<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
TOTAL RETURN BOND PORTFOLIO
INSTITUTIONAL CLASS
----------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Contents
<TABLE>
<S> <C>
Chairman's Letter....................................... 1
Financial Highlights.................................... 3
Statement of Assets and Liabilities..................... 4
Statement of Operations................................. 5
Statements of Changes in Net Assets..................... 6
Notes to Financial Statements........................... 9
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Total Return Bond Portfolio (Institutional ClasS)....... 2 7-8
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Total Return Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily intermediate maturity fixed income securities
Duration:
4.51 years
Total Net Assets:
$13.2 million
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
Sector Breakdown:*
[GRAPH]
Mortgage-Backed Securities 52.5%
Corporate Bonds and Notes 22.9%
Short-Term Instruments 14.9%
Asset-Backed Securities 7.3%
Other 2.4%
Quality Breakdown:*
[GRAPH]
AAA 62.6%
AA 10.4%
A 12.1%
BBB 12.5%
BB 0.6%
B 1.8%
*% of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Total Return Bond Portfolio Institutional Class' total return
investment performance since inception on April 10, 2000 through June 30,
2000 was 1.10%.
. The yield curve inverted as the Treasury Department began buying back
Treasury debt with maturities greater than 10 years.
. The Fund held its duration, or sensitivity to interest rate changes, below
benchmark for most of the period. This was neutral for returns because the
yield curve inverted.
. A shift into longer term Treasuries early in the year was a positive for
performance because of a rally in the longer maturities caused by the
Treasury buyback program.
. An overweight in mortgages was positive as mortgages outperformed
Treasuries due to a significant yield premium.
. Limited holdings of below investment grade and emerging markets bonds
detracted slightly from returns because of historically high default rates
and political instability.
. A conservative allocation to non-U.S. bonds was negative as the euro
depreciated relative to the dollar.
2
<PAGE>
Financial Highlights
Total Return Bond Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 (b)
----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Net asset value beginning of period $ 9.50
----------------------------------------------------------------------------------------------- -----------------
Net investment income (a) 0.14
----------------------------------------------------------------------------------------------- -----------------
Net realized / unrealized (loss) on investments (a) (0.04)
----------------------------------------------------------------------------------------------- -----------------
Total income from investment operations 0.10
----------------------------------------------------------------------------------------------- -----------------
Dividends from net investment income (0.14)
----------------------------------------------------------------------------------------------- -----------------
Distributions from net realized capital gains 0.00
----------------------------------------------------------------------------------------------- -----------------
Total distributions (0.14)
----------------------------------------------------------------------------------------------- -----------------
Net asset value end of period $ 9.46
----------------------------------------------------------------------------------------------- -----------------
Total return % 1.10
----------------------------------------------------------------------------------------------- -----------------
Net assets end of period (000s) $ 2,729
----------------------------------------------------------------------------------------------- -----------------
Ratio of expenses to average net assets % 0.50*
----------------------------------------------------------------------------------------------- -----------------
Ratio of net investment income to average net assets % 6.76*
----------------------------------------------------------------------------------------------- -----------------
Portfolio turnover rate % 134
----------------------------------------------------------------------------------------------- -----------------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 10, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 17,739
------------------------------------------------------------------------------------------------ ----------------
Cash and foreign currency 820
------------------------------------------------------------------------------------------------ ----------------
Receivable for investments sold and forward foreign currency contracts 14
------------------------------------------------------------------------------------------------ ----------------
Interest and dividends receivable 112
------------------------------------------------------------------------------------------------ ----------------
Manager reimbursement receivable 2
------------------------------------------------------------------------------------------------ ----------------
Other assets 29
------------------------------------------------------------------------------------------------ ----------------
18,716
================================================================================================ ================
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 5,493
------------------------------------------------------------------------------------------------ ----------------
Payable for financing transactions 31
------------------------------------------------------------------------------------------------ ----------------
Written options outstanding 1
------------------------------------------------------------------------------------------------ ----------------
Accrued investment advisory fee 2
------------------------------------------------------------------------------------------------ ----------------
Accrued administration fee 2
------------------------------------------------------------------------------------------------ ----------------
Accrued distribution fee 0
------------------------------------------------------------------------------------------------ ----------------
Accrued servicing fee 1
------------------------------------------------------------------------------------------------ ----------------
Other liabilities 13
------------------------------------------------------------------------------------------------ ----------------
5,543
================================================================================================ ================
Net Assets $ 13,173
================================================================================================ ================
Net Assets Consist of:
Paid in capital $ 13,276
------------------------------------------------------------------------------------------------ ----------------
Undistributed net investment income (11)
------------------------------------------------------------------------------------------------ ----------------
Accumulated undistributed net realized (loss) (85)
------------------------------------------------------------------------------------------------ ----------------
Net unrealized (depreciation) (7)
------------------------------------------------------------------------------------------------ ----------------
$ 13,173
================================================================================================ ================
Net Assets:
Institutional Class $ 2,729
------------------------------------------------------------------------------------------------ ----------------
Administrative Class 10,444
------------------------------------------------------------------------------------------------ ----------------
Shares Issued and Outstanding:
Institutional Class 289
------------------------------------------------------------------------------------------------ ----------------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 9.46
------------------------------------------------------------------------------------------------ ----------------
Cost of Investments Owned $ 17,781
================================================================================================ ================
Cost of Foreign Currency Held $ 20
================================================================================================ ================
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Total Return Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 209
------------------------------------------------------------------------------------------------------- ----------
Total Income 209
======================================================================================================= ==========
Expenses:
Investment advisory fees 8
------------------------------------------------------------------------------------------------------- ----------
Administration fees 7
------------------------------------------------------------------------------------------------------- ----------
Distribution and/or servicing fees - Administrative Class 2
------------------------------------------------------------------------------------------------------- ----------
Organization costs 1
------------------------------------------------------------------------------------------------------- ----------
Total Expenses 18
------------------------------------------------------------------------------------------------------- ----------
Net Investment Income 191
======================================================================================================= ==========
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 28
------------------------------------------------------------------------------------------------------- ----------
Net realized (loss) on futures contracts and written options (25)
------------------------------------------------------------------------------------------------------- ----------
Net realized (loss) on foreign currency transactions (2)
------------------------------------------------------------------------------------------------------- ----------
Net change in unrealized appreciation on investments 50
------------------------------------------------------------------------------------------------------- ----------
Net change in unrealized appreciation on futures contracts and written options 28
------------------------------------------------------------------------------------------------------- ----------
Net change in unrealized appreciation on translation of assets and liabilities denominated in
foreign currencies 1
------------------------------------------------------------------------------------------------------- ----------
Net Gain 80
------------------------------------------------------------------------------------------------------- ----------
Net Increase in Assets Resulting from Operations $ 271
======================================================================================================= ==========
</TABLE>
2000 Semi-Annual Report 5
<PAGE>
Statements of Changes in Net Assets
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Year Ended
Increase (Decrease) in Net Assets from: June 30, 2000 December 31, 1999
<S> <C> <C>
Operations:
Net investment income $ 191 $ 192
------------------------------------------------------------------------------ ---------------- -----------------
Net realized gain (loss) 1 (102)
------------------------------------------------------------------------------ ---------------- -----------------
Net change in unrealized appreciation (depreciation) 79 (109)
------------------------------------------------------------------------------ ---------------- -----------------
Net increase (decrease) resulting from operations 271 (19)
============================================================================== ================ =================
Distributions to Shareholders:
From net investment income
Institutional Class (40) 0
------------------------------------------------------------------------------ ---------------- -----------------
Administrative Class (150) (192)
------------------------------------------------------------------------------ ---------------- -----------------
Total Distributions (190) (192)
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 2,758 0
------------------------------------------------------------------------------ ---------------- -----------------
Administrative Class 9,686 637
------------------------------------------------------------------------------ ---------------- -----------------
Issued as reinvestment of distributions
Institutional Class 43 0
------------------------------------------------------------------------------ ---------------- -----------------
Administrative Class 148 192
------------------------------------------------------------------------------ ---------------- -----------------
Cost of shares redeemed
Institutional Class (67) 0
------------------------------------------------------------------------------ ---------------- -----------------
Administrative Class (3,353) 0
------------------------------------------------------------------------------ ---------------- -----------------
Net increase resulting from Portfolio share transactions 9,215 829
------------------------------------------------------------------------------ ---------------- -----------------
Total Increase in Net Assets $ 9,296 $ 618
============================================================================== ================ =================
Net Assets:
Beginning of period 3,877 3,259
------------------------------------------------------------------------------ ---------------- -----------------
End of period * $ 13,173 $ 3,877
------------------------------------------------------------------------------ ---------------- -----------------
*Including net (overdistributed) investment income of: $ (11) $ (12)
------------------------------------------------------------------------------ ---------------- -----------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 30.8%
--------------------------------------------------------------------------------
Banking & Finance 18.0%
Bank One Corp.
6.792% due 05/07/2002 (d) $ 400 $ 400
Caterpillar Financial Service Corp.
6.875% due 08/01/2004 100 99
Ford Motor Credit Corp.
6.320% due 05/21/2002 (d) 200 200
6.190% due 10/15/2002 (d) 150 150
Household Finance Corp.
6.198% due 11/01/2001 (d) 200 200
Morgan Stanley, Dean Witter, Discover and Co.
6.165% due 01/28/2002 (d) 100 100
Pemex Finance Ltd.
5.720% due 11/15/2003 175 170
PNC Funding Corp.
6.125% due 09/01/2003 100 95
Popular, Inc.
6.625% due 01/15/2004 500 481
Republic of Brazil
7.000% due 01/01/2001 123 123
7.375% due 04/15/2006 186 169
Residential Rein
10.926% due 06/01/2001 100 100
Westdeutsche Landesbank
6.050% due 05/15/2009 100 89
-------
2,376
=======
Industrials 6.4%
Daimler Chrysler North American Holding
7.750% due 05/27/2003 200 202
International Paper Co.
1.000% due 07/08/2002 (d) 200 200
Philip Morris Cos., Inc.
7.250% due 09/15/2001 100 99
TRW, Inc.
6.625% due 06/01/2004 250 238
Vodafone AirTouch PLC
6.852% due 12/19/2001 (d) 100 100
-------
839
=======
Utilities 6.4%
Deutsche Telekom
7.750% due 06/15/2005 100 100
MCI WorldCom, Inc.
6.125% due 08/15/2001 100 99
Philadelphia Electric
6.500% due 05/01/2003 100 97
Sprint Capital Corp.
8.125% due 07/15/2002 150 153
Telekomunikacja Polska SA
7.125% due 12/10/2003 100 96
Texas Utilities Co.
7.375% due 08/01/2001 100 100
5.940% due 10/15/2001 100 98
Worldcom, Inc.
7.050% due 11/26/2001 (d) 100 100
-------
843
-------
Total Corporate Bonds & Notes 4,058
=======
(Cost $4,083)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 2.9%
--------------------------------------------------------------------------------
Treasury Inflation Protected Securities
3.625% due 07/15/2002 (h) 107 106
U.S. Treasury Notes
5.125% due 08/31/2000 (b) 20 20
U.S. Treasury Bonds
8.750% due 08/15/2020 200 258
-------
Total U.S. Treasury Obligations 384
=======
(Cost $369)
--------------------------------------------------------------------------------
MORTAGE-BACKED SECURITIES 70.9%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 39.3%
Credit Suisse First Boston Mortgage Securities
6.750% due 12/27/2028 100 91
Federal Home Loan Mortgage Corp.
6.903% due 07/01/2027 (d) 42 42
6.752% due 01/01/2028 (d) 55 55
6.500% due 04/15/2029 539 435
6.000% due 07/17/2030 120 110
Federal National Mortgage Assn
6.961% due 11/01/2025 (d) 27 27
7.000% due 07/17/2030 200 193
6.000% due 07/17/2030 800 732
General Motors Acceptance Corporation
6.965% due 06/01/2005 (d) 400 400
Government National Mortgage Assn
7.500% due 07/24/2030 1,600 1,589
7.000% due 07/24/2030 200 194
7.000% due 08/24/2030 (d) 300 299
Small Business Investment Co.
8.017% due 02/10/2010 993 1,015
-------
5,182
=======
Federal Home Loan Mortgage Corporation 1.8%
8.500% due 08/01/2024 226 231
-------
Federal Housing Administration 3.6%
7.700% due 08/01/2028 476 461
-------
Federal National Mortgage Association 4.3%
7.430% due 01/25/2023 571 554
-------
Government National Mortgage Association 14.5%
6.500% due 05/20/2030 (d) 200 197
6.375% due 02/20/2027 (d) 79 79
6.500% due 07/24/2030 (h) 1,200 1,137
7.500% due 11/20/2029 418 404
7.800% due 08/01/2030 (d) 98 98
-------
1,915
=======
Mortgage-Backed Securities 7.4%
Credit-Based Asset Servicing and Securitization
7.045% due 09/25/2029 (d) 600 602
Resecuritization Mortgage Trust
6.500% due 04/19/2029 384 374
-------
976
-------
Total Mortgage-Backed Securities 9,319
=======
(Cost $9,349)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 9.8%
--------------------------------------------------------------------------------
AFC Mortgage Loan Trust
6.951% due 01/25/2025 400 400
Ameriquest Mortgage Securities
6.781% due 06/15/2030 99 98
Ameriquest Mortgage Securities Inc.
6.950% due 07/15/2030 (d) 400 400
Conseco Recreational Enthusiast Comsumer Trust
7.562% due 10/15/2007 200 200
Contimortgage Home Equity Loan Trust
7.580% due 08/15/2028 100 99
Irwin Low Balance Home Loan Trust
7.026% due 06/25/2021 (d) 100 100
-------
Total Asset-Backed Securities 1,297
=======
(Cost $1,301)
--------------------------------------------------------------------------------
FOREIGN CURRENCY-DENOMINATED (e)(f) 0.2%
--------------------------------------------------------------------------------
Republic of Germany
6.250% due 01/04/2024 EC 10 11
6.250% due 01/04/2030 20 21
-------
Total Foreign Currency-Denominated 32
=======
(Cost $30)
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments (Cont.)
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 20.1%
--------------------------------------------------------------------------------
Certificates of Deposit 1.5%
Societe Generale
6.052% due 02/28/2001 $ 200 $ 200
--------
Commercial Paper 15.1%
American Express
6.610% due 08/11/2000 100 99
American Express Credit Corp.
6.540% due 09/12/2000 200 198
Associates Corp. of North America
6.350% due 07/13/2000 100 100
CRX Corp.
6.770% due 07/14/2000 400 399
Delphi Auto Systems
6.780% due 07/05/2000 400 400
Nabisco, Inc.
6.860% due 08/10/2000 300 298
Norfolk Southern Corp.
6.850% due 07/27/2000 300 298
Reseau Ferre de France
6.560% due 09/13/2000 200 197
--------
1,989
========
Repurchase Agreement 3.3%
State Street Bank
5.850% due 07/03/2000 440 440
--------
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
6.000% due 08/15/2002 valued at $451
Repurchase proceeds are $440.)
U.S. Treasury Bills (b)(i) 0.2%
5.730% due 09/21/2000 20 20
--------
Total Short-Term Instruments 2,649
========
(Cost $2,649)
Total Investments (a) 134.7% $ 17,739
(Cost $17,781)
Written Options (c) (0.0%) (1)
(Premium $1)
Other Assets and Liabilities (Net) (34.7%) (4,565)
--------
Net Assets 100.0% $ 13,173
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was an excess
of value over tax cost. $ 74
Aggregate gross unrealized depreciation
for all investments in which there was an excess
of tax cost over value. (116)
--------
Unrealized depreciation-net (42)
========
(b) Securities with an aggregate market value of $40
have been segregated with the custodian to cover
margin requirements for the following open futures
contracts at June 30, 2000.
# of Unrealized
Type Contracts Appreciation
-------------------------------------------------------------------------------
Eurobond 10 Year Bond Futures (09/2000) 1 $ 0
United Kingdom 10 Year Gilt Futures
(09/2000) 1 1
U.S. Treasury 10 Year Bond (09/2000) 10 19
Eurodollar March Futures (03/2001) 4 2
--------
$ 22
--------
(c) Premiums received on written options:
# of
Type Contract Premium Value
-------------------------------------------------------------------------------
Call - CBOT AWCO U.S. Treasury Notes September Futures
Strike @ 100.00 Exp. 08/19/2000 2 $ 1 $ 1
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/22/2000 200,0000 0 0
-----------------------
$ 1 $ 1
=======================
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Foreign forward currency contracts outstanding at June 30, 2000:
Principal
Amount
Covered by Settlement Unrealized
Type Currency Contract Month Appreciation
-------------------------------------------------------------------------------
Buy EC 15 07/2000 $ 0
(f) Principal amount denoted in indicated currency:
EC - European Currency Unit
(g) Swap agreements outstanding at June 30, 2000.
Unrealized
Notional Appreciation
Type Amount (Depreciation)
--------------------------------------------------------------------------------
Receive floating rate based on 6 month Euribor
and pay fixed rate equal to 6.175% in Euro.
Broker: Goldman Sachs & Co.
Exp. 05/22/2030 EC 20 $ 0
Receive floating rate based on 6 month Euribor
plus 0.499% and pay fixed rate equal to 6.000%
in Euro.
Broker: J.P. Morgan Securities, Inc.
Exp. 01/04/2009 30 1
Receive floating rate based on 6 month Euribor
less 0.540% and pay fixed rate equal to 6.250%
in Euro.
Broker: J.P. Morgan Securities, Inc.
Exp. 01/04/2024 10 (1)
Receive fixed rate equal to 7.747% and
pay floating rate based on 3 month LIBOR.
Broker: Morgan Stanley Dean Witter
Exp. 05/24/2010 $ 600 21
Receive fixed rate equal to 7.670% and
pay floating rate based on 3 month LIBOR.
Broker: Morgan Stanley Dean Witter
Exp. 05/31/2010 150 4
--------
$ 25
========
(h) Principal amount of the security is adjusted
for inflation.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Total Return Bond Portfolio (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request. The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. On December
22, 1997 the Total Return Bond Portfolio was provided seed capital of $100,000
by the Adviser. The Portfolio commenced operations on December 31, 1997.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
2000 Semi-Annual Report 9
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. The Portfolio is authorized to enter into forward
foreign exchange 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 purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, the Portfolio may fail to recoup some or all of its
initial investment in these securities. The market value of these securities is
highly sensitive to changes in interest rates.
Delayed Delivery Transactions. The Portfolio may purchase or sell securities on
a when-issued or delayed delivery 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 beyond the customary settlement
period. When delayed delivery purchases are outstanding, the Portfolio will set
aside and maintain until the settlement date in a segregated account, liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery 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. The Portfolio may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss. When the
Portfolio has sold a security on a delayed delivery basis, the Portfolio does
not participate in future gains and losses with respect to the security. Forward
sales commitments are accounted for by the Portfolio in the same manner as
forward currency contracts discussed above.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
10
<PAGE>
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
<TABLE>
<CAPTION>
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
</TABLE>
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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. The ratio of expenses to average net assets per share
class, as disclosed in Financial Highlights, may differ from the annual fund
operating expenses per share class as disclosed in the Prospectus for the
reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
------------------------------------------------------------------------------
Total Return Bond Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
Organization Expense. Costs incurred in connection with the organization of the
Portfolio and its initial registration are amortized on a straight-line basis
over a five-year period from the Portfolio's commencement of operations.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. Government/Agency All Other
----------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Return Bond Portfolio $ 12,243 $ 8,202 $ 7,656 $ 693
</TABLE>
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Total Return Bond Portfolio
---------------------------------
# of Contracts Premium
--------------------------------------------------------------------------------
<S> <C> <C>
Balance at 12/31/1999 5 $ 4
Sales 1,180,007 6
Closing Buys (500,004) (5)
Expirations (480,006) (4)
Exercised 0 0
--------------------------------------------------------------------------------
Balance at 06/30/2000 200,002 $ 1
--------------------------------------------------------------------------------
</TABLE>
2000 Semi-Annual Report 11
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
6. Federal Income Tax Matters
As of December 31, 199 Total Return Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $1,350 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards (amounts in
thousands):
Capital Loss Carryforwards
------------------------------------
Realized Losses Expiration
--------------------------------------------------------------------
Total Return Bond Portfolio $ 93,238 12/31/2007
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Total Return Bond Portfolio
------------------------------------------------
Period Ended 06/30/2000 Year Ended 12/31/1998
Shares Amount Shares Amount
------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 291 $ 2,758 0 $ 0
-------------------------------------------------------------------- ------------------------------------------------
Administrative Class 1,038 9,686 67 637
-------------------------------------------------------------------- ------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 5 43 0 0
-------------------------------------------------------------------- ------------------------------------------------
Administrative Class 16 148 20 192
-------------------------------------------------------------------- ------------------------------------------------
Cost of shares redeemed
-------------------------------------------------------------------- ------------------------------------------------
Institutional Class (7) (67) 0 0
-------------------------------------------------------------------- ------------------------------------------------
Administrative Class (355) (3,353) 0 0
-------------------------------------------------------------------- ------------------------------------------------
Net increase resulting from Portfolio share transactions 988 $ 9,215 87 $ 829
==================================================================== ================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
-------------------------------------------------------------------
Total Return Bond Portfolio 4 95
8. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
12
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
Pimco Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, Ca 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
Pimco Funds Distributors LLc
2187 Atlantic Street
Stamford, Ct 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
TOTAL RETURN BOND PORTFOLIO II
INSTITUTIONAL CLASS
---------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
<S> <C>
Contents
Chairman's Letter.......................................................... 1
Financial Highlights....................................................... 3
Statement of Assets and Liabilities........................................ 4
Statement of Operations.................................................... 5
Statements of Changes in Net Assets........................................ 6
Notes to Financial Statements.............................................. 9
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Total Return Bond Portfolio II (Institutional Class)....................... 2 7-8
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Total Return Bond Portfolio II
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
Mortgage-investment management
Portfolio:
Primarily intermediate maturity fixed income securities with quality and non-
U.S. issuer restrictions
Duration:
4.90 years
Total Net Assets:
$5.4 million
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
Sector Breakdown:*
[GRAPH]
Mortgage-Backed Securities 46.3%
Corporate Bonds and Notes 19.5%
U.S. Treasury Obligations 15.2%
Asset-Backed Securities 10.5%
Short-Term Instruments 5.9%
Other 2.6%
Quality Breakdown:*
[GRAPH]
AAA 74.1%
AA 9.1%
A 8.3%
BBB 8.5%
*% of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Total Return Bond Portfolio II Institutional Class' total return
investment performance since inception on April 10, 2000 through June 30,
2000 was 1.05%.
. The yield curve inverted as the Treasury Department began buying back
Treasury debt with maturities greater than 10 years.
. The Portfolio held its duration, or sensitivity to interest rate changes,
below benchmark for most of the period. This was neutral for returns
because the yield curve inverted.
. A shift into longer term Treasuries early in the year was positive for
performance because of a rally in the longer maturities caused by the
Treasury buyback program.
. An overweight in mortgages was positive as mortgages outperformed
Treasuries due to a significant yield premium.
. An underweight in investment grade corporate bonds added significantly to
performance as this sector lagged due to concerns about rising default
rates and increased corporate leverage.
2
<PAGE>
Financial Highlights
Total Return Bond Portfolio II (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 (b)
-------------
<S> <C>
Net asset value beginning of period $ 10.02
---------------------------------------------------------------------------------------- -------------
Net investment income (a) 0.16
---------------------------------------------------------------------------------------- -------------
Net realized / unrealized (loss) on investments (a) (0.06)
---------------------------------------------------------------------------------------- -------------
Total income from investment operations 0.10
---------------------------------------------------------------------------------------- -------------
Dividends from net investment income (0.15)
---------------------------------------------------------------------------------------- -------------
Total distributions (0.15)
---------------------------------------------------------------------------------------- -------------
Net asset value end of period $ 9.97
---------------------------------------------------------------------------------------- -------------
Total return % 1.05
---------------------------------------------------------------------------------------- -------------
Net assets end of period (000s) $ 3,292
---------------------------------------------------------------------------------------- -------------
Ratio of expenses to average net assets %* 0.50
---------------------------------------------------------------------------------------- -------------
Ratio of net investment income to average net assets %* 7.04
---------------------------------------------------------------------------------------- -------------
Portfolio turnover rate % 485
---------------------------------------------------------------------------------------- -------------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 10, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 9,287
-------------------------------------------------------------------------------------- -------------
Interest and dividends receivable 55
-------------------------------------------------------------------------------------- -------------
Manager reimbursement receivable 5
-------------------------------------------------------------------------------------- -------------
Other assets 1
-------------------------------------------------------------------------------------- -------------
9,348
====================================================================================== =============
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 3,963
-------------------------------------------------------------------------------------- -------------
Written options outstanding 3
-------------------------------------------------------------------------------------- -------------
Accrued investment advisory fee 1
-------------------------------------------------------------------------------------- -------------
Accrued administration fee 1
-------------------------------------------------------------------------------------- -------------
Other liabilities 7
-------------------------------------------------------------------------------------- -------------
3,975
====================================================================================== =============
Net Assets $ 5,373
====================================================================================== =============
Net Assets Consist of:
Paid in capital $ 5,383
-------------------------------------------------------------------------------------- -------------
Undistributed net investment income (1)
-------------------------------------------------------------------------------------- -------------
Accumulated undistributed net realized (loss) (27)
-------------------------------------------------------------------------------------- -------------
Net unrealized appreciation 18
-------------------------------------------------------------------------------------- -------------
$ 5,373
====================================================================================== =============
Net Assets:
Institutional Class $ 3,292
-------------------------------------------------------------------------------------- -------------
Administrative Class 2,081
-------------------------------------------------------------------------------------- -------------
Shares Issued and Outstanding:
Institutional Class 330
-------------------------------------------------------------------------------------- -------------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 9.97
-------------------------------------------------------------------------------------- -------------
Cost of Investments Owned $ 9,268
====================================================================================== =============
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Total Return Bond Portfolio II
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 181
-------------------------------------------------------------------------------------- -------------
Total Income 181
====================================================================================== =============
Expenses:
Investment advisory fees 8
-------------------------------------------------------------------------------------- -------------
Administration fees 6
-------------------------------------------------------------------------------------- -------------
Distribution and/or servicing fees - Administrative Class 1
-------------------------------------------------------------------------------------- -------------
Total Expenses 15
-------------------------------------------------------------------------------------- -------------
Net Investment Income 166
====================================================================================== =============
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 16
-------------------------------------------------------------------------------------- -------------
Net realized (loss) on futures contracts and written options (2)
-------------------------------------------------------------------------------------- -------------
Net change in unrealized appreciation on investments 64
-------------------------------------------------------------------------------------- -------------
Net change in unrealized appreciation on futures contracts and written options 5
-------------------------------------------------------------------------------------- -------------
Net Gain 83
-------------------------------------------------------------------------------------- -------------
Net Increase in Assets Resulting from Operations $ 249
====================================================================================== =============
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from May 28, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 166 $ 166
------------------------------------------------------------------------------- ----------- -----------
Net realized gain (loss) 14 (42)
------------------------------------------------------------------------------- ----------- -----------
Net change in unrealized appreciation (depreciation) 69 (51)
------------------------------------------------------------------------------- ----------- -----------
Net increase resulting from operations 249 73
=============================================================================== ----------- -----------
Distributions to Shareholders:
From net investment income
Institutional Class (51) 0
------------------------------------------------------------------------------- ----------- -----------
Administrative Class (115) (166)
------------------------------------------------------------------------------- ----------- -----------
Total Distributions (166) (166)
=============================================================================== =========== ===========
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 3,250 0
------------------------------------------------------------------------------- ----------- -----------
Administrative Class 0 10,106
------------------------------------------------------------------------------- ----------- -----------
Issued as reinvestment of distributions
Institutional Class 56 0
------------------------------------------------------------------------------- ----------- -----------
Administrative Class 110 151
------------------------------------------------------------------------------- ----------- -----------
Cost of shares redeemed
Institutional Class 0 0
------------------------------------------------------------------------------- ----------- -----------
Administrative Class (3,254) (5,036)
------------------------------------------------------------------------------- ----------- -----------
Net increase resulting from Portfolio share transactions 162 5,221
------------------------------------------------------------------------------- ----------- -----------
Total Increase in Net Assets $ 245 $ 5,128
=============================================================================== =========== ===========
Net Assets:
Beginning of period 5,128 0
------------------------------------------------------------------------------- ----------- -----------
End of period * $ 5,373 $ 5,128
------------------------------------------------------------------------------- ----------- -----------
*Including net (overdistributed) investment income of: $ (1) $ (1)
------------------------------------------------------------------------------- ----------- -----------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------
CORPORATE BONDS & NOTES 33.7%
--------------------------------------------------------------------------
Banking & Finance 13.4%
Bank One Corp.
6.792% due 05/07/2002 (d) $ 100 $ 100
Bear Stearns Co., Inc.
6.423% due 08/01/2002 (d) 100 100
Dresdner Funding Trust I
8.151% due 06/30/2031 100 87
Ford Motor Credit Corp.
6.927% due 03/19/2002 (d) 180 181
Morgan Stanley, Dean Witter, Discover and Co.
6.190% due 04/15/2002 (d) 250 250
-------
718
=======
Industrials 18.4%
Arrow Electronics, Inc.
7.570% due 11/24/2000 (d) 250 250
Coastal Corp.
6.568% due 03/01/2002 (d) 250 250
Dillards, Inc.
6.080% due 08/01/2000 250 249
DTE Capital Corp.
7.110% due 11/15/2038 (d) 250 242
-------
991
=======
Utilities 1.9%
Worldcom, Inc.
7.050% due 11/26/2001 (d) 100 100
-------
Total Corporate Bonds & Notes 1,809
=======
(Cost $1,823)
--------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 4.5%
--------------------------------------------------------------------------
Federal National Mortgage Association
6.300% due 06/01/2004 250 242
-------
Total U.S. Government Agencies 242
=======
(Cost $246)
--------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 26.2%
--------------------------------------------------------------------------
Treasury Inflation Protected Securities (e)
3.625% due 07/15/2002 107 106
3.375% due 01/15/2007 1,081 1,037
U.S. Treasury Notes
5.125% due 08/31/2000 (b) 10 10
U.S. Treasury Bonds
8.750% due 08/15/2020 200 257
-------
Total U.S. Treasury Obligations 1,410
=======
(Cost $1,379)
--------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 80.1%
--------------------------------------------------------------------------
Collateralized Mortgage Obligations 27.3%
Federal Home Loan Mortgage Corp.
6.903% due 07/01/2027 (d) 42 42
6.752% due 01/01/2028 (d) 55 55
6.000% due 07/17/2030 30 28
Federal National Mortgage Assn.
7.000% due 07/17/2030 100 97
6.000% due 07/17/2030 100 92
Government National Mortgage Assn.
8.000% due 07/24/2030 500 505
7.500% due 07/24/2030 400 397
Morgan Stanley Capital
7.460% due 02/15/2020 250 251
-------
1,467
=======
Government National Mortgage Association 52.8%
6.500% due 05/20/2030-07/24/2030 (d)(g) 2,820 2,680
7.375% due 02/20/2027 (d) 159 159
-------
2,839
-------
Total Mortgage-Backed Securities 4,306
=======
(Cost $4,299)
--------------------------------------------------------------------------
ASSET-BACKED SECURITIES 18.1%
--------------------------------------------------------------------------
AFC Home Equity Loan Trust
6.951% due 06/25/2030 (d) $ 200 $ 200
Ameriquest Mortgage Securities, Inc.
6.781% due 06/15/2030 99 98
Ameriquest Mortgage Securities, Inc.
7.072% due 07/15/2030 (d) 200 200
Conseco Recreational Enthusiast Consumer Trust
7.562% due 10/15/2007 100 100
Freemont Home Loan Owner Trust
6.495% due 12/25/2029 (d) 175 175
Irwin Low Balance Home Loan Trust
7.026% due 06/25/2021 (d) 200 200
-------
Total Asset-Backed Securities 973
=======
(Cost $974)
--------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 10.2%
--------------------------------------------------------------------------
Commercial Paper 7.4%
Bank One Corp.
6.560% due 09/20/2000 100 99
General Electric Capital Corp.
6.290% due 07/18/2000 100 100
General Motors Acceptance Corp.
6.530% due 07/10/2000 200 200
-------
399
=======
Repurchase Agreement 2.8%
State Street Bank
5.850% due 07/03/2000 148 148
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
5.860% due 11/07/2000 valued at $156.
Repurchase proceeds are $148.)
-------
Total Short-Term Instruments 547
=======
(Cost $547)
Total Investments (a) 172.8% $ 9,287
(Cost $9,268)
Written Options (c) (0.0%) (3)
(Premiums $4)
Other Assets and Liabilities (Net) (72.8%) (3,911)
-------
Net Assets 100.0% $ 5,373
=======
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost. $ 44
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over
value. (25)
-------
Unrealized appreciation-net $ 19
=======
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments (Cont.)
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
(b) Securities with an aggregate market value of $10 have been segregated with
the custodian to cover margin requirements for the following open futures
contracts at June 30, 2000:
# of Unrealized
Type Contracts Appreciation
-------------------------------------------------------------------------------
Eurodollar March Futures (03/2001) 1 $ 0
--------------------------
(c) Premiums received on written options:
Type Par Premium Value
-------------------------------------------------------------------------------
Put - CME AWPO Eurodollar December Futures
Strike @ 93.00 Exp. 12/18/2000 5 $ 4 $ 3
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/15/2000 200,000 0 0
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/22/2000 100,000 0 0
-------------------------
$ 4 $ 3
=========================
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Principal amount of the security is adjusted for inflation.
(f) Swap agreements outstanding at June 30, 2000.
Notional Unrealized
Type Amount Appreciation
-----------------------------------------------------------------------------
Receive fixed rate equal to 7.670% and
pay floating rate based on 3 month LIBOR.
Broker: Morgan Stanley Dean Witter $ 30 $ 1
Exp. 05/31/2010
(g) Securities are grouped by coupon or range of coupons and represent a range
of maturities.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Total Return Bond Portfolio II (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on May 28, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statements of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
2000 Semi-Annual Report 9
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Fund sells the security becomes
insolvent, a Fund's right to repurchase the security may be restricted; the
value of the security may change over the term of the financing transaction; and
the return earned by a Fund with the proceeds of a financing transaction may not
exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, a Fund may fail to recoup some or all of its initial
investment in these securities. The market value of these securities is highly
sensitive to changes in interest rates.
Delayed Delivery Transactions. The Portfolio may purchase or sell securities on
a when-issued or delayed delivery 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 beyond the customary settlement
period. When delayed delivery purchases are outstanding, the Portfolio will set
aside and maintain until the settlement date in a segregated account, liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery 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. The Portfolio may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss. When the
Portfolio has sold a security on a delayed delivery basis, the Portfolio does
not participate in future gains and losses with respect to the security. Forward
sales commitments are accounted for by the Portfolio in the same manner as
forward currency contracts discussed above.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
10
<PAGE>
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
-------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
-------------------------------------------------------------------------------
Total Return Bond Portfolio II 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
----------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
Total Return Bond Portfolio II $ 32,557 $ 30,323 $ 1,675 $1,334
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
Total Return Bond Portfolio II
---------------------------------
# of Contracts Premium
--------------------------------------------------------------------------------
Balance at 12/31/1999 0 $ 0
Sales 300,010 6
Closing Buys (1) (1)
Expirations (4) (1)
Exercised 0 0
--------------------------------------------------------------------------------
Balance at 06/30/2000 300,005 $ 4
--------------------------------------------------------------------------------
6. Federal Income Tax Matters
As of December 31, 1999 Total Return Bond Portfolio II had remaining capital
loss carryforwards that were realized during the current year.
Additionally, the Portfolio realized $7,155 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards (amounts in
thousands):
Capital Loss Carryforwards
-------------------------------
Realized Losses Expiration
--------------------------------------------------------------------------------
Total Return Bond Portfolio II $ 38,479 12/31/2007
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
2000 Semi-Annual Report 11
<PAGE>
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Total Return Bond Portfolio II
-------------------------------------------------
Period Ended 06/30/2000 Period from 05/28/1998
to 12/31/1999
Shares Amount Shares Amount
-------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 324 $ 3,250 0 $ 0
------------------------------------------------------------------------- -------------------------------------------------
Administrative Class 0 0 1,016 10,106
------------------------------------------------------------------------- -------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 6 56 0 0
------------------------------------------------------------------------- -------------------------------------------------
Administrative Class 11 110 15 151
------------------------------------------------------------------------- -------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
------------------------------------------------------------------------- -------------------------------------------------
Administrative Class (325) (3,254) (509) (5,036)
------------------------------------------------------------------------- -------------------------------------------------
Net increase resulting from Portfolio share transactions 16 $ 162 522 $ 5,221
========================================================================= =================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
--------------------------------------------------------------------
Total Return Bond Portfolio II 2 100
8. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
12
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
LOW DURATION BOND PORTFOLIO
INSTITUTIONAL CLASS
----------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter....................................................... 1
Financial Highlights.................................................... 3
Statement of Assets and Liabilities..................................... 4
Statement of Operations................................................. 5
Statements of Changes in Net Assets..................................... 6
Notes to Financial Statements........................................... 9
</TABLE>
<TABLE>
<CAPTION>
Fund Shedule of
Summary Investments
<S> <C> <C>
Low Duration Bond Portfolio (Institutional Class)....................... 2 7
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Low Duration Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily short maturity fixed income securities
Duration:
1.84 years
Total Net Assets:
$5.5 million
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
Sector Breakdown:*
[GRAPH]
Corporate Bonds and Notes 39.9%
Mortgage- Backed Securities 34.5%
Short-Term Instruments 12.9%
Asset-Backed Securities 8.2%
Other 4.5%
Quality Breakdown:*
[GRAPH]
AAA 53.9%
AA 10.4%
A 5.9%
BBB 25.5%
BB 4.2%
Other 0.1%
*% of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Low Duration Bond Portfolio Institutional Class' total return investment
performance since inception on April 10, 2000 through June 30, 2000 was 1.53%.
. The U.S. Treasury yield curve inverted dramatically in the first half of 2000
with 30-year yields falling from 6.48% to 5.90% while three-month yields moved
in the opposite direction, rising from 5.31% to 5.86%.
. Short-term rates rose as the Federal Reserve fought inflation by raising the
federal funds target rate from 5.50% to 6.50%.
. Decreasing duration throughout the period helped performance as short-term
interest rates increased.
. Holdings of high quality, short duration corporates boosted relative
performance due to their attractive yield premiums.
. Mortgage holdings detracted slightly from performance as they lagged
Treasuries over the period.
. Emerging markets holdings added to returns as economic fundamentals in a broad
set of countries continued to improve.
. The 30-day yield (after fees) at June 30, 2000 was 6.58%.
2
<PAGE>
Financial Highlights
Low Duration Bond Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000(b)
-------------
<S> <C>
Net asset value beginning of period $ 9.70
------------------------------------------------------------ -------------
Net investment income (a) 0.15
------------------------------------------------------------ -------------
Net realized / unrealized gain on investments (a) 0.00
------------------------------------------------------------ -------------
Total income from investment operations 0.15
------------------------------------------------------------ -------------
Dividends from net investment income (0.15)
------------------------------------------------------------ -------------
Total distributions (0.15)
------------------------------------------------------------ -------------
Net asset value end of period $ 9.70
------------------------------------------------------------ -------------
Total return % 1.53
------------------------------------------------------------ -------------
Net assets end of period (000s) $ 5,272
------------------------------------------------------------ -------------
Ratio of expenses to average net assets %* 0.50(c)
------------------------------------------------------------ -------------
Ratio of net investment income to average net assets %* 6.04
------------------------------------------------------------ -------------
Portfolio turnover rate % 168
------------------------------------------------------------ -------------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 10, 2000.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.51% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Low Duration Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 5,976
---------------------------------------------------------------------------- --------
Interest and dividends receivable 50
---------------------------------------------------------------------------- --------
Manager reimbursement receivable 6
---------------------------------------------------------------------------- --------
6,032
============================================================================ ========
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 501
---------------------------------------------------------------------------- --------
Written Options Outstanding 3
---------------------------------------------------------------------------- --------
Accrued investment advisory fee 1
---------------------------------------------------------------------------- --------
Accrued administration fee 1
---------------------------------------------------------------------------- --------
Other liabilities 1
---------------------------------------------------------------------------- --------
507
============================================================================ ========
Net Assets 5,525
============================================================================ ========
Net Assets Consist of:
Paid in capital $ 5,678
---------------------------------------------------------------------------- --------
Undistributed (overdistributed) net investment income 0
---------------------------------------------------------------------------- --------
Accumulated undistributed net realized (loss) (91)
---------------------------------------------------------------------------- --------
Net unrealized (depreciation) (62)
---------------------------------------------------------------------------- --------
5,525
============================================================================ ========
Net Assets:
Institutional Class $ 5,272
---------------------------------------------------------------------------- --------
Administrative Class 253
---------------------------------------------------------------------------- --------
Shares Issued and Outstanding:
Institutional Class 544
---------------------------------------------------------------------------- --------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class 9.70
---------------------------------------------------------------------------- --------
Cost of Investments Owned $ 6,039
============================================================================ ========
Cost of Foreign Currency Held $ 1
============================================================================ ========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Low Duration Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 182
------------------------------------------------------------------------------------- ---------
Total Income 182
===================================================================================== =========
Expenses:
Investment advisory fees 8
------------------------------------------------------------------------------------- ---------
Administration fees 7
------------------------------------------------------------------------------------- ---------
Total Expenses 15
------------------------------------------------------------------------------------- ---------
Net Investment Income 167
===================================================================================== =========
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (82)
------------------------------------------------------------------------------------- ---------
Net realized gain on futures contracts and written options 2
------------------------------------------------------------------------------------- ---------
Net change in unrealized appreciation on investments 61
------------------------------------------------------------------------------------- ---------
Net change in unrealized appreciation on futures contracts and written options 1
------------------------------------------------------------------------------------- ---------
Net (Loss) (18)
------------------------------------------------------------------------------------- ---------
Net Increase in Assets Resulting from Operations $ 149
===================================================================================== =========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Low Duration Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from February 16, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 167 $ 255
--------------------------------------------------------------------- ------------------- -------------------
Net realized (loss) (80) (3)
--------------------------------------------------------------------- ------------------- -------------------
Net change in unrealized appreciation (depreciation) 62 (124)
--------------------------------------------------------------------- ------------------- -------------------
Net increase resulting from operations 149 128
===================================================================== =================== ====================
Distributions to Shareholders:
From net investment income
Institutional Class (79) 0
--------------------------------------------------------------------- ------------------- -------------------
Administrative Class (88) (263)
--------------------------------------------------------------------- ------------------- -------------------
Total Distributions (167) (263)
===================================================================== =================== ====================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 5,185 0
--------------------------------------------------------------------- ------------------- -------------------
Administrative Class 251 10,150
--------------------------------------------------------------------- ------------------- -------------------
Issued as reinvestment of distributions
Institutional Class 85 0
--------------------------------------------------------------------- ------------------- -------------------
Administrative Class 82 236
--------------------------------------------------------------------- ------------------- -------------------
Cost of shares redeemed
Institutional Class 0 0
--------------------------------------------------------------------- ------------------- -------------------
Administrative Class (5,209) (5,102)
--------------------------------------------------------------------- ------------------- -------------------
Net increase resulting from Portfolio share transactions 394 5,284
--------------------------------------------------------------------- ------------------- -------------------
Total Increase in Net Assets $ 376 $ 5,149
===================================================================== =================== ===================
Net Assets:
Beginning of period 5,149 0
--------------------------------------------------------------------- ------------------- -------------------
End of period * $ 5,525 $ 5,149
--------------------------------------------------------------------- ------------------- -------------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
--------------------------------------------------------------------- ------------------- -------------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Low Duration Bond Portfolio
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
(000s) (000s)
---------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 43.1%
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Banking & Finance 15.4%
Bear Stearns Co., Inc.
6.423% due 08/01/2002 (d) $ 100 $ 100
Case Credit Corp.
6.236% due 08/01/2001 (d) 250 251
Ford Motor Credit Corp.
6.927% due 03/19/2002 (d) 250 252
Morgan Stanley, Dean Witter, Discover and Co.
6.190% due 04/15/2002 (d) 250 250
--------
853
========
Industrials 17.9%
Chesapeake Corp.
10.375% due 10/01/2000 250 252
Petroleos Mexicanos
8.401% due 07/15/2005 (d) 250 250
Time Warner, Inc.
6.100% due 12/30/2001 250 246
Witco Corp.
6.600% due 04/01/2003 250 240
--------
988
========
Utilities 9.8%
Connecticut Light & Power Co.
7.750% due 06/01/2002 200 201
Telekomunikacja Polska SA
7.125% due 12/10/2003 100 96
Texas Utilities Co.
5.940% due 10/15/2001 250 245
--------
542
--------
Total Corporate Bonds & Notes 2,383
(Cost $2,395) ========
---------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 4.9%
---------------------------------------------------------------------------------------------------
Treasury Inflation Protected Securities
3.375% due 01/15/2007 (e) 270 259
U.S. Treasury Notes
5.125% due 08/31/2000 (b) 10 10
--------
Total U.S. Treasury Obligations 269
(Cost $265) ========
---------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 37.3%
---------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 17.6%
Federal Home Loan Mortgage Corp.
6.353% due 07/15/2028 (d) 246 245
Federal National Mortgage Assn.
7.100% due 12/25/2023 249 236
General Electric Capital Mortgage Services, Inc.
6.500% due 03/25/2024 365 329
Structured Asset Securities Corp.
6.750% due 07/25/2029 166 162
--------
972
========
Federal Housing Administration 10.6%
7.430% due 10/01/2020 586 584
--------
Government National Mortgage Association 9.1%
8.000% due 07/24/2030 500 503
--------
Total Mortgage-Backed Securities 2,059
(Cost $2,114) ========
---------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 8.9%
---------------------------------------------------------------------------------------------------
Accredited Mortgage Loan Trust
6.445% due 02/25/2030 (d) 243 243
Circuit City Credit Master Trust
6.360% due 02/15/2006 (d) 250 250
--------
Total Asset-Backed Securities 493
(Cost $493) ========
---------------------------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 14.0%
---------------------------------------------------------------------------------------------------
Commercial Paper 10.8%
Banc One Australia Ltd.
6.560% due 09/15/2000 200 197
General Electric Capital Corp.
6.620% due 07/24/2000 $ 200 $ 199
General Motors Acceptance Corp.
6.530% due 07/10/2000 100 100
IBM Corp.
6.180% due 07/07/2000 100 100
--------
596
========
Repurchase Agreement 3.2%
State Street Bank
5.850% due 07/03/2000 176 176
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
5.823% 05/06/2009 valued at $180.
Repurchase proceeds are $176.)
--------
Total Short-Term Instruments 772
(Cost $772) ========
Total Investments (a) 108.2% $ 5,976
(Cost $6,039)
Written Options (c) (0.1%) (3)
(Premiums $4)
Other Assets and Liabilities (Net) (8.1%) (448)
--------
Net Assets 100.0% $ 5,525
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 17
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (80)
--------
Unrealized depreciation-net $ (63)
========
(b) Securities with an aggregate market value of $10
have been segregated with the custodian to cover margin
requirements for the following open futures contracts at
June 30, 2000:
# Of Unrealized
Type Contracts Appreciation
-----------------------------------------------------------------------------------------------
Eurodollar March Futures (03/2001) 1 $ 0
(c) Premiums received on written options:
Type Par Premium Value
-----------------------------------------------------------------------------------------------
Put - CME AWPO Eurodollar December Futures
Strike @ 93.00 Exp. 12/18/2000 5 $ 4 $ 3
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/22/2000 100,000 0 0
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/15/2000 200,000 0 0
---------------------------------
$ 4 $ 3
=================================
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Principal amount of the security is adjusted for inflation.
</TABLE>
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Low Duration Portfolio (the "Portfolio") is a series of the PIMCO Variable
Insurance Trust (the "Trust"). The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company organized as
a Delaware business trust on October 3, 1997. The Trust may offer up to two
classes of shares: Institutional and Administrative. Each share class has
identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on February 16, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Fund sells the security becomes
insolvent, a Fund's right to repurchase the security may be restricted; the
value of the security may change over the term of the financing transaction; and
the return earned by a Fund with the proceeds of a financing transaction may not
exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price.
