and the PIMCO Strategic Balanced
Portfolio may invest in interest rate, stock index and foreign currency futures
contracts and options thereon.

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An interest rate, foreign currency or index futures contract provides for
the future sale by one party and purchase by another party of a specified
quantity of a financial instrument, foreign currency or the cash value of an
index at a specified price and time. A futures contract on an index is an
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. Although the value of an index might be a
function of the value of certain specified securities, no physical delivery of
these securities is made. A public market exists in futures contracts covering
a number of indexes as well as financial instruments and foreign currencies,
including: the S&P 500; the S&P Midcap 400; the Nikkei 300; the Nikkei 225; the
Hang Send Index; the TSE 300 Composite Index; the TSE 100 Index; the Financial
Times-Stock Exchange 100 Index; The Financial Times Mid-250 Index; the CAC 40
Index; the IBEX-35 Stock Index; the DAX Stock Index; the MIB Index; the NYSE
composite; U.S. Treasury bonds; German Government Bond; Italian Government Bond;
3-month Sterling Interest Rate; 3-month Eurodollar Interest Rate; 3-month Euro-
Deutsche Mark Interest Rate; 3-month Euro-Swiss Franc Interest Rate; 3-month
Euro-Lira Interest Rate; Treasury notes; GNMA Certificates; three-month U.S.
Treasury bills; 90-day commercial paper; bank certificates of deposit;
Eurodollar certificates of deposit; the Australian dollar; the Canadian dollar;
the British pound; the German mark; the Japanese yen; the French franc; the
Swiss franc; the Mexican peso; and certain multinational currencies, such as the
euro. It is expected that other futures contracts will be developed and traded
in the future.

A Portfolio may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities and
indexes (discussed above). A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true.

To comply with applicable rules of the Commodity Futures Trading Commission
("CFTC") under which the Trust and the Portfolios avoid being deemed a
"commodity pool" or a "commodity pool operator," each Portfolio intends
generally to limit its use of futures contracts and futures options to "bona
fide hedging" transactions, as such term is defined in applicable regulations,
interpretations and practice. For example, a Portfolio might use futures
contracts to hedge against anticipated changes in interest rates that might
adversely affect either the value of the Portfolio's securities or the price of
the securities which the Portfolio intends to purchase. A Portfolio's hedging
activities may include sales of futures contracts as an offset against the
effect of expected increases in interest rates, and purchases of futures
contracts as an offset against the effect of expected declines in interest
rates. Although other techniques could be used to reduce that Portfolio's
exposure to interest rate fluctuations, the Portfolio may be able to hedge its
exposure more effectively and perhaps at a lower cost by using futures contracts
and futures options.

A Portfolio will only enter into futures contracts and futures options
which are standardized and traded on a U.S. or foreign exchange, board of trade,
or similar entity, or quoted on an automated quotation system.

When a purchase or sale of a futures contract is made by a Portfolio, the
Portfolio is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of assets determined to be liquid by the Adviser
in accordance with procedures established by the Board of Trustees ("initial
margin"). The margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term of the
contract. Margin requirements on foreign exchanges may be different than U.S.
exchanges. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned to the Portfolio upon
termination of the contract, assuming all contractual obligations have been
satisfied. Each Portfolio expects to earn interest income on its initial margin
deposits. A futures contract held by a Portfolio is valued daily at the
official settlement price of the exchange on which it is traded. Each day the
Portfolio pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by a Portfolio
but is instead a settlement between the Portfolio and

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<PAGE>

the broker of the amount one would owe the other if the futures contract
expired. In computing daily net asset value, each Portfolio will mark to market
its open futures positions.

A Portfolio is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Portfolio.

Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Portfolio realizes a
capital gain, or if it is more, the Portfolio realizes a capital loss.
Conversely, if an offsetting sale price is more than the original purchase
price, the Portfolio realizes a capital gain, or if it is less, the Portfolio
realizes a capital loss. The transaction costs must also be included in these
calculations.

The Portfolios may write covered straddles consisting of a call and a put
written on the same underlying futures contract. A straddle will be covered
when sufficient assets are deposited to meet the Portfolios' immediate
obligations. A Portfolio may use the same liquid assets to cover both the call
and put options where the exercise price of the call and put are the same, or
the exercise price of the call is higher than that of the put. In such cases,
the Portfolios will also segregate liquid assets equivalent to the amount, if
any, by which the put is "in the money."

Limitations on Use of Futures and Futures Options. In general, the
Portfolios intend to enter into positions in futures contracts and related
options only for "bona fide hedging" purposes. With respect to positions in
futures and related options that do not constitute bona fide hedging positions,
a Portfolio will not enter into a futures contract or futures option contract
if, immediately thereafter, the aggregate initial margin deposits relating to
such positions plus premiums paid by it for open futures option positions, less
the amount by which any such options are "in-the-money," would exceed 5% of the
Portfolio's net assets. A call option is "in-the-money" if the value of the
futures contract that is the subject of the option exceeds the exercise price.
A put option is "in-the-money" if the exercise price exceeds the value of the
futures contract that is the subject of the option.

When purchasing a futures contract, a Portfolio will maintain with its
custodian (and mark-to-market on a daily basis) assets determined to be liquid
by the Adviser in accordance with procedures established by the Board of
Trustees, that, when added to the amounts deposited with a futures commission
merchant as margin, are equal to the market value of the futures contract.
Alternatively, the Portfolio may "cover" its position by purchasing a put option
on the same futures contract with a strike price as high or higher than the
price of the contract held by the Portfolio.

When selling a futures contract, a Portfolio will maintain with its
custodian (and mark-to-market on a daily basis) assets determined to be liquid
by the Adviser in accordance with procedures established by the Board of
Trustees, that are equal to the market value of the instruments underlying the
contract. Alternatively, the Portfolio may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based), or by holding a call option
permitting the Portfolio to purchase the same futures contract at a price no
higher than the price of the contract written by the Portfolio (or at a higher
price if the difference is maintained in liquid assets with the Trust's
custodian).

When selling a call option on a futures contract, a Portfolio will maintain
with its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees, that, when added to the amounts deposited with a futures commission
merchant as margin, equal the total market value of the futures contract
underlying the call option. Alternatively, the Portfolio may cover its position
by entering into a long position in the same

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futures contract at a price no higher than the strike price of the call option,
by owning the instruments underlying the futures contract, or by holding a
separate call option permitting the Portfolio to purchase the same futures
contract at a price not higher than the strike price of the call option sold by
the Portfolio.

When selling a put option on a futures contract, a Portfolio will maintain
with its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees, that equal the purchase price of the futures contract, less any margin
on deposit. Alternatively, the Portfolio may cover the position either by
entering into a short position in the same futures contract, or by owning a
separate put option permitting it to sell the same futures contract so long as
the strike price of the purchased put option is the same or higher than the
strike price of the put option sold by the Portfolio.

To the extent that securities with maturities greater than one year are
used to establish and maintain segregated accounts to cover a Portfolio's
obligations under futures contracts and related options, such use will not
eliminate the risk of a form of leverage, which may tend to exaggerate the
effect on net asset value of any increase or decrease in the market value of a
Portfolio's portfolio, and may require liquidation of portfolio positions when
it is not advantageous to do so. However, any potential risk of leverage
resulting from the use of securities with maturities greater than one year may
be mitigated by the overall duration limit on a Portfolio's portfolio
securities. Thus, the use of a longer-term security may require a Portfolio to
hold offsetting short-term securities to balance the Portfolio's portfolio such
that the Portfolio's duration does not exceed the maximum permitted for the
Portfolio in the Prospectus.

The requirements for qualification as a regulated investment company also
may limit the extent to which a Portfolio may enter into futures, futures
options or forward contracts. See "Taxation."

Risks Associated with Futures and Futures Options. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in the Portfolio securities being hedged. In addition,
there are significant differences between the securities and futures markets
that could result in an imperfect correlation between the markets, causing a
given hedge not to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as variations in speculative market
demand for futures and futures options on securities, including technical
influences in futures trading and futures options, and differences between the
financial instruments being hedged and the instruments underlying the standard
contracts available for trading in such respects as interest rate levels,
maturities, and creditworthiness of issuers. An incorrect correlation could
result in a loss on both the hedged securities in a Portfolio and the hedging
vehicle so that the portfolio return might have been greater had hedging not
been attempted. A decision as to whether, when and how to hedge involves the
exercise of skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of market behavior or unexpected interest
rate trends.

Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.

There can be no assurance that a liquid market will exist at a time when a
Portfolio seeks to close out a futures or a futures option position, and that
Portfolio would remain obligated to meet margin

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requirements until the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist. Lack of a liquid market for any reason may
prevent a Portfolio from liquidating an unfavorable position.

Additional Risks of Options on Securities, Futures Contracts, Options on
Futures Contracts, and Forward Currency Exchange Contracts and Options Thereon.
Options on securities, futures contracts, options on futures contracts, and
options on currencies may be traded on foreign exchanges. Such transactions may
not be regulated as effectively as similar transactions in the United States;
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities. The value of such positions also could be adversely affected by (i)
other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Trust's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lesser trading
volume.

Swap Agreements. The Portfolios (except the PIMCO Equity Income, Capital
Appreciation, Mid-Cap Growth and Small-Cap Value Portfolios) may enter into
interest rate, index and currency exchange rate swap agreements. These
transactions are entered into in a attempt to obtain a particular return when it
is considered desirable to do so, possibly at a lower cost to the Portfolio than
if the Portfolio had invested directly in an instrument that yielded that
desired return. Swap agreements are two party contracts entered into primarily
by institutional investors for periods ranging from a few weeks to more than one
year. In a standard "swap" transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on particular
predetermined investments or instruments, which may be adjusted for an interest
factor. The gross returns to be exchanged or "swapped" between the parties are
generally calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Forms of swap agreements include interest rate
caps, under which, in return for a premium, one party agrees to make payments to
the other to the extent that interest rates exceed a specified rate, or "cap";
interest rate floors, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified rate, or "floor"; and interest rate collars, under which a party sells
a cap and purchases a floor or vice versa in an attempt to protect itself
against interest rate movements exceeding given minimum or maximum levels.

Most swap agreements entered into by the Portfolios would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Portfolio's current obligations (or rights) under a swap agreement will
generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). A Portfolio's current obligations under a
swap agreement will be accrued daily (offset against any amounts owing to the
Portfolio) and any accrued but unpaid net amounts owed to a swap counterparty
will be covered by the maintenance of a segregated account consisting of assets
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees, to avoid any potential leveraging of the Portfolio's
portfolio. Obligations under swap agreements so covered will not be construed to
be "senior securities" for purposes of the Portfolio's investment restriction
concerning senior securities. A Portfolio will not enter into a swap agreement
with any single party if the net amount owed or to be received under existing
contracts with that party would exceed 5% of the Portfolio's assets.

Whether a Portfolio's use of swap agreements will be successful in
furthering its investment objective of total return will depend on the Adviser's
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Because they are two party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered

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to be illiquid. Moreover, a Portfolio bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Portfolios will enter into swap
agreements only with counterparties that meet certain standards of
creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Portfolios' repurchase agreement
guidelines). Certain restrictions imposed on the Portfolios by the Internal
Revenue Code may limit the Portfolios' ability to use swap agreements. The swaps
market is a relatively new market and is largely unregulated. It is possible
that developments in the swaps market, including potential government
regulation, could adversely affect a Portfolio's ability to terminate existing
swap agreements or to realize amounts to be received under such agreements.

Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC
effective February 22, 1993. To qualify for this exemption, a swap agreement
must be entered into by "eligible participants," which includes the following,
provided the participants' total assets exceed established levels: a bank or
trust company, savings association or credit union, insurance company,
investment company subject to regulation under the 1940 Act, commodity pool,
corporation, partnership, proprietorship, organization, trust or other entity,
employee benefit plan, governmental entity, broker-dealer, futures commission
merchant, natural person, or regulated foreign person. To be eligible, natural
persons and most other entities must have total assets exceeding $10 million;
commodity pools and employee benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are standardized as to their material economic terms. Second, the
creditworthiness of parties with actual or potential obligations under the swap
agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through
a multilateral transaction execution facility.

