<PAGE>
P I M C O
PIMCO
Variable
Insurance
Trust Intermediate Duration Bond Portfolios
Total Return Bond Portfolio
Prospectus
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March 15, 2000
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PIMCO Variable Insurance Trust
Prospectus
March 15, 2000
The PIMCO Total Return Bond 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 Investment
Management Company ("PIMCO" or the "Adviser"). The Portfolio has its own in-
vestment objective and strategies and its own risk/reward profile, which are
described in this Prospectus. 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 in-
vestment objectives and strategies similar to those of the Portfolio. Accord-
ingly, 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.
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.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW.................................................................... 3
Portfolio at a Glance..................................................... 3
Investment Strategies and Risk Factors.................................... 3
Fixed Income Instruments.................................................. 3
Ratings of Debt Securities................................................ 4
DESCRIPTION OF THE PORTFOLIO................................................ 5
PIMCO Total Return 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
FINANCIAL HIGHLIGHTS........................................................ 16
OTHER INFORMATION........................................................... 17
Portfolio Names........................................................... 17
Total Return.............................................................. 17
Performance Information of a similar Fund................................. 17
APPENDIX A.................................................................. A-1
APPENDIX B.................................................................. B-1
</TABLE>
Prospectus 2
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OVERVIEW
Portfolio at a Glance
<TABLE>
<CAPTION>
Intermediate
Duration Bond
Portfolios Primary Investments Duration Credit Quality(1) Foreign(2)
------------- ---------------------------------- --------- ----------------- ----------
<S> <C> <C> <C> <C>
Total Return Bond Intermediate maturity fixed income 3-6 years B to Aaa; max 10% 0-20%
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 the Portfolio, see the
Portfolio's description of Main Investment Strategies.
(2) Percentage limitations relate to foreign currency-denominated
securities. The Portfolio may invest beyond these limits in U.S.
dollar-denominated securities of foreign issuers.
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 Investment Strategies" in the Description of the Portfolio. Percent-
age limitations described in this Prospectus apply at the time of invest-
ment, and may vary with fluctuations in the value of the Portfolio's in-
vestment portfolio.
Risk Factors. The major risks associated with investing in the Portfolio
are described under the heading "Risk Factors" in the Description of Port-
folio. Please be sure to read all risk disclosures carefully before in-
vesting. This Prospectus does not describe all of the risks of every secu-
rity 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.
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. The Portfolio may hold different percentages of
its assets in these various types of securities.
3 PIMCO Variable Insurance Trust
<PAGE>
OVERVIEW (continued)
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 securi-
ties, which are commonly known as "junk bonds," are considered to be predomi-
nately speculative with respect to the issuer's ability to pay interest and re-
pay principal. For more information on the risks of investing in high yield se-
curities, see "High Yield Securities ("Junk Bonds")" in "Risk Factors and Spe-
cial Considerations."
Prospectus 4
<PAGE>
DESCRIPTION OF THE PORTFOLIO
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.
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 seek to ob-
tain market exposure to the securities in which it primarily invests by enter-
ing into a series of purchase and sale contracts or using other investment
techniques.
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%
5 PIMCO Variable Insurance Trust
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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>
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.
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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)%
</TABLE>
<TABLE>
------
<S> <C>
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.
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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 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 this 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 $186 billion in assets under manage-
ment as of December 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 L.P. The
general partners of PIMCO Advisors L.P. are PIMCO Partners, G.P. and PIMCO Ad-
visors Holdings L.P. ("PAH"). PIMCO Partners, G.P. is a general partnership
between PIMCO Holding LLC, a Delaware limited liability company and an indi-
rect 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'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 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 Experience (Past
Portfolio Five Years)
--------- -----------------------------------------------
<C> <S>
Total Return 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
Total Return Fund for the PIMCO Funds: Pacific
Investment Management Series since its inception
on May 11, 1987.
</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.
7 PIMCO Variable Insurance Trust
<PAGE>
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>
<CAPTION>
Advisory Fee
Portfolio Rate
--------- ------------
<S> <C>
Total Return Bond Portfolio.................................. 0.40%
</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's 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
the 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 Portfolio with a higher rate of portfolio turnover will gen-
erally 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
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.
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
Prospectus 8
<PAGE>
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 sepa-
rate 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 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 dis-
advantageous 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. 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 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 Portfolio.
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 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
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.
In determining its daily net asset values, 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
9 PIMCO Variable Insurance Trust
<PAGE>
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 Port-
folio, such prices represent the current market value of the securities as of
the time selected by the Portfolio for the calculation of net asset value. Be-
cause the Portfolio invests in securities traded in foreign securities mar-
kets, it may trade such securities on days when the Exchange is not open, and
the net asset value per share of the Portfolio may be affected significantly
on days when investors do not have access to the Portfolio.
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
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 the Portfolio" in this Prospectus. As with any mutual fund, there is
no guarantee that the Portfolio will earn income or show a positive total re-
turn over any period of time, and you could lose money by investing in the
Portfolio.
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 10
<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.
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
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
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.
11 PIMCO Variable Insurance Trust
<PAGE>
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
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 the 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.
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 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.