Fluctuations in the value of such instruments are recorded as unrealized
appreciation (depreciation) until terminated, at which time realized gains and
losses are recognized.
8
<PAGE>
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, the Portfolio may fail to recoup some or all of its
initial investment in these securities. The market value of these securities is
highly sensitive to changes in interest rates.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions Investment Advisory Fee.
Pacific Investment Management Company LLC (PIMCO), which is a wholly owned
subsidiary partnership of PIMCO Advisors L.P., serves as investment adviser (the
"Adviser") to the Trust, pursuant to an investment advisory contract, for which
it receives a monthly advisory fee based on average daily net assets. The
Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
Low Duration Bond Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
annual retainer of $500. These expenses are allocated to the Portfolios of the
Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
--------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
Low Duration Bond Portfolio $ 1,009 $ 1,619 $ 695 $ 496
2000 Semi- Annual Report 9
<PAGE>
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Low Duration Bond Portfolio
----------------------------------------
# of Contracts Premium
--------------------------------------------------------------------------------
<S> <C> <C>
Balance at 12/31/1999 0 $ 0
Sales 880,005 6
Closing Buys 0 0
Expirations (580,000) (2)
Exercised 0 0
--------------------------------------------------------------------------------
Balance at 06/30/2000 300,005 $ 4
--------------------------------------------------------------------------------
</TABLE>
6. Federal Income Tax Matters
As of December 31, 1999 Low Duration Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $10,676 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards.
Shareholders are advised to consult their own tax advisor with respect to
the tax consequences of their investment in the Trust. In January 2000, you will
be advised on IRS form 1099-DIV as to the federal tax status of the dividends
and distributions received by you in calendar year 1999.
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Low Duration Bond Portfolio
----------------------------------------------------
Period Ended 06/30/2000 Period from 02/16/1999
to 12/31/1999
Shares Amount Shares Amount
S ----------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 535 $ 5,185 0 $ 0
-------------------------------------------------------------- ----------------------------------------------------
Administrative Class 26 251 1,028 10,150
-------------------------------------------------------------- ----------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 9 85 0 0
-------------------------------------------------------------- ----------------------------------------------------
Administrative Class 8 82 24 236
-------------------------------------------------------------- ----------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
-------------------------------------------------------------- ----------------------------------------------------
Administrative Class (537) (5,209) (523) (5,102)
Net increase resulting from Portfolio share transactions 41 $ 394 529 $ 5,284
============================================================== ====================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
--------------------------------------------------------------------------
Low Duration Bond Portfolio 1 95
8. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
10
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO VARIABLE INSURANCE TRUST
840 NEWPORT CENTER DRIVE, SUITE 300
NEWPORT BEACH, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
FOREIGN BOND PORTFOLIO
INSTITUTIONAL CLASS
-----------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter.................................. 1
Financial Highlights............................... 3
Statement of Assets and Liabilities................ 4
Statement of Operations............................ 5
Statements of Changes in Net Assets................ 6
Statement of Cash Flows............................ 7
Notes to Financial Statements...................... 12
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Foreign Bond Portfolio (Institutional Class)....... 2 8-11
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Foreign Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily intermediate maturity hedged non-U.S. fixed income securities
Duration:
2.74 years
Total Net Assets:
$5.6 million
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
Country Allocation:*
[GRAPH]
United States 48.9%
Japan 14.5%
Supranational 6.2%
Germany 6.9%
United Kingdom 4.3%
Short-Term Instruments 4.2%
Other 15.0%
Quality Breakdown:*
[GRAPH]
AAA 70.9%
AA 11.5%
A 11.0%
BBB 4.6%
BB 1.0%
B 1.0%
*% of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Foreign Bond Portfolio Institutional Class' total return investment
performance since inception on April 10, 2000 through June 30, 2000 was
1.31%.
. Continued central bank rate hikes and a belief that the European Central
Bank would remain ahead of the inflation curve caused bond yields to fall
over the first half of the year. The Japanese bond market remained stable,
as domestic institutions continued to support government bonds. In this
market environment the Investment Adviser reduced the Portfolio's duration,
or sensitivity to interest rates, which detracted from returns.
. An overweight in the euro versus the U.S. dollar was negative for returns
after the U.S. dollar rallied in response to the relatively stronger U.S.
economy.
. An overweight in New Zealand aided performance after expectations of more
central bank tightening drove bond yields to near six-month lows.
. A U.K. underweight was slightly negative because the strong currency and
prospects for restrictive monetary policy kept inflation forecasts low.
. An underweight in Canada detracted from performance as yields fell due to
weaker growth than in the U.S.
. Emphasizing Danish mortgages was positive as the market benefited from
light new issuance and relatively high yields.
. Small allocations to global corporate bonds aided performance due to their
relatively attractive yields.
2
<PAGE>
Financial Highlights
Foreign Bond Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000(b)
--------------
<S> <C>
Net asset value beginning of period $ 9.48
--------------------------------------------------------------- --------------
Net investment income (a) 0.13
--------------------------------------------------------------- --------------
Net realized / unrealized (loss) on investments (a) (0.01)
--------------------------------------------------------------- --------------
Total income from investment operations 0.12
--------------------------------------------------------------- --------------
Dividends from net investment income (0.13)
--------------------------------------------------------------- --------------
Distributions from net realized capital gains 0.00
--------------------------------------------------------------- --------------
Total distributions (0.13)
--------------------------------------------------------------- --------------
Net asset value end of period $ 9.47
--------------------------------------------------------------- --------------
Total return % 1.31
--------------------------------------------------------------- --------------
Net assets end of period (000s) $ 4,945
--------------------------------------------------------------- --------------
Ratio of expenses to average net assets %* 0.75(c)
--------------------------------------------------------------- --------------
Ratio of net investment income to average net assets %* 6.09
--------------------------------------------------------------- --------------
Portfolio turnover rate % 169
--------------------------------------------------------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 10, 2000.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.76% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 9,481
---------------------------------------------------------------------------------- ----------
Cash and foreign currency 402
---------------------------------------------------------------------------------- ----------
Receivable for investments sold and forward foreign currency contracts 5,649
---------------------------------------------------------------------------------- ----------
Interest and dividends receivable 61
---------------------------------------------------------------------------------- ----------
Manager reimbursement receivable 6
---------------------------------------------------------------------------------- ----------
15,599
================================================================================== ==========
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 6,054
---------------------------------------------------------------------------------- ----------
Payable for financing transactions 3,915
---------------------------------------------------------------------------------- ----------
Written options outstanding 0
---------------------------------------------------------------------------------- ----------
Accrued investment advisory fee 1
---------------------------------------------------------------------------------- ----------
Accrued administration fee 3
---------------------------------------------------------------------------------- ----------
Other liabilities 6
---------------------------------------------------------------------------------- ----------
9,979
================================================================================== ==========
Net Assets $ 5,620
================================================================================== ==========
Net Assets Consist of:
Paid in capital $ 5,893
---------------------------------------------------------------------------------- ----------
Undistributed (overdistributed) net investment income (77)
---------------------------------------------------------------------------------- ----------
Accumulated undistributed net realized gain 21
---------------------------------------------------------------------------------- ----------
Net unrealized (depreciation) (217)
---------------------------------------------------------------------------------- ----------
$ 5,620
================================================================================== ==========
Net Assets:
Institutional Class $ 4,945
---------------------------------------------------------------------------------- ----------
Administrative Class 675
---------------------------------------------------------------------------------- ----------
Shares Issued and Outstanding:
Institutional Class 522
---------------------------------------------------------------------------------- ----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 9.47
---------------------------------------------------------------------------------- ----------
Cost of Investments Owned $ 9,656
================================================================================== ==========
Cost of Foreign Currency Held $ 400
================================================================================== ==========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Foreign Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 180
------------------------------------------------------------------------------------- ----------
Dividends (2)
------------------------------------------------------------------------------------- ----------
Total Income 178
===================================================================================== ==========
Expenses:
Investment advisory fees 11
------------------------------------------------------------------------------------- ----------
Administration fees 11
------------------------------------------------------------------------------------- ----------
Total Expenses 22
------------------------------------------------------------------------------------- ----------
Net Investment Income 156
===================================================================================== ==========
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 51
------------------------------------------------------------------------------------- ----------
Net realized (loss) on futures contracts and written options (67)
------------------------------------------------------------------------------------- ----------
Net realized gain on foreign currency transactions 180
------------------------------------------------------------------------------------- ----------
Net change in unrealized (depreciation) on investments (59)
------------------------------------------------------------------------------------- ----------
Net change in unrealized appreciation on futures contracts and written options 2
------------------------------------------------------------------------------------- ----------
Net change in unrealized (depreciation) on translation of assets and liabilities
denominated in foreign currencies (79)
------------------------------------------------------------------------------------- ----------
Net Gain 28
------------------------------------------------------------------------------------- ----------
Net Increase in Assets Resulting from Operations $ 184
===================================================================================== ==========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from February 16, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 156 $ 214
--------------------------------------------------------------------- ---------------- -----------------------------
Net realized gain (loss) 164 (169)
--------------------------------------------------------------------- ---------------- -----------------------------
Net change in unrealized (depreciation) (136) (81)
--------------------------------------------------------------------- ---------------- -----------------------------
Net increase (decrease) resulting from operations 184 (36)
===================================================================== ================ ==============================
Distributions to Shareholders:
From net investment income
Institutional Class (69) 0
--------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class (88) (214)
--------------------------------------------------------------------- ---------------- -----------------------------
From net realized capital gains
Institutional Class 0 0
--------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class 0 (50)
--------------------------------------------------------------------- ---------------- -----------------------------
Total Distributions (157) (264)
===================================================================== ================ =============================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 4,877 0
--------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class 333 10,240
--------------------------------------------------------------------- ---------------- -----------------------------
Issued as reinvestment of distributions
Institutional Class 75 0
--------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class 81 235
--------------------------------------------------------------------- ---------------- -----------------------------
Cost of shares redeemed
Institutional Class 0 0
--------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class (4,988) (4,960)
--------------------------------------------------------------------- ---------------- -----------------------------
Net increase resulting from Portfolio share transactions 378 5,515
--------------------------------------------------------------------- ---------------- -----------------------------
Total Increase in Net Assets $ 405 $ 5,215
===================================================================== ================ =============================
Net Assets:
Beginning of period 5,215 0
--------------------------------------------------------------------- ---------------- -----------------------------
End of period * $ 5,620 $ 5,215
--------------------------------------------------------------------- ---------------- -----------------------------
*Including net (overdistributed) investment income of: $ (77) $ (76)
--------------------------------------------------------------------- ---------------- -----------------------------
</TABLE>
6 See accompanying notes
<PAGE>
Statement of Cash Flows
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Increase (Decrease) in Cash and Foreign Currency from:
<S> <C>
Financing Activities
Sales of Portfolio shares $ 5,210
------------------------------------------------------------------- --------
Redemptions of Portfolio shares (4,987)
------------------------------------------------------------------- --------
Cash distributions paid (11)
------------------------------------------------------------------- --------
Proceeds from financing transactions 253
------------------------------------------------------------------- --------
Net increase (decrease) from financing activities 465
=================================================================== ========
Operating Activities
Purchases of long-term securities and foreign currency (13,419)
------------------------------------------------------------------- --------
Proceeds from sales of long-term securities and foreign currency 12,223
------------------------------------------------------------------- --------
Purchases of short-term securities (net) 914
------------------------------------------------------------------- --------
Net investment income 155
------------------------------------------------------------------- --------
Change in other receivables/payables (net) (6)
------------------------------------------------------------------- --------
Net increase (decrease) from operating activities (133)
=================================================================== ========
Net Increase in Cash and Foreign Currency 332
=================================================================== ========
Cash and Foreign Currency
Beginning of period 70
------------------------------------------------------------------- --------
End of period $ 402
------------------------------------------------------------------- --------
</TABLE>
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
-------------------------------------------------------------------------------
AUSTRALIA (g)(h) 0.9%
-------------------------------------------------------------------------------
National Australia Bank Ltd.
7.385% due 05/19/2010 (e) A$ 50 $ 50
-------
Total Australia 50
=======
(Cost $50)
-------------------------------------------------------------------------------
BRAZIL (g)(h) 1.1%
-------------------------------------------------------------------------------
Republic of Brazil
7.375% due 04/15/2006 BR 65 60
-------
Total Brazil 60
=======
(Cost $60)
-------------------------------------------------------------------------------
BULGARIA (g)(h) 0.6%
-------------------------------------------------------------------------------
Republic of Bulgaria
2.500% due 07/28/2012 (e) BL 29 21
6.500% due 07/28/2024 (e) 20 15
-------
Total Bulgaria 36
=======
(Cost $34)
-------------------------------------------------------------------------------
CANADA (g)(h) 2.0%
-------------------------------------------------------------------------------
Beneficial Canada, Inc.
6.350% due 04/01/2002 C$ 30 20
Commonwealth of Canada
6.625% due 10/03/2007 N$ 200 90
-------
Total Canada 110
=======
(Cost $131)
-------------------------------------------------------------------------------
CAYMAN ISLANDS (g)(h) 0.9%
-------------------------------------------------------------------------------
Capital Credit Card Corp.
5.625% due 10/15/2004 DM 100 49
-------
Total Cayman Islands 49
=======
(Cost $53)
-------------------------------------------------------------------------------
CHILE 0.3%
-------------------------------------------------------------------------------
Republic of Chile
6.875% due 04/28/2009 $ 19 18
-------
Total Chile 18
=======
(Cost $19)
-------------------------------------------------------------------------------
DENMARK (g)(h) 2.1%
-------------------------------------------------------------------------------
Danske Kredit Mortgage
5.000% due 10/01/2029 DK 1,063 116
Realkredit Danmark Mortgage
5.000% due 10/01/2029 1 0
Unikredit Realkredit
5.000% due 10/01/2029 5 1
-------
Total Denmark 117
=======
(Cost $143)
-------------------------------------------------------------------------------
GERMANY (g)(h) 11.7%
-------------------------------------------------------------------------------
Allgemeine Hypothekenbank AG
5.500% due 07/13/2010 EC 60 56
Depfa Pfandbriefbank
4.750% due 07/15/2008 20 19
5.750% due 03/04/2009 20 19
Hypothekenbank in Essen AG
4.750% due 08/11/2008 (i) 20 18
4.000% due 04/27/2009 (i) 22 19
Republic of Germany
4.125% due 07/04/2008 (i) 63 56
4.500% due 07/04/2009 (i) 20 18
5.375% due 01/04/2010 320 319
6.250% due 01/04/2024 10 10
4.750% due 07/04/2028 30 26
6.250% due 01/04/2030 (i) 90 96
-------
Total Germany 656
=======
(Cost $777)
-------------------------------------------------------------------------------
GREECE (g)(h) 0.2%
-------------------------------------------------------------------------------
Hellenic Republic
6.600% due 01/15/2004 (i) GD 5,000 13
-------
Total Greece 13
=======
(Cost $14)
-------------------------------------------------------------------------------
ITALY (g)(h) 1.9%
-------------------------------------------------------------------------------
Republic of Italy
5.500% due 11/01/2010 EC 110 105
-------
Total Italy 105
=======
(Cost $97)
-------------------------------------------------------------------------------
JAPAN (g)(h) 24.5%
-------------------------------------------------------------------------------
Government of Japan
3.400% due 06/20/2005 (i) JY 11,300 118
3.000% due 09/20/2005 (i) 21,000 216
3.300% due 06/20/2006 (i) 12,000 126
2.900% due 12/20/2006 (i) 2,000 21
2.700% due 06/20/2007 (i) 10,000 102
2.600% due 09/20/2007 (i) 12,000 122
0.900% due 12/22/2008 (i) 69,000 609
1.400% due 06/22/2009 (i) 7,000 64
-------
Total Japan 1,378
=======
(Cost $1,354)
-------------------------------------------------------------------------------
MEXICO (g)(h) 1.1%
-------------------------------------------------------------------------------
Banco Nacional de Comercio Exterior
8.000% due 08/05/2003 $ 10 10
Petroleos Mexicanos
8.850% due 09/15/2007 20 20
9.375% due 12/02/2008 30 31
-------
Total Mexico 61
=======
(Cost $57)
-------------------------------------------------------------------------------
NEW ZEALAND (g)(h) 2.5%
-------------------------------------------------------------------------------
Commonwealth of New Zealand
4.500% due 02/15/2016 (b) N$ 300 143
-------
Total New Zealand 143
=======
(Cost $166)
-------------------------------------------------------------------------------
PERU (g)(h) 1.2%
-------------------------------------------------------------------------------
Republic of Peru
4.500% due 03/07/2017 PN 100 67
-------
Total Peru 67
=======
(Cost $67)
-------------------------------------------------------------------------------
PHILIPPINES (g)(h) 0.4%
-------------------------------------------------------------------------------
Republic of Philippines
6.000% due 12/01/2009 (e) $ 8 7
8.000% due 09/17/2004 EC 20 18
-------
Total Philippines 25
=======
(Cost $29)
-------------------------------------------------------------------------------
PORTUGAL (h) 3.0%
-------------------------------------------------------------------------------
Republic of Portugal
3.950% due 07/15/2009 (i) PE 200 169
-------
Total Portugal 169
=======
(Cost $187)
-------------------------------------------------------------------------------
SOUTH KOREA (g)(h) 2.0%
-------------------------------------------------------------------------------
Korea Development Bank
9.600% due 12/01/2000 $ 50 50
4.436% due 05/14/2001 (e) DM 50 24
1.875% due 02/13/2002 JY 4,000 38
-------
Total South Korea 112
=======
(Cost $111)
8 See accompanying notes
<PAGE>
Schedule of Investments (Cont.)
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
-------------------------------------------------------------------------------
SPAIN (g)(h) 2.7%
-------------------------------------------------------------------------------
Kingdom of Spain
5.150% due 07/30/2009 (i) EC 70 $ 65
4.000% due 01/31/2010 (i) 100 85
-------
Total Spain 150
=======
(Cost $152)
-------------------------------------------------------------------------------
SUPRANATIONAL (g)(h) 10.4%
-------------------------------------------------------------------------------
Depfa Bank
4.750% due 07/15/2008 20 18
Eurofima
4.750% due 07/07/2004 SK 600 66
European Investment Bank
6.000% due 12/07/2028 BP 100 156
General Electric Capital Corp.
5.125% due 01/12/2004 80 115
Inter-American Development Bank
7.125% due 11/26/2004 30 47
International Bank for Reconstruction &
Development
7.250% due 04/09/2001 N$ 388 181
-------
Total Supranational 583
=======
(Cost $622)
-------------------------------------------------------------------------------
UNITED KINGDOM (g)(h) 7.2%
-------------------------------------------------------------------------------
Bank of Scotland
8.117% due 03/29/2049 BP 40 60
BG Transco Holdings
7.273% due 12/14/2009 20 31
HAUS Ltd.
4.352% due 12/10/2015 (e) EC 100 95
4.542% due 12/10/2037 (e) 100 95
Lloyds Bank PLC
5.625% due 07/15/2049 40 36
United Kingdom Gilt
9.000% due 10/13/2008 BP 46 86
-------
Total United Kingdom 403
=======
(Cost $422)
-------------------------------------------------------------------------------
UNITED STATES (g)(h) 82.4%
-------------------------------------------------------------------------------
Asset-Backed Securities 7.0%
Amresco Residential Securities Mortgage Loan Trust
7.121% due 06/25/2029 (e) $ 50 45
Circuit City Credit Master Trust
6.108% due 02/15/2006 (e) 100 100
MLCC Mortgage Investors, Inc.
6.265% due 03/15/2025 (e) 90 90
Novastar Home Equity Loan
6.885% due 04/25/2028 (e) 78 78
Providian Home Equity Loan Trust
6.900% due 06/25/2025 (e) 72 72
PSB Lending Home Loan Owner Trust
6.830% due 05/20/2018 10 10
-------
395
=======
Corporate Bonds & Notes 25.2%
Associates Corp. of North America
6.850% due 05/08/2003 (e) 80 80
Bear Stearns Co., Inc.
6.396% due 05/16/2003 (e) 100 101
Beckman Instruments, Inc.
7.100% due 03/04/2003 3 3
Century Communications Corp.
0.100% due 03/15/2003 3 2
CMS Energy
8.125% due 05/15/2002 3 3
DaimlerChrysler Holdings
5.747% due 08/23/2002 (e) 30 30
Donaldson, Lufkin & Jenrette Inc.
6.760% due 04/25/2003 (e) 50 50
Finova Capital Corp.
6.110% due 06/18/2003 (e) 100 100
Ford Motor Credit Corp.
1.200% due 02/07/2005 JY 6,000 $ 56
General Motors Acceptance Corp.
0.340% due 07/26/2002 $ 0 0
7.020% due 04/05/2004(c)(e) 240 240
6.875% due 09/09/2004 BP 150 222
Goldman Sachs Group
6.640% due 02/19/2004 (e) $ 100 101
Household Finance Corp.
5.125% due 06/24/2009 EC 100 88
J Seagram & Sons
5.790% due 04/15/2001 $ 50 49
J.P. Morgan & Co.
6.902% due 02/15/2012 (e) 10 9
Jones Intercable, Inc.
8.875% due 04/01/2007 3 3
KFW International Finance, Inc.
1.750% due 03/23/2010 JY 11,000 67
Oneok, Inc.
6.960% due 04/24/2002 (e) $ 100 100
Rogers Cantel, Inc.
8.300% due 10/01/2007 3 3
Sprint Capital Corp.
5.875% due 05/01/2004 10 9
Texas Utilities Co.
7.315% due 06/25/2001 (e) 100 100
TV Guide, Inc.
8.125% due 03/01/2009 2 2
-------
1,418
=======
Mortgage-Backed Securities 35.5%
Crusade Global Trust
5.843% due 02/15/2030 (e) 100 100
Federal Home Loan Mortgage Corp.
6.500% due 08/15/2023 81 80
General Electric Capital Corp.
5.125% due 01/12/2004 80 116
Government National Mortgage Assn.
1.000% due 07/25/2030 (e) 150 147
7.000% due 07/24/2030 540 525
7.500% due 07/24/2030 200 199
7.000% due 04/20/2030 100 100
6.500% due 07/24/2030 350 327
JP Morgan Commercial Mortgage
6.902% due 04/15/2010 (e) 100 100
Medallion Trust
6.471% due 07/12/2031 (e) 100 100
Residential Funding Mortgage Securities, Inc.
6.560% due 05/12/2032 (e) 199 198
-------
1,992
=======
U.S. Treasury Obligations 14.7%
Treasury Inflation Protected Securities
3.625% due 07/15/2002 (b)(f) 812 807
U.S. Treasury Notes
5.125% due 08/31/2000 (f) 20 20
-------
827
-------
Total United States 4,632
=======
(Cost $4,526)
-------------------------------------------------------------------------------
PURCHASE CALL OPTIONS 0.0%
-------------------------------------------------------------------------------
Canadian Dollar vs. U.S. Dollar (OTC)
Strike @ 1.40 Exp. 07/21/2000 $ 400 0
Canadian Dollar vs. U.S. Dollar (OTC)
Strike @ 1.44 Exp. 07/21/2000 380 0
Euro vs. U.S. Dollar (OTC)
Strike @ 1.05 Exp 07/28/2000 350 0
-------
Total Purchased Call Options 0
=======
(Cost $5)
2000 Semi-Annual Report See accompanying notes 9
<PAGE>
Principal
Amount Value
(000s) (000s)
-------------------------------------------------------------------------------
PURCHASE PUT OPTIONS 2.5%
-------------------------------------------------------------------------------
Canadian Government Bond (OTC)
6.000% due 06/2008
Strike @ 125.000 Exp. 08/02/2000 $ 36,000 $ 59
Government National Mortgage Assn. (OTC)
6.500% due 07/24/2030
Strike @ 89.391 Exp. 07/17/2000 350 0
Government National Mortgage Assn. (OTC)
7.000% due 07/24/2030
Strike @ 91.719 Exp. 07/17/2000 540 0
Government National Mortgage Assn. (OTC)
7.500% due 07/24/2030
Strike @ 93.813 Exp. 07/17/2000 200 0
U.S. Treasury Note (OTC)
6.375% due 04/30/2002
Strike @ 102.180 Exp. 08/03/2000 1,000 21
U.S. Treasury Note (OTC)
5.625% due 05/15/2008
Strike @ 105.438 Exp. 08/03/2000 700 62
--------
Total Purchased Put Options 142
========
(Cost $178)
-------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 7.1%
-------------------------------------------------------------------------------
Commercial Paper 3.5%
American Express Credit Corp.
6.550% due 07/10/2000 100 100
General Electric Capital Corp.
6.550% due 09/11/2000 100 99
--------
199
========
Repurchase Agreement 3.6%
State Street Bank
5.850% due 07/03/2000 203 203
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
6.000% due 08/15/2002 valued at $211.
Repurchase proceeds are $203.)
--------
Total Short-Term Instruments 402
========
(Cost $402)
Total Investments (a) 168.7% $ 9,481
(Cost $9,656)
Written Options (d) 0.0% 0
(Premium $1)
Other Assets and Liabilities (Net) (68.7%) (3,861)
--------
Net Assets 100.0% 5,620
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes1 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was
an excess of value over tax cost. 91
Aggregate gross unrealized depreciation
for all investments in which there was an excess
of tax cost over value. (266)
--------
Unrealized depreciation-net (175)
========
(b) Principal amount of the security is adjusted for inflation.
(c) Securities are grouped together by coupon or range of coupons
and represent a range of maturities.
(d) Premiums received on written options:
# of
Type Contract Premium Value
-------------------------------------------------------------------------------
Put - OTC Canadian Dollar vs. U.S. Dollar
Strike @ 1.55 Exp. 07/21/2000 210,000 $ 0 $ 0
Put - OTC Canadian Dollar vs. U.S. Dollar
Strike @ 1.50 Exp. 07/21/2000 420,000 1 0
Put - OTC Canadian Dollar vs. U.S. Dollar
Strike @ 1.55 Exp. 07/21/2000 210,000 0 0
-----------------------
$ 1 $ 0
=======================
(e) Variable rate security. The rate listed is as of June 30, 2000.
(f) Securities with an aggregate market value of $137
have been segregated with the custodian to cover margin
requirements for the following open future contracts at
June 30, 2000:
Unrealized
# of Appreciation/
Type Contracts (Depreciation)
-------------------------------------------------------------------------------
Eurobond 10 Year Bond Futures (09/2000) 6 $ 2
United Kingdom 10 Year Gilt Futures (09/2000) 2 (3)
Eurodollar March Futures (03/2001) 1 0
Euribor Futures (09/2000) 6 0
U.S. Treasury 30 Year Bond (09/2000) 1 1
-------
$ 0
=======
10
<PAGE>
Schedule of Investments (Cont.)
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
================================================================================
(g) Foreign forward currency contracts outstanding at June 30, 2000:
Principal
Amount Unrealized
Covered by Settlement Appreciation/
Type Currency Contract Month (Depreciation)
--------------------------------------------------------------------------------
Buy A$ 54 07/2000 1
Sell 56 08/2000 0
Buy BP 250 07/2000 0
Sell 757 08/2000 (4)
Buy BR 10 07/2000 0
Buy 10 09/2000 0
Sell C$ 115 07/2000 0
Buy CLP 3,500 07/2000 0
Buy 1,200 09/2000 0
Buy COP 12,700 08/2000 0
Buy DK 100 07/2000 0
Sell 1,154 08/2000 0
Buy EC 105 07/2000 (1)
Sell 911 08/2000 (3)
Buy HF 14,000 08/2000 (3)
Sell 12,000 08/2000 (1)
Buy 3,200 01/2001 1
Sell 2,000 01/2001 0
Buy HK$ 1,072 09/2000 0
Sell 1,072 09/2000 (2)
Buy 530 10/2000 0
Sell 530 10/2000 0
Buy IR 52,000 07/2000 (1)
Buy JY 26,249 07/2000 (1)
Sell 47,845 07/2000 2
Buy KRW 8,300 07/2000 0
Buy MP 70 10/2000 0
Sell N$ 429 07/2000
Sell 523 08/2000 (2)
Buy PN 40 08/2000 0
Buy PZ 10 01/2001 0
Sell 20 01/2001 0
Buy 190 02/2001 0
Sell 140 02/2001 (2)
Buy 60 03/2001 0
Sell 20 03/2001 0
Sell SK 588 07/2000 2
Buy SR 70 09/2000 0
Buy TB 300 07/2000 0
Buy TD 200 07/2000 0
Buy TL 9,341,000 08/2000 0
Buy VB 4,990 10/2000 0
Buy 1,900 12/2000 0
---------
$ (14)
=========
(h) Principal amount denoted in indicated currency:
A$ - Australian Dollar
BL - Bulgarian Lev
BP - British Pound
BR - Brazilian Real
C$ - Canadian Dollar
CLP - Chilean Peso
COP - Columbian Peso
DK - Danish Krone
DM - German Mark
EC - European Currency Unit
H$ - Hong Kong Dollar
GD - Greek Drachma
HF - Hungarian Forint
IL - Italian Lira
IR - Indonesian Rupiah
JY - Japanese Yen
KRW - South Korean Won
MP - Mexican Peso
N$ - New Zealand Dollar
PE - Portugese Escudo
PN - Peruvian New Sol
PZ - Polish Zloty
SK - Swedish Krona
SP - Spanish Peseta
SR - South Africa Rand
TB - Thai Baht
TD - Taiwan Dollar
TL - Turkish Lira
VB - Venezuelan Bolivar
(i) Subject to financing transaction.
(j) Swap agreements outstanding at June 30, 2000.
Unrealized
Notional Appreciation/
Type Amount (Depreciation)
-------------------------------------------------------------------------------
Receive floating rate based on 3 month
Canadian Bank Bill and pay fixed rate
equal to 6.515% in Canadian Dollar.
Broker: J.P. Morgan Securities, Inc.
Exp. 05/10/2002 C$ 250 $ (1)
Receive floating rate based on 6 month
Japanese Yen LIBOR and pay fixed rate
equal to 2.020% in Japanese Yen.
Broker: Goldman Sachs & Co.
Exp. 05/18/2010 JY 17,000 0
Receive floating rate based on 6 month
Euribor and pay fixed rate equal to
6.175% in Euro.
Broker: Goldman Sachs & Co.
Exp. 05/22/2030 EC 100 (1)
Receive floating rate based on 6 month
Euribor less 0.540% and pay fixed rate
equal to 6.250% in Euro.
Broker: J.P. Morgan Securities, Inc.
Exp. 01/04/2024 EC 10 (1)
------
$ (3)
======
2000 Semi-Annual Report 11
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Foreign Bond Portfolio (the "Portfolio") is a series of the PIMCO Variable
Insurance Trust (the "Trust"). The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company organized as
a Delaware business trust on October 3, 1997. The Trust may offer up to two
classes of shares: Institutional and Administrative. Each share class has
identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on February 16, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
12
<PAGE>
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. The Portfolio is authorized to enter into forward
foreign exchange 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 purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Swaps. The Portfolio is authorized to enter into interest rate, total return and
currency exchange swap agreements in order to obtain a desired return at a lower
cost than if the Portfolio had invested directly in the asset that yielded the
desired return. Swaps involve commitments to exchange components of income
(generally interest or returns) pegged to the underlying assets based on a
notional principal amount. Swaps are marked to market daily based upon
quotations from market makers and the change, if any, is recorded as unrealized
gains or losses in the Statements of Operations. The 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 counterparty.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Delayed Delivery Transactions. The Portfolio may purchase or sell securities on
a when-issued or delayed delivery 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 beyond the customary settlement
period. When delayed delivery purchases are outstanding, the Portfolio will set
aside and maintain until the settlement date in a segregated account, liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery 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. The Portfolio may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss. When the
Portfolio has sold a security on a delayed delivery basis, the Portfolio does
not participate in future gains and losses with respect to the security. Forward
sales commitments are accounted for by the Portfolio in the same manner as
forward currency contracts discussed above.
2000 Semi-Annual Report 13
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly-owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on each share class' average daily net assets. The
Administration Fee is charged at the annual rate of 0.50%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
------------------------------------------------------------------------------
Advisory Fee 0.25% 0.60%
Administrative Fee 0.50% 0.30%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the prospectus
(as set forth below) plus 0.49 basis points. PIMCO may be reimbursed for these
waived amounts in future periods, to limit the expenses (calculated as a
percentage of Portfolio's average daily net assets attributable to each class):
Institutional Class Administrative Class
-------------------------------------------------------------------------------
Foreign Bond Portfolio 0.75% 0.90%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
--------------------------------------------------
Purchases Sales Purchases Sales
-------------------------------------------------------------------------------
Foreign Bond Portfolio $ 7,217 $ 5,380 $ 7,191 $ 7,010
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
Foreign Bond Portfolio
----------------------------------
# of contracts Premium
-------------------------------------------------------------------------------
Balance at 12/31/1999 0 $ 0
Sales 2,230,000 9
Closing Buys (940,000) (4)
Expirations (450,000) (4)
Exercised 0 0
-------------------------------------------------------------------------------
Balance at 06/30/2000 840,000 $ 1
===============================================================================
14
<PAGE>
6. Federal Income Tax Matters
As of December 31, 1999 Foreign Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $49,398 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards (amounts in
thousands):
Capital Loss Carryforwards
-------------------------------------
Realized Losses Expiration
------------------------------------------------------------------
Foreign Bond Portfolio $ 74,591 12/31/2007
Shareholders are advised to consult their own tax advisor with respect to
the tax consequences of their investment in the Trust. In January 2000, you will
be advised on IRS form 1099-DIV as to the federal tax status of the dividends
and distributions received by you in calendar year 1999.
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Number % of Portfolio Held Foreign Bond Portfolio
-------------------------------------------------------------------------- ---------------------------------------------------
Period from 02/16/1999
Foreign Bond Portfolio 1 92 Period Ended 06/30/2000 to 12/31/1999
Shares Amount Shares Amount
---------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class $ 514 $ 4,877 $ 0 $ 0
----------------------------------------------------------------------------- ---------------------------------------------------
Administrative Class 35 333 1,057 10,240
----------------------------------------------------------------------------- ---------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 8 75 0 0
----------------------------------------------------------------------------- ---------------------------------------------------
Administrative Class 9 81 24 235
----------------------------------------------------------------------------- ---------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
----------------------------------------------------------------------------- ---------------------------------------------------
Administrative Class (526) (4,988) (527) (4,960)
----------------------------------------------------------------------------- ---------------------------------------------------
Net increase resulting from Portfolio
share transactions $ 40 $ 378 $ 554 $ 5,515
============================================================================= ===================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
------------------------------------------------------------------
Foreign Bond Portfolio 2 96
8. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 15
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
STOCKSPLUS GROWTH AND INCOME PORTFOLIO
INSTITUTIONAL CLASS
-----------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Contents
<TABLE>
<S> <C>
Chairman's Letter .......................................................... 1
Financial Highlights ....................................................... 3
Statement of Assets and Liabilities ........................................ 4
Statement of Operations .................................................... 5
Statements of Changes in Net Assets ........................................ 6
Notes to Financial Statements .............................................. 10
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
StocksPLUS Growth and Income Portfolio (Institutional Class)................ 2 7-9
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
StocksPLUS Growth and Income Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Total return which exceeds that of the S&P 500 Index
Portfolio:
Primarily S&P 500 stock index derivatives backed by a portfolio of short-term
fixed income securities
Duration:
40 days
Total Net Assets:
$275.6 million
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
Sector Breakdown:*
[GRAPH]
Corporate Bonds and Notes 50.1%
Short-Term Instruments 17.1%
Mortgage-Backed Securities 14.4%
Asset-Backed Securities 6.6%
Other 11.8%
Quality Breakdown:*
[GRAPH]
AAA 29.5%
AA 7.5%
A 16.9%
BBB 37.5%
BB 4.9%
B 3.6%
Other 0.1%
* % of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The StocksPLUS Growth and Income Portfolio Institutional Class' total return
investment performance since inception on April 28, 2000 through June 30,
2000 was 0.38%.
. The Treasury yield curve inverted as short-term interest rates rose in
anticipation of Federal Reserve tightening while long rates fell in response
to the Treasury's debt buyback. The increase in short-term interest rates
detracted from the performance of the Portfolio.
. Credit spreads rose due to supply pressures and heightened concerns over
credit quality. As a result, corporate holdings in the Portfolio hurt
relative performance.
. Real return bonds helped performance as their increasing inflation adjustment
more than offset a rise in real yields. In contrast, strategies based on
expectations of a stronger euro hurt returns as the euro fell amid capital
outflows to the U.S.
. Mortgage premiums rose slightly during the first six months of the year as a
result of increased volatility, however relatively high yields offset the
negative impact of spread widening.
. Although PIMCO achieved a less expensive calendar roll than the average
market participant, unusually high S&P futures roll costs detracted from
year-to-date performance.
2
<PAGE>
Financial Highlights
StocksPLUS Growth and Income Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000(b)
--------------
<S> <C>
Net asset value beginning of period $ 13.21
-------------------------------------------------------------------------------------- --------------
Net investment income (a) 0.14
-------------------------------------------------------------------------------------- --------------
Net realized / unrealized (loss) on investments (a) (0.09)
-------------------------------------------------------------------------------------- --------------
Total income from investment operations 0.05
-------------------------------------------------------------------------------------- --------------
Dividends from net investment income (0.18)
-------------------------------------------------------------------------------------- --------------
Distributions from net realized capital gains 0.00
-------------------------------------------------------------------------------------- --------------
Total distributions (0.18)
-------------------------------------------------------------------------------------- --------------
Net asset value end of period $ 13.08
-------------------------------------------------------------------------------------- --------------
Total return % 0.38
-------------------------------------------------------------------------------------- --------------
Net assets end of period (000s) $ 27
-------------------------------------------------------------------------------------- --------------
Ratio of expenses to average net assets %* 0.50
-------------------------------------------------------------------------------------- --------------
Ratio of net investment income to average net assets %* 5.88
-------------------------------------------------------------------------------------- --------------
Portfolio turnover rate %* 92
-------------------------------------------------------------------------------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding
during the period.
(b) Commenced operations on April 28, 2000
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 274,649
-------------------------------------------------------------------------------------- ----------
Cash and foreign currency 7,962
-------------------------------------------------------------------------------------- ----------
Receivable for investments sold and forward foreign currency contracts 7,516
-------------------------------------------------------------------------------------- ----------
Interest and dividends receivable 2,820
-------------------------------------------------------------------------------------- ----------
Variation margin receivable 1,838
-------------------------------------------------------------------------------------- ----------
Other assets 51
-------------------------------------------------------------------------------------- ----------
294,836
====================================================================================== ==========
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 18,907
-------------------------------------------------------------------------------------- ----------
Written options outstanding 132
-------------------------------------------------------------------------------------- ----------
Accrued investment advisory fee 95
-------------------------------------------------------------------------------------- ----------
Accrued administration fee 24
-------------------------------------------------------------------------------------- ----------
Accrued servicing fee 36
-------------------------------------------------------------------------------------- ----------
Recoupment payable to Manager 4
-------------------------------------------------------------------------------------- ----------
Other liabilities 34
-------------------------------------------------------------------------------------- ----------
19,232
====================================================================================== ==========
Net Assets $ 275,604
====================================================================================== ==========
Net Assets Consist of:
Paid in capital $ 272,309
-------------------------------------------------------------------------------------- ----------
Undistributed net investment income 6,088
-------------------------------------------------------------------------------------- ----------
Accumulated undistributed net realized gain 1,651
-------------------------------------------------------------------------------------- ----------
Net unrealized (depreciation) (4,444)
-------------------------------------------------------------------------------------- ----------
$ 275,604
====================================================================================== ==========
Net Assets:
Institutional Class $ 27
-------------------------------------------------------------------------------------- ----------
Administrative Class 275,577
-------------------------------------------------------------------------------------- ----------
Shares Issued and Outstanding:
Institutional Class 2
-------------------------------------------------------------------------------------- ----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 13.08
-------------------------------------------------------------------------------------- ----------
Cost of Investments Owned $ 275,569
====================================================================================== ==========
Cost of Foreign Currency Held $ 989
====================================================================================== ==========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
StocksPLUS Growth and Income Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 8,048
---------------------------------------------------------------------------------------------------- ------------
Dividends 59
---------------------------------------------------------------------------------------------------- ------------
Total Income 8,107
==================================================================================================== ============
Expenses:
Investment advisory fees 498
---------------------------------------------------------------------------------------------------- ------------
Administration fees 211
---------------------------------------------------------------------------------------------------- ------------
Distribution and/or servicing fees - Administrative Class 100
---------------------------------------------------------------------------------------------------- ------------
Trustees' fees 6
---------------------------------------------------------------------------------------------------- ------------
Organization costs 1
---------------------------------------------------------------------------------------------------- ------------
Recoupment of reimbursement 1
---------------------------------------------------------------------------------------------------- ------------
Total Expenses 817
---------------------------------------------------------------------------------------------------- ------------
Net Investment Income 7,290
==================================================================================================== ============
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (38)
---------------------------------------------------------------------------------------------------- ------------
Net realized gain on futures contracts and written options 1,292
---------------------------------------------------------------------------------------------------- ------------
Net realized gain on foreign currency transactions 457
---------------------------------------------------------------------------------------------------- ------------
Net change in unrealized (depreciation) on investments (141)
---------------------------------------------------------------------------------------------------- ------------
Net change in unrealized (depreciation) on futures contracts and written options (10,819)
---------------------------------------------------------------------------------------------------- ------------
Net change in unrealized (depreciation) on translation of assets and liabilities denominated in
foreign currencies (147)
---------------------------------------------------------------------------------------------------- ------------
Net (Loss) (9,396)
---------------------------------------------------------------------------------------------------- ------------
Net (Decrease) in Assets Resulting from Operations $ (2,106)
==================================================================================================== ============
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Year Ended
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1998
Operations:
<S> <C> <C>
Net investment income $ 7,290 $ 8,048
---------------------------------------------------------------------------------- ---------------- --------------------
Net realized gain 1,711 14,885
---------------------------------------------------------------------------------- ---------------- --------------------
Net change in unrealized appreciation (depreciation) (11,107) 4,024
---------------------------------------------------------------------------------- ---------------- --------------------
Net increase (decrease) resulting from operations (2,106) 26,957
================================================================================== ================ ====================
Distributions to Shareholders:
From net investment income
Institutional Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class (6,242) (7,970)
---------------------------------------------------------------------------------- ---------------- --------------------
In excess of net investment income
Institutional Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
From net realized capital gains
Institutional Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class 0 (11,998)
---------------------------------------------------------------------------------- ---------------- --------------------
In excess of net realized capital gains
Institutional Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Total Distributions (6,242) (19,968)
================================================================================== ================ ====================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 31 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class 75,395 188,965
---------------------------------------------------------------------------------- ---------------- --------------------
Issued in reorganization
Institutional Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Issued as reinvestment of distributions
Institutional Class 0 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class 6,242 19,968
---------------------------------------------------------------------------------- ---------------- --------------------
Cost of shares redeemed
Institutional Class (4) 0
---------------------------------------------------------------------------------- ---------------- --------------------
Administrative Class (28,124) (43,774)
---------------------------------------------------------------------------------- ---------------- --------------------
Net increase resulting from Portfolio share transactions 53,540 165,159
---------------------------------------------------------------------------------- ---------------- --------------------
Total Increase in Net Assets $ 45,192 $ 172,148
================================================================================== ================ ====================
Net Assets:
Beginning of period 230,412 58,264
---------------------------------------------------------------------------------- ---------------- --------------------
End of period * $ 275,604 $ 230,412
---------------------------------------------------------------------------------- ---------------- --------------------
*Including net undistributed investment income of: $ 6,088 $ 5,040
---------------------------------------------------------------------------------- ---------------- --------------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Value
Shares (000s)
--------------------------------------------------------------------------------
COMMON STOCKS 1.2%
--------------------------------------------------------------------------------
Utilities 1.2%
Eastern Enterprises 600 $ 38
Florida Progress Corp. 16,400 769
LG&E Energy Corp. 1,800 43
MCN Energy Group, Inc. 65,000 1,389
Northeast Utilities 47,600 1,035
--------
Total Common Stocks 3,274
========
(Cost $3,449)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 50.0%
--------------------------------------------------------------------------------
Principal
Amount
(000s)
Banking & Finance 28.5%
American General Finance
6.050% due 07/02/2001 $ 300 296
Banco de Inversion Y Comercial
9.375% due 12/27/2000 1,200 1,204
Banco Latinoamericano SA
7.639% due 12/10/2001 8,300 8,360
Caithness Coso Fund Corp.
6.800% due 12/15/2001 1,231 1,213
Chrysler Financial Co. LLC
6.677% due 06/11/2001 (d) 600 600
Donaldson, Lufkin & Jenrette, Inc.
6.760% due 04/25/2003 (d) 1,100 1,099
Edison Funding
6.950% due 12/19/2000 7,000 6,993
Finova Capital Corp.
6.390% due 06/18/2003 (d) 3,000 2,838
Ford Motor Credit Corp.
6.541% due 07/16/2002 (d) 700 701
6.320% due 12/16/2002 (d) 300 299
General Motors Acceptance Corp.
5.400% due 04/09/2001 2,000 1,973
5.500% due 12/15/2001 3,500 3,405
7.152% due 12/17/2001 (d) 2,000 2,022
6.170% due 08/18/2003 (d) 3,000 2,989
6.251% due 04/05/2004 (d) 800 798
Goldman Sachs Group
7.048% due 02/20/2001 (d) 700 701
5.690% due 02/10/2004 1,300 1,278
Heller Financial, Inc.
6.990% due 05/07/2002 (d) 10,400 10,368
Korea Development Bank
7.125% due 09/17/2001 3,000 2,977
Lehman Brothers Holdings, Inc.
6.731% due 08/01/2003 (d) 1,100 1,100
6.700% due 11/30/2006 2,715 2,457
Merrill Lynch & Co.
6.480% due 01/11/2002 (d) 2,200 2,209
6.423% due 02/01/2002 (d) 750 751
7.177% due 03/17/2004 (d) 200 199
Morgan Stanley, Dean Witter, Discover and Co.
6.165% due 01/28/2002 (d) 4,700 4,701
Nacional Financiera
9.548% due 12/01/2000 (d) 1,000 995
Old Kent Bank
7.083% due 11/01/2005 (d) 700 699
Paine Webber Group, Inc.
7.161% due 08/18/2004 (d) 1,000 976
Republic of Brazil
7.000% due 01/01/2001 7,294 7,312
7.375% due 04/15/2006 2,558 2,327
Salomon, Smith Barney Holdings
6.510% due 04/02/2002 (d) 300 302
Sovereign Bancorp
6.625% due 03/15/2001 4,300 4,225
--------
78,367
========
Industrials 13.7%
Arrow Electronics, Inc.
7.570% due 11/24/2000 (d) 5,000 5,000
Cemex SA
9.250% due 06/17/2002 900 917
Champion International Corp.
9.700% due 05/01/2001 300 305
Clear Channel Communications
7.327% due 06/15/2002 (d) 1,000 1,000
DaimlerChrysler Holdings
7.090% due 08/23/2002 (d) 3,300 3,310
Petroleos Mexicanos
9.436% due 07/15/2005 (d) 3,500 3,500
Reynolds & Reynolds
6.120% due 03/02/2001 8,000 7,925
Rollins Truck Leasing Corp.
8.250% due 05/01/2002 8,100 8,226
TRW, Inc.
6.450% due 06/15/2001 1,100 1,090
Tyco International Group SA
7.568% due 03/05/2001 (d) 500 501
Waste Management, Inc.
6.250% due 10/15/2000 5,735 5,689
Williams Communications Group, Inc.
6.540% due 11/15/2001 300 300
--------
37,763
========
Utilities 7.8%
Appalachian Power
7.272% due 06/27/2001 (d) 8,000 7,998
Cleveland Electric/Toledo Edison
7.190% due 07/01/2000 3,000 3,000
CMS Energy
8.000% due 07/01/2011 800 788
Entergy Arkansas, Inc.
7.720% due 03/01/2003 600 601
LG&E Capital Corp.
7.510% due 06/18/2001 (d) 1,200 1,200
Nevada Power Co.