This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap transactions from regulation as futures
or commodity option transactions under the CEA or its regulations. The Policy
Statement applies to swap transactions settled in cash that (1) have
individually tailored terms, (2) lack exchange-style offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public.

Structured Notes. Structured notes are derivative debt securities, the
interest rate or principal of which is determined by an unrelated indicator.
Indexed securities include structured notes as well as securities other than
debt securities, the interest rate or principal of which is determined by an
unrelated indicator. Indexed securities may include a multiplier that
multiplies the indexed element by a specified factor and, therefore, the value
of such securities may be very volatile. To the extent a Portfolio invests in
these securities, however, the Adviser analyzes these securities in its overall
assessment of the effective duration of the Portfolio's portfolio in an effort
to monitor the Portfolio's interest rate risk.

Warrants to Purchase Securities

The Portfolios may invest in or acquire warrants to purchase equity or
fixed income securities. Bonds with warrants attached to purchase equity
securities have many characteristics of convertible bonds and their prices may,
to some degree, reflect the performance of the underlying stock. Bonds also may
be issued with warrants attached to purchase additional fixed income securities
at the same coupon rate. A decline in interest rates would permit a Portfolio
to buy additional bonds at the favorable rate or to sell the warrants at a
profit. If interest rates rise, the warrants would generally expire with no
value.

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<PAGE>

Hybrid Instruments

A hybrid instrument can combine the characteristics of securities, futures,
and options. For example, the principal amount or interest rate of a hybrid
could be tied (positively or negatively) to the price of some commodity,
currency or securities index or another interest rate (each a "benchmark"). The
interest rate or (unlike most fixed income securities) the principal amount
payable at maturity of a hybrid security may be increased or decreased,
depending on changes in the value of the benchmark.

Hybrids can be used as an efficient means of pursuing a variety of
investment goals, including currency hedging, duration management, and increased
total return. Hybrids may not bear interest or pay dividends. The value of a
hybrid or its interest rate may be a multiple of a benchmark and, as a result,
may be leveraged and move (up or down) more steeply and rapidly than the
benchmark. These benchmarks may be sensitive to economic and political events,
such as commodity shortages and currency devaluations, which cannot be readily
foreseen by the purchaser of a hybrid. Under certain conditions, the redemption
value of a hybrid could be zero. Thus, an investment in a hybrid may entail
significant market risks that are not associated with a similar investment in a
traditional, U.S. dollar-denominated bond that has a fixed principal amount and
pays a fixed rate or floating rate of interest. The purchase of hybrids also
exposes a Portfolio to the credit risk of the issuer of the hybrids. These risks
may cause significant fluctuations in the net asset value of the Portfolio.
Accordingly, no Portfolio will invest more than 5% of its assets in hybrid
instruments.

Certain issuers of structured products such as hybrid instruments may be
deemed to be investment companies as defined in the 1940 Act. As a result, the
Portfolios' investments in these products will be subject to limits applicable
to investments in investment companies and may be subject to restrictions
contained in the 1940 Act.

Catastrophe Bonds

Each of the Fixed Income Portfolios (except the PIMCO Money Market
Portfolio) and the PIMCO StocksPLUS Portfolio may invest in "catastrophe bonds."
Catastrophe bonds are fixed income securities, for which the return of principal
and payment of interest is contingent on the non-occurrence of a specific
"trigger" catastrophic event, such as a hurricane or an earthquake. They may be
issued by government agencies, insurance companies, reinsurers, special purpose
corporations or other on-shore or off-shore entities. If a trigger event causes
losses exceeding a specific amount in the geographic region and time period
specified in a bond, a Portfolio investing in the bond may lose a portion or all
of its principal invested in the bond. If no trigger event occurs, the
Portfolio will recover its principal plus interest. For some catastrophe bonds,
the trigger event or losses may be based on companywide losses, index-portfolio
losses, industry indices, or readings of scientific instruments rather than
specified actual losses. Often the catastrophe bonds provide for extensions of
maturity that are mandatory, or optional at the discretion of the issuer, in
order to process and audit loss claims in those cases where an trigger event
has, or possibly has, occurred. In addition to the specified trigger events,
catastrophe bonds may also expose the Portfolio to certain unanticipated risks
including but not limited to issuer (credit) default, adverse regulatory or
jurisdictional interpretations, and adverse tax consequences.

Catastrophe bonds are a relatively new type of financial instrument. As
such, there is no significant trading history of these securities, and there can
be no assurance that a liquid market in these instruments will develop. See
"Illiquid Securities" below. Lack of a liquid market may impose the risk of
higher transaction costs and the possibility that a Portfolio may be forced to
liquidate positions when it would not be advantageous to do so. Catastrophe
bonds are typically rated, and a Portfolio will only invest in catastrophe bonds
that meet the credit quality requirements for the Portfolio.

29
<PAGE>

Investment in Investment Companies

Each of the Portfolios may invest up to 10% of its assets in securities of
other investment companies, such as closed-end management investment companies,
or in pooled accounts or other investment vehicles. As a shareholder of an
investment company, a Portfolio may indirectly bear service and other fees which
are in addition to the fees the Portfolio pays its service providers.

Illiquid Securities

The Portfolios may invest up to 15% of their net assets in illiquid
securities (10% in the case of the PIMCO Money Market Portfolio). The term
"illiquid securities" for this purpose means securities that cannot be disposed
of within seven days in the ordinary course of business at approximately the
amount at which a Portfolio has valued the securities. Illiquid securities are
considered to include, among other things, written over-the-counter options,
securities or other liquid assets being used as cover for such options,
repurchase agreements with maturities in excess of seven days, certain loan
participation interests, fixed time deposits which are not subject to prepayment
or provide for withdrawal penalties upon prepayment (other than overnight
deposits), and other securities which legally or in the Adviser's opinion may be
deemed illiquid (not including securities issued pursuant to Rule 144A under the
1933 Act and certain commercial paper that the Adviser has determined to be
liquid under procedures approved by the Board of Trustees).

Illiquid securities may include privately placed securities, which are sold
directly to a small number of investors, usually institutions. Unlike public
offerings, such securities are not registered under the federal securities laws.
Although certain of these securities may be readily sold, for example, under
Rule 144A, others may be illiquid, and their sale may involve substantial delays
and additional costs.

Certain illiquid securities may require pricing at fair value as determined
in good faith under the supervision of the Board of Trustees. The Adviser may be
subject to significant delays in disposing of illiquid securities, and
transactions in illiquid securities may entail registration expenses and other
transaction costs that are higher than those for transactions in liquid
securities.

INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions

Each Portfolio's investment objective as set forth in the Prospectus under
the heading "Description of Portfolios" for each respective Portfolio, together
with the investment restrictions set forth below, are fundamental policies of
the Portfolio and may not be changed with respect to a Portfolio without
shareholder approval by vote of a majority of the outstanding shares of that
Portfolio. Under these restrictions a Portfolio may not:

(1) invest in a security if, as a result of such investment, more than 25%
of its total assets (taken at market value at the time of such investment) would
be invested in the securities of issuers in any particular industry, except that
this restriction does not apply (a) to securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities (or repurchase agreements
with respect thereto) and (b) with respect to the Money Market Portfolio, to
securities or obligations issued by U.S. banks;

(2) with respect to 75% of its assets, invest in a security if, as a result
of such investment, more than 5% of its total assets (taken at market value at
the time of such investment) would be invested in the securities of any one
issuer, except that this restriction does not apply to securities issued or
guaranteed by

30
<PAGE>

the U.S. Government or its agencies or instrumentalities (This investment
restriction is not applicable to the Real Return Bond, Foreign Bond, Global
Bond, or Emerging Markets Bond Portfolios.);

(3) with respect to 75% of its assets, invest in a security if, as a result
of such investment, it would hold more than 10% (taken at the time of such
investment) of the outstanding voting securities of any one issuer (This
restriction is not applicable to the Real Return Bond, Foreign Bond, Global Bond
or the Emerging Markets Bond Portfolios.);

(4) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
which invest in real estate, or interests therein;

(5) purchase or sell commodities or commodities contracts or oil, gas or
mineral programs. This restriction shall not prohibit a Portfolio, subject to
restrictions described in the Prospectus and elsewhere in this Statement of
Additional Information, from purchasing, selling or entering into futures
contracts, options on futures contracts, foreign currency forward contracts,
foreign currency options, or any interest rate, securities-related or foreign
currency-related hedging instrument, including swap agreements and other
derivative instruments, subject to compliance with any applicable provisions of
the federal securities or commodities laws;

(6) borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that a Portfolio may (i) borrow from banks or
enter into reverse repurchase agreements, or employ similar investment
techniques, but only if immediately after each borrowing there is asset coverage
of 300% and (ii) enter into transactions in options, futures, options on
futures, and other derivative instruments as described in the Prospectus and in
this Statement of Additional Information (the deposit of assets in escrow in
connection with the writing of covered put and call options and the purchase of
securities on a when-issued or delayed delivery basis, collateral arrangements
with respect to initial or variation margin deposits for futures contracts and
commitments entered into under swap agreements or other derivative instruments,
will not be deemed to be pledges of a Portfolio's assets);

(7) lend any funds or other assets, except that a Portfolio may, consistent
with its investment objective and policies: (a) invest in debt obligations,
including bonds, debentures, or other debt securities, bankers' acceptances and
commercial paper, even though the purchase of such obligations may be deemed to
be the making of loans, (b) enter into repurchase agreements, and (c) lend its
portfolio securities in an amount not to exceed one-third of the value of its
total assets, provided such loans are made in accordance with applicable
guidelines established by the Securities and Exchange Commission and the
Trustees of the Trust;

(8) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under the federal securities laws.

Non-Fundamental Investment Restrictions

Each Portfolio is also subject to the following non-fundamental
restrictions and policies (which may be changed without shareholder approval)
relating to the investment of its assets and activities. Unless otherwise
indicated, a Portfolio may not:

(A) invest more than 15% of the net assets of the Portfolio (10% in the
case of the PIMCO Money Market Portfolio) (taken at market value at the time of
the investment) in "illiquid securities," which include securities subject to
legal or contractual restrictions on resale (which may include private
placements), repurchase agreements maturing in more than seven days, certain
loan participation interests, fixed time deposits which are not subject to
prepayment or provide for withdrawal penalties upon prepayment (other than
overnight deposits), certain options traded over the counter that a Portfolio
has purchased, securities or other liquid assets being used to cover such
options a Portfolio has written, securities for which market

31
<PAGE>

quotations are not readily available, or other securities which legally or in
the Adviser's opinion may be deemed illiquid (other than securities issued
pursuant to Rule 144A under the Securities Act of 1933 and certain commercial
paper that PIMCO has determined to be liquid under procedures approved by the
Board of Trustees);

(B) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but it
may make margin deposits in connection with covered transactions in options,
futures, options on futures and short positions;

In addition, the Trust has adopted a non-fundamental policy pursuant to
which each Portfolio that may invest in securities denominated in foreign
currencies, except the PIMCO Global Bond and PIMCO Emerging Markets Bond
Portfolios, will hedge at least 75% of its exposure to foreign currency using
the techniques described in the Prospectus and the Statement of Additional
Information. There can be no assurance that currency hedging techniques will be
successful.

Under the 1940 Act, a "senior security" does not include any promissory
note or evidence of indebtedness where such loan is for temporary purposes only
and in an amount not exceeding 5% of the value of the total assets of the issuer
at the time the loan is made. A loan is presumed to be for temporary purposes
if it is repaid within sixty days and is not extended or renewed.
Notwithstanding the provisions of fundamental investment restriction (6) above,
a Portfolio may borrow money for temporary administrative purposes. To the
extent that borrowings for temporary administrative purposes exceed 5% of the
total assets of a Portfolio, such excess shall be subject to the 300% asset
coverage requirement of that restriction.