Foreign Securities
The Portfolio may invest directly in fixed income securities of non-U.S. is-
suers.
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,
Prospectus 12
<PAGE>
expropriation or confiscatory taxation; adverse changes in investment or ex-
change control regulations (which may include suspension of the ability to
transfer currency from a country); and political instability which could af-
fect U.S. investments in foreign countries. Additionally, foreign securities
and dividends and interest payable on those securities may be subject to for-
eign taxes, including taxes withheld from payments on those securities. For-
eign securities often trade with less frequency and volume than domestic secu-
rities and therefore may exhibit greater price volatility. Additional costs
associated with an investment in foreign securities may include higher custo-
dial 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 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 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
Foreign currency exchange rates may fluctuate significantly over short peri-
ods of time. The Portfolio may buy and sell foreign currencies on a spot and
forward basis to reduce the risks of adverse changes in foreign exchange
rates. A forward foreign currency exchange contract 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 currency 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 an-
ticipated investment in securities denominated in foreign currencies. The
Portfolio also may enter into these contracts for purposes of increasing expo-
sure to a foreign currency or to shift exposure to foreign currency fluctua-
tions from one country to another.
The Portfolio may invest in options on foreign currencies and foreign cur-
rency futures and options thereon. The Portfolio 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.
The 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.
Significant uncertainty surrounds the 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 cur-
rencies in which the Portfolio's assets are denominated may be devalued
against the U.S. dollar, resulting in a loss to the Portfolio.
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.
13 PIMCO Variable Insurance Trust
<PAGE>
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, the 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 the 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.
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
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, foreign currency exchange rates or securities
prices or as part of its overall investment 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 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 the Portfo-
lio 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 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 the Portfolio to close out or to liqui-
date its derivatives positions. The value of some derivative instruments in
which the Portfolio invests may be particularly sensitive to changes in pre-
vailing 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 eco-
nomic 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.
Prospectus 14
<PAGE>
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% 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 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.
15 PIMCO Variable Insurance Trust
<PAGE>
FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the Port-
folio's financial performance for the period of its operations. Certain infor-
mation reflects financial results for a single portfolio share. The total re-
turns 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 Portfolio's 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>
Total Return
Bond
Portfolio(a)
Selected Per Share Data for the Period Ended: December 31, 1998 ------------
<S> <C>
Net asset value, beginning of period............................. $10.00
Income from Investment Operations
Net investment income(b)......................................... 0.56
Net gains or losses on securities (both realized and
unrealized)(b).................................................. 0.28
Total from investment operations................................. 0.84
Less Distributions
Dividends (from net investment income)........................... (0.56)
Distributions (from capital gains)............................... (0.19)
Total distributions.............................................. (0.75)
Net asset value, end of period................................... $10.09
Total return (%)................................................. 8.61%
Ratios/Supplemental Data
Net assets, end of period (000's)................................ $3,259
Ratio of expenses to average net assets (%)(c)................... 0.65%
Ratio of net investment income to average net assets (%)(c)...... 5.55%
Portfolio turnover rate (%)...................................... 138.72%
</TABLE>
*Annualized
(a) Commenced operations on December 31, 1997.
(b) Per share amounts based on average number of shares outstanding during the
period.
(c) Prior to the waiver and reimbursement of expenses, the ratio of expenses
to average net assets was 0.75% and the ratio of net investment income to
average net assets was 5.45% for the Portfolio.
Prospectus 16
<PAGE>
OTHER INFORMATION
Portfolio Names
The Portfolio considers the various types of debt or fixed income securities
in which it invests, as specifically described in this Prospectus, to be
"bonds" as referenced in the Portfolio's name. The use of this name is not
meant to restrict the Portfolio's investment to the narrow category of debt
securities that are formally called "bonds."
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.
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.
Performance Information of a Similar Fund
The following table provides information concerning the historical total re-
turn performance of the Institutional Class of the Total Return Fund, a series
of PIMCO Funds: Pacific Investment Management Series ("PIMS"). The PIMS series
has investment objectives, policies and strategies substantially similar to
those of the Portfolio and is currently managed by the same portfolio manager.
While the investment objectives and policies of the PIMS series and the Port-
folio are similar, they are not identical and the performance of the PIMS se-
ries and the Portfolio will vary. The data is provided to illustrate the past
performance of the respective Adviser in managing a substantially similar in-
vestment portfolio and does not represent the past performance of the Portfo-
lio or the future performance of the Portfolio or its portfolio manager. Con-
sequently, potential investors should not consider this performance data as an
indication of the future performance of the Portfolio or of its portfolio man-
ager.
17 PIMCO Variable Insurance Trust
<PAGE>
The performance data shown below reflects the operating expenses of the PIMS
series, which is lower than the expenses of the Portfolio. In addition, the
PIMS series, unlike the Portfolio, is 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 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 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 Total Return Fund................... 9.77 8.18 7.89 9.89 5/11/87
Lehman Aggregate Bond/1/................. 8.69 7.29 7.27
</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.
Prospectus 18
<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
PIMCO
Variable
Insurance
Trust
For More Information
The following documents are available that offer further information on this
Portfolio 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 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
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
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March 15, 2000