7.347% due 06/12/2001 (d) 1,000 1,000
Noram Energy
7.500% due 08/01/2000 500 500
Sierra Pacific Power Co.
7.297% due 06/12/2001 (d) 3,300 3,300
Sprint Capital Corp.
7.010% due 11/15/2001 (d) 3,200 3,200
--------
21,587
--------
Total Corporate Bonds & Notes 137,717
========
(Cost $137,442)
--------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES 4.0%
--------------------------------------------------------------------------------
North Carolina 4.0%
North Carolina State Education Assistance
Authority Revenue Bonds, (GTD Insured), Series 2000
7.000% due 06/01/2009 (d) 11,000 11,000
--------
Total Municipal Bonds & Notes 11,000
========
(Cost $11,000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 5.0%
--------------------------------------------------------------------------------
Treasury Inflation Protected Securities (b)(h)
3.625% due 07/15/2002 13,897 13,810
--------
Total U.S. Treasury Obligations 13,810
========
(Cost $13,810)
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments (Cont.)
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 14.3%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 7.4%
Countrywide Home Loans
6.500% due 03/25/2028 $ 523 $ 509
6.050% due 04/25/2029 362 356
DLJ Mortgage Acceptance Corp.
6.125% due06/25/2026 (d) 913 907
Federal Home Loan Mortgage Corp.
6.500% due 02/15/2024 488 487
Federal National Mortgage Assn
7.000% due 06/25/2006 72 71
6.900% due 10/25/2020 1,000 978
General Electric Capital Mortgage Services, Inc.
6.500% due 12/25/2023 1,636 1,598
6.500% due 08/25/2024 3,010 2,987
Government National Mortgage Assn
7.500% due 08/20/2021 74 73
8.000% due 12/31/2099 4,300 4,346
Headlands Mortgage Securities, Inc.
7.250% due 11/25/2027 1,000 975
7.000% due 02/25/2028 421 418
Independent National Mortgage Corp.
8.350% due 06/25/2025 107 107
Morgan Stanley, Dean Witter, Discover and Co.
5.568% due 07/25/2027 (d) 152 151
Norwest Asset Securities Corp.
6.750% due 08/25/2029 926 911
PNC Mortgage Securities Corp.
6.625% due 03/25/2028 606 591
Prudential Home Mortgage Securities
6.750% due 08/25/2008 117 116
Prudential-Bache CMO Trust
7.965% due 03/01/2019 463 461
Resecuritization Mortgage Trust
5.843% due 04/26/2021 (d) 381 371
Residential Accredit Loans, Inc.
8.000% due 08/25/2026 510 512
Residential Asset Securitization Trust
7.750% due 04/25/2027 850 849
Residential Funding Mortgage Securities, Inc.
6.500% due 07/25/2008 93 93
7.250% due 08/25/2027 16 16
7.250% due 10/25/2027 1,000 987
Structured Asset Securities Corp.
6.780% due 12/25/2000 (d) 49 49
Thrift Financing Corp.
11.250% due 01/01/2016 1,571 1,613
--------
20,532
========
Federal National Mortgage Association 0.3%
5.812% due 08/01/2029 (d) 251 245
5.848% due 08/01/2031 (d) 61 59
6.500% due 09/01/2005 398 390
--------
694
========
Government National Mortgage Association 5.0%
6.375% due 04/20/2024-04/20/2027 (d) 9,513 9,495
6.750% due 08/20/2024 (d) 216 217
7.150% due 06/16/2026 4,104 4,094
--------
13,806
========
Mortgage-Backed Securities 1.6%
CS First Boston Mortgage Securities
6.960% due 06/20/2029 261 259
Housing Securities, Inc.
5.863% due 07/25/2032 1,048 1,048
MGM Grand Term Loan
8.060% due 05/06/2001 3,200 3,179
--------
4,486
--------
Total Mortgage-Backed Securities 39,518
========
(Cost $39,951)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 6.6%
--------------------------------------------------------------------------------
Arcadia Automobile Receivables Trust
6.500% due 06/17/2002 276 276
Banc One Auto Grantor Trust
6.270% due 11/20/2003 496 494
Korea National Housing
10.343% due 05/23/2001 3,000 3,045
Money Store Home Equity Trust
6.550% due 09/15/2021 1,165 1,160
6.345% due 11/15/2021 (d) 90 89
Option One Mortgage Loan Trust
6.955% due 04/25/2030 (d) 9,387 9,392
Saxon Asset Securities Trust
6.380% due 05/25/2029 (d) 3,332 3,326
WMC Mortgage Loan
6.671% due 03/20/2028 (d) 349 349
--------
Total Asset-Backed Securities 18,131
========
(Cost $18,165)
--------------------------------------------------------------------------------
FOREIGN CURRENCY-DENOMINATED (e)(f) 1.5%
--------------------------------------------------------------------------------
Korea Development Bank
5.625% due 11/05/2002 FF 20,000 2,807
Tecnost International NV
4.487% due 06/23/2004 (d) EC 1,500 1,440
--------
Total Foreign Currency-Denominated 4,247
========
(Cost $4,794)
--------------------------------------------------------------------------------
PURCHASED PUT OPTIONS 0.0%
--------------------------------------------------------------------------------
S & P 500 Index Futures
Strike @ 925.000 Exp. 09/15/2000 $ 400 20
--------
Total Purchased Put Options 20
========
(Cost $26)
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 17.0%
--------------------------------------------------------------------------------
Commercial Paper 13.2%
Bombardier Capital, Inc.
6.780% due 07/26/2000 3,700 3,684
Conoco, Inc.
6.460% due 07/12/2000 2,000 1,997
Dominion Resources
6.870% due 07/06/2000 4,000 3,998
Dupont De Nemours & Co.
6.270% due 07/10/2000 300 300
Ford Motor Credit Corp.
6.570% due 07/20/2000 800 798
General Electric Capital Corp.
6.620% due 07/24/2000 3,000 2,988
6.540% due 07/31/2000 700 696
Ingersoll Rand Co.
6.750% due 07/13/2000 4,200 4,192
Pearson, Inc.
7.000% due 08/02/2000 1,100 1,093
6.870% due 08/24/2000 500 495
Sumitomo Bank
6.730% due 07/05/2000 5,900 5,898
Texas Utilities Co.
6.800% due 07/07/2000 4,400 4,397
UBS AG
6.600% due 09/05/2000 3,000 2,965
Visteon Corp.
6.790% due 07/21/2000 2,900 2,890
--------
36,391
========
8 See accompanying notes
<PAGE>
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
Repurchase Agreement 3.8%
State Street Bank
5.850% due 07/03/2000 $ 10,477 $ 10,477
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
5.800% due 09/02/2008 valued at $10,687.
Repurchase proceeds are $10,482.)
U.S. Treasury Bills (b) 0.0%
5.617% due 09/21/2000 65 64
----------
Total Short-Term Instruments 46,932
==========
(Cost $46,932)
Total Investments (a) 99.6% $ 274,649
(Cost $275,569)
Written Options (c) (0.0%) (132)
(Premiums $213)
Other Assets and Liabilities (Net) 0.4% 1,087
----------
Net Assets 100.0% $ 275,604
==========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 681
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (1,601)
----------
Unrealized depreciation-net $ (920)
==========
(b) Securities with an aggregate market value of $13,874
have been segregated with the custodian to cover margin
requirement for the following open futures contracts at
June 30, 2000:
Unrealized
# of Appreciation/
Type Contracts (Depreciation)
--------------------------------------------------------------------------------
Japan 10 Year Bond (09/2000) 4 $ 14
S&P 500 Index (09/2000) 725 (3,638)
Eurodollar March Futures (03/2001) 26 22
U.S. Treasury 30 Year Bond (09/2000) 49 (3)
----------
$ (3,605)
==========
(c) Premiums received on written options:
Type Par Premium Value
--------------------------------------------------------------------------------
Call - CME AWCO Eurodollar December Futures
Strike @ 93.00 Exp. 12/18/2000 28 $ 11 $ 9
Call - CME AWCO Eurodollar December Futures
Strike @ 92.75 Exp. 12/18/2000 14 10 9
Put - CME AWPO Eurodollar March Futures
Strike @ 92.75 Exp. 03/19/2001 12 8 6
Call - CME AWCO Eurodollar March Futures
Strike @ 93.25 Exp. 03/19/2001 233 37 64
Put - CME AWPO Eurodollar March Futures
Strike @ 92.25 Exp. 03/19/2001 221 142 38
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/28/2000 5,000,000 6 6
------------------------
$ 213 $ 132
========================
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Foreign forward currency contracts outstanding at June 30, 2000:
Principal
Amount Unrealized
Covered by Settlement Appreciation/
Type Currency Contract Month (Depreciation)
--------------------------------------------------------------------------------
Buy PZ 4,200 01/2001 $ (33)
Sell EC 5,236 07/2000 1
Sell 250 08/2000 (3)
----------
$ (35)
==========
(f) Principal amount denoted in indicated currency:
EC - European Currency Unit
FF - French Franc
PZ - Polish Zloty
(g) Swap agreements outstanding at June 30, 2000.
Unrealized
Notional Appreciation/
Type Amount Depreciation)
--------------------------------------------------------------------------------
Receive floating rate based on 6 month Japanese
Yen LIBOR and pay fixed rate equal to 1.746%
in Japanese Yen.
Broker: Goldman Sachs & Co.
Exp. 09/20/2007 JY 506,000 $ (7)
Receive total return on S&P 500 Index and
pay floating rate based on 1 month
LIBOR plus 0.18%.
Broker: J.P. Morgan Securities, Inc.
Exp. 05/03/2001 $ 4 0
----------
$ (7)
==========
(h) Prinicpal amount of the security is adjusted for inflation.
2000 Semi-Annual Report See accompanying notes 9
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The StocksPLUS Growth and Income Portfolio (the "Portfolio") is a series of the
PIMCO Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request. The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on December 31, 1997.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, of the Portfolio are declared and distributed to shareholders
quarterly. All dividends are reinvested in additional shares of the Portfolio.
Net realized capital gains earned by the Portfolio, if any, will be distributed
at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
10
<PAGE>
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. The Portfolio is authorized to enter into forward
foreign exchange 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 purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Swaps. The Portfolio is authorized to enter into interest rate, total return and
currency exchange swap agreements in order to obtain a desired return at a lower
cost than if the Portfolio had invested directly in the asset that yielded the
desired return. Swaps involve commitments to exchange components of income
(generally interest or returns) pegged to the underlying assets based on a
notional principal amount. Swaps are marked to market daily based upon
quotations from market makers and the change, if any, is recorded as unrealized
gains or losses in the Statements of Operations. The 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 counterparty.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, the Portfolio may fail to recoup some or all of its
initial investment in these securities. The market value of these securities is
highly sensitive to changes in interest rates.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
Restricted Securities. The Portfolio is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These securities
generally may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.40%.
2000 Semi-Annual Report 11
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.10%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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. The ratio of expenses to average net assets per share
class, as disclosed in Financial Highlights, may differ from the annual fund
operating expenses per share class as disclosed in the Prospectus for the
reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
-------------------------------------------------------------------------------
StocksPLUS Growth
and Income Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
Organization Expense. Costs incurred in connection with the organization of the
Portfolio and its initial registration are amortized on a straight-line basis
over a five-year period from the Portfolio's commencement of operations.
4. Purchases and Sales of Securities Purchases and sales of securities
(excluding short-term investments) for the period ended June 30, 2000 were as
follows (amounts in thousands):
U.S. Government/Agency All Other
--------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
StocksPLUS Growth
and Income Portfolio $ 128,694 $ 129,920 $ 119,196 $ 41,562
5. Transactions in Written Call and Put Options Transactions in written call and
put options were as follows (amounts in thousands):
StocksPLUS Growth and Income Portfolio
--------------------------------------------------
# of Contracts Premium
-------------------------------------------------------------------------------
Balance at 12/31/1999 300 $ 253
Sales 234,781,050 3,088
Closing Buys (205,000,335) (1,327)
Expirations (24,780,507) (1,801)
Exercised 0 0
-------------------------------------------------------------------------------
Balance at 06/30/2000 5,000,508 $ 213
-------------------------------------------------------------------------------
12
<PAGE>
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
StocksPLUS Growth and Income Portfolio
-------------------------------------------------
Period Ended 06/30/2000 Year Ended 12/31/1999
Shares Amount Shares Amount
-------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 2 $ 31 0 $ 0
--------------------------------------------------------------------- -------------------------------------------------
Administrative Class 5,729 75,395 14,200 188,965
--------------------------------------------------------------------- -------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 0 0 0 0
--------------------------------------------------------------------- -------------------------------------------------
Administrative Class 466 6,242 1,460 19,968
--------------------------------------------------------------------- -------------------------------------------------
Cost of shares redeemed
Institutional Class 0 (4) 0 0
--------------------------------------------------------------------- -------------------------------------------------
Administrative Class (2,123) (28,124) (3,301) (43,774)
--------------------------------------------------------------------- -------------------------------------------------
Net increase resulting from Portfolio share transactions 4,074 $ 53,540 12,359 $165,159
===================================================================== =================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
---------------------------------------------------------------------------
StocksPLUS Growth and Income Portfolio 1 95
7. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 13
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Streets
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
MONEY MARKET PORTFOLIO
INSTITUTIONAL CLASS
----------------
SEMI-ANNUAL REPORT
JUNE 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter.............................................................................. 1
Financial Highlights........................................................................... 3
Statement of Assets and Liabilities............................................................ 4
Statement of Operations........................................................................ 5
Statements of Changes in Net Assets............................................................ 6
Notes to Financial Statements.................................................................. 8
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Money Market Portfolio (Institutional Class)........................................... 2 7
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Money Market Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum current income, consistent with preservation of capital and daily
liquidity
Portfolio
Primarily money market instruments
Duration:
40 days
Total Net Assets:
$4.3 million
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
Quality Breakdown:*
[GRAPH]
AAA 60.1%
AA 39.9%
* % of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. An investment in the Money Market
Portfolio is neither insured nor guaranteed by the Federal Deposit Insurance
Corporation or any other U.S. Government Agency. Although 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. If there is a material difference between
the quoted total return and the quoted current yield, the yield quotation more
closely reflects the current earnings of the Money Market Portfolio than the
total return quotation.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Money Market Portfolio Institutional Class' total return investment
performance since inception on April 10, 2000 through June 30, 2000 was
1.36%.
. The U.S. Treasury yield curve inverted dramatically in the first half of
2000 with 30-year yields falling from 6.48% to 5.90% while three-month
yields moved in the opposite direction, rising from 5.31% to 5.86%.
. Short-term rates rose as the Federal Reserve fought inflation by raising
the federal funds target rate from 5.50% to 6.50%.
. The Portfolio maintained a below-Index duration (relative to the Salomon 3-
Month Treasury Bill Index) throughout the period, which helped performance
as short-term interest rates increased.
. Holdings of high quality commercial paper and short maturity corporates
boosted relative performance due to their attractive yield premiums.
. The 7- and 30-day yields (after fees) at June 30, 2000 were 6.41% and
6.19%, respectively.
2
<PAGE>
Financial Highlights
Money Market Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000(b)
-----------------
<S> <C>
Net asset value beginning of period $ 1.00
----------------------------------------------------------------------------- -----------------
Net investment income (a) 0.01
----------------------------------------------------------------------------- -----------------
Total income from investment operations 0.01
----------------------------------------------------------------------------- -----------------
Dividends from net investment income (0.01)
----------------------------------------------------------------------------- -----------------
Total distributions 1.36
----------------------------------------------------------------------------- -----------------
Net asset value end of period $ 1.00
----------------------------------------------------------------------------- -----------------
Total return % 1.36
----------------------------------------------------------------------------- -----------------
Net assets end of period (000s) $ 740
----------------------------------------------------------------------------- -----------------
Ratio of expenses to average net assets %* 0.35(c)
----------------------------------------------------------------------------- -----------------
Ratio of net investment income to average net assets %* 6.38
----------------------------------------------------------------------------- -----------------
Portfolio turnover rate % N/A
----------------------------------------------------------------------------- -----------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding
during the period.
(b) Commenced operations on April 10, 2000.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.36% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Money Market Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 4,296
------------------------------------------------------------------ ----------
Cash and foreign currency 1
------------------------------------------------------------------ ----------
Interest and dividends receivable 2
------------------------------------------------------------------ ----------
Manager reimbursement receivable 6
------------------------------------------------------------------ ----------
4,305
================================================================== ==========
Liabilities:
Accrued investment advisory fee 1
------------------------------------------------------------------ ----------
Accrued administration fee 1
------------------------------------------------------------------ ----------
2
================================================================== ==========
Net Assets $ 4,303
================================================================== ==========
Net Assets Consist of:
Paid in capital $ 4,303
------------------------------------------------------------------ ----------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------ ----------
Accumulated undistributed net realized gain (loss) 0
------------------------------------------------------------------ ----------
Net unrealized appreciation (depreciation) 0
------------------------------------------------------------------ ----------
$ 4,303
================================================================== ==========
Net Assets:
Institutional Class $ 740
------------------------------------------------------------------ ----------
Administrative Class 3,563
------------------------------------------------------------------ ----------
Shares Issued and Outstanding:
Institutional Class 740
------------------------------------------------------------------ ----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 1.00
------------------------------------------------------------------ ----------
Cost of Investments Owned $ 4,296
================================================================== ==========
Cost of Foreign Currency Held $ 0
================================================================== ==========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Money Market Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 99
------------------------------------------------------------------- -----------
Total Income 99
=================================================================== ===========
Expenses:
Investment advisory fees 4
------------------------------------------------------------------- -----------
Administration fees 3
------------------------------------------------------------------- -----------
Distribution and/or servicing fees - Administrative Class 1
------------------------------------------------------------------- -----------
Distribution and/or servicing fees - Institutional Class 0
------------------------------------------------------------------- -----------
Trustees' fees 0
------------------------------------------------------------------- -----------
Total Expenses 8
------------------------------------------------------------------- -----------
Net Investment Income 91
=================================================================== ===========
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investments 0
------------------------------------------------------------------- -----------
Net change in unrealized appreciation (depreciation) on investments 0
------------------------------------------------------------------- -----------
Net Gain (Loss) 0
------------------------------------------------------------------- -----------
Net Increase in Assets Resulting from Operations $ 91
=================================================================== ===========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Money Market Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from September 30, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 91 $ 41
------------------------------------------------------------------------ ---------------- ------------------------------
Net realized gain (loss) 0 0
------------------------------------------------------------------------ ---------------- ------------------------------
Net change in unrealized appreciation (depreciation) 0 0
------------------------------------------------------------------------ ---------------- ------------------------------
Net increase resulting from operations 91 41
======================================================================== ================ ==============================
Distributions to Shareholders:
From net investment income
Institutional Class (10) 0
------------------------------------------------------------------------ ---------------- ------------------------------
Administrative Class (81) (41)
------------------------------------------------------------------------ ---------------- ------------------------------
Total Distributions (91) (41)
======================================================================== ================ ==============================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 739 0
------------------------------------------------------------------------ ---------------- ------------------------------
Administrative Class 5,147 6,784
------------------------------------------------------------------------ ---------------- ------------------------------
Issued as reinvestment of distributions
Institutional Class 11 0
------------------------------------------------------------------------ ---------------- ------------------------------
Administrative Class 80 28
------------------------------------------------------------------------ ---------------- ------------------------------
Cost of shares redeemed
Institutional Class (10) 0
------------------------------------------------------------------------ ---------------- ------------------------------
Administrative Class (5,269) (3,207)
------------------------------------------------------------------------ ---------------- ------------------------------
Net increase resulting from Portfolio share transactions 698 3,605
------------------------------------------------------------------------ ---------------- ------------------------------
Total Increase in Net Assets $ 698 $ 3,605
======================================================================== ================ ==============================
Net Assets:
Beginning of period 3,605 0
------------------------------------------------------------------------ ---------------- ------------------------------
End of period * $ 4,303 $ 3,605
------------------------------------------------------------------------ ---------------- ------------------------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
------------------------------------------------------------------------ ---------------- ------------------------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Money Market Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 99.8%
--------------------------------------------------------------------------
Commercial Paper 90.0%
Alcoa, Inc.
6.570% due 09/14/2000 $ 100 $ 98
American Express Credit Corp.
6.520% due 07/06/2000 100 100
Associates Corp. of North America
6.530% due 08/16/2000 100 99
Banc One Australia Ltd.
6.560% due 09/15/2000 100 98
Becton Dickinson & Co.
6.550% due 07/05/2000 100 100
DaimlerChrysler Holdings Corp.
6.630% due 09/21/2000 100 99
FCC National Bank
6.375% due 03/15/2001 100 99
Federal Home Loan Bank
6.410% due 07/07/2000 200 200
6.450% due 07/19/2000 200 199
Federal Home Loan Mortgage Corp.
6.360% due 07/05/2000 300 300
6.390% due 07/05/2000 200 200
Federal National Mortgage Assn
6.440% due 08/22/2000 900 892
Ford Motor Credit Corp.
6.530% due 07/10/2000 100 100
General Electric Capital Corp.
6.570% due 07/13/2000 100 100
General Motors Acceptance Corp.
6.570% due 09/26/2000 100 98
Heinz Co.
6.560% due 07/21/2000 100 100
IBM Corp.
6.130% due 07/07/2000 100 100
KFW International Finance Corp.
6.570% due 09/26/2000 100 98
Minnesota Co.
6.550% due 09/13/2000 100 99
National Australia Funding
6.570% due 09/15/2000 100 99
Reseau Ferre de France
6.560% due 09/13/2000 100 99
SBC Communications, Inc.
6.560% due 09/20/2000 100 99
Southwestern Public Services Co.
6.550% due 07/07/2000 100 100
Swedbank, Inc.
6.530% due 08/14/2000 100 99
Textron Financial Corp.
6.580% due 09/14/2000 100 99
UBS AG
6.600% due 09/05/2000 100 99
--------
3,873
========
--------------------------------------------------------------------------
REPURCHASE AGREEMENT 9.8%
--------------------------------------------------------------------------
State Street Bank
5.850% due 07/03/2000 $ 423 423
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
5.900% due 12/01/2000 valued at $436
Repurchase proceeds are $423.)
--------
Total Short-Term Instruments 4,296
========
(Cost $4,296)
Total Investments (a) 99.8% $ 4,296
(Cost $4,296)
Other Assets and Liabilities (Net) 0.2% 7
--------
Net Assets 100.0% $ 4,303
========
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Money Market Portfolio (the "Portfolio") is a series of the PIMCO Variable
Insurance Trust (the "Trust"). The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company organized as
a Delaware business trust on October 3, 1997. The Trust may offer up to two
classes of shares: Institutional and Administrative. Each share class has
identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on September 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions Investment Advisory Fee.
Pacific Investment Management Company LLC (PIMCO), which is a wholly owned
subsidiary partnership of PIMCO Advisors L.P., serves as investment adviser (the
"Adviser") to the Trust, pursuant to an investment advisory contract, for which
it receives a monthly advisory fee based on average daily net assets. The
Advisory Fee is charged at an annual rate of 0.15%.
8
<PAGE>
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.20%.
Servicing Fee. PIMCO Funds Distributors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of each
Fund offering Administrative Class shares in an amount up to 0.15% on an annual
basis of the average daily net assets of that class, financial intermediaries
that provide services in connection with the distribution of shares or
administration of plans or programs that use Fund shares as their funding
medium. The effective rate paid to PFD was 0.15% during the current fiscal year.
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
----------------------------------------------------------------------
Advisory Fee 0.15% 0.30%
Administrative Fee 0.20% 0.20%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the prospectus
(as set forth below) plus 0.49 basis points. PIMCO may be reimbursed for these
waived amounts in future periods, to limit the expenses (calculated as a
percentage of Portfolio's average daily net assets attributable to each class):
Institutional Class Administrative Class
-----------------------------------------------------------------------------
Money Market Portfolio 0.35% 0.50%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Federal Income Tax Matters
As of December 31, 1999 Money Market Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $155 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards.
Shareholders are advised to consult their own tax advisor with respect to
the tax consequences of their investment in the Trust. In January 2000, you will
be advised on IRS form 1099-DIV as to the federal tax status of the dividends
and distributions received by you in calendar year 1999.
2000 Semi-Annual Report 9
<PAGE>
5. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Money Market Portfolio
--------------------------------------------------
Period from 09/30/1999
Period Ended 06/30/2000 to 12/31/1999
Shares Amount Shares Amount
--------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 739 $ 739 0 $ 0
--------------------------------------------------------- --------------------------------------------------
Administrative Class 5,147 5,147 6,784 6,784
--------------------------------------------------------- --------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 11 11 0 0
--------------------------------------------------------- --------------------------------------------------
Administrative Class 81 80 28 28
--------------------------------------------------------- --------------------------------------------------
Cost of shares redeemed
Institutional Class (10) (10) 0 0
--------------------------------------------------------- --------------------------------------------------
Administrative Class (5,269) (5,269) (3,207) (3,297)
--------------------------------------------------------- --------------------------------------------------
Net increase resulting from Portfolio share transactions 699 $ 698 3,605 $ 3,605
=========================================================== ==================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
-------------------------------------------------------------------
Money Market Portfolio 2 100
6. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
10
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach,
California Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
TOTAL RETURN BOND PORTFOLIO II
ADMINISTRATIVE CLASS
-------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter................................................ 1
Financial Highlights............................................. 3
Statement of Assets and Liabilities.............................. 4
Statement of Operations.......................................... 5
Statements of Changes in Net Assets.............................. 6
Notes to Financial Statements.................................... 9
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Total Return Bond Portfolio II (Administrative Class)......... 2 7-8
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Annual Report 1
<PAGE>
Total Return Bond Portfolio II
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management.
Portfolio:
Primarily intermediate maturity fixed income securities with quality and non-
U.S. issuer restrictions
Duration:
4.90 years
Total Net Assets:
$5.4 million
Sector Breakdown:*
[GRAPH]
Mortgage-Backed Securities 46.3%
Corporate Bonds and Notes 19.5%
U.S. Treasury Obligations 15.2%
Asset-Backed Securities 10.5%
Short-Term Instruments 5.9%
Other 2.6%
Quality Breakdown:*
[GRAPH]
AAA 74.1%
AA 9.1%
A 8.3%
BBB 8.5%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class Lehman Brothers
(Incep. 5/28/1999) Aggregate Bond Index
--------------------------------------------------------------------------------
6 Months 4.79% 3.99%
1 Year 5.51% 4.56%
Since Inception* 5.73% --
*Annualized
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
[GRAPH]
Month Total Lehman
Return Brothers
Bond Aggregate
Portfolio II Bond
Index
========== ============ =========
05/31/1999 10,000 10,000
06/30/1999 10,071 9,968
07/31/1999 10,025 9,926
08/31/1999 10,001 9,921
09/30/1999 10,127 10,036
10/31/1999 10,134 10,073
11/30/1999 10,180 10,072
12/31/1999 10,141 10,024
01/31/2000 10,115 9,991
02/29/2000 10,224 10,112
03/31/2000 10,435 10,245
04/30/2000 10,452 10,215
05/31/2000 10,436 10,211
06/30/2000 10,627 10,423
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 6/01/1999, the first full month following the
Portfolio's inception on 5/28/1999, compared to the Lehman Brothers Aggregate
Bond Index, an unmanaged market index.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Total Return Bond Portfolio II returned 4.79% for the six-month period
ended June 30, 2000, outperforming the 3.99% for the benchmark Lehman
Brothers Aggregate Bond Index.
. The yield curve inverted as the Treasury Department began buying back
Treasury debt with maturities greater than 10 years.
. The Portfolio held its duration, or sensitivity to interest rate changes,
below benchmark for most of the period. This was neutral for returns
because the yield curve inverted.
. A shift into longer term Treasuries early in the year was positive for
performance because of a rally in the longer maturities caused by the
Treasury buyback program.
. An overweight in mortgages was positive as mortgages outperformed
Treasuries due to a significant yield premium.
. An underweight in investment grade corporate bonds added significantly to
performance as this sector lagged due to concerns about rising default
rates and increased corporate leverage.
2
<PAGE>
Financial Highlights
Total Return Bond Portfolio II (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000(b) 12/31/1999(b)
------------ -------------
<S> <C> <C>
Net asset value beginning of period $ 9.82 $ 10.00
--------------------------------------------------------------------------------- ------------ -------------
Net investment income (a) 0.30 0.32
--------------------------------------------------------------------------------- ------------ -------------
Net realized / unrealized gain (loss) on investments (a) 0.16 (0.18)
--------------------------------------------------------------------------------- ------------ -------------
Total income from investment operations 0.46 0.14
--------------------------------------------------------------------------------- ------------ -------------
Dividends from net investment income (0.31) (0.32)
--------------------------------------------------------------------------------- ------------ -------------
Total distributions (0.31) (0.32)
--------------------------------------------------------------------------------- ------------ -------------
Net asset value end of period $ 9.97 $ 9.82
--------------------------------------------------------------------------------- ------------ -------------
Total return % 4.79 1.41
--------------------------------------------------------------------------------- ------------ -------------
Net assets end of period (000s) $ 2,081 $ 5,128
--------------------------------------------------------------------------------- ------------ -------------
Ratio of expenses to average net assets %* 0.65(d) 0.65(c)
--------------------------------------------------------------------------------- ------------ -------------
Ratio of net investment income to average net assets %* 6.16 5.38
--------------------------------------------------------------------------------- ------------ -------------
Portfolio turnover rate % 485 378
--------------------------------------------------------------------------------- ------------ -------------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on May 28, 1999.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.78% for the year
ended December 31, 1999. (d) If the investment manager had not reimbursed
expenses, the ratio of operating expenses to average net assets would have
been 0.66% for the period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 9,287
------------------------------------------------------------------------------- --------------------
Interest and dividends receivable 55
------------------------------------------------------------------------------- --------------------
Manager reimbursement receivable 5
------------------------------------------------------------------------------- --------------------
Other assets 1
------------------------------------------------------------------------------- --------------------
9,348
=============================================================================== ====================
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 3,963
------------------------------------------------------------------------------- --------------------
Written options outstanding 3
------------------------------------------------------------------------------- --------------------
Accrued investment advisory fee 1
------------------------------------------------------------------------------- --------------------
Accrued administration fee 1
------------------------------------------------------------------------------- --------------------
Other liabilities 7
------------------------------------------------------------------------------- --------------------
3,975
=============================================================================== ====================
Net Assets $ 5,373
=============================================================================== ====================
Net Assets Consist of:
Paid in capital $ 5,383
------------------------------------------------------------------------------- --------------------
Undistributed (overdistributed) net investment income (1)
------------------------------------------------------------------------------- --------------------
Accumulated undistributed net realized (loss) (27)
------------------------------------------------------------------------------- --------------------
Net unrealized appreciation 18
------------------------------------------------------------------------------- --------------------
$ 5,373
=============================================================================== ====================
Net Assets:
Institutional Class $ 3,292
------------------------------------------------------------------------------- --------------------
Administrative Class 2,081
------------------------------------------------------------------------------- --------------------
Shares Issued and Outstanding:
Administrative Class 209
------------------------------------------------------------------------------- --------------------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 9.97
------------------------------------------------------------------------------- --------------------
Cost of Investments Owned $ 9,268
=============================================================================== ====================
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Total Return Bond Portfolio II
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 181
------------------------------------------------------------------------------- --------------------
Total Income 181
=============================================================================== ====================
Expenses:
Investment advisory fees 8
------------------------------------------------------------------------------- --------------------
Administration fees 6
------------------------------------------------------------------------------- --------------------
Distribution and/or servicing fees - Administrative Class 1
------------------------------------------------------------------------------- --------------------
Total Expenses 15
------------------------------------------------------------------------------- --------------------
Net Investment Income 166
=============================================================================== ====================
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 16
------------------------------------------------------------------------------- --------------------
Net realized (loss) on futures contracts and written options (2)
------------------------------------------------------------------------------- --------------------
Net change in unrealized appreciation on investments 64
------------------------------------------------------------------------------- --------------------
Net change in unrealized appreciation on futures contracts and written options 5
------------------------------------------------------------------------------- --------------------
Net Gain 83
------------------------------------------------------------------------------- --------------------
Net Increase in Assets Resulting from Operations $ 249
=============================================================================== ====================
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from May 28, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1998
----------------------------------------------------------------------------------- ---------------- ------------------------
Operations:
<S> <C> <C>
Net investment income $ 166 $ 166
----------------------------------------------------------------------------------- ---------------- ------------------------
Net realized gain (loss) 14 (42)
----------------------------------------------------------------------------------- ---------------- ------------------------
Net change in unrealized appreciation (depreciation) 69 (51)
----------------------------------------------------------------------------------- ---------------- ------------------------
Net increase resulting from operations 249 73
=================================================================================== ================ ========================
Distributions to Shareholders:
From net investment income
Institutional Class (51) 0
----------------------------------------------------------------------------------- ---------------- ------------------------
Administrative Class (115) (166)
----------------------------------------------------------------------------------- ---------------- ------------------------
Total Distributions (166) (166)
=================================================================================== ================ ========================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 3,250 0
----------------------------------------------------------------------------------- ---------------- ------------------------
Administrative Class 0 10,106
----------------------------------------------------------------------------------- ---------------- ------------------------
Issued as reinvestment of distributions
Institutional Class 56 0
----------------------------------------------------------------------------------- ---------------- ------------------------
Administrative Class 110 151
----------------------------------------------------------------------------------- ---------------- ------------------------
Cost of shares redeemed
Institutional Class 0 0
----------------------------------------------------------------------------------- ---------------- ------------------------
Administrative Class (3,254) (5,036)
----------------------------------------------------------------------------------- ---------------- ------------------------
Net increase resulting from Portfolio share transactions 162 5,221
----------------------------------------------------------------------------------- ---------------- ------------------------
Total Increase in Net Assets $ 245 $ 5,128
=================================================================================== ================ ========================
Net Assets:
Beginning of period 5,128 0
----------------------------------------------------------------------------------- ---------------- ------------------------
End of period * $ 5,373 $ 5,128
----------------------------------------------------------------------------------- ---------------- ------------------------
*Including net undistributed (overdistributed) investment income of: $ (1) $ (1)
----------------------------------------------------------------------------------- ---------------- ------------------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
-------------------------------------------------------------------------
CORPORATE BONDS & NOTES 33.7%
-------------------------------------------------------------------------
Banking & Finance 13.4%
Bank One Corp.
6.792% due 05/07/2002 (d) $ 100 $ 100
Bear Stearns Co., Inc.
6.423% due 08/01/2002 (d) 100 100
Dresdner Funding Trust I
8.151% due 06/30/2031 100 87
Ford Motor Credit Corp.
6.927% due 03/19/2002 (d) 180 181
Morgan Stanley, Dean Witter, Discover and Co.
6.190% due 04/15/2002 (d) 250 250
--------
718
========
Industrials 18.4%
Arrow Electronics, Inc.
7.570% due 11/24/2000 (d) 250 250
Coastal Corp.
6.568% due 03/01/2002 (d) 250 250
Dillards, Inc.
6.080% due 08/01/2000 250 249
DTE Capital Corp.
7.110% due 11/15/2038 (d) 250 242
--------
991
========
Utilities 1.9%
Worldcom, Inc.
7.050% due 11/26/2001 (d) 100 100
--------
Total Corporate Bonds & Notes 1,809
========
(Cost $1,823)
-------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 4.5%
-------------------------------------------------------------------------
Federal National Mortgage Association
6.300% due 06/01/2004 250 242
--------
Total U.S. Government Agencies 242
========
(Cost $246)
-------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 26.2%
-------------------------------------------------------------------------
Treasury Inflation Protected Securities (e)
3.625% due 07/15/2002 107 106
3.375% due 01/15/2007 1,081 1,037
U.S. Treasury Notes
5.125% due 08/31/2000 (b) 10 10
U.S. Treasury Bonds
8.750% due 08/15/2020 200 257
--------
Total U.S. Treasury Obligations 1,410
========
(Cost $1,379)
-------------------------------------------------------------------------
MORTGAGED-BACKED SECURITIES 80.1%
-------------------------------------------------------------------------
Collateralized Mortgage Obligations 27.3%
Federal Home Loan Mortgage Corp.
6.903% due 07/01/2027 (d) 42 42
6.752% due 01/01/2028 (d) 55 55
6.000% due 07/17/2030 30 28
Federal National Mortgage Assn.
7.000% due 07/17/2030 100 97
6.000% due 07/17/2030 100 92
Government National Mortgage Assn.
8.000% due 07/24/2030 500 505
7.500% due 07/24/2030 400 397
Morgan Stanley Capital
7.460% due 02/15/2020 250 251
--------
1,467
========
Government National Mortgage Association 52.8%
6.500% due 05/20/2030-07/24/2030 (d)(g) 2,820 2,680
7.375% due 02/20/2027 (d) 159 159
--------
2,839
--------
Total Mortgage-Backed Securities 4,306
========
(Cost $4,299)
-------------------------------------------------------------------------
ASSET-BACKED SECURITIES 18.1%
-------------------------------------------------------------------------
AFC Home Equity Loan Trust
6.951% due 06/25/2030 (d) 200 200
Ameriquest Mortgage Securities, Inc.
6.781% due 06/15/2030 99 98
Ameriquest Mortgage Securities, Inc.
7.072% due 07/15/2030 (d) 200 200
Conseco Recreational Enthusiast Consumer Trust
7.562% due 10/15/2007 100 100
Freemont Home Loan Owner Trust
6.495% due 12/25/2029 (d) 175 175
Irwin Low Balance Home Loan Trust
7.026% due 06/25/2021 (d) 200 200
--------
Total Asset-Backed Securities 973
========
(Cost $974)
-------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 10.2%
-------------------------------------------------------------------------
Commercial Paper 7.4%
Bank One Corp.
6.560% due 09/20/2000 100 99
General Electric Capital Corp.
6.290% due 07/18/2000 100 100
General Motors Acceptance Corp.
6.530% due 07/10/2000 200 200
--------
399
========
Repurchase Agreement 2.8%
State Street Bank
5.850% due 07/03/2000 148 148
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
5.860% due 11/07/2000 valued at $156.
Repurchase proceeds are $148.)
--------
Total Short-Term Instruments 547
========
(Cost $547)
Total Investments (a) 172.8% $ 9,287
(Cost $9,268)
Written Options (c) (0.0%) (3)
(Premiums $4)
Other Assets and Liabilities (Net) (72.8%) (3,911)
--------
Net Assets 100.0% $ 5,373
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 44
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (25)
--------
Unrealized appreciation-net $ 19
========
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments (Cont.)
Total Return Bond Portfolio II
June 30, 2000 (Unaudited)
(b) Securities with an aggregate market value of $10 have been segregated with
the custodian to cover margin requirements for the following open futures
contracts at June 30, 2000:
# of Unrealized
Type Contracts Appreciation
-------------------------------------------------------------------------------
Eurodollar March Futures (03/2001) 1 $ 0
--------------------------
(c) Premiums received on written options:
Type Par Premium Value
-------------------------------------------------------------------------------
Put - CME AWPO Eurodollar December Futures
Strike @ 93.00 Exp. 12/18/2000 5 $ 4 $ 3
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/15/2000 200,000 0 0
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/22/2000 100,000 0 0
--------------------------
$ 4 $ 3
==========================
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Principal amount of the security is adjusted for inflation.
(f) Swap agreements outstanding at June 30, 2000.
Notional Unrealized
Type Amount Appreciation
-------------------------------------------------------------------------------
Receive fixed rate equal to 7.670% and
pay floating rate based on 3 month LIBOR.
Broker: Morgan Stanley Dean Witter $ 30 $ 1
Exp. 05/31/2010
(g) Securities are grouped by coupon or range of coupons and represent
a range of maturities.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Total Return Bond Portfolio II (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting regarding any matter relating solely to that class of shares) Information
presented in these financial statements pertains to the Administrative Class of
the Trust. Certain detailed financial information for the Institutional Class is
provided separately and is available upon request.The Trust is designed to be
used as an investment vehicle by Separate Accounts of insurance companies that
fund variable annuity contracts and variable life insurance policies and by
qualified pension and retirement plans. The Portfolio commenced operations on
May 28, 1999.
2. Significant Accounting Policies.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
rights currency exchange rates on investments in securities are not segregated
in the Statements of Operations from the effects of changes in market prices of
those securities, but are included with the net realized and unrealized gain or
loss on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Fund sells the security becomes
insolvent, a Fund's right to repurchase the security may be restricted; the
value of the security may change over the term of the financing transaction; and
the return earned by a Fund with the proceeds of a financing transaction may not
exceed transaction costs.
2000 Semi-Annual Report 9
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjust-ed to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with receive varying proportions of principal and
interest. SMBS include interest-only securities (IOs), which receive all of the
interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, a Fund may fail to recoup some or all of its initial
investment in these securities. The market value of these securities is highly
sensitive to changes in interest rates.
Delayed Delivery Transactions. The Portfolio may purchase or sell securities on
a when-issued or delayed delivery 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 beyond the customary settlement
period. When delayed delivery purchases are outstanding, the Portfolio will set
aside and maintain until the settlement date in a segregated account, liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery 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. The Portfolio may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss. When the
Portfolio has sold a security on a delayed delivery basis, the Portfolio does
not participate in future gains and losses with respect to the security. Forward
sales commitments are accounted for by the Portfolio in the same manner as
forward currency contracts discussed above.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is rights to charged at an annual rate of
0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
10
<PAGE>
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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 sub-
sidiaries or affiliates; (ii) taxes and governmental fees; (iii) brokerage fees
and commissions and other portfolio transaction expenses; (iv) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administra-tive fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
Total Return Bond Portfolio II 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in
future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
-----------------------------------------------
Purchases Sales Purchases Sales
-------------------------------------------------------------------------------
Total Return Bond Portfolio II $ 32,557 $ 30,323 $ 1,675 $ 1,334
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows
(amounts in thousands):
Total Return Bond Portfolio II
-------------------------------------
# of Contracts Premium
-------------------------------------------------------------------------------
Balance at 12/31/1999 0 $ 0
Sales 300,010 6
Closing Buys (1) (1)
Expirations (4) (1)
Exercised 0 0
------------------------------------------------------------------------------
Balance at 06/30/2000 300,005 $ 4
------------------------------------------------------------------------------
6. Federal Income Tax Matters
As of December 31, 1999 Total Return Bond Portfolio II had remaining capital
loss carryforwards that were realized during the current year.
Additionally, the Portfolio realized $7,155 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards (amounts in
thousands):
Capital Loss Carryforwards
-------------------------------------
Realized Losses Expiration
-------------------------------------------------------------------------------
Total Return Bond Portfolio II $ 38,479 12/31/2007
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
2000 Semi-Annual Report 11
<PAGE>
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Total Return Bond Portfolio II
-------------------------------------------------
Period Ended 6/30/2000 Period from 05/28/1998
to 12/31/1999
Shares Amount Shares Amount
-------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 324 $ 3,250 0 $ 0
------------------------------------------------------------------------------- -----------------------------------------------
Administrative Class 0 0 1,016 10,106
------------------------------------------------------------------------------- -----------------------------------------------
Issued as reinvestment of distributions
Institutional Class 6 56 0 0
------------------------------------------------------------------------------- -----------------------------------------------
Administrative Class 11 110 15 151
------------------------------------------------------------------------------- -----------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
------------------------------------------------------------------------------- -----------------------------------------------
Administrative Class (325) (3,254) (509) (5,036)
------------------------------------------------------------------------------- -----------------------------------------------
Net increase resulting from Portfolio share transactions 16 $ 162 522 $ 5,221
=============================================================================== ===============================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
---------------------------------------------------------------------
Total Return Bond Portfolio II 2 100
8. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long- term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
12
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Beach Center Drive, Suite 300
Newport Beach. CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or proceeded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
FOREIGN BOND PORTFOLIO
ADMINISTRATIVE CLASS
------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
<S> <C>
Contents
Chairman's Letter........................................ 1
Financial Highlights..................................... 3
Statement of Assets and Liabilities...................... 4
Statement of Operations.................................. 5
Statements of Changes in Net Assets...................... 6
Statement of Cash Flows ................................. 7
Notes to Financial Statements............................ 9
<CAPTION>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Foreign Bond Portfolio (Administrative Class)............ 2 8-11
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Foreign Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily intermediate maturity hedged non-U.S. fixed income securities
Duration:
2.74 years
Total Net Assets:
$5.6 million
Country Allocation:*
[GRAPH]
United States 48.9%
Japan 14.5%
Supranational 6.2%
Germany 6.9%
United Kingdom 4.3%
Short-Term Instruments 4.2%
Other 15.0%
Quality Breakdown:*
[GRAPH]
AAA 70.9%
AA 11.5%
A 11.0%
BBB 4.6%
BB 1.0%
B 1.0%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class J.P. Morgan
(Incep. 2/16/1999) Non-U.S. Index (Hedged)
------------------------------------------------------------------
6 Months 3.46% 4.09%
1 Year 4.35% 5.58%
Since Inception* 1.93% --
*Annualized
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
$10.7 (in thousands)
[GRAPH]
Month Foreign J.P.
Bond Morgan
Portfolio Non-U.S.
Index
(Hedged)
========== ========= ========
02/28/1999 10,000 10,000
03/31/1999 10,069 10,119
04/30/1999 10,186 10,248
05/31/1999 10,075 10,205
06/30/1999 9,857 10,047
07/31/1999 9,787 10,021
08/31/1999 9,706 10,039
09/30/1999 9,693 10,077
10/31/1999 9,870 10,102
11/30/1999 9,868 10,160
12/31/1999 9,942 10,191
01/31/2000 9,964 10,192
02/29/2000 9,997 10,267
03/31/2000 10,119 10,417
04/30/2000 10,170 10,473
05/31/2000 10,210 10,557
06/30/2000 10,286 10,608
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 3/01/1999, the first full month following the
Portfolio's inception on 2/16/1999, compared to the J.P. Morgan Non-U.S. Index
(Hedged), an unmanaged market index. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. For the six-month period ended June 30, 2000, the Foreign Bond Portfolio's
total return investment performance was 3.46%, underperforming the 4.09%
return of its benchmark, the J.P. Morgan non-U.S. Index (Hedged).
. Continued central bank rate hikes and a belief that the European Central
Bank would remain ahead of the inflation curve caused bond yields to fall
over the first half of the year. The Japanese bond market remained stable,
as domestic institutions continued to support government bonds. In this
market environment the Investment Adviser reduced the Portfolio's duration,
or sensitivity to interest rates, which detracted from returns.
. An overweight in the euro versus the U.S. dollar was negative for returns
after the U.S. dollar rallied in response to the relatively stronger U.S.
economy.
. An overweight in New Zealand aided performance after expectations of more
central bank tightening drove bond yields to near six-month lows.
. A U.K. underweight was slightly negative because the strong currency and
prospects for restrictive monetary policy kept inflation forecasts low.
. An underweight in Canada detracted from performance as yields fell due to
weaker growth than in the U.S.
. Emphasizing Danish mortgages was positive as the market benefited from
light new issuance and relatively high yields.
. Small allocations to global corporate bonds aided performance due to their
relatively attractive yields.