To the extent a Portfolio covers its commitment under a reverse repurchase
agreement (or economically similar transaction) by the maintenance of a
segregated account consisting of assets determined to be liquid in accordance
with procedures adopted by the Trustees, equal in value to the amount of the
Portfolio's commitment to repurchase, such an agreement will not be considered a
"senior security" by the Portfolio and therefore will not be subject to the 300%
asset coverage requirement otherwise applicable to borrowings by the Portfolio.

Unless otherwise indicated, all limitations applicable to Portfolio
investments (as stated above and elsewhere in this Statement of Additional
Information) apply only at the time a transaction is entered into. Any
subsequent change in a rating assigned by any rating service to a security (or,
if unrated, deemed to be of comparable quality), or change in the percentage of
Portfolio assets invested in certain securities or other instruments, or change
in the average duration of a Portfolio's investment portfolio, resulting from
market fluctuations or other changes in a Portfolio's total assets will not
require a Portfolio to dispose of an investment until the Adviser determines
that it is practicable to sell or close out the investment without undue market
or tax consequences to the Portfolio. In the event that ratings services assign
different ratings to the same security, the Adviser will determine which rating
it believes best reflects the security's quality and risk at that time, which
may be the higher of the several assigned ratings.

MANAGEMENT OF THE TRUST

Trustees and Officers

The business affairs of the Trust and each Portfolio are managed by a Board
of Trustees. The Board retains various companies to carry out the Trust's and
the Portfolios' operations. The Board has the right to terminate these
relationships and retain a different company if it believes it is in the best
interests of the shareholders.

The Trustees and Executive Officers of the Trust, their business address
and principal occupations during the past five years are as follows (unless
otherwise indicated, the address of all persons below is 840 Newport Center
Drive, Suite 300, Newport Beach, California 92660):

32
<PAGE>

<TABLE>
<CAPTION>
Position Principal Occupation(s)
Name, Address and Age with the Trust During the Past Five Years
- ----------------------------------- ------------------------------ ----------------------------------------------
<C> <C> <S>
Brent R. Harris* Chairman of the Board and Managing Director, PIMCO; Board of Governors,
Age 39 Trustee Investment Company Institute; Director,
Harris Holdings, Harris Oil Company; Chairman
and Trustee, PIMCO Funds: Pacific Investment
Management Series; Chairman and Director,
PIMCO Commercial Mortgage Securities Trust,
Inc.

R. Wesley Burns* President and Trustee Managing Director, PIMCO; Trustee and
Age 39 President, PIMCO Funds: Pacific Investment
Management Series; Director and President,
PIMCO Commercial Mortgage Securities Trust,
Inc.; Executive Vice President, PIMCO Funds:
Multi-Manager Series. Formerly Executive Vice
President, PIMCO.

Guilford C. Babcock Trustee Associate Professor of Finance, University of
1575 Circle Drive Southern California; Trustee, PIMCO Funds:
San Marino, California Pacific Investment Management Series;
91108 Director, PIMCO Commercial Mortgage
Age 68 Securities Trust, Inc.; Director, Growth Fund
of America and Fundamental Investors Fund of
the Capital Group; Director, Good Hope
Medical Foundation.

Vern O. Curtis Trustee Private Investor; Trustee, PIMCO Funds:
14158 N.W. Bronson Creek Drive Pacific Investment Management Series;
Portland, Oregon Director, PIMCO Commercial Mortgage
97229 Securities Trust, Inc.; Director of American
Age 65 Office Park Properties, Inc., a Real Estate
Investment Trust; Director, Fresh Choice,
Inc. Formerly Charitable Work, The Church of
Jesus Christ of Latter Day Saints.

Thomas P. Kemp Trustee Private Investor; Trustee, PIMCO Funds:
1141 Marine Drive Pacific Investment Management Series;
Laguna Beach, California Director, PIMCO Commercial Mortgage
92651 Securities Trust, Inc. Formerly Co-Chairman,
Age 68 U.S. Committee to Assist Russian Reform;
Director, Union Financial Corp.; Senior
Consultant, World Cup 1994 Organizing
Committee.
</TABLE>

33
<PAGE>

<TABLE>
<CAPTION>
Position Principal Occupation(s)
Name, Address and Age with the Trust During the Past Five Years
- ----------------------------------- ------------------------------ ----------------------------------------------
<C> <C> <S>
William J. Popejoy Trustee Director, PacPro (formerly Western Printing);
29 Chatham Court Trustee, PIMCO Funds: Pacific Investment
Newport Beach, California Management Series; Director, PIMCO Commercial
92660 Mortgage Securities Trust, Inc. Formerly
Age 61 Director, California State Lottery; Chief
Executive Officer, Orange County, California.

William H. Gross Senior Vice President Managing Director, PIMCO; Senior Vice President,
Age 55 PIMCO Funds: Pacific Investment Management Series.

James F. Muzzy Senior Vice President Managing Director, PIMCO; Vice President,
Age 59 PIMCO Funds: Pacific Investment Management Series.

William S. Thompson, Jr. Senior Vice President Chief Executive Officer and Managing Director,
Age 53 PIMCO. Vice President, PIMCO Funds: Pacific
Investment Management Series and Commercial Mortgage
Securities Trust, Inc. Formerly Managing Director,
Salomon Brothers, Inc.

Jeffrey M. Sargent Vice President Vice President and Manager of Investment
Age 36 Operations Shareholder Services, PIMCO; Senior
Vice President, PIMCO Commercial Mortgage
Securities Trust, Inc.; PIMCO Funds: Pacific
Investment Management Series; Vice President,
PIMCO Funds: Multi-Manager Series.

Steven P. Kirkbaumer Vice President Vice President, PIMCO and PIMCO Management, Inc.
Age 43 Previously associated with Prime Advisors and
Conseco Capital Management as Director of Marketing.

Henrik Larsen Vice President Manager, Fund Administration, PIMCO; Vice
Age 29 President, PIMCO Commercial Mortgage Securities
Trust, Inc. and PIMCO Funds: Pacific Investment
Management Series; Formerly, Supervisor, PIMCO.

John P. Hardaway Treasurer Senior Vice President and Manager of Investment
Age 42 Operations Accounting, PIMCO; Treasurer,
PIMCO Commercial Mortgage Securities Trust,
Inc.; PIMCO Funds: Pacific Investment
Management Series; PIMCO Funds: Multi-Manager
Series.

Garlin G. Flynn Secretary Specialist, PIMCO; Secretary, PIMCO
Age 53 Commercial Mortgage Securities Trust, Inc.;
PIMCO Funds: Pacific Investment Management
Series; Assistant Secretary, PIMCO Funds:
Multi-Manager Series. Formerly Senior
Portfolio Administrator, PIMCO.
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
Position Principal Occupation(s)
Name, Address and Age with the Trust During the Past Five Years
- ----------------------------------- ------------------------------ ----------------------------------------------
<C> <C> <S>
Joseph D. Hattesohl Assistant Treasurer Vice President and Manager of Fund Taxation,
Age 35 PIMCO. Assistant Treasurer, PIMCO Commercial
Mortgage Securities Trust, Inc.; PIMCO Funds:
Pacific Investment Management Series; PIMCO
Funds: Multi-Manager Series.

Michael J. Willemsen Assistant Secretary Manager, PIMCO. Assistant Secretary, PIMCO
Age 39 Commercial Mortgage Securities Trust, Inc.;
PIMCO Funds: Pacific Investment Management Series.
Formerly Project Lead, PIMCO.

</TABLE>

___________________
*Mr. Harris and Mr. Burns are "interested persons" of the Trust (as that term
is defined in the 1940 Act) because of their affiliations with PIMCO.

Compensation Table

For the fiscal year ending December 31, 1998, the Trust paid the following
compensation to the Trustees of the Trust:
<TABLE>
<CAPTION>

Aggregate Total Compensation from
Compensation Trust and Fund Complex
Name and Position from Trust/1/ Paid to Trustees/2/
- --------------------------- ------------ -----------------------
<S> <C> <C>

Guilford C. Babcock $10,000 $78,500
Trustee

Vern O. Curtis $10,500 $81,000
Trustee

Thomas P. Kemp $10,000 $78,500
Trustee

William J. Popejoy $10,000 $78,500
Trustee
</TABLE>
____________________

/1/Each Trustee, other than those affiliated with the Adviser or its
affiliates will receive an annual retainer of $4,000 plus $1,500 for each Board
of Trustees meeting attended in person and $250 for each meeting attended
telephonically, plus reimbursement of related expenses. In addition, a Trustee
serving as a Committee Chair, other than those affiliated with the Adviser or
its affiliates, will receive an additional annual retainer of $500.

/2/Each Trustee also serves as a Director of PIMCO Commercial Mortgage
Securities Trust, Inc., a registered closed-end management investment company,
and as a Trustee of PIMCO Funds: Pacific Investment Management Series, a
registered open-end management investment company. For their services to PIMCO
Commercial Mortgage Securities Trust, Inc., each Director who is unaffiliated
with the Adviser

35
<PAGE>

or its affiliates receives an annual retainer of $6,000 plus $1,000 for each
Board of Directors meeting attended and $500 for each Board of Directors meeting
attended telephonically. Each Trustee serving as a Committee Chair, other than
those affiliated with the Adviser or its affiliates, receives an annual retainer
of $500. For their services to PIMCO Funds: Pacific Investment Management
Series, each Trustee, other than those affiliated with the Adviser or its
affiliates, receives an annual retainer of $45,000 plus $3,000 for each Board of
Trustees meeting attended in person and $500 for each meeting attended
telephonically, plus reimbursement of related expenses. In addition, a Trustee
serving as a Committee Chair, other than those affiliated with the Adviser or
its affiliates, receives an additional annual retainer of $1,500.

Investment Adviser

PIMCO serves as investment adviser to the Fixed Income Portfolios and the
PIMCO Strategic Balanced and StocksPLUS Growth and Income Portfolios pursuant to
an investment advisory contract ("PIMCO Advisory Contract") between PIMCO and
the Trust. PIMCO is a subsidiary partnership of PIMCO Advisors.

PIMCO Advisors serves as investment adviser to the PIMCO Equity Income,
Capital Appreciation, Mid-Cap Growth, and Small-Cap Value Portfolios pursuant to
an investment advisory contract ("PIMCO Advisors Advisory Contract") between
PIMCO Advisors and the Trust. The general partners of PIMCO Advisors are PIMCO
Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH"). PIMCO 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, and PIMCO Partners LLC, a California limited liability company
controlled by the current Managing Directors and two former Managing Directors
of PIMCO. PIMCO Partners, G.P. is the sole general partner of PAH.

PIMCO and the Portfolio Managers are responsible for making investment
decisions and placing orders for the purchase and sale of the Portfolios'
investments directly with the issuers or with brokers or dealers selected by it
in its discretion. See "Portfolio Transactions and Brokerage" below. PIMCO and
the Portfolio Managers also furnish to the Board of Trustees, which has overall
responsibility for the business and affairs of the Trust, periodic reports on
the investment performance of each Portfolio.

Under the terms of the Advisory Contracts, PIMCO and PIMCO Advisors are
obligated to manage the Portfolios in accordance with applicable laws and
regulations. The investment advisory services of PIMCO and PIMCO Advisors to
the Trust are not exclusive under the terms of the Advisory Contracts. PIMCO
and PIMCO Advisors are free to, and do, render investment advisory services to
others. The PIMCO Advisory Contract was approved by the Board of Trustees,
including a majority of the Trustees who are not parties to the Advisory
Contract or interested persons of such parties ("Independent Trustees"), at a
meeting held on August 26, 1997, as supplemented on February 23, 1999, and was
approved by the shareholders of all then-operational Portfolios on December 31,
1997. The PIMCO Advisors Advisory Contract was approved by the Board of
Trustees, including a majority of the Trustees who are not parties to the
Advisory Contract or interested persons of such parties ("Independent
Trustees"), at a meeting held on May 26, 1998.