2
<PAGE>
Financial Highlights
Foreign Bond Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999(b)
---------- ---------------
<S> <C> <C>
Net asset value beginning of period $ 9.42 $ 10.00
--------------------------------------------------------------- ---------- ---------------
Net investment income (a) 0.26 0.41
--------------------------------------------------------------- ---------- ---------------
Net realized / unrealized gain (loss) on investments (a) 0.06 (0.49)
--------------------------------------------------------------- ---------- ---------------
Total income from investment operations 0.32 (0.08)
--------------------------------------------------------------- ---------- ---------------
Dividends from net investment income (0.27) (0.41)
--------------------------------------------------------------- ---------- ---------------
Distributions from net realized capital gains 0.00 0.09
--------------------------------------------------------------- ---------- ---------------
Total distributions (0.27) (0.50)
--------------------------------------------------------------- ---------- ---------------
Net asset value end of period $ 9.47 $ 9.42
--------------------------------------------------------------- ---------- ---------------
Total return % 3.46 (0.78)
--------------------------------------------------------------- ---------- ---------------
Net assets end of period (000s) $ 675 $ 5,215
--------------------------------------------------------------- ---------- ---------------
Ratio of expenses to average net assets %* 0.90 1.10 (c)(d)
--------------------------------------------------------------- ---------- ---------------
Ratio of net investment income to average net assets %* 5.57 4.83
--------------------------------------------------------------- ---------- ---------------
Portfolio turnover rate % 169 285
--------------------------------------------------------------- ---------- ---------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on February 16, 1999.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 1.25% for the
period ended December 31, 1999. (d) Ratio of net expenses to average net
assets excluding interest expense is 0.90%.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 9,481
----------------------------------------------------------------------------------------------------- ----------
Cash and foreign currency 402
----------------------------------------------------------------------------------------------------- ----------
Receivable for investments sold and forward foreign currency contracts 5,649
----------------------------------------------------------------------------------------------------- ----------
Interest and dividends receivable 61
----------------------------------------------------------------------------------------------------- ----------
Manager reimbursement receivable 6
----------------------------------------------------------------------------------------------------- ----------
15,599
===================================================================================================== ==========
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 6,054
----------------------------------------------------------------------------------------------------- ----------
Payable for financing transactions 3,915
----------------------------------------------------------------------------------------------------- ----------
Written options outstanding 0
----------------------------------------------------------------------------------------------------- ----------
Accrued investment advisory fee 1
----------------------------------------------------------------------------------------------------- ----------
Accrued administration fee 3
----------------------------------------------------------------------------------------------------- ----------
Other liabilities 6
----------------------------------------------------------------------------------------------------- ----------
9,979
===================================================================================================== ==========
Net Assets $ 5,620
===================================================================================================== ==========
Net Assets Consist of:
Paid in capital $ 5,893
----------------------------------------------------------------------------------------------------- ----------
Undistributed (overdistributed) net investment income (77)
----------------------------------------------------------------------------------------------------- ----------
Accumulated undistributed net realized gain 21
----------------------------------------------------------------------------------------------------- ----------
Net unrealized (depreciation) (217)
----------------------------------------------------------------------------------------------------- ----------
$ 5,620
----------------------------------------------------------------------------------------------------- ----------
Net Assets:
Institutional Class $ 4,945
----------------------------------------------------------------------------------------------------- ----------
Administrative Class 675
----------------------------------------------------------------------------------------------------- ----------
Shares Issued and Outstanding:
Administrative Class 71
----------------------------------------------------------------------------------------------------- ----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 9.47
----------------------------------------------------------------------------------------------------- ----------
Cost of Investments Owned $ 9,656
===================================================================================================== ==========
Cost of Foreign Currency Held $ 400
===================================================================================================== ==========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Foreign Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 180
---------------------------------------------------------------------------------------- -----------
Dividends (2)
---------------------------------------------------------------------------------------- -----------
Total Income 178
======================================================================================== ===========
Expenses:
Investment advisory fees 11
---------------------------------------------------------------------------------------- -----------
Administration fees 11
---------------------------------------------------------------------------------------- -----------
Total Expenses 22
---------------------------------------------------------------------------------------- -----------
Net Investment Income 156
======================================================================================== ===========
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 51
---------------------------------------------------------------------------------------- -----------
Net realized (loss) on futures contracts and written options (67)
---------------------------------------------------------------------------------------- -----------
Net realized gain on foreign currency transactions 180
---------------------------------------------------------------------------------------- -----------
Net change in unrealized (depreciation) on investments (59)
---------------------------------------------------------------------------------------- -----------
Net change in unrealized appreciation on futures contracts and written options 2
---------------------------------------------------------------------------------------- -----------
Net change in unrealized (depreciation) on translation of assets and
liabilities denominated in foreign currencies (79)
---------------------------------------------------------------------------------------- -----------
Net Gain 28
---------------------------------------------------------------------------------------- -----------
Net Increase in Assets Resulting from Operations $ 184
======================================================================================== ===========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from February 16, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 156 $ 214
--------------------------------------------------------------------- ----------- -----------
Net realized gain (loss) 164 (169)
--------------------------------------------------------------------- ----------- -----------
Net change in unrealized appreciation (depreciation) (136) (81)
--------------------------------------------------------------------- ----------- -----------
Net increase (decrease) resulting from operations 184 (36)
===================================================================== =========== ===========
Distributions to Shareholders:
From net investment income
Institutional Class (69) 0
--------------------------------------------------------------------- ----------- -----------
Administrative Class (88) (214)
--------------------------------------------------------------------- ----------- -----------
From net realized capital gains
Institutional Class 0 0
--------------------------------------------------------------------- ----------- -----------
Administrative Class 0 (50)
--------------------------------------------------------------------- ----------- -----------
Total Distributions (157) (264)
===================================================================== =========== ===========
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 4,877 0
--------------------------------------------------------------------- ----------- -----------
Administrative Class 333 10,240
--------------------------------------------------------------------- ----------- -----------
Issued as reinvestment of distributions
Institutional Class 75 0
--------------------------------------------------------------------- ----------- -----------
Administrative Class 81 235
--------------------------------------------------------------------- ----------- -----------
Cost of shares redeemed
Institutional Class 0 0
--------------------------------------------------------------------- ----------- -----------
Administrative Class (4,988) (4,960)
--------------------------------------------------------------------- ----------- -----------
Net increase resulting from Portfolio share transactions 378 5,515
--------------------------------------------------------------------- ----------- -----------
Total Increase in Net Assets $ 405 $ 5,215
===================================================================== =========== ===========
Net Assets:
Beginning of period 5,215 0
--------------------------------------------------------------------- ----------- -----------
End of period * $ 5,620 $ 5,215
--------------------------------------------------------------------- ----------- -----------
*Including net (overdistributed) investment income of: $ (77) $ (76)
--------------------------------------------------------------------- ----------- -----------
</TABLE>
6 See accompanying notes
<PAGE>
Statement of Cash Flows
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
Increase (Decrease) in Cash and Foreign Currency from:
<TABLE>
<CAPTION>
Financing Activities
<S> <C>
Sales of Portfolio shares $ 5,210
--------------------------------------------------------------------------------------- -----------
Redemptions of Portfolio shares (4,987)
--------------------------------------------------------------------------------------- -----------
Cash distributions paid (11)
--------------------------------------------------------------------------------------- -----------
Proceeds from financing transactions 253
--------------------------------------------------------------------------------------- -----------
Net increase (decrease) from financing activities 465
======================================================================================= ===========
Operating Activities
Purchases of long-term securities and foreign currency (13,419)
--------------------------------------------------------------------------------------- -----------
Proceeds from sales of long-term securities and foreign currency 12,223
--------------------------------------------------------------------------------------- -----------
Purchases of short-term securities (net) 914
--------------------------------------------------------------------------------------- -----------
Net investment income 155
--------------------------------------------------------------------------------------- -----------
Change in other receivables/payables (net) (6)
--------------------------------------------------------------------------------------- -----------
Net increase (decrease) from operating activities (133)
======================================================================================= ===========
Net Increase in Cash and Foreign Currency 332
======================================================================================= ===========
Cash and Foreign Currency
Beginning of period 70
--------------------------------------------------------------------------------------- -----------
End of period $ 402
--------------------------------------------------------------------------------------- -----------
</TABLE>
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
-------------------------------------------------------------------------
AUSTRALIA (g)(h) 0.9%
-------------------------------------------------------------------------
National Australia Bank Ltd.
7.385% due 05/19/2010 (e) A$ 50 $ 50
--------
Total Australia 50
========
(Cost $50)
-------------------------------------------------------------------------
BRAZIL (g)(h) 1.1%
-------------------------------------------------------------------------
Republic of Brazil
7.375% due 04/15/2006 BR 65 60
--------
Total Brazil 60
========
(Cost $60)
-------------------------------------------------------------------------
BULGARIA (h) 0.6%
-------------------------------------------------------------------------
Republic of Bulgaria
2.500% due 07/28/2012 (e) BL 29 21
6.500% due 07/28/2024 (e) 20 15
--------
Total Bulgaria 36
========
(Cost $34)
-------------------------------------------------------------------------
CANADA (g)(h) 2.0%
-------------------------------------------------------------------------
Beneficial Canada, Inc.
6.350% due 04/01/2002 C$ 30 20
Commonwealth of Canada
6.625% due 10/03/2007 N$ 200 90
--------
Total Canada 110
========
(Cost $131)
-------------------------------------------------------------------------
CAYMAN ISLANDS (g)(h) 0.9%
-------------------------------------------------------------------------
Capital Credit Card Corp.
5.625% due 10/15/2004 DM 100 49
--------
Total Cayman Islands 49
========
(Cost $53)
-------------------------------------------------------------------------
CHILE 0.3%
-------------------------------------------------------------------------
Republic of Chile
6.875% due 04/28/2009 $ 19 18
--------
Total Chile 18
========
(Cost $19)
-------------------------------------------------------------------------
DENMARK (g)(h) 2.1%
-------------------------------------------------------------------------
Danske Kredit Mortgage
5.000% due 10/01/2029 DK 1,063 116
Realkredit Danmark Mortgage
5.000% due 10/01/2029 1 0
Unikredit Realkredit
5.000% due 10/01/2029 5 1
--------
Total Denmark 117
========
(Cost $143)
------------------------------------------------------------------------
GERMANY (g)(h) 11.7%
------------------------------------------------------------------------
Allgemeine Hypothekenbank AG
5.500% due 07/13/2010 EC 60 56
Depfa Pfandbriefbank
4.750% due 07/15/2008 20 19
5.750% due 03/04/2009 20 19
Hypothekenbank in Essen AG
4.750% due 08/11/2008 (i) 20 18
4.000% due 04/27/2009 (i) 22 19
Republic of Germany
4.125% due 07/04/2008 (i) 63 56
4.500% due 07/04/2009 (i) 20 18
5.375% due 01/04/2010 320 319
6.250% due 01/04/2024 10 10
4.750% due 07/04/2028 30 26
6.250% due 01/04/2030 (i) 90 96
--------
Total Germany 656
========
(Cost $777)
------------------------------------------------------------------------
GREECE (g)(h) 0.2%
------------------------------------------------------------------------
Hellenic Republic
6.600% due 01/15/2004 (i) GD 5,000 13
--------
Total Greece 13
========
(Cost $14)
------------------------------------------------------------------------
ITALY (g)(h) 1.9%
------------------------------------------------------------------------
Republic of Italy
5.500% due 11/01/2010 EC 110 105
--------
Total Italy 105
========
(Cost $97)
------------------------------------------------------------------------
JAPAN (g)(h) 24.5%
------------------------------------------------------------------------
Government of Japan
3.400% due 06/20/2005 (i) JY 11,300 118
3.000% due 09/20/2005 (i) 21,000 216
3.300% due 06/20/2006 (i) 12,000 126
2.900% due 12/20/2006 (i) 2,000 21
2.700% due 06/20/2007 (i) 10,000 102
2.600% due 09/20/2007 (i) 12,000 122
0.900% due 12/22/2008 (i) 69,000 609
1.400% due 06/22/2009 (i) 7,000 64
--------
Total Japan 1,378
========
(Cost $1,354)
------------------------------------------------------------------------
MEXICO (g)(h) 1.1%
------------------------------------------------------------------------
Banco Nacional de Comercio Exterior
8.000% due 08/05/2003 $ 10 10
Petroleos Mexicanos
8.850% due 09/15/2007 20 20
9.375% due 12/02/2008 30 31
--------
Total Mexico 61
========
(Cost $57)
------------------------------------------------------------------------
NEW ZEALAND (g)(h) 2.5%
------------------------------------------------------------------------
Commonwealth of New Zealand
4.500% due 02/15/2016 (b) N$ 300 143
--------
Total New Zealand 143
========
(Cost $166)
------------------------------------------------------------------------
PERU (g)(h) 1.2%
------------------------------------------------------------------------
Republic of Peru
4.500% due 03/07/2017 PN 100 67
--------
Total Peru 67
========
(Cost $67)
------------------------------------------------------------------------
PHILIPPINES (g)(h) 0.4%
------------------------------------------------------------------------
Republic of Philippines
6.000% due 12/01/2009 (e) $ 8 7
8.000% due 09/17/2004 EC 20 18
--------
Total Philippines 25
========
(Cost $29)
------------------------------------------------------------------------
PORTUGAL (h) 3.0%
------------------------------------------------------------------------
Republic of Portugal
3.950% due 07/15/2009 (i) PE 200 169
--------
Total Portugal 169
========
(Cost $187)
------------------------------------------------------------------------
SOUTH KOREA (g)(h) 2.0%
------------------------------------------------------------------------
Korea Development Bank
9.600% due 12/01/2000 $ 50 50
4.436% due 05/14/2001 (e) DM 50 24
1.875% due 02/13/2002 JY 4,000 38
--------
Total South Korea 112
========
(Cost $111)
8 See accompanying notes
<PAGE>
Principal
Amount Value
(000s) (000s)
----------------------------------------------------------------------------
SPAIN (g)(h) 2.7%
----------------------------------------------------------------------------
Kingdom of Spain
5.150% due 07/30/2009 (i) EC 70 $ 65
4.000% due 01/31/2010 (i) 100 85
-------
Total Spain 150
=======
(Cost $152)
----------------------------------------------------------------------------
SUPRANATIONAL (g)(h) 10.4%
----------------------------------------------------------------------------
Depfa Bank
4.750% due 07/15/2008 20 18
Eurofima
4.750% due 07/07/2004 SK 600 66
European Investment Bank
6.000% due 12/07/2028 BP 100 156
General Electric Capital Corp.
5.125% due 01/12/2004 80 115
Inter-American Development Bank
7.125% due 11/26/2004 30 47
International Bank for Reconstruction & Development
7.250% due 04/09/2001 N$ 388 181
-------
Total Supranational 583
=======
(Cost $622)
----------------------------------------------------------------------------
UNITED KINGDOM (g)(h) 7.2%
----------------------------------------------------------------------------
Bank of Scotland
8.117% due 03/29/2049 BP 40 60
BG Transco Holdings
7.273% due 12/14/2009 20 31
HAUS Ltd.
4.352% due 12/10/2015 (e) EC 100 95
4.542% due 12/10/2037 (e) 100 95
Lloyds Bank PLC
5.625% due 07/15/2049 40 36
United Kingdom Gilt
9.000% due 10/13/2008 BP 46 86
-------
Total United Kingdom 403
=======
(Cost $422)
----------------------------------------------------------------------------
UNITES STATES (g)(h) 82.4%
----------------------------------------------------------------------------
Asset-Backed Securities 7.0%
Amresco Residential Securities Mortgage Loan Trust
7.121% due 06/25/2029 (e) $ 50 45
Circuit City Credit Master Trust
6.108% due 02/15/2006 (e) 100 100
MLCC Mortgage Investors, Inc.
6.265% due 03/15/2025 (e) 90 90
Novastar Home Equity Loan
6.885% due 04/25/2028 (e) 78 78
Providian Home Equity Loan Trust
6.900% due 06/25/2025 (e) 72 72
PSB Lending Home Loan Owner Trust
6.830% due 05/20/2018 10 10
-------
395
=======
Corporate Bonds & Notes 25.2%
Associates Corp. of North America
6.850% due 05/08/2003 (e) 80 80
bear Stearns Co., Inc.
6.396% due 05/16/2003 (e) 100 101
Beckman Instruments, Inc.
7.100% due 03/04/2003 3 3
Century Communications Corp.
0.100% due 03/15/2003 3 2
CMS Energy
8.125% due 05/15/2002 3 3
DaimlerChrysler Holdings
5.747% due 08/23/2002 (e) 30 30
Donaldson, Lufkin & Jenrette Inc.
6.760% due 04/25/2003 (e) 50 50
Finova Capital Corp.
6.110% due 06/18/2003 (e) 100 100
Ford Motor Credit Corp.
1.200% due 02/07/2005 JY 6,000 $ 56
General Motors Acceptance Corp.
0.340% due 07/26/2002 $ 0 0
7.020% due 04/05/2004 (c)(e) 240 240
6.875% due 09/09/2004 BP 150 222
Goldman Sachs Group
6.640% due 02/19/2004 (e) $ 100 101
Household Finance Corp.
5.125% due 06/24/2009 EC 100 88
J Seagram & Sons
5.790% due 04/15/2001 $ 50 49
J.P. Morgan & Co.
6.902% due 02/15/2012 (e) 10 9
Jones Intercable, Inc.
8.875% due 04/01/2007 3 3
KFW International Finance, Inc.
1.750% due 03/23/2010 JY 11,000 67
Oneok, Inc.
6.960% due 04/24/2002 (e) $ 100 100
Rogers Cantel, Inc.
8.300% due 10/01/2007 3 3
Sprint Capital Corp.
5.875% due 05/01/2004 10 9
Texas Utilities Co.
7.315% due 06/25/2001 (e) 100 100
TV Guide, Inc.
8.125% due 03/01/2009 2 2
--------
1,418
========
Mortgage-Backed Securities 35.5%
Crusade Global Trust
5.843% due 02/15/2030 (e) 100 100
Federal Home Loan Mortgage Corp.
6.500% due 08/15/2023 81 80
General Electric Capital Corp.
5.125% due 01/12/2004 80 116
Government National Mortgage Assn.
1.000% due 07/25/2030 (e) 150 147
7.000% due 07/24/2030 540 525
7.500% due 07/24/2030 200 199
7.000% due 04/20/2030 100 100
6.500% due 07/24/2030 350 327
JP Morgan Commercial Mortgage
6.902% due 04/15/2010 (e) 100 100
Medallion Trust
6.471% due 07/12/2031 (e) 100 100
Residential Funding Mortgage Securities, Inc.
6.560% due 05/12/2032 (e) 199 198
--------
1,992
========
U.S. Treasury Obligations 14.7%
Treasury Inflation Protected Securities
3.625% due 07/15/2002 (b)(f) 812 807
U.S. Treasury Notes
5.125% due 08/31/2000 (f) 20 20
--------
827
--------
Total United States 4,632
========
(Cost $4,526)
----------------------------------------------------------------------------
PURCHASED CALL OPTIONS 0.0%
----------------------------------------------------------------------------
Canadian Dollar vs. U.S. Dollar (OTC)
Strike @ 1.40 Exp. 07/21/2000 $ 400 0
Canadian Dollar vs. U.S. Dollar (OTC)
Strike @ 1.44 Exp. 07/21/2000 380 0
Euro vs. U.S. Dollar (OTC)
Strike @ 1.05 Exp 07/28/2000 350 0
--------
Total Purchased Call Options 0
========
(Cost $5)
2000 Semi-Annual Report See accompanying notes 9
<PAGE>
Schedule of Investments (Cont.)
Foreign Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
------------------------------------------------------------------------------
PURCHASED PUT OPTIONS 2.5%
------------------------------------------------------------------------------
Canadian Government Bond (OTC)
6.000% due 06/2008
Strike @ 125.000 Exp. 08/02/2000 $ 36,000 $ 59
Government National Mortgage Assn. (OTC)
6.500% due 07/24/2030
Strike @ 89.391 Exp. 07/17/2000 350 0
Government National Mortgage Assn. (OTC)
7.000% due 07/24/2030
Strike @ 91.719 Exp. 07/17/2000 540 0
Government National Mortgage Assn. (OTC)
7.500% due 07/24/2030
Strike @ 93.813 Exp. 07/17/2000 200 0
U.S. Treasury Note (OTC)
6.375% due 04/30/2002
Strike @ 102.180 Exp. 08/03/2000 1,000 21
U.S. Treasury Note (OTC)
5.625% due 05/15/2008
Strike @ 105.438 Exp. 08/03/2000 700 62
--------
Total Purchased Put Options 142
========
(Cost $178)
------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 7.1%
------------------------------------------------------------------------------
Commercial Paper 3.5%
American Express Credit Corp.
6.550% due 07/10/2000 $ 100 100
General Electric Capital Corp.
6.550% due 09/11/2000 100 99
--------
199
========
Repurchase Agreement 3.6%
State Street Bank
5.850% due 07/03/2000 203 203
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
6.000% due 08/15/2002 valued at $211.
Repurchase proceeds are $203.)
--------
Total Short-Term Instruments 402
========
(Cost $402)
Total Investments (a) 168.7% $ 9,481
(Cost $9,656)
Written Options (d) 0.0% 0
(Premium $1)
Other Assets and Liabilities (Net) (68.7%) (3,861)
--------
Net Assets 100.0% 5,620
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. 91
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (266)
--------
Unrealized depreciation-net (175)
========
(b) Principal amount of the security is adjusted for inflation.
(c) Securities are grouped together by coupon or range of
coupons and represent a range of maturities.
(d) Premiums received on written options:
# of
Type Contracts Premium Value
-------------------------------------------------------------------------------
Put - OTC Canadian Dollar vs. U.S. Dollar
Strike @ 1.55 Exp. 07/21/2000 210,000 $ 0 $ 0
Put - OTC Canadian Dollar vs. U.S. Dollar
Strike @ 1.50 Exp. 07/21/2000 420,000 1 0
Put - OTC Canadian Dollar vs. U.S. Dollar
Strike @ 1.55 Exp. 07/21/2000 210,000 0 0
----------------
$ 1 $ 0
================
(e) Variable rate security. The rate listed is as of June 30,
2000.
(f) Securities with an aggregate market value of $137
have been segregated with the custodian to cover margin
requirements for the following open future contracts
at June 30, 2000:
Unrealized)
# of Appreciation/
Type Contracts (Depreciation)
------------------------------------------------------------------------------
Eurobond 10 Year Bond Futures (09/2000) 6 $ 2
United Kingdom 10 Year Gilt Futures (09/2000) 2 (3)
Eurodollar March Futures (03/2001) 1 0
Euribor Futures (09/2000) 6 0
U.S. Treasury 30 Year Bond (09/2000) 1 1
--------
$ 0
========
10
<PAGE>
<TABLE>
<CAPTION>
(g) Foreign forward currency contracts outstanding at June 30, 2000: (h) Principal amount denoted in indicated currency:
Principal A$ - Australian Dollar
Amount Unrealized BL - Bulgarian Lev
Covered by Settlement Appreciation/ BP - British Pound
Type Currency Contract Month (Depreciation) BR - Brazilian Real
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Buy A$ 54 07/2000 1 C$ - Canadian Dollar
Sell 56 08/2000 0 CLP - Chilean Peso
Buy BP 250 07/2000 0 COP - Columbian Peso
Sell 757 08/2000 (4) DK - Danish Krone
Buy BR 10 07/2000 0 DM - German Mark
Buy 10 09/2000 0 EC - European Currency Unit
Sell C$ 115 07/2000 0 GD - Greek Drachma
Buy CLP 3,500 07/2000 0 H$ - Hong Kong Dollar
Buy 1,200 09/2000 0 HF - Hungarian Forint
Buy COP 12,700 08/2000 0 IL - Italian Lira
Buy DK 100 07/2000 0 IR - Indonesian Rupiah
Sell 1,154 08/2000 0 JY - Japanese Yen
Buy EC 105 07/2000 (1) KRW - South Korean Won
Sell 911 08/2000 (3) MP - Mexican Peso
Buy HF 14,000 08/2000 (3) N$ - New Zealand Dollar
Sell 12,000 08/2000 (1) PE - Portugese Escudo
Buy 3,200 01/2001 1 PN - Peruvian New Sol
Sell 2,000 01/2001 0 PZ - Polish Zloty
Sell 1,072 09/2000 (2) SP - Spanish Peseta
Buy 530 10/2000 0 SR - South Africa Rand
Sell 530 10/2000 0 TB - Thai Baht
Buy IR 52,000 07/2000 (1) TD - Taiwan Dollar
Buy JY 26,249 07/2000 (1) TL - Turkish Lira
Sell 47,845 07/2000 2 VB - Venezuelan Bolivar
Buy KRW 8,300 07/2000 0
Buy MP 70 10/2000 0 (i) Subject to financing transaction.
Sell N$ 429 07/2000
Sell 523 08/2000 (2) (j) Swap agreements outstanding at June 30, 2000.
Buy PN 40 08/2000 0
Buy PZ 10 01/2001 0 Unrealized
Sell 20 01/2001 0 Notional Appreciation/
Buy 190 02/2001 0 Type Amount (Depreciation)
-------------------------------------------------------------
<S> <C> <C>
Sell 140 02/2001 (2) Receive floating rate based on 3 month
Buy 60 03/2001 0 Canadian Bank Bill and pay fixed rate
Sell 20 03/2001 0 equal to 6.515% in Canadian Dollar.
Sell SK 588 07/2000 2
Buy SR 70 09/2000 0 Broker: J.P. Morgan Securities, Inc.
Buy TB 300 07/2000 0 Exp. 05/10/2002 C$ 250 $ (1)
Buy TD 200 07/2000 0
Buy TL 9,341,000 08/2000 0 Receive floating rate based on 6 month Japanese
Buy VB 4,990 10/2000 0 Yen LIBOR and pay fixed rate equal to 2.020%
Buy 1,900 12/2000 0 in Japanese Yen.
---------
$ (14) Broker: Goldman Sachs & Co.
=========
Exp. 05/18/2010 JY 17,000 0
Receive floating rate based on 6 month Euribor
and pay fixed rate equal to 6.175% in Euro.
Broker: Goldman Sachs & Co.
Exp. 05/22/2030 EC 100 (1)
Receive floating rate based on 6 month Euribor less
0.540% and pay fixed rate equal to 6.250% in Euro.
Broker: J.P. Morgan Securities, Inc.
Exp. 01/04/2024 EC 10 (1)
--------
$ (3)
========
</TABLE>
2000 Semi-Annual Report 11
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Foreign Bond Portfolio (the "Portfolio") is a series of the PIMCO Variable
Insurance Trust (the "Trust"). The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company organized as
a Delaware business trust on October 3, 1997. The Trust may offer up to two
classes of shares: Institutional and Administrative. Each share class has
identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on February 16, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
12
<PAGE>
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. The Portfolio is authorized to enter into forward
foreign exchange 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 purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Swaps. The Portfolio is authorized to enter into interest rate, total return and
currency exchange swap agreements in order to obtain a desired return at a lower
cost than if the Portfolio had invested directly in the asset that yielded the
desired return. Swaps involve commitments to exchange components of income
(generally interest or returns) pegged to the underlying assets based on a
notional principal amount. Swaps are marked to market daily based upon
quotations from market makers and the change, if any, is recorded as unrealized
gains or losses in the Statements of Operations. The 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 counterparty.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Delayed Delivery Transactions. The Portfolio may purchase or sell securities on
a when-issued or delayed delivery 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 beyond the customary settlement
period. When delayed delivery purchases are outstanding, the Portfolio will set
aside and maintain until the settlement date in a segregated account, liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery 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. The Portfolio may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss. When the
Portfolio has sold a security on a delayed delivery basis, the Portfolio does
not participate in future gains and losses with respect to the security. Forward
sales commitments are accounted for by the Portfolio in the same manner as
forward currency contracts discussed above.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly-owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
2000 Semi-Annual Report 13
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on each share class' average daily net assets. The
Administration Fee is charged at the annual rate of 0.50%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
<TABLE>
<CAPTION>
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------
<S> <C> <C>
Advisory Fee 0.25% 0.60%
Administrative Fee 0.50% 0.30%
Service Fee 0.15% --
</TABLE>
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the prospectus
(as set forth below) plus 0.49 basis points. PIMCO may be reimbursed for these
waived amounts in future periods, to limit the expenses (calculated as a
percentage of Portfolio's average daily net assets attributable to each class):
<TABLE>
<CAPTION>
Institutional Class Administrative Class
---------------------------------------------------------------------------
<S> <C> <C>
Foreign Bond Portfolio 0.75% 0.90%
</TABLE>
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. Government/Agency All Other
---------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign Bond Portfolio $7,217 $5,380 $ 7,191 $7,010
</TABLE>
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Foreign Bond Portfolio
-------------------------------
# of contracts Premium
-----------------------------------------------------------------------
<S> <C> <C>
Balance at 12/31/1999 0 $ 0
Sales 2,230,000 9
Closing Buys (940,000) (4)
Expirations (450,000) (4)
Exercised 0 0
-----------------------------------------------------------------------
Balance at 06/30/2000 840,000 $ 1
=======================================================================
</TABLE>
14
<PAGE>
6. Federal Income Tax Matters
As of December 31, 1999 Foreign Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $49,398 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards (amounts in
thousands):
<TABLE>
<CAPTION>
Capital Loss Carryforwards
--------------------------------
Realized Losses Expiration
----------------------------------------------------------------
<S> <C> <C>
Foreign Bond Portfolio $ 74,591 12/31/2007
</TABLE>
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Foreign Bond Portfolio
---------------------------------------------------
Period from 02/16/1999
Period Ended 06/30/2000 to 12/31/1999
Shares Amount Shares Amount
---------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 514 $ 4,877 0 $ 0
----------------------------------------------------------------- ---------------------------------------------------
Administrative Class 35 333 1,057 10,240
----------------------------------------------------------------- ---------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 8 75 0 0
----------------------------------------------------------------- ---------------------------------------------------
Administrative Class 9 81 24 235
----------------------------------------------------------------- ---------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
----------------------------------------------------------------- ---------------------------------------------------
Administrative Class (526) (4,988) (527) (4,960)
----------------------------------------------------------------- ---------------------------------------------------
Net increase resulting from Portfolio share transactions 40 $ 378 554 $ 5,515
================================================================= ===================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
<TABLE>
<CAPTION>
Number % of Portfolio Held
------------------------------------------------------------------
<S> <C> <C>
Foreign Bond Portfolio 2 96
</TABLE>
8. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of app roximately 70% of
the outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"),
of which PIMCO is a subsidiary partnership. As a result of this transaction,
PIMCO Advisors, and its subsidiaries, are now controlled by Allianz AG, a
leading provider of financial services, particularly in Europe. PIM CO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 15
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
MONEY MARKET PORTFOLIO
ADMINISTRATIVE CLASS
------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter............................................................................ 1
Financial Highlights......................................................................... 3
Statement of Assets and Liabilities.......................................................... 4
Statement of Operations...................................................................... 5
Statements of Changes in Net Assets.......................................................... 6
Notes to Financial Statements................................................................ 8
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Money Market Portfolio (Administrative Class)................................................ 2 7
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Money Market Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum current income, consistent with preservation of capital and daily
liquidity
Portfolio:
Primarily money market instruments
Duration:
0.11 years
Total Net Assets:
$4.3 million
Quality Breakdown:*
[GRAPH]
AAA 60.1%
AA 39.9%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class Salomon 3-Month
(Incep. 9/30/1999) Treasury Bill Index
--------------------------------------------------------------------------------
6 Months 2.81% 2.80%
Since Inception 4.15% --
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
$10.5 (in thousands)
[GRAPH]
Month Money Market Salomon
Portfolio 3-Month Treasury
Bill Index
========== ============ ================
09/30/1999 10,000 10,000
10/31/1999 10,041 10,041
11/30/1999 10,082 10,081
12/31/1999 10,130 10,125
01/31/2000 10,174 10,169
02/29/2000 10,218 10,213
03/31/2000 10,268 10,261
04/30/2000 10,311 10,309
05/31/2000 10,361 10,360
06/30/2000 10,415 10,408
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 10/01/1999, the first full month following the
Portfolio's inception on 9/30/1999, compared to the Salomon 3-Month Treasury
Bill Index, an unmanaged market index. An investment in the Money Market
Portfolio is neither insured nor guaranteed by the Federal Deposit Insurance
Corporation or any other U.S. Government Agency. Although 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. If there is a material difference between
the quoted total return and the quoted current yield, the yield quotation more
closely reflects the current earnings of the Money Market Portfolio than the
total return quotation.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The total return performance of the Money Market Portfolio was 2.81% for the
six-month period ended June 30, 2000, versus a return of 2.80% for its
benchmark, the Salomon 3-Month Treasury Bill Index.
. The U.S. Treasury yield curve inverted dramatically in the first half of 2000
with 30-year yields falling from 6.48% to 5.90% while three-month yields moved
in the opposite direction, rising from 5.31% to 5.86%.
. Short-term rates rose as the Federal Reserve fought inflation by raising the
federal funds target rate from 5.50% to 6.50%.
. The Portfolio maintained a below-Index duration (relative to the Salomon 3-
Month Treasury Bill Index) throughout the period, which helped performance as
short-term interest rates increased.
. Holdings of high quality commercial paper and short maturity corporates
boosted relative performance due to their attractive yield premiums.
. The 7- and 30-day yields (after fees) at June 30, 2000 were 6.25% and 6.03%,
respectively.
2
<PAGE>
Financial Highlights
Money Market Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999(b)
-------------- --------------
<S> <C> <C>
Net asset value beginning of period $ 1.00 $ 1.00
---------------------------------------------------------------- -------------- --------------
Net investment income (a) 0.03 0.01
---------------------------------------------------------------- -------------- --------------
Total income from investment operations 0.03 0.01
---------------------------------------------------------------- -------------- --------------
Dividends from net investment income (0.03) (0.01)
---------------------------------------------------------------- -------------- --------------
Total distributions (0.03) (0.01)
---------------------------------------------------------------- -------------- --------------
Net asset value end of period $ 1.00 $ 1.00
---------------------------------------------------------------- -------------- --------------
Total return % 2.81 1.30
---------------------------------------------------------------- -------------- --------------
Net assets end of period (000s) $ 3,564 $ 3,605
---------------------------------------------------------------- -------------- --------------
Ratio of expenses to average net assets %* 0.50 0.50(c)
---------------------------------------------------------------- -------------- --------------
Ratio of net investment income to average net assets %* 6.06 5.14
---------------------------------------------------------------- -------------- --------------
Portfolio turnover rate % N/A N/A
---------------------------------------------------------------- -------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operatons on September 30, 1999
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 1.27% for the
period ended December 31, 1999.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Money Market Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 4,296
------------------------------------------------------------------- ---------
Cash and foreign currency 1
------------------------------------------------------------------- ---------
Interest and dividends receivable 2
------------------------------------------------------------------- ---------
Manager reimbursement receivable 6
------------------------------------------------------------------- ---------
4,305
=================================================================== =========
Liabilities:
Accrued investment advisory fee 1
------------------------------------------------------------------- ---------
Accrued administration fee 1
------------------------------------------------------------------- ---------
2
=================================================================== =========
Net Assets $ 4,303
=================================================================== =========
Net Assets Consist of:
Paid in capital $ 4,303
------------------------------------------------------------------- ---------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------- ---------
Accumulated undistributed net realized gain (loss) 0
------------------------------------------------------------------- ---------
Net unrealized appreciation (depreciation) 0
------------------------------------------------------------------- ---------
$ 4,303
=================================================================== =========
Net Assets:
Institutional Class $ 740
------------------------------------------------------------------- ---------
Administrative Class 3,563
------------------------------------------------------------------- ---------
Shares Issued and Outstanding:
Administrative Class 3,564
------------------------------------------------------------------- ---------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 1.00
------------------------------------------------------------------- ---------
Cost of Investments Owned $ 4,296
=================================================================== =========
Cost of Foreign Currency Held $ 0
=================================================================== =========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Money Market Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 99
------------------------------------------------------------------- ---------
Total Income 99
=================================================================== =========
Expenses:
Investment advisory fees 4
------------------------------------------------------------------- ---------
Administration fees 3
------------------------------------------------------------------- ---------
Distribution and/or servicing fees - Administrative Class 1
------------------------------------------------------------------- ---------
Distribution and/or servicing fees - Institutional Class 0
------------------------------------------------------------------- ---------
Trustees' fees 0
------------------------------------------------------------------- ---------
Total Expenses 8
------------------------------------------------------------------- ---------
Net Investment Income 91
=================================================================== =========
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investments 0
------------------------------------------------------------------- ---------
Net change in unrealized appreciation (depreciation) on investments 0
------------------------------------------------------------------- ---------
Net Gain (Loss) 0
------------------------------------------------------------------- ---------
Net Increase in Assets Resulting from Operations $ 91
=================================================================== =========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Money Market Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from September 30, 1999
June 30, 2000 to December 31, 1999
Increase (Decrease) in Net Assets from:
Operations:
<S> <C> <C>
Net investment income $ 91 $ 41
------------------------------------------------------------------- ---------------- -----------------
Net realized gain (loss) 0 0
------------------------------------------------------------------- ---------------- -----------------
Net change in unrealized appreciation (depreciation) 0 0
------------------------------------------------------------------- ---------------- -----------------
Net increase resulting from operations 91 41
=================================================================== ================ =================
Distributions to Shareholders:
From net investment income
Institutional Class (10) 0
------------------------------------------------------------------- ---------------- -----------------
Administrative Class (81) (41)
------------------------------------------------------------------- ---------------- -----------------
Total Distributions (91) (41)
=================================================================== ================ =================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 739 0
------------------------------------------------------------------- ---------------- -----------------
Administrative Class 5,147 6,784
------------------------------------------------------------------- ---------------- -----------------
Issued as reinvestment of distributions
Institutional Class 11 0
------------------------------------------------------------------- ---------------- -----------------
Administrative Class 80 28
------------------------------------------------------------------- ---------------- -----------------
Cost of shares redeemed
Institutional Class (10) 0
------------------------------------------------------------------- ---------------- -----------------
Administrative Class (5,269) (3,207)
------------------------------------------------------------------- ---------------- -----------------
Net increase resulting from Portfolio share transactions 698 3,605
------------------------------------------------------------------- ---------------- -----------------
Total Increase in Net Assets $ 698 $ 3,605
=================================================================== ================ =================
Net Assets:
Beginning of period 3,605 0
------------------------------------------------------------------- ---------------- -----------------
End of period * $ 4,303 $ 3,605
------------------------------------------------------------------- ---------------- -----------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
------------------------------------------------------------------- ---------------- -----------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Money Market Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 99.8%
--------------------------------------------------------------------------------
Commercial Paper 90.0%
Alcoa, Inc.
6.570% due 09/14/2000 $ 100 $ 98
American Express Credit Corp.
6.520% due 07/06/2000 100 100
Associates Corp. of North America
6.530% due 08/16/2000 100 99
Banc One Australia Ltd.
6.560% due 09/15/2000 100 98
Becton Dickinson & Co.
6.550% due 07/05/2000 100 100
DaimlerChrysler Holdings Corp.
6.630% due 09/21/2000 100 99
FCC National Bank
6.375% due 03/15/2001 100 99
Federal Home Loan Bank
6.410% due 07/07/2000 200 200
6.450% due 07/19/2000 200 199
Federal Home Loan Mortgage Corp.
6.360% due 07/05/2000 300 300
6.390% due 07/05/2000 200 200
Federal National Mortgage Assn.
6.440% due 08/22/2000 900 892
Ford Motor Credit Corp.
6.530% due 07/10/2000 100 100
General Electric Capital Corp.
6.570% due 07/13/2000 100 100
General Motors Acceptance Corp.
6.570% due 09/26/2000 100 98
Heinz Co.
6.560% due 07/21/2000 100 100
IBM Corp.
6.130% due 07/07/2000 100 100
KFW International Finance Corp.
6.570% due 09/26/2000 100 98
Minnesota Co.
6.550% due 09/13/2000 100 99
National Australia Funding
6.570% due 09/15/2000 100 99
Reseau Ferre de France
6.560% due 09/13/2000 100 99
SBC Communications, Inc.
6.560% due 09/20/2000 100 99
Southwestern Public Services Co.
6.550% due 07/07/2000 100 100
Swedbank, Inc.
6.530% due 08/14/2000 100 99
Textron Financial Corp.
6.580% due 09/14/2000 100 99
UBS AG
6.600% due 09/05/2000 100 99
-------
3,873
=======
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT 9.8%
--------------------------------------------------------------------------------
State Street Bank
5.850% due 07/03/2000 $ 423 423
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
5.900% due 12/01/2000 valued at $436.
Repurchase proceeds are $423.)
-------
Total Short-Term Instruments 4,296
(Cost $4,296) =======
Total Investments (a) 99.8% $ 4,296
(Cost $4,296)
Other Assets and Liabilities (Net) 0.2% 7
-------
Net Assets 100.0% $ 4,303
=======
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Money Market Portfolio (the "Portfolio") is a series of the PIMCO Variable
Insurance Trust (the "Trust"). The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company organized as
a Delaware business trust on October 3, 1997. The Trust may offer up to two
classes of shares: Institutional and Administrative. Each share class has
identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on September 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.15%.
8
<PAGE>
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.20%.
Servicing Fee. PIMCO Funds Distributors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of each
Fund offering Administrative Class shares in an amount up to 0.15% on an annual
basis of the average daily net assets of that class, financial intermediaries
that provide services in connection with the distribution of shares or
administration of plans or programs that use Fund shares as their funding
medium. The effective rate paid to PFD was 0.15% during the current fiscal year.
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.15% 0.30%
Administrative Fee 0.20% 0.20%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the prospectus
(as set forth below) plus 0.49 basis points. PIMCO may be reimbursed for these
waived amounts in future periods, to limit the expenses (calculated as a
percentage of Portfolio's average daily net assets attributable to each class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
Money Market Portfolio 0.35% 0.50%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Federal Income Tax Matters
As of December 31, 1999 Money Market Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $155 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards.
Shareholders are advised to consult their own tax advisor with respect to
the tax consequences of their investment in the Trust. In January 2000, you will
be advised on IRS form 1099-DIV as to the federal tax status of the dividends
and distributions received by you in calendar year 1999.
2000 Semi-Annual Report 9
<PAGE>
5. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Money Market Portfolio
------------------------------------------------
Period from 09/30/1999
Period Ended 6/30/2000 to 12/31/1999
Shares Amount Shares Amount
------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 739 $ 739 0 $ 0
----------------------------------------------------------------- ------------------------------------------------
Administrative Class 5,147 5,147 6,784 6,784
----------------------------------------------------------------- ------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 11 11 0 0
----------------------------------------------------------------- ------------------------------------------------
Administrative Class 81 80 28 28
----------------------------------------------------------------- ------------------------------------------------
Cost of shares redeemed
Institutional Class (10) (10) 0 0
----------------------------------------------------------------- ------------------------------------------------
Administrative Class (5,269) (5,269) (3,207) (3,207)
----------------------------------------------------------------- ------------------------------------------------
Net increase resulting from Portfolio share transactions 699 $ 698 3,605 $ 3,605
================================================================= ================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
----------------------------------------------------------------------
Money Market Portfolio 2 100
6. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
10
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
SHORT-TERM BOND PORTFOLIO
ADMINISTRATIVE CLASS
-------------------
SEMI - ANNUAL REPORT
June 30, 2000
<PAGE>
Contents
<TABLE>
<S> <C>
Chairman's Letter.................................................................. 1
Financial Highlights............................................................... 3
Statement of Assets and Liabilities................................................ 4
Statement of Operations............................................................ 5
Statements of Changes in Net Assets................................................ 6
Notes to Financial Statements...................................................... 8
Fund Schedule of
Summary Investments
Short-Term Bond Portfolio (Administrative Class)................................... 2 7
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S.
stock market volatility. After reaching record highs in the first
quarter, both the Dow Jones Industrial Average and the tech-focused
NASDAQ Composite Index tumbled during the second quarter before
starting to recover lost ground as the quarter ended.
The short and long ends of the U.S Treasury market diverged during the
first half of 2000. Short- and intermediate-term yields increased in
anticipation of U.S. Federal Reserve tightening with the yield on the
3-month Treasury up 0.55% to close the period at 5.86%. In marked
contrast, the 30-year Treasury yield fell 0.58%, closing the second
quarter at 5.90%, as investors grew concerned that the U.S.
government's debt buy-back program would create a scarcity of long-
term Treasuries. These changes resulted in an inverted yield curve,
with 5-year Treasuries yielding 6.18% and 30-year Treasuries offering
only a slight 0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the
past six months to 6.50%, the highest level in nine years. It was the
central bank's sixth rate increase since June 1999. The size of the
latest increase confirmed that the Fed's recent policy of gradual,
0.25% rate hikes was insufficient to cool an economy that grew by more
than 5% annually in each of the past three quarters. That pace is
faster than the Fed believes is possible without triggering an
increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled
meeting amid signs that higher rates were starting to have the desired
effect. Economic reports in April and May showed the first back-to-
back declines in retail sales in two years, falling employment,
reduced new home construction and little change in consumer prices.
Nevertheless, the Fed suggested that more tightening might be needed.
Rising energy prices, especially for retail gasoline, were one reason
for concern. Risks posed by economic imbalances such as the tight
labor market, an expanding U.S. trade deficit and high levels of
consumer and corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the
Portfolio in light of financial market activities as well as specific
details about the total return investment performance.
We appreciate the trust you have placed in us, and we will continue to
focus our efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Short-Term Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum current income, consistent with Administrative preservation of capital
and daily liquidity
Portfolio:
Primarily money market instruments and short maturity fixed income securities
Duration:
0.60 years
Total Net Assets:
$3.2 million
Sector Breakdown:*
[GRAPH]
Corporate Bond and Notes 74.5%
Asset-Backed Securities 12.9%
Mortgage-Backed Securities 7.1%
Short-Term Instruments 5.5%
Quality Breakdown:*
[GRAPH]
AAA 20.5%
AA 8.9%
A 25.2%
BBB 45.3%
Others 0.1%
% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class Salomon 3-Month
(Incep. 9/30/1999) Treasury Bill Index
--------------------------------------------------------------------------------
6 Months 2.89% 2.80%
Since Inception 4.26% --
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
$10.5 (in thousands)
[GRAPH]
Month Short-Term Salomon
Bond Portfolio 3-Month Treasury
Bill Index
========== ============== ================
09/30/1999 10,000 10,000
10/31/1999 10,042 10,041
11/30/1999 10,081 10,081
12/31/1999 10,132 10,125
01/31/2000 10,175 10,169
02/29/2000 10,218 10,213
03/31/2000 10,267 10,261
04/30/2000 10,310 10,309
05/31/2000 10,369 10,360
06/30/2000 10,426 10,408
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 10/01/1999, the first full month following the
Portfolio's inception on 9/30/1999, compared to the Salomon 3-Month Treasury
Bill Index, an unmanaged market index. Whereas money market funds Quality
Breakdown:* attempt to maintain a stable share price, the Short-Term Bond
Portfolio's share price will fluctuate in response to market conditions. The
Portfolio may invest in foreign securities which involve potentially higher
risks including foreign currency fluctuations and political or economic
uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The total return performance of the Short-Term Bond Portfolio was 2.89% for
the six-month period ended June 30, 2000, versus a return of 2.80% for its
benchmark, the Salomon 3-Month Treasury Bill Index.
. The U.S. Treasury yield curve inverted dramatically in the first half of 2000
with 30-year yields falling from 6.48% to 5.90% while three-month yields moved
in the opposite direction, rising from 5.31% to 5.86%.
. Short-term rates rose as the Federal Reserve fought inflation by raising the
federal funds target rate from 5.50% to 6.50%.
. The Portfolio maintained a below-Index duration throughout most of the period,
which helped performance as short-term interest rates increased.
. Mortgages boosted returns due to a combination of low volatility, high
relative yields and reduced new issuance.
. Short maturity corporates added to returns as higher yields more than
compensated investors for the credit risk of these securities.
. The 30-day yield (after fees) at June 30, 2000 was 6.44%.
2
<PAGE>
Financial Highlights
Short-Term Bond Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999 (b)
-------------- --------------
<S> <C> <C>
Net asset value beginning of period $ 10.00 $ 10.00
------------------------------------------------------------------------- -------------- --------------
Net investment income (a) 0.27 0.13
------------------------------------------------------------------------- -------------- --------------
Net realized / unrealized gain on investments (a) 0.02 0.00
------------------------------------------------------------------------- -------------- --------------
Total income from investment operations 0.29 0.13
------------------------------------------------------------------------- -------------- --------------
Dividends from net investment income (0.28) (0.13)
------------------------------------------------------------------------- -------------- --------------
Total distributions (0.28) (0.13)
------------------------------------------------------------------------- -------------- --------------
Net asset value end of period $ 10.01 $ 10.00
------------------------------------------------------------------------- -------------- --------------
Total return % 2.89 1.32
------------------------------------------------------------------------- -------------- --------------
Net assets end of period (000s) $ 10 $ 3,040
------------------------------------------------------------------------- -------------- --------------
Ratio of expenses to average net assets %* 0.55 (d) 0.60 (c)
------------------------------------------------------------------------- -------------- --------------
Ratio of net investment income to average net assets %* 5.31 5.17
------------------------------------------------------------------------- -------------- --------------
Portfolio turnover rate % 0 0
------------------------------------------------------------------------- -------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operation on September 30, 1999.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 1.42% for the
period ended December 31, 1999.
(d) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.60% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Short-Term Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 3,269
------------------------------------------------------------------------ -------
Cash and foreign currency 118
------------------------------------------------------------------------ -------
Interest and dividends receivable 27
------------------------------------------------------------------------ -------
Manager reimbursement receivable 6
------------------------------------------------------------------------ -------
3,420
======================================================================== =======
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 218
------------------------------------------------------------------------ -------
Accrued investment advisory fee 1
------------------------------------------------------------------------ -------
Accrued administration fee 1
------------------------------------------------------------------------ -------
220
======================================================================== =======
Net Assets $ 3,200
======================================================================== =======
Net Assets Consist of:
Paid in capital $ 3,197
------------------------------------------------------------------------ -------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------------ -------
Accumulated undistributed net realized (loss) (2)
------------------------------------------------------------------------ -------
Net unrealized appreciation 5
------------------------------------------------------------------------ -------
$ 3,200
======================================================================== =======
Net Assets:
Institutional Class $ 3,190
------------------------------------------------------------------------ -------
Administrative Class 10
------------------------------------------------------------------------ -------
Shares Issued and Outstanding:
Administrative Class 1
------------------------------------------------------------------------ -------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 10.01
------------------------------------------------------------------------ -------
Cost of Investments Owned $ 3,263
======================================================================== =======
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Short-Term Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 95
--------------------------------------------------------------- -------
Total Income 95
=============================================================== ========
Expenses:
Investment advisory fees 5
--------------------------------------------------------------- -------
Administration fees 3
--------------------------------------------------------------- -------
Distribution and/or servicing fees - Administrative Class 1
--------------------------------------------------------------- -------
Total Expenses 9
--------------------------------------------------------------- -------
Reimbursement by manager 0
--------------------------------------------------------------- -------
Net Expenses 9
--------------------------------------------------------------- -------
Net Investment Income 86
=============================================================== =======
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (2)
--------------------------------------------------------------- -------
Net change in unrealized appreciation on investments 5
--------------------------------------------------------------- -------
Net Gain 3
--------------------------------------------------------------- -------
Net Increase in Assets Resulting from Operations $ 89
=============================================================== =======
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Short-Term Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from September 30, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
<S> <C> <C>
Operations:
Net investment income $ 86 $ 40
----------------------------------------------------------------- ------- -------
Net realized gain (loss) (2) 0
----------------------------------------------------------------- ------- -------
Net change in unrealized appreciation (depreciation) 5 0
----------------------------------------------------------------- ------- -------
Net increase resulting from operations 89 40
================================================================= ======= =======
Distributions to Shareholders:
From net investment income
Institutional Class (33) 0
----------------------------------------------------------------- ------- -------
Administrative Class (53) (40)
----------------------------------------------------------------- ------- -------
Total Distributions (86) (40)
================================================================= ======= =======
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 3,141 0
----------------------------------------------------------------- ------- -------
Administrative Class 10 3,000
----------------------------------------------------------------- ------- -------
Issued as reinvestment of distributions
Institutional Class 46 0
----------------------------------------------------------------- ------- -------
Administrative Class 40 40
----------------------------------------------------------------- ------- -------
Cost of shares redeemed
Institutional Class 0 0
----------------------------------------------------------------- ------- -------
Administrative Class (3,080) 0
----------------------------------------------------------------- ------- -------
Net increase resulting from Portfolio share transactions 157 3,040
----------------------------------------------------------------- ------- -------
Total Increase in Net Assets $ 160 $ 3,040
================================================================= ======= =======
Net Assets:
Beginning of period 3,040 0
----------------------------------------------------------------- ------- -------
End of period * $ 3,200 $ 3,040
----------------------------------------------------------------- ------- -------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
----------------------------------------------------------------- ------- -------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Short-Term Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 76.1%
--------------------------------------------------------------------------------
Banking & Finance 25.0%
Donaldson, Lufkin & Jenrette, Inc.
6.110% due 05/15/2001 $ 100 $ 99
FCC National Bank
6.166% due 05/15/2002 100 100
Fleet Financial Group
9.900% due 06/15/2001 100 102
Ford Motor Credit Corp.
6.927% due 08/27/2001 (b) 100 100
MFN Financial Corp.
6.460% due 09/13/2001 (b) 100 100
Paine Webber Group, Inc.
6.585% due 07/23/2001 100 99
PS Colorado Credit Corp.
7.470% due 05/30/2002 (b) 100 100
U.S. West Capital Funding, Inc.
6.875% due 08/15/2001 100 99
-------
799
=======
Industrials 41.7%
Clear Channel Communications
7.327% due 06/15/2002 (b) 100 100
ICI Wilmington, Inc.
9.500% due 11/15/2000 100 101
J Seagram & Sons
6.250% due 12/15/2001 100 98
Kroger Co.
6.340% due 06/01/2001 100 99
Lockheed Martin Corp.
6.850% due 05/15/2001 140 139
Meridan Co.
6.408% due 07/18/2002 (b) 100 100
Norfolk Southern Corp.
6.875% due 05/01/2001 100 100
Philip Morris Cos., Inc.
9.000% due 01/01/2001 100 100
Raytheon Co.
6.450% due 08/15/2002 100 98
Staples, Inc.
7.670% due 11/26/2001 (b) 100 100
Temple-Inland, Inc.
9.000% due 05/01/2001 100 101
Tyco International Group SA
6.125% due 06/15/2001 100 99
Viacom, Inc.
8.875% due 06/01/2001 100 101
-------
1,336
=======
Utilities 9.4%
Appalachian Power
7.272% due 06/27/2001 (b) 100 100
Public Service Enterprise Group, Inc.
7.038% due 11/22/2000 (b) 100 100
Worldcom, Inc.
7.050% due 11/26/2001 (b) 100 100
300
-------
Total Corporate Bonds & Notes 2,435
(Cost $2,432) =======
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 7.2%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 7.2%
Federal Home Loan Mortgage Corp.
8.000% due 04/15/2003 76 77
Federal National Mortgage Assn
6.500% due 10/25/2007 97 96
Nomura Asset Securities Corp.
6.625% due 01/25/2009 59 58
--------
Mortgage-Backed Securities 231
(Cost $229) ========
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 13.2%
--------------------------------------------------------------------------------
Chase Manhattan Grantor Trust
5.200% due 02/15/2002 $ 55 $ 55
EQCC Home Equity Loan Trust
8.340% due 08/15/2025 100 101
Mellon Auto Grantor Trust
5.460% due 10/17/2005 119 117
Onyx Acceptance Auto Trust
5.500% due 10/15/2002 87 86
Premier Auto Trust
6.350% due 04/06/2002 62 62
-------
Total Asset-Backed Securities 421
(Cost $420) =======
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 5.7%
--------------------------------------------------------------------------------
Certificates of Deposits 3.1%
Societe Generale
6.052% due 02/28/2001 100 100
Repurchase Agreement 2.6%
State Street Bank
5.850% due 07/03/2000 82 82
(Dated 06/30/2000. Collateralized by
Federal Farm Credit Bank
6.000% due 10/01/2001 valued at $85
Repurchase proceeds are $82.)
-------
Total Short-Term Instruments 182
(Cost $182) =======
Total Investments (a) 102.2% $ 3,269
(Cost $3,263)
Other Assets and Liabilities (Net) (2.2%) (69)
-------
Net Assets 100.0% $ 3,200
=======
Notes to Schedule of Investments (amounts in
thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was
an excess of value over tax cost. $ 7
Aggregate gross unrealized depreciation
for all investments in which there was
an excess of tax cost over value. (1)
-------
Unrealized appreciation-net $ 6
=======
(b) Variable rate security. The rate listed is as of June 30, 2000.
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Short-Term Bond Portfolio (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on September 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Fund sells the security becomes
insolvent, a Fund's right to repurchase the security may be restricted; the
value of the security may change over the term of the financing transaction; and
the return earned by a Fund with the proceeds of a financing transaction may not
exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid
8
<PAGE>
market, and the inability of the counterparty to meet the terms of the contract.
Futures contracts and purchased options are valued based upon their quoted daily
settlement prices. The premium received for a written option is recorded as an
asset with an equal liability which is marked to market based on the option's
quoted daily settlement price. Fluctuations in the value of such instruments are
recorded as unrealized appreciation (depreciation) until terminated, at which
time realized gains and losses are recognized.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly-owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.20%.
Servicing Fee. PIMCO Funds Distributors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of each
Fund offering Administrative Class shares in an amount up to 0.15% on an annual
basis of the average daily net assets of that class, financial intermediaries
that provide services in connection with the distribution of shares or
administration of plans or programs that use Fund shares as their funding
medium. The effective rate paid to PFD was 0.15% during the current fiscal year.
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
---------------------------------------------------------------------
Advisory Fee 0.25% 0.35%
Administrative Fee 0.20% 0.20%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
------------------------------------------------------------------------------
Short-Term Bond Portfolio 0.45% 0.60%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
annual retainer of $500. These expenses are allocated to the Portfolios of the
Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
--------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
Short-Term Bond Portfolio $ 172 $ 0 $ 2,668 $ 0
2000 Semi-Annual Report 9
<PAGE>
5. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Short-Term Bond Portfolio
---------------------------------------------------------
Period from 09/30/1999
Period Ended 6/30/2000 to 12/31/1999
Shares Amount Shares Amount
---------------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class $ 314 $ 3,141 0 $ 0
------------------------------------------------------------ ---------------------------------------------------------
Administrative Class 1 10 300 3,000
------------------------------------------------------------ ---------------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 5 46 0 0
------------------------------------------------------------ ---------------------------------------------------------
Administrative Class 4 40 4 40
------------------------------------------------------------ ---------------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
------------------------------------------------------------ ---------------------------------------------------------
Administrative Class (308) (3,080) 0
------------------------------------------------------------ ---------------------------------------------------------
Net increase resulting from Portfolio share transactions $ 16 $ 157 304 $ 3,040
============================================================ =========================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
---------------------------------------------------------------------------
Short-Term Bond Portfolio 1 98
6. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
10
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO VARIABLE INSURANCE TRUST
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO FUNDS DISTRIBUTORS LLC
2187 ATLANTIC STREET
STAMFORD, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
TOTAL RETURN BOND PORTFOLIO
ADMINISTRATIVE CLASS
------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Contents
Chairman's Letter ....................................................... 1
Financial Highlights .................................................... 3
Statement of Assets and Liabilities ..................................... 4
Statement of Operations ................................................. 5
Statements of Changes in Net Assets ..................................... 6
Notes to Financial Statements ........................................... 9
Fund Schedule of
Summary Investments
Total Return Bond Portfolio (Administrative Class) ....... 2 7-8
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/S/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Total Return Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily intermediate maturity fixed
income securities
Duration:
4.51 years
Total Net Assets:
$13.2 million
Sector Breakdown:*
[GRAPH]
Mortage-Backed Securities 52.5%
Corporate Bonds and Notes 22.9%
Short-Term Instruments 14.9%
Asset-Backed Securities 7.3%
Other 2.4%
Quality Breakdown:*
[GRAPH]
AAA 62.6%
AA 10.4%
A 12.1%
BBB 12.5%
BB 0.6%
B 1.8%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class Lehman Brothers
(Incep. 12/31/1997) Aggregate Bond Index
--------------------------------------------------------------------------------
6 Months 3.36% 3.99%
1 Year 4.62% 4.56%
Since Inception* 4.51% --
*Annualized
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
$11.5 (in thousands)
[GRAPH]
Month Total Return Lehman Brothers
Bond Portfolio Aggregate
Bond Index
========== ============== ===============
12/31/1997 10,000 10,000
01/31/1998 10,102 10,128
02/28/1998 10,059 10,120
03/31/1998 10,081 10,156
04/30/1998 10,124 10,209
05/31/1998 10,222 10,305
06/30/1998 10,302 10,393
07/31/1998 10,355 10,415
08/31/1998 10,546 10,584
09/30/1998 10,861 10,832
10/31/1998 10,820 10,775
11/30/1998 10,806 10,836
12/31/1998 10,861 10,869
01/31/1999 10,907 10,946
02/28/1999 10,641 10,755
03/31/1999 10,769 10,815
04/30/1999 10,754 10,849
05/31/1999 10,660 10,754
06/30/1999 10,668 10,720
07/31/1999 10,611 10,674
08/31/1999 10,596 10,669
09/30/1999 10,755 10,793
10/31/1999 10,843 10,832
11/30/1999 10,829 10,832
12/31/1999 10,798 10,779
01/31/2000 10,713 10,744
02/29/2000 10,756 10,874
03/31/2000 10,959 11,017
04/30/2000 10,909 10,986
05/31/2000 10,959 10,981
06/30/2000 11,161 11,209
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 01/01/1998, the first full month following the
Portfolio's inception on 12/31/1997, compared to the Lehman Brothers Aggregate
Bond Index, an unmanaged market index. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Total Return Bond Portfolio returned 3.36% for the six-month period
from January 1, 2000 through June 30, 2000, versus 3.99% for the benchmark
Lehman Brothers Aggregate Bond Index.
. The yield curve inverted as the Treasury Department began buying back
Treasury debt with maturities greater than 10 years.
. The Portfolio held its duration, or sensitivity to interest rate changes,
below benchmark for most of the period. This was neutral for returns
because the yield curve inverted.
. A shift into longer term Treasuries early in the year was a positive for
performance because of a rally in the longer maturities caused by the
Treasury buyback program.
. An overweight in mortgages was positive as mortgages outperformed
Treasuries due to a significant yield premium.
. Limited holdings of below investment grade and emerging markets bonds
detracted slightly from returns because of historically high default rates
and political instability.
. A conservative allocation to non-U.S. bonds was negative as the euro
depreciated relative to the dollar.
2
<PAGE>
Financial Highlights
Total Return Bond Portfolio
(Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999 12/31/1998 (b)
---------- ---------- --------------
<S> <C> <C> <C>
Net asset value beginning of period $ 9.45 $ 10.09 $ 10.00
-------------------------------------------------------- ----------- ------------ -------------
Net investment income (a) 0.31 0.58 0.56
-------------------------------------------------------- ----------- ------------ -------------
Net realized / unrealized gain (loss) on investments (a) 0.00 (0.64) 0.28
-------------------------------------------------------- ----------- ------------ -------------
Total income from investment operations 0.31 (0.06) 0.84
-------------------------------------------------------- ----------- ------------ -------------
Dividends from net investment income (0.30) (0.58) (0.56)
-------------------------------------------------------- ----------- ------------ -------------
Distributions from net realized capital gains 0.00 0.00 (0.19)
-------------------------------------------------------- ----------- ------------ -------------
Total distributions (0.30) (0.58) (0.75)
-------------------------------------------------------- ----------- ------------ -------------
Net asset value end of period $ 9.46 $ 9.45 $ 10.09
-------------------------------------------------------- ----------- ------------ -------------
Total return % 3.36 (0.58) 8.61
-------------------------------------------------------- ----------- ------------ -------------
Net assets end of period (000s) $ 10,444 $ 3,877 $ 3,259
-------------------------------------------------------- ----------- ------------ -------------
Ratio of expenses to average net assets % 0.65*(d) 0.65 (c) 0.65
-------------------------------------------------------- ----------- ------------ -------------
Ratio of net investment income to average net assets % 6.54* 5.96 5.55
-------------------------------------------------------- ----------- ------------ -------------
Portfolio turnover rate % 134 102 139
-------------------------------------------------------- ----------- ------------ -------------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on December 31, 1997.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.69% for the
period ended December 31, 1999.
(d) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.66% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 17,739
---------------------------------------------------------------------------- -----------
Cash and foreign currency 820
---------------------------------------------------------------------------- -----------
Receivable for investments sold and forward foreign currency contracts 14
---------------------------------------------------------------------------- -----------
Interest and dividends receivable 112
---------------------------------------------------------------------------- -----------
Manager reimbursement receivable 2
---------------------------------------------------------------------------- -----------
Other assets 29
---------------------------------------------------------------------------- -----------
18,716
============================================================================ ===========
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 5,493
---------------------------------------------------------------------------- -----------
Payable for financing transactions 31
---------------------------------------------------------------------------- -----------
Written options outstanding 1
---------------------------------------------------------------------------- -----------
Accrued investment advisory fee 2
---------------------------------------------------------------------------- -----------
Accrued administration fee 2
---------------------------------------------------------------------------- -----------
Accrued distribution fee 0
---------------------------------------------------------------------------- -----------
Accrued servicing fee 1
---------------------------------------------------------------------------- -----------
Other liabilities 13
---------------------------------------------------------------------------- -----------
5,543
============================================================================ ===========
Net Assets $ 13,173
============================================================================ ===========
Net Assets Consist of:
Paid in capital $ 13,276
---------------------------------------------------------------------------- -----------
Undistributed (overdistributed) net investment income (11)
---------------------------------------------------------------------------- -----------
Accumulated undistributed net realized (loss) (85)
---------------------------------------------------------------------------- -----------
Net unrealized (depreciation) (7)
---------------------------------------------------------------------------- -----------
$ 13,173
============================================================================ ===========
Net Assets:
Institutional Class $ 2,729
---------------------------------------------------------------------------- -----------
Administrative Class 10,444
---------------------------------------------------------------------------- -----------
Shares Issued and Outstanding:
Administrative Class 1,109
---------------------------------------------------------------------------- -----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 9.46
---------------------------------------------------------------------------- -----------
Cost of Investments Owned $ 17,781
============================================================================ ===========
Cost of Foreign Currency Held $ 20
============================================================================ ===========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Total Return Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 209
------------------------------------------------------------------------------------------------------------------- -----------
Total Income 209
=================================================================================================================== ===========
Expenses:
Investment advisory fees 8
------------------------------------------------------------------------------------------------------------------- -----------
Administration fees 7
------------------------------------------------------------------------------------------------------------------- -----------
Distribution and/or servicing fees - Administrative Class 2
------------------------------------------------------------------------------------------------------------------- -----------
Organization costs 1
------------------------------------------------------------------------------------------------------------------- -----------
Total Expenses 18
------------------------------------------------------------------------------------------------------------------- -----------
Net Investment Income 191
=================================================================================================================== ===========
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 28
------------------------------------------------------------------------------------------------------------------- -----------
Net realized (loss) on futures contracts and written options (25)
------------------------------------------------------------------------------------------------------------------- -----------
Net realized (loss) on foreign currency transactions (2)
------------------------------------------------------------------------------------------------------------------- -----------
Net change in unrealized appreciation on investments 50
------------------------------------------------------------------------------------------------------------------- -----------
Net change in unrealized appreciation on futures contracts and written options 28
------------------------------------------------------------------------------------------------------------------- -----------
Net change in unrealized appreciation on translation of assets and liabilities denominated in foreign currencies 1
------------------------------------------------------------------------------------------------------------------- -----------
Net Gain 80
------------------------------------------------------------------------------------------------------------------- -----------
Net Increase in Assets Resulting from Operations $ 271
=================================================================================================================== ===========
</TABLE>
2000 Semi-Annual Report 5
<PAGE>
Statements of Changes in Net Assets
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income $ 191 $ 192
---------------------------------------------------------------------------------------- -------------- --------------
Net realized gain (loss) 1 (102)
---------------------------------------------------------------------------------------- -------------- --------------
Net change in unrealized appreciation (depreciation) 79 (109)
---------------------------------------------------------------------------------------- -------------- --------------
Net increase (decrease) resulting from operations 271 (19)
======================================================================================== ============== ==============
Distributions to Shareholders:
From net investment income
Institutional Class (40) 0
---------------------------------------------------------------------------------------- -------------- --------------
Administrative Class (150) (192)
---------------------------------------------------------------------------------------- -------------- --------------
Total Distributions (190) (192)
======================================================================================== ============== ==============
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 2,758 0
---------------------------------------------------------------------------------------- -------------- --------------
Administrative Class 9,686 637
---------------------------------------------------------------------------------------- -------------- --------------
Issued as reinvestment of distributions
Institutional Class 43 0
---------------------------------------------------------------------------------------- -------------- --------------
Administrative Class 148 192
---------------------------------------------------------------------------------------- -------------- --------------
Cost of shares redeemed
Institutional Class (67) 0
---------------------------------------------------------------------------------------- -------------- --------------
Administrative Class (3,353) 0
---------------------------------------------------------------------------------------- -------------- --------------
Net increase resulting from Portfolio share transactions 9,215 829
---------------------------------------------------------------------------------------- -------------- --------------
Total Increase in Net Assets $ 9,296 $ 618
======================================================================================== ============== ==============
Net Assets:
Beginning of period 3,877 3,259
---------------------------------------------------------------------------------------- -------------- --------------
End of period * $ 13,173 $ 3,877
*Including net undistributed (overdistributed) investment income of: $ (11) $ (12)
---------------------------------------------------------------------------------------- -------------- --------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 30.8%
--------------------------------------------------------------------------------
Banking & Finance 18.0%
Bank One Corp.
6.792% due 05/07/2002 (d) $ 400 $ 400
Caterpillar Financial Service Corp.
6.875% due 08/01/2004 100 99
Ford Motor Credit Corp.
6.320% due 05/21/2002 (d) 200 200
6.190% due 10/15/2002 (d) 150 150
Household Finance Corp.
6.198% due 11/01/2001 (d) 200 200
Morgan Stanley, Dean Witter, Discover and Co.
6.165% due 01/28/2002 (d) 100 100
Pemex Finance Ltd.
5.720% due 11/15/2003 175 170
PNC Funding Corp.
6.125% due 09/01/2003 100 95
Popular, Inc.
6.625% due 01/15/2004 500 481
Republic of Brazil
7.000% due 01/01/2001 123 123
7.375% due 04/15/2006 186 169
Residential Rein
10.926% due 06/01/2001 100 100
Westdeutsche Landesbank
6.050% due 01/15/2009 100 89
-------
2,376
=======
Industrials 6.4%
Daimler Chrysler North American Holding
7.750% due 05/27/2003 200 202
International Paper Co.
1.000% due 07/08/2002 (d) 200 200
Philip Morris Cos., Inc.
7.250% due 09/15/2001 100 99
TRW, Inc.
6.625% due 06/01/2004 250 238
Vodafone AirTouch PLC
6.852% due 12/19/2001 (d) 100 100
-------
839
=======
Utilities 6.4%
Deutsche Telekom
7.750% due 06/15/2005 100 100
MCI WorldCom, Inc.
6.125% due 08/15/2001 100 99
Philadelphia Electric
6.500% due 05/01/2003 100 97
Sprint Capital Corp.
8.125% due 07/15/2002 150 153
Telekomunikacja Polska SA
7.125% due 12/10/2003 100 96
Texas Utilities Co.
7.375% due 08/01/2001 100 100
5.940% due 10/15/2001 100 98
Worldcom, Inc.
7.050% due 11/26/2001 (d) 100 100
-------
843
-------
Total Corporate Bonds & Notes 4,058
=======
(Cost $4,083)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 2.9%
--------------------------------------------------------------------------------
Treasury Inflation Protected Securities
3.625% due 07/15/2002 (h) 107 106
U.S. Treasury Notes
5.125% due 08/31/2000 (b) 20 20
U.S. Treasury Bonds
8.750% due 08/15/2020 200 258
-------
Total U.S. Treasury Obligations 384
=======
(Cost $369)
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 70.9%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 39.3%
Credit Suisse First Boston Mortgage Securities
6.750% due 12/27/2028 $ 100 $ 91
Federal Home Loan Mortgage Corp.
6.903% due 07/01/2027 (d) 42 42
6.752% due 01/01/2028 (d) 55 55
6.500% due 04/15/2029 539 435
6.000% due 07/17/2030 120 110
Federal National Mortgage Assn.
6.961% due 11/01/2025 (d) 27 27
7.000% due 07/17/2030 200 193
6.000% due 07/17/2030 800 732
General Motors Acceptance Corporation
6.965% due 06/01/2005 (d) 400 400
Government National Mortgage Assn.
7.500% due 07/24/2030 1,600 1,589
7.000% due 07/24/2030 200 194
7.000% due 08/24/2030 (d) 300 299
Small Business Investment Co.
8.017% due 02/10/2010 993 1,015
-------
5,182
=======
Federal Home Loan Mortgage Corporation 1.8%
8.500% due 08/01/2024 226 231
-------
Federal Housing Administration 3.6%
7.700% due 08/01/2028 476 461
-------
Federal National Mortgage Association 4.3%
7.430% due 01/25/2023 571 554
-------
Government National Mortgage Association 14.5%
6.500% due 05/20/2030 (d) 200 197
6.375% due 02/20/2027 (d) 79 79
6.500% due 07/24/2030 1,200 1,137
7.500% due 11/20/2029 418 404
7.800% due 08/01/2030 (d) 98 98
-------
1,915
=======
Mortgage-Backed Securities 7.4%
Credit-Based Asset Servicing and Securitization
7.045% due 09/25/2029 (d) 600 602
Resecuritization Mortgage Trust
6.500% due 04/19/2029 384 374
-------
976
-------
Total Mortgage-Backed Securities 9,319
=======
(Cost $9,349)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 9.8%
--------------------------------------------------------------------------------
AFC Mortgage Loan Trust
6.951% due 01/25/2025 400 400
Ameriquest Mortgage Securities
6.781% due 06/15/2030 99 98
Ameriquest Mortgage Securities Inc.
6.950% due 07/15/2030 (d) 400 400
Conseco Recreational Enthusiast Comsumer Trust
7.562% due 10/15/2007 200 200
Contimortgage Home Equity Loan Trust
7.580% due 08/15/2028 100 99
Irwin Low Balance Home Loan Trust
7.026% due 06/25/2021 (d) 100 100
-------
Total Asset-Backed Securities 1,297
=======
(Cost $1,301)
--------------------------------------------------------------------------------
FOREIGN CURRENCY-DENOMINATED (e)(f) 0.2%
--------------------------------------------------------------------------------
Republic of Germany
6.250% due 01/04/2024 EC 10 11
6.250% due 01/04/2030 20 21
-------
Total Foreign Currency-Denominated 32
=======
(Cost $30)
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments (Cont.)
Total Return Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 20.1%
--------------------------------------------------------------------------------
Certificates of Deposit 1.5%
Societe Generale
6.052% due 02/28/2001 $ 200 $ 200
---------
Commercial Paper 15.1%
American Express
6.610% due 08/11/2000 100 99
American Express Credit Corp.
6.540% due 09/12/2000 200 198
Associates Corp. of North America
6.350% due 07/13/2000 100 100
CRX Corp.
6.770% due 07/14/2000 400 399
Delphi Auto Systems
6.780% due 07/05/2000 400 400
Nabisco, Inc.
6.860% due 08/10/2000 300 298
Norfolk Southern Corp.
6.850% due 07/27/2000 300 298
Reseau Ferre de France
6.560% due 09/13/2000 200 197
---------
1,989
=========
Repurchase Agreement 3.3%
State Street Bank
5.850% due 07/03/2000 440 440
---------
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
6.000% due 08/15/2002 valued at $451.
Repurchase proceeds are $440.)
U.S. Treasury Bills (b)(i) 0.2%
5.730% due 09/21/2000 20 20
---------
Total Short-Term Instruments 2,649
=========
(Cost $2,649)
Total Investments (a) 134.7% $ 17,739
(Cost $17,781)
Written Options (c) (0.0%) (1)
(Premium $1)
Other Assets and Liabilities (Net) (34.7%) (4,565)
---------
Net Assets 100.0% $ 13,173
=========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized
appreciation (depreciation) of
investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 74
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (116)
---------
Unrealized depreciation-net (42)
---------
(b) Securities with an aggregate market value of $40
have been segregated with the custodian to cover margin
requirements for the following open futures contracts at
June 30, 2000.
# of Unrealized
Type Contracts Appreciation
--------------------------------------------------------------------------------
Eurobond 10 Year Bond Futures (09/2000) 1 $ 0
United Kingdom 10 Year Gilt Futures (09/2000) 1 1
U.S. Treasury 10 Year Bond (09/2000) 10 19
Eurodollar March Futures (03/2001) 4 2
---------
$ 22
=========
(c) Premiums received on written options:
# of
Type Contracts Premium Value
--------------------------------------------------------------------------------
Call - CBOT AWCO U.S. Treasury Notes September Futures
Strike @ 100.00 Exp. 08/19/2000 2 $ 1 $ 1
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/22/2000 200,000 0 0
-----------------
$ 1 $ 1
=================
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Foreign forward currency contracts outstanding at June 30, 2000:
Principal
Amount
Covered by Settlement Unrealized
Type Currency Contract Month Appreciation
--------------------------------------------------------------------------------
Buy EC 15 07/2000 $ 0
(f) Principal amount denoted in indicated currency:
EC - European Currency Unit
(g) Swap agreements outstanding at June 30, 2000.
Unrealized
Notional Appreciation
Type Amount (Depreciation)
--------------------------------------------------------------------------------
Receive floating rate based on 6 month Euribor and
pay fixed rate equal to 6.175% in Euro.
Broker: Goldman Sachs & Co.
Exp. 05/22/2030 EC 20 $ 0
Receive floating rate based on 6 month
Euribor plus 0.499% and pay fixed rate
equal to 6.000% in Euro.
Broker: J.P. Morgan Securities, Inc.
Exp. 01/04/2009 30 1
Receive floating rate based on 6 month
Euribor less 0.540% and pay fixed rate
equal to 6.250% in Euro.
Broker: J.P. Morgan Securities, Inc.
Exp. 01/04/2024 10 (1)
Receive fixed rate equal to 7.747% and
pay floating rate based on 3 month LIBOR.
Broker: Morgan Stanley Dean Witter
Exp. 05/24/2010 $ 600 21
Receive fixed rate equal to 7.670% and
pay floating rate based on 3 month LIBOR.
Broker: Morgan Stanley Dean Witter
Exp. 05/31/2010 150 4
---------
$ 25
=========
(h) Principal amount of the security is adjusted for inflation.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Total Return Bond Portfolio (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.
The Trust may offer up to two classes of shares: Institutional and
Administrative. Each share class has identical voting rights (except that
shareholders of a class have exclusive voting rights regarding any matter
relating solely to that class of shares). Information presented in these
financial statements pertains to the Administrative Class of the Trust. Certain
detailed financial information for the Institutional Class is provided
separately and is available upon request. The Trust is designed to be used as an
investment vehicle by Separate Accounts of insurance companies that fund
variable annuity contracts and variable life insurance policies and by qualified
pension and retirement plans. On December 22, 1997 the Total Return Bond
Portfolio was provided seed capital of $100,000 by the Adviser. The Portfolio
commenced operations on December 31, 1997.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
2000 Semi-Annual Report 9
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. The Portfolio is authorized to enter into forward
foreign exchange 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 purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, the Portfolio may fail to recoup some or all of its
initial investment in these securities. The market value of these securities is
highly sensitive to changes in interest rates.
Delayed Delivery Transactions. The Portfolio may purchase or sell securities on
a when-issued or delayed delivery 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 beyond the customary settlement
period. When delayed delivery purchases are outstanding, the Portfolio will set
aside and maintain until the settlement date in a segregated account, liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery 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. The Portfolio may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss. When the
Portfolio has sold a security on a delayed delivery basis, the Portfolio does
not participate in future gains and losses with respect to the security. Forward
sales commitments are accounted for by the Portfolio in the same manner as
forward currency contracts discussed above.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
10
<PAGE>
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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. The ratio of expenses to average net assets per share
class, as disclosed in Financial Highlights, may differ from the annual fund
operating expenses per share class as disclosed in the Prospectus for the
reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
Total Return Bond Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
Organization Expense. Costs incurred in connection with the organization of the
Portfolio and its initial registration are amortized on a straight-line basis
over a five-year period from the Portfolio's commencement of operations.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
----------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
Total Return Bond Portfolio $ 12,243 $ 8,202 $ 7,656 $ 693
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
Total Return Bond Portfolio
---------------------------
# of Contracts Premium
--------------------------------------------------------------------------------
Balance at 12/31/1999 5 $ 4
Sales 1,180,007 6
Closing Buys (500,004) (5)
Expirations (480,006) (4)
Exercised 0 0
--------------------------------------------------------------------------------
Balance at 06/30/2000 200,002 $ 1
--------------------------------------------------------------------------------
2000 Semi-Annual Report 11
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
5. Federal Income Tax Matters
As of December 31, 1999 Total Return Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $1,350 of capital losses during the
period November 1, 1999 through December 31, 1999 which the Fund elected to
defer to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards (amounts in
thousands):
Capital Loss Carryforwards
--------------------------------
Realized Losses Expiration
--------------------------------------------------------------------------------
Total Return Bond Portfolio $ 93,238 12/31/2007
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Total Return Bond Portfolio
---------------------------------------------------
Period Ended 06/30/2000 Year Ended 12/31/1999
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 291 $ 2,758 0 $ 0
------------------------------------------------------------------------------------------------------------------------
Administrative Class 1,038 9,686 67 637
------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 5 43 0 0
------------------------------------------------------------------------------------------------------------------------
Administrative Class 16 148 20 192
------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed
Institutional Class (7) (67) 0 0
------------------------------------------------------------------------------------------------------------------------
Administrative Class (355) (3,353) 0 0
------------------------------------------------------------------------------------------------------------------------
Net increase resulting from Portfolio share transactions 988 $ 9,215 87 $ 829
========================================================================================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
--------------------------------------------------------------------------------
Total Return Bond Portfolio 4 95
7. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
12
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders
of the PIMCO Variable Insurance Trust. It is not authorized for distribution
to prospective investors unless accompanied or preceded by an effective
prospectus for the PIMCO Variable Insurance Trust, which contains information
covering its investment policies as well as other pertinent information.
PIMCO FUNDS DISTRIBUTORS LLC
2187 ATLANTIC STREET
STAMFORD, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
STOCKSPLUS GROWTH AND INCOME PORTFOLIO
ADMINISTRATIVE CLASS
------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Contents
Chairman's Letter...................................................1
Financial Highlights................................................3
Statement of Assets and Liabilities.................................4
Statement of Operations.............................................5
Statements of Changes in Net Assets.................................6
Notes to Financial Statements......................................10
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
StocksPLUS Growth and Income Portfolio (Administrative Class)..... 2 7-9
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
StocksPLUS Growth and Income Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Total return which exceeds that of
the S&P 500 Index
Portfolio:
Primarily S&P 500 stock index derivatives backed by a portfolio of short-term
fixed income securities
Duration:
40 days
Total Net Assets:
$275.6 million
Sector Breakdown:*
[CHART]
Corporate
Bonds and Notes 50.1%
Short-Term
Instruments 17.1%
Mortgage-
Backed Securities 14.4%
Asset-
Backed Securities 6.6%
Other 11.8%
[CHART]
AAA 29.5%
AA 7.5%
A 16.9%
BBB 37.5%
BB 4.95%
B 3.6%
Other 0.1%
* % of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class
(Incep. 12/31/1997) S&P 500 Index
6 Months -1.26% -0.42%
1 Year 6.24% 7.25%
Since Inception* 18.91% --
*Annualized
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
[GRAPH]
Month StocksPLUS S&P 500
Growth and Income Index
Portfolio
========== ================= =======
12/31/1997 10,000 10,000
01/31/1998 10,140 10,111
02/28/1998 10,820 10,840
03/31/1998 11,370 11,395
04/30/1998 11,490 11,510
05/31/1998 11,260 11,312
06/30/1998 11,701 11,771
07/31/1998 11,570 11,646
08/31/1998 9,906 9,962
09/30/1998 10,669 10,600
10/31/1998 11,552 11,462
11/30/1998 12,222 12,157
12/31/1998 13,011 12,858
01/31/1999 13,446 13,395
02/28/1999 12,990 12,979
03/31/1999 13,541 13,498
04/30/1999 14,052 14,021
05/31/1999 13,697 13,690
06/30/1999 14,493 14,450
07/31/1999 14,031 13,999
08/31/1999 13,968 13,929
09/30/1999 13,663 13,548
10/31/1999 14,525 14,405
11/30/1999 14,759 14,698
12/31/1999 15,594 15,564
01/31/2000 14,720 14,782
02/29/2000 14,501 14,502
03/31/2000 15,844 15,920
04/30/2000 15,355 15,441
05/31/2000 15,042 15,125
06/30/2000 15,398 15,497
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of$10,000 on 1/01/1998, the first full month following the
Portfolio's inception on 12/31/1997, compared to the S&P 500 Index, an unmanaged
market index. The Portfolio may invest in foreign securities which involve
potentially higher risks including foreign currency fluctuations and political
or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. In sharp contrast to 1999, 2000 has been a difficult year for the equity
market. After rising 21.04% in 1999, the S&P 500 Index returned a -0.42%
for the first six months of 2000 amid heightened equity market volatility.
The StocksPLUS Growth and Income Portfolio returned -1.26%, underperforming
the S&P 500 Index for the year-to-date as of June 30, 2000.
. The Treasury yield curve inverted as short-term interest rates rose in
anticipation of Federal Reserve tightening while long rates fell in
response to the Treasury's debt buyback. The increase in short-term
interest rates detracted from the performance of the Portfolio.
. Credit spreads rose due to supply pressures and heightened concerns over
credit quality. As a result, corporate holdings in the Portfolio hurt
relative performance.
. Real return bonds helped performance as their increasing inflation
adjustment more than offset a rise in real yields. In contrast, strategies
based on expectations of a stronger euro hurt returns as the euro fell amid
capital outflows to the U.S.
. Mortgage premiums rose slightly during the first six months of the year as
a result of increased volatility, however relatively high yields offset the
negative impact of spread widening.
. Although PIMCO achieved a less expensive calendar roll than the average
market participant, unusually high S&P futures roll costs detracted from
year-to-date performance.
2
<PAGE>
Financial Highlights
StocksPLUS Growth and Income Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999 12/31/1998 (b)
--------------- --------------- --------------
<S> <C> <C> <C>
Net asset value beginning of period $ 13.56 $ 12.58 $ 10.00
----------------------------------------------------------------- --------------- --------------- --------------
Net investment income (a) 0.38 0.76 0.30
----------------------------------------------------------------- --------------- --------------- --------------
Net realized / unrealized gain (loss) on investments (a) (0.54) 1.65 2.68
----------------------------------------------------------------- --------------- --------------- --------------
Total income from investment operations (0.16) 2.41 2.98
----------------------------------------------------------------- --------------- --------------- --------------
Dividends from net investment income (0.32) (0.61) (0.29)
----------------------------------------------------------------- --------------- --------------- --------------
Distributions from net realized capital gains 0.00 (0.82) (0.11)
----------------------------------------------------------------- --------------- --------------- --------------
Total distributions (0.32) (1.43) (0.40)
----------------------------------------------------------------- --------------- --------------- --------------
Net asset value end of period $ 13.08 $ 13.56 $ 12.58
----------------------------------------------------------------- --------------- --------------- --------------
Total return % (1.26) 19.85 30.11
----------------------------------------------------------------- --------------- --------------- --------------
Net assets end of period (000s) $ 275,577 $ 230,412 $ 58,264
----------------------------------------------------------------- --------------- --------------- --------------
Ratio of expenses to average net assets % 0.65* 0.65 (c) 0.65
----------------------------------------------------------------- --------------- --------------- --------------
Ratio of net investment income to average net assets % 5.84* 5.69 5.30
----------------------------------------------------------------- --------------- --------------- --------------
Portfolio turnover rate % 92 34 61
----------------------------------------------------------------- --------------- --------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on December 31, 1997.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.65% for the
period ended December 31, 1999.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments, at value $ 274,649
-------------------------------------------------------------------------------------------- ---------------
Cash and foreign currency 7,962
-------------------------------------------------------------------------------------------- ---------------
Receivable for investments sold and forward foreign currency contracts 7,516
-------------------------------------------------------------------------------------------- ---------------
Interest and dividends receivable 2,820
-------------------------------------------------------------------------------------------- ---------------
Variation margin receivable 1,838
-------------------------------------------------------------------------------------------- ---------------
Other assets 51
-------------------------------------------------------------------------------------------- ---------------
294,836
============================================================================================ ===============
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 18,907
-------------------------------------------------------------------------------------------- ---------------
Written options outstanding 132
-------------------------------------------------------------------------------------------- ---------------
Accrued investment advisory fee 95
-------------------------------------------------------------------------------------------- ---------------
Accrued administration fee 24
-------------------------------------------------------------------------------------------- ---------------
Accrued servicing fee 36
-------------------------------------------------------------------------------------------- ---------------
Recoupment payable to Manager 4
-------------------------------------------------------------------------------------------- ---------------
Other liabilities 34
-------------------------------------------------------------------------------------------- ---------------
19,232
============================================================================================ ===============
Net Assets $ 275,604
============================================================================================ ===============
Net Assets Consist of:
Paid in capital $ 272,309
-------------------------------------------------------------------------------------------- ---------------
Undistributed net investment income 6,088
-------------------------------------------------------------------------------------------- ---------------
Accumulated undistributed net realized gain 1,651
-------------------------------------------------------------------------------------------- ---------------
Net unrealized (depreciation) (4,444)
-------------------------------------------------------------------------------------------- ---------------
$ 275,604
============================================================================================ ===============
Net Assets:
Institutional Class $ 27
-------------------------------------------------------------------------------------------- ---------------
Administrative Class 275,577
-------------------------------------------------------------------------------------------- ---------------
Shares Issued and Outstanding:
Administrative Class 21,063
-------------------------------------------------------------------------------------------- ---------------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 13.08
-------------------------------------------------------------------------------------------- ---------------
Cost of Investments Owned $ 275,569
============================================================================================ ===============
Cost of Foreign Currency Held $ 989
============================================================================================ ===============
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
StocksPLUS Growth and Income Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Interest $ 8,048
------------------------------------------------------------------------------------ -------------
Dividends 59
------------------------------------------------------------------------------------ -------------
Total Income 8,107
==================================================================================== =============
Expenses:
Investment advisory fees 498
------------------------------------------------------------------------------------ -------------
Administration fees 211
------------------------------------------------------------------------------------ -------------
Distribution and/or servicing fees - Administrative Class 100
------------------------------------------------------------------------------------ -------------
Trustees' fees 6
------------------------------------------------------------------------------------ -------------
Organization costs 1
------------------------------------------------------------------------------------ -------------
Recoupment of reimbursement 1
------------------------------------------------------------------------------------ -------------
Total Expenses 817
------------------------------------------------------------------------------------ -------------
Net Investment Income 7,290
==================================================================================== =============
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (38)
------------------------------------------------------------------------------------ -------------
Net realized gain on futures contracts and written options 1,292
------------------------------------------------------------------------------------ -------------
Net realized gain on foreign currency transactions 457
------------------------------------------------------------------------------------ -------------
Net change in unrealized (depreciation) on investments (141)
------------------------------------------------------------------------------------ -------------
Net change in unrealized (depreciation) on futures contracts and written options (10,819)
------------------------------------------------------------------------------------ -------------
Net change in unrealized (depreciation) on translation of assets and liabilities
denominated in foreign currencies (147)
------------------------------------------------------------------------------------ -------------
Net (Loss) (9,396)
------------------------------------------------------------------------------------ -------------
Net (Decrease) in Assets Resulting from Operations $ (2,106)
==================================================================================== =============
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
------------------- ----------------------
Six Months Ended Year Ended
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1998
<S> <C> <C>
Operations:
Net investment income $ 7,290 $ 8,048
-------------------------------------------------------------------- ------------------ ----------------------
Net realized gain 1,711 14,885
-------------------------------------------------------------------- ------------------ ----------------------
Net change in unrealized appreciation (depreciation) (11,107) 4,024
-------------------------------------------------------------------- ------------------ ----------------------
Net increase (decrease) resulting from operations (2,106) 26,957
==================================================================== ================== ======================
Distributions to Shareholders:
From net investment income
Institutional Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class (6,242) (7,970)
-------------------------------------------------------------------- ------------------ ----------------------
In excess of net investment income
Institutional Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
From net realized capital gains
Institutional Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class 0 (11,998)
-------------------------------------------------------------------- ------------------ ----------------------
In excess of net realized capital gains
Institutional Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Total Distributions (6,242) (19,968)
==================================================================== ================== ======================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 31 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class 75,395 188,965
-------------------------------------------------------------------- ------------------ ----------------------
Issued in reorganization
Institutional Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Issued as reinvestment of distributions
Institutional Class 0 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class 6,242 19,968
-------------------------------------------------------------------- ------------------ ----------------------
Cost of shares redeemed
Institutional Class (4) 0
-------------------------------------------------------------------- ------------------ ----------------------
Administrative Class (28,124) (43,774)
-------------------------------------------------------------------- ------------------ ----------------------
Net increase resulting from Portfolio share transactions 53,540 165,159
-------------------------------------------------------------------- ------------------ ----------------------
Total Increase in Net Assets $ 45,192 $ 172,148
==================================================================== ================== ======================
Net Assets:
Beginning of period 230,412 58,264
-------------------------------------------------------------------- ------------------ ----------------------
End of period * $ 275,604 $ 230,412
-------------------------------------------------------------------- ------------------ ----------------------
*Including net undistributed (overdistributed) investment income of: $ 6,088 $ 5,040
-------------------------------------------------------------------- ------------------ ----------------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Value
Shares (000s)
--------------------------------------------------------------------------------
COMMON STOCKS 1.2%
--------------------------------------------------------------------------------
Utilities 1.2%
Eastern Enterprises 600 $ 38
Florida Progress Corp. 16,400 769
LG&E Energy Corp. 1,800 43
MCN Energy Group, Inc. 65,000 1,389
Northeast Utilities 47,600 1,035
---------
Total Common Stocks 3,274
=========
(Cost $3,449)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 50.0%
--------------------------------------------------------------------------------
Principal
Amount
(000s)
Banking & Finance 28.5%
American General Finance
6.050% due 07/02/2001 $ 300 296
Banco de Inversion Y Comercial
9.375% due 12/27/2000 1,200 1,204
Banco Latinoamericano SA
7.639% due 12/10/2001 8,300 8,360
Caithness Coso Fund Corp.
6.800% due 12/15/2001 1,231 1,213
Chrysler Financial Co. LLC
6.677% due 06/11/2001 (d) 600 600
Donaldson, Lufkin & Jenrette, Inc.
6.760% due 04/25/2003 (d) 1,100 1,099
Edison Funding
6.950% due 12/19/2000 7,000 6,993
Finova Capital Corp.
6.390% due 06/18/2003 (d) 3,000 2,838
Ford Motor Credit Corp.
6.541% due 07/16/2002 (d) 700 701
6.320% due 12/16/2002 (d) 300 299
General Motors Acceptance Corp.
5.400% due 04/09/2001 2,000 1,973
5.500% due 12/15/2001 3,500 3,405
7.152% due 12/17/2001 (d) 2,000 2,022
6.170% due 08/18/2003 (d) 3,000 2,989
6.251% due 04/05/2004 (d) 800 798
Goldman Sachs Group
7.048% due 02/20/2001 (d) 700 701
5.690% due 02/10/2004 1,300 1,278
Heller Financial, Inc.
6.990% due 05/07/2002 (d) 10,400 10,368
Korea Development Bank
7.125% due 09/17/2001 3,000 2,977
Lehman Brothers Holdings, Inc.
6.731% due 08/01/2003 (d) 1,100 1,100
6.700% due 11/30/2006 2,715 2,457
Merrill Lynch & Co.
6.480% due 01/11/2002 (d) 2,200 2,209
6.423% due 02/01/2002 (d) 750 751
7.177% due 03/17/2004 (d) 200 199
Morgan Stanley, Dean Witter, Discover and Co.
6.165% due 01/28/2002 (d) 4,700 4,701
Nacional Financiera
9.548% due 12/01/2000 (d) 1,000 995
Old Kent Bank
7.083% due 11/01/2005 (d) 700 699
Paine Webber Group, Inc.
7.161% due 08/18/2004 (d) 1,000 976
Republic of Brazil
7.000% due 01/01/2001 7,294 7,312
7.375% due 04/15/2006 2,558 2,327
Salomon, Smith Barney Holdings
6.510% due 04/02/2002 (d) 300 302
Sovereign Bancorp
6.625% due 03/15/2001 4,300 4,225
---------
78,367
=========
Industrials 13.7%
Arrow Electronics, Inc.
7.570% due 11/24/2000 (d) 5,000 5,000
Cemex SA
9.250% due 06/17/2002 900 917
Champion International Corp.