Following the expiration of the two year period commencing with the
effectiveness of each Advisory Contract, it will continue in effect on a yearly
basis provided such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of the Trust or by the Board of
Trustees and (ii) by a majority of the Independent Trustees. The Advisory
Contracts may be terminated without penalty by vote of the Trustees or the
shareholders of the Trust, or by the Adviser, on 60 days' written notice by
either party to the contract and will terminate automatically if assigned.

Each Portfolio currently pays a monthly investment advisory fee at an
annual rate based on average daily net assets of the Portfolios as follows:

36
<PAGE>

Advisory
Portfolio Fee Rate
- --------- --------
<S> <C>
Money Market Portfolio........................................... 0.30
Short-Term Bond Portfolio........................................ 0.35
Low Duration Bond, Real Return Bond, Total Return Bond, Total
Return Bond II, Long-Term U.S. Government Bond and
StocksPLUS Growth and Income Portfolios........................ 0.40
High Yield Bond and Strategic Balanced Portfolios................ 0.50
Global Bond, Foreign Bond, Equity Income, Capital Appreciation
and Mid-Cap Growth Portfolios.................................. 0.60
Emerging Markets Bond Portfolio.................................. 0.65
Small-Cap Value Portfolio........................................ 0.70
</TABLE>

The advisory fees paid by each Portfolio that was operational during the
fiscal year ended December 31, 1998 was:
<TABLE>
<CAPTION>
Portfolio Advisory Fee
--------- ------------
<S> <C>
Total Return Bond Portfolio $12,338
High Yield Bond Portfolio $99,034
StocksPLUS Growth and Income Portfolio $57,064
</TABLE>

For each Portfolio for which it serves as investment adviser, PIMCO
Advisors has engaged its affiliates to serve as Portfolio Managers. These
affiliated Portfolio Managers, each of which is a subsidiary partnership of
PIMCO Advisors, are Cadence Capital Management ("Cadence"), and NFJ Investment
Group ("NFJ"). Cadence manages the PIMCO Capital Appreciation and Mid-Cap
Growth Portfolios. Cadence is a general partnership, the two partners of which
are PIMCO Advisors as the supervisory partner, and Cadence Capital Management
Inc. as the managing partner. NFJ manages the PIMCO Equity Income and Small-Cap
Value Portfolios. NFJ is a general partnership, the two partners of which are
PIMCO Advisors as the supervisory partner, and NFJ Management Inc. as the
managing partner. Under the supervision of PIMCO Advisors, the Portfolio
Managers make determinations with respect to the purchase and sale of portfolio
securities, and they place orders for execution of the Portfolios' transactions.

PIMCO Advisors (and not the Portfolios or the Trust) compensates the
Portfolio Managers from its advisory fee. PIMCO Advisors pays Cadence a monthly
fee at the annual rate (based on the average daily net assets of the Portfolio)
of 0.35% for the PIMCO Capital Appreciation Portfolio. PIMCO Advisors pays
Cadence a monthly fee at the annual rate (based on the average daily net assets
of the Portfolio) of 0.35% for the PIMCO Mid-Cap Growth Portfolio when the net
assets of the Portfolio are less than $100 million. When the net assets of the
PIMCO Mid-Cap Growth Portfolio exceed $100 million, PIMCO Advisors pays Cadence
a fee of 0.45% on the first $100 million of net assets and 0.40% on the net
assets in excess of $100 million. PIMCO Advisors pays NFJ a monthly fee at the
annual rate (based on the average daily net assets of the Portfolio) of 0.35%
for the PIMCO Equity Income and 0.50% for the Small-Cap Value Portfolios.

Administrator

PIMCO also serves as Administrator to the Portfolios pursuant to an
administration agreement dated December 31, 1997 (the "Administration
Agreement") which was approved by the Board of Trustees, including all of the
Independent Trustees, at a meeting held on August 26, 1997, as supplemented on
February 23, 1999. PIMCO provides the Portfolios with certain administrative and
shareholder services necessary for Portfolio operations and is responsible for
the supervision of other Portfolio service providers. PIMCO may in turn use the
facilities or assistance of its affiliates to provide certain services under the
Administration Agreement, on terms agreed between PIMCO and such affiliates.
The administrative services provided by PIMCO include but are not limited to:
(1) shareholder servicing functions, including preparation of reports and
communications to shareholders and other appropriate parties, (2) regulatory
compliance, such as reports and filings with the SEC and state securities
commissions, and (3) general supervision of the operations of the Portfolios,
including coordination of the services performed by the Portfolios' transfer
agent, custodian, legal counsel, independent accountants, and others. PIMCO (or
an affiliate of PIMCO) also furnishes the Portfolios with office space
facilities required for conducting the

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business of the Portfolios, and pays the compensation of those officers,
employees and Trustees of the Trust affiliated with PIMCO. In addition, PIMCO,
at its own expense, arranges for the provision of legal, audit, custody,
transfer agency and other services for the Portfolios, and is responsible for
the costs of registration of the Trust's shares and the printing of prospectuses
and reports for current shareholders and other appropriate parties. PIMCO has
hired PIMCO Advisors to provide certain services to the PIMCO Equity Income,
Capital Appreciation, Mid-Cap Growth and Small-Cap Value Portfolios as sub-
administrator pursuant to a sub-administration agreement (the "Sub-
Administration Agreement").

PIMCO has contractually agreed to provide the foregoing services, and to
bear these expenses, at the following rates for each Portfolio (each expressed
as a percentage of the Portfolio's average daily net assets attributable to its
classes of shares on an annual basis):

Administrative
Portfolio Fee Rate
--------- --------------
<S> <C>
Money Market Portfolio.................... 0.20%
Global Bond and Foreign Bond Portfolios... 0.30
Emerging Markets Bond Portfolio........... 0.35
All Other Portfolios...................... 0.25
</TABLE>

Except for the expenses paid by PIMCO, the Trust bears all costs of its
operations. The Portfolios are responsible for: (i) salaries and other
compensation of any of the Trust's executive officers and employees who are not
officers, directors, stockholders, or employees of PIMCO or its subsidiaries or
affiliates; (ii) taxes and governmental fees; (iii) brokerage fees and
commissions and other portfolio transaction expenses; (iv) costs of borrowing
money, including interest expenses; (v) fees and expenses of the Trustees who
are not "interested persons" of PIMCO or the Trust, and any counsel retained
exclusively for their benefit; (vi) extraordinary expenses, including costs of
litigation and indemnification expenses; and (vii) expenses, such as
organizational expenses, which are capitalized in accordance with generally
accepted accounting principles.

The Administration Agreement may be terminated by the Trustees, or by a vote
of the outstanding voting securities of the Trust or Portfolio, as applicable,
at any time on 60 days' written notice. Following the expiration of the two year
period commencing with the effectiveness of the Administration Agreement, it may
be terminated by PIMCO on 60 days' written notice. Following its initial two-
year term, the agreement will continue from year to year if approved by the
Trustees, including a majority of the Trust's Independent Trustees (as that term
is defined in the 1940 Act).

The Sub-Administration Agreement may be terminated by the Trustees, or by a
vote of the outstanding voting securities of the Trust or Portfolio, as
applicable, at any time on 60 days' written notice. Following the expiration of
the two year period commencing with the effectiveness of the Sub-Administration
Agreement, it may be terminated by PIMCO Advisors on 60 days' written notice.
Following its initial two-year term, the agreement will continue from year to
year if approved by the Trustees, including a majority of the Trust's
Independent Trustees (as that term is defined in the 1940 Act).

The administrative fees paid by each Portfolio that was operational during
the fiscal year ended December 31, 1998 was:

<TABLE>
<CAPTION>
Portfolio Administrative Fee
--------- ------------------
<S> <C>
Total Return Bond Portfolio $ 7,711
High Yield Bond Portfolio $49,512
StocksPLUS Growth and Income Portfolio $35,665
</TABLE>

PIMCO has entered into an expense limitation agreement with the Trust,
pursuant to which PIMCO has agreed to waive or reduce its administrative fee so
that the total annual Portfolio operating expenses of each Portfolio do not
exceed, due to organizational expenses and/or the payment of the Portfolio's pro
rata share of the Trust's Trustees' fees, the total portfolio operating expenses
specified for that Portfolio in the table identifying the Portfolio's annual
portfolio operating expenses in the Portfolio's then-current prospectus, plus
0.49 basis points. Each Portfolio will at a later date reimburse PIMCO for
administrative fees waived by PIMCO during the previous 36 months, but only if,
after such reimbursement, the Portfolio's expense ratio does not exceed the
percentage described above. The agreement has an initial term through December
31, 1999, and will automatically renew for one-year terms unless PIMCO provides
written notice to the Trust at least 30 days prior to the end of the then-

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<PAGE>

current term. In addition, the agreement will terminate upon termination of the
Administration Agreement, or may be terminated by the Trust, without payment of
any penalty, upon ninety (90) days' prior written notice to PIMCO.

DISTRIBUTION OF TRUST SHARES

Distributor

PIMCO Funds Distributors LLC (the "Distributor") serves as the distributor
of the Trust's shares pursuant to a distribution contract ("Distribution
Contract") with the Trust which is subject to annual approval by the Board. The
Distributor is a wholly owned subsidiary of PIMCO Advisors. The Distribution
Contract is terminable with respect to a Portfolio or class without penalty, at
any time, by the Portfolio or class by not more than 60 days' nor less than 30
days' written notice to the Distributor, or by the Distributor upon not more
than 60 days' nor less than 30 days' written notice to the Trust. The
Distributor is not obligated to sell any specific amount of Trust shares.

The Distribution Contract will continue in effect with respect to each
Portfolio for successive one-year periods, provided that each such continuance
is specifically approved (i) by the vote of a majority of the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Contract; and (ii) by
the vote of a majority of the entire Board of Trustees cast in person at a
meeting called for that purpose. If the Distribution Contract is terminated (or
not renewed) with respect to one or more Portfolios, it may continue in effect
with respect to any Portfolio as to which it has not been terminated (or has
been renewed).

Purchases and Redemptions

Variable Contract Owners do not deal directly with the Portfolios to
purchase, redeem, or exchange shares, and Variable Contract Owners should refer
to the prospectus for the applicable Separate Account for information on the
allocation of premiums and on transfers of accumulated value among sub-accounts
of the Separate Accounts that invest in the Portfolios.

Shares of a Portfolio may not be offered or sold in any state unless
qualified in that jurisdiction, unless an exemption from qualification is
available.

A shareholder may exchange shares of any Portfolio for shares of any other
Portfolio of the Trust on the basis of their respective net asset values.
Orders for exchanges accepted prior to the close of regular trading on the New
York Stock Exchange (the "Exchange") on any day the Trust is open for business
will be executed at the respective net asset values determined as of the close
of business that day.

The Trust reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the Exchange is restricted, as determined by the
SEC, or that Exchange is closed for other than customary weekend and holiday
closings; (b) the SEC has by order permitted such suspension; or (c) an
emergency, as determined by the SEC, exists, making disposal of portfolio
securities or valuation of net assets of the Portfolio not reasonably
practicable.

Although the Trust will normally redeem all shares for cash, it may, in
unusual circumstances, redeem by payment in kind of securities held in the
Portfolios.

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<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

Investment Decisions

Investment decisions for the Trust and for the other investment advisory
clients of the Advisers are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved (including the
Trust). Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the security. In some instances, one
client may sell a particular security to another client. It also sometimes
happens that two or more clients simultaneously purchase or sell the same
security, in which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such clients in a manner
which in the Adviser's opinion is equitable to each and in accordance with the
amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.

Brokerage and Research Services

There is generally no stated commission in the case of fixed income
securities, which are traded in the over-the-counter markets, but the price paid
by the Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Trust of negotiated brokerage commissions. Such commissions vary among
different brokers. Also, a particular broker may charge different commissions
according to such factors as the difficulty and size of the transaction.
Transactions in foreign securities generally involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States.