9.700% due 05/01/2001 300 305
Clear Channel Communications
7.327% due 06/15/2002 (d) 1,000 1,000
DaimlerChrysler Holdings
7.090% due 08/23/2002 (d) 3,300 3,310
Petroleos Mexicanos
9.436% due 07/15/2005 (d) 3,500 3,500
Reynolds & Reynolds
6.120% due 03/02/2001 8,000 7,925
Rollins Truck Leasing Corp.
8.250% due 05/01/2002 8,100 8,226
TRW, Inc.
6.450% due 06/15/2001 1,100 1,090
Tyco International Group SA
7.568% due 03/05/2001 (d) 500 501
Waste Management, Inc.
6.250% due 10/15/2000 5,735 5,689
Williams Communications Group, Inc.
6.540% due 11/15/2001 300 300
---------
37,763
=========
Utilities 7.8%
Appalachian Power
7.272% due 06/27/2001 (d) 8,000 7,998
Cleveland Electric/Toledo Edison
7.190% due 07/01/2000 3,000 3,000
CMS Energy
8.000% due 07/01/2011 800 788
Entergy Arkansas, Inc.
7.720% due 03/01/2003 600 601
LG&E Capital Corp.
7.510% due 06/18/2001 (d) 1,200 1,200
Nevada Power Co.
7.347% due 06/12/2001 (d) 1,000 1,000
Noram Energy
7.500% due 08/01/2000 500 500
Sierra Pacific Power Co.
7.297% due 06/12/2001 (d) 3,300 3,300
Sprint Capital Corp.
7.010% due 11/15/2001 (d) 3,200 3,200
---------
21,587
---------
Total Corporate Bonds & Notes 137,717
=========
(Cost $137,442)
--------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES 4.0%
--------------------------------------------------------------------------------
North Carolina 4.0%
North Carolina State Education Assistance Authority
Revenue Bonds, (GTD Insured), Series 2000
7.000% due 06/01/2009 (d) 11,000 11,000
---------
Total Municipal Bonds & Notes 11,000
=========
(Cost $11,000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 5.0%
--------------------------------------------------------------------------------
Treasury Inflation Protected Securities (b)(h)
3.625% due 07/15/2002 13,897 13,810
---------
Total U.S. Treasury Obligations 13,810
=========
(Cost $13,810)
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments(Cont.)
StocksPLUS Growth and Income Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
MORTAGE-BACKED SECURITIES 14.3%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 7.4%
Countrywide Home Loans
6.500% due 03/25/2028 $ 523 $ 509
6.050% due 04/25/2029 362 356
DLJ Mortgage Acceptance Corp.
6.125% due 06/25/2026 (d) 913 907
Federal Home Loan Mortgage Corp.
6.500% due 02/15/2024 488 487
Federal National Mortgage Assn.
7.000% due 06/25/2006 72 71
6.900% due 10/25/2020 1,000 978
General Electric Capital Mortgage Services, Inc.
6.500% due 12/25/2023 1,636 1,598
6.500% due 08/25/2024 3,010 2,987
Government National Mortgage Assn.
7.500% due 08/20/2021 74 73
8.000% due 07/24/2030 4,300 4,346
Headlands Mortgage Securities, Inc.
7.250% due 11/25/2027 1,000 975
7.000% due 02/25/2028 421 418
Independent National Mortgage Corp.
8.350% due 06/25/2025 107 107
Morgan Stanley, Dean Witter, Discover and Co.
5.568% due 07/25/2027 (d) 152 151
Norwest Asset Securities Corp.
6.750% due 08/25/2029 926 911
PNC Mortgage Securities Corp.
6.625% due 03/25/2028 606 591
Prudential Home Mortgage Securities
6.750% due 08/25/2008 117 116
Prudential-Bache CMO Trust
7.965% due 03/01/2019 463 461
Resecuritization Mortgage Trust
5.843% due 04/26/2021 (d) 381 371
Residential Accredit Loans, Inc.
8.000% due 08/25/2026 510 512
Residential Asset Securitization Trust
7.750% due 04/25/2027 850 849
Residential Funding Mortgage Securities, Inc.
6.500% due 07/25/2008 93 93
7.250% due 08/25/2027 16 16
7.250% due 10/25/2027 1,000 987
Structured Asset Securities Corp.
6.780% due 12/25/2000 (d) 49 49
Thrift Financing Corp.
11.250% due 01/01/2016 1,571 1,613
--------
20,532
========
Federal National Mortgage Association 0.3%
5.812% due 08/01/2029 (d) 251 245
5.848% due 08/01/2031 (d) 61 59
6.500% due 09/01/2005 398 390
--------
694
========
Government National Mortgage Association 5.0%
6.375% due 04/20/2024-04/20/2027 (d) 9,513 9,495
6.750% due 08/20/2024 (d) 216 217
7.150% due 06/16/2026 4,104 4,094
--------
13,806
========
Mortgage-Backed Securities 1.6%
CS First Boston Mortgage Securities
6.960% due 06/20/2029 261 259
Housing Securities, Inc.
5.863% due 07/25/2032 1,048 1,048
MGM Grand Term Loan
8.060% due 05/06/2001 3,200 3,179
--------
4,486
--------
Total Mortgage-Backed Securities 39,518
========
(Cost $39,951)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 6.6%
--------------------------------------------------------------------------------
Arcadia Automobile Receivables Trust
6.500% due 06/17/2002 276 276
Banc One Auto Grantor Trust
6.270% due 11/20/2003 496 494
Korea National Housing
10.343% due 05/23/2001 3,000 3,045
Money Store Home Equity Trust
6.550% due 09/15/2021 1,165 1,160
6.345% due 11/15/2021 (d) 90 89
Option One Mortgage Loan Trust
6.955% due 04/25/2030 (d) 9,387 9,392
Saxon Asset Securities Trust
6.380% due 05/25/2029 (d) 3,332 3,326
WMC Mortgage Loan
6.671% due 03/20/2028 (d) 349 349
--------
Total Asset-Backed Securities 18,131
========
(Cost $18,165)
--------------------------------------------------------------------------------
FOREIGN CURRENCY-DENOMINATED (e)(f) 1.5%
--------------------------------------------------------------------------------
Korea Development Bank
5.625% due 11/05/2002 FF 20,000 2,807
Tecnost International NV
4.487% due 06/23/2004 (d) EC 1,500 1,440
--------
Total Foreign Currency-Denominated 4,247
========
(Cost $4,794)
--------------------------------------------------------------------------------
PURCHASED PUT OPTIONS 0.0%
--------------------------------------------------------------------------------
S & P 500 Index Futures
Strike @ 925.000 Exp. 09/15/2000 $ 400 20
--------
Total Purchased Put Options 20
========
(Cost $26)
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 17.0%
--------------------------------------------------------------------------------
Commercial Paper 13.2%
Bombardier Capital, Inc.
6.780% due 07/26/2000 3,700 3,684
Conoco, Inc.
6.460% due 07/12/2000 2,000 1,997
Dominion Resources
6.870% due 07/06/2000 4,000 3,998
Dupont De Nemours & Co.
6.270% due 07/10/2000 300 300
Ford Motor Credit Corp.
6.570% due 07/20/2000 800 798
General Electric Capital Corp.
6.620% due 07/24/2000 3,000 2,988
6.540% due 07/31/2000 700 696
Ingersoll Rand Co.
6.750% due 07/13/2000 4,200 4,192
Pearson, Inc.
7.000% due 08/02/2000 1,100 1,093
6.870% due 08/24/2000 500 495
Sumitomo Bank
6.730% due 07/05/2000 5,900 5,898
Texas Utilities Co.
6.800% due 07/07/2000 4,400 4,397
UBS AG
6.600% due 09/05/2000 3,000 2,965
Visteon Corp.
6.790% due 07/21/2000 2,900 2,890
--------
36,391
========
8 See accompanying notes
<PAGE>
Principal
Amount Value
(000s) (000s)
Repurchase Agreement 3.8%
State Street Bank
5.850% due 07/03/2000 $ 10,477 $ 10,477
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
5.800% due 09/02/2008 valued at 10,687.
Repurchase proceeds are $10,482.)
U.S. Treasury Bills (b) 0.0%
5.617% due 09/21/2000 65 64
-----------
Total Short-Term Instruments 46,932
===========
(Cost $46,932)
Total Investments (a) 99.6% $ 274,649
(Cost $275,569)
Written Options (c) (0.0%) (132)
(Premiums $213)
Other Assets and Liabilities (Net) 0.4% 1,087
-----------
Net Assets 100.0% $ 275,604
===========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 681
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (1,601)
-----------
Unrealized depreciation-net $ (920)
===========
(b) Securities with an aggregate market value of $13,874
have been segregated with the custodian to cover margin
requirement for the following open futures contracts
at June 30, 2000:
Unrealized
# of Appreciation/
Type Contracts (Depreciation)
--------------------------------------------------------------------------------
Japan 10 Year Bond (09/2000) 4 $ 14
S&P 500 Index (09/2000) 725 (3,638)
Eurodollar March Futures (03/2001) 26 22
U.S. Treasury 30 Year Bond (09/2000) 49 (3)
-----------
$ (3,605)
===========
(c) Premiums received on written options:
Type Par Premium Value
--------------------------------------------------------------------------------
Call - CME AWCO Eurodollar December Futures
Strike @ 93.00 Exp. 12/18/2000 28 $ 11 $ 9
Call - CME AWCO Eurodollar December Futures
Strike @ 92.75 Exp. 12/18/2000 14 10 9
Put - CME AWPO Eurodollar March Futures
Strike @ 92.75 Exp. 03/19/2001 12 8 6
Call - CME AWCO Eurodollar March Futures
Strike @ 93.25 Exp. 03/19/2001 233 37 64
Put - CME AWPO Eurodollar March Futures
Strike @ 92.25 Exp. 03/19/2001 221 142 38
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/28/2000 5,000,000 6 6
----------------
$ 213 $ 132
================
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Foreign forward currency contracts outstanding at June 30, 2000:
Principal
Amount Unrealized
Covered by Settlement Appreciation/
Type Currency Contract Month (Depreciation)
--------------------------------------------------------------------------------
Buy PZ 4,200 01/2001 $ (33)
Sell EC 5,236 07/2000 1
Sell 250 08/2000 (3)
--------------
$ (35)
==============
(f) Principal amount denoted in indicated currency:
EC - European Currency Unit
FF - French Franc
PZ - Polish Zloty
(g) Swap agreements outstanding at June 30, 2000.
Unrealized
Notional Appreciation/
Type Amount (Depreciation)
--------------------------------------------------------------------------------
Receive floating rate based on 6 month Japanese Yen LIBOR
and pay fixed rate equal to 1.746% in Japanese Yen.
Broker: Goldman Sachs & Co.
Exp. 09/20/2007 JY 506,000 $ (7)
Receive total return on S&P 500 Index
and pay floating rate based on 1 month
LIBOR plus 0.18%.
Broker: J.P. Morgan Securities, Inc.
Exp. 05/03/2001 $ 4 0
-------------
$ (7)
=============
(h) Prinicpal amount of the security is adjusted for inflation.
2000 Semi-Annual Report See accompanying notes 9
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The StocksPLUS Growth and Income Portfolio (the "Portfolio") is a series of the
PIMCO Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.
The Trust is designed to be used as an investment vehicle by Separate Accounts
of insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on December 31, 1997.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, of the Portfolio are declared and distributed to shareholders
quarterly. All dividends are reinvested in additional shares of the Portfolio.
Net realized capital gains earned by the Portfolio, if any, will be distributed
at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the
10
<PAGE>
security may be restricted; the value of the security may change over the term
of the financing transaction; and the return earned by the Portfolio with the
proceeds of a financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. The Portfolio is authorized to enter into forward
foreign exchange 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 purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Swaps. The Portfolio is authorized to enter into interest rate, total return and
currency exchange swap agreements in order to obtain a desired return at a lower
cost than if the Portfolio had invested directly in the asset that yielded the
desired return. Swaps involve commitments to exchange components of income
(generally interest or returns) pegged to the underlying assets based on a
notional principal amount. Swaps are marked to market daily based upon
quotations from market makers and the change, if any, is recorded as unrealized
gains or losses in the Statements of Operations. The 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 counterparty.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, the Portfolio may fail to recoup some or all of its
initial investment in these securities. The market value of these securities is
highly sensitive to changes in interest rates.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
Restricted Securities. The Portfolio is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These securities
generally may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.40%.
2000 Semi- Annual Report 11
<PAGE>
Notes to Financial Statements(Cont.)
June 30, 2000 (Unaudited)
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.10%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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. The ratio of expenses to average net assets per share
class, as disclosed in Financial Highlights, may differ from the annual fund
operating expenses per share class as disclosed in the Prospectus for the
reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
StocksPLUS Growth
and Income Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of$500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
Organization Expense. Costs incurred in connection with the organization of the
Portfolio and its initial registration are amortized on a straight-line basis
over a five-year period from the Portfolio's commencement of operations.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
----------------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
StocksPLUS Growth
and Income Portfolio $ 128,694 $ 129,920 $ 119,196 $ 41,562
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
StocksPLUS Growth and Income Portfolio
----------------------------------------------------------
# of Contracts Premium
--------------------------------------------------------------------------------
Balance at 12/31/1999 300 $ 253
Sales 234,781,050 3,088
Closing Buys (205,000,335) (1,327)
Expirations (24,780,507) (1,801)
Exercised 0 0
--------------------------------------------------------------------------------
Balance at 06/30/2000 5,000,508 $ 213
--------------------------------------------------------------------------------
12
<PAGE>
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with
a $.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
StocksPLUS Growth Income Portfolio
----------------------------------------------
Period Ended 6/30/2000 Year Ended 12/31/1999
Shares Amount Shares Amount
----------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 2 $ 31 0 $ 0
-------------------------------------------------------- ----------------------------------------------
Administrative Class 5,729 75,395 14,200 188,965
-------------------------------------------------------- ----------------------------------------------
Issued as reinvestment of distributions
Institutional Class 0 0 0 0
-------------------------------------------------------- ----------------------------------------------
Administrative Class 466 6,242 1,460 19,968
-------------------------------------------------------- ----------------------------------------------
Cost of shares redeemed
Institutional Class 0 (4) 0 0
-------------------------------------------------------- ----------------------------------------------
Administrative Class (2,123) (28,124) (3,301) (43,774)
-------------------------------------------------------- ----------------------------------------------
Net increase resulting from Portfolio share transactions 4,074 $ 53,540 12,359 $ 165,159
-------------------------------------------------------- ----------------------------------------------
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
------------------------------------------------------------------------------
StocksPLUS Growth and Income Portfolio 1 95
7. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi- Annual Report 13
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO VARIABLE INSURANCE TRUST
840 NEWPORT CENTER DRIVE, SUITE 300
NEWPORT BEACH, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO FUNDS DISTRIBUTORS LLC
2187 ATLANTIC STREET
STAMFORD, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
HIGH YIELD BOND PORTFOLIO
ADMINISTRATIVE CLASS
------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Contents
Chairman's Letter............................................1
Financial Highlights.........................................3
Statement of Assets and Liabilities..........................4
Statement of Operations......................................5
Statements of Changes in Net Assets......................... 6
Notes to Financial Statements...............................11
Fund Schedule of
Summary Investments
High Yield Bond Portfolio (Administrative Class).............2 7-10
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
High Yield Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily higher yielding fixed income
securities
Duration:
4.46 years
Total Net Assets:
$154.6 million
Sector Breakdown:*
[CHART]
Corporate
Bonds & Notes 94.4%
Other 5.6%
Quality Breakdown:*
[CHART]
AAA 0.6%
AA 0.6%
A 1.2%
BBB 9.5%
BB 45.7%
B 42.4%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
Performance
--------------------------------------------------------------------------------
Total Return Investment Performance For the Period Ended June 30, 2000
Administrative
Class Lehman Intermediate
(Incep. 4/30/1998) BB rated Corp. Index
--------------------------------------------------------------------------------
6 Months -0.89% 1.04%
1 Year 0.60% 2.68%
Since Inception* 1.80% --
*Annualized
Cumulative Returns Through June 30, 2000
$10,000 invested at inception
[GRAPH]
Month High Yield Lehman
Bond Intermediate
Portfolio BB rated
Corp. Index
========== ========== ============
04/30/1998 10,000 10,000
05/31/1998 10,004 10,065
06/30/1998 10,101 10,126
07/31/1998 10,195 10,179
08/31/1998 9,722 9,898
09/30/1998 9,858 10,108
10/31/1998 9,760 9,979
11/30/1998 10,152 10,218
12/31/1998 10,180 10,282
01/31/1999 10,357 10,388
02/28/1999 10,279 10,311
03/31/1999 10,383 10,386
04/30/1999 10,539 10,492
05/31/1999 10,335 10,365
06/30/1999 10,331 10,341
07/31/1999 10,338 10,380
08/31/1999 10,288 10,315
09/30/1999 10,292 10,357
10/31/1999 10,277 10,322
11/30/1999 10,403 10,410
12/31/1999 10,486 10,508
01/31/2000 10,419 10,434
02/29/2000 10,401 10,454
03/31/2000 10,205 10,354
04/30/2000 10,253 10,390
05/31/2000 10,226 10,394
06/30/2000 10,393 10,618
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 5/01/1998, the first full month following the
Portfolio's inception on 4/30/1998, compared to the Lehman Intermediate BB rated
Corp. Index, an unmanaged market index. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty. The investments made by the
High Yield Bond Portfolio may involve high risk and may have speculative
characteristics.
--------------------------------------------------------------------------------
Portfolio Insights
--------------------------------------------------------------------------------
. The high yield market underperformed higher quality bonds in the first half
of 2000 as the government's buyback of debt prompted a rally in the U.S.
Treasury market.
. The High Yield Bond Portfolio underperformed the Lehman Intermediate BB
rated Corporate Index for the six-month period ended June 30, 2000, posting
a return of -0.89% versus 1.04% for the Index.
. Maintaining a duration, or sensitivity to interest rates, higher than the
Index was positive for returns as longer maturity Treasury yields fell.
. Although the holdings of B rated securities were concentrated in better
performing B+ issues, B rated securities significantly underperformed BB
rated issues.
. Industry orientation was mixed as the benefit from a focus on non-cyclical
industries such as publishing and medical services was partially offset by
the poor performance of the telecommunications industry.
. The Portfolio's focus on data-related communications companies hurt
performance as this sub-sector lagged the broader industry group.
2
<PAGE>
Financial Highlights
High Yield Bond Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999 12/31/1998 (b)
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value beginning of period $ 9.18 $ 9.67 $ 10.00
-------------------------------------------------------- ----------------- ---------------- ----------------
Net investment income (a) 0.40 0.77 0.51
-------------------------------------------------------- ----------------- ---------------- ----------------
Net realized / unrealized (loss) on investments (a) (0.48) (0.49) (0.34)
-------------------------------------------------------- ----------------- ---------------- ----------------
Total income from investment operations (0.08) 0.28 0.17
-------------------------------------------------------- ----------------- ---------------- ----------------
Dividends from net investment income (0.40) (0.77) (0.50)
-------------------------------------------------------- ----------------- ---------------- ----------------
Total distributions (0.40) (0.77) (0.50)
-------------------------------------------------------- ----------------- ---------------- ----------------
Net asset value end of period $ 8.70 $ 9.18 $ 9.67
-------------------------------------------------------- ----------------- ---------------- ----------------
Total return % (0.89) 3.01 1.80
-------------------------------------------------------- ----------------- ---------------- ----------------
Net assets end of period (000s) $ 154,626 $ 151,020 $ 49,761
-------------------------------------------------------- ----------------- ---------------- ----------------
Ratio of expenses to average net assets % 0.75 (d)* 0.75 (c) 0.75*
-------------------------------------------------------- ----------------- ---------------- ----------------
Ratio of net investment income to average net assets % 8.98* 8.25 7.90*
-------------------------------------------------------- ----------------- ---------------- ----------------
Portfolio turnover rate % 13 13 13
-------------------------------------------------------- ----------------- ---------------- ----------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 30, 1998.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.75% for the
period ended December 31, 1999.
(d) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.76% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
High Yield Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 151,364
----------------------------------------------------------------------- --------------
Interest and dividends receivable 3,359
----------------------------------------------------------------------- --------------
Manager reimbursement receivable 4
----------------------------------------------------------------------- --------------
Other assets 4
----------------------------------------------------------------------- --------------
154,731
======================================================================= ==============
Liabilities:
Accrued investment advisory fee 33
----------------------------------------------------------------------- --------------
Accrued administration fee 47
----------------------------------------------------------------------- --------------
Accrued distribution fee 0
----------------------------------------------------------------------- --------------
Accrued servicing fee 20
----------------------------------------------------------------------- --------------
Other liabilities 5
----------------------------------------------------------------------- --------------
105
======================================================================= ==============
Net Assets $ 154,626
----------------------------------------------------------------------- --------------
Net Assets Consist of:
Paid in capital $ 169,310
----------------------------------------------------------------------- --------------
Accumulated undistributed net realized (loss) (2,364)
----------------------------------------------------------------------- --------------
Net unrealized (depreciation) (12,320)
----------------------------------------------------------------------- --------------
$ 154,626
======================================================================= ==============
Net Assets:
Administrative Class $ 154,626
----------------------------------------------------------------------- --------------
Shares Issued and Outstanding:
Administrative Class 17,783
----------------------------------------------------------------------- --------------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 8.70
----------------------------------------------------------------------- --------------
Cost of Investments Owned $ 163,684
======================================================================= ==============
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
High Yield Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
-------------
Investment Income:
<S> <C>
Interest $ 7,097
------------------------------------------------------------------- -------------
Dividends 60
------------------------------------------------------------------- -------------
Total Income 7,157
=================================================================== =============
Expenses:
Investment advisory fees 273
------------------------------------------------------------------- -------------
Administration fees 221
------------------------------------------------------------------- -------------
Distribution and/or servicing fees - Administrative Class 56
------------------------------------------------------------------- -------------
Trustees' fees 4
------------------------------------------------------------------- -------------
Organization costs 1
------------------------------------------------------------------- -------------
Total Expenses 555
------------------------------------------------------------------- -------------
Reimbursement by manager (1)
------------------------------------------------------------------- -------------
Net Expenses 554
------------------------------------------------------------------- -------------
Net Investment Income 6,603
=================================================================== =============
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (1,291)
------------------------------------------------------------------- -------------
Net change in unrealized (depreciation) on investments (6,721)
------------------------------------------------------------------- -------------
Net (Loss) (8,012)
------------------------------------------------------------------- -------------
Net (Decrease) in Assets Resulting from Operations $ (1,409)
=================================================================== =============
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
High Yield Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
----------------- ------------------
Six Months Ended Year Ended
Increase (Decrease) in Net Assets from: June 30, 2000 December 31, 1999
<S> <C> <C>
Operations:
Net investment income $ 6,603 $ 8,618
------------------------------------------------------------------------ --------------- -----------------
Net realized gain (loss) (1,291) (986)
------------------------------------------------------------------------ --------------- -----------------
Net change in unrealized appreciation (depreciation) (6,721) (4,967)
------------------------------------------------------------------------ --------------- -----------------
Net increase (decrease) resulting from operations (1,409) 2,665
======================================================================== =============== =================
Distributions to Shareholders:
From net investment income
Administrative Class (6,603) (8,620)
------------------------------------------------------------------------ --------------- -----------------
Total Distributions (6,603) (8,620)
======================================================================== =============== =================
Portfolio Share Transactions:
Receipts for shares sold
Administrative Class 44,346 120,685
------------------------------------------------------------------------ --------------- -----------------
Issued as reinvestment of distributions
Administrative Class 6,603 9,322
------------------------------------------------------------------------ --------------- -----------------
Cost of shares redeemed
Administrative Class (39,331) (22,793)
------------------------------------------------------------------------ --------------- -----------------
Net increase resulting from Portfolio share transactions 11,618 107,214
------------------------------------------------------------------------ --------------- -----------------
Total Increase in Net Assets $ 3,606 $ 101,259
======================================================================== =============== =================
Net Assets:
Beginning of period 151,020 49,761
------------------------------------------------------------------------ --------------- -----------------
End of period * $ 154,626 $ 151,020
------------------------------------------------------------------------ --------------- -----------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
------------------------------------------------------------------------ --------------- -----------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
High Yield Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 92.4%
--------------------------------------------------------------------------------
Banking & Finance 5.6%
AmeriCredit Corp.
9.875% due 04/15/2006 $ 500 $ 487
Bay View Capital Corp.
9.125% due 08/15/2007 750 574
Crown Castle International Corp.
0.000% due 11/15/2007 1,000 745
Fuji Bank
9.870% due 12/31/2049(b) 100 97
Golden State Holdings
6.750% due 08/01/2001 1,000 972
Host Marriott LP
8.375% due 02/15/2006 500 467
Imperial Credit Industries, Inc.
9.875% due 01/15/2007 450 316
Mercury Finance Co.
10.000% due 03/23/2001 800 756
10.670% due 03/23/2001(b) 350 340
Orion Power Holdings
12.000% due 05/01/2010 500 520
Presidential Life Insurance Corp.
7.875% due 02/15/2009 500 454
Reliance Group Holdings
9.000% due 11/15/2000 1,200 948
Sovereign Bancorp
6.625% due 03/15/2001 500 491
Sumitomo Bank Treasury Co.
9.400% due 12/29/2049(b) 100 98
Trizec Finance Ltd.
10.875% due 10/15/2005 750 758
Willis Corroon Corp.
9.000% due 02/01/2009 750 634
-------------
8,657
=============
Industrials 79.9%
360 Networks, Inc.
13.000% due 05/01/2008 500 503
Aaf-Mcquay, Inc.
8.875% due 02/15/2003 500 432
Abbey Healthcare Group
9.500% due 11/01/2002 700 686
Adelphia Business Solution
12.250% due 09/01/2004 1,000 1,015
Advanced Lighting
8.000% due 03/15/2008 1,150 845
AEI Holding Co.
10.500% due 12/15/2005 1,150 236
Allied Waste North America, Inc.
7.625% due 01/01/2006 550 484
American Axle & Manufacturing, Inc.
9.750% due 03/01/2009 750 703
American Standard, Inc.
7.375% due 02/01/2008 500 455
Amerigas Partners LP
10.125% due 04/15/2007 750 752
AMFM, Inc.
8.125% due 12/15/2007 500 506
Amphenol Corp.
9.875% due 05/15/2007 510 517
Applied Power, Inc.
8.750% due 04/01/2009 700 728
Archibald Candy Corp.
10.250% due 07/01/2004 500 365
AT&T Canada, Inc
0.000% due 11/01/2007(c) 350 308
Ball Corp.
7.750% due 08/01/2006 650 614
8.250% due 08/01/2008 250 236
Beckman Instruments, Inc.
7.450% due 03/04/2008 3,000 2,733
Benedek Communications Corp.
1.000% due 05/15/2006(c) 1,000 705
Beverly Enterprises, Inc.
9.000% due 02/15/2006 900 751
Browning-Ferris Industries, Inc.
6.100% due 01/15/2003 1,250 1,111
Buckeye Technologies, Inc.
8.000% due 10/15/2010 800 748
Building Materials Corp.
7.750% due 07/15/2005 200 166
8.625% due 12/15/2006 250 220
8.000% due 10/15/2007 200 161
8.000% due 12/01/2008 750 592
Cadmus Communications Corp.
9.750% due 06/01/2009 750 731
Call-Net Enterprises, Inc.
8.000% due 08/15/2008 200 117
9.375% due 05/15/2009 400 248
Canadian Forest Oil Ltd.
8.750% due 09/15/2007 1,000 945
Century Communications Corp.
0.000% due 03/15/2003 400 297
8.750% due 10/01/2007 900 821
Chancellor AMFM, Inc.
8.000% due 11/01/2008 500 504
Charter Communications Holding LLC
8.250% due 04/01/2007 1,000 887
Charter Communications Holdings Corp.
10.000% due 04/01/2009 650 630
Circus Circus Enterprises
6.750% due 07/15/2003 850 784
9.250% due 12/01/2005 200 194
Clark R & M, Inc.
8.375% due 11/15/2007 250 198
Clearnet Communications
0.000% due 05/01/2009(c) 1,000 605
Cliffs Drilling Co.
10.250% due 05/15/2003 1,250 1,259
Coltec Industries, Inc.
7.500% due 04/15/2008 400 377
Columbia/HCA Healthcare
6.910% due 06/15/2005 1,000 914
7.000% due 07/01/2007 700 620
Columbus McKinnon
8.500% due 04/01/2008 250 216
Consolidated Container Co.
10.125% due 07/15/2009 750 746
Container Corp. of America
11.250% due 05/01/2004 2,500 2,537
Cross Timbers Oil Co.
9.250% due 04/01/2007 250 244
8.750% due 11/01/2009 500 477
CSC Holdings, Inc.
9.875% due 02/15/2013 900 928
Cumberland Farms
10.500% due 10/01/2003 476 459
Dade International, Inc.
11.125% due 05/01/2006 600 285
Diamond Cable Communication Co.
13.250% due 09/30/2004 500 528
0.000% due 12/15/2005(c) 500 477
Dunlop Stand Aerospace Holdings
11.875% due 05/15/2009 500 494
Echostar Communications Corp.
9.250% due 02/01/2006 1,250 1,222
Embotelladora Arica SA
9.875% due 03/15/2006 1,000 1,036
Emmis Communications Corp.
8.125% due 03/15/2009 700 642
Extended Stay America
9.150% due 03/15/2008 250 224
Extendicare Health Services
9.350% due 12/15/2007 350 151
Federal-Mogul Corp.
7.500% due 07/01/2004 150 116
7.750% due 07/01/2006 350 255
Ferrellgas Partners LP
9.375% due 06/15/2006 1,000 965
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments (Cont.)
High Yield Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
Fisher Scientific International
7.125% due 12/15/2005 $ 500 $ 447
9.000% due 02/01/2008 1,225 1,127
Focal Communications
11.875% due 01/15/2010 500 505
Forest City Enterprises
8.500% due 03/15/2008 850 774
Forest Oil Corp.
10.500% due 01/15/2006 500 511
Fox/Liberty Networks LLC
0.000% due 08/15/2007(c) 750 611
Garden State Newspapers
8.750% due 10/01/2009 850 756
8.625% due 07/01/2011 250 219
Georgia Gulf Corp.
7.625% due 11/15/2005 1,500 1,438
Golden Northwest Aluminum
12.000% due 12/15/2006 125 126
Gulf Canada Resources
9.625% due 07/01/2005 350 354
Harrahs Operating Co., Inc.
7.875% due 12/15/2005 700 660
Henry Co.
10.000% due 04/15/2008 500 327
HMH Properties, Inc.
7.875% due 08/01/2005 1,350 1,255
8.450% due 12/01/2008 150 140
Hollinger International Publishing
8.625% due 03/15/2005 650 643
9.250% due 02/01/2006 200 198
9.250% due 03/15/2007 650 643
Holmes Products Corp.
9.875% due 11/15/2007 500 352
Horseshoe Gaming Holding
8.625% due 05/15/2009 1,250 1,184
HS Resources, Inc.
9.875% due 12/01/2003 500 501
9.250% due 11/15/2006 700 684
Huntsman Chemicals Corp.
10.125% due 07/01/2009 250 253
Huntsman Corp.
9.500% due 07/01/2007 625 572
Huntsman ICI Chemicals LLC
10.125% due 07/01/2009 200 202
Impsat Corp.
12.375% due 06/15/2008 500 396
Insight Midwest/Insight Capital
9.750% due 10/01/2009 500 492
Intermedia Communications, Inc.
0.000% due 05/15/2006(c) 500 465
International Game Technology
7.875% due 05/15/2004 900 868
8.375% due 05/15/2009 650 618
ISP Holdings, Inc.
9.750% due 02/15/2002 500 489
9.000% due 10/15/2003 700 655
J.Q. Hammons Hotels
8.875% due 02/15/2004 250 219
John Q Hammons Hotels LP
9.750% due 10/01/2005 100 89
Jones Intercable, Inc.
8.875% due 04/01/2007 250 254
Jupiters Ltd.
8.500% due 03/01/2006 600 563
K-Mart Corp.
8.130% due 12/16/2003 500 480
9.780% due 01/05/2020 300 278
Keebler Corp.
10.750% due 07/01/2006 1,000 1,064
K-III Communications Co.
8.500% due 02/01/2006 1,250 1,184
KPNQWest BV
8.125% due 06/01/2009 1,250 1,181
L-3 Communications Corp.
10.375% due 05/01/2007 700 716
Level 3 Communications, Inc.
11.000% due 03/15/2008 1,250 1,244
9.125% due 05/01/2008 1,400 1,261
Levi Strauss & Co.
6.800% due 11/01/2003 750 615
Leviathan Gas Corp.
10.375% due 06/01/2009 750 761
Lin Television Corp.
8.375% due 03/01/2008 500 458
Loral Space & Communication Ltd.
9.500% due 01/15/2006 500 365
Lyondell Chemical Co.
9.625% due 05/01/2007 1,000 988
Mail-Well Corp.
8.750% due 12/15/2008 875 739
Mark IV Industries, Inc.
7.500% due 09/01/2007 1,000 766
Market Hub Partners
8.250% due 03/01/2008 1,000 935
Marsh Supermarkets, Inc.
8.875%due08/01/2007 1,000 935
McLeodUSA, Inc.
0.000% due 03/01/2007(c) 1,585 1,316
8.375% due 03/15/2008 500 463
9.500% due 11/01/2008 250 246
8.125% due 02/15/2009 1,600 1,448
Metromedia Fiber Network, Inc.
10.000% due 11/15/2008 750 743
10.000% due 12/15/2009 600 594
Metronet Communications
0.000% due 06/15/2008(c) 200 163
MGM Grand, Inc.
6.950% due 02/01/2005 750 706
MJD Communications, Inc.
9.500% due 05/01/2008 850 761
Nextel Communications, Inc.
9.375% due 11/15/2009 1,750 1,680
Nextel Partners, Inc.
0.000% due 02/01/2009(c) 487 338
Nextlink Communications, Inc.
10.750% due 06/01/2009 750 743
NL Industries, Inc.
11.750% due 10/15/2003 1,000 1,025
Nortek, Inc.
9.125% due 09/01/2007 500 465
8.875% due 08/01/2008 750 683
NTL, Inc.
0.000% due 02/01/2006(c) 750 696
11.500% due 10/01/2008 400 400
Octel Developments PLC
10.000% due 05/01/2006 1,250 1,150
Orion Network Systems, Inc.
11.250% due 01/15/2007 400 244
0.000% due 01/15/2007(c) 400 166
Owens-Illinois, Inc.
7.850% due 05/15/2004 900 855
P&L Coal Holdings
8.875% due 05/15/2008 1,400 1,327
Packaging Corp. of America
9.625% due 04/01/2009 400 399
Packard Bioscience Co.
9.375% due 03/01/2007 350 320
Perry-Judd
10.625% due 12/15/2007 250 211
Petroleos Mexicanos
8.401% due 07/15/2005(b) 300 300
Pharmerica, Inc.
8.375% due 04/01/2008 1,500 893
Phar-Mor, Inc.
11.720% due 09/11/2002 150 131
Physician Sales and Service, Inc.
8.500% due 10/01/2007 375 347
Piedmont Aviation
10.250% due 03/28/2005 400 385
8 See accompanying notes
<PAGE>
Principal
Amount Value
(000s) (000s)
Pioneer National Resources
8.875% due 04/15/2005 $ 250 $ 253
8.250% due 08/15/2007 250 244
6.500% due 01/15/2008 650 561
Pioneer Natural Resources Co.
9.625% due 04/01/2010 750 776
Polymer Group, Inc.
9.000% due 07/01/2007 750 641
8.750% due 03/01/2008 900 752
Price Communications Wireless, Inc.
9.125% due 12/15/2006 500 508
Pride International, Inc.
9.375% due 05/01/2007 600 602
Qwest Communications International, Inc.
0.000% due 10/15/2007(c) 800 673
0.000% due 02/01/2008(c) 610 482
R & B Falcon Corp.
6.500% due 04/15/2003 500 463
9.125% due 12/15/2008 1,000 995
R.H. Donnelly, Inc.
9.125% due 06/01/2008 125 118
Renaissance Media Group
0.000% due 04/15/2008(c) 100 69
Rexene Corp.
11.750% due 12/01/2004 1,000 1,020
Rogers Cantel Mobile Communications, Inc.
9.375% due 06/01/2008 1,000 1,033
Rogers Cantel, Inc.
8.300% due 10/01/2007 1,500 1,474
Safety-Kleen Services
9.250% due 06/01/2008(d) 1,450 123
9.250% due 05/15/2009(d) 250 6
Salem Communications
9.500% due 10/01/2007 900 851
SC International Services, Inc.
9.250% due 09/01/2007 800 764
Scotts Co.
8.625% due 01/15/2009 500 482
Sequa Corp.
9.000% due 08/01/2009 1,000 965
Silgan Holdings, Inc.
9.000% due 06/01/2009 1,250 1,187
Smithfield Foods
7.625% due 02/15/2008 275 248
Station Casinos, Inc.
9.750% due 04/15/2007 550 553
8.875% due 12/01/2008 250 239
Stone Container Corp.
10.750% due 10/01/2002 750 764
Telewest Communications PLC
9.625% due 10/01/2006 400 378
0.000% due 10/01/2007 (b)(c) 1,000 953
0.000% due 04/15/2009(c) 500 271
9.875% due 02/01/2010 250 234
Tenet Healthcare Corp.
7.875% due 01/15/2003 500 490
8.625% due 12/01/2003 250 248
8.000% due 01/15/2005 250 241
TFM SA
10.250% due 06/15/2007 400 355
TFM SA de CV
0.000% due 06/15/2009(c) 600 412
Total Renal Care Holdings
7.000% due 05/15/2009 800 543
Trans-Resources, Inc.
10.750% due 03/15/2008 350 72
Triad Hospitals, Inc.
11.000% due 05/15/2009 500 514
TV Guide, Inc.
8.125% due 03/01/2009 1,100 1,103
U.S. Air, Inc.
9.625% due 09/01/2003 325 312
9.330% due 01/01/2006 120 111
United Defense Industry, Inc.
8.750% due 11/15/2007 150 140
United Pan-Europe Communication NV
0.000% due 07/15/2008(c) 750 476
0.000% due 02/01/2009(c) 1,100 644
10.875% due 08/01/2009 1,250 1,094
United Refining Co.
10.750% due 06/15/2007 500 302
Vectura Group, Inc.
10.250% due 06/30/2008 200 165
Vintage Petroleum
9.000% due 12/15/2005 500 500
Voicestream Wireless Holding Corp.
10.375% due 11/15/2009 600 624
Western Gas Resources, Inc.
10.000% due 06/15/2009 750 778
Westpoint Stevens, Inc.
7.875% due 06/15/2005 500 420
7.875% due 06/15/2008 300 240
Williams Communications Group, Inc.
10.700% due 10/01/2007 1,300 1,297
10.875% due 10/01/2009 250 246
World Color Press, Inc.
8.375% due 11/15/2008 700 677
7.750% due 02/15/2009 250 232
Worldwide Fiber, Inc.
12.000% due 08/01/2009 500 475
Young Broadcasting, Inc.
9.000% due 01/15/2006 300 284
8.750% due 06/15/2007 550 509
-------------
123,649
=============
Utilities 6.9% AES Corp.
10.250% due 07/15/2006 500 501
8.500% due 11/01/2007 100 92
9.500% due 06/01/2009 500 492
Azurix Corporation
10.375%due02/15/2007 700 679
Calpine Corp.
9.250% due 02/01/2004 1,000 1,000
10.500% due 05/15/2006 175 183
8.750% due 07/15/2007 300 304
7.875% due 04/01/2008 600 575
7.750% due 04/15/2009 200 190
CMS Energy
8.125% due 05/15/2002 500 494
Flag Ltd.
8.250% due 01/30/2008 1,800 1,602
ITC Deltacom, Inc.
8.875% due 03/01/2008 350 322
Nextlink Communications
10.500% due 12/01/2009 250 246
Nextlink Communications, Inc.
0.000% due 12/01/2009(c) 1,500 870
North Atlantic Energy
9.050% due 06/01/2002 302 301
Philippine Long Distance Telephone Co.
10.500% due0 4/15/2009 750 671
Qwest Communications International, Inc.
7.500% due 11/01/2008 500 486
Rural Cellular Corp.
9.625% due 05/15/2008 400 390
Sprint Spectrum LP
11.000% due 08/15/2006 500 538
Telekomunikacja Polska SA
7.750% due 12/10/2008 750 692
-------------
10,628
-------------
Total Corporate Bonds & Notes
(Cost $155,054) 142,934
=============
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 0.7%
--------------------------------------------------------------------------------
Other Mortgage-Backed Securities 0.7%
Sasco Floating Rate Commercial Mortgage
7.160% due 04/25/2003(b) 1,100 1,072
-------------
Total Mortgage-Backed Securities
(Cost $998) 1,072
=============
2000 Semi-Annual Report See Accompanying Notes 9
<PAGE>
Schedule of Investments (Cont.)
High Yield Bond Portfolio
June 20, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 1.4%
--------------------------------------------------------------------------------
Airplanes Pass Through Trust
10.875% due 03/15/2019 $ 593 $ 482
Conseco Finance
9.300%due10/15/2030 1,300 1,317
Morgan Stanley Aircraft Finance
8.700% due 03/15/2023 500 436
-------------
Total Asset-Backed Securities
(Cost $2,381) 2,235
=============
--------------------------------------------------------------------------------
CONVERTIBLE BONDS & NOTES 1.1%
--------------------------------------------------------------------------------
Industrial 0.8%
Hercules Trust VI
8.730% due 12/29/2000(b) 1,250,000 1,250
Hilton Hotels Corp.
5.000% due 05/15/2006 500 397
-------------
Total Convertible Bonds & Notes
(Cost $1,625) 1,647
=============
--------------------------------------------------------------------------------
PREFERRED STOCK 1.1%
--------------------------------------------------------------------------------
Shares
CSC Holdings, Inc.
11.125% due 04/01/2008 3,197 337
Fresenius Medical Care
9.000% due 12/01/2006 600 571
7.875% due 02/01/2008 850 759
-------------
Total Preferred Stock
(Cost $1,817) 1,667
=============
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 1.2%
--------------------------------------------------------------------------------
Principal
Amount
(000s)
Commercial Paper 1.0%
Banc One Australia Ltd.
6.560% due 09/15/2000 $ 400 395
General Electric Capital Corp.
6.620% due 09/06/2000 200 197
6.610% due 09/06/2000 100 99
IBM Corp.
6.180% due 07/07/2000 100 100
Motorola, Inc.
6.540% due 08/23/2000 500 495
UBS AG
6.600% due 09/05/2000 200 198
-------------
1,484
=============
Repurchase Agreement 0.2%
State Street Bank
5.850% due 07/03/2000 325 325
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
6.030% due 08/06/2001 valued at $335.
Repurchase proceeds are $325.)
-------------
Total Short-Term Instruments
(Cost $1,809) 1,809
=============
Total Investments (a) 97.9%
(Cost $163,684) $ 151,364
Other Assets and Liabilities (Net) 2.1% 3,262
-------------
Net Assets 100.0% $ 154,626
=============
================================================================================
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for
federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 542
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (12,862)
-------------
Unrealized depreciation-net $ (12,320)
=============
(b) Variable rate security. The rate listed is as of June 30, 2000.
(c) Security becomes interest bearing at a future date.
(d) Security is in default.
10 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The High Yield Bond Portfolio (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.
The Trust is designed to be used as an investment vehicle by Separate Accounts
of insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on April 30, 1998.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, a Fund may fail to recoup some or all of its initial
investment in these securities. The market value of these securities is highly
sensitive to changes in interest rates.
2000 Semi-Annual Report 11
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on each share class' average daily net assets. The
Administration Fee for Institutional and Administrative Classes is charged at
the annual rate of 0.35%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.50%
Administrative Fee 0.35% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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. The ratio of expenses to average net assets per share
class, as disclosed in Financial Highlights, may differ from the annual fund
operating expenses per share class as disclosed in the Prospectus for the
reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees and
organizational expenses cause the actual expense ratios to rise above the rates
disclosed in the then-current prospectus (as set forth below) plus 0.49 basis
points. PIMCO may be reimbursed for these waived amounts in future periods, to
limit the expenses (calculated as a percentage of Portfolio's average daily net
assets attributable to each class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
High Yield Bond Portfolio 0.60% 0.75%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair
receives an additional annual retainer of $500. These expenses are allocated to
the Portfolios of the Trust according to their respective net assets.
Organization Expense. Costs incurred in connection with the organization of the
Portfolio and its initial registration are amortized on a straight-line basis
over a five-year period from the Portfolio's commencement of operations.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
-------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
High Yield Bond Portfolio $ 0 $ 0 $ 36,164 $ 17,504
12
<PAGE>
5. Federal Income Tax Matters
As of December 31, 1999 High Yield Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $175,001 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards (amounts in
thousands):
Capital Loss Carryforwards
------------------------------------------
Realized Losses Expiration
--------------------------------------------------------------------------------
High Yield Bond Portfolio $ 75,638 12/31/2006
821,912 12/31/2007
Shareholders are advised to consult their own tax advisor with respect to
the tax consequences of their investment in the Trust. In January 2000, you will
be advised on IRS form 1099-DIV as to the federal tax status of the dividends
and distributions received by you in calendar year 1999.
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
High Yield Bond Portfolio
-------------------------------------------------------
Period Ended 06/30/2000 Year Ended 12/31/1999
Shares Amount Shares Amount
-------------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Administrative Class 5,017 $ 44,346 12,749 $ 120,685
--------------------------------------------------------------- -------------------------------------------------------
Issued as reinvestment of distributions
Administrative Class 751 6.603 996 9,322
--------------------------------------------------------------- -------------------------------------------------------
Cost of shares redeemed
Administrative Class (4,439) (39,331) (2,437) (22,793)
--------------------------------------------------------------- -------------------------------------------------------
Net increase resulting from Portfolio share transactions 1,329 $ 11,618 11,308 $ 107,214
=============================================================== =======================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
--------------------------------------------------------------------------------
High Yield Bond Portfolio 1 97
7. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 13
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO VARIABLE INSURANCE TRUST
840 NEWPORT CENTER DRIVE, SUITE 300
NEWPORT BEACH, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO FUNDS DISTRIBUTORS LLC
2187 ATLANTIC STREET
STAMFORD, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
LONG-TERM U.S. GOVERNMENT BOND PORTFOLIO
INSTITUTIONAL CLASS
-------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter...................................................................... 1
Financial Highlights................................................................... 3
Statement of Assets and Liabilities ................................................... 4
Statement of Operations................................................................ 5
Statements of Changes in Net Assets.................................................... 6
Statement of Cash Flows................................................................ 7
Notes to Financial Statements.......................................................... 9
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Long-Term U.S. Government Bond Portfolio (Institutional Class)......................... 2 8
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Long-Term U.S. Government Bond Portfolio
--------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent U.S.
Treasury investment management
Portfolio:
Primarily long-term maturity fixed income securities
Duration:
10.43 years
Total Net Assets:
$8.3 million
--------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------
Sector Breakdown:*
[GRAPH]
U.S. Treasury Obligations 54.0%
Short-Term Instruments 26.4%
Corporate Bonds and Notes 9.5%
U.S. Government Agencies 7.0%
Other 3.1%
Quality Breakdown:*
[GRAPH]
AAA 70.5%
AA 12.0%
A 7.2%
BBB 10.3%
*% of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost.
--------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------
. The Long-Term U.S. Government Bond Portfolio Institutional Class' total
return investment performance since inception on April 10, 2000 through June
30, 2000 was -0.59%.
. The Portfolio's below-benchmark duration detracted from performance as long-
term Treasuries rallied.
. Emphasis on longer maturities was positive for the Portfolio as long-term
Treasuries rallied and the yield curve inverted.
. An underweight in Treasuries hurt performance as long Treasuries benefited
from the buyback program.