The Advisers places all orders for the purchase and sale of portfolio
securities, options and futures contracts for the relevant Portfolio and buys
and sells such securities, options and futures for the Trust through a
substantial number of brokers and dealers. In so doing, the Advisers use their
best efforts to obtain for the Trust the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable price and
execution, each Adviser, having in mind the Trust's best interests, considers
all factors it deems relevant, including, by way of illustration, price, the
size of the transaction, the nature of the market for the security, the amount
of the commission, the timing of the transaction taking into account market
prices and trends, the reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the broker-dealer
in other transactions.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the Advisers receive research services from many broker-dealers with which the
Advisers place the Trust's portfolio transactions. These services, which in
some cases may also be purchased for cash, include such matters as general
economic and security 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 the Adviser in advising various of its
clients (including the Trust), although not all of these services are
necessarily useful and of value in managing the Trust. The management fee paid
by the Trust is not reduced because the Advisers and their affiliates receive
such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, each
Adviser may cause the Trust to pay a broker-dealer which provides "brokerage and
research services" (as defined in the Act) to the Adviser an amount of disclosed
commission for effecting a securities transaction for the Trust in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.

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<PAGE>

Consistent with the Rules of the NASD and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Adviser or Portfolio Managers may also consider sales of
shares of the Trust as a factor in the selection of broker-dealers to execute
portfolio transactions for the Trust, which may result in the payment of an
amount of disclosed commission for effecting a securities transaction for the
Trust in excess of the commission which another broker-dealer would have charged
for effecting that transaction.

The Adviser or a Portfolio Manager may place orders for the purchase and
sale of exchange-listed portfolio securities with a broker-dealer that is an
affiliate of the Adviser or Portfolio Manager where, in the judgment of the
Adviser or Portfolio Manager, such firm will be able to obtain a price and
execution at least as favorable as other qualified broker-dealers.

Pursuant to rules of the SEC, a broker-dealer that is an affiliate of the
Adviser or a Portfolio Manager may receive and retain compensation for effecting
portfolio transactions for a Portfolio on a national securities exchange of
which the broker-dealer is a member if the transaction is "executed" on the
floor of the exchange by another broker which is not an "associated person" of
the affiliated broker-dealer, and if there is in effect a written contract
between the Adviser or Portfolio Manager and the Trust expressly permitting the
affiliated broker-dealer to receive and retain such compensation.

SEC rules further require that commissions paid to such an affiliated
broker-dealer, the Adviser, or Portfolio Manager by a Portfolio on exchange
transactions not exceed "usual and customary brokerage commissions." The rules
define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time."

Portfolio Turnover

The Advisers manages the Portfolios without regard generally to
restrictions on portfolio turnover. See "Taxation" below. The use of certain
derivative instruments with relatively short maturities may tend to exaggerate
the portfolio turnover rate for some of the Portfolios. Trading in fixed income
securities does not generally involve the payment of brokerage commissions, but
does involve indirect transaction costs. The use of futures contracts may
involve the payment of commissions to futures commission merchants. A Portfolio
with a higher rate of portfolio turnover will generally incur higher transaction
costs. The portfolio turnover rate for each of the following Portfolios
generally is not expected to exceed the indicated rate: PIMCO Short-Term Bond
Portfolio - 100%; PIMCO Low Duration Bond Portfolio - 250%; PIMCO Real Return
Bond Portfolio - 1,000%; PIMCO High Yield Bond Portfolio - 75%; PIMCO Total
Return Bond Portfolio - 175%; Total Return Bond Portfolio II - 175%; PIMCO Long-
Term U.S. Government Bond Portfolio - 500%; PIMCO Foreign Bond Portfolio -
1,000%; PIMCO Global Bond Portfolio - 1,000%; PIMCO Emerging Markets Bond
Portfolio - 1,000%; PIMCO Strategic Balanced Portfolio - 100%; PIMCO StocksPLUS
Growth and Income Portfolio - 100%; PIMCO Equity Income Portfolio - 75%; PIMCO
Capital Appreciation Portfolio - 100%; PIMCO Mid-Cap Growth Portfolio - 100%;
and PIMCO Small-Cap Value Portfolio - 50%.

The portfolio turnover rate of a Portfolio is calculated by dividing (a)
the lesser of purchases or sales of portfolio securities for the particular
fiscal year by (b) the monthly average of the value of the portfolio securities
owned by the Portfolio during the particular fiscal year. In calculating the
rate of portfolio turnover, there is excluded from both (a) and (b) all
securities, including options, whose maturities or expiration dates at the time
of acquisition were one year or less. Proceeds from short sales and assets used
to cover short positions undertaken are included in the amounts of securities
sold and purchased, respectively, during the year.

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<PAGE>

NET ASSET VALUE

The net asset value per share of each Portfolio will be determined once on
each day as of 4:00 p.m. Eastern time, or as of such other time designated by
the New York Stock Exchange (the "Exchange") as the close of trading for that
day. Net asset value will not be determined on any day on which the Exchange is
closed. The Exchange is closed on the following holidays: New Year's Day,
Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The net asset
value per share of each Portfolio is determined by dividing the total market
value of a Portfolio's portfolio investments and other assets, less any
liabilities, by the number of total outstanding shares. Net asset value will
not be determined on days on which the Exchange is closed.

In determining their net asset values, the Portfolios use price data
received shortly after 4:00 p.m. Eastern time believed to reflect the current
market value of the securities held by the Portfolios as of the closing of the
Exchange. The Portfolios intend to use these prices regardless of the impact of
any post-closing adjustments to securities prices, as long as, in the view of
the Portfolios, such prices represent the current market value of the securities
as of the time selected by the Portfolios for the calculation of net asset
value. Portfolios that invest in securities traded in foreign securities market
may trade such securities on days when the Exchange is not open, and the net
asset value per share of these Portfolios may be affected significantly on days
when investors do not have access to the Portfolios.

For all Portfolios other than the PIMCO Money Market Portfolio, portfolio
securities and other assets for which market quotations are readily available
are stated at market value. Market value is determined on the basis of last
reported sales prices, or if no sales are reported, as is the case for most
securities traded over-the-counter, at the mean between representative bid and
asked quotations obtained from a quotation reporting system or from established
market makers. Fixed income securities, including those to be purchased under
firm commitment agreements (other than obligations having a maturity of 60 days
or less), are normally valued on the basis of quotations obtained from brokers
and dealers or pricing services, which take into account appropriate factors
such as institutional-sized trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics, and
other market data.

Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using foreign exchange quotations received from independent
dealers. Short-term investments having a maturity of 60 days or less are valued
at amortized cost, when the Board of Trustees determines that amortized cost is
their fair value. Certain fixed income securities for which daily market
quotations are not readily available may be valued, pursuant to guidelines
established by the Board of Trustees, with reference to fixed income securities
whose prices are more readily obtainable and whose durations are comparable to
the securities being valued. Subject to the foregoing, other securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees.

The PIMCO Money Market Portfolio's securities are valued using the
amortized cost method of valuation. This involves valuing a security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold the instrument. During such periods the
yield to investors in the Portfolio may differ somewhat from that obtained in a
similar investment company which uses available market quotations to value all
of its portfolio securities.

The SEC's regulations require the PIMCO Money Market Portfolio to adhere to
certain conditions. The Trustees, as part of their responsibility within the
overall duty of care owed to the shareholders, are required to establish
procedures reasonably designed, taking into account current market conditions
and the Portfolio's investment objective, to stabilize the net asset value per
share as computed for the purpose of distribution and redemption at $1.00 per
share. The Trustees' procedures include a requirement to periodically monitor,
as appropriate and at such intervals as are reasonable in light of current
market conditions, the relationship between the amortized cost value per share
and the net asset value per share based upon available indications of market
value. The Trustees will consider what steps should be taken, if

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<PAGE>

any, in the event of a difference of more than 1/2 of 1% between the two. The
Trustees will take such steps as they consider appropriate, (e.g., selling
securities to shorten the average portfolio maturity) to minimize any material
dilution or other unfair results which might arise from differences between the
two. The Portfolio also is required to maintain a dollar-weighted average
portfolio maturity of 90 days or less, to limit its investments to instruments
having remaining maturities of 397 days or less (except securities held subject
to repurchase agreements having 397 days or less maturity) and to invest only in
securities determined by the Adviser under procedures established by the Board
of Trustees to be of high quality with minimal credit risks.

TAXATION

The following discussion is general in nature and should not be regarded as
an exhaustive presentation of all possible tax ramifications. All shareholders
should consult a qualified tax adviser regarding their investment in a
Portfolio.

Each Portfolio intends to qualify annually and elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify as a regulated investment company, each Portfolio
generally must, among other things, (a) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of stock,
securities or foreign currencies, or other income derived with respect to its
business of investing in such stock, securities or currencies ("Qualifying
Income Test"); (b) diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the Portfolio's assets
is represented by cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Portfolio's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities or the securities of other regulated investment
companies); and (c) distribute at least 90% of its investment company taxable
income (which includes dividends, interest and net short-term capital gains in
excess of any net long-term capital losses) each taxable year. The Treasury
Department is authorized to promulgate regulations under which gains from
foreign currencies (and options, futures, and forward contracts on foreign
currency) would constitute qualifying income for purposes of the Qualifying
Income Test only if such gains are directly relating to investing in securities.
To date, such regulations have not been issued.

As a regulated investment company, a Portfolio generally will not be
subject to U.S. federal income tax on its investment company taxable income and
net capital gains (any net long-term capital gains in excess of the sum of net
short-term capital losses and capital loss carryovers from prior years)
designated by the Portfolio as capital gain dividends, if any, that it
distributes to shareholders on a timely basis. Each Portfolio intends to
distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and any net capital gains. In addition,
amounts not distributed by a Portfolio on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To avoid the tax, a Portfolio must distribute during each calendar year an
amount equal to the sum of (1) at least 98% of its ordinary income (not taking
into account any capital gains or losses) for the calendar year, (2) at least
98% of its capital gains in excess of its capital losses (and adjusted for
certain ordinary losses) for the twelve month period ending on October 31 of the
calendar year, and (3) all ordinary income and capital gains for previous years
that were not distributed during such years. A distribution will be treated as
paid on December 31 of the calendar year if it is declared by a Portfolio in
October, November, or December of that year to shareholders of record on a date
in such a month and paid by the Portfolio during January of the following year.
Such distributions will be taxable to shareholders (other than those not subject
to federal income tax) in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To avoid application of the excise tax, each Portfolio intends to make its
distributions in accordance with the calendar year distribution requirement.

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<PAGE>

To comply with regulations under section 817(h) of the Code, each Portfolio
is required to diversify its investments. Generally, a Portfolio will be
required to diversify its investments so that on the last day of each quarter of
a calendar year no more than 55% of the value of its total assets is represented
by any one investment, no more than 70% is represented by any two investments,
no more than 80% is represented by any three investments, and no more than 90%
is represented by any four investments. For this purpose, securities of a given
issuer generally are treated as one investment, but each U.S. Government agency
and instrumentality is treated as a separate issuer. Any security issued,
guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. or
an agency or instrumentality of the U.S. is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.

The Treasury Department announced that it would issue future regulations or
rulings addressing the circumstances in which a variable contract owner's
control of the investments of the separate account may cause the contract owner,
rather than the insurance company, to be treated as the owner of the assets held
by the separate account. If the contract owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the contract owner's gross income. It
is not known what standards will be set forth in the regulations or rulings.

In the event that rules or regulations are adopted, there can be no
assurance that the Portfolios will be able to operate as currently described, or
that the Trust will not have to change one or more Portfolio's investment
objective or investment policies. While each Portfolio's investment objective
is fundamental and may be changed only by a vote of a majority of its
outstanding shares, the investment policies of a Portfolio may be modified as
necessary to prevent any such prospective rules and regulations from causing
Variable Contract Owners to be considered the owners of the shares of a
Portfolio underlying the Separate Accounts.