2
<PAGE>
Financial Highlights
Long-Term U.S. Government Bond Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000(b)
----------------
<S> <C>
Net asset value beginning of period $ 9.90
--------------------------------------------------------- ---------------
Net investment income (a) 0.13
--------------------------------------------------------- ---------------
Net realized / unrealized (loss) on investments(a) (0.19)
--------------------------------------------------------- ---------------
Total income from investment operations (0.06)
--------------------------------------------------------- ---------------
Dividends from net investment income (0.13)
--------------------------------------------------------- ---------------
Total distributions (0.13)
--------------------------------------------------------- ---------------
Net asset value end of period $ 9.71
--------------------------------------------------------- ---------------
Total return % (0.59)
--------------------------------------------------------- ---------------
Net assets end of period (000s) $ 2,151
--------------------------------------------------------- ---------------
Ratio of expenses to average net assets %* 0.50(c)
--------------------------------------------------------- ---------------
Ratio of net investment income to average net assets %* 6.04
--------------------------------------------------------- ---------------
Portfolio turnover rate % 299
--------------------------------------------------------- ---------------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 10, 2000.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.51% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 12,587
------------------------------------------------------------------- -------------
Cash 1
------------------------------------------------------------------- -------------
Interest and dividends receivable 213
------------------------------------------------------------------- -------------
Variation margin receivable 2
------------------------------------------------------------------- -------------
Manager reimbursement receivable 2
------------------------------------------------------------------- -------------
12,805
=================================================================== =============
Liabilities:
Payable for investments purchased $ 100
------------------------------------------------------------------- -------------
Payable for financing transactions 4,375
------------------------------------------------------------------- -------------
Accrued investment advisory fee 2
------------------------------------------------------------------- -------------
Accrued administration fee 2
------------------------------------------------------------------- -------------
Accrued distribution fee 0
------------------------------------------------------------------- -------------
Accrued servicing fee 1
------------------------------------------------------------------- -------------
4,480
=================================================================== =============
Net Assets $ 8,325
=================================================================== =============
Net Assets Consist of:
Paid in capital $ 8,421
------------------------------------------------------------------- -------------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------- -------------
Accumulated undistributed net realized (loss) (36)
------------------------------------------------------------------- -------------
Net unrealized (depreciation) (60)
------------------------------------------------------------------- -------------
$ 8,325
=================================================================== =============
Net Assets:
Institutional Class $ 2,151
------------------------------------------------------------------- -------------
Administrative Class $ 6,174
------------------------------------------------------------------- -------------
Shares Issued and Outstanding:
Institutional Class 222
------------------------------------------------------------------- -------------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 9.71
------------------------------------------------------------------- -------------
Cost of Investments Owned $ 12,658
=================================================================== =============
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Long-Term U.S. Government Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 248
------------------------------------------------------------------------------ -------------
Total Income 248
============================================================================== =============
Expenses:
Investment advisory fees 12
------------------------------------------------------------------------------ -------------
Administration fees 10
------------------------------------------------------------------------------ -------------
Distribution and/or servicing fees - Administrative Class 2
------------------------------------------------------------------------------ -------------
Total Expenses 24
------------------------------------------------------------------------------ -------------
Net Investment Income 224
============================================================================== =============
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 106
------------------------------------------------------------------------------ -------------
Net realized gain on futures contracts and written options 17
------------------------------------------------------------------------------ -------------
Net change in unrealized appreciation on investments 269
------------------------------------------------------------------------------ -------------
Net change in unrealized appreciation on futures contracts and written options 11
------------------------------------------------------------------------------ -------------
Net Gain 403
------------------------------------------------------------------------------ -------------
Net Increase in Assets Resulting from Operations $ 627
============================================================================== =============
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from April 30, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 224 $ 248
---------------------------------------------------------------------------- ---------------- --------------------------
Net realized gain (loss) 123 (159)
---------------------------------------------------------------------------- ---------------- --------------------------
Net change in unrealized appreciation (depreciation) 280 (340)
---------------------------------------------------------------------------- ---------------- --------------------------
Net increase (decrease) resulting from operations 627 (251)
============================================================================ ================ ==========================
Distributions to Shareholders:
From net investment income
Institutional Class (29) 0
---------------------------------------------------------------------------- ---------------- --------------------------
Administrative Class (195) (248)
---------------------------------------------------------------------------- ---------------- --------------------------
Total Distributions (224) (248)
============================================================================ ================ ==========================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 2,162 0
---------------------------------------------------------------------------- ---------------- --------------------------
Administrative Class 1,602 12,755
---------------------------------------------------------------------------- ---------------- --------------------------
Issued as reinvestment of distributions
Institutional Class 31 0
---------------------------------------------------------------------------- ---------------- --------------------------
Administrative Class 193 234
---------------------------------------------------------------------------- ---------------- --------------------------
Cost of shares redeemed
Administrative Class (3,239) (5,317)
---------------------------------------------------------------------------- ---------------- --------------------------
Net increase resulting from Portfolio share transactions 749 7,672
---------------------------------------------------------------------------- ---------------- --------------------------
Total Increase in Net Assets $ 1,152 $ 7,173
============================================================================ ================ ==========================
Net Assets:
Beginning of period 7,173 0
---------------------------------------------------------------------------- ----------------- --------------------------
End of period * $ 8,325 $ 7,173
---------------------------------------------------------------------------- ----------------- --------------------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
---------------------------------------------------------------------------- ----------------- --------------------------
</TABLE>
6 See accompanying notes
<PAGE>
Statement of Cash Flows
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Increase (Decrease) in Cash from:
Financing Activities
<S> <C>
Sales of Portfolio shares $ 3,763
--------------------------------------------------------------- ------------
Redemptions of Portfolio shares (3,238)
--------------------------------------------------------------- ------------
Cash distributions paid 0
--------------------------------------------------------------- ------------
Proceeds from financing transactions 1,082
--------------------------------------------------------------- ------------
Net increase (decrease) from financing activities 1,607
=============================================================== ============
Operating Activities
Purchases of long-term securities (23,970)
--------------------------------------------------------------- ------------
Proceeds from sales of long-term securities 21,831
--------------------------------------------------------------- ------------
Purchases of short-term securities (net) 344
--------------------------------------------------------------- ------------
Net investment income 224
--------------------------------------------------------------- ------------
Change in other receivables/payables (net) (35)
--------------------------------------------------------------- ------------
Net increase (decrease) from operating activities (1,606)
=============================================================== ============
Net Increase in Cash and Foreign Currency 1
--------------------------------------------------------------- ------------
Cash and Foreign Currency
Beginning of period 0
--------------------------------------------------------------- ------------
End of period $ 1
--------------------------------------------------------------- ------------
</TABLE>
2000 Semi-Annual Report 7
<PAGE>
Schedule of Investments
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
-----------------------------------------------------------------------------
CORPORATE BONDS & NOTES 14.4%
-----------------------------------------------------------------------------
Banking & Finance 8.4%
AESOP Funding II LLC
6.220% due 10/20/2001 $ 100 $ 100
Bank One Corp.
6.792% due 05/07/2002 (d) 200 200
Ford Motor Credit Corp.
7.110% due 06/02/2003 (d) 200 200
General Motors Acceptance Corp.
6.950% due 03/10/2003 (d) 200 200
---------
700
=========
Industrials 2.4%
Vodafone AirTouch PLC
6.961% due 12/19/2001 (d) 200 200
---------
Utilities 3.6%
Worldcom, Inc.
7.050% due 11/26/2001 (d) 300 300
---------
Total Corporate Bonds & Notes 1,200
(Cost $1,198) =========
-----------------------------------------------------------------------------
U.S GOVERNMENT AGENCIES 10.5%
-----------------------------------------------------------------------------
Financing Corp.
10.700% due 10/06/2017 650 875
---------
Total U.S. Government Agencies 875
(Cost $950) =========
-----------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 81.5%
-----------------------------------------------------------------------------
Treasury Inflation Protected Securities
3.625% due 07/15/2002 (b)(c) 107 106
U.S. Treasury Bonds
11.250% due 02/15/2015 340 500
8.875% due 02/15/2019 1,650 2,120
6.000% due 02/15/2026 1,000 978
8.750% due 08/15/2020 2,400 3,080
---------
Total U.S. Treasury Obligations 6,784
(Cost $6,784) =========
-----------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 0.8%
-----------------------------------------------------------------------------
Collateralized Mortgage Obligations 0.8%
Federal Home Loan Mortgage Corp.
6.000% due 05/15/2029 86 68
---------
Total Mortgage-Backed Securities 68
(Cost $65) =========
-----------------------------------------------------------------------------
ASSET-BACKED SECURITIES 2.9%
-----------------------------------------------------------------------------
SMS Student Loan Trust
6.406% due 10/27/2025 (d) 250 242
---------
Total Asset-Backed Securities 242
(Cost $244) =========
-----------------------------------------------------------------------------
SOVEREIGN ISSUES 1.1%
-----------------------------------------------------------------------------
Federal Home Loan Bank
5.950% due 12/10/2008 100 91
---------
Total Sovereign Issues 91
(Cost $90) =========
-----------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 40.0%
-----------------------------------------------------------------------------
Commercial Paper 37.2%
American Express Credit Corp.
6.550% due 07/10/2000 300 300
Associates Corp. of North America
6.350% due 07/12/2000 300 300
AT&T Corp.
6.510% due 07/11/2000 100 100
Bombardier Capital, Inc.
6.780% due 07/26/2000 300 299
Dominion Resources
6.870% due 07/06/2000 $ 300 $ 300
Edison Mission Midwest Holdings
6.780% due 07/19/2000 300 299
General Electric Capital Corp.
6.540% due 07/31/2000 200 199
General Motors Acceptance Corp.
6.140% due 07/12/2000 300 300
Lucent Technology, Inc.
6.500% due 07/05/2000 200 200
Minnesota Co.
6.550% due 09/13/2000 200 197
Procter & Gamble Co.
6.550% due 07/17/2000 200 199
Sumitomo Bank
6.730% due 07/05/2000 400 400
---------
3,093
=========
Repurchase Agreement 2.8%
State Street Bank
5.850% due 07/03/2000 234 234
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
6.100% 08/10/2001 valued at $239.
Repurchase proceeds are $234.)
---------
Total Short-Term Instruments 3,327
(Cost $3,327) =========
Total Investments (a) 151.2% $ 12,587
(Cost $12,658)
Other Assets and Liabilities (Net) (51.2%) (4,262)
---------
Net Assets 100.0% $ 8,325
=========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized
appreciation (depreciation) of investments based
on cost for federal income tax purposes was as
follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 23
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (94)
---------
Unrealized depreciation-net $ (71)
=========
(b) Securities with an aggregate market value of
$106 have been segregated with the custodian to
cover margin requirements for the following open
futures contracts at June 30, 2000:
# of Unrealized
Type Contracts Appreciation
-----------------------------------------------------------------------------
U.S. Treasury 10 Year Note (09/2000) 8 $ 8
U.S. Treasury 30 Year Bond (09/2000) 1 3
------------
$ 11
============
(c) Subject to a financing transaction.
(d) Variable rate security. The rate listed is as of
June 30, 2000.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Long-Term U.S. Government Portfolio (the "Portfolio") is a series of the
PIMCO Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request. The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on April 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
2000 Semi-Annual Report 9
<PAGE>
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly-owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (v) fees and expenses of the
Trustees who are not "interested persons" of PIMCO or the Trust, and any
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
-------------------------------------------------------------------------------
Long Term U.S. Gov't
Bond Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer who
is affiliated with the Administrator, all of whom receive renumeration for their
services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an
unaffiliated Trustee who serves as a committee chair receives an additional
annual retainer of $500. These expenses are allocated to the Portfolios of the
Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. Government/Agency All Other
---------------------------------------------------
Purchases Sales Purchases Sales
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term U.S. Gov't
Bond Portfolio $ 22,870 $ 21,808 $ 999 $ 0
</TABLE>
10
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
5. Federal Income Tax Matters
As of December 31, 1999, Long-Term U.S. Government Bond Portfolio had remaining
capital loss carryforwards that were realized during the current year (amounts
in thousands):
<TABLE>
<CAPTION>
Capital Loss Carryforwards
-----------------------------------
Realized Losses Expiration
----------------------------------------------------------------
<S> <C> <C>
Long-Term U.S. Government
Bond Portfolio $ 158,700 12/31/2007
</TABLE>
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Long-Term U.S. Government Bond Portfolio
------------------------------------------------
Period Ended 06/30/2000 Period from 04/30/1999
to 12/31/1999
Shares Amount Shares Amount
------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 218 $ 2,162 0 $ 0
-------------------------------------------------------------------------------- -----------------------------------------------
Administrative Class 172 1,602 1,319 12,755
-------------------------------------------------------------------------------- -----------------------------------------------
Issued as reinvestment of distributions
Institutional Class 3 31 0 0
-------------------------------------------------------------------------------- -----------------------------------------------
Administrative Class 20 193 25 234
-------------------------------------------------------------------------------- -----------------------------------------------
Cost of shares redeemed
Administrative Class (334) (3,239) (566) (5,317)
-------------------------------------------------------------------------------- -----------------------------------------------
Net increase resulting from Portfolio share transactions 79 $ 749 778 $ 7,672
================================================================================ ===============================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
------------------------------------------------------------
Long-Term U.S. Government
Bond Portfolio 3 100
7. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 11
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
LONG-TERM U.S. GOVERNMENT BOND PORTFOLIO
ADMINISTRATIVE CLASS
----------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter...................................................... 1
Financial Highlights................................................... 3
Statement of Assets and Liabilities.................................... 4
Statement of Operations................................................ 5
Statements of Changes in Net Assets.................................... 6
Statement of Cash Flows................................................ 7
Notes to Financial Statements.......................................... 9
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Long-Term U.S. Government Bond Portfolio (Administrative Class)..... 2 8
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Long-Term U.S. Government Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily long-term maturity fixed income securities
Duration:
10.43 years
Total Net Assets:
$8.3 million
Sector Breakdown:*
[GRAPH]
U.S. Treasury Obligations 54.0%
Short-Term Instruments 26.4%
Corporate Bonds and Notes 9.5%
U.S. Government Agencies 7.0%
Other 3.1%
Quality Breakdown:*
[GRAPH]
AAA 70.5%
AA 12.0%
A 7.2%
BBB 10.3%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class Lehman Long-Term
(Incep. 4/30/1999) Treasury Index
--------------------------------------------------------------------------------
6 Months 8.35% 9.13%
1 Year 6.20% 6.70%
Since Inception* 3.18% --
*Annualized
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
[GRAPH]
Month Long-Term Lehman
U.S. Gov't Brothers Int.
Bond & 20+Year
Portfolio Treasury
Index
========== ========== =============
04/30/1999 10,000 10,000
05/31/1999 9,882 9,843
06/30/1999 9,766 9,739
07/31/1999 9,730 9,692
08/31/1999 9,672 9,654
09/30/1999 9,758 9,726
10/31/1999 9,754 9,731
11/30/1999 9,686 9,665
12/31/1999 9,572 9,521
01/31/2000 9,680 9,657
02/29/2000 9,944 9,949
03/31/2000 10,257 10,289
04/30/2000 10,164 10,207
05/31/2000 10,119 10,170
06/30/2000 10,372 10,391
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 5/01/1999, the first full month following the
Portfolio's inception on 4/30/1999, compared to the Lehman Long-Term Treasury
Index, an unmanaged market index.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Long-Term U.S. Government Bond Portfolio total return investment
performance was 8.35% over the six-month period ended June 30, 2000, versus
the 9.13% return of its benchmark, the Lehman Long-Term Treasury Index.
. The Portfolio's below-benchmark duration detracted from performance as
long-term Treasuries rallied. o Emphasis on longer maturities was positive
for the Portfolio as long-term Treasuries rallied and the yield curve
inverted.
. An underweight in Treasuries hurt performance as long Treasuries benefited
from the buyback program.
2
<PAGE>
Financial Highlights
Long-Term U.S. Government Bond Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999(b)
---------- --------------
<S> <C> <C>
Net asset value beginning of period $ 9.22 $ 10.00
------------------------------------------------------------------------------ ----------- --------------
Net investment income (a) 0.27 0.36
------------------------------------------------------------------------------ ----------- --------------
Net realized / unrealized gain (loss) on investments (a) 0.49 (0.78)
------------------------------------------------------------------------------ ----------- --------------
Total income from investment operations 0.76 (0.42)
------------------------------------------------------------------------------ ----------- --------------
Dividends from net investment income (0.27) (0.36)
------------------------------------------------------------------------------ ----------- --------------
Total distributions (0.27) (0.36)
------------------------------------------------------------------------------ ----------- --------------
Net asset value end of period $ 9.71 $ 9.22
------------------------------------------------------------------------------ ----------- --------------
Total return % 8.35 (4.28)
------------------------------------------------------------------------------ ----------- --------------
Net assets end of period (000s) $ 6,174 $ 7,173
------------------------------------------------------------------------------ ----------- --------------
Ratio of expenses to average net assets %* 0.65 0.65(c)
------------------------------------------------------------------------------ ----------- --------------
Ratio of net investment income to average net assets %* 5.74 5.55
------------------------------------------------------------------------------ ----------- --------------
Portfolio turnover rate % 299 294
------------------------------------------------------------------------------ ----------- --------------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 30, 1999.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.71% for the
period ended December 31, 1999.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 12,587
------------------------------------------------------------------------------------- ----------
Cash 1
------------------------------------------------------------------------------------- ----------
Interest and dividends receivable 213
------------------------------------------------------------------------------------- ----------
Variation margin receivable 2
------------------------------------------------------------------------------------- ----------
Manager reimbursement receivable 2
------------------------------------------------------------------------------------- ----------
12,805
===================================================================================== ==========
Liabilities:
Payable for investments purchased $ 100
------------------------------------------------------------------------------------- ----------
Payable for financing transactions 4,375
------------------------------------------------------------------------------------- ----------
Accrued investment advisory fee 2
------------------------------------------------------------------------------------- ----------
Accrued administration fee 2
------------------------------------------------------------------------------------- ----------
Accrued distribution fee 0
------------------------------------------------------------------------------------- ----------
Accrued servicing fee 1
------------------------------------------------------------------------------------- ----------
4,480
===================================================================================== ==========
Net Assets $ 8,325
===================================================================================== ==========
Net Assets Consist of:
Paid in capital $ 8,421
------------------------------------------------------------------------------------- ----------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------------------------- ----------
Accumulated undistributed net realized (loss) (36)
------------------------------------------------------------------------------------- ----------
Net unrealized (depreciation) (60)
------------------------------------------------------------------------------------- ----------
$ 8,325
===================================================================================== ==========
Net Assets:
Institutional Class $ 2,151
------------------------------------------------------------------------------------- ----------
Administrative Class 6,174
------------------------------------------------------------------------------------- ----------
Shares Issued and Outstanding:
Administrative Class 636
------------------------------------------------------------------------------------- ----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 9.71
------------------------------------------------------------------------------------- ----------
Cost of Investments Owned $ 12,658
==================================================================================== ==========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Long-Term U.S. Government Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 248
------------------------------------------------------------------------------------- -----------
Total Income 248
===================================================================================== ===========
Expenses:
Investment advisory fees 12
------------------------------------------------------------------------------------- -----------
Administration fees 10
------------------------------------------------------------------------------------- -----------
Distribution and/or servicing fees - Administrative Class 2
------------------------------------------------------------------------------------- -----------
Total Expenses 24
------------------------------------------------------------------------------------- -----------
Net Investment Income 224
===================================================================================== ===========
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 106
------------------------------------------------------------------------------------- -----------
Net realized gain on futures contracts and written options 17
------------------------------------------------------------------------------------- -----------
Net change in unrealized appreciation on investments 269
------------------------------------------------------------------------------------- -----------
Net change in unrealized appreciation on futures contracts and written options 11
------------------------------------------------------------------------------------- -----------
Net Gain 403
------------------------------------------------------------------------------------- -----------
Net Increase in Assets Resulting from Operations $ 627
===================================================================================== ===========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from April 30, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 224 $ 248
-------------------------------------------------------------------- --------------- --------------------------
Net realized gain (loss) 123 (159)
-------------------------------------------------------------------- --------------- --------------------------
Net change in unrealized appreciation (depreciation) 280 (340)
-------------------------------------------------------------------- --------------- --------------------------
Net increase (decrease) resulting from operations 627 (251)
==================================================================== =============== ==========================
Distributions to Shareholders:
From net investment income
Institutional Class (29) 0
-------------------------------------------------------------------- --------------- --------------------------
Administrative Class (195) (248)
-------------------------------------------------------------------- --------------- --------------------------
Total Distributions (224) (248)
==================================================================== =============== ==========================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 2,162 0
-------------------------------------------------------------------- --------------- --------------------------
Administrative Class 1,602 12,755
-------------------------------------------------------------------- --------------- --------------------------
Issued as reinvestment of distributions
Institutional Class 31 0
-------------------------------------------------------------------- --------------- --------------------------
Administrative Class 193 234
-------------------------------------------------------------------- --------------- --------------------------
Cost of shares redeemed
Administrative Class (3,239) (5,317)
-------------------------------------------------------------------- --------------- --------------------------
Net increase resulting from Portfolio share transactions 749 7,672
-------------------------------------------------------------------- --------------- --------------------------
Total Increase in Net Assets $ 1,152 $ 7,173
==================================================================== =============== ==========================
Net Assets:
Beginning of period 7,173 0
-------------------------------------------------------------------- --------------- --------------------------
End of period * $ 8,325 $ 7,173
-------------------------------------------------------------------- --------------- --------------------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
-------------------------------------------------------------------- --------------- --------------------------
</TABLE>
6 See accompanying notes
<PAGE>
Statement of Cash Flows
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Increase (Decrease) in Cash from:
Financing Activities
<S> <C>
Sales of Portfolio shares $ 3,763
------------------------------------------------------------- -------------
Redemptions of Portfolio shares (3,238)
------------------------------------------------------------- -------------
Cash distributions paid 0
------------------------------------------------------------- -------------
Proceeds from financing transactions 1,082
------------------------------------------------------------- -------------
Net increase (decrease) from financing activities 1,607
============================================================= =============
Operating Activities
Purchases of long-term securities (23,970)
------------------------------------------------------------- -------------
Proceeds from sales of long-term securities 21,831
------------------------------------------------------------- -------------
Purchases of short-term securities (net) 344
------------------------------------------------------------- -------------
Net investment income 224
------------------------------------------------------------- -------------
Change in other receivables/payables (net) (35)
------------------------------------------------------------- -------------
Net increase (decrease) from operating activities (1,606)
============================================================= =============
Net Increase in Cash and Foreign Currency 1
------------------------------------------------------------- -------------
Cash and Foreign Currency
Beginning of period 0
------------------------------------------------------------- -------------
End of period $ 1
------------------------------------------------------------- -------------
</TABLE>
2000 Semi- Annual Report 7
<PAGE>
Schedule of Investments
Long-Term U.S. Government Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
---------------------------------------------------------------------------
CORPORATE BONDS & NOTES 14.4%
---------------------------------------------------------------------------
Banking & Finance 8.4%
AESOP Funding II LLC
6.220% due 10/20/2001 $ 100 $ 100
Bank One Corp.
6.792% due 05/07/2002 (d) 200 200
Ford Motor Credit Corp.
7.110% due 06/02/2003 (d) 200 200
General Motors Acceptance Corp.
6.950% due 03/10/2003 (d) 200 200
---------
700
=========
Industrials 2.4%
Vodafone AirTouch PLC
6.961% due 12/19/2001 (d) 200 200
---------
Utilities 3.6%
Worldcom, Inc.
7.050% due 11/26/2001 (d) 300 300
---------
Total Corporate Bonds & Notes 1,200
(Cost $1,198) =========
---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 10.5%
---------------------------------------------------------------------------
Financing Corp.
10.700% due 10/06/2017 650 875
---------
Total U.S. Government Agencies 875
(Cost $950) =========
---------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 81.5%
---------------------------------------------------------------------------
Treasury Inflation Protected Securities
3.625% due 07/15/2002 (b)(c) 107 106
U.S. Treasury Bonds
11.250% due 02/15/2015 340 500
8.875% due 02/15/2019 1,650 2,120
6.000% due 02/15/2026 1,000 978
8.750% due 08/15/2020 2,400 3,080
---------
Total U.S. Treasury Obligations 6,784
(Cost $6,784) ==========
---------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES 0.8%
---------------------------------------------------------------------------
Collateralized Mortgage Obligations 0.8%
Federal Home Loan Mortgage Corp.
6.000% due 05/15/2029 86 68
---------
Total Mortgage-Backed Securities 68
(Cost $65) =========
---------------------------------------------------------------------------
ASSET-BACKED SECURITIES 2.9%
---------------------------------------------------------------------------
SMS Student Loan Trust
6.406% due 10/27/2025 (d) 250 242
---------
Total Asset-Backed Securities 242
(Cost $244) =========
---------------------------------------------------------------------------
SOVEREIGN ISSUES 1.1%
---------------------------------------------------------------------------
Federal Home Loan Bank
5.950% due 12/10/2008 100 91
---------
Total Sovereign Issues 91
(Cost $90) =========
---------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 40.0%
---------------------------------------------------------------------------
Commercial Paper 37.2%
American Express Credit Corp.
6.550% due 07/10/2000 300 300
Associates Corp. of North America
6.350% due 07/12/2000 300 300
AT&T Corp.
6.510% due 07/11/2000 100 100
Bombardier Capital, Inc.
6.780% due 07/26/2000 300 299
Dominion Resources
6.870% due 07/06/2000 $ 300 $ 300
Edison Mission Midwest Holdings
6.780% due 07/19/2000 300 299
General Electric Capital Corp.
6.540% due 07/31/2000 200 199
General Motors Acceptance Corp.
6.140% due 07/12/2000 300 300
Lucent Technology, Inc.
6.500% due 07/05/2000 200 200
Minnesota Co.
6.550% due 09/13/2000 200 197
Procter & Gamble Co.
6.550% due 07/17/2000 200 199
Sumitomo Bank
6.730% due 07/05/2000 400 400
---------
3,093
=========
Repurchase Agreement 2.8%
State Street Bank
5.850% due 07/03/2000 234 234
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
6.100% 08/10/2001 valued at $239
Repurchase proceeds are $234.)
---------
Total Short-Term Instruments 3,327
(Cost $3,327) =========
Total Investments (a) 151.2% $ 12,587
(Cost $12,658)
Other Assets and Liabilities (Net) (51.2%) (4,262)
---------
Net Assets 100.0% $ 8,325
=========
Notes to Schedule of Investments (amounts in
thousands):
(a) At June 30, 2000, the net unrealized
appreciation (depreciation) of investments based
on cost for federal income tax purposes was as
follows:
Aggregate gross unrealized appreciation for
all investments in which there was an excess of
value over tax cost. $ 23
Aggregate gross unrealized depreciation for
all investments in which there was an excess of
tax cost over value. (94)
---------
Unrealized depreciation-net $ (71)
=========
(b) Securities with an aggregate market value of
$106 have been segregated with the custodian to
cover margin requirements for the following open
futures contracts at June 30, 2000:
# of Unrealized
Type Contracts Appreciation
----------------------------------------------------------------------
U.S. Treasury 10 Year Note (09/2000) 8 $ 8
U.S. Treasury 30 Year Bond (09/2000) 1 3
------------
$ 11
============
(c) Subject to a financing transaction.
(d) Variable rate security. The rate listed is as of
June 30, 2000.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Long-Term U.S. Government Portfolio (the "Portfolio") is a series of the
PIMCO Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.
The Trust is designed to be used as an investment vehicle by Separate Accounts
of insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on April 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the markets or to movements in interest rates and currency values. The primary
risks associated with the use of futures contracts and options are imperfect
correlation between the change in market value of the securities held by the
Portfolio and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
2000 Semi-Annual Report 9
<PAGE>
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly-owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned
subsidiary of PIMCO Advisors L.P., serves as the distributor of the Trust's
shares. The Trust is permitted to reimburse, out of the Administrative Class
assets of the Portfolio in an amount up to 0.15% on an annual basis of the
average daily net assets of that class, financial intermediaries that provide
services in connection with the distribution of shares or administration of
plans or programs that use Portfolio shares as their funding medium. The
effective rate paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
---------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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. The ratio of expenses to
average net assets per share class, as disclosed in Financial Highlights, may
differ from the annual fund operating expenses per share class as disclosed in
the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
---------------------------------------------------------------------------
Long Term U.S. Gov't
Bond Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer who
is affiliated with the Administrator, all of whom receive renumeration for their
services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an
unaffiliated Trustee who serves as a committee chair receives an additional
annual retainer of $500. These expenses are allocated to the Portfolios of the
Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
---------------------------------------------
Purchases Sales Purchases Sales
----------------------------------------------------------------------------
Long-Term U.S. Gov't
Bond Portfolio $ 22,870 $ 21,808 $ 999 $ 0
10
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
5. Federal Income Tax Matters
As of December 31, 1999, Long-Term U.S. Government Bond Portfolio had remaining
capital loss carryforwards that were realized during the current year (amounts
in thousands):
Capital Loss Carryforwards
------------------------------------
Realized Losses Expiration
-------------------------------------------------------------------
Long-Term U.S. Government
Bond Portfolio $ 158,700 12/31/2007
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Long-Term U.S. Government Bond Portfolio
---------------------------------------------------------
Period Ended 06/30/2000 Period from 04/30/1999
to 12/31/1999
Shares Amount Shares Amount
---------------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 218 $ 2,162 0 $ 0
------------------------------------------------------------------- ---------------------------------------------------------
Administrative Class 172 1,602 1,319 12,755
------------------------------------------------------------------- ---------------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 3 31 0 0
------------------------------------------------------------------- ---------------------------------------------------------
Administrative Class 20 193 25 234
------------------------------------------------------------------- ---------------------------------------------------------
Cost of shares redeemed
Administrative Class (334) (3,239) (566) (5,317)
------------------------------------------------------------------- ---------------------------------------------------------
Net increase resulting from Portfolio share transactions 79 $ 749 778 $ 7,672
=================================================================== =========================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
--------------------------------------------------------------
Long-Term U.S. Government
Bond Portfolio 3 100
7. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 11
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 New Port Center Drive, Suite 300
Newport Beach, CA
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
REAL RETURN BOND PORTFOLIO
ADMINISTRATIVE CLASS
------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter.................................... 1
Financial Highlights................................. 3
Statement of Assets and Liabilities.................. 4
Statement of Operations.............................. 5
Statements of Changes in Net Assets.................. 6
Statement of Cash Flows.............................. 7
Notes to Financial Statements........................ 9
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Real Return Bond Portfolio (Administrative Class).... 2 8
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short-and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi- Annual Report 1
<PAGE>
Real Return Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum real return, consistent with preservation of real capital and prudent
investment management
Portfolio:
Primarily inflation-indexed fixed income securities
Duration:
3.03 years
Total Net Assets:
$3.2 million
Sector Breakdown:*
[GRAPH]
U.S. Treasury Obligations 54.5%
U.S. Government Agencies 19.1%
Corporate Bonds and Notes 14.7%
Mortgage-Backed Securities 7.9%
Other 3.8%
Quality Breakdown:*
[GRAPH]
AAA 86.7%
AA 4.0%
A 9.3%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative Lehman Brothers
Class Inflation Linked
(Incep. 9/30/1999) Treasury Index
--------------------------------------------------------------------------------
6 Months 6.58% 6.78%
Since Inception 6.55% --
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
$10.8 (in thousands)
[GRAPH]
Month Real Return Lehman Brothers
Bond Portfolio Inflation Linked Treasury
Index
========== ============== =========================
09/30/1999 10,000 10,000
10/31/1999 10,013 10,020
11/30/1999 10,090 10,081
12/31/1999 9,997 10,000
01/31/2000 10,060 10,045
02/29/2000 10,131 10,139
03/31/2000 10,441 10,434
04/30/2000 10,545 10,573
05/31/2000 10,489 10,545
06/30/2000 10,655 10,678
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 10/01/1999, the first full month following the
Portfolio's inception on 9/30/1999, compared to the Lehman Brothers Inflation
Linked Treasury Index, an unmanaged market index. The Portfolio may invest in
foreign securities which involve potentially higher risks including foreign
currency fluctuations and political or economic uncertainly.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Real Return Bond Portfolio returned 6.58% for the first six months of
2000 versus 6.78% for the benchmark, the Lehman Brothers Inflation Linked
Treasury Index.
. Maintaining the Portfolio's duration close to that of the benchmark (the
Lehman Brothers Inflation Linked Treasury Index) resulted in neutral return
performance.
. Underweighting long maturity Treasury Inflation Protection Securities
(TIPS) lowered relative performance as yields of long-term TIPS dropped the
most during the first half of 2000.
. Cash-backing strategies, combined with real return bond exposures, boosted
performance modestly.
. Allocations to U.S. agency and corporate real return bonds lowered relative
returns marginally as credit premiums for agency and investment-grade
corporate debt increased generally.
. TIPS were one of the better performing U.S. debt sectors during the first
half due to heightened concerns over credit quality and rising inflation
rates.
. TIPS real yields were on average 4.0% at June 30, 2000, while the rolling
12-month year-over-year increase in the Consumer Price Index-All Urban
Consumers Index was 3.7%.
2
<PAGE>
Financial Highlights
Real Return Bond Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Period Ended: 06/30/2000(b) 12/31/1999(b)
------------- --------------
<S> <C> <C>
Net asset value beginning of period $ 9.80 $ 10.00
----------------------------------------------------------------- ------------- --------------
Net investment income (a) 0.32 0.20
----------------------------------------------------------------- ------------- --------------
Net realized / unrealized gain (loss) on investments (a) 0.32 (0.20)
----------------------------------------------------------------- ------------- --------------
Total income from investment operations 0.64 0.00
----------------------------------------------------------------- ------------- --------------
Dividends from net investment income (0.41) (0.20)
----------------------------------------------------------------- ------------- --------------
Total distributions (0.41) (0.20)
----------------------------------------------------------------- ------------- --------------
Net asset value end of period $ 10.03 $ 9.80
----------------------------------------------------------------- ------------- --------------
Total return % 6.58 (0.03)
----------------------------------------------------------------- ------------- --------------
Net assets end of period (000s) $ 60 $ 3,000
----------------------------------------------------------------- ------------- --------------
Ratio of expenses to average net assets %* 0.65 0.65(c)
----------------------------------------------------------------- ------------- --------------
Ratio of net investment income to average net assets %* 6.42 7.72
----------------------------------------------------------------- ------------- --------------
Portfolio turnover rate % 0 23
----------------------------------------------------------------- ------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operation on September 30, 1999.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.92% for the
period ended December 31, 1999.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 5,679
------------------------------------------------------------------------- ----------
Interest and dividends receivable 38
------------------------------------------------------------------------- ----------
Receivable for investments sold and forward foreign currency contracts 6
------------------------------------------------------------------------- ----------
Manager reimbursement receivable 2
------------------------------------------------------------------------- ----------
5,725
========================================================================= ==========
Liabilities:
Payable for financing transactions $ 2,489
------------------------------------------------------------------------- ----------
Accrued investment advisory fee 1
------------------------------------------------------------------------- ----------
Accrued administration fee 1
------------------------------------------------------------------------- ----------
2,491
========================================================================= ==========
Net Assets $ 3,234
========================================================================= ==========
Net Assets Consist of:
Paid in capital $ 3,223
------------------------------------------------------------------------- ----------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------------- ----------
Accumulated undistributed net realized (loss) (8)
------------------------------------------------------------------------- ----------
Net unrealized appreciation 19
------------------------------------------------------------------------- ----------
$ 3,234
========================================================================= ==========
Net Assets:
Institutional Class $ 3,174
------------------------------------------------------------------------- ----------
Administrative Class 60
------------------------------------------------------------------------- ----------
Shares Issued and Outstanding:
Administrative Class 6
------------------------------------------------------------------------- ----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 10.03
------------------------------------------------------------------------- ----------
Cost of Investments Owned $ 5,660
========================================================================= ==========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Real Return Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 131
------------------------------------------------------------------------- ----------
Dividends 0
------------------------------------------------------------------------- ----------
Total Income 131
========================================================================= ==========
Expenses:
Investment advisory fees 5
------------------------------------------------------------------------- ----------
Administration fees 4
------------------------------------------------------------------------- ----------
Total Expenses 9
------------------------------------------------------------------------- ----------
Net Investment Income 122
========================================================================= ==========
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (3)
------------------------------------------------------------------------- ----------
Net change in unrealized appreciation on investments 74
------------------------------------------------------------------------- ----------
Net Gain 71
------------------------------------------------------------------------- ----------
Net Increase in Assets Resulting from Operations $ 193
========================================================================= ==========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from September
June 30, 2000 to December 31, 1999
Increase (Decrease) in Net Assets from:
Operations:
<S> <C> <C>
Net investment income $ 122 $ 60
--------------------------------------------------------------------- ----------------- ---------------------
Net realized (loss) (3) (5)
--------------------------------------------------------------------- ----------------- ---------------------
Net change in unrealized appreciation (depreciation) 74 (55)
--------------------------------------------------------------------- ----------------- ---------------------
Net increase resulting from operations 193 0
===================================================================== ================= =====================
Distributions to Shareholders:
From net investment income
Institutional Class (74) 0
--------------------------------------------------------------------- ---------------- ---------------------
Administrative Class (48) (60)
--------------------------------------------------------------------- ----------------- ---------------------
From net realized capital gains
Institutional Class 0 0
--------------------------------------------------------------------- ----------------- ---------------------
Administrative Class 0 0
--------------------------------------------------------------------- ----------------- ---------------------
Total Distributions (122) (60)
===================================================================== ================= =====================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 3,125 0
--------------------------------------------------------------------- ----------------- ---------------------
Administrative Class 42 6,000
--------------------------------------------------------------------- ----------------- ---------------------
Issued as reinvestment of distributions
Institutional Class 72 0
--------------------------------------------------------------------- ----------------- ---------------------
Administrative Class 49 44
--------------------------------------------------------------------- ----------------- ---------------------
Cost of shares redeemed
Institutional Class 0 0
--------------------------------------------------------------------- ----------------- ---------------------
Administrative Class (3,125) (2,984)
--------------------------------------------------------------------- ----------------- ---------------------
Net increase resulting from Portfolio share transactions 163 3,060
--------------------------------------------------------------------- ----------------- ---------------------
Total Increase in Net Assets $ 234 $ 3,000
===================================================================== ================= =====================
Net Assets:
Beginning of period 3,000 0
--------------------------------------------------------------------- ----------------- ---------------------
End of period * $ 3,234 $ 3,000
--------------------------------------------------------------------- ----------------- ---------------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
--------------------------------------------------------------------- ----------------- --------------------
</TABLE>
6 See accompanying notes
<PAGE>
Statement of Cash Flows
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Increase (Decrease) in Cash and Foreign Currency from:
<S> <C>
Financing Activities
Sales of Portfolio shares $ 3,167
--------------------------------------------------------------------------- -------------
Redemptions of Portfolio shares (3,125)
--------------------------------------------------------------------------- -------------
Cash distributions paid 0
--------------------------------------------------------------------------- -------------
Proceeds from financing transactions (602)
--------------------------------------------------------------------------- -------------
Net increase (decrease) from financing activities (560)
=========================================================================== =============
Operating Activities
Purchases of long-term securities and foreign currency (74)
--------------------------------------------------------------------------- -------------
Proceeds from sales of long-term securities and foreign currency 580
--------------------------------------------------------------------------- -------------
Purchases of short-term securities (net) (3)
--------------------------------------------------------------------------- -------------
Net investment income 122
--------------------------------------------------------------------------- -------------
Change in other receivables/payables (net) (66)
--------------------------------------------------------------------------- -------------
Net increase (decrease) from operating activities 559
=========================================================================== =============
Net Increase in Cash and Foreign Currency (1)
=========================================================================== =============
Cash and Foreign Currency
Beginning of period 1
--------------------------------------------------------------------------- -------------
End of period $ 0
--------------------------------------------------------------------------- -------------
</TABLE>
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES 25.8%
-----------------------------------------------------------------
Banking & Finance 8.7%
General Motors Acceptance Corp.
6.320% due 12/09/2002 (b) $ 150 $ 150
J.P. Morgan & Co.
6.882% due 02/15/2012 (b) 150 132
-------
282
Industrials 4.7%
Arrow Electronics, Inc.
6.860% due 11/24/2000 (b) 150 150
-------
Utilities 12.4%
Edison Mission Energy
6.790% due 06/15/2001 (b) 100 100
Tennessee Valley Authority
3.375% due 01/15/2007 (c) 324 301
-------
401
-------
Total Corporate Bonds & Notes 833
-------
(Cost $833)
-----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 33.6%
-----------------------------------------------------------------
Federal Home Loan Bank
5.539% due 02/15/2002 (b) 500 490
Student Loan Marketing Assn
6.343% due 10/25/2005 (b) 598 595
-------
Total U.S. Government Agencies 1,085
-------
(Cost $1,085)
-----------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 95.7%
-----------------------------------------------------------------
Treasury Inflation Protected Securities (c)
3.375% due 01/15/2007 2,593 2,490
3.625% due 04/15/2028 635 606
-------
Total U.S. Treasury Obligations 3,096
-------
(Cost $3,080)
-----------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 13.8%
-----------------------------------------------------------------
Collateralized Mortgage Obligations 8.7%
Federal Home Loan Mortgage Corp.
6.750% due 05/15/2021 282 281
-------
Federal National Mortgage Association 5.1%
8.045% due 11/01/2024 (b) 161 166
-------
Total Mortgage-Backed Securities 447
-------
(Cost $444)
-----------------------------------------------------------------
SHORT-TERM INSTRUMENTS 6.7%
-----------------------------------------------------------------
Repurchase Agreement 6.7%
State Street Bank
5.850% due 07/03/2000 218 218
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
6.195% due 12/27/2000 valued at $224
Repurchase proceeds are $218.)
-------
Total Short-Term Instruments 218
=======
(Cost $218)
Total Investments (a) 175.6% $ 5,679
(Cost $5,660)
Other Assets and Liabilities (Net) (75.6%) (2,445)
-------
Net Assets 100.0% $ 3,234
=======
Notes to Schedule of Investments (amounts in
thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 23
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (4)
-------
Unrealized appreciation-net $ 19
=======
(b) Variable rate security. The rate listed is as
of June 30, 2000.
(c) Principal amount of the security is adjusted
for inflation.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Real Return Bond Portfolio (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on September 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
2000 Semi-Annual Report 9
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time. The market value of the collateral must be equal at
all times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
Real Return Bond Portfolio 0.50% 0.65%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
--------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------
Real Return Bond Portfolio $ 0 $ 0 $ 0 $ 0
10
<PAGE>
5. Federal Income Tax Matters
As of December 31, 1999 Real Return Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $4,937 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards.
Shareholders are advised to consult their own tax advisor with respect to
the tax consequences of their investment in the Trust. In January 2000, you will
be advised on IRS form 1099-DIV as to the federal tax status of the dividends
and distributions received by you in calendar year 1999.
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Real Return Bond Portfolio
---------------------------------------------
Period from 09/30/1999
Period Ended 6/30/2000 to 12/31/1999
Shares Amount Shares Amount
---------------------------------------------
<S> <C> <C>
Receipts for shares sold
Institutional Class $ 309 $ 3,125 $ 0 $ 0
---------------------------------- ---------------------------------------------
Administrative Class 4 42 606 6,000
---------------------------------- ---------------------------------------------
Issued as reinvestment of
distributions
Institutional Class 7 72 0 0
---------------------------------- ---------------------------------------------
Administrative Class 5 49 4 44
---------------------------------- ---------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
---------------------------------- ---------------------------------------------
Administrative Class (309) (3,125) (304) (2,984)
--------------------------------------------------------------------------------
Net increase resulting from
Portfolio share transactions $ 16 $ 163 $ 306 $ 3,060
================================================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
------------------------------------------------------------------------
Real Return Bond Portfolio 1 99
7. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 11
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
SHORT-TERM BOND PORTFOLIO
INSTITUTIONAL CLASS
--------------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Contents
<TABLE>
<S> <C>
Chairman's Letter.................................................................................... 1
Financial Highlights................................................................................. 3
Statement of Assets and Liabilities.................................................................. 4
Statement of Operations.............................................................................. 5
Statements of Changes in Net Assets.................................................................. 6
Notes to Financial Statements........................................................................ 8
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Short-Term Bond Portfolio (Institutional Class).......................................... 2 7
</TABLE>
<PAGE>
CHAIRMAN'S LETTER
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with
5-year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Short-Term Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum current income, consistent with preservation of capital and daily
liquidity
Portfolio:
Primarily money market instruments and short maturity fixed income securities
Duration:
0.60 years
Total Net Assets:
$3.2 million
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
Sector Breakdown:*
[GRAPH]
Corporate Bonds and Notes 74.5%
Asset-Backed Securities 12.9%
Mortgage-Backed Securities 7.1%
Short-Term Instruments 5.5%
Quality Breakdown:*
AAA 20.5%
AA 8.9%
A 25.2%
BBB 45.3%
Others 0.1%
*% of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. Whereas money market funds attempt
to maintain a stable share price, the Short-Term Bond Portfolio's share price
will fluctuate in response to market conditions. The Portfolio may invest in
foreign securities which involve potentially higher risks including foreign
currency fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The Short-Term Bond Portfolio Institutional Class' total return investment
performance since inception on April 28, 2000 through June 30, 2000 was 1.14%.
. The U.S. Treasury yield curve inverted dramatically in the first half of 2000
with 30-year yields falling from 6.48% to 5.90% while three-month yields moved
in the opposite direction, rising from 5.31% to 5.86%.
. Short-term rates rose as the Federal Reserve fought inflation by raising the
federal funds target rate from 5.50% to 6.50%.
. The Portfolio maintained a below-Index duration throughout most of the period,
which helped performance as short-term interest rates increased.
. Mortgages boosted returns due to a combination of low volatility, high
relative yields and reduced new issuance.
. Short maturity corporates added to returns as higher yields more than
compensated investors for the credit risk of these securities.
. The 30-day yield (after fees) at June 30, 2000 was 6.59%.
2
<PAGE>
Financial Highlights
Short-Term Bond Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data For The Year Or Period Ended: 06/30/2000(b)
--------------
<S> <C>
Net asset value beginning of period $ 10.00
--------------------------------------------------------------------- --------------
Net investment income (a) 0.11
--------------------------------------------------------------------- --------------
Net realized / unrealized gain on investments (a) 0.00
--------------------------------------------------------------------- --------------
Total income from investment operations 0.11
--------------------------------------------------------------------- --------------
Dividends from net investment income (0.10)
--------------------------------------------------------------------- --------------
Total distributions (0.10)
--------------------------------------------------------------------- --------------
Net asset value end of period $ 10.01
--------------------------------------------------------------------- --------------
Total return % 1.14
--------------------------------------------------------------------- --------------
Net assets end of period (000s) $ 3,190
--------------------------------------------------------------------- --------------
Ratio of expenses to average net assets %* 0.45
--------------------------------------------------------------------- --------------
Ratio of net investment income to average net assets %* 6.01
--------------------------------------------------------------------- --------------
Portfolio turnover rate % 0
--------------------------------------------------------------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 28, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Short-Term Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 3,269
------------------------------------------------------------------------- --------
Cash and foreign currency 118
------------------------------------------------------------------------- --------
Interest and dividends receivable 27
------------------------------------------------------------------------- --------
Manager reimbursement receivable 6
------------------------------------------------------------------------- --------
3,420
========================================================================= ========
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 218
------------------------------------------------------------------------- --------
Accrued investment advisory fee 1
------------------------------------------------------------------------- --------
Accrued administration fee 1
------------------------------------------------------------------------- --------
220
========================================================================= ========
Net Assets $ 3,200
========================================================================= ========
Net Assets Consist of:
Paid in capital $ 3,197
------------------------------------------------------------------------- --------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------------- --------
Accumulated undistributed net realized (loss) (2)
------------------------------------------------------------------------- --------
Net unrealized appreciation 5
------------------------------------------------------------------------- --------
$ 3,200
========================================================================= ========
Net Assets:
Institutional Class $ 3,190
------------------------------------------------------------------------- --------
Administrative Class 10
------------------------------------------------------------------------- --------
Shares Issued and Outstanding:
Institutional Class 319
------------------------------------------------------------------------- --------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 10.01
------------------------------------------------------------------------- --------
Cost of Investments Owned $ 3,263
========================================================================= ========
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Short-Term Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 95
------------------------------------------------------------------------- --------
Total Income 95
========================================================================== ========
Expenses:
Investment advisory fees 5
------------------------------------------------------------------------- --------
Administration fees 3
------------------------------------------------------------------------- --------
Distribution and/or servicing fees - Administrative Class 1
------------------------------------------------------------------------- --------
Total expenses 9
------------------------------------------------------------------------- --------
Reimbursement by manager 0
------------------------------------------------------------------------- --------
Net Expenses 9
------------------------------------------------------------------------- --------
Net Investment Income 86
========================================================================= ========
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (2)
------------------------------------------------------------------------- --------
Net change in unrealized appreciation on investments 5
------------------------------------------------------------------------- --------
Net Gain 3
------------------------------------------------------------------------- --------
Net Increase in Assets Resulting from Operations $ 89
========================================================================= ========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Short-Term Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from September 30, 1999
Increase (Decrease) in Net Assets From: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 86 $ 40
---------------------------------------------------------------------- -------------- --------------
Net realized gain (loss) (2) 0
---------------------------------------------------------------------- -------------- --------------
Net change in unrealized appreciation (depreciation) 5 0
---------------------------------------------------------------------- -------------- --------------
Net increase resulting from operations 89 40
====================================================================== ============== ==============
Distributions to Shareholders:
From net investment income
Institutional Class (33) 0
---------------------------------------------------------------------- -------------- --------------
Administrative Class (53) (40)
---------------------------------------------------------------------- -------------- --------------
Total Distributions (86) (40)
====================================================================== ============== ==============
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 3,141 0
---------------------------------------------------------------------- -------------- --------------
Administrative Class 10 3,000
---------------------------------------------------------------------- -------------- --------------
Issued as reinvestment of distributions
Institutional Class 46 0
---------------------------------------------------------------------- -------------- --------------
Administrative Class 40 40
---------------------------------------------------------------------- -------------- --------------
Cost of shares redeemed
Institutional Class 0 0
---------------------------------------------------------------------- -------------- --------------
Administrative Class (3,080) 0
---------------------------------------------------------------------- -------------- --------------
Net increase resulting from Portfolio share transactions 157 3,040
---------------------------------------------------------------------- -------------- --------------
Total Increase in Net Assets $ 160 $ 3,040
====================================================================== ============== ==============
Net Assets:
Beginning of period 3,040 0
---------------------------------------------------------------------- -------------- --------------
End of period * $ 3,200 $ 3,040
---------------------------------------------------------------------- -------------- --------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
---------------------------------------------------------------------- -------------- --------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Short-Term Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 76.1%
--------------------------------------------------------------------------------
Banking & Finance 25.0%
Donaldson, Lufkin & Jenrette, Inc.