Distributions

Dividends paid out of a Portfolio's investment company taxable income will
be treated as ordinary income for tax purposes in the hands of a U.S.
shareholder (such as a Separate Account). Distributions received by tax-exempt
shareholders will not be subject to federal income tax to the extent permitted
under applicable tax law.

A portion of the dividends paid by the PIMCO StocksPLUS Growth and Income
Portfolio may qualify for the deduction for dividends received by corporations.
Dividends paid by the other Portfolios generally are not expected to qualify for
the deduction for dividends received by corporations, although certain
distributions from the PIMCO High Yield Bond Portfolio may qualify.
Distributions of net capital gains, if any, designated as capital gain
dividends, are taxable as long-term capital gains, regardless of how long the
shareholder has held a Portfolio's shares and are not eligible for the dividends
received deduction. Any distributions that are not from a Portfolio's investment
company taxable income or net realized capital gains may be characterized as a
return of capital to shareholders or, in some cases, as capital gain.

Sales of Shares

Upon the disposition of shares of a Portfolio (whether by redemption, sale
or exchange), a shareholder (such as a Separate Account) will realize a gain or
loss. Such gain or loss will be capital gain or loss if the shares are capital
assets in the shareholder's hands, and will be long-term or short-term generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a disposition will be disallowed to the extent the shares disposed
of are replaced within a period of 61 days beginning 30 days before and ending
30 days after the shares are disposed of. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of shares held by the shareholder for
six months or less will be treated as a long-term capital loss to the extent of
any distributions of capital gain dividends received by the shareholder with
respect to such shares.

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<PAGE>

Options, Futures and Forward Contracts, and Swap Agreements

Some of the options, futures contracts, forward contracts, and swap
agreements used by the Portfolios may be "section 1256 contracts." Any gains or
losses on section 1256 contracts are generally considered 60% long-term and 40%
short-term capital gains or losses ("60/40") although certain foreign currency
gains and losses from such contracts may be treated as ordinary in character.
Also, section 1256 contracts held by a Portfolio at the end of each taxable year
(and, for purposes of the 4% excise tax, on certain other dates as prescribed
under the Code) are "marked to market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as ordinary or 60/40 gain or loss.

Generally, the hedging transactions and certain other transactions in
options, futures and forward contracts undertaken by a Portfolio, may result in
"straddles" for U.S. federal income tax purposes. In some cases, the straddle
rules also could apply in connection with swap agreements. The straddle rules
may affect the character of gains (or losses) realized by a Portfolio. In
addition, losses realized by a Portfolio on positions that are part of a
straddle may be deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in which such
losses are realized. Because only a few regulations implementing the straddle
rules have been promulgated, the tax consequences of transactions in options,
futures, forward contracts, and swap agreements to a Portfolio are not entirely
clear. The transactions may increase the amount of short-term capital gain
realized by a Portfolio which is taxed as ordinary income when distributed to
shareholders.

A Portfolio may make one or more of the elections available under the Code
which are applicable to straddles. If a Portfolio makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a portfolio that did not engage in such hedging transactions.

Rules governing the tax aspects of swap agreements are in a developing
stage and are not entirely clear in certain respects. Accordingly, while the
Portfolios intend to account for such transactions in a manner they deem to be
appropriate, the Internal Revenue Service might not accept such treatment. If
it did not, the status of a Portfolio as a regulated investment company might be
affected. The Trust intends to monitor developments in this area. Certain
requirements that must be met under the Code in order for a Portfolio to qualify
as a regulated investment company may limit the extent to which a Portfolio will
be able to engage in swap agreements.

Short Sales

Certain Portfolios may make short sales of securities. Short sales may
increase the amount of short-term capital gain realized by a Portfolio, which is
taxed as ordinary income when distributed to shareholders.

Passive Foreign Investment Companies

Certain Portfolios may invest in the stock of foreign corporations which
may be classified under the Code as passive foreign investment companies
("PFICs"). In general, a foreign corporation is classified as a PFIC for a
taxable year if at least one-half of its assets constitute investment-type
assets or 75% or more of its gross income is investment-type income. If a
Portfolio receives a so-called "excess distribution" with

45
<PAGE>

respect to PFIC stock, the Portfolio itself may be subject to tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Portfolio to stockholders. In general, under the PFIC rules,
an excess distribution is treated as having been realized ratably over the
period during which the Portfolio held the PFIC stock. A Portfolio itself will
be subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior taxable years and an interest factor will be added to the
tax, as if the tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC stock are
treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.

A Portfolio may be eligible to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently is available in some
circumstances, a Portfolio generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, another election may be
available that would involve marking to market a Portfolio's PFIC shares at the
end of each taxable year (and on certain other dates prescribed in the Code),
with the result that unrealized gains are treated as though they were realized.
If this election were made, tax at the Portfolio level under the PFIC rules
would generally be eliminated, but the Portfolio could, in limited
circumstances, incur nondeductible interest charges. A Portfolio's intention to
qualify annually as a regulated investment company may limit its elections with
respect to PFIC shares.

Because the application of the PFIC rules may affect, among other things,
the character of gains and the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, and may subject a Portfolio
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders and will be taxed to shareholders as ordinary income
or long-term capital gain may be increased or decreased substantially as
compared to a portfolio that did not invest in PFIC shares.

Foreign Currency Transactions

Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Portfolio accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Portfolio actually collects such receivables or pays
such liabilities generally are treated as ordinary income or loss. Similarly,
on disposition of debt securities denominated in a foreign currency and on
disposition of certain other instruments, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Portfolio's investment company taxable income to be distributed to its
shareholders as ordinary income.

Foreign Taxation

Income received by the Portfolios from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. In addition, the Adviser intends to manage the Portfolios with the
intention of minimizing foreign taxation in cases where it is deemed prudent to
do so. If more than 50% of the value of the PIMCO Foreign Bond, Global Bond or
Emerging Markets Bond Portfolios' total assets at the close of their taxable
year consists of securities of foreign corporations, such Portfolio will be
eligible to elect to "pass-through" to the Portfolio's shareholders the amount
of foreign income and similar taxes paid by the Portfolio. If this election is
made, a shareholder generally subject to tax will be required to include in
gross income (in addition to taxable dividends actually received) his pro rata
share of the foreign taxes paid by the Portfolio, and may be entitled either to
deduct (as an itemized deduction) his or her pro rata share of foreign taxes in
computing his taxable income or to use it (subject to limitations) as a foreign
tax credit against his or her U.S. federal income tax liability. No deduction
for foreign taxes may be claimed by a

46
<PAGE>

shareholder who does not itemize deductions. Each shareholder will be notified
within 60 days after the close of the Portfolio's taxable year whether the
foreign taxes paid by the Portfolio will "pass-through" for that year.

Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election
is made, the source of the PIMCO Foreign Bond, Global Bond or Emerging Markets
Bond Portfolios' income will flow through to shareholders of the Trust. With
respect to such Portfolios, gains from the sale of securities will be treated as
derived from U.S. sources and certain currency fluctuation gains, including
fluctuation gains from foreign currency-denominated debt securities, receivables
and payables will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income, and to certain other types of income. Shareholders may be
unable to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Portfolio. The foreign tax credit can be used to
offset only 90% of the revised alternative minimum tax imposed on corporations
and individuals and foreign taxes generally are not deductible in computing
alternative minimum taxable income.

Original Issue Discount

Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Portfolio may be
treated as debt securities that are issued originally at a discount. Generally,
the amount of the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. A portion of the OID includable in income with respect to
certain high-yield corporate debt securities may be treated as a dividend for
Federal income tax purposes.

Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Portfolio in the
secondary market may be treated as having market discount. Generally, any gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. Market discount generally accrues in equal daily
installments. A Portfolio may make one or more of the elections applicable to
debt securities having market discount, which could affect the character and
timing of recognition of income.

Some debt securities (with a fixed maturity date of one year or less from
the date of issuance) that may be acquired by a Portfolio may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, the Portfolio will be required to include the
acquisition discount, or OID, in income over the term of the debt security, even
though payment of that amount is not received until a later time, usually when
the debt security matures. The Portfolio may make one or more of the elections
applicable to debt securities having acquisition discount, or OID, which could
affect the character and timing of recognition of income.

A Portfolio generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by the Portfolio. Cash to pay such dividends may be obtained from
sales proceeds of securities held by the Portfolio.

Inflation-Indexed Bonds

Coupon payments received by a Portfolio from inflation-indexed bonds will
be includable in the Portfolio's gross income in the period in which they
accrue. Periodic adjustments for inflation in the principal value of these
securities also may give rise to original issue discount, which, likewise, will
be includable in the Portfolio's gross income on a current basis, regardless of
whether the Portfolio receives

47
<PAGE>

any cash payments. Amounts includable in a Portfolio's gross income become
subject to tax-related distribution requirements. Accordingly, a Portfolio may
be required to make annual distributions to shareholders in excess of the cash
received in a given period from these investments. As a result, the Portfolio
may be required to liquidate certain investments at a time when it is not
advantageous to do so. If the principal value of an inflation-indexed bond is
adjusted downward in any period as a result of deflation, the reduction may be
treated as a loss to the extent the reduction exceeds coupon payments received
in that period; in that case, the amount distributable by the Portfolio may be
reduced and amounts distributed previously in the taxable year may be
characterized in some circumstances as a return of capital.

Other Taxation

Distributions also may be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Under the laws of
various states, distributions of investment company taxable income generally are
taxable to shareholders even though all or a substantial portion of such
distributions may be derived from interest on certain federal obligations which,
if the interest were received directly by a resident of such state, would be
exempt from such state's income tax ("qualifying federal obligations").
However, some states may exempt all or a portion of such distributions from
income tax to the extent the shareholder is able to establish that the
distribution is derived from qualifying federal obligations. Moreover, for
state income tax purposes, interest on some federal obligations generally is not
exempt from taxation, whether received directly by a shareholder or through
distributions of investment company taxable income (for example, interest on
FNMA Certificates and GNMA Certificates). Each Portfolio will provide
information annually to shareholders indicating the amount and percentage of a
Portfolio's dividend distribution which is attributable to interest on federal
obligations, and will indicate to the extent possible from what types of federal
obligations such dividends are derived.

OTHER INFORMATION

Capitalization

The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 each. The Board of
Trustees may establish additional series (with different investment objectives
and fundamental policies) at any time in the future. Establishment and offering
of additional series will not alter the rights of the Trust's shareholders.
When issued, shares are fully paid, non-assessable, redeemable and freely
transferable. Shares do not have preemptive rights or subscription rights. In
liquidation of a Portfolio, each shareholder is entitled to receive his pro rata
share of the net assets of that Portfolio.

Expenses incurred by the Trust in connection with its organization and the
public offering of its shares will be deferred and amortized on a straight line
basis over a period not less than five years. Expenses incurred in the
organization of subsequently offered Portfolios will be charged to those
Portfolios and will be amortized on a straight line basis over a period not less
than five years.

Under Delaware law, shareholders are not personally liable for the
obligations of the Trust. In addition, the Trust Instrument disclaims liability
of the shareholders, Trustees or officers of the Trust for acts or obligations
of the Trust, which are binding only on the assets and property of the Trust,
and requires that notice of the disclaimer be given in each contract or
obligation entered into or executed by the Trust or the Trustees. The Trust
Instrument also provides for indemnification out of Trust property for all loss
and expense of any shareholder held personally liable for the obligations of the
Trust. However, there is no certainty that the limited liability of shareholders
of a Delaware business trust will be recognized in every state. Even in such a
circumstance, the risk of a shareholder incurring financial loss on account of
shareholder liability would be limited to circumstances in which the contractual
disclaimer

48
<PAGE>

against shareholder liability is inoperative or the Trust itself is unable to
meet its obligations, and thus should be considered remote.

Performance Information

Each Portfolio may, from time to time, include information regarding its
performance in advertisements or reports to shareholders or prospective
investors. Performance information for the Portfolios will not be advertised or
included in sales literature unless accompanied by comparable performance
information for a separate account to which the Portfolios offer their shares.