6.110% due 05/15/2001 $ 100 $ 99
FCC National Bank
6.166% due 05/15/2002 100 100
Fleet Financial Group
9.900% due 06/15/2001 100 102
Ford Motor Credit Corp.
6.927% due 08/27/2001 (b) 100 100
MFN Financial Corp.
6.460% due 09/13/2001 (b) 100 100
Paine Webber Group, Inc.
6.585% due 07/23/2001 100 99
PS Colorado Credit Corp.
7.470% due 05/30/2002 (b) 100 100
U.S. West Capital Funding, Inc.
6.875% due 08/15/2001 100 99
-------
799
=======
Industrials 41.7%
Clear Channel Communications
7.327% due 06/15/2002 (b) 100 100
ICI Wilmington, Inc.
9.500% due 11/15/2000 100 101
J Seagram & Sons
6.250% due 12/15/2001 100 98
Kroger Co.
6.340% due 06/01/2001 100 99
Lockheed Martin Corp.
6.850% due 05/15/2001 140 139
Meridan Co.
6.408% due 07/18/2002 (b) 100 100
Norfolk Southern Corp.
6.875% due 05/01/2001 100 100
Philip Morris Cos., Inc.
9.000% due 01/01/2001 100 100
Raytheon Co.
6.450% due 08/15/2002 100 98
Staples, Inc.
7.670% due 11/26/2001 (b) 100 100
Temple-Inland, Inc.
9.000% due 05/01/2001 100 101
Tyco International Group SA
6.125% due 06/15/2001 100 99
Viacom, Inc.
8.875% due 06/01/2001 100 101
-------
1,336
=======
Utilities 9.4%
Appalachian Power
7.272% due 06/27/2001 (b) 100 100
Public Service Enterprise Group, Inc.
7.038% due 11/22/2000 (b) 100 100
Worldcom, Inc.
7.050% due 11/26/2001 (b) 100 100
-------
300
-------
Total Corporate Bonds & Notes 2,435
(Cost $2,432) =======
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 7.2%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 7.2%
Federal Home Loan Mortgage Corp.
8.000% due 04/15/2003 76 77
Federal National Mortgage Assn.
6.500% due 10/25/2007 97 96
Nomura Asset Securities Corp.
6.625% due 01/25/2009 59 58
-------
Total Mortgage-Backed Securities 231
(Cost $229) =======
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 13.2%
--------------------------------------------------------------------------------
Chase Manhattan Grantor Trust
5.200% due 02/15/2002 $ 55 $ 55
EQCC Home Equity Loan Trust
8.340% due 08/15/2025 100 101
Mellon Auto Grantor Trust
5.460% due 10/17/2005 119 117
Onyx Acceptance Auto Trust
5.500% due 10/15/2002 87 86
Premier Auto Trust
6.350% due 04/06/2002 62 62
-------
Total Asset-Backed Securities 421
(Cost $420) =======
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 5.7%
--------------------------------------------------------------------------------
Certificates of Deposits 3.1%
Societe Generale
6.052% due 02/28/2001 100 100
Repurchase Agreement 2.6%
State Street Bank
5.850% due 07/03/2000 82 82
(Dated 06/30/2000. Collateralized by
Federal Farm Credit Bank
6.000% due 10/01/2001 valued at $85
Repurchase proceeds are $82.)
-------
Total Short-Term Instruments 182
(Cost $182) =======
Total Investments (a) 102.2% $ 3,269
(Cost $3,263)
Other Assets and Liabilities (Net) (2.2%) (69)
-------
Net Assets 100.0% $ 3,200
=======
Notes to Schedule of Investments (amounts in
thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was
an excess of value over tax cost. $ 7
Aggregate gross unrealized depreciation
for all investments in which there was
an excess of tax cost over value. (1)
-------
Unrealized appreciation-net $ 6
=======
(b) Variable rate security. The rate listed is as of June 30, 2000.
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Short-Term Bond Portfolio (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on September 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for such
items as wash sales, foreign currency transactions, net operating losses and
capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Fund sells the security becomes
insolvent, a Fund's right to repurchase the security may be restricted; the
value of the security may change over the term of the financing transaction; and
the return earned by a Fund with the proceeds of a financing transaction may not
exceed transaction costs.
Futures And Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices
8
<PAGE>
of futures contracts and options, the possibility of an illiquid market, and the
inability of the counterparty to meet the terms of the contract. Futures
contracts and purchased options are valued based upon their quoted daily
settlement prices. The premium received for a written option is recorded as an
asset with an equal liability which is marked to market based on the option's
quoted daily settlement price.
Fluctuations in the value of such instruments are recorded as unrealized
appreciation (depreciation) until terminated, at which time realized gains and
losses are recognized.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly-owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.20%.
Servicing Fee. PIMCO Funds Distributors LLC, ("PFD"), a wholly-owned
subsidiary of PIMCO Advisors L.P., serves as the distributor of the Trust's
shares. The Trust is permitted to reimburse, out of the Administrative Class
assets of each Fund offering Administrative Class shares in an amount up to
0.15% on an annual basis of the average daily net assets of that class,
financial intermediaries that provide services in connection with the
distribution of shares or administration of plans or programs that use Fund
shares as their funding medium. The effective rate paid to PFD was 0.15% during
the current fiscal year.
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
Advisory Fee 0.25% 0.35%
Administrative Fee 0.20% 0.20%
Service Fee 0.15% --
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
Institutional Class Administrative Class
--------------------------------------------------------------------------------
Short-term Bond Portfolio 0.45% 0.60%
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
annual retainer of $500. These expenses are allocated to the Portfolios of the
Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
U.S. Government/Agency All Other
---------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
Short-Term Bond Portfolio $ 172 $ 0 $ 2,668 $ 0
2000 Semi-Annual Report 9
<PAGE>
5. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Short-Term Bond Portfolio
----------------------------------------------------
Period from 09/30/1999
Period Ended 06/30/2000 to 12/31/1999
Shares Amount Shares Amount
----------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 314 $ 3,141 0 $ 0
------------------------------------------------------------------------- -----------------------------------------------------
Administrative Class 1 10 300 3,000
------------------------------------------------------------------------- -----------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 5 46 0 0
------------------------------------------------------------------------- -----------------------------------------------------
Administrative Class 4 40 4 40
------------------------------------------------------------------------- -----------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
------------------------------------------------------------------------- -----------------------------------------------------
Administrative Class (308) (3,080) 0 0
------------------------------------------------------------------------- -----------------------------------------------------
Net increase resulting from Portfolio share transactions 16 $ 157 304 $ 3,040
========================================================================= =====================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
--------------------------------------------------------------------------------
Short-Term Bond Portfolio 1 98
6. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
10
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
REAL RETURN BOND PORTFOLIO
INSTITUTIONAL CLASS
----------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
<CAPTION>
Contents
<S> <C>
Chairman's Letter.................................................................. 1
Financial Highlights............................................................... 3
Statement of Assets and Liabilities................................................ 4
Statement of Operations............................................................ 5
Statements of Changes in Net Assets................................................ 6
Statement of Cash Flows............................................................ 7
Notes to Financial Statements...................................................... 9
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Real Return Bond Portfolio (Institutional Class)................................... 2 8
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Real Return Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum real return, consistent with preservation of real capital and prudent
investment management
Portfolio:
Primarily inflation-indexed fixed income
securities
Duration:
3.03 years
Total Net Assets:
$3.2 million
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
Sector Breakdown:*
[GRAPH]
U.S. Treasury Obligations 54.5%
U.S. Government Agencies 19.1%
Corporate Bonds and Notes 14.7%
Mortgage-Backed Securities 7.9%
Other 3.8%
Quality Breakdown:*
[GRAPH]
AAA 86.7%
AA 4.0%
A 9.3%
* % of Total Investments as of June 30, 2000
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainly.
-------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
-------------------------------------------------------------------------------
. The Real Return Bond Portfolio Institutional Class' total return investment
performance since inception on April 10, 2000 through June 30, 2000 was
1.56%.
. Maintaining the Portfolio's duration close to that of the benchmark (the
Lehman Brothers Inflation Linked Treasury Index) resulted in neutral return
performance.
. Underweighting long maturity Treasury Inflation Protection Securities
(TIPS) lowered relative performance as yields of long-term TIPS dropped the
most during the first half of 2000.
. Cash-backing strategies, combined with real return bond exposures, boosted
performance modestly.
. Allocations to U.S. agency and corporate real return bonds lowered relative
returns marginally as credit premiums for agency and investment-grade
corporate debt increased generally.
. TIPS were one of the better performing U.S. debt sectors during the first
half due to heightened concerns over credit quality and rising inflation
rates.
. TIPS real yields were on average 4.0% at June 30, 2000, while the rolling
12-month year-over-year increase in the Consumer Price Index-All Urban
Consumers Index was 3.7%.
2
<PAGE>
Financial Highlights
Real Return Bond Portfolio (Institutional Class)
June 30, 2000 (Unaudited)
<TABLE>
Selected Per Share Data for the Period Ended: 06/30/2000(b)
--------------
<S> <C>
Net asset value beginning of period $ 10.11
---------------------------------------------------------- --------------
Net investment income (a) 0.25
---------------------------------------------------------- --------------
Net realized / unrealized (loss) on investments (a) (0.09)
---------------------------------------------------------- --------------
Total income from investment operations 0.16
---------------------------------------------------------- --------------
Dividends from net investment income (0.24)
---------------------------------------------------------- --------------
Total distributions (0.24)
---------------------------------------------------------- --------------
Net asset value end of period $ 10.03
---------------------------------------------------------- --------------
Total return % 1.56
---------------------------------------------------------- --------------
Net assets end of period (000s) $ 3,174
---------------------------------------------------------- --------------
Ratio of expenses to average net assets %* 0.50
---------------------------------------------------------- --------------
Ratio of net investment income to average net assets %* 10.95
---------------------------------------------------------- --------------
Portfolio turnover rate % 0
---------------------------------------------------------- --------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operation on April 10, 2000.
2000 Semi-Annual Report See Accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at value $ 5,679
------------------------------------------------------------------------------- --------------
Interest and dividends receivable 38
------------------------------------------------------------------------------- --------------
Receivable for investments sold and forward foreign currency contracts 6
------------------------------------------------------------------------------- --------------
Manager reimbursement receivable 2
------------------------------------------------------------------------------- --------------
5,725
=============================================================================== =============
Liabilities:
Payable for financing transactions $ 2,489
------------------------------------------------------------------------------- --------------
Accrued investment advisory fee 1
------------------------------------------------------------------------------- --------------
Accrued administration fee 1
------------------------------------------------------------------------------- --------------
2,491
=============================================================================== --------------
Net Assets $ 3,234
=============================================================================== =============
Net Assets Consist of:
Paid in capital $ 3,223
------------------------------------------------------------------------------- -------------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------------------- -------------
Accumulated undistributed net realized (loss) (8)
------------------------------------------------------------------------------- -------------
Net unrealized appreciation 19
------------------------------------------------------------------------------- -------------
$ 3,234
=============================================================================== =============
Net Assets:
Institutional Class $ 3,174
------------------------------------------------------------------------------- -------------
Administrative Class 60
------------------------------------------------------------------------------- -------------
Shares Issued and Outstanding:
Institutional Class 316
------------------------------------------------------------------------------- -------------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 10.03
------------------------------------------------------------------------------- -------------
Cost of Investments Owned $ 5,660
=============================================================================== =============
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Real Return Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Interest $ 131
-------------------------------------------------------------- ----------
Dividends 0
-------------------------------------------------------------- ----------
Total Income 131
============================================================== ==========
Expenses:
Investment advisory fees 5
-------------------------------------------------------------- ----------
Administration fees 4
-------------------------------------------------------------- ----------
Total Expenses 9
-------------------------------------------------------------- ----------
Net Investment Income 122
============================================================= ==========
Net Realized and Unrealized Gain (Loss):
Net realized (loss) on investments (3)
--------------------------------------------------------------
Net change in unrealized appreciation on investments 74
-------------------------------------------------------------- ----------
Net Gain 71
-------------------------------------------------------------- ----------
Net Increase in Assets Resulting from Operations $ 193
============================================================== ==========
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Six Months Ended Period from September 30, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 122 $ 60
-------------------------------------------------------------------- ---------------- --------------------
Net realized (loss) (3) (5)
-------------------------------------------------------------------- ---------------- --------------------
Net change in unrealized appreciation (depreciation) 74 (55)
-------------------------------------------------------------------- ---------------- --------------------
Net increase (decrease) resulting from operations 193 0
==================================================================== ================ ====================
Distributions to Shareholders:
From net investment income
Institutional Class (74) 0
-------------------------------------------------------------------- ---------------- --------------------
Administrative Class (48) (60)
-------------------------------------------------------------------- ---------------- --------------------
From net realized capital gains
Institutional Class 0 0
-------------------------------------------------------------------- ---------------- --------------------
Administrative Class 0 0
-------------------------------------------------------------------- ---------------- --------------------
Total Distributions (122) (60)
==================================================================== ================ ====================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 3,125 0
-------------------------------------------------------------------- ---------------- --------------------
Administrative Class 42 6,000
-------------------------------------------------------------------- ---------------- --------------------
Issued as reinvestment of distributions
Institutional Class 72 0
-------------------------------------------------------------------- ---------------- --------------------
Administrative Class 49 44
-------------------------------------------------------------------- ---------------- --------------------
Cost of shares redeemed
Institutional Class 0 0
-------------------------------------------------------------------- ---------------- --------------------
Administrative Class (3,125) (2,984)
-------------------------------------------------------------------- ---------------- --------------------
Net increase resulting from Portfolio share transactions 163 3,060
-------------------------------------------------------------------- ---------------- --------------------
Total Increase in Net Assets $ 234 $ 3,000
==================================================================== ================ ====================
Net Assets:
Beginning of period 3,000 0
-------------------------------------------------------------------- ---------------- --------------------
End of period * $ 3,234 $ 3,000
-------------------------------------------------------------------- ---------------- --------------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
-------------------------------------------------------------------- ---------------- --------------------
</TABLE>
6 See accompanying notes
<PAGE>
Statement of Cash Flows
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Increase (Decrease) in Cash and Foreign Currency from:
Financing Activities
<S> <C>
Sales of Portfolio shares $ 3,167
----------------------------------------------------------------------------------- --------------
Redemptions of Portfolio shares (3,125)
----------------------------------------------------------------------------------- --------------
Cash distributions paid 0
----------------------------------------------------------------------------------- --------------
Proceeds from financing transactions (602)
----------------------------------------------------------------------------------- --------------
Net increase (decrease) from financing activities (560)
=================================================================================== ==============
Operating Activities
Purchases of long-term securities and foreign currency (74)
----------------------------------------------------------------------------------- --------------
Proceeds from sales of long-term securities and foreign currency 580
----------------------------------------------------------------------------------- --------------
Purchases of short-term securities (net) (3)
----------------------------------------------------------------------------------- --------------
Net investment income 122
----------------------------------------------------------------------------------- --------------
Change in other receivables/payables (net) (66)
----------------------------------------------------------------------------------- --------------
Net increase (decrease) from operating activities 559
=================================================================================== ==============
Net Increase in Cash and Foreign Currency (1)
----------------------------------------------------------------------------------- --------------
Cash and Foreign Currency
Beginning of period 1
----------------------------------------------------------------------------------- --------------
End of period $ 0
----------------------------------------------------------------------------------- --------------
</TABLE>
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Schedule of Investments
Real Return Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
-----------------------------------------------------------------------------
CORPORATE BONDS & NOTES 25.8%
-----------------------------------------------------------------------------
Banking & Finance 8.7%
General Motors Acceptance Corp.
6.320% due 12/09/2002 (b) $ 150 $ 150
J.P. Morgan & Co.
6.882% due 02/15/2012 (b) 150 132
-------
282
Industrials 4.7%
Arrow Electronics, Inc.
6.860% due 11/24/2000 (b) 150 150
-------
Utilities 12.4%
Edison Mission Energy
6.790% due 06/15/2001 (b) 100 100
Tennessee Valley Authority
3.375% due 01/15/2007 (c) 324 301
-------
401
-------
Total Corporate Bonds & Notes 833
=======
(Cost $833)
-----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 33.6%
-----------------------------------------------------------------------------
Federal Home Loan Bank
5.539% due 02/15/2002 (b) 500 490
Student Loan Marketing Assn.
6.343% due 10/25/2005 (b) 598 595
-------
Total U.S. Government Agencies 1,085
=======
(Cost $1,085)
-----------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 95.7%
-----------------------------------------------------------------------------
Treasury Inflation Protected Securities (c)
3.375% due 01/15/2007 2,593 2,490
3.625% due 04/15/2028 635 606
-------
Total U.S. Treasury Obligations 3,096
=======
(Cost $3,080)
-----------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 13.8%
-----------------------------------------------------------------------------
Collateralized Mortgage Obligations 8.7%
Federal Home Loan Mortgage Corp.
6.750% due 05/15/2021 282 281
-------
Federal National Mortgage Association 5.1%
8.045% due 11/01/2024 (b) 161 166
-------
Total Mortgage-Backed Securities 447
=======
(Cost $444)
-----------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 6.7%
-----------------------------------------------------------------------------
Repurchase Agreement 6.7%
State Street Bank
5.850% due 07/03/2000 218 218
(Dated 06/30/2000. Collateralized by
Federal National Mortgage Association
6.195% due 12/27/2000 valued at $224.
Repurchase proceeds are $218.)
-------
Total Short-Term Instruments 218
=======
(Cost $218)
Total Investments (a) 175.6% $ 5,679
(Cost $5,660)
Other Assets and Liabilities (Net) (75.6%) (2,445)
-------
Net Assets 100.0% $ 3,234
=======
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 23
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (4)
------
Unrealized appreciation-net $ 19
=======
(b) Variable rate security. The rate listed is as of June 30, 2000.
(c) Principal amount of the security is adjusted for inflation.
8 See accompanying notes
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Real Return Bond Portfolio (the "Portfolio") is a series of the PIMCO
Variable Insurance Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end investment company
organized as a Delaware business trust on October 3, 1997. The Trust may offer
up to two classes of shares: Institutional and Administrative. Each share class
has identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Institutional Class of the Trust. Certain detailed financial information for the
Administrative Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on September 30, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statement of Changes in Net Assets have been reclassified to paid
in capital. In addition, other amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting to tax characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Portfolio sells the security
becomes insolvent, the Portfolio's right to repurchase the security may be
restricted; the value of the security may change over the term of the financing
transaction; and the return earned by the Portfolio with the proceeds of a
financing transaction may not exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
2000 Semi-Annual Report 9
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 2000 (Unaudited)
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower than
typical bonds. Over the life of an inflation-indexed bond, however, interest
will be paid based on a principal value which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be considered
interest income, even though investors do not receive their principal until
maturity.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
<TABLE>
<CAPTION>
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
-----------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
</TABLE>
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the
extent that the payment of each Portfolio's pro rata share of Trustee fees cause
the actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
<TABLE>
<CAPTION>
Institutional Class Administrative Class
---------------------------------------------------------------------------------------------
<S> <C> <C>
Real Return Bond Portfolio 0.50% 0.65%
</TABLE>
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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, an unaffiliated Trustee who serves as a committee chair receives an
additional annual retainer of $500. These expenses are allocated to the
Portfolios of the Trust according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. Government/Agency All Other
-------------------------------------------------------------
Purchases Sales Purchases Sales
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Return Bond Portfolio $ 0 $ 0 $ 0 $ 0
</TABLE>
10
<PAGE>
5. Federal Income Tax Matters
As of December 31, 1999 Real Return Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $4,937 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards.
Shareholders are advised to consult their own tax advisor with respect to
the tax consequences of their investment in the Trust. In January 2000, you will
be advised on IRS form 1099-DIV as to the federal tax status of the dividends
and distributions received by you in calendar year 1999.
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Real Return Bond Portfolio
---------------------------------------------------------
Period from 09/30/1999
Period Ended 06/30/2000 to 12/31/1999
Shares Amount Shares Amount
---------------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 309 $ 3,125 0 $ 0
------------------------------------------------------------------ ---------------------------------------------------------
Administrative Class 4 42 606 6,000
------------------------------------------------------------------ ---------------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 7 72 0 0
------------------------------------------------------------------ ---------------------------------------------------------
Administrative Class 5 49 4 44
------------------------------------------------------------------ ---------------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
------------------------------------------------------------------ ---------------------------------------------------------
Administrative Class (309) (3,125) (304) (2,984)
------------------------------------------------------------------ ---------------------------------------------------------
Net increase resulting from Portfolio share transactions 16 $ 163 306 $ 3,060
================================================================== =========================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
<TABLE>
<CAPTION>
Number % of Portfolio Held
-------------------------------------------------------------------------------------------
<S> <C> <C>
Real Return Bond Portfolio 1 99
</TABLE>
7. Acquistion by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
2000 Semi-Annual Report 11
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach , CA 92660
888.746.2688
This report is submitted for the general
information of the shareholders of the
PIMCO Variable Insurance Trust. It is
not authorized for distribution to
prospective investors unless accompanied
or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust,
which contains information covering its
investment policies as well as other
pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
<PAGE>
PIMCO
PIMCO VARIABLE INSURANCE TRUST
LOW DURATION BOND PORTFOLIO
ADMINISTRATIVE CLASS
----------------
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
<TABLE>
Contents
<S> <C>
Chairman's Letter...................................................... 1
Financial Highlights .................................................. 3
Statement of Assets and Liabilities.................................... 4
Statement of Operations................................................ 5
Statements of Changes in Net Assets.................................... 6
Notes to Financial Statements.......................................... 8
</TABLE>
<TABLE>
<CAPTION>
Fund Schedule of
Summary Investments
<S> <C> <C>
Low Duration Bond Portfolio (Administrative Class)..................... 2 7
</TABLE>
<PAGE>
Chairman's Letter
Dear PIMCO Variable Insurance Trust Shareholder:
The first half of 2000 could serve as a textbook illustration of U.S. stock
market volatility. After reaching record highs in the first quarter, both the
Dow Jones Industrial Average and the tech-focused NASDAQ Composite Index tumbled
during the second quarter before starting to recover lost ground as the quarter
ended.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening with the yield on the 3-month Treasury up 0.55%
to close the period at 5.86%. In marked contrast, the 30-year Treasury yield
fell 0.58%, closing the second quarter at 5.90%, as investors grew concerned
that the U.S. government's debt buy-back program would create a scarcity of
long-term Treasuries. These changes resulted in an inverted yield curve, with 5-
year Treasuries yielding 6.18% and 30-year Treasuries offering only a slight
0.04% yield advantage over their 3-month counterparts.
The Federal Reserve raised the federal funds rate three times over the past six
months to 6.50%, the highest level in nine years. It was the central bank's
sixth rate increase since June 1999. The size of the latest increase confirmed
that the Fed's recent policy of gradual, 0.25% rate hikes was insufficient to
cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
On the following pages you will find a more complete review of the Portfolio in
light of financial market activities as well as specific details about the total
return investment performance.
We appreciate the trust you have placed in us, and we will continue to focus our
efforts to meet your investment needs.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman
July 30, 2000
2000 Semi-Annual Report 1
<PAGE>
Low Duration Bond Portfolio
--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
Objective:
Maximum total return, consistent with preservation of capital and prudent
investment management
Portfolio:
Primarily short maturity fixed income securities
Duration:
1.84 years
Total Net Assets:
$5.5 million
Sector Breakdown:*
[GRAPH]
Corporate Bonds and Notes 39.9%
Mortgage-Backed Securities 34.5%
Short-Term Instruments 12.9%
Asset-Backed Securities 8.2%
Other 4.5%
Quality Breakdown:*
[GRAPH]
AAA 53.9%
AA 10.4%
A 5.9%
BBB 25.5%
BB 4.2%
Other 0.1%
*% of Total Investments as of June 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
TOTAL RETURN INVESTMENT PERFORMANCE For the Period Ended June 30, 2000
Administrative
Class Merrill Lynch
(Incep. 2/16/1999) 1-3 Year Treasury Index
--------------------------------------------------------------------------------
6 Months 2.84% 2.99%
1 Year 4.14% 4.91%
Since Inception* 3.97% --
*Annualized
CUMULATIVE RETURNS THROUGH JUNE 30, 2000
$10,000 invested at inception
[GRAPH]
Month Low Merrill
Duration Lynch
Bond 1-3 Year
Portfolio Treasury
Index
========== ========= ========
02/28/1999 10,000 10,000
03/31/1999 10,082 10,070
04/30/1999 10,151 10,102
05/31/1999 10,116 10,095
06/30/1999 10,164 10,127
07/31/1999 10,165 10,159
08/31/1999 10,162 10,188
09/30/1999 10,243 10,255
10/31/1999 10,293 10,282
11/30/1999 10,303 10,301
12/31/1999 10,292 10,316
01/31/2000 10,290 10,312
02/29/2000 10,308 10,381
03/31/2000 10,386 10,445
04/30/2000 10,406 10,472
05/31/2000 10,432 10,516
06/30/2000 10,584 10,625
Past performance is not an indication of future results. Investment return and
principal value will fluctuate so that Portfolio shares, when redeemed, may be
worth more or less than their original cost. The line graph above assumes the
investment of $10,000 on 3/01/1999, the first full month following the
Portfolio's inception on 2/16/1999, compared to the Merrill Lynch 1-3 Year
Treasury Index, an unmanaged market index. The Portfolio may invest in foreign
securities which involve potentially higher risks including foreign currency
fluctuations and political or economic uncertainty.
--------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
--------------------------------------------------------------------------------
. The total return performance of the Low Duration Bond Portfolio was 2.84% for
the six-month period ended June 30, 2000, versus a return of 2.99% for its
benchmark, the Merrill Lynch 1-3 Year Treasury Index.
. The U.S. Treasury yield curve inverted dramatically in the first half of 2000
with 30-year yields falling from 6.48% to 5.90% while three-month yields
moved in the opposite direction, rising from 5.31% to 5.86%.
. Short-term rates rose as the Federal Reserve fought inflation by raising the
federal funds target rate from 5.50% to 6.50%.
. Decreasing duration throughout the period helped performance as short-term
interest rates increased.
. Holdings of high quality, short duration corporates boosted relative
performance due to their attractive yield premiums.
. Mortgage holdings detracted slightly from performance as they lagged
Treasuries over the period.
. Emerging markets holdings added to returns as economic fundamentals in a
broad set of countries continued to improve.
. The 30-day yield (after fees) at June 30, 2000 was 6.49%.
2
<PAGE>
Financial Highlights
Low Duration Bond Portfolio (Administrative Class)
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Selected Per Share Data for the Year or Period Ended: 06/30/2000 12/31/1999(b)
---------- -------------
<S> <C> <C>
Net asset value beginning of period $ 9.74 $ 10.00
------------------------------------------------------------------------- --------- -------------
Net investment income (a) 0.29 0.50
------------------------------------------------------------------------- --------- -------------
Net realized / unrealized (loss) on investments (a) (0.02) (0.25)
------------------------------------------------------------------------- --------- -------------
Total income from investment operations 0.27 0.25
------------------------------------------------------------------------- --------- -------------
Dividends from net investment income (0.31) (0.51)
------------------------------------------------------------------------- --------- -------------
Total distributions (0.31) (0.51)
------------------------------------------------------------------------- --------- -------------
Net asset value end of period $ 9.70 $ 9.74
------------------------------------------------------------------------- --------- -------------
Total return % 2.84 2.56
------------------------------------------------------------------------- --------- -------------
Net assets end of period (000s) $ 253 $ 5,149
------------------------------------------------------------------------- --------- -------------
Ratio of expenses to average net assets %* 0.65(d) 0.65(c)
------------------------------------------------------------------------- --------- -------------
Ratio of net investment income to average net assets %* 6.04 5.74
------------------------------------------------------------------------- --------- -------------
Portfolio turnover rate % 168 11
------------------------------------------------------------------------- --------- -------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on February 16, 1999.
(c) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.78% for the
period ended December 31, 1999.
(d) If the investment manager had not reimbursed expenses, the ratio of
operating expenses to average net assets would have been 0.66% for the
period ended June 30, 2000.
2000 Semi-Annual Report See accompanying notes 3
<PAGE>
Statement of Assets and Liabilities
Low Duration Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands, except per share amounts
<TABLE>
Assets:
<S> <C>
Investments, at value $ 5,976
------------------------------------------------------------------------------ -------
Interest and dividends receivable 50
------------------------------------------------------------------------------ -------
Manager reimbursement receivable 6
------------------------------------------------------------------------------ -------
6,032
============================================================================== =======
Liabilities:
Payable for investments purchased and forward foreign currency contracts $ 501
------------------------------------------------------------------------------ -------
Written Options Outstanding 3
------------------------------------------------------------------------------ -------
Accrued investment advisory fee 1
------------------------------------------------------------------------------ -------
Accrued administration fee 1
------------------------------------------------------------------------------ -------
Other liabilities 1
------------------------------------------------------------------------------ -------
507
============================================================================== =======
Net Assets $ 5,525
============================================================================== =======
Net Assets Consist of:
Paid in capital $ 5,678
------------------------------------------------------------------------------ -------
Undistributed (overdistributed) net investment income 0
------------------------------------------------------------------------------ -------
Accumulated undistributed net realized (loss) (91)
------------------------------------------------------------------------------ -------
Net unrealized (depreciation) (62)
------------------------------------------------------------------------------ -------
$ 5,525
============================================================================== =======
Net Assets:
Institutional Class $ 5,272
------------------------------------------------------------------------------ -------
Administrative Class 253
------------------------------------------------------------------------------ -------
Shares Issued and Outstanding:
Administrative Class 26
------------------------------------------------------------------------------ -------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Administrative Class $ 9.70
------------------------------------------------------------------------------ -------
Cost of Investments Owned $ 6,039
============================================================================== =======
Cost of Foreign Currency Held $ 1
============================================================================== =======
</TABLE>
4 See accompanying notes
<PAGE>
Statement of Operations
Low Duration Bond Portfolio
For the six months ended June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $ 182
------------------------------------------------------------------- -----
Total Income 182
=================================================================== =====
Expenses:
Investment advisory fees 8
------------------------------------------------------------------- -----
Administration fees 7
------------------------------------------------------------------- -----
Total Expenses 15
------------------------------------------------------------------- -----
Net Investment Income 167
=================================================================== =====
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investments (82)
------------------------------------------------------------------- -----
Net realized gain on futures contracts and written options 2
------------------------------------------------------------------- -----
Net change in unrealized appreciation on investments 61
------------------------------------------------------------------- -----
Net change in unrealized appreciation on futures contracts and
written options 1
------------------------------------------------------------------- -----
Net (Loss) (18)
------------------------------------------------------------------- -----
Net increase in Assets Resulting from Operations $ 149
=================================================================== =====
</TABLE>
2000 Semi-Annual Report See accompanying notes 5
<PAGE>
Statements of Changes in Net Assets
Low Duration Bond Portfolio
June 30, 2000 (Unaudited)
Amounts in thousands
<TABLE>
<CAPTION>
---------------- -----------------------------
Six Months Ended Period from February 16, 1999
Increase (Decrease) in Net Assets from: June 30, 2000 to December 31, 1999
Operations:
<S> <C> <C>
Net investment income $ 167 $ 255
----------------------------------------------------------------------------- ---------------- -----------------------------
Net realized (loss) (80) (3)
----------------------------------------------------------------------------- ---------------- -----------------------------
Net change in unrealized appreciation (depreciation) 62 (124)
----------------------------------------------------------------------------- ---------------- -----------------------------
Net increase resulting from operations 149 128
============================================================================= ================ =============================
Distributions to Shareholders:
From net investment income
Institutional Class (79) 0
----------------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class (88) (263)
----------------------------------------------------------------------------- ---------------- -----------------------------
Total Distributions (167) (263)
============================================================================= ================ =============================
Portfolio Share Transactions:
Receipts for shares sold
Institutional Class 5,185 0
----------------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class 251 10,150
----------------------------------------------------------------------------- ---------------- -----------------------------
Issued as reinvestment of distributions
Institutional Class 85 0
----------------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class 82 236
----------------------------------------------------------------------------- ---------------- -----------------------------
Cost of shares redeemed
Institutional Class 0 0
----------------------------------------------------------------------------- ---------------- -----------------------------
Administrative Class (5,209) (5,102)
----------------------------------------------------------------------------- ---------------- -----------------------------
Net increase resulting from Portfolio share transactions 394 5,284
----------------------------------------------------------------------------- ---------------- -----------------------------
Total Increase in Net Assets $ 376 $ 5,149
============================================================================= ================ =============================
Net Assets:
Beginning of period 5,149 0
----------------------------------------------------------------------------- ---------------- -----------------------------
End of period * $ 5,525 $ 5,149
----------------------------------------------------------------------------- ---------------- -----------------------------
*Including net undistributed (overdistributed) investment income of: $ 0 $ 0
----------------------------------------------------------------------------- ---------------- -----------------------------
</TABLE>
6 See accompanying notes
<PAGE>
Schedule of Investments
Low Duration Bond Portfolio
June 30, 2000 (Unaudited)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 43.1%
--------------------------------------------------------------------------------
Banking & Finance 15.4%
Bear Stearns Co., Inc.
6.423% due 08/01/2002 (d) $ 100 $ 100
Case Credit Corp.
6.236% due 08/01/2001 (d) 250 251
Ford Motor Credit Corp.
6.927% due 03/19/2002 (d) 250 252
Morgan Stanley, Dean Witter, Discover and Co.
6.190% due 04/15/2002 (d) 250 250
------
853
======
Industrials 17.9%
Chesapeake Corp.
10.375% due 10/01/2000 250 252
Petroleos Mexicanos
8.401% due 07/15/2005 (d) 250 250
Time Warner, Inc.
6.100% due 12/30/2001 250 246
Witco Corp.
6.600% due 04/01/2003 250 240
------
988
======
Utilities 9.8%
Connecticut Light & Power Co.
7.750% due 06/01/2002 200 201
Telekomunikacja Polska SA
7.125% due 12/10/2003 100 96
Texas Utilities Co.
5.940% due 10/15/2001 250 245
------
542
------
Total Corporate Bonds & Notes 2,383
(Cost $2,395) ======
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 4.9%
--------------------------------------------------------------------------------
Treasury Inflation Protected Securities
3.375% due 01/15/2007 (e) 270 259
U.S. Treasury Notes
5.125% due 08/31/2000 (b) 10 10
------
Total U.S. Treasury Obligations 269
(Cost $265) ======
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 37.3%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 17.6%
Federal Home Loan Mortgage Corp.
6.353% due 07/15/2028 (d) 246 245
Federal National Mortgage Assn.
7.100% due 12/25/2023 249 236
General Electric Capital Mortgage Services, Inc.
6.500% due 03/25/2024 365 329
Structured Asset Securities Corp.
6.750% due 07/25/2029 166 162
------
972
======
Federal Housing Administration 10.6%
7.430% due 10/01/2020 586 584
------
Government National Mortgage Association 9.1%
8.000% due 07/24/2030 500 503
------
Total Mortgage-Backed Securities 2,059
(Cost $2,114) ======
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 8.9%
--------------------------------------------------------------------------------
Accredited Mortgage Loan Trust
6.445% due 02/25/2030 (d) 243 243
Circuit City Credit Master Trust
6.360% due 02/15/2006 (d) 250 250
------
Total Asset-Backed Securities 493
(Cost $493) ======
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 14.0%
--------------------------------------------------------------------------------
Commercial Paper 10.8%
Banc One Australia Ltd.
6.560% due 09/15/2000 200 197
General Electric Capital Corp.
6.620% due 07/24/2000 $ 200 $ 199
General Motors Acceptance Corp.
6.530% due 07/10/2000 100 100
IBM Corp.
6.180% due 07/07/2000 100 100
------
596
======
Repurchase Agreement 3.2%
State Street Bank
5.850% due 07/03/2000 176 176
(Dated 06/30/2000. Collateralized by
Federal Home Loan Bank
5.823% 05/06/2009 valued at $180.
Repurchase proceeds are $176.)
------
Total Short-Term Instruments 772
(Cost $772) ======
Total Investments (a) 108.2% $5,976
(Cost $6,039)
Written Options (c) (0.1%) (3)
(Premiums $4)
Other Assets and Liabilities (Net) (8.1%) (448)
------
Net Assets 100.0% $5,525
======
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 2000, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost. $ 17
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (80)
------
Unrealized depreciation-net $ (63)
======
(b) Securities with an aggregate market value of $10
have been segregated with the custodian to cover margin
requirements for the following open futures contracts at
June 30, 2000:
<TABLE>
<CAPTION>
# of Unrealized
Type Contracts Appreciation
---------------------------------------------------------------------------------------
<S> <C> <C>
Eurodollar March Futures (03/2001) 1 $ 0
</TABLE>
(c) Premiums received on written options:
<TABLE>
<CAPTION>
Type Par Premium Value
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Put - CME AWPO Eurodollar December Futures
Strike @ 93.00 Exp. 12/18/2000 5 $ 4 $ 3
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/22/2000 100,000 0 0
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/15/2000 200,000 0 0
-----------------------
$ 4 $ 3
=======================
</TABLE>
(d) Variable rate security. The rate listed is as of June 30, 2000.
(e) Principal amount of the security is adjusted for inflation.
2000 Semi-Annual Report See accompanying notes 7
<PAGE>
Notes to Financial Statements
June 30, 2000 (Unaudited)
1. Organization
The Low Duration Portfolio (the "Portfolio") is a series of the PIMCO Variable
Insurance Trust (the "Trust"). The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company organized as
a Delaware business trust on October 3, 1997. The Trust may offer up to two
classes of shares: Institutional and Administrative. Each share class has
identical voting rights (except that shareholders of a class have exclusive
voting rights regarding any matter relating solely to that class of shares).
Information presented in these financial statements pertains to the
Administrative Class of the Trust. Certain detailed financial information for
the Institutional Class is provided separately and is available upon request.The
Trust is designed to be used as an investment vehicle by Separate Accounts of
insurance companies that fund variable annuity contracts and variable life
insurance policies and by qualified pension and retirement plans. The Portfolio
commenced operations on February 16, 1999.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments 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, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared on each day the Trust is open for business and are
distributed to shareholders monthly. All dividends are reinvested in additional
shares of the Portfolio. Net realized capital gains earned by the Portfolio, if
any, will be distributed at least once each year.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for such
items as wash sales, foreign currency transactions, net operating losses and
capital loss carryforwards.
Distributions reflected as a tax basis return of capital in the accompanying
Statement of Changes in Net Assets have been reclassified to paid in capital. In
addition, other amounts have been reclassified between undistributed net
investment income, accumulated undistributed net realized gains or losses and
paid in capital to more appropriately conform financial accounting to tax
characterizations of dividend distributions.
Federal Income Taxes. The Portfolio intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Financing Transactions. The Portfolio may enter into financing transactions
consisting of the sale by the Portfolio of securities, together with a
commitment to repurchase similar securities at a future date. The difference
between the selling price and the future purchase price is an adjustment to
interest income. If the counterparty to whom the Fund sells the security becomes
insolvent, a Fund's right to repurchase the security may be restricted; the
value of the security may change over the term of the financing transaction; and
the return earned by a Fund with the proceeds of a financing transaction may not
exceed transaction costs.
Futures and Options. The Portfolio is authorized to enter into futures contracts
and options. The Portfolio may use futures contracts to manage its exposure to
the securities markets or to movements in interest rates and currency values.
The primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
8
<PAGE>
Stripped Mortgage-Backed Securities (SMBS). SMBS represent a participation in,
or are secured by and payable from, mortgage loans on real property, and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBS include interest-only securities (IOs), which receive all of
the interest, and principal-only securities (POs), which receive all of the
principal. If the underlying mortgage assets experience greater than anticipated
payments of principal, the Portfolio may fail to recoup some or all of its
initial investment in these securities. The market value of these securities is
highly sensitive to changes in interest rates.
Repurchase Agreements. The Portfolio may engage in repurchase transactions.
Under the terms of a typical repurchase agreement, the Portfolio takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an agreed-
upon price and time. The market value of the collateral must be equal at all
times to the total amount of the repurchase obligations, including interest.
Generally, in the event of counterparty default, the Portfolio has the right to
use the collateral to offset losses incurred.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company LLC (PIMCO),
which is a wholly owned subsidiary partnership of PIMCO Advisors L.P., serves as
investment adviser (the "Adviser") to the Trust, pursuant to an investment
advisory contract, for which it receives a monthly advisory fee based on average
daily net assets. The Advisory Fee is charged at an annual rate of 0.25%.
Administration Fee. PIMCO serves as administrator (the "Administrator"), and
provides administrative services to the Trust for which it receives a monthly
administrative fee based on average daily net assets. The Administration Fee is
charged at the annual rate of 0.25%.
Servicing Fee. PIMCO Funds Distributiors LLC, ("PFD"), a wholly-owned subsidiary
of PIMCO Advisors L.P., serves as the distributor of the Trust's shares. The
Trust is permitted to reimburse, out of the Administrative Class assets of the
Portfolio in an amount up to 0.15% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Portfolio shares as their funding medium. The effective rate
paid to PFD was 0.15% during current fiscal year.
New Administrative Class Fee Structure:
<TABLE>
<CAPTION>
From 01/01/2000
Effective 04/01/2000 to 03/31/2000
--------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fee 0.25% 0.40%
Administrative Fee 0.25% 0.25%
Service Fee 0.15% --
</TABLE>
Expenses. The Portfolio is responsible for the following expenses: (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) the cost of
borrowing money, including interest expense; (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 and (vi) extraordinary expenses,
including costs of litigation and indemnification expenses. The ratio of
expenses to average net assets per share class, as disclosed in Financial
Highlights, may differ from the annual fund operating expenses per share class
as disclosed in the Prospectus for the reasons set forth above.
PIMCO has agreed to waive a portion of its administrative fees to the extent
that the payment of each Portfolio's pro rata share of Trustee fees cause the
actual expense ratios to rise above the rates disclosed in the then-current
prospectus (as set forth below) plus 0.49 basis points (calculated as a
percentage of each Portfolio's average daily net assets attributable to each
class):
<TABLE>
<CAPTION>
Institutional Class Administrative Class
--------------------------------------------------------------------------------
<S> <C> <C>
Low Duration Bond Portfolio 0.50% 0.65%
</TABLE>
PIMCO may be reimbursed for these waived amounts in future periods.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Administrator, all of whom receive renumeration for
their services to the Trust from the Administrator or its affiliates.
Each unaffiliated Trustee receives 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,
an unaffiliated Trustee who serves as a committee chair receives an annual
retainer of $500. These expenses are allocated to the Portfolios of the Trust
according to their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 2000 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. Government/Agency All Other
--------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Low Duration Bond Portfolio $1,009 $1,619 $695 $ 496
</TABLE>
2000 Semi-Annual Report 9
<PAGE>
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Low Duration Bond Portfolio
-----------------------------------
# of Contracts Premium
-------------------------------------------------------------------
<S> <C> <C>
Balance at 12/31/1999 0 $ 0
Sales 880,005 6
Closing Buys 0 0
Expirations (580,000) (2)
Exercised 0 0
-------------------------------------------------------------------
Balance at 06/30/2000 300,005 $ 4
-------------------------------------------------------------------
</TABLE>
6. Federal Income Tax Matters
As of December 31, 1999 Low Duration Bond Portfolio had remaining capital loss
carryforwards that were realized during the current year.
Additionally, the Portfolio realized $10,676 of capital losses during the
period November 1, 1999 through December 31,1999 which the Fund elected to defer
to the following taxable year pursuant to income tax regulations.
The Portfolio will resume capital gain distributions in the future to the
extent gains are realized in excess of the available carryforwards.
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. In January 2000, you will be
advised on IRS form 1099-DIV as to the federal tax status of the dividends and
distributions received by you in calendar year 1999.
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Low Duration Bond Portfolio
--------------------------------------------------------
Period Ended 6/30/2000 Period from 02/16/1999 to
12/31/1999
Shares Amount Shares Amount
--------------------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares sold
Institutional Class 535 $ 5,185 0 $ 0
---------------------------------------------------------------- --------------------------------------------------------
Administrative Class 26 251 1,028 10,150
---------------------------------------------------------------- --------------------------------------------------------
Issued as reinvestment of distributions
Institutional Class 9 85 0 0
---------------------------------------------------------------- --------------------------------------------------------
Administrative Class 8 82 24 236
---------------------------------------------------------------- --------------------------------------------------------
Cost of shares redeemed
Institutional Class 0 0 0 0
---------------------------------------------------------------- --------------------------------------------------------
Administrative Class (537) (5,209) (523) (5,102)
---------------------------------------------------------------- --------------------------------------------------------
Net increase resulting from Portfolio share transactions 41 $ 394 529 $ 5,284
================================================================ ========================================================
</TABLE>
The following schedule shows the number of shareholders each owning 5% or more
of a Portfolio and the total percentage of the Portfolio held by such
shareholders:
Number % of Portfolio Held
----------------------------------------------------------------------
Low Duration Bond Portfolio 1 95
8. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
10
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Variable Insurance Trust. Founded in 1971, Pacific
Investment Management Company currently manages assets in excess of $199 billion
on behalf of mutual fund and institutional clients located around the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and high-
quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York, a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/New York, New York
Trustees and Officers
Brent R. Harris, Chairman and Trustee
R. Wesley Burns, President and Trustee
Guilford C. Babcock, Trustee
E. Philip Cannon, Trustee
Vern O. Curtis, Trustee
J. Michael Hagan, Trustee
Thomas P. Kemp, Sr., Trustee
William J. Popejoy, Trustee
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Adviser and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Transfer Agent
National Financial Data Services
330 W. 9th Street, 4th Floor
Kansas City, Missouri 64105
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, Missouri 64105
<PAGE>
PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
888.746.2688
This report is submitted for the general information of the shareholders of the
PIMCO Variable Insurance Trust. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the PIMCO Variable Insurance Trust, which contains information covering its
investment policies as well as other pertinent information.
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