The Trust may, from time to time, include the yield and effective yield of
the PIMCO Money Market Portfolio, and the yield and total return for all of the
Portfolios, computed in accordance with SEC-prescribed formulas, in
advertisements or reports to shareholders, prospective investors or other
appropriate parties. Current yield for the PIMCO Money Market Portfolio will be
based on the change in the value of hypothetical investment (exclusive of
capital changes) over a particular 7-day period less a pro-rata share of
Portfolio expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the PIMCO Money Market Portfolio assumes that all
dividends received during an annual period have been reinvested. Calculation of
"effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:

Effective Yield = [(Base Period Return +1) (To the power of 365/7)] - 1

Quotations of yield for the remaining Portfolios will be based on all
investment income per share (as defined by the SEC) during a particular 30-day
(or one month) period (including dividends and interest), less expenses accrued
during the period ("net investment income"), and are computed by dividing net
investment income by the maximum offering price per share on the last day of the
period, according to the following formula:

YIELD = 2[(a-b + 1) (To the power of 6) - 1]
---
cd

where a = dividends and interest earned during the period,

b = expenses accrued for the period (net of reimbursements),

c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and

d = the maximum offering price per share on the last day of the
period.

Quotations of average annual total return for a Portfolio will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in the Portfolio over periods of one, five and ten years (up to the
life of the Portfolio), calculated pursuant to the following formula: P (1 +
T)/n/ = ERV (where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years, and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the period).
Except as noted below, all total return figures reflect, to the extent
applicable, the deduction of a proportional share of Portfolio expenses on an
annual basis, and assume that all dividends and distributions are reinvested
when paid. The Portfolios also may, with respect to certain periods of less
than one year, provide total return information for that period that is
unannualized. Quotations of total return may also be shown for other periods.
Any such information would be accompanied by standardized total

49
<PAGE>

return information. Total return is measured by comparing the value of an
investment in the Portfolio at the beginning of the relevant period to the
redemption value of the investment in the Portfolio at the end of the period
(assuming immediate reinvestment of any dividends or capital gains distributions
at net asset value). The Portfolios may advertise total return using alternative
methods that reflect all elements of return, but that may be adjusted to reflect
the cumulative impact of alternative fee and expense structures, such as the
currently effective advisory and administrative fees for the Portfolios.

Current distribution information for a Portfolio will be based on
distributions for a specified period (i.e., total dividends from net investment
income), divided by Portfolio net asset value per share on the last day of the
period and annualized according to the following formula:

DIVIDEND YIELD = (((a/b)*365)/c)

where a = actual dividends distributed for the calendar month in question,

b = number of days of dividend declaration in the month in question,
and

c = net asset value (NAV) calculated on the last business day of
the month in question.

The rate of current distributions does not reflect deductions for
unrealized losses from transactions in derivative instruments such as options
and futures, which may reduce total return. Current distribution rates differ
from standardized yield rates in that they represent what a Portfolio has
declared and paid to shareholders as of the end of a specified period rather
than the Portfolio's actual net investment income for that same period.
Distribution rates will exclude net realized short-term capital gains. The rate
of current distributions for a Portfolio should be evaluated in light of these
differences and in light of the Portfolio's total return figures, which will
always accompany any calculation of the rate of current distributions.

Performance information for a Portfolio may also be compared to various
unmanaged indexes, such as the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, the Lehman Brothers Aggregate Bond
Index, the Lehman Brothers Mortgage-Backed Securities Index, the Merrill Lynch 1
to 3 Year Treasury Index, the Lehman Intermediate and 20+ Year Treasury Bond
Index, the Lehman BB Intermediate Corporate Index, indexes prepared by Lipper
Analytical Services, the J.P. Morgan Global Index, the J.P. Morgan Emerging
Markets Bond Index Plus, the Salomon Brothers World Government Bond Index-10 Non
U.S.-Dollar Hedged and the J.P. Morgan Government Bond Index Non U.S.-Dollar
Hedged. Unmanaged indexes (i.e., other than Lipper) generally do not reflect
deductions for administrative and management costs and expenses. PIMCO may
report to shareholders or to the public in advertisements concerning the
performance of PIMCO as adviser to clients other than the Trust, or on the
comparative performance or standing of PIMCO in relation to other money
managers. PIMCO also may provide current or prospective private account
clients, in connection with standardized performance information for the
Portfolios, performance information for the Portfolios gross of fees and
expenses for the purpose of assisting such clients in evaluating similar
performance information provided by other investment managers or institutions.
Comparative information may be compiled or provided by independent ratings
services or by news organizations. Any performance information, whether related
to the Portfolios or to the Adviser, should be considered in light of the
Portfolios' investment objectives and policies, characteristics and quality of
the Portfolios, and the market conditions during the time period indicated, and
should not be considered to be representative of what may be achieved in the
future.

Performance information for a Portfolio will not take into account charges
or deductions against a Separate Account or Variable Contract specific
deductions for cost of insurance charges, premium loads, administrative fees,
maintenance fees, premium taxes, mortality and expense risk charges, or other
charges that may be incurred under a Variable Contract for which the Portfolio
serves as an underlying investment vehicle. A Portfolio's performance should not
be compared with the performance of mutual

50
<PAGE>

funds that sell their shares directly to the public since the figures provided
do not reflect charges against a Separate Account or the Variable Contracts.

For the one month period ended December 31, 1998, the yield of the
following Portfolios was as follows (all numbers are annualized):

<TABLE>
<CAPTION>
Yield for Period
Portfolio Ended December 31, 1998
- -------- -----------------------
<S> <C>
Total Return Bond Portfolio 6.40%
High Yield Bond Portfolio 8.28%
StocksPLUS Growth and Income Portfolio 5.46%
</TABLE>

The table below sets forth the average annual total return of the following
Portfolios for the periods ended December 31, 1998.

<TABLE>
<CAPTION>
Total Return for Periods Ended December 31, 1998

=============================================================
Since Inception Inception
of Portfolio Date of
Portfolio (Cumulative) Portfolio
-------------------------------------------------------------
<S> <C> <C>
Total Return 8.61% 12/31/97
-------------------------------------------------------------
High Yield 1.80% 4/30/98
-------------------------------------------------------------
StocksPLUS 30.11% 12/31/97
=============================================================
</TABLE>

For the month ended December 31, 1998, the current distribution rates
(annualized) for the following Portfolios were as follows:

<TABLE>
<CAPTION>
Distribution
Fund Rate
- ---- ----
<S> <C>
Total Return Portfolio 6.51%
High Yield Portfolio 8.46%
StocksPLUS Growth and Income Portfolio N/A

</TABLE>

The Trust may also include in its advertisements or in reports to
shareholder, prospective investors or other appropriate parties performance
information regarding certain series (the "Funds") of PIMCO Funds: Pacific
Investment Management Series (the "PIMS") or PIMCO Funds: Multi-Manager Series
("MMS") which have investment objectives, policies and strategies substantially
the same as a corresponding Portfolio of the Trust. In addition, the current
portfolio manager for each Fund is the same as the current portfolio manager for
the corresponding Portfolio of the Trust. The methods discussed above with
regard to calculating the yield, total return and distribution rates for the
Portfolios will also be used to calculate the same information for the Funds,
although performance information for the Funds will reflect the deduction of
sales loads and other charges to which the Funds are subject.

51
<PAGE>

The following table shows which Fund of PIMS or MMS corresponds to each
Portfolio of the Trust:

Portfolio Fund
- --------- ----
Money Market Portfolio Money Market Fund
Short-Term Bond Portfolio Short-Term Fund
Low Duration Bond Portfolio Low Duration Fund
Real Return Bond Portfolio Real Return Bond Fund
Total Return Bond Portfolio Total Return Fund

Total Return Bond Portfolio II Total Return Fund II
High Yield Bond Portfolio High Yield Fund
Long-Term U.S. Government Bond Portfolio Long-Term U.S. Government Fund
Global Bond Portfolio Global Bond Fund
Foreign Bond Portfolio Foreign Bond Fund
Emerging Markets Bond Portfolio Emerging Markets Bond Fund
Strategic Balanced Portfolio Strategic Balanced Fund
StocksPLUS Growth and Income Portfolio StocksPLUS Fund
Equity Income Portfolio Equity Income Fund
Capital Appreciation Portfolio Capital Appreciation Fund
Mid-Cap Growth Portfolio Mid-Cap Growth Fund
Small-Cap Value Portfolio Small-Cap Value Fund

The yield of the Institutional Class of the PIMCO Money Market Fund for the
seven day period ended December 31, 1998 was 4.81%. The effective yield of the
Institutional Class of the PIMCO Money Market Fund for the seven day period
ended December 31, 1998 was 4.92%.

For the one month period ended December 31, 1998, the yield of the
Institutional Class of the Funds was as follows (all numbers are annualized):

<TABLE>
<CAPTION>
Yield for Period
Fund Ended December 31, 1998
- ---- -----------------------
<S> <C>
Money Market Fund 4.97%
Short-Term Fund 5.58%
Low Duration Fund 5.92%
Real Return Bond Fund 5.95%
Total Return Fund 6.17%
Total Return Fund II 5.51%
High Yield Fund 8.22%
Long-Term U.S. Government Fund 6.03%
Global Bond Fund 5.72%
Foreign Bond Fund 6.14%
Strategic Balanced Fund 5.29%
StocksPLUS Fund 5.66%

</TABLE>

The average annual total returns of the Institutional Class shares of the
corresponding Funds of PIMS and MMS are provided in the Trust's prospectus under
the caption "Performance Information of Similar Funds."

52
<PAGE>

For the month ended December 31, 1998, the current distribution rates
(annualized) for the Institutional Class shares of the following Funds were as
follows:

<TABLE>
<CAPTION>
Distribution
Fund Rate
- ---- ----
<S> <C>
Money Market Fund 4.85%
Short-Term Fund 5.55%
Low Duration Fund 6.52%
Real Return Bond Fund 5.96%
Total Return Fund 5.85%
Total Return Fund II 5.62%
High Yield Fund 8.49%
Long-Term U.S. Government Fund 5.68%
Global Bond Fund 4.93%
Foreign Bond Fund 5.45%
Strategic Balanced Fund N/A
StocksPLUS Fund N/A

</TABLE>

In its advertisements and other materials, the Trust may compare the
returns over periods of time of investments in stocks, bonds and treasury bills
to each other and to the general rate of inflation. For example, the average
annual return of each during the 25 years from 1974 to 1998 was:

*Stocks: 14.9%
Bonds: 9.9%
T-Bills: 7.0%
Inflation: 5.2%

*Returns of unmanaged indexes do not reflect past or future performance of
any of the Portfolios of PIMCO Variable Insurance Trust. Stocks are represented
by Ibbotson's Common Stock Total Return Index. Bonds are represented by
Ibbotson's Long-term Corporate Bond Index. T-bills are represented by Ibbotson's
Treasury Bill Index and Inflation is represented by the Cost of Living Index.
These are all unmanaged indices, which can not be invested in directly. While
Treasury bills are insured and offer a fixed rate of return, both the principal
and yield of investment securities will fluctuate with changes in market
conditions. Source: Ibbotson, Roger G., and Rex A. Sinquefiled, Stocks, Bonds,
Bill and Inflation (SBBI), 1989, updated in Stocks, Bonds, Bills and Inflation
1999 Yearbook, Ibbotson Associates, Chicago. All rights reserved.

The Trust may also compare the relative historic returns and range of
returns for an investment in each of common stocks, bonds and treasury bills to
a portfolio that blends all three investments. For example, over the 25 years
from 1974-1998, the average annual return of stocks comprising the Ibbotson's
Large Company Stock Total Return Index ranged from -26.5% to 37.4% while the
annual return of a hypothetical portfolio comprised 40% of such common stocks,
40% of bonds comprising the Ibbotson's Long-term Corporate bond Index and 20% of
Treasury bills comprising the Ibbottson's Treasury Bill Index (a "mixed
portfolio") would have ranged from -10.2% to 28.2% over the same period. The
average annual returns of each investment for each of the years from 1974
through 1998 is set forth in the following table.

YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
- ---- ------- ------ -------- ---------- ----------
1974 -26.47% -3.06% 8.00% 12.26% -10.21%
1975 37.20% 14.64% 5.80% 7.01% 21.90%
1976 23.84% 18.65% 5.08% 4.81% 18.01%

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<PAGE>

1977 -7.18% 1.71% 5.12% 6.77% -1.17%
1978 6.56% -0.07% 7.18% 9.03% 4.03%
1979 18.44% -4.18% 10.38% 13.31% 7.78%
1980 32.42% 2.61% 11.24% 12.40% 14.17%
1981 -4.91% -0.96% 14.71% 8.94% 0.59%
1982 21.41% 43.79% 10.54% .387% 28.19%
1983 22.51% 4.70% 8.80% 3.80% 12.64%
1984 6.27% 16.39% 9.85% 3.95% 11.03%
1985 32.16% 30.90% 7.72% 3.77% 26.77%
1986 18.47% 19.85% 6.16% 1.13% 16.56%
1987 5.23% -0.27% 5.46% 4.41% 3.08%
1988 16.81% 10.70% 6.35% 4.42% 12.28%
1989 31.49% 16.23% 8.37% 4.65% 20.76%
1990 -3.17% 6.87% 7.52% 6.11% 2.98%
1991 30.55% 19.79% 5.88% 3.06% 21.31%
1992 7.67% 9.39% 3.51% 2.90% 7.53%
1993 10.06% 13.17% 2.89% 2.75% 9.84%
1994 1.31% -5.76% 3.90% 2.67% -1.00%
1995 37.40% 27.20% 5.60% 2.70% 26.90%
1996 23.10% 1.40% 5.20% 3.30% 10.84%
1997 33.40% 12.90% 7.10% 1.70% 19.94%
1998 28.58% 10.76% 4.86% 1.61% 16.70%

*Returns of unmanaged indexes do not reflect past or future performance of any
of the Portfolios of PIMCO Variable Insurance Trust. Stocks are represented by
Ibbotson's Large Company Stock Total Return Index. Bonds are represented by
Ibbotson's Long-term Corporate Bond Index. T'bills are represented by Ibbotson's
Treasury Bill Index and Inflation is represented by the Cost of Living Index.
These are all unmanaged indices, which can not be invested in directly. While
Treasury bills are insured and offer a fixed rate of return, both the principal
and yield of investment securities will fluctuate with changes in market
conditions. Source: Ibbotson, Roger G., and Rex A. Sinquefiled, Stocks, Bonds,
Bill and Inflation (SBBI), 1989, updated in Stocks, Bonds, Bills and Inflation
1999 Yearbook, Ibbotson Associates, Chicago. All rights reserved.

The Trust may use in its advertisement and other materials examples
designed to demonstrate the effect of compounding when an investment is
maintained over several or many years. For example, the following table shows
the annual and total contributions necessary to accumulate $200,000 of savings
(assuming a fixed rate of return) over various periods of time:

Investment Annual Total Total
Period Contribution Contribution Saved
------ ------------ ------------- -----
30 Years $ 1,979 $ 59,370 $200,000
25 Years $ 2,955 $ 73,875 $200,000
20 Years $ 4,559 $ 91,180 $200,000
15 Years $ 7,438 $111,570 $200,000
10 Years $13,529 $135,290 $200,000

This hypothetical example assumes a fixed 7% return compounded annually and a
guaranteed return of principal. The example is intended to show the benefits of
a long-term, regular investment program, and is in no way representative of any
past or future performance of a Portfolio. There can be no guarantee that you
will be able to find an investment that would provide such a return at the times
you invest and an investor in any of the Portfolios should be aware that certain
of the Portfolios have experienced periods of negative growth in the past and
may again in the future.

The Trust may set forth in its advertisements and other materials
information regarding the relative reliance in recent years on personal savings
for retirement income versus reliance on Social Security

54
<PAGE>

benefits and company sponsored retirement plans. For example, the following
table offers such information for 1997:

% of Income for Individuals
Aged 65 Years and Older in 1997*
--------------------------------

Social Security
Year and Pension Plans Other
---- ----------------- -----

1990 43% 57%

* For individuals with an annual income of at least $51,000. Other
includes personal savings, earnings and other undisclosed sources of income.
Source: Social Security Administration.

Articles or reports which include information relating to performance,
rankings and other characteristics of the Portfolios may appear in various
national publications and services including, but not limited to: The Wall
Street Journal, Barron's, Pensions and Investments, Forbes, Smart Money, Mutual
Portfolio Magazine, The New York Times, Kiplinger's Personal Finance, Fortune,
Money Magazine, Morningstar's Mutual Portfolio Values, CDA Investment
Technologies and The Donoghue Organization. Some or all of these publications or
reports may publish their own rankings or performance reviews of mutual funds,
including the Portfolios, and may provide information relating to the Adviser,
including descriptions of assets under management and client base, and opinions
of the author(s) regarding the skills of personnel and employees of the Adviser
who have portfolio management responsibility. From time to time, the Trust may
include references to or reprints of such publications or reports in its
advertisements and other information relating to the Portfolios.

From time to time, the Trust may set forth in its advertisements and other
materials information about the growth of a certain dollar-amount invested in
one or more of the Portfolios over a specified period of time and may use charts
and graphs to display that growth.

From time to time, the Trust may set forth in its advertisements and other
materials the names of and additional information regarding investment analysts
employed by the Adviser who assist with portfolio management and research
activities on behalf of the Portfolios. The following lists various analysts
associated with the Adviser: Jane Howe, Mark Hudoff, Doris Nakamura and Ray
Kennedy.

Investment results of the Portfolios or the Funds will fluctuate over time,
and any presentation of the Portfolios' or the Funds' total return or yield for
any prior period should not be considered as a representation of what an
investor's total return or yield may be in any future period. The Trust's Annual
Report contains additional performance information for the Portfolios and is
available upon request, without charge, by calling (888) 746-2688.

Voting Rights

Under the Trust Instrument, the Trust is not required to hold annual
meetings of Trust shareholders to elect Trustees or for other purposes. It is
not anticipated that the Trust will hold shareholders' meetings unless required
by law or the Trust Instrument. In this regard, the Trust will be required to
hold a meeting to elect Trustees to fill any existing vacancies on the Board if,
at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Trust Instrument provides that the
holders of not less than two-thirds of the outstanding shares of the Trust may
remove a person serving as Trustee at any shareholder meeting. The Trustees are
required to call a meeting of shareholders if requested in writing to do so by
the holders of not less than ten percent of the outstanding shares of the Trust.
The Trust's shares do not have cumulative voting rights, so that a holder of
more than 50% of the outstanding shares may elect the entire Board of Trustees,
in which case the holders of the remaining shares would not be able to elect any
Trustees.

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Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in the Prospectus or this Statement of
Additional Information, the phrase "vote of a majority of the outstanding
shares" of a Portfolio (or the Trust) means the vote of the lesser of: (1) 67%
of the shares of the Portfolio (or the Trust) present at a meeting, if the
holders of more than 50% of the outstanding shares are present in person or by
proxy; or (2) more than 50% of the outstanding shares of the Portfolio (or the
Trust).

In accordance with current laws, it is anticipated that an insurance
company issuing a variable contract that participates in the Portfolios will
request voting instructions from variable contract owners and will vote shares
or other voting interests in the separate account in proportion to the votes
received.

Year 2000 Readiness Disclosure

Many of the world's computer systems may be unable to correctly recognize,
interpret or use dates beyond the year 1999. This inability might lead to
significant business disruptions. PIMCO Advisors and PIMCO are taking steps to
assure that their computer systems will function properly. PIMCO Advisors has
designated a team of information and business professionals to address the Year
2000 problem and developed a written Year 2000 Plan.

The PIMCO Advisors Year 2000 Plan consists of five general phases:
Awareness, Assessment, Remediation, Testing, and Implementation. During the
Awareness phase, the Year 2000 team informs the employees of PIMCO Advisors and
its subsidiaries, including the highest levels of management, about the Year
2000 problem. A written Year 2000 Plan and budget is prepared and approved by
the PIMCO Advisors Management Board. During the Assessment phase, the Year 2000
team prepares an inventory of information technology ("IT") and non-IT systems
used in PIMCO Advisors and its subsidiaries business. Systems are classified as
software, hardware, and embedded chips. Separately, systems are also classified
as mission critical and non-mission critical systems. As the inventory is
compiled and verified, each system is preliminarily assessed for Year 2000
compliance. This preliminary assessment is made by obtaining manufacturers'
representations that a given product is Year 2000 compliant or other evidence of
compliance. Systems for which no such evidence can be obtained are identified
as candidates for correction or replacement ("Remediation"). During the
Remediation phase, software, hardware, and embedded chips identified during the
Assessment phase to be non-Year 2000 compliant are corrected or replaced.
Necessarily, further corrections and replacements may need to be made after the
Remediation phase has been completed as a result of problems identified during
the Testing phase or otherwise. During the Testing phase, PIMCO Advisors
performs internal testing, point-to-point testing, and industry testing
programs. Testing generally will be performed in order of criticality (mission
critical, then non-mission critical). Several PIMCO Advisors subsidiaries plan
on participating in the Securities Industry Association's industry-wide testing
forum. During the Implementation phase, systems that have been tested and
identified as being Year 2000 ready are put into normal business operation and
contingency plans are finalized.

As all investment advisers, PIMCO Advisors' and PIMCO's business operations
are heavily dependent upon a complex worldwide network of financial systems that
utilize date fields. PIMCO Advisors' and PIMCO's ability to endure any adverse
effects of the transition to Year 2000 is highly dependent upon the efforts of
third parties, particularly issuers, brokers, dealers, and custodians. The
failure of third party organizations to resolve their own processing issues with
respect to the Year 2000 Problem in a timely manner could have a material
adverse effect on PIMCO Advisors' or PIMCO's business. The management of PIMCO
Advisors and PIMCO believe that the transition to Year 2000 will not have a
material adverse effect on their business or operations as of the date of this
Statement of Additional Information. However, complications as yet unidentified
may arise in internal or external systems, with data providers, with other
securities firms or institutions, with issuers, with other counterparties, with
other entities or even with general economic conditions related to the Year 2000
in general. Although PIMCO Advisors' efforts and

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expenditures on Year 2000 issues are substantial, there can be no assurances
that shareholders or others will not suffer from disruptions or adverse results
arising as a consequence of entering Year 2000.

Custodian

Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania, Kansas City,
Missouri 64105 serves as custodian for assets of all Portfolios. Pursuant to
rules adopted under the 1940 Act, the Trust may maintain foreign securities and
cash in the custody of certain eligible foreign banks and securities
depositories. Pursuant to a sub-custody agreement between IFTC and State Street
Bank and Trust Company ("State Street"), State Street serves as subcustodian of
the Trust for the custody of the foreign securities acquired by those Portfolios
that invest in foreign securities. No assurance can be given that expropriation,
nationalization, freezes, or confiscation of assets that would impact assets of
the Portfolios will not occur, and shareholders bear the risk of losses arising
from these or other events.

Independent Accountants

PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105, serves as
independent public accountants for all Portfolios. PricewaterhouseCoopers LLP
provides audit services and consultation in connection with review of SEC and
IRS filings.

Counsel

Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, D.C. 20006,
passes upon certain legal matters in connection with the shares offered by the
Trust, and also acts as counsel to the Trust.

Registration Statement

This Statement of Additional Information and the Prospectus do not contain
all of the information included in the Trust's registration statement filed with
the SEC under the 1933 Act with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statement, including the exhibits
filed therewith, may be examined at the offices of the SEC in Washington, D.C.

Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.

Financial Statements

Financial statements for the Trust as of December 31, 1998 for the fiscal
year then ended, including notes thereto and the report of
PricewaterhouseCoopers LLP thereon dated February 12, 1999, are incorporated by
reference from the Trust's 1998 Annual Report.